In today’s briefing:
- CPF Global Food Solution Pre-IPO – The Positives – One of the Largest Players in the Industry
- Shimano (7309) | The Hangover
- Lalatech IPO: Huge Drop in Operating Costs Prior to IPO Is Concerning
- CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion
- Wynn Macau: We like the Bonds Now Moving to the Shares Later This Spring
- Oriental Watch: Recovery of HK Sales in Jan-Feb 2023, Trading at 15% Yield, 50% of Mkt Cap in Cash
- Next Corporate Governance Code Revision May Further Dissolve Parent-Subsidiary Listings
- CPF Global Food Solution Pre-IPO – The Negatives – Muted Growth Prospects
- Ricegrowers Limited (SunRice) – Global Market Forecasts Positive for SunRice
- Sleep Country – Deep Dive (TSX: ZZZ)
CPF Global Food Solution Pre-IPO – The Positives – One of the Largest Players in the Industry
- CPF Global Food Solution (2247162D TB) is looking to raise around US$1bn in its upcoming Thailand IPO.
- CPF Global Food Solution (CPFGS) is a subsidiary of CP Foods Group, offering food products and services to food operators and consumers locally and internationally.
- In this note, we talk about the positive aspects of the deal.
Shimano (7309) | The Hangover
- Shimano reported Q1 results post close. Operating profit fell 26% YoY and full year guidance was cut 21%
- We believe that sales in 2023 have simply reverted back to trend. We expect sales to grow in 2024 as underlying demand drivers remain intact
- With the stock down 9% over the past year, we believe the market has discounted the profit revision. We see good value at 17x EV/EBIT
Lalatech IPO: Huge Drop in Operating Costs Prior to IPO Is Concerning
- Lalatech Holdings Co Ltd (LALA HK) is a technology driven logistics transportation platform with a global footprint. The company has filed for an IPO and plans to raise about US$1bn.
- The company’s financials have shown significant improvement over the last 2 years with the company turning profitable at the operating profit line in 2022.
- Huge drop in selling and marketing costs have helped cut down losses which seems too realistic and the company hasn’t provided sufficient explanation on these cost cuts.
CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion
- With three trading days left in the review period for the CSI 500 Index (SH000905 INDEX) June rebalance, we forecast 50 changes at the close on 9 June.
- There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.77% at the June rebalance resulting in a one-way trade of CNY 6.28bn.
- The potential adds have outperformed the potential deletes but there has been a big selloff in the last couple of weeks as the market has headed lower.
Wynn Macau: We like the Bonds Now Moving to the Shares Later This Spring
- Wynn’s issuance of US$600m in convertible bonds for its Macau subsidiary pushes out maturities by five years, easing investor concerns about debt levels.
- The Macau gaming market is in early stages of pent up demand recovery compared with Las Vegas which is in a mature stage of the cycle.
- Premium mass and VIP customers key to Wynn Macau business model are returning at a faster rate than industry observers have judged. Decline of junkets not hurting VIP in 2023.
Oriental Watch: Recovery of HK Sales in Jan-Feb 2023, Trading at 15% Yield, 50% of Mkt Cap in Cash
- The census and statistics department data for watches and jewelry showed a sharp rebound for HK in Jan-Feb 2023 (up 63% YoY). China sales, we estimate, continue to be resilient.
- Over the last month, secondhand watch pricing has also shown an uptrend of 3-4%. This leads us to believe that demand is having a decent uptick in April.
- The stock trades at 7.2x PE FY23e, with >50% of the market capitalization in cash and a 15% dividend yield (assuming a 100% payout ratio).
Next Corporate Governance Code Revision May Further Dissolve Parent-Subsidiary Listings
- As statements of reasonableness are disclosed with respect to subsidiary listings that are less than reasonable, further elimination of parent-subsidiary listings is expected to progress.
- The issue of parent-subsidiary listings will to come under further scrutiny, as no fundamental solution can be expected even if formal system for ensuring independence of a subsidiary is established.
- Extending disclosure to affiliate relationships is a commendable step forward not only for minority shareholders of dependent companies, but also for shareholders of the listed parent company.
CPF Global Food Solution Pre-IPO – The Negatives – Muted Growth Prospects
- CPF Global Food Solution (2247162D TB) is looking to raise around US$1bn in its upcoming Thailand IPO.
- CPF Global Food Solution (CPFGS) is a subsidiary of CP Foods Group, offering food products and services to food operators and consumers locally and internationally.
- In this note, we talk about the not-so-positive aspects of the deal.
Ricegrowers Limited (SunRice) – Global Market Forecasts Positive for SunRice
- The latest release of the USDA Rice Crop Outlook Report (April 13) provides useful data on the global and US rice markets, which has implications for the rice-related businesses within Ricegrowers Limited, trading as SunRice (ASX:SGLLV).
- The global rice market is forecast to see the second consecutive year of demand exceeding supply (due mainly to supply issues), with global-ending rice stocks expected to be the lowest since 2017/2018 and equal to just four months’ demand.
- Prices for most grades, as a result, remain at record highs (US-medium-grain, which is a proxy for Australian grades) or trending higher in recent months (including Thailand +4%-5% and Vietnam +7%).
Sleep Country – Deep Dive (TSX: ZZZ)
- Sleep Country is Canada’s largest specialty mattress retailer with an estimated market share of 37% as of 2022.
- The company has a coast-to-coast retail network of 289 stores supported by 20 warehouses.
- In addition to being the leading brick-and-mortar retailer in Canada, Sleep Country also owns e-commerce mattress and accessories brands such as Endy (bed-in-a-box), Hush (weighted blankets), and Silk & Snow (bed-in-a-box).
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