In today’s briefing:
- Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon
- Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics
- Sanrio (8136 JP): A US$840 Million Secondary Offering
- Sanrio Placement – Opportunistic >US$800m Selling at All-Time Highs
- FineToday Holdings (289A JP) IPO: Valuation Insights
- 2025 High Conviction Idea: PG Electroplast
- SET50 Index Rebalance Preview: 4 Changes Coming Up in December
- Lotte Chilsung Beverage – Its Land in Seochogu, Seoul Is More Than 3x Its Market Cap
- China Education Group (839 HK): What’s up After the Big Bath?
- Taste Gourmet (8371 HK): Resilient H1 FY25: Cash Now 35% of Market Cap
Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon
- Today, Sanrio (8136 JP) announced a large secondary offering where banks would sell down shares and the Tsuji family would sell a few shares at the margin.
- The stock has been on a rocket for two years. It’s expensive. Growth slows next year. Will this cause momentum to turn? Maybe. The offering is 38% of Max RWF.
- I think one could give this a pass, and even sell it if it opens down small.
Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics
- Overnight, Sanrio (8136 JP) announced a placement of 25.87m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 3.88m shares.
- There will be limited passive buying in the short-term and the shares offered is a large percentage of real float of the stock.
- However, Sanrio (8136 JP) is the highest ranked non-constituent stock in a global index universe and a drop in the stock price could be used to accumulate positions.
Sanrio (8136 JP): A US$840 Million Secondary Offering
- Sanrio (8136 JP) has announced a secondary offering of up to 25.9 million shares (29.8 million including overallotment), worth around US$840 million (US$970 million including overallotment).
- Sanrio’s goal with the secondary offering is (i) to reduce cross-shareholdings and (ii) to expand and diversify the shareholder base, which should further enhance liquidity.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 10 and 13 December (likely 10 December).
Sanrio Placement – Opportunistic >US$800m Selling at All-Time Highs
- A group of domestic financial institutions and the firm’s executives are looking to raise US$840m from trimming their stakes in Sanrio (8136 JP).
- While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
- In this note, we will talk about the placement and run the deal through our ECM framework.
FineToday Holdings (289A JP) IPO: Valuation Insights
- FineToday Holdings Co Ltd (289A JP) is a Japanese personal care business seeking to raise up to US$500 million. It will be listed on 17 December.
- We previously discussed the IPO in FineToday Holdings (289A JP) IPO: The Bull Case and FineToday Holdings (289A JP) IPO: The Bear Case.
- Our valuation analysis suggests that the IPO reference price of JPY2,150 per share is unattractive. Therefore, we would pass on the IPO.
2025 High Conviction Idea: PG Electroplast
- PG Electroplast (PGEL IN) is India’s 2nd largest ODM player for washing machines. It also serve as ODM and OEM for leading brands in Room ACs, electronics, air coolers etc.
- Company is guiding for 76% of topline growth as well as 250Cr of PAT for FY25, out of which 103Cr is already delivered. Also company revised guidance upwards in Q2.
- With 1500Cr of QIP in plan, company is looking for inorganic growth opportunities to make stronger growth going forward.
SET50 Index Rebalance Preview: 4 Changes Coming Up in December
- With 3 trading days left in the review period, we forecast 4 changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the December rebalance.
- Passive trackers will need to buy between 1.2-3.6 days of ADV on the inclusions and sell between 0.3-3.1 days of ADV on the deletions.
- The forecast adds have continued to outperform the forecast deletes and there could be more movement in stocks with relatively high ADV to trade.
Lotte Chilsung Beverage – Its Land in Seochogu, Seoul Is More Than 3x Its Market Cap
- Lotte Chilsung Beverage’s land in Seochogu, Seoul is estimated to be worth more than 3x its market cap.
- In the past several weeks, there have been increasing concerns about the overall debt pressures at the Lotte Group.
- Lotte Group may be considering on selling some of its assets including Lotte Rental, Lotte Capital, and Lotte Chilsung Beverage’s Seochogu land.
China Education Group (839 HK): What’s up After the Big Bath?
- Although the reported FY24 net profit plunged 69.7% due to intangible impairments, China Education Group (839 HK)‘s adjusted net profit grew by 3.3% and adjusted EBITDA by 12.3%.
- Based on adjusted net profit, its payout ratio is flat at 40%, implying an 8% dividend yield. This suggests underlying operations are decent and demonstrate confidence in the outlook.
- Both tuition and enrollment are expected to sustain growth in FY25, meaning that a consensus forecast of 9% net profit is achievable. Its 4.5x PER does not appear stretched.
Taste Gourmet (8371 HK): Resilient H1 FY25: Cash Now 35% of Market Cap
- Taste Gourmet (8371 HK) reported H1 FY25 results of Revenues/Pat 19% YoY/-6%YoY. Profits disappointed slightly as the company was unable to achieve the desired restaurant table turns.
- Cash continues to pile on the balance sheet, with 185 mn HKD of net cash representing 35% of market capitalization. The company paid a 6-cent semi-annual dividend.
- The stock trades at a 5.2x PE for FY25, has a 10% dividend yield, and plans to grow at least 15% CAGR.
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