Daily Brief Consumer: DCM Holdings, Galaxy Entertainment Group, ZEEKR, Taste Gourmet, Onward Holdings, SJM Holdings and more

• DCM Holdings (3050 JP) and Keiyo Co Ltd (8168 JP) and Aeon Co Ltd (8267 JP) signed capital and business tie-up agreements 30+yrs ago. Recently, DCM bought Keiyo.
• Aeon got some money from this and has decided to put that money back into DCM shares.
• That changes both the current dynamics and future shareholder structure. And that leads to interesting questions about the outcome.

• Our review of the  three stocks here reveals considerable run room ahead as revenue  recovery in Asia gaming is  outpacing  forecasts.
• These companies  have proven   resilient after taking big hits during covid crisis.
• Balance sheets are stronger, revenue  rising, margins  improved–much of  this not as yet  reflected in valuations.

• ZEEKR, a fast-growing premium BEV maker, filed its F-1 last week. The company is going public through an IPO and offering ADSs of a Cayman Islands holding company.
• In 2022, Geely agreed to spin off ZEEKR and list its EV maker in Asia/the U.S. The company has raised ~$1.6B and was backed by Geely and top-tier investors.
• Geely Auto will hold 50%+ of the voting power upon completing an IPO. ZEEKR’s last round was a $750M Series A in February 2023 at a $13B post-money valuation. 

• Taste Gourmet (8371 HK) reported Q2 profits 25% over our expectations at 30 mn HKD (81% YoY), led by net margin expansion to 11.2% (vs. our expectation of 8.8%)
• The net cash of 133 mn HKD represents around 27% of market capitalization, which is used to increase the restaurant count in HK from 42 to 48 QoQ.
• The company declared a 5.5 cent interim dividend (Vs. 4.8 cents last year). We believe they can declare a 12.5/13 cent dividend for FY24 (March-End)

• Some of Japan’s big apparel firms are making a comeback, and only some of the recent growth is coming from department stores.
• Most of the revival is thanks to direct sales through e-commerce and stores, and the increasingly seamless links between them.
• Onward Holdings is one of the leaders in this renaissance and is delivering the same profits as it used to with 30% higher sales.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• SJM Holdings