In today’s briefing:
- Seven & I Investor Activism Update
- Shimano (7309 JP) | EU Tax Cuts Keep Cycle Boom Rolling
- ASIAN: Expect 1Q22 Earnings to Modestly Drop QoQ
- Uju Holding IPO Lock-Up – Would Improve the Liquidity but We Wouldn’t Be Buyers
- Deezer’s Deal is More than Just a Broken Record
- Zhuangyuan Pasture (1533 HK): H-Share Offer Via Buyback
- Tosho (8920): Acquires Large-Scale Property in Suzuka. Warehousing for Tosho REIT
Seven & I Investor Activism Update
- Value Act’s investor activism campaign has already made more progress than any other investor activism campaign in the recent past.
- There are many similarities between ValueAct’s transformation plan and Seven & I Holdings (3382 JP)‘s letter to its shareholders, one might think the letter could be minutes from a meeting.
- Therefore, we see no reason to get frustrated over the lack of tangible developments, as the management is fully on board and things are moving on nicely behind the scenes.
Shimano (7309 JP) | EU Tax Cuts Keep Cycle Boom Rolling
- The drivers of bike demand are structural and have nothing to do with Covid. We expect the company to beat numbers this year.
- EU regulation will drive huge growth in the bike market over the next several years and Shimano is uniquely positioned to benefit.
- The stock price decline from over ¥35k to under ¥25k has brought valuations down to the bottom of the historical range.
ASIAN: Expect 1Q22 Earnings to Modestly Drop QoQ
- Maintain BUY rating with a TP of B23.00 based on 16xPE’22E, which is close to +1SD of its five-years average trading.Our rating is premised on positive pet food growth outlook
- We expect 1Q22E earnings to come in at Bt250m (+16%YoY,-6%QoQ), soften QoQ on the back of weak margin outlook from surging raw material costs.
- We foresee earnings visibility to pick up in 2Q22 onwards, driven by stronger pet food revenue thanks to new capacity and margin improvement given easing cost pressures.
Uju Holding IPO Lock-Up – Would Improve the Liquidity but We Wouldn’t Be Buyers
- Uju Holding raised US$103m from its Hong Kong IPO in Nov 2021, where the IPO had been priced at the bottom end.
- The offering was only mildly oversubscribed and the two cornerstones in the deal, Bytedance and Green Better (Xiaomi), had combined to subscribe to 12.6% of the offer shares
- The cornerstones and Pre-IPO investors’ stake are coming up for lockup expiry. The latter will see half of their stakes unlocked, with the remainder locked up for another six months.
Deezer’s Deal is More than Just a Broken Record
- Streaming Fatigue – Rising Inflation, Sluggish Economic Growth, and Rising Geopolitical Tensions have led to consumers reducing their discretionary spending in the past few months.
- Stepping Up to the Major Leagues – Deezer primarily serves customers in France and Brazil, where it has 29% and 17% market share, respectively, but its global market share pales compared to market leader Spotify.
- Broken Economics – While Music Streaming has seen explosive growth in the past decade, the economics behind streaming costs and customer acquisition makes it almost impossible to turn a profit.
Zhuangyuan Pasture (1533 HK): H-Share Offer Via Buyback
- PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) has announced a Conditional Cash Offer for all H-shares at $10.89/share.
- The Offer is being done via a Voluntary Cash Offer, therefore an onerous 90% tendering condition is present.
- This transaction could potentially be wrapped up late-July. The FY21 dividend may also be added to terms.
Tosho (8920): Acquires Large-Scale Property in Suzuka. Warehousing for Tosho REIT
- On April 22, Tosho (8920, the company) announced that it would acquire a fixed asset (trust beneficiary certificate) under a sponsor support agreement with Tosho REIT Investment Corporation (Tosho REIT)
- Based on the announced location, we confirmed the map and found that Aeon Town Suzuka is located in the same area
- The company sold 9.8bn yen in fixed assets (sports clubs, rental housing, and hotels) to Tosho REIT in March 2020 and 7.5bn yen in fixed assets (rental housing) to Tosho REIT in February 2022
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