In today’s briefing:
- Oriental Watch: Trading at 17% Yield, 60% Mkt Cap in Cash
- I-Tail Corporation Pre-IPO – Peer Comparison
- Flashlight Capital Partners Goes Activist on KT&G
- Lifestyle International’s Court Meeting on 21 November
- DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Porsche AG Gets a Headstart!
- Pre-IPO Giant Biogene (2367 HK) – Some Unstable Factors
- Calbee – Price Hikes Are Appealing to Institutional Investors
- I-Tail Corporation Pre-IPO – Initial Thoughts on Valuation
- Ultrajaya Milk Industry & Trading (ULTJ IJ) – The Raw Milk Dividend
- CyberAgent 4Q: Gaming Deteriorates Further with Absence of New Hit Titles
Oriental Watch: Trading at 17% Yield, 60% Mkt Cap in Cash
- We remain cautious on Oriental Watch (398 HK) despite the recovery in sales in June this year. Wealth destruction in financial markets could impact sales in the short term.
- Having said that, the stock is extremely cheap at 6.7x FY23 earnings (-32% YoY from FY22), with more than one bn HKD in cash (60% of market capitalization).
- With a generous payout ratio of >100%, the stock trades at >17% yield. We believe the company will dip into cash reserves to maintain a high yield.
I-Tail Corporation Pre-IPO – Peer Comparison
- I-Tail Corporation, an original equipment manufacturer (OEM) in the wet pet food category, aims to list in Thailand in 4Q22. ITC is a subsidiary of Thai Union Group (TU TB).
- As per ITC, it was the number two pet food company in Asia and in the top ten pet food companies globally. ITC expertise lies in fish-based wet pet food.
- In our previous notes, we have looked at the company’s past performance. In this note, we undertake a peer comparison.
Flashlight Capital Partners Goes Activist on KT&G
- On 26 October, a Singaporean private equity firm called Flashlight Capital Partners started to go activist on KT&G demanding that the company spin-off its ginseng business to improve shareholder value.
- While a spin-off of the ginseng business is not likely near term, the company could buyback more shares and sell more non-core assets which could soothe Flashlight Capital Partners.
- Back in June 2022, we wrote a prescient insight called KT&G Is a Prime Candidate for Corporate Activism in Korea.
Lifestyle International’s Court Meeting on 21 November
- The Lifestyle International Holdings (1212 HK) scheme document is out with the court meeting scheduled for 21 November. The IFA considers the HK$5.00 offer to be fair and reasonable.
- Key conditions include approval by at least 75% of independent shareholders (<10% rejection). Headcount test not applicable. No shareholder holds a blocking stake.
- The offer is light but likely to succeed. At last close and for a 30 December payment, the gross and annualised spread to the offer is 9.6% and 65.7%, respectively.
DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Porsche AG Gets a Headstart!
- In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
- Based on current rankings, Commerzbank AG (CBK GR) could move from MDAX to DAX and Puma SE (PUM GR) could move from DAX to MDAX.
- I also expect multiple changes for the MDAX and SDAX indices including the impact of the recently-listed Porsche AG (P911 GR).
Pre-IPO Giant Biogene (2367 HK) – Some Unstable Factors
- Although the recombinant collagen with relatively low price is “subversive” in the preparation process, animal-derived collagen is still more widely used, covering larger markets with various products.
- Either for business diversification or to avoid policy risks, how to explore the second growth point is important to Giant Biogene.Otherwise,the Company’s hard to improve the resilience to market/policy changes.
- Bloomage would have higher valuation expansion potential than Giant Biogene in mid- to long-term. In other words, if the valuation of Giant Biogene is higher than Bloomage, there’s overvaluation risk.
Calbee – Price Hikes Are Appealing to Institutional Investors
- Japan’s largest snacks maker, Calbee Inc (2229 JP) is raising prices by 10-20% for almost 75% of its product range.
- These price hikes have boded well with institutional investors with a vast most of them deciding to up their stake in the company following the first price hike announcement.
- While institutional-investors bet on earnings growth over long-term through regular price revisions, we think there could also be short and medium-term gains as OP growth turns positive after many years.
I-Tail Corporation Pre-IPO – Initial Thoughts on Valuation
- I-Tail Corporation, an original equipment manufacturer (OEM) in the wet pet food category, aims to list in Thailand in 4Q22. ITC is a subsidiary of Thai Union Group (TU TB).
- As per ITC, it was the number two pet food company in Asia and in the top ten pet food companies globally. ITC expertise lies in fish-based wet pet food.
- In our previous notes, we have looked at the company’s past performance and undertaken a peer comparison. In this note, we talk about valuations.
Ultrajaya Milk Industry & Trading (ULTJ IJ) – The Raw Milk Dividend
- Ultrajaya Milk Industry & Trading‘s last set of results reflected both the recovery in sales as mobility improved as well the pressure from rising packaging and imported milk powder prices.
- Both whole milk powder and skimmed milk powder prices have declined by around 30% from the peak in April this year, which should help to underpin better margins in 2H2022.
- Ultrajaya Milk Industry & Trading has increased its advertising and promotional spending to take advantage of improved mobility, with strong growth momentum likely to persist in 2H2022 and into FY2023.
CyberAgent 4Q: Gaming Deteriorates Further with Absence of New Hit Titles
- CyberAgent Inc (4751 JP) reported 4QFY09/22 financial results after the market closed on 26th. Revenue for the quarter decreased 1.9% YoY to JPY 176.2bn vs consensus revenue of JPY 175.5bn.
- OP declined 50.8% YoY to JPY 13.2bn vs consensus JPY 16.0bn (miss of 9%) due to decline in profits from gaming business. OPM declined to 7.5% from 14.9% in 4QFY09/21.
- CA’s earnings have come under pressure with absence of new hit game titles. Media segment continues to see strong growth and FIFA World Cup is only a one-off boost.
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