In today’s briefing:
- Merger Arb Mondays (21 Oct) – Seven & I, Fuji Soft, Henlius, Canvest, GA Pack, Dyna-Mac
- [JAPAN ACTIVISM] Murakami Group Now 23.5% on Exedy (7278) – LOTS of Room Left To Run
- JD.com (JD US): Boycotted by Male Users, Denies Run on JD Finance
- Pre-IPO China Resources Beverage – Due to the Pain Points, High Valuation Is Not Justified
- China Consumption Weekly (21 Oct 2024): Sun Art, Alibaba, Tesla, JD.com
- Unloved Japan Roundup: Bracing for Q3
Merger Arb Mondays (21 Oct) – Seven & I, Fuji Soft, Henlius, Canvest, GA Pack, Dyna-Mac
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Seven & I Holdings (3382 JP), Shanghai Henlius Biotech (2696 HK), Shinko Electric Industries (6967 JP),Canvest Environmental Protection Group (1381 HK), Arcadium Lithium (LTM AU).
- Lowest spreads: Trancom Co Ltd (9058 JP), Fuji Soft Inc (9749 JP), Silverlake Axis (SILV SP), T Gaia Corp (3738 JP), Descente Ltd (8114 JP), Pasco Corp (9232 JP).
[JAPAN ACTIVISM] Murakami Group Now 23.5% on Exedy (7278) – LOTS of Room Left To Run
- This past week, activist Murakami-san’s City Index Eleventh announced that the companies which jointly report now own 20.3%, which translates to 23.5% of voting rights. Average in-price? ¥2,928/share.
- The 2030 Plan from April saw 8% ROE by 2030, 6% by 2026. They’ve since bought back 11% of shares out. Better, but 1/4 of market cap is net cash+securities.
- If one assumes they spend the net cash+securities to buy back stock 10% higher than here, pro-forma PBR is <0.6x. ROE would be 7+%. There’s room to run here, still.
JD.com (JD US): Boycotted by Male Users, Denies Run on JD Finance
- On October 18, JD denies there is a run on JD Finance.
- Many male users claimed they boycott JD for the invitation of Miss Yang, a talk show celebrity.
- We believe the event will negatively impact JD and benefit Alibaba.
Pre-IPO China Resources Beverage – Due to the Pain Points, High Valuation Is Not Justified
- The whole industry has entered a medium to low-speed growth stage, and the industry’s future growth rate will remain single-digit growth. So, CR Beverage’s future performance decline is inevitable.
- Due to serious homogenization/competition of packaged drinking water market, there’s not much room for innovation/iteration. CR Beverage’s sales-driven model is hard to bring “new story” to break through the dilemma.
- CR Beverage is clearly inferior to Nongfu Spring. Its valuation should be lower than Nongfu Spring. We think reasonable valuation of CR Beverage is about US$4 billion (or lower).
China Consumption Weekly (21 Oct 2024): Sun Art, Alibaba, Tesla, JD.com
- Alibaba is selling Sun Art, a listed supermarket subsidiary, as Sun Art’s revenue is shrinking.
- Alibaba gained 6 million new retailers on its Taobao Tmall platform year to date.
- In September Tesla’s sales volume increased by 66% YoY and all major Chinese NEV grew strongly.
Unloved Japan Roundup: Bracing for Q3
- Mazda’s domestic unit volume was up 24% in September, compared to an industrywide total of only 1.1%.
- Meanwhile, Q2 consensus EBIT estimates have come down by 32% since the release of Q1 results.
- But the yield is over 6%, and the Payout ratio is only 17% even on the new estimates.
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