In today’s briefing:
- Toyota Group Cross-Holding Structure Primer – Holdings, Unwind Progress, Buyback Policies, Etc
- Nikkei 225 Index Rebalance Preview (Sep 2024): Potential Adds/Deletes, Capping & Funding Changes
- India Car Sales Slow: Can Hyundai Keep Its No. 2 Spot Amidst Fierce Competition?
- HKTV (1137 HK)’s Low-Balled Buyback Gets The Nod
- Mercari (4385) | Fintech and Gig Economy as Key Catalysts
- Play the Hand You’re Dealt; Bullish Outlook Intact; Remain Overweight Large-Cap Growth; Tech Buys
- CarMax Inc.: Operational Efficiencies In Reconditioning & Logistics Expanding The Bottom-Line? – Major Drivers
- elf Beauty Inc – STCB: 2H Signposts; Building for a Better Tomorrow; Reiterate Buy, $0.25 PT
- LE: 2H Signposts; Proving Model Shifts Working; Reiterate Buy, $17 PT
- BBW: Snapping the Store – Milan Edition – Looking at Expansion, Reiterate Buy
Toyota Group Cross-Holding Structure Primer – Holdings, Unwind Progress, Buyback Policies, Etc
- Last September in the release of its new Mid-Term Management Plan, Toyota Group member Aisin (7259 JP) announced a plan to cut cross-holdings to zero. JTEKT Corp (6473 JP) followed suit.
- It started with a selldown of Denso Corp (6902 JP), then Toyota Industries (6201 JP), now Aisin. Last FY, Toyota Group cos reduced crossholdings by ¥870bn. This year will be more.
- Attached below is a general breakdown of Toyota Group cross-holdings, discussion of cross-holding policies, and analysis of what is next, and what is not.
Nikkei 225 Index Rebalance Preview (Sep 2024): Potential Adds/Deletes, Capping & Funding Changes
- The review period for the Nikkei 225 Index September rebalance ends in three weeks. There could be three changes at the rebalance with sector balance used for the additions.
- Depending on the changes, passive trackers will need to buy between 3-57x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-8.4x ADV on the deletions.
- Fast Retailing (9983 JP)‘s index weight is currently higher than 10% and that will result in capping in September. Passives will need to sell 6x ADV in the stock.
India Car Sales Slow: Can Hyundai Keep Its No. 2 Spot Amidst Fierce Competition?
- Hyundai Motor India (HMIL) saw a market share loss in India Passenger Vehicles sales reported for June 2024 and 1QFY2025, impacted by intensified competition in the SUV segment.
- Mahindra & Mahindra, and Toyota Kirloskar India gained market share in 1QFY2025 led by upgraded model launches in the SUV segment, traditionally a strong category for HMIL.
- HMIL’s declining market share, if not reversed soon, could challenge optimistic growth projections and valuation multiples for its upcoming IPO.
HKTV (1137 HK)’s Low-Balled Buyback Gets The Nod
- Back in May, online shopping platform play Hong Kong Television Network (1137 HK) announced a buy-back of 11.25% of shares out, at $2.15/share, a mediocre 20.8% premium to undisturbed.
- The thrust of the Offer was to lift co-founder Ricky Wong’s stake to 51.55% from 45.75%. But that required independent shareholders approving a whitewash waiver not to make a MGO.
- I didn’t expect shareholder pushback. And there wasn’t. Tendering closes on the 23rd July. Keep an eye on CCASS movements. Shares gained 4.7% yesterday prior to the EGM outcome. Mmm.
Mercari (4385) | Fintech and Gig Economy as Key Catalysts
- Mercari’s US operations, responsible for major losses, saw a workforce reduction by 45%, potentially preceding a market exit to improve overall margins.
- Fintech growth is strong, with Mercari issuing over 3 million credit cards, achieving a 67% YoY credit balance increase, despite current operational losses
- Mercari Hallo, an on-demand work platform, has rapidly gained users and business partners, positioning it to capitalize on Japan’s growing gig economy.
Play the Hand You’re Dealt; Bullish Outlook Intact; Remain Overweight Large-Cap Growth; Tech Buys
- We continue to play the hand we have been dealt; i.e., riding the trend higher on the SPX and Nasdaq 100, and being overweight large-cap growth
- Russell 1000 GrowthVs.Value ratio is breaking out from a 4-year base, suggesting growth’s outperformance is likely to continue in the months ahead. Growth outperforming during bull markets is no surprise.
- Latest bullish developments include the equal-weighted Nasdaq 100 (QQQE) breaking out from a 4-month base, while Discretionary (XLY) displays a 6-month base breakout and RS is reversing its YTD downtrend
CarMax Inc.: Operational Efficiencies In Reconditioning & Logistics Expanding The Bottom-Line? – Major Drivers
- CarMax has reported its fiscal 2025 first quarter results, revealing a mixed financial scenario.
- This analysis aims to objectively evaluate the performance by weighing the key positives and negatives reflected in the data and future company outlook.
- Starting with the positives, CarMax noted several encouraging business trends, such as a stabilization in vehicle values and a decrease in average vehicle selling prices, which fell by approximately $700 per unit.
elf Beauty Inc – STCB: 2H Signposts; Building for a Better Tomorrow; Reiterate Buy, $0.25 PT
- We are reiterating our Buy rating.
- $0.25 price target and projections for Starco Brands as we look at key trends for 2H24 and beyond.
- We believe 2024, while somewhat frustrating from an investor standpoint (given the downward revenue guidance and pulling of EBITDA guidance after 1Q), will be seen as a positive over the longer term, as the company has made material steps forward for all of their brands, positioning Starco for significant top line growth and going forward, material operating leverage, which we believe will become increasingly self-evident in 2025 and beyond.
LE: 2H Signposts; Proving Model Shifts Working; Reiterate Buy, $17 PT
- We are reiterating our Buy rating, $17 price target and projections for Lands’ End as we look at key trends for 2HFY24 and beyond.
- We believe management’s focus on reducing discounting, material product newness and excitement, telling product “stories” focused on key differentiating features, and shifting the product mix to higher levels of licensing, has been a hit, and we believe FY24 will continue to demonstrate there remain material upgrades still to come, with the potential for further top andbottom line upside.
- Further, with international top line growth nearing, digital marketplaces remaining a plus and the full positive margin impact of licensing still on tap, we believe there remain further catalysts going forward.
BBW: Snapping the Store – Milan Edition – Looking at Expansion, Reiterate Buy
- We are reiterating our Buy rating, $41 price target and projections after visiting franchised stores in Milan, Italy.
- With the company ramping up penetration with commercial partners and international franchisees, we believe it will be increasingly important for investors to understand and appreciate what we believe are the impressive economics of the franchised Build-A-Bear business.
- Our Milan visits reiterated both the ability to recreate the experiential aspect of the Build-A-Bear operating model with partners and what we believe can be the lucrative nature of the business.
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