Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Asean (Thailand) Focused Independent Research

M Corp Review

M Corp is led by Athaporn Arayasantiparb who served as Head of Research for UOB and ANZ in Thailand and was an award-winning telecoms analyst at UBS in 2010 (AsiaMoney Thailand category) and Regional Strategist for DMG in Singapore. Prior to that, he also served as Kasikornbank credit analyst and scholar. He has a total work experience of 17 years, of which 14 were in research and 4 in research management roles. He started his career as an engineer for PTT and currently manages family investments. He holds an MBA from Stern (NYU) and CFA Charter since 2006. Apart from IPO Radar, which focuses on future listings, MCorp Review also provides six on-going thematic series ranked by frequency in descending order, namely: 1) Silicon Stories (technology) 2) Sathorn Series (financial services) 3) Thai-Coons (billionaire origin stories) 4) Reality Check (data-driven, investigative) 5) Thai Media Spotlight; and 6) Thai Macro Watch (global market drivers).

Event-Driven

In their request for approval of the deal between CP Group and Tesco (Thailand), CP All, which would acquire 40% of the assets, sent us details in greater depth than can be found in the press. Some key points include:<ul>
<li>
Earnings-accretive. The deal should add Bt4bn in earnings and Bt38.2bn in assets to CP Group. For CP All, that's a nice earnings bump of almost Bt1.4bn on a sustainable basis that doesn't seem impacted by COVID-19.</li>
<li>
Complex structure with non-core assets. Two special purpose vehicles (SPV) and numerous non-core assets such as TLGF and two insurance businesses are involved in this deal. Difficult to summarize...better see the charts and details for yourself.
</li>
<li>
Approval will likely be delayed, since the shareholder meeting is scheduled on April 24 in the midst of Bangkok's shutdown.</li>
<li>
Blood and sweat. Several top executives were infected with COVID-19 due to their presence in London as they pursued this historic deal with one of them Quant Chairman Pakpoom having passed away.</li>
</ul>

In their request for approval of the deal between CP Group and Tesco (Thailand), CP All, which would acquire 40% of the assets, sent us details in greater depth than can be found in the press. Some key points include:

Earnings-accretive. The deal should add Bt4bn in earnings and Bt38.2bn in assets to CP Group. For CP All, that's a nice earnings bump of almost Bt1.4bn on a sustainable basis that doesn't seem impacted by COVID-19.

Complex structure with non-core assets. Two special purpose vehicles (SPV) and numerous non-core assets such as TLGF and two insurance businesses are involved in this deal. Difficult to summarize...better see the charts and details for yourself.


Approval will likely be delayed, since the shareholder meeting is scheduled on April 24 in the midst of Bangkok's shutdown.

Blood and sweat. Several top executives were infected with COVID-19 due to their presence in London as they pursued this historic deal with one of them Quant Chairman Pakpoom having passed away.


Mechanics and Details of the CP Group-Tesco Deal

CP Group defeated rivals TCC Group and Central Retail in an epic war to buy Tesco's assets in Thailand and Malaysia for US$10.6bn, one of the biggest deals in Thailand.<ul>
<li>The listed entity CP All is taking a 40% stake in this asset, which gives it control of the largest hypermarket in Thailand. With this higher than expected price tag, we estimate that Bt10.9bn or Bt2.2/sh of value was destroyed, but CP All's share price dropped Bt5.5/sh on the day the deal was announced, suggesting a market over-reaction in our view.</li>
<li>While the results are unfavorable, our original analysis shows that things could have been worse if smaller companies, BJC or CRC, that had smaller levels or synergy had won this bid. It appears that all three parties were willing to overpay relative to what made sense for them.</li>
<li>Mergers between retailers typically create synergies via reduction of overlaps and increases in bargaining power in purchasing. Hypermarkets can also expect to benefit from shoppers hoarding necessities in Thailand during the coronavirus crisis.</li>
<li>
Winner's curse. Ironically, because of the overpayment impact, the real 'winners' are BJC, which controls rival Big C, and Central Retail.</li>
</ul>

