In today’s briefing:
- Merger Arb Mondays (6 Feb) – Yashili, Kingston, Origin, Pushpay, Halcyon, O2Micro, Techno Associe
- Hesai Group IPO – Thoughts on Valuation
- Hesai Group IPO: The Bear Case
- Luckin(LKNCY.US) Initiation: Rising Challenger, Market and Business Model
- Minor International (MINT): The Best Stock for Thai Tourism Recovery?
- Unreasonable Company Opposition, but No Change in Outlook for Shareholder Proposals to Be Rejected
Merger Arb Mondays (6 Feb) – Yashili, Kingston, Origin, Pushpay, Halcyon, O2Micro, Techno Associe
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), Origin Energy (ORG AU), Golden Energy & Resources (GER SP), 111 Inc (YI US), Toyo Construction (1890 JP).
- Lowest spreads – Essential Metals (ESS AU), Tyro Payments (TYR AU), Chip Eng Seng Corp (CHIP SP), Conexio Corp (9422 JP), Kanematsu Electronics (8096 JP), Elmo Software (ELO AU).
Hesai Group IPO – Thoughts on Valuation
- Hesai Group (HSAI US) is looking to raise around US$170m in its upcoming US IPO.
- HSAI is a manufacturer of three-dimensional light detection and ranging (Lidar) solutions. It has shipped over 103,000 Lidar units from 2017 to the end of 2022.
- We have looked at the company’s past performance and undertaken a peer comparison in our previous notes. In this note, we will talk about valuations.
Hesai Group IPO: The Bear Case
- Hesai Group (HSAI US) has launched a Nasdaq IPO to raise up to US$171 million at an indicative price range of US$17-19 per ADS.
- In Hesai Group IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The key elements of the bear case rest on continuing pricing pressure, declining contract liabilities, gross margin decline, ongoing losses, worsening cash conversion cycle and FCF burn.
Luckin(LKNCY.US) Initiation: Rising Challenger, Market and Business Model
- We initiated Luckin with a BUY with TP $40 because we believe Luckin is a rising challenger in a rising market, half way through a rising business model;
- We see room for Luckin to expand transaction frequency and transacting customers before expanding ASP in order to drive same store sales;
- In the long run, we see coffee + western bakery to gain market share over tea house + Chinese dim sum in the snack + breakfast market.
Minor International (MINT): The Best Stock for Thai Tourism Recovery?
- Minor International (MINT TB) is trading at 2.4x PBR, slightly higher than during the pre-COVID level at 2x.
- Most of its hotels are in Europe (77%) and only half of the food business is in Thailand.
- Other Thai stocks have higher exposure to Thai tourism-related activities.
Unreasonable Company Opposition, but No Change in Outlook for Shareholder Proposals to Be Rejected
- Zojirushi’s low profitability and numerical targets are at the root of the problem with this shareholder proposal, which required disclosure of cost of capital to verify reasonableness of the targets.
- To ensure transparency of BOD, it would have required individual disclosure of director compensation, divestment of policy shareholdings, and elimination of takeover defenses, which are issues of corporate governance practices.
- When % foreign shareholders reaches 30% level, companies tend to eliminate takeover defense. Since Zojirushi’s % foreign shareholders is 20%, the shareholder proposal will be very likely to be rejected.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
