In today’s briefing:
- July TOPIX FFW Rebal – Update With 2 Days To Go on $3bn a Side
- Tata Motors (TTMT IN) – Goodbye to the DVR Arb
- Quiddity HSTECH Sep 23 Flow Expectations Update: Last Trade Sucessful; Some New Trade Ideas
- Lalatech IPO Valuation Analysis: Discount To Last Round Valuation Is Justified
- CyberAgent 3Q: Gaming Collapses and Spurs Downward Revision
- Feng Tay Enterprise: Risks from Higher Inventory at Nike & Unattractive Valuations
- Netflix Inc.: Crackdown On Password Sharing A Temporary Subscriber Growth Boost! – Key Drivers
- PepsiCo Inc.: Can The Product Price Increase Be A Deterrent For Consumers? – Key Drivers
- Las Vegas Sands Corp.: The Comeback King of the Casino Industry! – Major Drivers
- IPAR: Adding and Growing
July TOPIX FFW Rebal – Update With 2 Days To Go on $3bn a Side
- In the two weeks since the announcement, Large ADDs (>2d ADV, >$5mm) have outperformed Large DELs by 1.3%. Smaller ADDs vs DELs (>2d, >$2<$5mm) have outperformed by 1.3%.
- Using only >$20mm >2d DELs vs Top 5 $amt >2d ADDs, that’s a bit better than 1%. And the really obvious large ones? Not so obvious.
- There is still a large reverse funding trade, with some large sells.
Tata Motors (TTMT IN) – Goodbye to the DVR Arb
- Tata Motors Ltd (TTMT IN) has announced a Scheme of Arrangement where all the Tata Motors DVR (TTMT/A IN) shares will be cancelled.
- For every 10 shares of Tata Motors DVR (TTMT/A IN) held, shareholders will receive 7 shares of Tata Motors Ltd (TTMT IN).
- The process is expected to take 12-15 months to complete and there will be passive buying in Tata Motors Ltd (TTMT IN) at the end of it.
Quiddity HSTECH Sep 23 Flow Expectations Update: Last Trade Sucessful; Some New Trade Ideas
- In Quiddity HSTECH Sep 23 Flow Expectations: Two ADDs/DELs Possible, I discussed my initial flow expectations and potential index changes for the September 2023 Rebalance.
- The suggested (previous insight) SHORT Ping An Healthcare and Technol (1833 HK) is down 10.6% vs the hedge JD Health International (6618 HK) in ~1.5 months.
- In this insight, I have presented my updated flow expectations and some new trade ideas for the next few weeks.
Lalatech IPO Valuation Analysis: Discount To Last Round Valuation Is Justified
- Lalatech Holdings filed for an IPO in March. I have tried to come at an IPO valuation for the company using a mix of methodologies: EV/Revenue, EV/GTV and EV/Gross Profit.
- Taking a weighted average of peer group multiples-based valuation methodologies, I arrived at a ~$7B IPO valuation for Lalatech Holdings, including ~$1.65B of cash and cash equivalents.
- From a peer group perspective, I arrived at a fair IPO valuation close to ~$7B, using a ~5x EV/CY22 Revenue, ~0.7x EV/CY22 GTV, and a 10x EV/CY22 Gross Profit multiple.
CyberAgent 3Q: Gaming Collapses and Spurs Downward Revision
- CyberAgent Inc (4751 JP) reported 3QFY09/2023 results today. Revenue decreased 0.2% YoY to ¥171.7n (vs consensus ¥177.8bn) while operating income decreased 86.2% YoY to ¥1.4bn (vs consensus ¥11.0bn).
- The game business has further deteriorated during 3Q with the absence of hit title launches and drop in UMA MUSUME Rankings. Segment reported losses during the quarter.
- CA has opened pre-registrations for two new games, we are not convinced that these could become top performers as the company has not given a hit title since UMA MUSUME.
Feng Tay Enterprise: Risks from Higher Inventory at Nike & Unattractive Valuations
- We are negative on Feng Tay Enterprise’s share price in the next 6-12 months mainly due to inventory/margin concerns at its largest customer Nike combined with unattractive valuations.
- In the next several months, we think there is a higher probability of Feng Tay’s share price underperforming versus Nike.
- Feng Tay Enterprise is one of the largest global OEM/ODM companies that specializes the design and manufacturing of footwear. Nike is one of the largest customers of Feng Tay Enterprise.
Netflix Inc.: Crackdown On Password Sharing A Temporary Subscriber Growth Boost! – Key Drivers
- Netflix delivered a mixed set of results for the previous quarter, with revenues below the analyst consensus.
- Key second quarter results indicated revenue of $8.19 billion, adjusted earnings per share (EPS) at $3.29, and a surge in subscribers with 5.89 million net additions, all of which are above expectations.
- The shortfall in revenue was counteracted by strong performance in profitability metrics, such as the operating margin and free cash flow, which surpassed expectations.
PepsiCo Inc.: Can The Product Price Increase Be A Deterrent For Consumers? – Key Drivers
- PepsiCo delivered an all-around beat in the previous quarter.
- The labor market is generally improving, which has improved how PepsiCo conducts its business.
- Another good news for the company was that PBNA’s margins decreased in the second quarter.
Las Vegas Sands Corp.: The Comeback King of the Casino Industry! – Major Drivers
- Las Vegas Sands managed to exceed analyst expectations in terms of revenue as well as earnings.
- With its scale and substantial investment, Las Vegas Sands is well-positioned to benefit from this trend.
- We give Las Vegas Sands Corp. a ‘Hold’ rating with a revised target price.
IPAR: Adding and Growing
- IPAR continued to experience momentum in demand in the second quarter with preliminary sales ending up at $309 million compared to our Street high estimate of $283.7 million
- IPAR’s management is taking a conservative approach with sales forecast given the supply chain and sales volatility in certain regions.
- The strength in second quarter sales was across multiple brands and in both segments
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