In today’s briefing:
- ZJLD Group: Limited Near-Term Post-IPO Upside, but Long-Term Prospects Indicate a Promising Future
- Matahari Department Store (LPPF IJ) – Normalizing with Stylish Growth
- Shangri-La Asia (69 HK): Not yet Fully Reflected China’s Comeback
- Might Consider Creating Mechanism to Allocate Companies’ Cash in Cash Cow to Companies that Can Grow
ZJLD Group: Limited Near-Term Post-IPO Upside, but Long-Term Prospects Indicate a Promising Future
- ZJLD Group, a founder-led baijiu company, backed by PE firm KKR priced its Hong Kong IPO at HK$10.82/share. ZJLD Group shares are expected to start trading on Thursday, Apr.27.
- The company’s IPO price implies a market cap of ~$4.6B, making it the Hong Kong’s largest IPO this year. Goldman Sachs and China Securities International acted as joint sponsors.
- Baijiu is the world’s most consumed liquor and accounted for ~70% of the alcoholic beverage market in China in 2021. Baijiu has a history of more than 5,000 years.
Matahari Department Store (LPPF IJ) – Normalizing with Stylish Growth
- Matahari Department Store (LPPF IJ) 1Q2023 results reflected a normalization of sales growth at a sold +14.2% YoY, with normalisation of rentals plus minimum wage increase impacting margins temporarily.
- The company has resumed its store openings with seven new stores in 1Q2023 and 12-15 new stores planned for FY2023. New merchandising campaigns have made a strong impression in 1Q2023.
- Matahari will launch its new Suko brand in May in 20 stores plus 2H2023 will see its new modern format being rolled out. Valuations are attractive with a double-digit yield.
Shangri-La Asia (69 HK): Not yet Fully Reflected China’s Comeback
- Despite Shangri-La Asia (69 HK)‘s good share price performance YTD, it has still not yet fully reflected the strengths of and benefits from China’s re-opening. More upside to come.
- Occupancy for Hong Kong and mainland China has surged 30-45pp YoY in Mar, and with China’s RevPAR for FY22 is down 56.5% from peak, we see massive rebound in profitability.
- Share of China’s EBITDA was US$258m in FY22, from US$465m in FY16-19, suggests good room for recovery. It is cheap on ~70% discount to revalued NAV, vs. 37% in FY18.
Might Consider Creating Mechanism to Allocate Companies’ Cash in Cash Cow to Companies that Can Grow
- Share buybacks are likely to increase considerably in FY2023. One of the reasons for this is that the TSE has requested companies with stagnant stock prices to disclose improvement measures.
- More important than the amount of share repurchase is how much ROE increased as a result. Whether shareholder returns were adequate for cash reserves and cash flow should be examined.
- While Japanese companies today are in a cash cow situation as a whole, they are very cautious about investing aggressively.
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