IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/dada-nexus-ltd" target="_blank" data-smartkarma-citation="entities:28961:1" rel="noopener">Dada Nexus (DADA US)</a> has filed the <a href="https://ir.imdada.cn/static-files/159abee6-f8ee-4ad7-ac9a-e1943183d072" target="_blank" rel="noopener">13E-3</a> relating to the binding proposal from <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a> at US$2.00 per ADS, a 41.8% premium to the undisturbed price.</li>
<li>The 13E-3 filing provides more details on the price negotiations, required regulatory approvals and IFA valuation. Crucially, no Chinese regulatory approvals are required.</li>
<li>The completion conditions are low-risk. At last close and for an end-September payment, the gross/annualised spread is 5.4%/12.1% (including the US$0.05 ADS cancellation fee). </li>
</ul>



Dada Nexus (DADA US) has filed the 13E-3 relating to the binding proposal from JD.com Inc (ADR) (JD US) at US$2.00 per ADS, a 41.8% premium to the undisturbed price.
The 13E-3 filing provides more details on the price negotiations, required regulatory approvals and IFA valuation. Crucially, no Chinese regulatory approvals are required.
The completion conditions are low-risk. At last close and for an end-September payment, the gross/annualised spread is 5.4%/12.1% (including the US$0.05 ADS cancellation fee). 


Dada Nexus (DADA US): Takeaways from the 13E-3 Filing

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/903/original/2020-09-09_10-14-19.png?1599614088" class="editor-image img-responsive" data-smartkarma-image-id="157903"></figure><div class="content-caption">Source for all charts: Japan Analytics</div>LISTED RESTAURANTS - Japan currently has 102 listed restaurant companies with an aggregate market value of ¥4.9 trillion, representing 2.6% of all listed companies and 0.9% of total market value. Only thirteen companies are capitalised at over ¥100 billion, and forty-one have a market value of less than ¥10 billion. The Sector is ripe for consolidation and COVID-19 should provide a catalyst for an acceleration of the process.  Both <a href="https://www.smartkarma.com/entities/create-restaurants-holdings-inc" target="_blank" data-smartkarma-citation="entities:11513:1" rel="noopener">create restaurants (3387 JP)</a>, and <a href="https://www.smartkarma.com/entities/colowide-co-ltd" target="_blank" data-smartkarma-citation="entities:13967:1" rel="noopener">Colowide (7616 JP)</a> have positioned themselves as consolidators, but have become highly leveraged in the process.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/917/original/File%202020-09-09%2010%2025%2051.jpeg?1599614981" class="editor-image img-responsive" data-smartkarma-image-id="157917"></figure>Also, the Sector is highly fragmented and segmented by type of food and concept. Only nineteen companies can be deemed 'diversified'. Furthermore, there are only five listed take-out/delivery specialists, of which <a href="https://www.smartkarma.com/entities/ride-on-express-co-ltd" target="_blank" data-smartkarma-citation="entities:2812:1" rel="noopener">Ride On Express (6082 JP)</a> has been the best performer. Overall, the Sector has declined by 3.6% over one year and by 3.2% over three months - a third quartile performance. Colowide's 31% rise over the last month has pushed the Sector into fourth place amongst our thirty market Sectors, fueled by the apparent success of the tender offer for <a href="https://www.smartkarma.com/entities/ootoya-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7329:1" rel="noopener">OOTOYA (2705 JP)</a>.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/928/original/2020-09-09_10-38-37.png?1599615530" class="editor-image img-responsive" data-smartkarma-image-id="157928"></figure>YUTAI KEN - One important consideration for investors to note is the widespread practice of offering kabunushi yutai-ken. In addition to dividends, shareholders are sent coupons that can be redeemed at most of the company's restaurants. Many specialist publications review such programs and offer stock recommendations based on the yutai-yield. As a result, restaurant companies in Japan have some of the highest shareholder counts among listed companies. As coupon-customers normally top-up their spending, this practice helps provide a basic level of cash flow but is a costly exercise to administer. However, there is the added benefit of limiting the number of shares for shorting.<a href="https://www.smartkarma.com/entities/yoshinoya-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:14630:1" rel="noopener"></a>100,000+ CLUB - <a href="https://www.smartkarma.com/entities/yoshinoya-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:14630:1" rel="noopener">Yoshinoya (9861 JP)</a>, <a href="https://www.smartkarma.com/entities/atom-corp" target="_blank" data-smartkarma-citation="entities:12420:1" rel="noopener">Atom (7412 JP)</a>, <a href="https://www.smartkarma.com/entities/zensho-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:4586:1" rel="noopener">Zensho (7550 JP)</a>, <a href="https://www.smartkarma.com/entities/kappa-create-co-ltd" target="_blank" data-smartkarma-citation="entities:19456:1" rel="noopener">Kappa Create (7421 JP)</a>, <a href="https://www.smartkarma.com/entities/komeda-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:24019:1" rel="noopener">Komeda (3543 JP)</a>, and <a href="https://www.smartkarma.com/entities/create-restaurants-holdings-inc" target="_blank" data-smartkarma-citation="entities:11513:1" rel="noopener">create (3387 JP)</a> are all in the top-fifty listed companies ranked by the number of shareholders. All exceed 100,000 shareholders -  beef-bowl chain Yoshiniya has 308,265 exceeding <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" data-smartkarma-citation="entities:20799:1" rel="noopener">Mitsui (8031 JP)</a> which has twenty-four times the capitalisation.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/157/942/original/2020-09-09_11-15-31.png?1599617746" class="editor-image img-responsive" data-smartkarma-image-id="157942"></figure>In this DETAIL below, we shall review Colowide's long-term performance, returns and valuation and offer a view on the prospects for further consolidation. The Colowide group currently comprises of two listed chains - <a href="https://www.smartkarma.com/entities/kappa-create-co-ltd" target="_blank" data-smartkarma-citation="entities:19456:1" rel="noopener">Kappa Create (7421 JP)</a> and <a href="https://www.smartkarma.com/entities/atom-corp" target="_blank" data-smartkarma-citation="entities:12420:1" rel="noopener">Atom (7412 JP)</a> and the franchise chain Reins International which also operates in Asia and the US.

