In today’s briefing:
- Sun Art (6808 HK): Potential Divestiture By Alibaba Worth A Bet
- Cisarua Mountain Dairy (CMRY IJ) – Increasingly Accessible Protein Provider
- Snow Peak: Cheap MBO
- Trial Holdings IPO Trading – Demand and Valuation Are Towards the Higher Side
- 1Q Follow-Up – LIFUL (2120 JP)
- Taste Gourmet (8371 HK): Earnings Preview FY24
- Quick Ideas #8
- Tongcheng Travel (780 HK): Riding the High Tide
- Meituan (3690 HK): Improving Fundamentals Already in Price
- Global Business Travel Group Inc.: Initiation Of Coverage – Emphasis on Digital Transactions
Sun Art (6808 HK): Potential Divestiture By Alibaba Worth A Bet
- According to public news two days ago, COFCO Group is rumored to be a potential suitor for Alibaba’s 78% stake in Sun Art Retail (6808 HK).
- Alibaba wants to eventually get rid of the Sun Art stake, especially after Alibaba’s management change in late 2023.
- Given limited downside, I believe it is worth a bet on the uncertain timeline but certain intention of the eventual divestiture of Sun Art by Alibaba.
Cisarua Mountain Dairy (CMRY IJ) – Increasingly Accessible Protein Provider
- Cisarua Mountain Dairy (CMRY IJ) held an analyst call after its results, revealing a positive outlook for dairy products and premium consumer foods, with potentially higher margins ahead.
- The company launched several new products in 2023, with more of a focus on affordability through yoghurt sticks. It will launch more affordable Kanzler Singles in 2H2024.
- Cisarua Mountain Dairy will expand distribution through general trade and Miss Cimory MCM, with ongoing sales & marketing spending. Valuations remain attractive relative to growth and returns.
Snow Peak: Cheap MBO
- Snow Peak agreement with Bain Capital to take the outdoor brand private next month seems to have been in the works for a couple of years.
- Although sales are expected to rebound this year to near record highs, Snow Peak insists the domestic camping boom is over and will look at long-term growth overseas instead.
- Even so, the MBO price looks cheap. Snow Peak is likely to see a rebound in domestic sales in FY2024 and its plans for overseas expansion are solid.
Trial Holdings IPO Trading – Demand and Valuation Are Towards the Higher Side
- Trial Holdings (5882 JP) (TH) raised around US$259m after pricing its IPO at the top-end in its Japan IPO.
- TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
- We have looked at the company’s past performance in our previous notes. In this note, we talk about the trading dynamics.
1Q Follow-Up – LIFUL (2120 JP)
- LIFULL reported an 8% increase in net sales to ¥8.1 bn, driven by overseas acquisitions made during the second quarter of the previous FY.
- OP from comparable operations remained steady at around ¥0.15bn. In the previous year, the company recorded an operating profit of ¥0.8bn, but this included ¥0.66bn in profits from the sale of Rakuten LIFULL STAY, a hotel and lodging platform operator, in October of 2022.
- In the current term, the company recorded a net loss of ¥0.05bn, but this included about ¥0.2bn in one-off costs for the transition to a new management structure in the overseas business.
Taste Gourmet (8371 HK): Earnings Preview FY24
- Taste Gourmet (8371 HK) will report its FY24 results in the third week of June. We estimate revenue/earnings growth of 38%/40% YoY.
- We expect the company to end FY24 with >180 mn HKD of net cash on the balance sheet, representing 32% of the mkt cap (9MFY23 cash 148 mn HKD)
- Maintaining a 50% dividend payout ratio, we expect the company to declare a final DPS of 7 cents ( H1FY24 5.5 cents HKD), representing an 8.5% yield for FY24
Quick Ideas #8
- Chinese stocks feel like loaded springs to me now. I have played this so far by buying DADA at $1.50 (I think I posted it at $1.67 ish) and closed it with a very nice profit at $2.6ish.
- I did buy RERE at $1.15 and sold my last shares at $1.85. Unfortunately I was too late to post a write-up as I got reporting dates confused.
- But maybe we get to have another go at this one. I had DQ on my watch list, I expected negative earnings, but their report was slightly better than expected and shares jumped from $18 to nearly $30 in a few weeks.
Tongcheng Travel (780 HK): Riding the High Tide
- Tongcheng Travel Holdings (780 HK) has a solid FY23 and 4Q23 with massive net profit recovery. Earnings momentum for FY24 and FY25 look to stay impressive.
- FY23 is a record year of profit, demonstrating its ability to gain market share after COVID-19 disruption. Further volume growth will lead to better operating leverage.
- Net cash reached Rmb2.3bn, up 90.4% YoY, showcasing its cash-generating ability. The first-time dividend payout also reflected management’s confidence on the outlook.
Meituan (3690 HK): Improving Fundamentals Already in Price
- Recent newsflow suggests positive developments bode well for Meituan’s fundamental.
- Yet 50% share price rebound since February low means it is largely in price and 4Q23 results will serve as a window for investors to read 2024 outlook.
- We would take some profits from the rally and wait for better entry points.
Global Business Travel Group Inc.: Initiation Of Coverage – Emphasis on Digital Transactions
- This is our first report on American Express Global Business Travel (GBT).
- The company recently released Q4 2023 earnings.
- On a positive note, the company delivered impressive financial results, with standout numbers including 24% year-over-year revenue growth and a roughly fourfold increase in adjusted EBITDA. Paul Abbott, CEO, attributed this strong performance to share gains and a focus on margin expansion.
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