Daily Brief Financials: Mitsui Fudosan, HKEX, HashKey Digital Asset Group Lt, Industrivarden AB, EML Payments Limited, Hopson Development and more

• The FT carries an article this AM saying Elliott Management have built a stake in Mitsui Fudosan (8801 JP) and has asked it to undertake measures to increase ROE.
• Measures requested apparently include a very large buyback and a demand the company sell down its stake in Oriental Land (4661 JP). The article is worth reading.  
• Shares are up sharply on this news. The fund was in the news last year about this time regarding Dai Nippon Printing (7912 JP). I’d expect more noise to come. 

• Even the company itself shows in its recent presentation that a substantial portion of its revenue growth was due to rising rates on its cash deposit balances. This should wane.
• The company’s effective tax rate moved from 14% in the past few years, when it was stable to 10% in most recent period, this is not a core positive attribute.
• Geopolitical risk, economic malaise in both Hong Kong and China, can lead to less interest in the market, trading, placements, perhaps suggesting its 6x PB is not warranted?

• HashKey Group, an end-to-end digital asset financial services group based in Hong Kong, has completed a Series A financing round of nearly US$100 million at a pre-money valuation of over US$1.2 billion.
• The round attracted new and existing investors, including prominent institutional investors, leading Web3 institutions, and strategic partners.
• The group will use the money to accelerate the product diversification of its licensed business in Hong Kong and drive development globally.

• FY2023 was another year of value creation: 19% increase of NAV. Discount/NAV of C shares is 4.3%, below both the “usual” 15% conglomerate discount, and 5-year average of 9%.
• C shares are trading at a 0% discount to A shares. My target NAV is SEK 158,215 million, an 8.5% increase. My target TP, assuming 5% discount/NAV, is SEK 329.5.
• Implementing the typical holding discount trade would be risky. However, I would put on a reversal trade, betting on a widening of the discount up to around 7.5%-8%.

As part of its strategy to focus on profitable, cash-generative businesses, the boards of EML Payments and PFS Card Services Ireland Limited (PCSIL) have decided to wind down the PCSIL business. This removes a source of considerable cash burn and management distraction and leaves the group better positioned to support the Gifting and the Australian and UK General Purpose Reloadable (GPR) businesses. The strategic review is ongoing and management noted it had received several expressions of interest for Sentenial. FY24 guidance given in November is maintained despite the PCSIL liquidation. We have revised our forecasts to reflect the November trading update and the PCSIL liquidation, upgrading our underlying EBITDA forecasts by 14.9% in FY24 and 6.0% in FY25.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Hopson Development