Daily Brief Consumer: Alibaba Group, CJ CGV Co Ltd, Coupang, Las Vegas Sands, Nikon Corp, SML Group, Tesla Motors, Health And Happiness (H&H) and more

• Daniel Zhang’s transition to a less prominent role within Alibaba’s Cloud business, after previously serving as CEO and Chairman of Alibaba Group (9988 HK), could be seen as a demotion.
• We suspect that there could be some government influence on these proposed leadership changes.
• Nonetheless, the situation is not encouraging, especially as the company enters a turbulent phase with multiple units poised to pursue IPOs in the near future.

• A capital increase event of this size allows for a classic arbitrage trading strategy involving the acquisition of subscription rights and the simultaneous sale of an equal amount of SSF.
• We can aim to profit from the price movements between warrants and SSF during the warrants trading period by getting out of the positions before the trading period ends.
• We will also likely encounter a significantly juicy price difference between warrants+subscription and SSF, given a discount rate of 25% with an enormous capital increase rate, 

• CJ CGV announced a massive capital increase plan of nearly 1 trillion won which includes a rights offering of 570 billion won and 450 billion won of in-kind investments.
• This capital increase is likely to negatively impact CJ CGV’s share price in the coming months. Through this capital raise, the existing shareholders are likely to be diluted significantly. 
• The expected rights offering price is 7,630 won, which is 47% discount to its current price.

• AliExpress has prioritized South Korea. We expect AliExpress’ South Korea GMV to increase 150%~ YoY to about US 1bn in 2023, or about 3% of Coupang’s. 
• We found that AliExpress has more overlap with CPNG’s key products rather than Naver. The average price of recommended items on AliExpress was 65%~ cheaper than CPNG in our sample; 
• We lower our CPNG GMV est. by 2%/3% in 2023/2024. We downgrade CPNG to SELL and lower its TP to US$ 15.1. 

• Initial positive study by legislative group completed in 2021. Regulatory follow up could move faster than generally believed igniting a process for market leaders in Asia.
• Initial study recommended Bangkok and 22 regional, smaller scale properties including world famous resort area Phuket.
• Baseline tourism to Thailand in 2019 rated as the 5th largest on the globe.

• Poised for Profitability rebound in FY3/25 putting Nikon on track to meet mid-term plan targets.  
• ArF Unit Expansion as Intel benefits from government fiscal incentives to build fabs in EU and US. 
• Based on the FY3/26 plan for EBIT of Y70b, the stock’s theoretical valuation would reach around Y2,200/share

• During 4QFY03/2023 results release, Nikon announced a medium-term target of revenues of ¥700bn, OPM of 10%+ and ROE of 8%+ by the end of FY2025E (FY ended 31st March 2026).
• Our analysis (with conservative assumptions) suggests that the company could easily achieve its medium-term target despite the company expecting to see its earnings declining in FY03/2024E.
• Nikon is trading at a discount to its Japanese peers Canon and Konica Minolta and we think the market is clearly undervaluing the company as a pure-play Imaging products player.

• SML Group (SMLGZ HK) is looking to raise about US$200m in its upcoming Hong Kong IPO.
• SML Group (SMLG) is a vertically integrated digital identification solutions provider. It primarily engages in developing, manufacturing and selling label and tag products with radio frequency identification (RFID).
• SMLG’s revenue growth rebounded post-COVID on the back of improved consumer sentiment. However, the firm’s profitability growth has been slowing down yet it has undertaken additional debt to payout dividends.

• Risks such as potential asset impairments, the stock’s volatility, and industry fragmentation persist.
• However, key valuation metrics coupled with our analysis leaves us with the conclusion that Tesla’s stock remains grossly undervalued.
• The company’s price cuts might be phased out by softening material costs, the company says.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess H&H International’s ESG as “Adequate”, in line with the “Adequate” Environmental, Social and Governance scores. The Social pillar has the highest weightage, given the nature of the business. Controversies are “Immaterial” and Disclosure is “Strong”.