In today’s briefing:
- Alibaba Group: Looking Through the Noise
- Merger Arb Mondays – Yashili, Razer, 51Job, Uniti, Link, Sezzle, Guodian
- WISE Secondary Cell (TIGER ETF) Rebalancing Preview
- KOSPI 200 Rebalance in June 2022 Amid Portfolio Changes Post Outbreak of War in Ukraine
- Matahari Department Store (LPPF IJ) – All Eyes to the Podium
- KRX Auto (KODEX ETF) Rebalancing Preview
- Bloomberry Resorts: Recovery Cycle Has Arrived for This Manila-Based Casino Hotel
- Focus on smaller stores to improve productivity
Alibaba Group: Looking Through the Noise
- The major trend, witnessed over the past two years, has been the continued loss of relative market share by Alibaba, and the continued market share gains by JD.com.
- Alibaba has been able to steadily grow its active user base, on its Chinese retail platforms, by above 10%y/y since at least 2019, off an extremely high base.
- Short-Term growth expectations seem relatively conservative, with limited risk for a further negative surprise.
Merger Arb Mondays – Yashili, Razer, 51Job, Uniti, Link, Sezzle, Guodian
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore and the US (Chinese ADRs only).
- This week, the highest gross spreads are Yashili International Holdings (1230 HK), Razer Inc (1337 HK), 51 Job Inc Adr (JOBS US), Uniti Group Ltd (UWL AU)
- The lowest gross spreads are CIMIC Group Ltd (CIM AU), Virtus Health (VRT AU), China Logistics Property Holdings (1589 HK), Z Energy Ltd (ZEL NZ), Singapore Press Holdings (SPH SP)
WISE Secondary Cell (TIGER ETF) Rebalancing Preview
- WISE Secondary Cell rebalances every quarter in January, April, July, and October. The effective date for the upcoming rebalancing is April 15.
- The flow impact/price correlation of small/mid-caps is shown to be at a meaningful level. Therefore, we may need to design long/short basket trading setups focusing on these small/mid-caps.
- The following five stocks are expected to have a significant level of flow impact at this point: SKC, Soulbrain, Youlchon Chemical, Posco Chemical, and LG Energy Solution.
KOSPI 200 Rebalance in June 2022 Amid Portfolio Changes Post Outbreak of War in Ukraine
- We discuss the potential additions and deletions in the upcoming June 2022 KOSPI200 rebalance. The outbreak of war in Ukraine has impacted the potential additions/deletion candidates.
- These top 10 potential inclusions are up on average 10.8% YTD, outperforming KOSPI which is down 9.1% YTD.
- Among the potential inclusions, Ildong Pharm, Meritz F&M Insurance, Hana Tour, Dongwon Systems, and Lotte Rental have been materially outperforming the market in the past three months.
Matahari Department Store (LPPF IJ) – All Eyes to the Podium
- Matahari Department Store’s results marked a turning point in terms of profitability, and this year will see the company back in expansion mode, with a new strategy in place.
- Management is pushing hard to entrench its position in existing categories as well as pushing into new ones, with an omnichannel approach and new partnerships in place.
- Matahari Department Store has the potential for a re-rating as it regains its place on the winning podium amongst Indonesian retailers in very reasonable valuations.
KRX Auto (KODEX ETF) Rebalancing Preview
- KRX Autos rebalances once a year in September. The effective date of the upcoming rebalancing is September 9.
- The market cap difference between the top three stocks and the rest of the stocks is significant. So, the passive impact of the non-capped constituents is substantial.
- Accordingly, this index rebalancing is well worth a preemptive position build-up. At this point, notable stocks from a flow perspective are Hanon Systems, Kumho Tire, and Halla Holdings.
Bloomberry Resorts: Recovery Cycle Has Arrived for This Manila-Based Casino Hotel
- We have been bullish on the broad Philippine gaming market because it has moved ahead dealing with covid. It is Asia’s second most robust gaming market.
- The company’s Solaire resort at Manila’s Entertainment Zone just reported increases in mass revenue sector indicating that recovery is well underway.
- 4Q21 and total 2021 results do not include South Korea property due to lockdowns. But once reopened, it will be accretive to forward earnings.
Focus on smaller stores to improve productivity
- According to our channel checks, the new smaller compact feature stores (of 20k-25k sqft) enjoy significantly better revenue/sqft (of ~1.5x) v/s the existing bigger stores (of 40k-50k sqft).
- Management targets to double revenue over the next 3-4 years backed by: its strategy of adding 10-12% new stores annually, its initiative to revive SSSG to high single or double digit on improved new store productivity and focus on private labels, strong growth in the Beauty segment and ecommerce initiatives.
- However, our revenue estimates are nearly 40% below the management.
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