In today’s briefing:
- Fast Retailing (9983) | Fantastic Execution at Fantastical Valuation
- StubWorld: Macau Plays Need To Up Non-Gaming Game
- Suzuki (7269) | Small Cars at Tiny Valuations
- Keepers Holdings: Global Market Weakness Creates Opportunity
- Becketts/Euromoney Institutional Investor: Spread
- Alibaba, JD.Com, Longfor Group, and Country Garden
- Korea Consumer Discretionary: A Pair Trade (Long CJ ENM and Short HYBE)
- Review of TSE Market Reclassification Requires a Big Cleanup, Not a Small Cleanup as It Should Be
- Vietnamese Fashion Recommerce Firm Raises US$1 Million
Fast Retailing (9983) | Fantastic Execution at Fantastical Valuation
- We were Bearish on Fast Retailing, mainly due to valuation concerns against global peers. That view still stands.
- We expected cautious guidance reflecting a harsh macro environment. Fast surprised with bullish guidance. That could be a risk.
- We highlight the key slides from the results presentation and re-iterate our view that Fast should not trade at such a premium to its global peers
StubWorld: Macau Plays Need To Up Non-Gaming Game
- Reportedly Macau authorities are not satisfied with some concessionaire proposals from gaming firms and require them to increase investment into non-gaming facilities under a concession retendering process
- Preceding my comments on some of the gaming plays such as Melco International Development (200 HK) and Genting Bhd (GENT MK) are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Suzuki (7269) | Small Cars at Tiny Valuations
- We are bullish on the share price of Suzuki given its exposure to secular growth in India
- The ex-Maruti business is recovering as supply chain constraints ease.
- We see at least 25% upside to the share price and believe the non-Maruti business is significantly undervalued
Keepers Holdings: Global Market Weakness Creates Opportunity
- The Keepers Holdings, Inc. (KEEPR PM) correction in share price by 23% from the peak provides an opportunity with the stock trading at 7.4x/6.1x PE FY22e/23e (excluding Bodegas W&H earnings).
- The company will release its Q3 2022 earnings in early November, and we expect revenue and earnings growth to be >25% YoY.
- We also eagerly await more color on accretion to earnings from a 50% stake in Bodegas W&H post which we expect the stock to be even cheaper.
Becketts/Euromoney Institutional Investor: Spread
- The scheme is just pending court sanction and the remaining regulatory approval, with closing reasonably expected to happen in Q4 2022.
- I believe Euromoney is going cheap, but the current debt markets make it harder to raise money/counterbid. Euromoney is trading at 16.3x EV/Fwd EBIT vs. RELX at 17.3x.
- The shares are liquid. Gross spread is 1.3%, with estimated annual return of 7.9% assuming settlement by 15 December. Long.
Alibaba, JD.Com, Longfor Group, and Country Garden
- Country Garden 2031 USD bond closed at 17.00. It is pricing a near-inevitable default.
- Longfor Group-rated BBB- maturing in 2032, is trading at 54.25, yielding 12.6%.
- The bonds are down 50% since their peak near 109 in February 2021. it is getting into a crisis of confidence mode.
Korea Consumer Discretionary: A Pair Trade (Long CJ ENM and Short HYBE)
- In this insight, we discuss a pair trade of going long on CJ ENM and going short on HYBE.
- CJ ENM’s valuations are much more attractive and offer higher value as compared to HYBE. CJ ENM shares are trading at EV/EBITDA of 2.7x versus 10.9x for HYBE in 2023.
- The Korean government is likely to require BTS members to conscript for military service which is likely to lead to sharp decline in earnings estimates for HYBE.
Review of TSE Market Reclassification Requires a Big Cleanup, Not a Small Cleanup as It Should Be
- Prime market was conceived as a market for institutional investors to invest in, but the problem is that little has changed in substance as a result of the market reclassification.
- The current discussion hasn’t raised any debate on raising the market cap-threshold for prime market. To keep up appearances as a global market, TSE will proceed with disclosure in English.
- TSE will probably set 5-year exit deadline for companies that don’t meet the listing criteria within the next year, and will prepare a market for those companies.
Vietnamese Fashion Recommerce Firm Raises US$1 Million
- Piktina, an online marketplace for secondhand clothes in Vietnam, has raised US$1 million in seed funding
Founded in June, Piktina connects buyers and sellers of secondhand goods, targeting both individuals who want to free up their closets and businesses that specialize in pre-owned fashion items.
The recommerce platform was established by Phuong Nguyen, the former CEO of Vietnamese ride-hailing firm Be Group, and Huyen Trinh, also a former Be Group executive.
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