Daily Brief Consumer: Tata Motors Ltd, Unilever PLC, TSE Tokyo Price Index TOPIX, Jade Group, Melco Resorts & Entertainment, Golf Digest Online, Card Factory, Select Comfort, Kayou and more

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.

• Tata Motors ADR
• Xiaomi Corp

• Unilever announced plans to separate its ice cream business into a separate publicly listed company (SpinCo), potentially via a spin-off transaction.
• Post separation, Unilever will focus on four core businesses: beauty and wellbeing, personal care, home care, and nutrition. The separation is expected to be completed by the end of 2025.
• The separation will allow Unilever to allocate capital and resources more efficiently towards higher growth categories with significant potential to scale.

• Nominal GDP grew 1.8% from 2012 to 2017, higher than the annual average over the past 33 years, in anticipation of an escape from deflation, but TOPIX gains have stalled.
• Nominal GDP from 2021 to 2023 will grow 3.8% per year, far above the average of the past 33 years, and the correlation with TOPIX is even higher.
• With average P/B showing little correlation with TOPIX after 2020, expanding nominal earnings without losing out to rising prices seems to be a more important factor for stock price appreciation.

• Jade Group has acquired Magaseek and will merge the online mall with its own fashion e-commerce platform, Locondo and hopes to create a growing rival to Zozo.
• Magaseek was founded by Itochu 20 years ago, and the deal underlines Itochu’s growing influence over Jade as a proxy for its ambitions in fashion e-commerce and distribution.
• However, Jade Group has seen little organic growth for its Locondo platform in recent years, and while its acquisitions have added scale, integration has been haphazard.

Melco Resorts and Entertainment (MLCO) announced yesterday that it is planning to issue USD 500 mn in 8NC3 notes. In addition, subsidiary Studio City has initiated a tender offer to repurchase up to USD 100 mn of the STCITY 6.0 ’25s. We view positively MLCO’s proposed bond issuance and the maturity extension of its credit facilities, as well as Studio City’s tender offer, as they demonstrate management’s proactive approach in managing the company’s debt maturities. The transactions will significantly reduce MLCO’s refinancing risk in FY 2025, as the company would have c. USD 1.5 bn of availability under its credit facilities that can be used to help repay the USD 1.0 bn MPEL 4.875 ’25s due in June 2025. Moreover, management has committed to prioritise debt reduction over dividend payments in FY 2024.

We view the price talk of 7.75-7.875% as fair.

• On the surface, FY23/12 consolidated OP -68% YoY, profit ATOP -53%, and FY24/12 initial guidance for a profit ATOP net loss may appear to indicate a challenging earnings environment.
• However, closer examination reveals steady earnings improvement, and the new MTP through FY26/12 targets recouping major overseas growth investments.
• The table below shows sequential improvement in the amount change YoY for Group EBITDA, OP and profit ATOP every quarter, with profits at all 9 levels posting YoY gains in the 4Q.

• Given that it has already been 6 months since I first bought Card Factory and the stock is currently trading only slightly above my average purchase price, I decided to send you guys a short and sweet thesis on why I believe $CARD.L is an attractive opportunity.
• Card Factory is a greeting card and other “celebration essentials” retailer operating primarily in the UK.
• What is unique about the Northern Europeans, particularly the British, is their habit of buying greeting cards. It is ingrained in their culture

• Decision to invest in Sleep Number Corporation (SNBR) due to cyclical downturn in mattress sector
• SNBR seen as potential opportunity for cyclical turnaround despite drop in stock value since COVID-19 peak
• SNBR targets older, affluent customers with high-end mattresses sold through physical stores; has maintained constant market share for past decade

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Kayou is looking to raise up to US$500m in its upcoming HK IPO.
• Kayou is a Chinese pan-entertainment product retailer of toys, with trading cards in particular as its core product.
• In this note, we talk about the not-so-positive aspects of the deal.