In today’s briefing:
- Toyota Industries (6201) – TMC’s Sale of TI Shares Is Innocuous, TI’s Valuation Remains Uncompelling
- Meituan Is the Biggest Beneficiary of China’s Domestic Travel Recovery
- MT/ Meituan (3690 HK): 1Q24, Total Revenue Up by 25% and Initiatives Loss Down by 45%
- Water Oasis (1161 HK): Dividend Cut As Company Gets Conservative
- Guzman Y Gomez IPO – The Positives – Network Growing, Sales Have Outpaced Network Growth
- Saizeriya (7581 JP): Buy On Any Weakness On A More Profitable Japan And Continued Strength In China
- Affinity Equity Partners Seeking Delisting of Lock & Lock Through Comprehensive Stock Exchange
- MV Australia Equal Weight Index Rebalance Preview: Close Deletions in June
- Guzman Y Gomez IPO – The Negatives – Lawsuits and Management Churn
- Lululemon 1Q’24 Update
Toyota Industries (6201) – TMC’s Sale of TI Shares Is Innocuous, TI’s Valuation Remains Uncompelling
- Last September, Toyota Motor (7203 JP) Group affiliate Aisin (7259 JP) said they would get rid of ALL their cross-holdings. That signalled a future sea change in Toyota intra-group relations.
- It meant all Toyota group companies could do that. The big moves started with a multi-party offering of Denso Corp (6902 JP) shares – Toyota, Toyota Industries, and Aisin sold.
- Then others. Then in March, Denso announced a 2.5yr selldown of ~¥460bn of Toyota Industries shares. That meant a TI buyback was likely. We got one. Now we have details.
Meituan Is the Biggest Beneficiary of China’s Domestic Travel Recovery
- During the upcoming Dragon Boat Festival, both flight and railway traffic seems sluggish, indicating a cooled-down enthusiasm for long-distance trips due to budget constraints.
- Data points to booming short-distance travel with self-driving as the major means, helped by lower price;
- Benefiting from hotel booking and catering, Meituan is the biggest beneficiary of such consumption downgrade.
MT/ Meituan (3690 HK): 1Q24, Total Revenue Up by 25% and Initiatives Loss Down by 45%
- Total revenue increased by 25% YoY and all business lines grew strongly.
- In 1Q24, the operating losses from new initiatives decreased by 45% YoY, but new initiatives revenue still grow.
- We conclude that the price target can be double of the market price.
Water Oasis (1161 HK): Dividend Cut As Company Gets Conservative
- Water Oasis (1161 HK) reported profits down 30% YoY (ex-one-off profits down 9% YoY only), but commentary cited headwinds in the business due to muted HK economic sentiment.
- Anticipating these headwinds, the company cut its semi-annual dividend by 50% to only 3.5 cents (implying a 7% yield on the current share price) despite a massive cash buildup.
- Net cash at 396 mn HKD is now 58% of the market cap. Given the current economic backdrop, we see a conservative approach to dividend payment in the medium term.
Guzman Y Gomez IPO – The Positives – Network Growing, Sales Have Outpaced Network Growth
- Guzman Y Gomez plans to raise around US$160m in its Australian IPO.
- GYG is a quick service restaurant business with more than 200 restaurants globally. It mainly focuses on fresh, made-to-order, Mexican-inspired food.
- In this note, we look at the company’s prior performance and future prospects.
Saizeriya (7581 JP): Buy On Any Weakness On A More Profitable Japan And Continued Strength In China
- After a strong 68% increase in share price in 2023, Saizeriya (7581 JP) has been trading range bound, and up 8% year-to-date in 2024.
- Continued weakness in Japan on the profitability front in 1HFY24 offset continued strong performance in China.
- Japan’s operating profit is set to improve in the second half of the current fiscal year (ending August), and China’s strength will continue on the back of accelerating store openings.
Affinity Equity Partners Seeking Delisting of Lock & Lock Through Comprehensive Stock Exchange
- On 5 June, Affinity Equity Partners (AEP) announced that it is seeking a delisting of Lock&Lock (115390 KS) shares through a comprehensive stock exchange.
- It has been reported that the second tender offer failed. Only 1.5% of the outstanding shares participated in the second tender offer, falling short of the 9.5% participation required.
- Affinity plans to transfer the shares of Lock&Lock held by an overseas corporation to a domestic corporation (investment-in-kind) and then go through a comprehensive stock exchange procedure.
MV Australia Equal Weight Index Rebalance Preview: Close Deletions in June
- With the review period complete, there are 3 stocks that are close to the deletion zone and could be removed from the index at the June rebalance.
- Even if there are no constituent changes, capping changes will lead to one-way turnover of 3.6% and a one-way trade of A$83m.
- There are 6 stocks with over A$5m to trade from passive trackers but the impact on the stocks is not very high.
Guzman Y Gomez IPO – The Negatives – Lawsuits and Management Churn
- Guzman Y Gomez plans to raise around US$160m in its Australian IPO.
- GYG is a quick service restaurant business with more than 200 restaurants globally. It mainly focuses on fresh, made-to-order, Mexican-inspired food.
- In this note, we talk about the not-so-positive aspects of the deal.
Lululemon 1Q’24 Update
- Lululemon was facing some really thorny questions from Mr. Market ever since 4Q’23 earnings. Today’s earnings should help calm some nerves.
- Here are my highlights from tonight’s call. Sales Growth by Region At first glance, one may find confirmation to plenty of concerns for LULU. US sales, which was ~61% of overall sales this quarter, grew by only 2%.
- Growth momentum in international markets, especially in China helped mask the weakness in the US.
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