Source for all charts: Japan AnalyticsLISTED RESTAURANTS - Japan currently has 102 listed restaurant companies with an aggregate market value of ¥4.9 trillion, representing 2.6% of all listed companies and 0.9% of total market value. Only thirteen companies are capitalised at over ¥100 billion, and forty-one have a market value of less than ¥10 billion. The Sector is ripe for consolidation and COVID-19 should provide a catalyst for an acceleration of the process.  Both create restaurants (3387 JP), and Colowide (7616 JP) have positioned themselves as consolidators, but have become highly leveraged in the process.Also, the Sector is highly fragmented and segmented by type of food and concept. Only nineteen companies can be deemed 'diversified'. Furthermore, there are only five listed take-out/delivery specialists, of which Ride On Express (6082 JP) has been the best performer. Overall, the Sector has declined by 3.6% over one year and by 3.2% over three months - a third quartile performance. Colowide's 31% rise over the last month has pushed the Sector into fourth place amongst our thirty market Sectors, fueled by the apparent success of the tender offer for OOTOYA (2705 JP).YUTAI KEN - One important consideration for investors to note is the widespread practice of offering kabunushi yutai-ken. In addition to dividends, shareholders are sent coupons that can be redeemed at most of the company's restaurants. Many specialist publications review such programs and offer stock recommendations based on the yutai-yield. As a result, restaurant companies in Japan have some of the highest shareholder counts among listed companies. As coupon-customers normally top-up their spending, this practice helps provide a basic level of cash flow but is a costly exercise to administer. However, there is the added benefit of limiting the number of shares for shorting.100,000+ CLUB - Yoshinoya (9861 JP), Atom (7412 JP), Zensho (7550 JP), Kappa Create (7421 JP), Komeda (3543 JP), and create (3387 JP) are all in the top-fifty listed companies ranked by the number of shareholders. All exceed 100,000 shareholders -  beef-bowl chain Yoshiniya has 308,265 exceeding Mitsui (8031 JP) which has twenty-four times the capitalisation.In this DETAIL below, we shall review Colowide's long-term performance, returns and valuation and offer a view on the prospects for further consolidation. The Colowide group currently comprises of two listed chains - Kappa Create (7421 JP) and Atom (7412 JP) and the franchise chain Reins International which also operates in Asia and the US.

