In today’s briefing:
- Colowide Placement – Needs a Very Large Correction
- Couche-Tard Targets Seven & I: Seven & I’s Pride on the Line
- COLOWIDE (7616) – UGLY Register On Expensive Co Needs a Capital Construct Upgrade, Won’t Get It Here
- Mercari (4385) | Activist to Add Urgency
- Guzman Y Gomez (GYG AU): Free Float to Determine Index Inclusion
- Narrative and Numbers | Household Durables | FY24
- I-Scream Media IPO Book Building Results Analysis
- Beer in China: 1H2024 Low Point—What Lies Ahead?
- Tongcheng Travel (780 HK): Seems like a Cost Issue
- Oriental Watch (398 HK): Sluggish Sales But Deep Value And Rolex Resilience
Colowide Placement – Needs a Very Large Correction
- Colowide Co Ltd (7616 JP) aims to raise around US$230m in order to fund its prospective M&A transactions over the next few years
- While the company has undertaken a number of M&A transactions in the past, it hasn’t clearly stated its intended targets for this round.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
Couche-Tard Targets Seven & I: Seven & I’s Pride on the Line
- It was reported yesterday that Alimentation Couche-Tard (ATD CN) has put forward a bold proposal to acquire Seven & I Holdings (3382 JP).
- The offer price remains undisclosed, but the market may be anticipating a significant premium based on the share price movement following the news.
- However, we believe the offer price could fall short of market expectations, and it is likely that Seven & i will reject the proposal.
COLOWIDE (7616) – UGLY Register On Expensive Co Needs a Capital Construct Upgrade, Won’t Get It Here
- Colowide Co Ltd (7616 JP) is an industrial fastish-food operator in Japan. They sell several dozen kinds of cuisine under several dozen brands, owned and franchised in Japan and overseas.
- The company “philosophy” is “Everything we do is for our customers and employees.” The stock is up 30% in 10yrs. It pays no dividend, but it pays a big yutairimawari.
- This means Real World Float is 100% owned by retail who want restaurant coupons. This offering will be bought by index, short covers, and another 20-30k coupon holders.
Mercari (4385) | Activist to Add Urgency
- Q4 results were a mixed bag with GMV growth slowing to just 6%. However, costs came in better than expected, boosting margins
- Management surprise the market with bullish FY6/25 guidance. Expects GMV growth to accelerate to +10% and sees OP at a healthy 22-25 billion yen
- Activist investor Oasis has taken a stake in the company. There is an obvious restructuring angle in addition to significant upside from fintech expansion
Guzman Y Gomez (GYG AU): Free Float to Determine Index Inclusion
- Guzman Y Gomez (GYG AU) listed on 20 June and is eligible for inclusion in the S&P/ASX family of indices at the September rebalance.
- Whether the stock is included in indices depends on the index providers estimate of free float. We expect index providers to assign floats of between 25-35% for the stock.
- Inclusion in one global index could come in November and another in December. Inclusion in the S&P/ASX indices will depend on whether float is higher than 30% or lower.
Narrative and Numbers | Household Durables | FY24
- This Insight is focued on Whirlpool of India (WHIRL IN) ; Crompton Greaves Consumer Electricals (CROMPTON IN) ; TTK Prestige (TTKPT IN) & Symphony Ltd (SYML IN).
- As per ARs, the Indian durables industry is poised for significant growth due to increasing consumer demand, premiumization trends, and government support.
- SYML and WHIRL are the ones that warrant attention. Challenges faced by TTKPT are likely to continue.
I-Scream Media IPO Book Building Results Analysis
- I-Scream Media reported its IPO book building results. The IPO price has been determined at 32,000 won, which is at the low end of the IPO price range.
- A total of 561 institutional investors participated in the IPO survey. The final demand ratio was 31.3 to 1.
- Our valuation analysis suggests an implied price per share of 41,450 won, which represent a 29.5% upside from the IPO price.
Beer in China: 1H2024 Low Point—What Lies Ahead?
- Stock valuations for China’s top beer players are near historical lows, but is a recovery on the horizon? Will it ever return to the heady valuations of 2019-2020?
- China Resources Beer Holdings (291 HK) and Budweiser Brewing APAC (1876 HK) have reported 1H2024 results showing a decline in sales volumes, attributed to several short term factors.
- We highlight long-term factors, including an aging population and shifting consumer habits, that could limit sustained growth in China’s alcoholic beverage market.
Tongcheng Travel (780 HK): Seems like a Cost Issue
- Tongcheng Travel Holdings (780 HK) is still suffering from cost pressure, with adjusted net profit increased by 10.9% in 2Q24, despite a 48.1% revenue growth.
- Both GMV and MPU growth rates have slowed in 2Q24 when compared with 1Q24, and revenue may also decelerate in 2H24 given the higher base for comparison.
- The market will need some time to see if the moderating earnings trend will sustain, negatively affecting investor interests. Potential earnings downgrade is also a challenge.
Oriental Watch (398 HK): Sluggish Sales But Deep Value And Rolex Resilience
- Hong Kong’s watch and jewelry sales were weak in Q2 CY24 (-24% YoY) as dampened sentiment continues to plague overall retail sales across regional sectors.
- However, Oriental Watch (398 HK), with its Rolex and Patek Phillipe portfolio, is expected to be more resilient than the rest of the watch industry.
- The company is still a very good dividend play, trading at 7.6x FY25 PE, with 60% of the market cap in cash and a 13.5% dividend yield.
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