Daily Brief Consumer: Samsonite, Sun Art Retail, Meituan, China Motor, Tesla , Cocoa Futures, United Arrows, Vera Bradley, elf Beauty Inc and more

• It seems like every week, Bloomberg reports a HK-listed company weighing privatisation options. HKBN (1310 HK), ESR (1821 HK), and Samsonite (1910 HK) have all been rumoured of late.
• Last Friday, Samsonite announced it was focused on pursuing the listing of its shares on a second exchange.
• No preferred exchange was mentioned. Nor whether the goal is to secure a dual primary listing, or a secondary listing. A buyout, for now, appears to be on the backburner.

• It’s time to revisit the network of Alibaba’s ( Alibaba Group Holding (9988 HK) ) affiliated listed companies for near term investment opportunities
• After investing in an ecosystem of online and offline companies over the last 10 years, Alibaba is rapidly restructuring its businesses to refocus on its most profitable opportunities
• Sun Art Retail (6808 HK) will benefit from the synergies of Baba’s restructuring

• Total revenue grew by 22.6% YoY in 4Q23, three percentage points higher than we expected.
• MT’s operating profit broke even for the fiscal year 2023.
• We conclude an upside of 113% and a price target of HK$188. Buy.

• In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the June 2024 index rebal event.
• I currently see 5 ADDs and 5 DELs but there are several names close to the border and expectations could change before the base date as prices move around.
• The estimate for one-way flow in June 2024 is US$1.22bn.

• You know it’s bad when Tesla’s delivery trends blow through even my lowest estimates, which already had trailed market projections.
• With no help from the hapless CyberTruck which, not surprisingly, continues to shoot Tesla in the foot.
• See my latest Q1 and full-year estimates—which still prove to be too high.

• Fund Manager Positioning In March fund managers added to their energy position but reduced overall commodities like grains, softs and metals on a MoM basis — the latest BofA survey shows.
• Investors have been underweight commodities now for the past 4 months (longest underweight streak since Aug’19) Compared to the past 20-year z-score, fund managers remain heavily underweight in commodities and even more in energy.
• In March fund managers added to their energy position but reduced overall commodities like grains, softs and metals on a MoM basis — the latest BofA survey shows.

• United Arrows (7606 JP) is an industry leader in operating clothing select shops in Japan, and is the eighth largest apparel company in the country in terms of sales value.
• In FY03/23, United Arrows reported revenue of JPY130.1bn, operating profit of JPY6.4bn, recurring profit of JPY6.9bn, and net income attributable to owners of the parent of JPY4.3bn
• In May 2023, the company announced its long-term vision ending in FY03/33 and medium-term management plan ending in FY03/26 as the first step.

Meituan has released FY 2023 numbers that were excellent in our view, with significantly improved profitability and solid cash generation. The financial risk profile has strengthened further, with a large and growing net cash position coupled with robust leverage and coverage ratios. Liquidity is sound. We expect FY 2024 to be a better year for the company.

We revise our Credit Bias on Meituan to “Positive” from “Stable”, given the material increase in profitability and strong cash-flow generation following the pandemic. That said, we do not expect ratings upgrades in the near future.

• We are reiterating our Buy rating, $10 price target and projections for Vera Bradley after visiting stores in Connecticut and Long Island.
• We believe, as we near the launch of management’s full vision for Vera Bradley in July, both the outlets and main line locations increasingly reflect what is being added and what will be discarded in the shift.
• As such, we are seeing less inventory, especially in the outlet stores, flow in; further, there is an increasing emphasis on core categories, especially handbags, totes and luggage.

• We are reiterating our Buy rating and $0.25 price target for Starco Brands with the company announcing 4Q23 (December) results after the close on Monday.
• We believe 2024, with a full compliment of unique, value-added brands which leverage Starco’s aerosol and marketing infrastructure in hand, and a laser focus on adding key categories and new relationships, is shaping up as another year of material progress for Starco.
• We believe there are also continued margin expansion opportunities from both economies of scale and the company’s manufacturing expertise.