In today’s briefing:
- Sanei Architecture Planning (3228 JP): Open House’s JPY2,025 Tender Offer
- GoTo Gojek Tokopedia (GOTO IJ) – Striking a New Balance
- Richemont: Investment Case Intact. Pullback Offers Entry Point
- [Tencent Music (TME US, SELL, TP US$5.7) TP Change]: Competition Remains the Biggest Downward Factor
- Expanding Nominal Profits from Shift from Deflation Rather than P/B Is the Driver of Stock Prices
- Addressing Misconceptions: Lotte Tour’s Short-Selling Entry Point
Sanei Architecture Planning (3228 JP): Open House’s JPY2,025 Tender Offer
- Sanei Architecture Planning (3228 JP) has recommended Open House (3288 JP)’s tender offer of JPY2,025 per share, an 18.0% premium to the undisturbed price (15 August).
- The transaction is required to facilitate the exit of Mr Koike, the largest shareholder, and satisfy Article 27 of the Tokyo Metropolitan Organized Crime Exclusion Ordinance.
- Irrevocables represent a 64.21% ownership ratio, and the lower limit requires a 6.9% minority acceptance rate. The offer is a reasonable solution to the current predicament.
GoTo Gojek Tokopedia (GOTO IJ) – Striking a New Balance
- GoTo Gojek Tokopedia (GOTO IJ) released results for 2Q2023, which reflected a slower growth environment exacerbated by lower incentive spend but some significant progress towards its profitability goals for 2023.
- The company continues to focus on maintaining high-quality users but with an increasing focus on more affordable offerings to expand its demographic reach with the potential to double its users.
- GoTo is undergoing a full assessment across all divisions, with a focus on improving synergies, with new strategies for growth to be revealed next quarter.
Richemont: Investment Case Intact. Pullback Offers Entry Point
- Q1 2024 results proved that the long trade into numbers was crowded, with the share price falling 10% on the day, despite strong results
- Richemont is in an excellent position to capture future growth coupled with very high profitability
- Investment thesis intact: Cartier and Van Cleef keep gaining market share in a branded fine jewellery category that remains one of the most fundamentally attractive places to be
[Tencent Music (TME US, SELL, TP US$5.7) TP Change]: Competition Remains the Biggest Downward Factor
- TME reported in-line results with continued divergence in its two major businesses: Online music increased by 48% YoY, while social entertainment declined by 25% YoY.
- We expect these trends to continue, with online music benefiting from price increases and social entertainment facing ongoing challenges from competition, regulations, and macro influences.
- Recently, Douyin has been advancing the integration of its large entertainment division. We anticipate that this will pose pressure on TME. Remain SELL and cut TP to US$ 5.7.
Expanding Nominal Profits from Shift from Deflation Rather than P/B Is the Driver of Stock Prices
- TSE market capitalization of has doubled since 1990 and the number of companies has doubled, while TOPIX is 20% lower than its 1989 high. Money went mainly to IPOs.
- P/B, TSE’s expectation for stock price appreciation, had high correlation with TOPIX, 0.84 from 1999-2019. However, it correlated negatively for 4 years from 2020 with other factors having significant impact.
- Correlation between TOPIX and nominal GDP is 0.94 for 2020-2023, showing higher correlation. Expectations of higher nominal profits caused by transition from deflation to inflation are behind the stock rally.
Addressing Misconceptions: Lotte Tour’s Short-Selling Entry Point
- Lotte Tour has emerged as a prominent short-selling target in the Korean market, and there are efforts to use an ₩80B convertible bond (CB) to exploit its dilution/overhang risk.
- Linden Capital and LMR, upon obtaining the CB, promptly borrowed 4.6M shares from Donghwa for short selling. Thus, the CB conversion incentive remains largely unaffected by stock price changes.
- We should avoid synchronizing our entry point with CB conversion. Instead, we should target the likely rights issuance in the latter half of the year, anticipated in the market.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
