In today’s briefing:
- Oriental Watch: Ex-Dividend, 7x PE + 50% of Mkt Cap in Cash + >15% Dividend Yield
- China MeiDong Auto Placement – Strong Track Record and Past Deals Have Held Up
- Japfa Ltd: Trading Cheap After AustAsia In-Specie Distribution
- HSI Index Rebalance Preview: Better Late Than Never?
- Minor International (MINT TB) – More Than Just Revenge Tourism
- How Far Has Corporate Governance Progressed in 2021? (1) ~ Key Actions Section
- Hisense Announced the Long-Awaited Equity Incentive Scheme
- Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store
Oriental Watch: Ex-Dividend, 7x PE + 50% of Mkt Cap in Cash + >15% Dividend Yield
- Oriental Watch (398 HK) went ex-dividend on the 30th of December, post which there was a slight correction, and now the stock is 7x PE FY23 (~15% dividend yield).
- There is a substantial margin of safety with assets worth 4+ HKD/share ( 2 HKD/share of net cash + 1 HKD/share of inventory and >1 HKD of real estate).
- Trends point to a year of decent profitability as SSSG continues remain stable in China in November/December 2022. HK sales trended lower due to outbound travel.
China MeiDong Auto Placement – Strong Track Record and Past Deals Have Held Up
- China MeiDong Auto (1268 HK) is looking to raise US$100m via a top-up placement.
- Proceeds from the offering will be geared towards potential M&A and general working capital purposes.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
Japfa Ltd: Trading Cheap After AustAsia In-Specie Distribution
- Agri-Food play Japfa Ltd (JAP SP) recently distributed in-specie its 62.5% stake in AustAsia Group (2425 HK).
- Japfa continues to hold a 55.4% stake in Japfa Comfeed Indonesia (JPFA IJ), together with unlisted ops focused on animal proteins in Vietnam, India, Bangladesh, and Myanmar.
- Japfa is estimated to be trading at around a 41% discount to NAV and ~4x EV/EBITDA.
HSI Index Rebalance Preview: Better Late Than Never?
- There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
- We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
- All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.
Minor International (MINT TB) – More Than Just Revenge Tourism
- Minor International (MINT TB) represents a unique combination of exposure to a diverse set of hotel and restaurant brands both in Thailand and globally making it a true recovery proxy.
- The company’s hotel portfolio is well-diversified geographically and across different segments giving it exposure to both tourism in Thailand and globally and to the recovery in business travel.
- Minor Food has also seen a strong recovery as revenge dining draws consumers to dine out. Overall valuations look attractive given expected growth rates over the next two years.
How Far Has Corporate Governance Progressed in 2021? (1) ~ Key Actions Section
- Shareholder returns, including dividend policy and treasury stock retirement/buyback and growth policies improved slightly. Still, cash allocations are weak in both shareholder returns and growth, so cash is piling up.
- The policy shareholdings is decreasing year by year, but the holdings is so large that they still account for a large % of total assets, so cash is piling up.
- Companies with ROEs above 12% achieved even higher returns, and Tobin’s Q1.2-1.4 companies (with higher valuations than average) increased slightly. Investors may have valued companies that exhibit higher returns.
Hisense Announced the Long-Awaited Equity Incentive Scheme
- Hisense announced the long-awaited equity incentive scheme on Jan 2.
- For 100% vetting, Hisense net profit needs to grow by 62%/86%/109% from 2023 to 2025, compared with its 2021 net profit level.
- We have seen Hisense Home Appliance (Hisense HA) transforming itself into a more market-oriented company.
Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store
- Amid sharply rising interest rates and greater economic uncertainty, the subject of loan guarantees to affiliates among Korean companies has become more important.
- In this insight, we discuss a pair trade between Shinsegae (long) and Hyundai Dept Store Co (short).
- Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan guarantees), valuations, and economies of scale.
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