In today’s briefing:
- Geely Stalls As ZEEKR Spins Off
- Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent
- Zeekr Pre-IPO – Thoughts on Valuation
- 2024 High Conviction: Anta Sports (2020 HK)
- Beyond Fashion: Unraveling Bangladesh’s Garment Industry Challenges
- A Potential Fight for Management Rights of Socar Between Lee Jae-Woong and Lotte Rental
- China Dongxiang (3818 HK): Turned Around on Sports Business
- Fast Retailing: On to the Next (Bigger) Stage
- IPAR: Clarity on Growth
Geely Stalls As ZEEKR Spins Off
- Geely Auto (175 HK)‘s share price has largely swatted away the pending US-listing of ZEEKR (ZK US).
- ZEEKR was valued at US$13bn after a US$750mn fund raising in February. At that value, Geely’s 54.7% stake is worth 58% of its market cap.
- Geely is trading around a six and half year low, and below its five average trailing/forward metrics.
Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent
- The fast entry screening spans from November 17th to December 7th. Given its current market cap, we should anticipate the potential success of fast entry.
- The implementation date will coincide with the effective day of the December rebalancing, which is December 15th. There are precedents of successfully achieving fast entry with such a tight schedule.
- The setup will be challenging due to the short selling ban. Nevertheless, with an existing position, there may be value in a market timing approach.
Zeekr Pre-IPO – Thoughts on Valuation
- ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$500m in its US listing.
- Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
- We have looked at the company’s past performance and undertaken a peer comparison in our earlier notes. In this note, we will talk about valuations.
2024 High Conviction: Anta Sports (2020 HK)
- Anta Sports Products (2020 HK) is the second largest China sportswear company at 20% market share in 2022.
- The thesis for Anta lies in Anta’s above-industry earnings growth for the next 3 years, low market expectations on China sportswear sector, and flexible multi-brand strategy.
- Anta trades at a forward PE of 17x based on estimated 2024 earnings, with around 15-20% expected net profit growth in 2024-2026.
Beyond Fashion: Unraveling Bangladesh’s Garment Industry Challenges
- Bangladesh’s garment industry grapples with a 14% export dip, prompting worker unrest over wage discrepancies.
- Efforts by a wage board fall short as workers advocate for a Tk25,000 minimum, seeking fair compensation.
- Economic turbulence looms as 3,500 factories, constituting 85% of exports, confront closure amid widespread unrest.
A Potential Fight for Management Rights of Socar Between Lee Jae-Woong and Lotte Rental
- It was announced that founder of Socar Lee Jae-Woong purchased 336,000 additional shares of Socar. This signals a potential M&A fight for Socar between Lee Jae-Woong/related parties and Lotte Rental.
- Founder Lee Jae-Woong and related parties currently own 37.8% stake in Socar versus Lotte Rental which has 32.9% stake.
- Socar is currently trading at more attractive valuations and we like the company’s aggressive strategy to raise profitability.
China Dongxiang (3818 HK): Turned Around on Sports Business
- The turnaround of sports business at China Dongxiang (3818 HK) is very welcoming. We are glad that sales trend in Oct-Nov is sustained and Phenix brand is well-received.
- Reported losses widened as poor market environment enlarged investment losses. However, net cash and investment portfolio are still valued at Rmb8.5bn, or 5.9x its market capitalisation.
- CNDX looks comfortably at over 6% full-year dividend yield. Together with just 0.15x P/B, there are enough protections for the downside of the stock.
Fast Retailing: On to the Next (Bigger) Stage
- We once called Uniqlo the Toyota of clothing. And this remains apposite. Its consistent, reliable quality, focus on supply chain efficiency, and increasingly global renown make it a solid bet.
- The majority of the growth last year came from overseas markets, including even the US and Europe and the appointment of Daisuke Tsukagoshi as president will boost overseas performance further.
- Fast Retailing is talking up the potential of GU, which should make up for lower domestic growth from Uniqlo but also now thinks it can make it a global brand.
IPAR: Clarity on Growth
- IPAR issued its initial 2024 sales and EPS guidance proving clarity as investors value the stock for the year ahead.
- IPAR is forecasting sales and EPS in line with our current estimates suggesting there could be ample upside to the numbers if the current demand for fragrances were to continue.
- IPAR expects 2024 sales of $1.45 billion and EPS of $5.15. Both of which are in line with our estimates of $1.42 billion and $5.16, respectively.
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