CP Group defeated rivals TCC Group and Central Retail in an epic war to buy Tesco's assets in Thailand and Malaysia for US$10.6bn, one of the biggest deals in Thailand.
The listed entity CP All is taking a 40% stake in this asset, which gives it control of the largest hypermarket in Thailand. With this higher than expected price tag, we estimate that Bt10.9bn or Bt2.2/sh of value was destroyed, but CP All's share price dropped Bt5.5/sh on the day the deal was announced, suggesting a market over-reaction in our view.
While the results are unfavorable, our original analysis shows that things could have been worse if smaller companies, BJC or CRC, that had smaller levels or synergy had won this bid. It appears that all three parties were willing to overpay relative to what made sense for them.
Mergers between retailers typically create synergies via reduction of overlaps and increases in bargaining power in purchasing. Hypermarkets can also expect to benefit from shoppers hoarding necessities in Thailand during the coronavirus crisis.

Winner's curse. Ironically, because of the overpayment impact, the real 'winners' are BJC, which controls rival Big C, and Central Retail.


Reality Check 2020: Did CP All Really 'Win' the Tesco Deal?

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.

<a href="https://www.smartkarma.com/entities/tesco-plc" target="_blank" data-smartkarma-citation="entities:22187:1" rel="noopener">Tesco PLC (TSCO LN)</a>'s CEO Dave Lewis has done an admirable job turning around Tesco, despite a pretty muted share price reaction since his arrival in late 2014. Despite improving profitability and selling prized assets such as Korea to reduce debt, Tesco’s share price recovery has moved in-line with the FTSE 100 over the past five years whilst Tesco shares are worth half of their peak 13 years ago.
We argue the latest decision by Tesco to consider selling its Thai/Malaysian assets is misguided for three reasons; which are as follows:
<ol>
<li>
Tesco’s Thailand and Malaysian robust valuation are already broadly reflected in the group valuation.
</li>
<li>
Tesco would heavily dilute its group margins and lose 12% of its EBIT whilst doubling down on a UK business that continues to lose market share.
</li>
<li>
Tesco could see significant supply chain disruptions as it uses its Thai business as an importing hub. 
</li>
</ol>
<div class="content-highlight">
For more of our commentary over the years on Tesco and Thai retail, you can find our content here: 
<a href="https://www.smartkarma.com/insights/central-retail-ipo-trading-debut-valuation-scenario-analysis" target="_blank" data-smartkarma-citation="insights:36740" rel="noopener">Central Retail IPO: Trading Debut, Valuation Scenario Analysis</a> 
<a href="https://www.smartkarma.com/insights/central-retail-corp-ipo-initiation-trouble-at-till" target="_blank" data-smartkarma-citation="insights:35932" rel="noopener">Central Retail Corp IPO Initiation: Trouble at Till</a>  
</div>

Tesco PLC (TSCO LN)'s CEO Dave Lewis has done an admirable job turning around Tesco, despite a pretty muted share price reaction since his arrival in late 2014. Despite improving profitability and selling prized assets such as Korea to reduce debt, Tesco’s share price recovery has moved in-line with the FTSE 100 over the past five years whilst Tesco shares are worth half of their peak 13 years ago.
We argue the latest decision by Tesco to consider selling its Thai/Malaysian assets is misguided for three reasons; which are as follows:


Tesco’s Thailand and Malaysian robust valuation are already broadly reflected in the group valuation.


Tesco would heavily dilute its group margins and lose 12% of its EBIT whilst doubling down on a UK business that continues to lose market share.


Tesco could see significant supply chain disruptions as it uses its Thai business as an importing hub. 



