In today’s briefing:
- Korea Spin-Offs: Details and KOSPI200 Index Impact
- Hesai Group IPO Trading – Managed to Break the Drought
- Playmates Toys: Betting on Paramount’s New Teenage Mutant Ninja Turtle (TMNT) Movie
- HYBE to Acquire a 39.8% Stake in SM Entertainment
- Dignity’s Last Gasps
- China Resources Beer Holdings (291 HK) – ST Technical Triggers Imply 8.5% Tactical Opportunity
- The 2023 Box Office Looks Promising
- LVMH: Long-Term Winner
- Quality Issues Are a Common Challenge for TSE Market Restructuring and Corporate Governance Reform
- PPIH – Consensus Is Discounting Personal Brands Potential
Korea Spin-Offs: Details and KOSPI200 Index Impact
- Hyundai Dept Store Co (069960 KS), Hyundai Greenfood (005440 KS) and Oci Co Ltd (010060 KS) will spin-off divisions and list them prior to the next rebalance in June.
- The equity spin-offs will result in passive flows prior to the trading suspension as well as on relisting of the stocks post the spin-off.
- We expect one change to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in April as one stock will be deleted due to low market cap following the spin-off.
Hesai Group IPO Trading – Managed to Break the Drought
- Hesai Group (HSAI US) (HSAI) raised around US$190m in its US IPO.
- HSAI is a manufacturer of three-dimensional light detection and ranging (Lidar) solutions. It has shipped over 103,000 Lidar units from 2017 to the end of 2022.
- We have looked at the company’s past performance and valuations. In this note, we will talk about the trading updates.
Playmates Toys: Betting on Paramount’s New Teenage Mutant Ninja Turtle (TMNT) Movie
- Playmates Toys (869 HK) has been listed since 2008 and makes TMNT toys. It has traded as high as 4 HKD/share on the back of successful TMNT movie launches
- Paramount is set to launch a highly anticipated Seth Rogen-produced, TMNT movie in August 2023. In 2013/2014 the stock went up 8x on the last successful TMNT movie launch
- Playmates Toys trades at negative enterprise value, hence giving a large margin of safety option to bet on the success of a TMNT revival
HYBE to Acquire a 39.8% Stake in SM Entertainment
- On 10 February (prior to market open), Seoul Economic Daily reported that HYBE will conduct a tender offer of SM Entertainment shares taking over the controlling ownership of the company.
- HYBE agreed to acquire a 14.8% stake from SM Entertainment’s founder Lee Soo-Man at 120,000 won per share, which represents a 21.8% premium to the closing price on 9 February.
- HYBE is also conducting a tender offer to minority shareholders and it plans to acquire up to 25% additional shares at 120,000 won per share, representing 717 billion won.
Dignity’s Last Gasps
- Almost killed by Covid and debt burden, funeral company Dignity agreed to a 550p offer (15.5x EV/Fwd EBITDA). Shifting demographics, Baby Boomers and capex investments should provide clients and growth.
- Unlike other takeout transactions, all shareholders may elect to partly reinvest in the bidding consortium: either unlisted non-voting Valderrama D shares or listed Castelnau (with Dignity making c.50% of NAV).
- My base-case DCF fair value estimate is 531p, 3.5% downside vs. offer price, which seems fair. I set my TP at 550p. Spread gross/annualised is 1.1%/3.2%.
China Resources Beer Holdings (291 HK) – ST Technical Triggers Imply 8.5% Tactical Opportunity
- At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
- Bullish price action and LT momentum failure in Oct/Nov 2023 could be compared to holding a fully inflated balloon under water. Eventually it must rise.
- January 2023 delivered that spike and a recent correction and multi-day test of key support has delivered an impulsive positive price response today. Target an 8.5% tactical upswing towards 63.90.
The 2023 Box Office Looks Promising
- The cinema industry has been suffering from COVID-19 restrictions, in particular social distancing measures that have kept cinema operating rates low.
- Now that the release pipeline looks strong again, cinemas will be on a path to recovery. I doubt that the global box office will reach the 2019 level this year, but it will get closer to that number.
- Cinema operators worth mentioning include North America’s Cinemark, Cineplex and Marcus Corporation, China’s IMAX China and Thailand’s Major Cineplex.
LVMH: Long-Term Winner
- LVMH’s sales’ growth is supported by a rebound in China, resumption of Chinese outbound travel, resilient US demand and higher marketing investments in 2H22 which should bear fruit this year.
- The Company holds leading market positions in each of its brands, as it benefits from substantial financial backing to invest and innovate.
- The Company has a high-quality management with decades of experience!
Quality Issues Are a Common Challenge for TSE Market Restructuring and Corporate Governance Reform
- There seems to be consensus on the end of the transitional measures in 3 years. Even if this issue is finally settled, the issue of prime market quality will remain.
- There’s no better solution to raise stock price than for companies to develop their own strategies and expand corporate value. TSE should promote metabolism and improve quality of the market.
- If the quality of corporate governance is an issue, it is necessary to encourage change in boards that are dominated by male internal executive directors and lack diversity.
PPIH – Consensus Is Discounting Personal Brands Potential
- Pan Pacific International Holdings (7532 JP)’s 2QFY23 was a touch above consensus with revenue at ¥504.8bn (consensus: ¥497.6bn) and OP at ¥33.6bn (consensus: ¥30.3bn).
- With consensus cautious about personal brands potential, earnings have beaten consensus in each of the past five quarters.
- Having already proven the personal brands earnings potential, we think it is unwarranted for consensus to discount PPIH’s personal brands growth.
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