In today’s briefing:
- Vinfast: Stock Is in Free Fall; Still Expensive
- ENM Holdings (128 HK): A Wide Spread with the Scheme Vote on 26 September
- Mengniu Dairy (2319 HK): Solid Value Play
- Culp, Inc. – Revising Estimates to Reflect Continued Demand Weakness and Margin Improvement
- Better than Zero? But Limitations of One Female Board Member to Influence Board Decision-Making
Vinfast: Stock Is in Free Fall; Still Expensive
- Vietnamese automaker Vinfast (VFS US) made its public debut on 15th August via a SPAC deal which valued the company approx. US$23bn.
- Shares opened US$22 per share and went up to $37.06 at the end of first-day. Share price hit a peak of $82.35, however, shares closed last at $34.71 per share.
- Our forecasts and valuation for Vinfast suggest that the company’s shares are still overvalued even after falling more than 50% from its peak over the last few days.
ENM Holdings (128 HK): A Wide Spread with the Scheme Vote on 26 September
- ENM Holdings (128 HK)‘s scheme document is out, with the vote scheduled for 26 September. The IFA considers Chime Corporation’s HK$0.58 per share offer fair and reasonable.
- The spread of 7.4% reflects vote risk – cash required for the proposal is lower than the net cash, and the offer price is below the IFA’s SoTP valuation (HK$0.658).
- Shareholder approval of the scheme is aided by no shareholder holding a blocking stake, a low AGM minority participation rate and no visible retail opposition to the offer.
Mengniu Dairy (2319 HK): Solid Value Play
- China Mengniu Dairy Co (2319 HK) is a good pick for those seeking value in the China consumer sector.
- The company currently trades at 15x 2024E PE, compared to over 20x forward PE in the last 5 years, as the industry growth stagnated.
- We can still expect above 10% net profit growth over the next three years, with the company looking to return more cash to shareholders.
Culp, Inc. – Revising Estimates to Reflect Continued Demand Weakness and Margin Improvement
- Herein we revise our estimates for Culp, which reported 1QFY24 results and issued guidance in the face of continued weak demand juxtaposed against improving and better-than-expected margins.
- Gross margin for CHF, Culp’s mattress fabrics segment, is recovering faster than expected (up ~700 bps in 1QFY24 versus 1QFY23).
- For CUF, Culp’s upholstery fabrics segment, management grew 1QFY24 gross margin by 667 bps despite a significantly down Y/Y sales comparison (~ -17.4%).
Better than Zero? But Limitations of One Female Board Member to Influence Board Decision-Making
- It’s debatable whether to view the gradual increase in the percentage of female executives as a positive or a negative that it is so much lower than in other countries.
- This issue should be considered from the shareholder’s perspective, and the ratio of female board members should be increased if it is considered positive for the company’s management.
- While there are many things that companies should do to increase the ratio of female managers, there are also significant issues that society as a whole needs to address.
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