In today’s briefing:
- SJM Holdings (880 HK) Rights Issue – Capital Raise, Unappreciated, but Interesting Trading Dynamics
- Alibaba (9988 HK): Zero Growth for First Time, But Overly Sold, Buy
- Giant Biogene Pre-IPO – The Negatives – Co-Founders Have Already Cashed in US$1bn+
- Toyota’s Q1 EBIT Missed by 28%; FY3/23 Guidance Effectively Lowered
- FTSE China 50 Index Rebalance Preview: One Change in Range, Couple Others Close
- Hongjiu Fruit IPO: A Bitter Fruit
- Della Valle/Tod’s: Lowball Minorities Buyout
- Sai Silk Kalamandir Pre-IPO Tearsheet
- Yamaha Corporation: Guidance Seems Optimistic With Inflation Starting to Affect Demand Conditions
- Nextage (3186 JP): Long-Term Potential Not Yet Discounted
SJM Holdings (880 HK) Rights Issue – Capital Raise, Unappreciated, but Interesting Trading Dynamics
- SJM Holdings (880 HK) announced earnings on Monday and a HK$3bn Rights Issue last night designed to inject capital into Macau gaming licensee SJM Resorts.
- An increase in share capital is required to pre-qualify for then tender process where the Macau Govt would allocate a 10-year gaming concession starting 1 Jan 2023.
- 54.7% SJM Holder/Parent Sociedade de Turismo e Diversões de Macau (STDM) had previously extended a loan to SJM designed to allow SJM to inject capital to SJM Resorts.
Alibaba (9988 HK): Zero Growth for First Time, But Overly Sold, Buy
- Alibaba’s revenue stopped growing for the first time on record.
- We still believe the revenue growth rate will recover in the December quarter.
- We believe the stock price will have at least an upside of 29% after a significant plunge.
Giant Biogene Pre-IPO – The Negatives – Co-Founders Have Already Cashed in US$1bn+
- Giant Biogene (GB) aims to raise around US$500m in its Hong Kong IPO.
- GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
- In this note, we talk about the not-so-positive aspects of the deal.
Toyota’s Q1 EBIT Missed by 28%; FY3/23 Guidance Effectively Lowered
- Toyota’s Q1 operating profit was 28% below consensus estimates, while pretax profit only undershot by 4%. Support for 2nd & 3rd-tier suppliers was the main cause.
- While full-year operating profit target was maintained & EPS slightly raised, this was due to bigger forex tailwinds. Ex-forex, FY3/23 operating profit was lowered by 28%.
- Much of FY3/23’s negatives are one-off, which paves the way for higher profits in FY3/24. But support for suppliers while rivals grow earnings is somewhat of a concern.
FTSE China 50 Index Rebalance Preview: One Change in Range, Couple Others Close
- Shenzhou Intl Group Holdings (2313 HK) is a high probability deletion in September, while JD Health (6618 HK) is currently the highest ranked non-constituent stock.
- There are a couple of other stocks that are close to the inclusion/exclusion thresholds and price changes over the next few weeks will determine if there are any more changes.
- Short interest on JD Health (6618 HK) is high in terms of days to cover and as a percentage of free float. Covering could take the stock higher.
Hongjiu Fruit IPO: A Bitter Fruit
- Chongqing Hongjiu Fruit (CHF HK), a multi-brand fruit company in China, is pre-marketing an HKEX IPO to raise US$200-300 million.
- The fundamentals are uninspiring as it is delivering profitable growth with a heavy cash burn. The rising but tiny market share suggests a lack of sustainable competitive advantage.
- Hongjiu Fruit aims to be the first HKEx-listed fruit distributor. Investors can likely avoid a bitter aftertaste by remaining on the sidelines.
Della Valle/Tod’s: Lowball Minorities Buyout
- The Della Valles offer €40/share (1.8 EV/Fwd Sales, c.20% premium) to buy out the minorities (LVMH stays a 10% shareholder). Minimum acceptance condition is 90%, aiming at 60.9% of float.
- Tod’s is in turnaround mode (my valuation assumes it’ll be successful). A DCF valuation gives €52.21/share, a break-up valuation could reach €57.12/share, while a simpler 2.0x EV/Fwd Sales throws €43.02/share.
- The shares trade above the offer and a sweetening may be needed; the offer price seems cheap on any measure. A template could be the acquisition of Creval. Long.
Sai Silk Kalamandir Pre-IPO Tearsheet
- Sai Silk Kalamandir (SSKL IN) is looking to raise about US$150m in its upcoming India IPO. The deal will be run by Motilal Oswal, Edelweiss and HDFC Bank.
- Sai Silk Kalamandir (SSK) is one of the largest retailers of ethnic apparel in South India, particularly in sarees, according to Technopak.
- Through its four store formats, it offers ethnic and value fashion products to various segments across different price points. As of 31 May 2022, it has 46 network stores.
Yamaha Corporation: Guidance Seems Optimistic With Inflation Starting to Affect Demand Conditions
- Even though Q1 topped consensus through favourable FX movements, it seems inflationary pressure is starting to affect all business units of Yamaha Corp (7951 JP).
- The company raised revenue guidance due to favourable FX movements but maintained the OP at the previous level due to rising procurement and energy costs.
- However, with inflation starting to affect demand, these estimates are likely to be revised down over the next few quarters.
Nextage (3186 JP): Long-Term Potential Not Yet Discounted
- The July 4 upward revision to FY Nov-22 sales and profit guidance appears to have been discounted, but the company’s long-term growth potential has not.
- Sales could more than double over the next several years as Nextage takes share in Japan’s highly fragmented and consolidating used car market. Margins also have room to expand.
- Prospective P/E ratio headed down from 18x this fiscal year to 12x and below on a medium-term view.
💡 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
