Consumer: LG Energy Solution, XPeng, Kadokawa Dwango, Crown Resorts, Farm Fresh Berhad, Central Plaza Hotel, Melco Resorts & Entertainment, Japfa Comfeed Indonesia and more

• The announced changes are exactly in line with our forecasts with one change each for the Secondary Battery, Bio and Game Index. There are three changes to the Internet Index.
• There are two changes to the BBIG Index with LG Energy Solution (373220 KS) replacing LG Chem Ltd (051910 KS) and AfreecaTV (067160 KS) replacing Douzone Bizon (012510 KS). 
• The largest buying impact will be on AfreecaTV (067160 KS) while the largest selling impact will be on Douzone Bizon (012510 KS), Soulbrain (357780) and LG Chem Ltd (051910 KS).

• As expected, Nongfu Spring (9633), China Overseas Land & Investment (688) and XPeng (9868) will replace Geely Auto (175), China Tower (788) and JD Health (6618) in the index.
• The adds, deletes and capping changes will result in one-way turnover estimated at 9.14% and will result in a one-way trade of HK$4,576m.
• Shorts in Nongfu Spring (9633 HK), JD Health (6618 HK) and China Tower (788 HK) have over 10 days of ADV to cover.

• Over the past few quarters Square Enix has repeatedly been the subject of M&A speculation related to both Microsoft and Sony.
• We consider such speculation to be nonsense and have repeatedly said so. 
• However, there is a far more intriguing M&A prospect in Kadokawa and it has not gotten much press…

• AUSTRAC has commenced civil penalty proceedings against Crown Resorts (CWN AU) for alleged serious and systemic non-compliance with Australia’s anti-money laundering and counter-terrorism financing laws.
• The statement of claim does not include any quantification of the penalty sought. For Blackstone to walk away from the Crown deal, the fine needs to be at least $750mn.
• A prescribed occurrence appears to have been triggered. But technically, that is not accurate.

• Farm Fresh Berhad (FF MY) is a leading vertically integrated dairy player in Malaysia. It has launched an IPO to raise $239 million. 
• The business is navigating the normalisation of consumer demand and input cost inflation by delivering healthy growth, market share gains, creditable margin performance and cash generation. 
• Overall, this IPO is worth a closer look. The offer period is from 28 February to 10 March. The listing is on 22 March.   

• Farm Fresh Berhad (FF MY) is looking to raise US$239m in its Malaysia IPO.
• While not exactly the cheapest per se, including Nestle Malaysia, were the firm to trade towards its domestic peer’s simple average, there is an upside potential of 26%-33.3%. 
• In this note, we will look at peers, assumptions, and share our thoughts on valuation.

• Those non-top three constituents in the battery index get to face more substantial outflow due to LG Chem’s remaining in the index. They are Posco Chemical, SKC, and Iljin Materials.
• It is still that AfreecaTV (067160 KS) and Douzone Bizon (012510 KS) are the ones with the most significant passive impacts, +1.73x and -2.67x ADTVs, respectively. 
• LG Energy Fast Entry will be implemented on the same day. The combined inflow should rise to +0.95x ADTV, substantial enough to deserve special attention.

• Analyst meeting came out with a positive tone. We expect 2022 EBITDA to grow by 78%YoY supported by strong recovery in hotel businesses especially in Maldives and Dubai.We maintain BUY
• 4Q21 EBITDA reached the highest level since 1Q20 at Bt977m (+113%YoY, +307%QoQ) backed by strong recovery of hotel performance especially in Maldives and Dubai.
• The company plans to open39 new hotels with 8,038 rooms by 2025 and 200-250 new food stores of existing brands and JV brands in 2022 which could support earnings momentum

Melco Resorts’ (MLCO) Q4 and FY 2021 results were acceptable in our view, albeit still poor relative to the pre-COVID-19 levels. Positively, the company will likely recover faster than peers, supported by higher growth at its assets in the Philippines and Cyprus (compared to Macau). The Macau gaming industry is expected to remain range-bound in FY 2022. Moreover, the spate of COVID-19 cases in Hong Kong means China is unlikely to relax its border restrictions in the near future.

We view negatively MLCO’s USD 31 mn share repurchases in Q4/21 despite continued negative OCF. This may indicate management’s priorities lie in maximising shareholder returns over improving the balance sheet.

4Q21 beats, but FY22 outlook moderates