In today’s briefing:
- The MatsuKiyoCocokara (3088) February Flow Show
- Oriental Watch: Management Meet, HK Slow + China Resilient, 50% of Mkt Cap Cash + 15% Yield
- Who Wants SM Entertainment More? Kim Bum-Soo (Kakao) Or Bang Si-Hyuk (Hybe)?
- Japan Tobacco: An Activist Targeting Torii Pharmaceutical, Turns to JT to Fulfil Their Wishes
- Morinaga Milk (2264 JP)’s Overseas Expansion
- Star Entertainment: Imminent Fund Raising?
- Star Entertainment (SGR AU): Entertaining Known Unknowns
- SoCar Lock-Up – US$242m Pre-IPO Lock-Up Expiry, Expect Scattered Selling
- Comparability of Disclosures Between Companies Will Enhance Content of Sustainability Information
- LVMH: New Menswear Creative Director & Price Increases in Europe and China at LV
The MatsuKiyoCocokara (3088) February Flow Show
- MatsukiyoCocokara (3088 JP) has run up quite well in the past year, rising strongly and outperforming Peers significantly. It has been the avatar of Inbound Rebound hopes and dreams.
- Over that time, forward EPS expectations have also improved, but not as much as price. MatsukiyoCocokara used to be cheap to peers on forward PER. Now it is not.
- 28 Feb sees an MSCI inclusion trade to swing 7% of shares from active to passive. Understanding where those come from is key.
Oriental Watch: Management Meet, HK Slow + China Resilient, 50% of Mkt Cap Cash + 15% Yield
- We met with the management of Oriental Watch (398 HK). HK demand continues to be sluggish, while China sales were resilient with single-digit SSSG growth.
- The company will continue with its conservative policy of not expanding as Rolex/Patek restrict watch supply. It will only foray into boutique expansions if KPIs on return/brands etc., are met.
- With its generous >100% payout ratio, the stock trades at a 15% dividend yield based on our estimated 6.9x FY23 PE, with >50% of its market capitalization in net cash.
Who Wants SM Entertainment More? Kim Bum-Soo (Kakao) Or Bang Si-Hyuk (Hybe)?
- It has been reported that Kakao has hired local brokerage firms to discuss the details of another tender offer of SM Entertainment shares (at more than 130,000 won).
- We believe that this has been the key reason why SM Entertainment’s shares rose an additional 5% on 15 February.
- We believe that eventually Kakao Group will win the M&A fight for SM Entertainment and shares of SM could rise further in the coming weeks.
Japan Tobacco: An Activist Targeting Torii Pharmaceutical, Turns to JT to Fulfil Their Wishes
- Japan Tobacco (2914 JP)’s 4Q22 results were stronger than anticipated yet again with revenue and OP surpassing consensus by 4.3% and 35.2% respectively through selling price increments.
- 2023 guidance looks a bit disappointing, with the company guiding adjusted OP at ¥667bn in 2023 compared to ¥729bn in the previous year, expecting an unfavourable foreign exchange movement.
- But the highlight these days was the proposal by the activist investor LIM Advisors to dispose JT’s share ownership in Torii Pharmaceutical (4551 JP).
Morinaga Milk (2264 JP)’s Overseas Expansion
- Last week, Japanese dairy play Morinaga Milk Industry Co (2264 JP) acquired a soy-based food company in the US and a baby formula distribution company in Vietnam
- These acquisitions are in keeping with Moringa’s medium-term business plan (to Mar-2025) to achieve an overseas sale ratio of 13%, compared to 8.7% last year.
- 3Q23 results were also announced with 9M23 sales and operating profit of ¥405.2bn and ¥20.5bn, a change of +16.8% and -7.2% yoy.
Star Entertainment: Imminent Fund Raising?
- In its earnings update, troubled Aussie casino operator Star Entertainment (SGR AU) said revenue was down 1% on pre-COVID levels, and expects FY23 EBITDA of $330mn-$360mn vs A$525mn in FY19.
- But the big news was the possible $400mn to $1.6bn non-cash impairment charge in relation to disciplinary fines from regulators and new casino duties.
- Shares tanked and are currently trading around a lifetime low. One for the brave or one to ignore?
Star Entertainment (SGR AU): Entertaining Known Unknowns
- Star Entertainment Group (SGR AU) scored an own goal by failing to provide an update on the balance sheet in the update on 13 February. The results are next week.
- There is a whirlwind of uncertainty surrounding potential fines and Star is in desperate need to recapitalise its balance sheet to avoid breaching covenants.
- Our leverage scenarios suggest an equity raise of A$250-500 million is required. Despite the share price fall, we would steer clear until the details of its equity raise are disclosed.
SoCar Lock-Up – US$242m Pre-IPO Lock-Up Expiry, Expect Scattered Selling
- SOCAR (403550 KS) was listed on 22nd Aug 2022, where it raised US$78m in its Korea IPO. Its six-month lockup will expire on 21st Feb 2023.
- SoCar is a Korean car sharing business which aims to become an all-in-one mobility solutions provider beyond car sharing, with approximately 78% domestic market share in the car sharing space.
- Coming up for six-month lockup expiry are the firm’s pre-IPO investors, but the bulk of the shares unlocked will come from its strategic investors.
Comparability of Disclosures Between Companies Will Enhance Content of Sustainability Information
- Since the revised Corporate Governance Code in 2021 requires TCFD disclosure for prime market listed companies, TCFD disclosure is expected to expand to all prime listed market companies going forward.
- Most companies do not have a roadmap for meeting their emissions targets, and there is a need to look carefully at whether their numerical targets and timelines are reasonable.
- Until now, companies that preceded TCFD disclosures have mainly disclosed information in integrated reports. However, attention will focus on how these information will be disclosed in the Annual Securities Report.
LVMH: New Menswear Creative Director & Price Increases in Europe and China at LV
- Pharrell Williams named new menswear creative director for Louis Vuitton
- Price increases in Europe (+4%-6%), and in China (+20%) at Louis Vuitton
- Small incremental positive to our recent investment case on LVMH, long-term winner
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