In today’s briefing:
- Value-Up Tax Support Revealed by End of June: Local Market Eyes Corporate Tax Cut Beneficiaries
- Webtoon Entertainment Pre-IPO – The Positives – Just Turned Profitable
- China E-Commerce: Stabilizing Property Market Matters a Lot
- Companies with High Corporate Governance Practices Have High ROE, but Not Vice Versa
- Pre-IPO Midea Group H Share – Even in the Face of Challenges, There Is Still Investment Value
- CP Axtra (CPAXT TB) – Symbiotic Alliance
- VRA: 1Q Preview: Looking Forward to the New Day; Reiterate Buy, $10 PT
- Webtoon Entertainment Pre-IPO – The Negatives – Korea Revenue Declined, JP Acquisition to the Rescue
Value-Up Tax Support Revealed by End of June: Local Market Eyes Corporate Tax Cut Beneficiaries
- A high-ranking official from the local financial regulatory authority has confirmed to several local media outlets that the tax benefits for the value-up program will be unveiled this month.
- Corporate tax cuts and separate taxation on dividend income will be included. The short-term impact at the time of the announcement will likely be more significant for corporate tax cuts.
- Local market is focused on screening large companies within the KOSPI 200 that have substantial pre-tax profits in anticipation of the corporate tax cut momentum to be announced this month.
Webtoon Entertainment Pre-IPO – The Positives – Just Turned Profitable
- Webtoon Entertainment (WBTN US) is looking to raise up to US$500m in its US IPO.
- Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
- In this note, we talk about the positive aspects of the deal.
China E-Commerce: Stabilizing Property Market Matters a Lot
- A stabilizing property market matters more than other factors such as industry rivalry and shareholder return policies for the performance of leading China e-commerce players in our view.
- China’s worst property market downturn is probably behind us. This will gradually help restore consumer confidence and lift consumer propensity to spend, improving growth outlook for China e-commerce sector.
- We believe China e-commerce players will in general benefit from a stabilizing housing market. Alibaba remains the most attractive play in the space.
Companies with High Corporate Governance Practices Have High ROE, but Not Vice Versa
- Companies in the 0% to 8% ROE group have low stock valuations and are in trouble because they are unable to step into value-creating management.
- Companies in this group, which includes many prime market listed companies, have done what is required by Corporate Governance Code, but could not take action to increase their ROE.
- The lack of significant differences in corporate governance practices for group with ROEs above 10% is due to foreign ownership not being significantly differentiated from other groups.
Pre-IPO Midea Group H Share – Even in the Face of Challenges, There Is Still Investment Value
- Although Midea’s performance keeps growing, it is difficult for the home appliance industry to return to rapidly growing incremental market as it was during the robust development of real estate.
- As Midea’s To C business encounters growth bottleneck, To B business has become new performance driver and second growth curve, but several new businesses are facing challenges in 24Q1.
- For mature leading enterprises in home appliance industry, a valuation of 10-20x PE is reasonable, which means market value of RMB370-740 billion, assuming 2024 net profit would reach RMB37 billion.
CP Axtra (CPAXT TB) – Symbiotic Alliance
- CP Axtra (CPAXT TB) is a merger upon a merger combining the Makro wholesale business and the Lotus hypermarket and supermarket businesses, along with a hybrid mall operation.
- The combined entity continues to realise operational synergies in sourcing and logistics, with a strong B2B element. Omnichannel makes up more than 16% of sales and is growing rapidly.
- CP Axtra (CPAXT TB) provides an alternative retail exposure to its parent CP ALL (CPALL TB) with ongoing restructuring benefits still to be realised. Valuations look attractive relative to growth.
VRA: 1Q Preview: Looking Forward to the New Day; Reiterate Buy, $10 PT
- We are reiterating our Buy rating, $10 price target and projections for Vera Bradley with the company announcing 1QFY25 (April) results before the open on Wednesday.
- We believe, more than the 1Q results, which we expect to reflect the company’s desire to reduce inventory and start afresh, will be management commentary on their new relaunch of the Vera Bradley brand.
- We expect the “New Day,” which will launch on July 11th, to focus on core styles/categories, a new store look and expanding the appeal of Vera Bradley to a wider range of customers.
Webtoon Entertainment Pre-IPO – The Negatives – Korea Revenue Declined, JP Acquisition to the Rescue
- Webtoon Entertainment (WBTN US) is looking to raise up to US$500m in its US IPO.
- Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
- In this note, we talk about the not-so-positive aspects of the deal.
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