In today’s briefing:
- Sep24 Nikkei 225 Rebal – Still 1 ADD (Ryohin Keikaku), 1 DELETE, and 1 Very Large Very Dark Horse
- L’Occitane (973 HK): Dilemma as the Share Alternative Pre-Condition Met
- L’Occitane (973 HK): On Activism And The Scrip Alternative
- Kansai Food Market (9919) Minorities Get Squeezed into H2O Retailing (8242)
- Alibaba (9988 HK): Core Segments Moving Into The Right Direction
- Giant Biogene Placement – Has Been Doing Well but Doesn’t Need the Cash
- [Alibaba (BABA US, BUY, TP US$85) Review]: Positive Transformation Still Underway…BUY on Dip
- [Miniso Group (MNSO US, BUY, TP US$34) Earnings Review]: No News Is Good News…Maintain BUY
- LOBO: Initiating Coverage of Innovative Global E-Bike Manufacturer
- Pvh Corp – VNCE: Upside Clarity Increasing; Initiating Coverage with a Buy Rating, $3 PT
Sep24 Nikkei 225 Rebal – Still 1 ADD (Ryohin Keikaku), 1 DELETE, and 1 Very Large Very Dark Horse
- The Sep 2024 Nikkei 225 Review data set is mostly done, and one can interpolate results relatively accurately. It still leaves us with one ADD, one DELETE, and capping fun.
- Recently, Yanai-san sold more Fast Retailing (9983 JP). There is more Real World Float- more active holders own more stock (which may mean less interest to buy later).
- There is a dark horse candidate which is on investor radar for other reasons. It would not be out of the question, but the precedent is old, and different.
L’Occitane (973 HK): Dilemma as the Share Alternative Pre-Condition Met
- L’Occitane (973 HK) announced that the share alternative pre-condition was satisfied. However, The share alternative offer is at the offeror’s discretion and with the consent of the financing parties.
- The share alternative offer poses a dilemma due to the requirement to satisfy the minimum acceptance condition while not breaching the upper limit of the share alternative offer.
- The share alternative offer is a play on higher multiples by relisting the business. At HK$50.00, L’Occitane would trade in line with its median global beauty peers’ multiples.
L’Occitane (973 HK): On Activism And The Scrip Alternative
- In the 29th April HK$34/share VGO announcement, a share scrip alternative may be afforded if 10% of L’Occitane (973 HK)‘s disinterested shareholders expressed interest by the 15th May
- That pre-condition has been satisfied. However, we are none the wiser whether you receive shares of the levered-up Bidco, at some undetermined scrip ratio; or keep shares of L’Occitane as-is.
- Some shareholders, like Butler Hall, considered terms low-balled. They now have the option to rollover. But there are still other large activists on the register, whose intentions are not known.
Kansai Food Market (9919) Minorities Get Squeezed into H2O Retailing (8242)
- Two and a half years ago, H2O Retailing (8242 JP) the 10.9% owner, arranged to merge its own units into Kansai Super Market (9919 JP) to get control. OK Corp complained.
- OK Corp offered to double the price in a Tender Offer but wouldn’t go hostile. KSM/KFM said no go. Shares popped to ¥2,000+ then when the deal failed, they fell.
- H₂O ended up with 58% (64.9% of votes now). The ultimate goal was to swallow it paying zero premium. On 15 May, it announced the merger to do just that.
Alibaba (9988 HK): Core Segments Moving Into The Right Direction
- On first look, Alibaba Group Holding (9988 HK) missed on margins in 4QFY24 as adjusted EBITA declined by 5% yoy.
- We can give the company the benefit of the doubt given that the important segments of the company are heading into the right direction.
- Alibaba returned USD13.4bn and USD16.5bn to shareholders in FY23 and FY24, compared to the current market cap of USD197bn
Giant Biogene Placement – Has Been Doing Well but Doesn’t Need the Cash
- Giant Biogene (2367 HK) aims to raise up to US$205m via a top-up placement.
- We have followed the company since listing and its recent performance has been great. Although it doesn’t seem to need the cash.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
[Alibaba (BABA US, BUY, TP US$85) Review]: Positive Transformation Still Underway…BUY on Dip
- BABA reported CY1Q24 top line, GAAP operating profit and non-GAAP net income 0.9%, (4.6%) and (6.7%) vs. consensus, and in-line, in-line, (6.9%) vs. our estimate;
- Results reaffirmed our positive view as increased investment is leading to significant improvement in key businesses: (1) Taobao/Tmall stabilized, (2) overseas e-commerce accelerated along with overseas AntFin and Cainiao
- We expect pay-off from its strategy shift in 2H of the year. Spin-off, dividends,and share buy-backs provide valuation support until then.We maintain BUY and US$85 TP, implying 9.5x CY25 P/E.
[Miniso Group (MNSO US, BUY, TP US$34) Earnings Review]: No News Is Good News…Maintain BUY
- Miniso (MNSO) reported C1Q24 revenue in-line with our estimate/consensus. Non-GAAP NI beat our estimate/consensus by 4.2%/2.6%, mainly due to better gross margin from IP sales.
- Company cited pressure on profits in C2Q24 due to store expansion, yet we still believe MNSO can maintain an OPM of 20% for entire 2024
- We maintain a BUY rating on the stock and maintain TP at US$34/ADS
LOBO: Initiating Coverage of Innovative Global E-Bike Manufacturer
- LOBO EV Technologies (LOBO) designs, develops, and manufactures micro mobility electric vehicles (EVs) and sells products through a broad-based dealership network in China, Southeast Asia, Latin America, and Europe.
- The company’s product lineup includes e-Bicycles, e-Mopeds, e-Tricycles, and electric off-highway four-wheeled shuttles (golf carts and scooters for elderly and disabled persons).
- In addition, LOBO provides automobile information and entertainment software development and design services.
Pvh Corp – VNCE: Upside Clarity Increasing; Initiating Coverage with a Buy Rating, $3 PT
- We are initiating coverage of Vince Holding Corp., a leading ready to wear brand, offering luxury men’s and women’s apparel, accessories and home goods via their own stores, online and in wholesale partnerships with key retailers, with a Buy rating and $3 price target, or 6.5X our FY25 EBITDA projection.
- We believe, after a momentous FY23, where the company formed a partnership with Authentic Brands Group, a leading brand licensor, materially recast their balance sheet with debt paydowns and maturity extensions, and began a $30 million transformation program, Vince is ready to shine once again in 2HFY24 and return to top line growth, with higher returns and a more enduring business model.
- As such, and with investor skepticism remaining a drag, we view the longer term risk/reward as compelling, and are initiating coverage of VNCE with a Buy rating and $3 price target.
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