For more of our commentary over the years on Tesco and Thai retail, you can find our content here: 
Central Retail IPO: Trading Debut, Valuation Scenario Analysis 
Central Retail Corp IPO Initiation: Trouble at Till   


Why Tesco Should Not Sell Its Thai Business

Equity analyst UK & Europe, UK Long Short

Peter Toeman

Equity analyst UK & Europe

Accelerating Tomorrow’s Independent Research

Boost Research

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Thematic (Sector/Industry)

The UK's principal share index FTSE 100 closed 2018 marginally lower than its level at the start of the Millenium
 In contrast with the lackluster performance of the stockmarket, nominal GDP of the UK economy almost doubled over the period
Relative to the domestic economy FTSE 100 looks marginally undervalued which may explain the rebound seen in the first month of this year
On the other hand, courtesy of the political decision to leave the European Union, the outlook has never been more uncertain
Major structural change involving tearing up a 40 year arrangement with the UK's largest trading partner is bound to have significant and unpredictable consequences 
We offer a long/short portfolio of UK stocks designed to exploit emerging themes

The UK's principal share index FTSE 100 closed 2018 marginally lower than its level at the start of the Millenium
 In contrast with the lackluster performance of the stockmarket, nominal GDP of the UK economy almost doubled over the period
Relative to the domestic economy FTSE 100 looks marginally undervalued which may explain the rebound seen in the first month of this year
On the other hand, courtesy of the political decision to leave the European Union, the outlook has never been more uncertain
Major structural change involving tearing up a 40 year arrangement with the UK's largest trading partner is bound to have significant and unpredictable consequences 
We offer a long/short portfolio of UK stocks designed to exploit emerging themes 

FTSE 100: Twenty Years of Going Nowhere (Almost)

Making sense of the Global Market, Euromonitor International Ltd.

Yu Mitsuhashi

Making sense of the Global Market

Euromonitor International Ltd.

We are a global market research company focused on industries, countries, economies and consumers worldwide. Our cross-country comparable research helps your organisation identify opportunities and develop growth strategies in countries and regions across the globe. With offices around the world, 1,200 analysts in 100 countries and market research on every key trend and driver, we give you powerful access to the real story behind consumer change.

Macroeconomics

Hyper-connectedness has emerged as one of six key long-term themes shaping the world’s cities. No other major city globally is permeated with technology to the extent that <a target="_blank">Seoul </a>is. Moreover, the latter is not a standalone example of tech savviness in the country: all 11 South Korean cities that Euromonitor tracks, from Busan to Gwangju to Cheongju, boast the highest proportions of households with access to broadband internet among 1,150 world cities, namely 99-100% in 2016. Businesses have been both driving and benefiting from the pervasiveness of technology in South Korean cities.

Hyper-connectedness has emerged as one of six key long-term themes shaping the world’s cities. No other major city globally is permeated with technology to the extent that Seoul is. Moreover, the latter is not a standalone example of tech savviness in the country: all 11 South Korean cities that Euromonitor tracks, from Busan to Gwangju to Cheongju, boast the highest proportions of households with access to broadband internet among 1,150 world cities, namely 99-100% in 2016. Businesses have been both driving and benefiting from the pervasiveness of technology in South Korean cities.

Is South Korea Home to the 'Smartest' Cities in the World?

United States

Tesco Corporation manufactures and designs technology based solutions for upstream energy industry. The Company markets and operates top drive and underbalanced drilling, completion products, control, electrical, and hydraulic systems. Tesco serves oil and natural gas industries throughout the world.

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Tesco Corp (TESO US)

Mechanics and Details of the CP Group-Tesco Deal

In their request for approval of the deal between CP Group and Tesco (Thailand), CP All, which would acquire 40% of the assets, sent us details in...

Athaporn Arayasantiparb, CFA

Reality Check 2020: Did CP All Really 'Win' the Tesco Deal?

CP Group defeated rivals TCC Group and Central Retail in an epic war to buy Tesco's assets in Thailand and Malaysia for US$10.6bn, one of the...

Athaporn Arayasantiparb, CFA

Why Tesco Should Not Sell Its Thai Business

Tesco PLC (TSCO LN)'s CEO Dave Lewis has done an admirable job turning around Tesco, despite a pretty muted share price reaction since his arrival...

Arun George

FTSE 100: Twenty Years of Going Nowhere (Almost)

The UK's principal share index FTSE 100 closed 2018 marginally lower than its level at the start of the Millenium In contrast with the lackluster...

Boost Research

Is South Korea Home to the 'Smartest' Cities in the World?

Hyper-connectedness has emerged as one of six key long-term themes shaping the world’s cities. No other major city globally is permeated with...

Euromonitor International Ltd.

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