In today’s briefing:
- Mahindra & Mahindra (MM IN) | The Bookings Fallacy
- Fengxiang (9977 HK): MGO Expected To Follow Judicial Auction
- Sula Vineyards Pre-IPO – Big Fish in a Small Pond
- Vistry/Countryside Partnerships: Agreed Offer
- Leapmotor IPO Valuation Analysis
- Long Idea: Warner Music’s New CEO Could Prove a Catalyst
- ActivistTalk: Is Bed Bath & Beyond Heading For Bankruptcy? Altman Versus The Bond Market
- EbixCash Pre-IPO – The Negatives – Growing Too Fast for Its Previous Auditors, and Short Sellers
- Bruush Oral Care – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 07/22
- Ace Hardware Indonesia (ACES IJ) – The Laggard Household Recovery Story
Mahindra & Mahindra (MM IN) | The Bookings Fallacy
- We challenge Mahindra & Mahindra (MM IN) ‘s narrative of strong demand and booking pipeline (140k+ open bookings, excl Scorpio N as of Q1 FY23)
- There is a possibility of a monthly booking rate of 10.3k for XUV700 and 5K per month for Thar being overstated.
- With increasing competition (MSIL + Toyota), cancellations will increase leading to even lower waiting periods and a reduced booking pipeline.
Fengxiang (9977 HK): MGO Expected To Follow Judicial Auction
- The controlling shareholders of Shandong Fengxiang Co Ltd-H (9977 HK), a company engaged in chicken breeding, slaughtering, and processing, are unable to meet their debts.
- As such, these shareholders who hold 70.92% of shares out in Fengxiang, via domestic shares, have been forced into a judicial auction, the completion of which may trigger an MGO.
- Taking pointers from Dongzheng Automotive Finance (2718 HK)‘s recent auction means we back out a possible payment around late December – on the assumption an unconditional MGO is triggered.
Sula Vineyards Pre-IPO – Big Fish in a Small Pond
- Sula Vineyards (1332009D IN) is looking to raise about US$175m in its upcoming India IPO.
- Sula Vineyards (SV) distributes wines under a bouquet of brands. In addition to its flagship brand “Sula,” popular brands include “RASA,” “Dindori”, “The source,” “Satori”, “Madera” & “Dia”.
- The firm has managed to stay profitable with margin expansion despite COVID-19. However, wine appears to remain a very small part of the Indian alcohol consumption market.
Vistry/Countryside Partnerships: Agreed Offer
- FTSE-250 constituent Vistry Group (VTY LN) has agreed to buy rival Countryside Partnerships (CSP LN) in a recommended cash&stock deal that values embattled Countryside at c.£1.25 billion (lower than previous offers).
- Consideration is 1 CSP LN=0.255 VTY LN+60p, 9.1% premium, 7.0x EV/Fwd EBITDA and 1.3x P/Fwd BV, which seems cheap. The sector is pricing in many potential bad news.
- Gross spread is +2.1%. It has only been negative during three days since the deal announcement. I would wait for the spread to become negative before taking a position.
Leapmotor IPO Valuation Analysis
- Our base valuation of Leapmotor HKD 34.9 per share, which is 27% lower than the low end of the IPO price range of HKD 48 per share.
- Given the steep downside of our target price (6-12 month period) relative to the IPO price range, we are Negative on the Leapmotor IPO.
- Leapmotor is selling 130.82 million shares in the IPO at a price range of HKD 48 to HKD 62 per share, scaling back the size of the IPO considerably.
Long Idea: Warner Music’s New CEO Could Prove a Catalyst
- Warner Music hired YouTube’s Chief Business Officer Robert Kyncl as its new CEO, an impressive executive well positioned to expand music monetization to newer frontiers.
- The stock has roundtripped its $25 June 2020 IPO price after doubling.
- There is a compelling “comping the comp” catalyst path for 2023, as streaming revenues reaccelerate, and Kyncl renegotiates static licensing deals with Peloton, Tiktok, etc.
ActivistTalk: Is Bed Bath & Beyond Heading For Bankruptcy? Altman Versus The Bond Market
- Bed Bath & Beyond’s fundamentals have continued deteriorate resulting in the departure of the man brought in to turn the struggling home goods retailer less than 3 years ago
- Amid an unfriendly operating environment and short term liquidity issues, the specter of bankruptcy for this one-time iconic retailer has been raised
- The Altman Z-Score model which has decent track record for bankruptcy prediction, suggests there is no imminent danger. If correct, there is a potentially lucrative trade in BBBY’s bonds
EbixCash Pre-IPO – The Negatives – Growing Too Fast for Its Previous Auditors, and Short Sellers
- EbixCash (EC) is looking to raise around US$800m in its upcoming India IPO. The deal will be run by Motilal, Equirus, ISec, SBI Caps and Yes Securities.
- EC is a provider of digital products and services in the B2C, B2B and financial technology arena. Its has four primary business segments: Payment solutions, travel, financial technologies and BPO.
- In this note, we talk about the not-so-positive aspects of the deal
Bruush Oral Care – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 07/22
- This is our first report on Bruush Oral Care and we look to provide a detailed account of the drivers that will propel the stock in the near future.
- Bruush got listed recently and its stock price has been volatile but has maintained a more or less sideways trajectory in this short period of time.
- Overall, we believe that Bruush Oral Care has phenomenal growth prospects and is an excellent investment prospect.
Ace Hardware Indonesia (ACES IJ) – The Laggard Household Recovery Story
- Ace Hardware Indonesia (ACES IJ) is a household name in Indonesia and should be a beneficiary of the economic recovery and improved mobility but has languished, trading at 5-year lows.
- SSSG for the last two months have remained strong pushing the YTD SSSG into positive territory and confirming an ongoing recovery. It will roll out 15 new stores this year.
- Ace Hardware Indonesia (ACES IJ) is trading at 13.5x FY2023E PER, with EPS forecast to recover by +27.8% in FY2023E versus its 5-year average forward PER of 27x.
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