In today’s briefing:
- Merger Arb Mondays (01 Jan) – Weiqiao Textile, IRC, IJTT, JSR, Shinko Electric, Hollysys, OreCorp
- The Objective of an MBO Is Not to Strip Bothersome Activist Investors of Their Equity Interests
- (Mostly) Asia M&A, Dec 2023: Vinda, Adbri, Perpetual, CPMC, Sigma Health, Shinko Electric
- Burlington Stores Inc.: Reinventing the Off-Price Retail Model! – Major Drivers
- Domino’s Pizza Inc.: Can The New AI-Driven Innovation Be A Game Changer? – Major Drivers
- The Estee Lauder Companies Inc.: The AI Makeup Revolution! Is This the Future of Beauty? – Major Drivers
- Dollar Tree Inc.: Can They Survive Amidst The Economic Turmoil? – Major Drivers
- EXPR: Getting Clean as Near Peak Xmas; Reiterate Buy Rating, $20 PT
- The Gap Inc.: How They’re Reclaiming Their Throne in the Fashion Industry! – Major Drivers
- Etsy Inc: Reinventing E-Commerce with AI-Powered Curation! – Major Drivers
Merger Arb Mondays (01 Jan) – Weiqiao Textile, IRC, IJTT, JSR, Shinko Electric, Hollysys, OreCorp
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – Irc Ltd (1029 HK), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Adbri (ABC AU), Probiotec Ltd (PBP AU).
- Lowest spreads – Tietto Minerals Ltd (TIE AU), A2B Australia (A2B AU), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Pact Group Holdings (PGH AU).
The Objective of an MBO Is Not to Strip Bothersome Activist Investors of Their Equity Interests
- Rather than “management with awareness of stock price,” the question is whether management is carrying out its duties toward “the goal of increasing shareholder interests,” to put it more accurately.
- In determining TOB price, the question is whether independent committee was established, whether that committee actually functioned, and whether the directors performed their duties in the best interests of shareholders.
- The real objective of an MBO is to restart the company for a sustainable expansion of corporate value, not to rip off the equity stake of a bothersome activist investor.
(Mostly) Asia M&A, Dec 2023: Vinda, Adbri, Perpetual, CPMC, Sigma Health, Shinko Electric
- For the month of December 2023, 16 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$10bn.
- The average premium for the new deals announced (or first discussed) in December was 44.7%. The average YTD is 39% (117 deals).
- This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.
Burlington Stores Inc.: Reinventing the Off-Price Retail Model! – Major Drivers
- Burlington Stores and its management reported a 6% increase in comparable store sales, aligning with the midpoint of their projected range of 5% to 7%.
- Despite a slight outperformance through September, unseasonably warm weather in October impacted the growth trajectory, particularly affecting outerwear sales, an area of strength for Burlington.
- Despite anticipating some variability, the company aims for mid-single-digit annual comparable store sales growth over the next five years, building on strategies implemented since 2019 to enhance its off-price model.
Domino’s Pizza Inc.: Can The New AI-Driven Innovation Be A Game Changer? – Major Drivers
- The company had a 5.1% global retail sales increase, excluding foreign currency impact, propelled by positive international sales comps and net store expansion.
- The US experienced a 0.9% growth in retail sales, while international retail sales, excluding foreign currency impact, saw an impressive 9.4% surge.
- Positive retail sales growth, excluding foreign currency impact, contributed to improved operating income across both US and international domains.
The Estee Lauder Companies Inc.: The AI Makeup Revolution! Is This the Future of Beauty? – Major Drivers
- Estee Lauder Companies Inc. delivered a mixed result in the recent quarter, with revenues below market expectations, but it managed to surpass the analyst consensus in terms of earnings.
- Despite an 11% decline in organic sales, adjusted diluted EPS exceeded expectations at $0.11, attributed to a better-than-expected adjusted operating margin.
- Estee Lauder remains optimistic about sequential improvements, anticipating double-digit organic sales growth.
Dollar Tree Inc.: Can They Survive Amidst The Economic Turmoil? – Major Drivers
- Dollar Tree, Inc. delivered a disappointing set of results as the company was unable to meet the revenue expectations as well as earnings expectations of Wall Street.
- In a demanding retail landscape, Dollar Tree has demonstrated resilience amid challenges faced by lower-income consumers, including inflation and reduced government benefits.
- The company’s strategic initiatives include a multi-price journey at Dollar Tree, with a growing assortment, and planogram resets at Family Dollar, enhancing product offerings.
EXPR: Getting Clean as Near Peak Xmas; Reiterate Buy Rating, $20 PT
- We are reiterating our Buy rating, price target and projections for Express after visiting stores in Connecticut and Long Island.
- As such, we believe Express is on track to achieve our 4Q projections.
- We reiterate our Buy rating and price target.
The Gap Inc.: How They’re Reclaiming Their Throne in the Fashion Industry! – Major Drivers
- The Gap, Inc. has been seeing an amazing upward momentum after it managed to surpass the revenue and earnings expectations of Wall Street.
- Despite a 7% dip in revenue and a 2% decrease in comp sales, the third quarter showcased improved margins, expenses, and cash flow.
- Old Navy saw a positive 1% comp, driven by women’s and back-to-school strength, while Gap brand found success in women’s and baby segments.
Etsy Inc: Reinventing E-Commerce with AI-Powered Curation! – Major Drivers
- Etsy Inc managed to surpass Wall Street’s revenue and earnings expectations, marked by moderate top-line growth and sustained robust profitability.
- The management’s dedication to enhancing buyer confidence was evident in the strides made to improve reliability and convenience metrics, such as estimated delivery dates, package tracking, on-time delivery, and transparent return policies.
- These additional layers of analysis serve to provide a comprehensive and robust valuation, giving investors a nuanced understanding of the inherent risks and opportunities.
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