In today’s briefing:
- Updates on The Couche-Tard Deal for 7&I (3382 JP)
- Toyota Partial Offer Results – What Next?
- PDD Holdings (PDD US): Earnings Call Spooks Investors. Is There More than Meets the Eye?
- Tohokushinsha Film (2329 JP): 3D Persists Despite Strong Pushback
- Trip.com (9961 HK): Stock Surged After 2Q24 Result, Upside Narrowed to 18%
- JSE Sep 24 Rebalance: PPH Expected to Enter Top 40, AMS to Fall Out
- Nongfu Spring (9633 HK): 1H24 Impacted by Defamation, But Finally the Public with Nongfu
- The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (August 26)
- Latest Information on LG Electronics India Subsidiary’s IPO on the Indian Stock Market
- The Key Is to Achieve Sustainable Growth Through Continuous Business Portfolio Review
Updates on The Couche-Tard Deal for 7&I (3382 JP)
- Today saw the publication of three different articles regarding the Alimentation Couche-Tard (ATD CN) approach and offer to purchase all the shares of Seven & I Holdings (3382 JP)
- The first in the Nikkei said ATD could push offer a high price, even up to ¥8 trillion. The second mentioned debt financing being feasible because of prodigious cash flow.
- The third in Bloomberg noted that 7&i had requested the government upgrade its FEFTA status to “core”, which would lead to a more burdensome/restrictive government approval process.
Toyota Partial Offer Results – What Next?
- Today after the close, Toyota Motor (7203 JP) reported the results of their ¥800bn Tender Offer Buyback, originally intended to repurchase 290.12mm shares from cross-holders.
- In the end, 343.83mm shares were tendered (53.71mm shares more than originally expected, worth about ¥150bn at Tender Price). That creates back-end “issues” which must be considered.
- The resulting supply/demand profile is mixed, but on balance, I expect sees positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.
PDD Holdings (PDD US): Earnings Call Spooks Investors. Is There More than Meets the Eye?
- PDD Holdings (PDD US) stock price nosedived 28.5% yesterday wiping away more than USD55 billion in market cap following Management’s call with investors.
- During the call, the management guided towards weakening profits in the next quarters and stated that high revenue growth was unsustainable in the long term.
- Investors however seemed to be spooked not by negative guidance on profitability/growth but by comments on impact of non-business factors and need to adapt to changing times etc.
Tohokushinsha Film (2329 JP): 3D Persists Despite Strong Pushback
- On 24 July, 3D Investment Partners proposed to privatise Tohokushinsha Film (2329 JP) through a tender at JPY600-650. 3D has extended the offer validity period from 23 to 30 August.
- The controlling shareholder, Mr Hisako, claims he is not a seller regardless of price. The Board goes through the motions, knowing that Mr Hisako will decide the offer’s fate.
- 3D’s persistence suggests that Mr Hisako’s resolve might be checked by bumping the offer. As this outcome is likely, the shares will continue to trade through terms.
Trip.com (9961 HK): Stock Surged After 2Q24 Result, Upside Narrowed to 18%
- In 2Q24, total revenue increased by 14% YoY and hotel booking revenue increased by 20%.
- We believe the company has been riding on the recovery of the travel market and will see historical high quarter in 3Q24.
- We also believe the stock still has an upside of 18% after one day’s surge.
JSE Sep 24 Rebalance: PPH Expected to Enter Top 40, AMS to Fall Out
- Last night, the price snapshot was taken for the JSE September rebalance. The rebalance is scheduled to take place during the closing auction on Friday the 20th of September.
- PPH is expected to enter the Top 40 with AMS falling out. No changes are expected for the FINI, FINDI, INDI or RESI.
- There are several noteworthy free float changes across ALSI constituents, particularly amongst foreign counters (detail below).
Nongfu Spring (9633 HK): 1H24 Impacted by Defamation, But Finally the Public with Nongfu
- 1H24, Nongfu’s revenue growth rate fell to 8% YoY, because Wahaha launched a propaganda against Nongfu.
- We believe the revenue growth will rise in 2H24 and 2025, as it seems that the public do not like the way Wahaha use.
- We set an upside of 26% and a price target at HK$38 for the end of 2025.
The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (August 26)
- ETF flows in the Asian region continued their positive momentum during August with Southbound Connect positive again for the week.
- Stella International (1836 HK) will increase its dividends and buybacks after positive earnings surprise. AIA Group Ltd (1299 HK) saw a surge in new policies from mainlanders in HK.
- Lufax Holding (6623 HK) reported an earnings miss with declining loan volume. Yancoal Australia (3668 HK) reported a decline of 57% in earnings which was below analysts’ estimates.
Latest Information on LG Electronics India Subsidiary’s IPO on the Indian Stock Market
- LG Electronics has already picked the bankers for the Indian IPO. JP Morgan and Morgan Stanley are on board as the lead underwriters, along with two unnamed local Indian banks.
- LGEIL is aiming to submit the Draft Red Herring Prospectus (DRHP) to India’s SEBI by the fourth quarter of this year.
- LG Electronics plans to raise about USD 700 million by selling around 25% of its stake in a secondary offering.
The Key Is to Achieve Sustainable Growth Through Continuous Business Portfolio Review
- Overseas investors tend to invest in companies with larger market capitalization and higher profitability, and companies with higher foreign shareholdings have significantly better values in corporate governance.
- Hitachi has been one of the most successful companies in this area, probably due to its intermittent reforms in profitability and corporate governance through engagement with overseas investors.
- Few companies, like Hitachi, achieved sustainable growth by continuous business portfolio review. This has led to high stock price volatility for many companies that cannot enter the sustainable growth phase.
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