Daily Brief Consumer: Genting Singapore, Vinda International, Dongwon Industries, China Education Group, Lionheart Studio, Luckin Coffee, Eicher Motors, iShares MSCI ACWI ETF, Studio City International Holdings Limited, Adeia and more

• Stock has become attractive at its still under the radar price.
• Nomura projects Singapore revenues are trending rapidly back to 90% of pre-covid levels.
• Adj. EBITDA of SG$774 (US$580m) for FY22—income attributable to holders up 85%

• Tissue-Maker Vinda International (3331 HK) closed down 6.4% yesterday, recovering from a 13.8% fall intra day.
• Vinda said its 1Q23 operating profit declined 85.4% to HK$65mn. Vinda also announced its controlling shareholder Essity (ESSITYB SS) will commence a strategic review of its 51.59% ownership.
• A long-term shareholder potentially seeking a possible divestment, shortly after a company announces poor results, is not a great look.

• We discuss the end of the mandatory lock-up periods for 46 stocks in Korea in May 2023, among which 4 are in KOSPI and 42 are in KOSDAQ.
• These 46 stocks on average could be subject to further selling pressures in May and could underperform relative to the market. 
• Among these 46 stocks, the top 6 market cap stocks include KG Mobility, Dongwon Industries, Hugel, Yunsung F&C, Enchem, and Jeio. 

• Adjusted net profit at China Education Group (839 HK) grew 15.1% in 1H23, accelerated from 5% in 2H22. We are delighted to see resumption of interim DPS at Rmb0.164.
• FY23 outlook will be underpinned by higher education student enrollment and tuition increase. Strengthened financial position offers opportunities for both organic and M&A growth.
• Potential upside will also come from completion of for-profit conversion at Jiangxi University of Technology. We consider its 7.9x PER, 1x P/B, 13.3% ROE and 5.5% yield attractive.

• Founded in 2018, Lionheart Studio (426630 KS) is a South Korean multiplayer online role-playing games developer for mobiles and PCs.
• The company’s game Odin: Valhalla Rising was based on Nordic mythology and was a huge success. Lionheart is planning to add more expansions to Odin.
• The company tried to go public in October 2022 on KOSDAQ however, it cancelled its listing plans due to negative market sentiments at the time.   

• We think the coffee price competition, mainly between Luckin and COTTI, is temporary, and will have little impact to Luckin’s gross margin. 
• We also think COTTI’s low pricing strategy is unsustainable, and its franchisees are keen for price hike.  
• We maintain the stock as BUY and maintain TP at US$41.

• Strong demand for Eicher Motors (EIM IN) ‘s Royal Enfield bikes with returning customers.
• The model “Hunter” is expanding the market and attracting a new set of customers.
• Royal Enfield entering a new growth phase with new launches and customer service focus.

• Our 2023 outlook, initially discussed in our January 6th 2023 Int’l Compass, was for $93 to cap upside on the MSCI ACWI (ACWI-US); this has again proven prescient.
• Since late-January/early-February we have recommended shifting to defensives, and MSCI ACWI defensive Sectors including Health Care (IXJ-US), Utilities (JXI-US), and Consumer Staples (KXI-US) are now hitting 3-4-month RS highs.
• With the ACWI-US just now starting to turn down after testing $93, we continue to recommend a tactical overweight to the aforementioned defensive Sectors, and also to gold miners (GDX-US).

We view Studio City as “Medium Risk” on the LARA scale. Our view considers the implied credit support from parent Melco Resorts & Entertainment (MLCO). We believe Studio City’s single-asset risk is mitigated by MLCO’s good management track record. The asset is well-located in Macau’s Cotai Strip, and is adjacent to the checkpoint connecting to Hengqin Island in Zhuhai. Studio City is positioned towards the mass-market segment, which is set to grow at a much faster pace than the VIP segment.

Our fundamental Credit Bias on Studio City is “Stable”. The company is poised to benefit from industry tailwinds, driven by the faster-than-expected recovery in gross gaming revenue (GGR) following China’s swift reopening. Moreover, its earnings may accelerate from H2/23, supported by the opening of Phase 2. Studio City does not have any debt maturities until July 2025. 

Controversies are “Immaterial”. Some ESG-compliant funds may be prohibited from investing in Studio City, due to the nature of its core business (casinos). That said, Macau’s gaming industry is established, transparent and highly regulated. We believe the curtailment of junket activities would help enhance operators’ transparency. Moreover, the authorities are seeking to reduce the city’s reliance on gaming and promote leisure tourism in the medium term. These factors should mitigate ESG-related risks. Overall, the ESG Impact on Credit is “Neutral”.

• ADEA has seen its stock price decline in the past month since announcing license agreements with two major NAND memory makers
• This could have put too much emphasis on the semiconductor side of the business even though it is purely additive to the business model
• The expected year over year decline in first quarter 2023 revenue is related to one-time license payment last year