Daily Brief Consumer: I-NE , Poly Culture Group Corp H, Meituan, PDD Holdings , Genting Bhd, Tuhu Car, Las Vegas Sands, Nongfu Spring , Instacart, Yaizu Suisankagaku Industry and more

• Skincare/Cosmetics company I-NE (4933 JP) on 31 August (¥2947) announced it would move to TSE Prime on 19 September, and announced a Secondary Offering by CEO Onishi-san to get there.
• There was no greenshoe provided. The stock popped. Then drifted back to ¥3025 and the Offering priced today at ¥2,934/share. 
• 75% went to Asian/European (non-US) offshore investors, and the rest to onshore institutions, which is unusual. But now we look to the TOPIX inclusion.

• The pre-condition relating to Poly Culture Group Corp H (3636 HK)’s privatisation offer from Poly Group at HK$8.88 per H Share has been fulfilled. 
• The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). No independent H Shareholder holds a blocking stake.
• The offer’s 77.6% premium to the undisturbed price and no minimum acceptance condition will help completion. At the last close and for 1 November completion, the gross/annualised spread is 7.1%/64.3%.

• The street’s expectations for Meituan’s bottom line have gone too pessimistic for 2023 while in the meantime too optimistic for 2024 and beyond.
• Besides the macro weakness, we see the company’s growth increasingly be constrained by the business model itself, resulting in only 14% CAGR for bottom line over 2023-25 by our calculation.
• We take investors’ indifference to Meituan’s strong bottom line growth for 2023 as a signal they are discounting the sharp deceleration kicking in from 2024. Stay neutral.

• Grizzly Research’s track record, especially with accusations against well-known Chinese ADRs like NIO (NIO US), ZTO Express Cayman (ZTO US), and Gaotu Techedu (GOTU US), hasn’t been successful lately.
• Despite past setbacks, the company has recently targeted another renowned Chinese ADR, PDD Holdings (PDD US).
• Grizzly Research alleges that Pinduoduo’s shopping app, “TEMU,” is a harmful malware/spyware secretly extracting user data.

We view Genting Berhad as “Low Risk” on the LARA scale. The company has a diversified business profile, having successfully expanded its gaming operations to six countries. In addition, it has minor businesses in plantations, oil & gas and power generation. Genting Berhad has a solid business position in Malaysia (where it is the sole casino licence holder) and Singapore (where it operates in a duopoly with Marina Bay Sands). Despite Genting Berhad’s expansion over the years, the company has maintained a prudent financial profile with moderately healthy leverage.

Genting Berhad’s USD notes are issued by its various subsidiaries. It is not an issuer and does not provide parental guarantees for any of the bonds. This means investors must assess the standalone credit profile of each individual issuer.

Our fundamental Credit Bias on Genting Berhad is “Stable”. We expect the company’s leverage to continue improving, supported by earnings recovery from the COVID-19 pandemic-induced downturn. Genting Berhad is reportedly among the frontrunners vying for a casino licence in New York (housed under Genting Malaysia), albeit the outcome is still uncertain at this point.

Controversies are “Immaterial” in our view. In 2019, a small group of Greenpeace activists briefly protested against Genting Plantations over forest fires in Indonesia, albeit the company denied the allegations. Some ESG-compliant funds may be prohibited from investing in Genting Berhad and its subsidiaries, due to the nature of its core businesses (casinos and oil palm plantations). That said, the group’s main gaming operations are in established and well-regulated markets (Malaysia, Singapore, the UK and Las Vegas). Overall, the ESG Impact on Credit is “Neutral”.

• We contacted drivers here in Shanghai and asked about their experience at Tuhu stores.
• Franchised stores are well positioned in the aftermarket and Tuhu is the largest store chain among them.
• However, Tuhu sets high standards for workshops, but average standards for mechanics.

• Las Vegas Sands (LVS US) is coming up “cheap” on my monitor as Macau’s gross gaming revenue touches a new post-Covid high. 
• Preceding my comments on LVS are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• The growth rate of total revenue accelerated to 23% YoY in 1H23 from 15% YoY in 2H22 and 9% YoY in 1H22.
• Tea revenue grew by 60% YoY in 1H23 as the company caught the fashion of sugar free.
• We believe the stock has an upside of 41% for yearend 2024.

• Instacart is targeting a valuation between US$8.6 billion to US$9.3 billion in its IPO. Instacart’s valuation has declined nearly 77% from its peak levels US$39 billion a few years ago.
• Established in 2012, Instacart is a leading players in North America of delivering online grocery goods to consumers’ homes.
• Instacart generated sales of US$2.6 billion (up 39.1% YoY), gross profit of US$1.8 billion (up 49.3% YoY), and operating profit of US$62 million (turned black YoY) in 2022.

• The Board of YSK has recommended that shareholders accept a TOB for the company’s shares
• Although a 35% premium to the undisturbed share price, the deal is not particularly generous to long-suffering shareholders
• Activist investor, Minami Aoyama, has been buying a significant stake in YSK. Will the deal go through?