Daily Brief Consumer: Seoul Broadcasting System, Del Monte Pacific, Trial Holdings, Fu Shou Yuan, Pinduoduo, Melco Resorts & Entertainment, Fast Retailing, Mcdonald’s Corp, Xpeng and more

• Hankyung exclusively reported that the Korean regulators were considering abolishing the foreign ownership limit. This morning, the Ministry of Economy and Finance released a statement that this report is untrue.
• Nevertheless, circumstantially, given the current government’s all-out effort to make it to MSCI Developed Market status, there is a high possibility that it will resurface not too far from now.
• Four out of the 33 foreign ownership-restricted stocks will likely be immediately affected: SKT, KT, and Korea Gas (MSCI inclusion) and SBS (flow improvement).

• Global branded food and beverage outfit Del Monte Pacific (DELM SP) recently announced group sales grew by 3% to US$68mn in the 3Q23 (April Y/E).
• However net profit declined by 62% to US$9.8mn due to lower operating results and increased interest expense from higher cost bank loans.
• Del Monte’s net debt, net gearing, and net debt/EBITDA were S$2.2bn, 582.5%, and 6.1x, compared to S$1.45bn, 211%, and 4.2x a year ago. 

• Trial Holdings (5882 JP)  is looking to raise around US$375m in its Japan IPO.
• TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
• In this note, we will undertake a peer comparison against some of its listed peers.

• After a dip in earnings in FY22, Fu Shou Yuan (1448 HK) guides for an encouraging rebound in FY23 with at least 35% revenue and 30-35% net profit growth.
• We think the 12.7% growth in earnings in 2H22, against -28.9% in 1H22, showed that pandemic impact has faded. It is still very well positioned to benefit from aging population. 
• Net cash equals 19% of its share price and its 13.9x PER for FY23 is not expensive relative to peers. We estimate, ex-cash, ROE is at a high of 24%. 

• In 4Q22, revenue grew by 46% YoY, lower than consensus, but higher than competitors.
• The operating margin improved significantly from 7% in 2021 to 23% in 2022.
• We believe the stock has an upside of 31% and a price target of US$120.

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.

• Melco Resorts & Entertainment
• Sunny Optical

• We don’t think that a strong-looking demand in the domestic market is sufficient to warrant an upside to Fast Retailing (9983 JP)’s current consensus FY+2 EV/OP of 19.9x.
• Although on the downside we see significant risks with China’s rebound, decelerating revenue growth in high growth markets and margin pressure from wage hikes and inventory growth.
• Therefore, we think the company’s FY+2 EV/OP could potentially go down to around 15.0x, which is towards the bottom end of Fast Retailing’s pre-COVID FY+2 EV/OP range.

• Trial Holdings (5882 JP) is looking to raise around US$375m in its Japan IPO.
• TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
• In this note, we talk about earnings forecast and provide our thoughts on valuation.

• Our estimations for 2022 annual revenue range around €22,982 million and for 2023 around €23,696 million.
• The company’s annual revenue reached €23,223 million in 2021 compared to €19,208 million in 2020, posting an in- crease by 20.9%.
• McDonalds’ gross profit for 2021 was €12,580 million, increased by 29% compared to the €9,752 million for the corresponding period of 2020.

• Xpeng reported soft 4Q22 results, with top line of RMB 5.14bn, missing our estimate/cons. by (5.6%)/(9.7%); GPM of 8.7%, missing our estimate/cons. by (1.6ppt)/(3.4ppt), primarily due to increased sales promotions. 
• We maintain SELL, because 1) price war and intensified competition in 2023 are still key challenges facing its existing and new models; 
• 2) margin pressure ahead amid the price war, while its cost reduction initiatives starting from 2H23 take time to verify effect.