Daily Brief Consumer: Mcdonald’s Japan, Guzman Y Gomez, Hyundai Motor, Netflix Inc, Webtoon Entertainment, Bloks Group, United Arrows, TSE Tokyo Price Index TOPIX, Geo Holdings and more

• In 2021 the JPX established new Listing Rules, and in April 2022 introduced new market segments (Prime/Standard/Growth) to much fanfare. Today, the TSE basically said those changes were meaningless.
• Today, the TSE announced proposed new rules for TOPIX constituent selection. There is a 2-month consultation period, then rules come out end-Sep 2024. Expect few changes from the Proposal.
• NextGen TOPIX will be created October 2026. 3-4 dozen ADDs, 500-600 DELETEs to create an index of 1,100-1,200 names. Some obvious large impacts 2+yrs from now, but this changes IPOs.

• Guzman Y Gomez (0817833D AU) has raised A$335.1m in a primary + secondary offering, valuing the company at A$2.23bn. The stock starts trading on the ASX Ltd (ASX AU) today.
• Just over 54% of the shares are escrowed which means there is a lot of stock that will be available for sale on listing day.
• Guzman Y Gomez (0817833D AU) could be added to the S&P/ASX 300 Index in September and there could be global index inclusions in November and December.

• Hyundai’s IR team appears to have communicated that a new shareholder return policy would be unveiled at the rescheduled CEO Investor Day in August.
• Hyundai aims to boost shareholder returns above 30% by canceling ₩800B to ₩1T in shares annually. The new dividend strategy won’t debut in August; last year’s three-year plan stands.
• Equal cancellation ratios apply to common and three types of preferred shares. August’s timing, with ISA tax reforms potentially favoring preferred shares, may enhance prefs’ price impact relative to ords.

• Understanding the audience is the number one rule in content creation and building relationships is important globally
• Min Yong Kim started her career in food and nutrition but transitioned to the entertainment industry, eventually joining Netflix
• Lessons learned include the importance of knowing your audience and the shift in thinking about content from traditional media to digital platforms

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• Webtoon Entertainment (WBTN US) is looking to raise up to US$315m in its US IPO, down from an earlier reported float of US$500m.
• Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
• In our previous notes, we talked about the company’s historical performance, undertook a peer comparison and shared our thoughts on valuation. In this note, we share additional thoughts on valuation.

• Guzman Y Gomez  raised around US$221m in its upsized Australian IPO. 
• GYG is a quick service restaurant business with more than 200 restaurants globally. It mainly focuses on fresh, made-to-order, Mexican-inspired food.
• We have looked at the company’s performance  and valuation in our past notes. In this note, we talk about the trading dynamics.

• Bloks Group, a fast-growing toy company and leader of assembly character toys, filed for a Hong Kong IPO. The company is headquartered in Shanghai, PRC, and has 410 full-time employees.
• Bloks Group has raised $200M+ to date from investors, including YF Capital, Legend Capital, Source Code Capital, Gaorong Capital and SinoMedia Asia Pacific.
• The Chinese toy maker has delivered an exceptional revenue hyper-growth of 169% y/y in 2023. Elite operating metrics and impressive financial profile make IPO attractive for investors.

• The premium fashion market in Japan is growing again and it is not just department stores.
• One of the leader is United Arrows, whose main urban chains are on a roll, up double digits, but is being held back by lower priced suburban chains.
• It will now focus more  on the premium market through aggressive category expansion, new brands and M&A.

• Even companies with high valuations and return on capital have room to further raise their return on capital and valuations because of cash allocation challenges.
• Companies whose valuations have not changed over the past year have low ROE and ROA, yet have high policy shareholdings. They have not taken steps to improve return on capital.
• As for whether many companies without high foreign ownership can raise their return on capital and valuations, strong will of management to achieve their goals is necessary.

• Market leader with growth potential – GEO HOLDINGS operates second-hand store chains 2nd STREET, GEO, OKURA, and off-price chain store Luck Rack.
• Its 2,027 domestic stores give it the leading market share in Japan.
• The company is making significant investments to extend its home advantage and build on its 2018 expansion overseas where it has 81 stores.