Brief Consumer: Meituan Dianping (3690 HK): Lock-Up Expiry – Good 4Q18 Required and more

In this briefing:

1. Meituan Dianping (3690 HK): Lock-Up Expiry – Good 4Q18 Required
2. Omron into the Nikkei 225, Pioneer Out
3. M: Trimmed 2019-20E Earnings Forecast by 12% and 19%
4. MINT’s First Post-Acquisition Update

1. Meituan Dianping (3690 HK): Lock-Up Expiry – Good 4Q18 Required

Meituan Dianping (3690 HK)‘s shares currently trade 18% below its IPO price of HK$69.00 per share. Meituan will announce its 4Q18 results on Monday, 11 March 2019, after market close. Notably, Meituan’s six-month lock-up period expires on 19 March 2019.

2. Omron into the Nikkei 225, Pioneer Out

Friday 8 March after the close, the Nikkei announced that because the third party share sale of Pioneer Corp (6773 JP)  had been completed, it would be deleted from the Nikkei 225 Average (and the Nikkei 500 Index). Omron Corp (6645 JP) will replace Pioneer in the Nikkei 225 Average, with a deemed par value of 50 yen per share.

The date for this index deletion and inclusion event is the 15th of March, as per the schedule of the February 19th announcement as to how the Pioneer event would be treated. 

This affords special sits/events followers a couple of different events to look at. 

3. M: Trimmed 2019-20E Earnings Forecast by 12% and 19%

M had 4Q18 net profit of Bt606m (+11%YoY, -10%QoQ). The 2018 earnings was 10% lower than our forecast but in line with our expectation.

• Excluding impairment cost from employee benefit, 4Q18 core earnings grew 26.4%YoY to Bt690m. Meanwhile, gross margin remains flat at 68.3%, close to past four quarters level.
• The 2018 earnings increases 6% driven by gross profit margin expansion to 68.4% from 67.8% in 2017 and 4.3% growth in sales to Bt16bn due mainly to branches expansion and lower raw material costs respectively.
• We maintain our positive view toward its 2019-2020 outlook backed by SSSG recovery and branch expansion plan. However, we cut our 2019-20E earnings forecast by 12% and 19% respectively to factor in weak sales and margin than our previous expectation.

We maintain our BUY rating based on a new target price of Bt88 (27.4xPE’19) or down 8% from our previous target to follow earnings cut.

4. MINT’s First Post-Acquisition Update

We caught up with MINT and Bangkok Dec-Con today. Some highlights from the meeting:

• MINT has gained international presence following the acquisition of NH Hotels in Spain, but the first benefits is mainly coming from the top line side (34% revenue growth) rather than profit level at this stage. Having said that, NH itself has turned around significantly.
• Synergies expected through branding, loyalty programs, and cross-selling, though perhaps not all at once. 
• Leverage reduction. Much has already been achieved by asset revaluation, but the next step involves sales of some selected Tivoli assets and issuance of new warrants entailing a maximum dilution of 20%.
• Bangkok Dec-Con acquired a 40% stake in Phuket water concessionaire Gold Shores in December for Bt600m. A sizable diversification, eventhough they are really growing their profits like crazy in 2018.