In today’s briefing:
- Amer Sports (AS US) IPO: Valuation Insights
- China Consumption Weekly: HSI, BYD, Trip.com, Kuaishou, Baidu
- Japanese Laggard Opportunity #1: Kato Sangyo (9869 JP)
- Temu and AliExpress Taking Away Meaningful Market Share from Coupang in Korea
- Amer Sports IPO Valuation Analysis
- GENDA Lock-Up – Since Selling in the IPO, Midas Capital’s Remaining Stake Is up Another 60%
- Weiqiao Textile (2698 HK): 8th March Vote. Payment Late March
- Guming Holdings (Goodme) Pre-IPO – The Positives – Benefited from Scaling Its Store Network
- FDJ/Kindred: Consolidation Is Back in Online Gaming
- Yum China (9987 HK/YUMC US): Earnings And Derating Risks Not Priced In
Amer Sports (AS US) IPO: Valuation Insights
- Amer Sports (AS US) is a global iconic sports and outdoor brand group. Amer has launched an NYSE IPO to raise US$1.6-1.8 billion at a US$16.00 to US$18.00 price range.
- We previously discussed the IPO in Amer Sports IPO: The Bull Case, Amer Sports IPO: The Bear Case and Amer Sports IPO: Valuation First-Look.
- We revise our forecasts to reflect the FY23 preliminary estimates and long-term growth targets. Our valuation analysis suggests that Amer is fairly valued at the IPO price range.
China Consumption Weekly: HSI, BYD, Trip.com, Kuaishou, Baidu
- We believe Hang Seng Index’s tumble was due to a comment in a governmental newspaper.
- BYD announced that it will sell three models of new energy vehicles in Indonesia.
- Trip.com began to sell tickets of scenic locations via the Kuaishou app.
Japanese Laggard Opportunity #1: Kato Sangyo (9869 JP)
- We identified Kato Sangyo (9869 JP) (Kato) as the most attractive Japanese laggard opportunity due to its net cash balance sheet, undemanding PER, and attractive PEG and P/FCF ratios
- Management guides for 25% EPS growth in FY24 with only 15% net profit growth, implying a massive share buyback of ~JPY9 billion (5.4% shares in issue) with subsequent cancellation
- The combination of impending share buybacks, cancellation of existing treasury shares, and dividends equates to 10% shareholder returns in FY24
Temu and AliExpress Taking Away Meaningful Market Share from Coupang in Korea
- In this insight, we discuss how Temu and AliExpress have been taking away meaningful market share away from Coupang (CPNG US) in Korea in the past year.
- Temu’s MAU skyrocketed in the past year in Korea. Temu’s MAU surged from zero in January 2023 to 3.28 million as of December 2023.
- One could argue that Coupang’s valuations are overvalued relative to its Chinese competitors such as PDD Holdings (PDD US).
Amer Sports IPO Valuation Analysis
- Amer Sports announced it plans to raise up to $1.8 billion at $16 to $18 per share, targeting a valuation of up to $8.7 billion.
- We estimate the company to generate revenue of $5.6 billion (up 23.5% YoY) and operating profit of $285.7 million (down 13.7% YoY) in 2024.
- We would pass on this IPO due to lack of valuation merits, highly leveraged balance sheet, and inconsistent profit margins, despite its solid sales growth in the past several years.
GENDA Lock-Up – Since Selling in the IPO, Midas Capital’s Remaining Stake Is up Another 60%
- GENDA (9166 JP) (GENDA) was listed on the TSE on 28th July 2023. The IPO had been a mix of primary and secondary shares.
- Genda develops and operates amusement facilities in Japan, primarily operating under its Genda GiGO Entertainment subsidiary.
- Coming up for six-month lockup expiry are the pre-IPO shareholders, notably Midas Capital, and the firm’s executives and directors.
Weiqiao Textile (2698 HK): 8th March Vote. Payment Late March
- On the 17th January, Weiqiao Textile Co (2698 HK) announced the pre-conditions – regulatory approvals from NDRC, MoC and SAFE – had been fulfilled.
- The Composite Document was dispatched this morning (23 January), with an 8th March EGM, and expected payment on or before the 28 March, bang in line with my estimate.
- Prudence has upped its stake to 10.47%. IF they were intending to block, they’d stop at just over 10%. Buying any more shares >10% is simply a waste of money.
Guming Holdings (Goodme) Pre-IPO – The Positives – Benefited from Scaling Its Store Network
- Guming Holdings (GUM HK) (Guming) is looking to raise US$300m in its upcoming Hong Kong IPO.
- Guming Holdings (Guming) is a maker of freshly-made beverages in China.
- In this note, we will talk about the positive aspects of the deal.
FDJ/Kindred: Consolidation Is Back in Online Gaming
- La Francaise des Jeux (FDJ FP) seeks scale in online gaming and betting through a recommended SEK 130 all-cash offer for Kindred Group (KINDSDB SS), 24% premium, SEK 27,951 million implied equity value.
- Minimum acceptance condition is >90%, which considering irrevocables, requires acceptances from 86.1% of the float. At 8.1x EV/Fwd NTM EBITDA, the offer looks slightly cheap vs. the median of comparables.
- Gross spread is 6.2%, partly due to 10+ months before settlement. Spread should tighten after the Kindred EGM. This deal appears to be a solid bet. Long Kindred.
Yum China (9987 HK/YUMC US): Earnings And Derating Risks Not Priced In
- China’s catering industry has changed compared to pre-COVID19, where overall average selling price (ASP) is continually under pressure, and customers are increasing seeking value-for-money options due to weaker consumer sentiment.
- Yum China’s same-store-sales growth could be under pressure if the company cannot raise ASP easily like in previous years.
- Yum China’s historical valuation should not be used as a benchmark, given that the growth profile has changed (new store openings reaching a plateau; sustained increased competition; lower ASP pressure).
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