In today’s briefing:
- MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period
- Fast Retailing: Another Beat Would Suggest That FR’s North America & Europe Expansion Is Viable
- H World (HTHT) Follow-On Offering – A More Genuine Need
- Xiabuxiabu (520 HK): GA Clean-Up Trade Not a Concern
- Korea Kolmar Holdings: Shares Cancellation of 17% of Market Cap + Deep Discount to NAV
- Discussing the Currently Widened Pref-Ord Disparity in Korea
- China Education Group (CEG) Completed the Placement for Potential M&As
- WDFC: The Floodgates of Inventory
- XXXLutz Consortium/Home24: Final Results and Delisting
MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period
- We expect a number of changes to the MSCI Standard indices for the Asia Pacific region at the first Quarterly Comprehensive Index Review to be implemented on 28 February.
- As usual, most changes are expected in China with a smattering of adds and deletes for the other markets.
- On average, the adds have outperformed the deletes over the last few weeks and months and pre-positioning should continue for the next couple of weeks.
Fast Retailing: Another Beat Would Suggest That FR’s North America & Europe Expansion Is Viable
- Although it looks quite challenging, we think Fast Retailing (9983 JP) should beat consensus when it reports 1QFY23 results on 12th Jan 2023.
- We think shares could briefly touch 2021 highs on a relatively strong beat as it would suggest that the company’s aggressive expansion plans in North America and Europe are viable.
- Thus, we would look to buy Fast Retailing with a short investment horizon. We see considerable downside risks over a full-year period.
H World (HTHT) Follow-On Offering – A More Genuine Need
- H World Group (HTHT US) aims to raise around US$260m via a follow-on ADS offering.
- The company plans to use the proceeds mostly for investment. This will be the first deal by the company post its H-share listing in 2020.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
Xiabuxiabu (520 HK): GA Clean-Up Trade Not a Concern
- Company’s second largest shareholder General Atlantic sold out entire holdings at 5.9% to 6.4% discount to Monday close.
- The placement reflected mainly General Atlantic’s attempt to time market to recoup a 10-year investment instead of any negative read of company fundamentals, in our view.
- Recent newsflow continues pointing to steady recovery in all business lines of Xiabu group. Its valuation discount relative to peers has not captured strong turnaround prospects. Sector top pick.
Korea Kolmar Holdings: Shares Cancellation of 17% of Market Cap + Deep Discount to NAV
- On 10 January, Korea Kolmar Holdings (024720 KS) announced that it plans to cancel 1.1 million shares to be acquired through redemption of redeemable convertible preferred shares.
- Korea Kolmar Holdings currently has a market cap of 314 billion won so this share cancellation represents nearly 17% of its market cap.
- This large shares cancellation should have a positive impact on Korea Kolmar Holdings’ share price. It is also trading at 40% discount to its NAV.
Discussing the Currently Widened Pref-Ord Disparity in Korea
- Many of the PREFERRED shares in Korea entered the short-term oversold territory versus ORDINARY (on a 20-day moving average).
- The liquidity boom that started in the local bond market at the beginning of the year seems to have led to the relative outperformance of ORDINARY.
- We should consider collective trading, which utilizes the oversold condition across the entire PREF zone, rather than an individual approach to a specific PREF at this point.
China Education Group (CEG) Completed the Placement for Potential M&As
- China Education Group (CEG) completed the placement of HKD1.61bn on Jan 9.
- CEG used to do 2-3 M&As per year and had a decent track record.
- CEG also has chances to acquire public companies or their assets.
WDFC: The Floodgates of Inventory
- WDFC reported fiscal first quarter (November 2022) results where sales declined more than expected while past price increases helped gross margin rebound from the August quarter
- WDFC’s inventory maintained its incline reaching a new record and is now $119.1 million. We believe WDFC’s inventory hides the true cost of the business
- The lack of demand remains a headwind that is leading to higher inventory levels. The scale of increase in inventory should continue to play a factor on WDFC’s earnings quality
XXXLutz Consortium/Home24: Final Results and Delisting
- The offer has ended. The bidding consortium has secured 92.67% of home24 shares (including capital increase and share purchases). Completion still remains subject to customary antitrust approvals.
- Unsurprisingly, the shares are now trading at a 8.07% discount to the offer price. Delisting is looming and holdouts have not a sell-out right.
- It is still puzzling to me why >7% of shares have not been tendered. The bidders might make a delisting offer, but not necessarily at the offer price.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
