In today’s briefing:
- Denso – Thoughts On The Cross-Holdings Sell-Down
- Itoen Pref (25935 JP) – Big Discount, Big Buyback, No Big Governance Change
- Sapporo Holdings: Activist Investor 3D Investment Partners Assumes Majority Ownership
- BYD (1211 HK) | Takeaways from India Showroom Visit | “Tata” Of China
- 2024 High Conviction: Meituan / MT (3690 HK) – Big Opportunity Emerging After Plunge
- Pinduoduo (PDD US): TEMU at Center Stage
- 2024 High Conviction – CyberAgent: Worst Seems to Be Over
- Indofood CBP Sukses (ICBP IJ) – FMCG On Track at Home and Abroad
- Kobayashi Pharmaceutical Co (4967 JP): Q3 Shows Early Signs of Business Revival; Aims Big for US
- GES: 3Q Review: Guess Goes Conservative for 4Q; Reiterate Buy, $32.50 Pt
Denso – Thoughts On The Cross-Holdings Sell-Down
- The trend of governance reform in Japan continues with Toyota, Toyota Industries and Aisin selling shares of Denso.
- Denso is buffering some of the flow impact by repurchasing roughly half of the shares to be sold.
- While the size of these moves is relatively large we believe their impact could be disproportionately large for the market as a whole.
Itoen Pref (25935 JP) – Big Discount, Big Buyback, No Big Governance Change
- This is always a tough subject, but every now and then I throw myself on the mercy of the ho-humming crowd and write about the Ito En Prefs (25935 JP).
- No strong catalyst. Limited capacity for strongly better governance. Even less apparent corporate interest in good governance.
- But we have a mini-catalyst, and it has been a while, and I think there IS a good way to think about this stock, so here’s another crack at it.
Sapporo Holdings: Activist Investor 3D Investment Partners Assumes Majority Ownership
- Last week, activist investor 3D Investment Partners raised its stake in Sapporo Holdings (2501 JP) by an additional 13%, cementing its position as the majority shareholder in the business.
- This suggests the activist investor is optimistic about successfully advancing their proposals.
- If investment properties are sold or spun off, and Alcoholic Beverages and Food & Soft Drinks undergo the suggested turnaround, we anticipate an additional 80-100% upside in the near term.
BYD (1211 HK) | Takeaways from India Showroom Visit | “Tata” Of China
- We recently visited a BYD (1211 HK) showroom in Ahmedabad, with the objective of understanding the preference for Electric Vehicles in India.
- Pitched as the “Tata” of China, BYD offers 2 models ATTO 3 and e6 in India.
- Considering Tesla Motors (TSLA US) India interest, and Mahindra & Mahindra (MM IN) big bet on EV, BYD’s current operations in India seem to be minuscule and may find little success.
2024 High Conviction: Meituan / MT (3690 HK) – Big Opportunity Emerging After Plunge
- The stock has been declining for about three years and plummeted after the 3Q23 results.
- However, we believe MT and its corporate clients have been recovering and MT’s profits will rise by 129% in 2024.
- We set an upside of 132% and a price target of HK$209 for 2024. Buy.
Pinduoduo (PDD US): TEMU at Center Stage
- Stock rally on strong revenue growth suggests TEMU will be at center stage of the investment thesis for PDD down the road.
- Besides soaring GMV, TEMU achieved blowout performance likely due to much higher-than-expected take-rate and disciplined marketing, resulting in narrower-than-expected losses.
- We expect the company’s growth will even accelerate in 4Q23 and generate adjusted net profit of US$12 bn for FY24, with a target market cap of US$240 bn (20xPE).
2024 High Conviction – CyberAgent: Worst Seems to Be Over
- CyberAgent Inc (4751 JP) (CA) is a Japan-based media and entertainment company offering media, internet advertising, smart games and investment development businesses in Japan.
- The gaming business of the company has collapsed with the slowdown of hit title UMA MUSUME while titles released after UMA MUSUME have failed to perform satisfactorily.
- Profitability of Internet advertising and media are expected recover and seems that worst is over for the games business as several titles are slated for release in the near future.
Indofood CBP Sukses (ICBP IJ) – FMCG On Track at Home and Abroad
- Indofood CBP Sukses (ICBP IJ) has weathered the worst of higher raw material prices and is now seeing the benefits of lower input costs, benefiting margins.
- The company is a core beneficiary of pre-election spending as its products are often given as gifts during campaigning. ICBP is also seeing strong performance in its export markets.
- ICBP should increasingly be seen as an emerging market staples player, with globally recognised brands such as Indomie and Chitato. Valuations do not reflect this.
Kobayashi Pharmaceutical Co (4967 JP): Q3 Shows Early Signs of Business Revival; Aims Big for US
- Kobayashi Pharmaceutical Co (4967 JP) witnessed business revival in Q3, especially in the domestic household and the U.S. business. In Q3, revenue increased 6% YoY and 13% QoQ to ¥45.4B.
- Kobayashi has reiterated FY24 guidance. The company has guided for FY24 revenue of ¥172.0B (+4% YoY), operating income of ¥25.5B (-4% YoY), and net profit of ¥20.2B (-1% YoY).
- By establishing the supplement business in North America and further expanding OTC medicines, the company aims to achieve sales of ¥34B in the U.S. in 2030, including ¥16B from healthcare.
GES: 3Q Review: Guess Goes Conservative for 4Q; Reiterate Buy, $32.50 Pt
- We are reiterating our Buy rating and $32.50 price target for Guess?, after the company reported mixed 3QFY24 (October) results, with EBITDA handily beating Street consensus, but EPS a miss, driven by a higher than expected tax rate and slightly weaker top line results, as Europe saw slowing traffic and the domestic stores remain negative.
- Jeans), the recapture of the company’s license for domestic outerwear and a normalization of the expense base.
- As such, we are reiterating our Buy rating and $32.50 price target on GES, which now translates to 6.5X our new FY25 EBITDA.
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