🇯🇵 Japan • Colowide (7616 JP) - A Bite Too Far

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/485/original/2020-09-01_16-17-11.png?1598992358" class="editor-image img-responsive" data-smartkarma-image-id="156485"></figure>
<div class="content-caption">Source for all charts: Japan Analytics</div>
DAILY RESULTS &amp; REVISIONS REVIEW - We resume our series of daily Insights reviewing the results and revisions released by Japanese companies in the last 24 hours. Our purpose is to provide brief commentary on notable changes in trends in earnings for individual companies as well as offering an early warning system on any sector and peer group trends. Where relevant, we shall also comment on valuation and relative price outliers using our proprietary models. Our coverage covers all listed companies until the number of reporting companies precludes it. Since our last 'R&amp;R' Insight covering 14th August, both our aggregate Results Score and Revision Score have continued to set new lows, the latter driven mostly by interim revisions. The companies currently reporting are mainly those with January, April, July, and October year-ends. Accordingly, the results reflect the period of greatest COVID-19 economic dislocation.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/486/original/2020-09-01_18-43-01.png?1598993171" class="editor-image img-responsive" data-smartkarma-image-id="156486"></figure>
SECTOR TIMELINES - The significant Sector changes since our last Insight have been declines in the Commercial Services<a href="https://www.smartkarma.com/entities/funai-soken-holdings-inc" target="_blank" data-smartkarma-citation="entities:4622:1" rel="noopener">Funai Soken (9757 JP)</a> and <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit (6098 JP)</a>) and Other Commercial Products (<a href="https://www.smartkarma.com/entities/toppan-printing-co-ltd" target="_blank" data-smartkarma-citation="entities:11875:1" rel="noopener">Toppan Printing (7911 JP)</a>) Sectors.  Only three Sectors -  Internet, Information Technology, and Non-Bank Finance have positive Scores. The Energy Sector has the strongest positive earnings momentum, while Transportation &amp; Logistics has the worst negative trend.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/487/original/2020-09-02_06-40-13.png?1598996429" class="editor-image img-responsive" data-smartkarma-image-id="156487"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/489/original/2020-09-02_06-41-01.png?1598996496" class="editor-image img-responsive" data-smartkarma-image-id="156489"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/490/original/2020-09-02_06-42-02.png?1598996538" class="editor-image img-responsive" data-smartkarma-image-id="156490"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/491/original/2020-09-02_06-44-36.png?1598996694" class="editor-image img-responsive" data-smartkarma-image-id="156491"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/492/original/2020-09-02_06-46-39.png?1598996814" class="editor-image img-responsive" data-smartkarma-image-id="156492"></figure>

DAILY STATS - With only nine announcements, our statistics section is brief. All four results scored negatively with an average Results Score of -6.0. The average year-on-year quarterly revenue change was -12%, and OPM declined by 2.7 percentage points. Only one of the five revisions scored positively - the average Forecast/Revision Score was -15.6.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/493/original/2020-09-01_16-10-30.png?1598997263" class="editor-image img-responsive" data-smartkarma-image-id="156493"></figure>
MEANWHILE - The Bank of Japan appears content with current market levels and has only intervened once in the last twenty trading sessions and for 20% less than the previous sixteen occasions.


Source for all charts: Japan Analytics
DAILY RESULTS &amp; REVISIONS REVIEW - We resume our series of daily Insights reviewing the results and revisions released by Japanese companies in the last 24 hours. Our purpose is to provide brief commentary on notable changes in trends in earnings for individual companies as well as offering an early warning system on any sector and peer group trends. Where relevant, we shall also comment on valuation and relative price outliers using our proprietary models. Our coverage covers all listed companies until the number of reporting companies precludes it. Since our last 'R&amp;R' Insight covering 14th August, both our aggregate Results Score and Revision Score have continued to set new lows, the latter driven mostly by interim revisions. The companies currently reporting are mainly those with January, April, July, and October year-ends. Accordingly, the results reflect the period of greatest COVID-19 economic dislocation.

SECTOR TIMELINES - The significant Sector changes since our last Insight have been declines in the Commercial ServicesFunai Soken (9757 JP) and Recruit (6098 JP)) and Other Commercial Products (Toppan Printing (7911 JP)) Sectors.  Only three Sectors -  Internet, Information Technology, and Non-Bank Finance have positive Scores. The Energy Sector has the strongest positive earnings momentum, while Transportation &amp; Logistics has the worst negative trend.






DAILY STATS - With only nine announcements, our statistics section is brief. All four results scored negatively with an average Results Score of -6.0. The average year-on-year quarterly revenue change was -12%, and OPM declined by 2.7 percentage points. Only one of the five revisions scored positively - the average Forecast/Revision Score was -15.6.

MEANWHILE - The Bank of Japan appears content with current market levels and has only intervened once in the last twenty trading sessions and for 20% less than the previous sixteen occasions. 

🇯🇵 JAPAN • Results & Revisions 09/01 - Ito En, Ain, Ride On Express

Japan

RIDE ON EXPRESS CO LTD conducts ready made food delivery service. The operation are conducted both through direct and franchise stores. The company also conduct "Little Art" operations that delivers designed art products based on children's art works.

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Ride On Express (6082 JP)

Dada Nexus (DADA US): Takeaways from the 13E-3 Filing

The 13E-3 filing provides more details on the price negotiations, required regulatory approvals and IFA valuation. The gross/annualised spread is...

Arun George

🇯🇵 Japan • Colowide (7616 JP) - A Bite Too Far

LISTED RESTAURANTS

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 09/01 - Ito En, Ain, Ride On Express

DAILY RESULTS & REVISIONS REVIEW - We resume our series of daily Insights reviewing the results and revisions released by Japanese companies...

Campbell Gunn

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