Daily Brief Consumer: Mazda Motor, Seven & I Holdings, WA Inc, BYD, TSE Tokyo Price Index TOPIX, Volkswagen (Pref), Genting Bhd, Onward Holdings, Taste Gourmet, IDOM Inc and more

• Up to 9 stocks could be deleted from global passive portfolios in November. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
• There has been a buildup of shorts on nearly all these stocks though the extent of the pre-positioning varies.
• The increase in shorts is smaller than the estimated passive selling, though there is a fair amount of variability across the names.

• Some two weeks after it became apparent Alimentation Couche-Tard (ATD CN) had lobbied a bid in for Seven & I Holdings (3382 JP), Artisan Partners wrote a letter.  
• It was full of misguided analysis, ungrounded insinuation of a general nature without specifying where they would have a problem. It seemed to be complaint for the sake of complaint.
• Today another public letter. This time there are a couple of worthwhile suggestions, some accusations of fiduciary impropriety based on no evidence, and an implicit admission they should have sold?

• Yesterday WA Inc (7683 JP) announced that on the five year anniversary of its listing in 2019, the stock would move to TSE Prime on 1 November 2024
• They also announced a secondary offering of 2.86mm shares including greenshoe. That’s 15% of shares out but the offering will double total float. This is almost a re-IPO.
• This will lead to a TOPIX inclusion on 27 December which will be smaller than the offering. This will be all retail. 

• BYD’s deliveries growth accelerated to 36% YoY in Aug and 46% YoY Sep.
• The whole domestic NEV (New Energy vehicle) market has been accelerating for for the entire third quarter.
• We believe the EU and the US market are not concerns, as both domestic and other emerging markets are promising.

• It’s understandable that compensation is paid for managing a global business and achieving significant growth, but it’s also paid for bloated performance in yen terms due to the weak yen.
• Employee engagement is very important for value-added products and more money should be spent on human capital. Otherwise, higher profit margins are unlikely to be achieved.
• The election of directors at AGMs rarely results in rejection of the company’s proposal. Cross-shareholdings should be reduced so that managers whose “employment” is protected by cross-shareholdings don’t receive commensurate compensation.

• Since mid-September, share-price spreads have generally widened across our European liquid universe of ordinary and preferred shares (9 have tightened, 10 widened).
• Recommended trades long preferred / short ordinary shares: Atlas Copco, Grifols SA, Media-for-Europe, Volkswagen.
• Recommended trades long ordinary / short preferred shares: Carlsberg, Henkel, SSAB Svenska Stal.

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.

• Adani Green Energy
• Anton Oilfield

• Most of Onward’s current customers are in their 40s and older but the purchase of casual clothing retailer, Wego, increases its exposure to people in their teens and 20s. 
• It will accelerate development of new omnichannel brands to match as part of plans to grow sales by 50% in the next six years and more than double operating profits.
• Onward itself has been transformed by a switch to omnichannel and after years of slashing stores and sales now looks set to become a growth business again.

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
• Our top picks are Perfect Medical Health (1830 HK), The Keepers Holdings (KEEPR PM), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and Ginebra San Miguel (GSMI PM).
• We preview Taste Gourmet’s (8371 HK) earnings for H1 FY24, which will be declared in November. 

• In 1H FY02/25, sales rose JPY46.0bn (22.6%) YoY, driven by large store operations and retail unit sales.
• Operating profit increased JPY3.0bn (42.1%) YoY, with gross profit per retail unit rising to JPY440,000 (+60,000 YoY).
• Revised FY02/25 forecast projects sales of JPY500.0bn (+19.1% YoY), operating profit of JPY20.3bn (+26.0% YoY).