Daily Brief Consumer: Sony Corp, Alibaba Group, Sing Tao News Corp, Vedant Fashions, DXN Holdings, The Keepers Holdings, Dentsu Inc, Dmall Inc and more

• Sony Corp (6758 JP) reported earnings on 28 April, which saw profit-taking the next day after a brief two-day run-up, as revenues, OP, and NP were guided down.
• There previous ¥200bn buyback ended about two weeks later. Yesterday they launched a new ¥200bn buyback, and the stock reacted well this AM. And then BIG new news this morning.
• Sony announced an assessment of a partial spin-off of Sony Financial. Assessment this FY, spinoff “within next 2-3yrs” (if possible). This garnered more excitement. Brief analysis of both follows.

• On 28th Mar 2023, Alibaba Group (9988 HK)  announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
• Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
• In our previous note, we highlighted which division could list. In this note, we will look at the Cloud segement.

• Alibaba’s revenue from physical stores decreased year over year for the first time.
• The operating margin declined despite that Alibaba cut losses in minor businesses.
• We conclude an upside of 15% and a price target at HK$101. Downgrade to Hold.

• Sing Tao News Corp (1105 HK), which owns Hong Kong’s oldest and third-largest Chinese language newspaper, is suspended pursuant to the Hong Kong Code on Takeovers and Mergers.
• A takeover of Sing Tao was mooted in 2019-2021 when Charles Ho, the former chairman, sought to exit his 48.98% stake; but that transaction fizzled out.
• At a market cap of just US$50mn, this (likely) Offer hardly rates a mention. Yet a takeover of a Hong Kong newspaper is still newsworthy.

• Vedant Fashions (MANYAVAR IN)‘ Promoter is looking to raise US$239m via trimming a 7% stake in the firm. 
• The selldown here is to meet the minimum public shareholding requirement of 25% set by SEBI.
• The deal would be a large one to process with the base deal alone representing 187 days of the firm’s three month ADV.

• Alibaba (ADR) (BABA US)‘s 4QFY23 OP beat consensus by around RMB 2.5bn (20% beat) through cost cutting, but YoY revenue growth remained sluggish at 2.0%.
• Consensus expectations of Alibaba achieving an OP of RMB 150bn by FY25 may be overly optimistic due to declining dominance of Taobao and Tmall, and lack of profitable alternative businesses.
• Alibaba Group (9988 HK) would need to excel to reach RMB100bn OP, resulting in a high FY+2 EV/OP of 14.0x. This seems steep for a company with minimal earnings growth.

• DXN Holdings (2080694D MK) raised around US$147m in its Malaysian IPO.
• DXN Holdings (DXN) is a global health-oriented and wellness direct selling company.
• In this note, we will talk about the trading dynamics.

• The Keepers Holdings (KEEPR PM) reported solid revenue growth of 33% YoY for Q1 2023, but profitability disappointed our expectations coming in a 26.5% YoY(vs. >50% our expectation).
• The primary reason for the disappointment was Bodegas W&H coming in with a 6mn peso profit in Q1 due to seasonality, one-offs, and cost increases (Vs. 100mn peso Q42022 profit).
• While trends remain strong on the core business, with the stock trading at 8.3x/7.1x FY23e/24e, with a 4.7/5.5% dividend yield, Bodega’s performance is an eyesore that we will monitor. 

Dentsu Group had demanding Q123 on Q122 comparisons and, with the acquisition contributions, we are not too concerned about the read-across for the rest of FY23, with performance skewed to H2. Progress in Customer Transformation and Technology (CT&T), up 6.7% in Q123 and now 35% of group net revenue, should buoy medium-term growth. Tag, the acquisition announced in March and expected to complete in early Q323 (subject to regulatory clearances), is another step towards the 50% CT&T target. We anticipate a return to margin expansion in FY24 as one-off factors retreat, the transition progresses and cost benefits from the ‘One dentsu’ initiative start to flow. The valuation remains at a marked discount to global peers.

• Dmall Inc (1751691D CH) is looking to raise around US$200m in its upcoming Hong Kong IPO.
• Dmall provides cloud-based, end-to-end SaaS platform purpose-built for the Chinese retail industry.
• In this note, we will talk about the not so positive aspects of the deal.