In today’s briefing:
- Rakuten – Sale of Stake in Securities Business Eases Funding Pressure
- KOSDAQ 150 Rebalancing: 7 Regular Changes + 2 Special Entries
- I-Tail Corporation Pre-IPO – The Positives – For the Pampered Pets
- Z Holdings / PayPay – A Focus on Margin Improvement as ZHD Moves to Consolidate
- Ryohin Keikaku: A Beat Can Turn Around Price Performance
- Shidax Outlook May Change – Better Governance Matters
- A Senior Korean Govt Official Provides the Likely Time of the End of Indoor Mask Mandate
- FEMSA/Valora Holding: Offer Success and Squeeze-Out
- I-Tail Corporation Pre-IPO – The Negatives – Non-Uniform Growth
Rakuten – Sale of Stake in Securities Business Eases Funding Pressure
- Rakuten is reportedly selling a stake in its Securities unit for ¥80bn, which probably means a near-term IPO of that business is off the table
- It may also give Rakuten greater flexibility on the timing of a Rakuten Bank IPO should pricing for that be problematic
- In terms of surfacing the value of Rakuten’s fintech assets this is good news but it is mobile losses that have held the shares back. We remain at Neutral.
KOSDAQ 150 Rebalancing: 7 Regular Changes + 2 Special Entries
- KOSDAQ 150’s December rebalancing will feature seven regular changes and two special entries.
- Among the additions, we should focus on Dear U and ISC, which have a balanced level of liquidity and flow, rather than those theme stocks with high volatility.
- As for Nature Holdings, Eoflow, and Nextin, I suggest a more aggressive entry point due to low trading volume. Then, I’d basket-trade the deletions on equal weight.
I-Tail Corporation Pre-IPO – The Positives – For the Pampered Pets
- 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 this note, we talk about the positive aspects of the deal.
Z Holdings / PayPay – A Focus on Margin Improvement as ZHD Moves to Consolidate
- The PayPay conversion is complete and management is focused on managing costs, which is reassuring for ZHD financial targets and for an eventual IPO
- There was less said about the latter, however, whilst detail on the valuation gain that parent Softbank Corp needs to hit its own operating income target has not been confirmed
- Our valuation of ¥500bn for PayPay looks more reasonable as 50-73% YTD declines in public comps have brought trading multiples in line (PayPay at 5x FY22e revenue versus 5-8x)
Ryohin Keikaku: A Beat Can Turn Around Price Performance
- Our analysis points to a significant earnings beat for Ryohin Keikaku, whose share price is down more than 50%-YTD and is currently hugging the bottom-end of the long-term trend channel.
- With freight and logistics down more than 50% since June 2022, we are expecting Ryohin Keikaku (7453 JP)’s gross margin to return to around 49-50%.
- In addition, the company’s monthly sales growth figures indicate that FQ4 revenue should be around ¥114.6bn compared to ¥105.8bn for consensus.
Shidax Outlook May Change – Better Governance Matters
- On 8 September, I went over the Oisix ra daichi (3182 JP) bid for the stake in Shidax Corp (4837 JP) held by Unison Capital.
- The founding Shida family had a deal whereby when the company raised capital years ago, the family had ROFR to buy or nominate a buyer of the Unison stake.
- The problem? Shidax’ independent board said this was unfair to minorities. The back and forth has continued but there may now be hope for a better deal.
A Senior Korean Govt Official Provides the Likely Time of the End of Indoor Mask Mandate
- In the past few days, a senior government Korean official announced that the indoor mask mandates will likely be lifted in March 2023.
- Although this is not officially finalized, we believe that there is a very high probability of the Korean government finally ending the indoor mask mandate sometime in March 2023.
- The end of the indoor mask mandate is likely to have a positive impact on the Korean cosmetics companies. Nonetheless, we are still concerned about the relatively high valuation multiples.
FEMSA/Valora Holding: Offer Success and Squeeze-Out
- The Additional Acceptance Period ended on 29 September. On 3 October, FEMSA announced the satisfaction of all conditions. On 5 October, FEMSA announced that its participation amounts to 96.87%.
- Settlement will occur on 7 October. FEMSA intends to initiate a squeeze-out procedure and delist the Valora shares from trading on SIX Swiss Exchange.
- The tender was good news for shareholders. My TP is CHF 252.2/share, therefore I believe the offer is fair and there was no counterbid.
I-Tail Corporation Pre-IPO – The Negatives – Non-Uniform Growth
- 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 this note, we talk about the not-so-positive aspects of the deal.
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