Daily Brief Equity Bottom-Up: China Tourism Group (601888 CH and more

• China Tourism Group Duty Free Corp Ltd (601888 CH)  (CTG) share price has plunged by 63% despite solid 9M23 profits growth and cash flushed balance sheet 
• Underlying fundamentals is solid, Chinese people still buying duty free goods, albeit tilting towards value than decadence purchases 
• CTG is cheap relative to its own history on all valuation metrics (PE, P/Book, P/FCF) and many technical indicators suggest it is in OVERSOLD territory 

• Li Auto’s deliveries and revenues surged by three digits since 3Q23.
• The company is building new factories in Changzhou and Beijing. 
• However, we believe the stock is overvalued apart from comparing with Tesla.

• AKR Corporindo (AKRA IJ) recently hosted an analyst meeting where it provided some positive guidance for FY2024, with projections of double digit net profit growth with growth across all segments.
• The core trading and distribution business is expected to see positive growth in 2024 with  the real kicker to come from its JIIPE industrial Estate plus recurrent income from utilities.
• AKR Corporindo (AKRA IJ) is an increasingly holistic play on Indonesia’s growth through its fuel and chemical distribution, which is being hosted by smelters and the EV battery complex.

• Adelson family interests have sold 10% of their LVS equity to acquire a pro basketball franchise. This triggered am 8.5% decline in the stock when it was actually  bullish.
• The market has not yet grasped the magnitude of  the Asian  gaming  recovery arc which points to 2024 reaching baseline 2019 arrivals and GRR pace by mid-2024.
• LVS has the scale and amenities to outperform peers but this  is  not  yet reflected in its trading  range dead pooled in  the $40s.

• JWD Acquisition: Infroneer acquires Japan Wind Development for ¥200 billion, sparking a ¥75 billion market cap dip and concerns about potential overpayment.
• Valuation Analysis: Using DCF and comparable transaction values, estimates suggest JWD’s equity value may be far lower than the agreed-upon ¥200 billion.
• Need for Transparency: Infroneer’s claim of fair value requires scrutiny. Market suggests an estimated fair value of ¥125 billion, emphasizing the need for detailed information on the acquisition.

• Consumption of used products is rising fast as exemplified by the rise of 2nd Street. 
• Operated by Geo Holdings (2681 JP), once just a DVD rental business, it is now Japan’s largest used goods retailer.
• Sales are booming in a market increasingly focused on thrift and re-use, allowing 2nd Street to even take on the might of Mercari.

• IDFC First Bank Limited (IDFCBK IN)  has built a banking franchise that holds the best promise among the mid-sized banks in India for long-run outperformance.
• A high-yielding and retail-oriented loan book, track record of pristine asset quality, superior funding profile boosting best-in-class retail deposit base, and incrementally improving unit economics.
• We value the stock as a long-term Buy, with 35% upside in near-term, as the bank continues to realize the benefits of its increasing scale on its earnings profile.

Templeton Emerging Markets Investment Trust’s (TEMIT’s) co-managers Chetan Sehgal (lead manager) and Andrew Ness consider that the case for emerging markets is not well understood. Hence, they believe that the regions remain under-owned, undervalued and under-appreciated, which provides an interesting opportunity for global investors. There are several powerful trends supporting the superior economic growth prospects of emerging markets versus those in developed regions, including demographics, urbanisation, higher consumption and technological innovation. Emerging markets also remain relatively attractively valued. TEMIT’s performance versus the MSCI Emerging Markets Index troughed in April 2022 and is in a steadily improving trend. The trust’s results tend to be better when investors focus on company fundamentals, which drive equity returns over the long term, rather than considering near-term macroeconomic events.

• Takachiho Koheki is a trading company highly specialized in electronics technology, introducing the world’s cutting-edge electronics products to Japan ahead of competitors, positioned as a specialized technical group with engineering employees accounting for 42.2% of its workforce.
• The company’s electronics products and IT solution services help solve modern social issues of great concern such as crime control and prevention, labor shortages and labor savings, and climate change and disasters.
• In 1H FY24/3, the company reported consolidated net sales of ¥12,729 mn (+14.5% YoY), operating profit of ¥713 mn (+22.2% YoY), ordinary profit of ¥1,057 mn (+18.2% YoY), and profit attributable to owners of parent (hereinafter, net profit) of ¥717 mn (+9.2% YoY).

• So there we were today, scanning the latest corporate filings to the Securities and Exchange Commission , when we noticed that Johnson Controls ($JCI) had filed its latest earnings report .
• We started reading, and were immediately stopped short by this earnings adjustment, right there in the second bullet point: Fiscal Q4 GAAP EPS of $0.80; Q4 Adjusted EPS of $1.
• Hold up — what cybersecurity incident? When did that happen, and what has Johnson Controls said about it so far?