In today’s briefing:
- Itochu Keeps Buying Fuji Oil, Takeover Offer Could Be Possible With Shares Near The Cyclical Bottom
- Hang Seng Indexes: Rebalances Today; Recent Trading Data
- Carbon Revolution: SPACed & Smacked
- Again, It Is the BOJ’s ETF Issue that Makes Us Think
- Gap Inc: Gap Store On Amazon & Other Developments
- Foot Locker Inc: Extended Partnership With Puma & Other Drivers
- Macy’s Inc: Digital Marketplace & Other Drivers
- Ross Stores: Store Additions & Other Drivers
Itochu Keeps Buying Fuji Oil, Takeover Offer Could Be Possible With Shares Near The Cyclical Bottom
- Itochu Corp (8001 JP) has restarted accumulating Fuji Oil Holdings (2607 JP) shares, with an acquisition of 3.5m shares during the last-quarter to take its ownership percentage in Fuji-Oil to 44%.
- With both earnings and valuations at a cyclical bottom, Itochu could be encouraged to accumulate more Fuji Oil shares in the short term, resulting in Fuji Oil outperforming its peers.
- We think even a takeover offer could be possible while the share price is hovering near the cyclical bottom.
Hang Seng Indexes: Rebalances Today; Recent Trading Data
- The December rebalance of the HSI INDEX, HSCEI INDEX and HSTECH INDEX takes place at the close today. One-way flow is estimated at HK$8.4bn.
- There are 3 adds for the HSI INDEX and 4 adds/ 4 deletes for the HSCEI INDEX. There are float changes for a few stocks as well as capping changes.
- There is excess volume on most adds/deletes post announcement and short interest has also picked up significantly.
Carbon Revolution: SPACed & Smacked
- Following a one-month suspension, carbon-fibre wheel maker Carbon Revolution Ltd (CBR AU) announced it will merge (and delist from the ASX) with Twin Ridge Capital, a US-listed SPAC.
- CBR said it also requires upward of A$30mn in bridging finance to fund near-term costs (through to June 2023). The share price promptly tanked 50% upon the resumption of trading.
- It’s an intriguing situation with an implied notional share price of A$1.49/share under the merger, versus the current price of A$0.15. So I dig a little deeper.
Again, It Is the BOJ’s ETF Issue that Makes Us Think
- Although the stock split doesn’t raise the intrinsic value of the stock, the stock price is likely to rise on the speculation that future purchases into the NISA are expected.
- As cross-shareholdings decline, the companies are actively engaging in IR activities with individual investors to secure shareholders who share the company’s position against foreign shareholders who are increasing their presence.
- Some believe that NISA will be used as receptacle for the disposal of BOJ’s ETF holdings, but companies may hope that the silent shareholder hold ETFs as long as possible.
Gap Inc: Gap Store On Amazon & Other Developments
- Gap delivered a strong set of results in the quarter surpassing Wall Street expectations in terms of revenues as well as earnings.
- The company has taken steps to maximize profitability and cash flow while rebalancing and lowering inventory to drive short-term and long-term improvements across its entire business.
- However, the company is proving strength in lifestyle segments, which are growing at an accelerated rate in the current market.
Foot Locker Inc: Extended Partnership With Puma & Other Drivers
- Despite operating in a turbulent market, including inflationary pressure on the consumer around the world, Foot Locker generated better-than-expected results and managed to surpass Wall Street expectations on all fronts.
- Due to strong brand consistency across the board and successful back-to-school marketing initiatives, Kids Foot Locker had mid-single-digit growth.
- Additionally, Foot Locker extended its partnership with Puma to connect with next-generation consumers through exclusive basketball and other high-end partnerships.
Macy’s Inc: Digital Marketplace & Other Drivers
- Macy’s delivered a strong set of results surpassing Wall Street expectations in terms of revenues as well as earnings.
- Besides, they created permanent Toys “R” Us shop-in-shops within every Macy’s site, offering a unique experience not offered nationally anywhere else.
- Macy’s also has a flexible pricing plan to change discounts and markdowns if demand materializes slowly.
Ross Stores: Store Additions & Other Drivers
- Ross Stores’ results were well above market expectations in terms of revenues as well as earnings as it increased storewide values.
- On the other hand, given their third-quarter sales growth and enhanced holiday assortments, they face their easiest sales and earnings comparisons in the fourth quarter.
- We maintain our ‘Hold’ rating on Ross Stores with a revised target price.
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