In today’s briefing:
- StubWorld: Wilmar Gains Ahead Of Adani Wilmar IPO
- KKR/Accell NV: Recommended Cash Offer
- What’s Working on the Short Side?
- Seven & I: Activist & Long Term Investors Riled Up Yet Again
- Adani Wilmar IPO – Has the Capabilities to Thrive but Needs to Prove Itself to Trade Higher
- Tesla – Starting to Look Safe to Short
- India Channel Insight #24 | Symphony, Sheela Foam, Relaxo
- China Education Group (839 HK): Further Regulatory Headwinds?
- A Pair Trade Opportunity Emerging Between BGF Co & BGF Retail
- CyberAgent: Earnings Miss Consensus and No Guidance; Games Growth Is Worrying
StubWorld: Wilmar Gains Ahead Of Adani Wilmar IPO
- Wilmar International (WIL SP) is coming up “expensive” on my stub monitor, yet still trades at a material 65% discount to NAV.
- Preceding my comments on Wilmar are the weekly setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold of at least 20%.
KKR/Accell NV: Recommended Cash Offer
- The 25% premium, €58/share offer implies an equity value of €1,556.5mn and EV of €1,712mn, which represents 12.4x EV/Fwd EBITDA (vs. 12.2x EV/LTM EBITDA comparable transactions) and 18.3x Fwd P/E.
- Minimum acceptance level of at least 95%, automatically adjusted to 80% in case GM approves it. The offeror intends to squeeze-out/delist as soon as practicable.
- Median implied share price across multiples is €56.37/share. On this basis, the offer price seems full. Gross spread is 0.34%, a bit tight. The market does not expect any counteroffer.
What’s Working on the Short Side?
- We normally write a “What’s Working in Equities” report at the end of every month.
- Today, we publish a “What’s not working” a/k/a “What’s working on the short side.”
- In one line, what’s working on the short side are expensive, smaller cap, unprofitable, growth stocks.
Seven & I: Activist & Long Term Investors Riled Up Yet Again
- Seven & I Holdings (3382 JP) has climbed above the June 2021 peak for the first time in seven months despite weaknesses in the overall market.
- Meanwhile, the Financial Times reported yesterday that 3 of the top 30 long term investors have requested Seven & I to get rid of underperforming businesses.
- Although the company brushed off previous attempts by activist investors, the pressure from long term investors could tip the scales and force Seven & I to focus on convenience stores.
Adani Wilmar IPO – Has the Capabilities to Thrive but Needs to Prove Itself to Trade Higher
- Adani Wilmar (6596700Z IN) is looking to raise up to US$482m in its upcoming India IPO.
- In our view, we doubt that the firm would be able to trade close to its blue chip FMCG peers, given its small FMCG component combined with overall weaker margins.
- In this note, we will look at updates since our last note, undertake a peer comparison, and share our thoughts on valuation.
Tesla – Starting to Look Safe to Short
- Tesla beat CapIQ consensus for 4Q slightly, beating by 3.3% at the OP level and 6.5% at the top line.
- Despite this, the reaction after hours was negative pointing to excessive froth in the name.
- With the collapse in momentum for low quality small caps it seems reasonable to us to expect Tesla to be next.
India Channel Insight #24 | Symphony, Sheela Foam, Relaxo
- We interact with Channels of Symphony Ltd (SYML IN) , Sheela Foam Ltd (SFL IN) , Relaxo Footwears (RLXF IN) to understand the demand environment and competitive positioning.
- Symphony Ltd (SYML IN) channels are reporting some market share loss, Sheela Foam Ltd (SFL IN) ‘s operating and competitive positioning is encouraging.
- For Relaxo Footwears (RLXF IN) , school reopening could be possible upside catalysts.
China Education Group (839 HK): Further Regulatory Headwinds?
- The 42% collapse in share price of China Education Group (839 HK) (CEG) seems to be overreaction to the speculated regulatory measures which we think many of them are counter-intuitive.
- These measures center around the legality of Variable Interest Entity, ban on future M&As, ownership of school assets and prohibition of increase in tuition fee at will.
- Higher education, unlike after school tutoring, supports government policy, lightens governments’ financial pressure and enhances common prosperity; and CEG remains the best play on this angle.
A Pair Trade Opportunity Emerging Between BGF Co & BGF Retail
- In this insight, we provide an analysis of a pair trade idea between BGF Co Ltd (027410 KS) and Bgf Retail (282330 KS).
- Our strategy is to be long BGF Co & short BGF Retail and achieve net gains of 5-8% on this pair trade over the next several weeks.
- Our NAV analysis suggests BGF is vastly undervalued as compared to its NAV. BGF’s 30% stake in BGF Retail is 819 billion won, which is 184% of BGF’s market cap.
CyberAgent: Earnings Miss Consensus and No Guidance; Games Growth Is Worrying
- CyberAgent reported 1QFY09/2022 results on Wednesday. Revenue for the quarter increased 30.6% YoY to JPY171.1bn (vs consensus revenue of JPY173.4bn) while OP increased 11.6% YoY to JPY19.8bn (vs consensus JPY24.5bn).
- Games business reported strong growth in revenue, however, OPM continues to decline with increased advertising cost. Some of the older titles which performed strong have started to decline.
- Internet advertising and Media continue to grow, with resurgence of Covid-19 cases, it seems internet ad business will take longer to bounce back to pre-Covid levels.
Before it’s here, it’s on Smartkarma
