In today’s briefing:
- Webtoon Entertainment IPO Preview
- Nagatanien Holdings (2899 JP): Marunouchi Capital-Sponsored MBO at JPY3,100
- Another Day Ending in Y, Another MBO Done Too Cheap. Today? Nagatanien (2899 JP).
- China Consumption Weekly (3 Jun 2024): Alibaba, Alibaba Pictures, Li Auto, JD.com, JD Health
- Trip.com Q124 Review: Solid Top-Line Growth | Progress on Margins | BUY Below US$50
- Only Seriousness of Shareholder Return Can Judge Change in Management in 1 Year After TSE’s Request
- Golf Digest Online (3319 JP) – 1Q FY24/12 Profits Down YoY Is Temporary
- GTX: Ice Unfrozen
Webtoon Entertainment IPO Preview
- Webtoon Entertainment is getting ready to complete its IPO on the NASDAQ exchange in 2H 2024. Webtoon Entertainment is a subsidiary of Naver Corp (035420 KS).
- Webtoon is seeking to raise as much of US$500 million at a valuation of US$3 billion to US$4 billion.
- Webtoon Entertainment is one of the largest Korean company related IPOs in 2024.
Nagatanien Holdings (2899 JP): Marunouchi Capital-Sponsored MBO at JPY3,100
- Nagatanien Holdings (2899 JP) recommended a Marunouchi Capital-sponsored MBO at JPY3,100, a 38.4% premium to the undisturbed price.
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The offer period is from 4 June to 16 July.
- While not a knockout bid, the offer represents a five-year high and requires a 58% minority acceptance rate. This is a done deal with payment commencing from 23 July.
Another Day Ending in Y, Another MBO Done Too Cheap. Today? Nagatanien (2899 JP).
- MitCorp – the largest shareholder – and the Nagatani family – today announced an MBO where they will buy a classic ubiquitous brand at an Adjusted EV of 5.4x EBITDA.
- The equity check appears to buy at ~2.5x Mar27-29 average FCF but they probably have 50% of the shares in the bag. Retail, or who they sell to, matter.
- There is room for a noisy activist to get involved here and disrupt the retail ownership. But there are very few of those around. And none in it now.
China Consumption Weekly (3 Jun 2024): Alibaba, Alibaba Pictures, Li Auto, JD.com, JD Health
- Alibaba Pictures’ revenue increased by 44% YoY and EBTIDA increased by 61% in the March quarter.
- Cainiao, Alibaba’s logistics network, plans to purchase fresh food from the places of origin.
- Li Auto finished a round of layoff, in which headcount was reduced to 22,000 from 30,000.
Trip.com Q124 Review: Solid Top-Line Growth | Progress on Margins | BUY Below US$50
- Q124 showed solid top-line growth, impressive improvement in core margins
- We are not too concerned about moderating domestic hotel, air pricing
- After consensus EPS raised, TCOM a BUY below US$50 per ADS, in our view
Only Seriousness of Shareholder Return Can Judge Change in Management in 1 Year After TSE’s Request
- Since companies with higher foreign ownership have better profitability and corporate governance practices, it can be inferred that the overseas investor engagement has improved the company’s profitability and corporate governance.
- If the company’s management has changed to value-creating management through the overseas investor’s engagement, the company isn’t expected to change to value-creating management in just one year after “TSE’s request”.
- Many companies that do not receive overseas investor engagement have more room for improvement in aspects of management strategy execution and will be evaluated over time for improvements in profitability.
Golf Digest Online (3319 JP) – 1Q FY24/12 Profits Down YoY Is Temporary
- Numerical targets for FY24/12 initial guidance are shown in the exhibit below.
- Despite initial guidance for consolidated OP of ¥800mn, an increase of ¥420mn (+110.3% YoY), the Company cites conservatively forecasting non-operating and extraordinary items such as interest expenses, restructuring costs, and exchange rate fluctuations for initial guidance for ordinary profit break-even and a net loss of (¥600mn) for profit attributable to owners of parent (see P2).
- Key initiatives and expectations for 2024 include: 1) in Japan, aim to provide more data-oriented and efficient services (online golf equipment sales GPM improving after 4Q inventory adjustment), 2) GOLFTEC golf lesson cash sales set to improve on coach issue addressed and marketing campaigns such as “7 shots better,” and 3) expand SkyTrak sales distribution channels.
GTX: Ice Unfrozen
- In the month since GTX reported first quarter results, there have been more industry news pointing towards automobile models benefiting GTX.
- Automakers are indicating to using ICE and hybrid for longer than expected, which should contribute to GTX’s ability to generate free cash flow beyond the next couple of years.
- We continue to expect 2024 sales to skew to the second half of the year, but GTX should generate adequate free cash flow to repurchase shares and reduce debt.
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