In today’s briefing:
- Water Oasis, Execution Makes It More Compelling
- Sony – Audio Visual Immersion
- Huitongda IPO: Testing Times
- Huitongda Network IPO Initiation: Clicks to Bricks
- Auchan/Carrefour: Ongoing Merger Plans, LBO
- Komeda Holdings (3543): Robust Earnings and Store Openings
Water Oasis, Execution Makes It More Compelling
- Water Oasis (1161 HK) trades at a 6x FY22 ( Sept end ) PE with 31% of its market capitalization in cash ( implying ex-cash 4x PE ).
- For FY21, Water Oasis (1161 HK) paid a 22 cent dividend implying a 12.43% dividend yield. We forecast a forward yield of 14%.
- The company will continue to execute as it opens newer stores and beds down its M&A for a 15% CAGR revenue growth.
Sony – Audio Visual Immersion
- Sony had some interesting panels at CES 2022 focusing on immersion in entertainment on both the audio and visual fronts.
- Following on from the PSVR2 announcement they help to outline Sony’s roadmap for driving forward entertainment technology.
- And of course there were some links to Epic and Unreal Engine…
Huitongda IPO: Testing Times
- Alibaba backed B2B e-commerce business, Huitongda (1566215D CH) is looking to test the HK IPO market with its $500m IPO while Beijing is on the attack on Chinese new economy stocks.
- The company’s focus on rural and lower tier markets sounds a promising prospect amidst the Chinese’s government’s push for common prosperity.
- Nevertheless, we think that investors are more likely to focus on the barrage of regulatory assaults and the fragilities of Huitongda’s business model.
Huitongda Network IPO Initiation: Clicks to Bricks
- Huitongda (1566215D CH) is a fast-growing commerce and service platform focused on China’s lower-tier retail market. It is pre-marketing an HKEx IPO to raise US$400-500 million.
- The positives are a large addressable market, solid top-line growth and profitability. The key negative is the low margin profile which reflects a fragmented and competitive market.
- Overall, we think that the positives outweigh the negatives and this IPO is worth a closer look.
Auchan/Carrefour: Ongoing Merger Plans, LBO
- Auchan, together with private equity, explores a possible €23.5/share offer for Carrefour SA (CA FP) (pro forma €105 billion revenues and 500,000 employees), after last October’s attempt failed. Synergies should be sizeable.
- On a simple LBO model, at year 5, the cumulative IRR would be 15.0%, and leverage would be 3.8x. Anti-trust and political hurdles are to be expected.
- The creation of a French champion, should likely be favoured by French politicians. Recommendation is long CA FP, underpinned by a 22e 9.6% FCF yield, with potential offer upside.
Komeda Holdings (3543): Robust Earnings and Store Openings
- Komeda Holdings (3543) announced 3Q FY2/22 results (IFRS). The impression continues to be positive.
Monthly data announced by the company shows that the positive trend of wholesale sales continued in December (which is included in 4Q).
- Our impression is that store openings are progressing ahead of the company’s plan of 940-950 total stores at the end of FY2/22.
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