In today’s briefing:
- Toei Animation (4816 JP) – This Offering Could Be Heavy; the NEXT Offering Is More Interesting
- Final Flows for Hang Seng, HSCEI, HS Tech on 1 March Rebal
- Rakuten’s New “Bond-Type Share” Issuance – Quite Quirky to Quantulate Rakuten’s Quisquous New Quoz
- HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Mar 2024)
- Samsonite (1910 HK): Evaluating a Potential Privatisation
- Samsonite (1910 HK): Leader Of The Pack
- Samsonite (1910 HK) Takeover Interest: Hold on to These Shares
- Matahari Department Store (LPPF IJ) – Primed for Recovery
- [Luckin Coffee (LKNCY US, BUY, TP US$41) TP Change]: Weak Earnings Could Be Temporary…Reiterate BUY
- U.S. Dollar Rolling Over; Small-Caps to Follow Mid- And Large-Caps to New Highs; Buys in Cons. Disc.
Toei Animation (4816 JP) – This Offering Could Be Heavy; the NEXT Offering Is More Interesting
- On 14 February, Sony Corp (6758 JP) and Bandai Namco Holdings (7832 JP) announced an equity offering of nearly 4.5mm shares of Toei Animation (4816 JP).
- Float on Toei Animation (4816 JP) has been low. This would raise it to meet the minimum standard to stay listed on the TSE Standard market section.
- To get to TSE Prime, it needs another offering. And there are lots of cross-holders to go.
Final Flows for Hang Seng, HSCEI, HS Tech on 1 March Rebal
- The Hang Seng Index, HSCEI, and HS Tech rebals were announced on 16 Feb. Janaghan Jeyakumar, CFA had expected GDS out, Tongcheng Travel in on HSTECH, along with the…
- …deletion of Zhongsheng Group (881 HK) in HSCEI, with a low conviction replacement of Zijin Mining, which turned out to be an add of China Unicom Hong Kong (762 HK).
- No changes to the main HSI Index, which means evolution is further delayed. Today was the day to recap the caps. Mar1 Flow estimates are included below for all three.
Rakuten’s New “Bond-Type Share” Issuance – Quite Quirky to Quantulate Rakuten’s Quisquous New Quoz
- Today, Rakuten Group (4755 JP) announced it would propose an amendment to its Articles at the AGM (28 March) to issue “Bond-Type Class Shares.” First reaction: You wot, mate?
- The company states it wants to “strengthen its financial base through reducing interesting-bearing debt by equity-related financings and conduct proactive control of debt maturity schedule, etc.”
- Now it wants to issue listed bond-type shares. Dividends not interest. The last Japanese issuer of something similar was NEC in 2001. Few will remember, so we study the situation.
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Mar 2024)
- The March rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
- Tencent (700 HK), Meituan (3690 HK) and Tongcheng Travel (780 HK) are the biggest buys while Alibaba (9988 HK), Li Auto (2015 HK), HSBC (5 HK) are the biggest sells.
- The round-trip trade across all stocks across the four indices is estimated at HK$16.16bn (US$2.06bn).
Samsonite (1910 HK): Evaluating a Potential Privatisation
- Bloomberg reports that Samsonite (1910 HK) is drawing takeover interest from several PE firms which aim to relist Samsonite in the US to draw a higher valuation.
- A standard takeover premium (around 30%) should be sufficient due to the shareholder register. There is no single large shareholder(s) to pose an issue to an offer.
- The probability of an offer is medium, with an offer price likely around HK$30.00. Irrespective of a binding offer, the upside remains as Samsonite trades at an undemanding valuation.
Samsonite (1910 HK): Leader Of The Pack
- Luggage maker Samsonite (1910 HK) is up 11.8% today, as I type, after Bloomberg reported it is working with advisers as it studies possibilities, including going private.
- With the reopening of China and the ongoing recovery in travel globally, Samsonite’s net sales improved markedly across all regions. 1H23 profit gained 185.3% versus 1H22.
- FY23 figures should be out in the middle of next month.
Samsonite (1910 HK) Takeover Interest: Hold on to These Shares
- Bloomberg reported that Samsonite (1910 HK) is considering several options, including going private, and there are several suitors including from buyout firms
- Share price has surged by 14% in the morning session. Stock is still very cheap, at 10.5x PE, 7.5x EV/EBITDA with an impressive ROE of 30%
- Our quick take values Samsonite at HKD34/share, based on its forecasted +1 year earnings multiplied to its average long-term PE of 15.5x
Matahari Department Store (LPPF IJ) – Primed for Recovery
- Matahari Department Store (LPPF IJ) reported another slow set of results in 4Q2023, as it saw slower demand and continues to clear aged inventory.
- The company is well-prepared for the upcoming Lebaran season with more conservative inventory levels. It will also see the benefits of new brands coming on stream this year.
- Matahari Department Store will open 4-6 new stores in 2024 but close 10 underperforming stores, with a continued focus on new DP brands like SUKO. Valuations remain attractive.
[Luckin Coffee (LKNCY US, BUY, TP US$41) TP Change]: Weak Earnings Could Be Temporary…Reiterate BUY
- Luckin Coffee reported 4Q23 revenue/non-GAAP NI in-line/(39.8%) vs. our estimate due to (1) extra winter subsidies; (2) rental cost from new stores; (3) more operating expenditures.
- We view the non-GAAP NPM decline to 5.1% in 4Q23 as temporary and outlook for sequential improvements in 1H24 from (1)ASP rebound from easing competition, (2)efficiency improvement in rental cost
- We think Luckin’s profitability outlook is intact and maintain BUY rating, but lower TP by US$2 to US$41 to factor in the rising cost.
U.S. Dollar Rolling Over; Small-Caps to Follow Mid- And Large-Caps to New Highs; Buys in Cons. Disc.
- Large-Cap indexes (S&P 500, Nasdaq 100, and DJI) remain bullish, all hitting new all-time highs last week while continuing to find short-term support at their respective 20-day MAs.
- Mid-Caps (S&P 400, Russell Mid-Cap) starting another leg higher following breakouts from 2-month consolidations. Small-caps (S&P 600, Russell 2000) are likely to follow in the footsteps of large- and mid-caps.
- Small-Cap indexes have been consolidating for 2.5 months following the historic rally from late-October to late-December 2023, a healthy sign. We expect they are gearing-up for another similar move higher.
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