In today’s briefing:
- 7&I (3382) – Asset Sale News Designed to Get Shareholder Attention to Future Value
- WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: US$1bn to Trade
- Tokyo Metro IPO: Steady Tracks with Potential for OP Growth Through Fixed Cost Savings
- Zhejiang Expressway (576 HK): Cheap Access to the Roaring Securities Sector
- ECM Weekly (7th Oct 2024) – Tokyo Metro, Rigaku, China Resources, K Bank, JD Ind, Swiggy, Lalatech
- AviChina Industry (2357 HK): Excellent Exposure to A-Share Surge
7&I (3382) – Asset Sale News Designed to Get Shareholder Attention to Future Value
- Seven & I Holdings (3382 JP) is currently “in limbo” as the initial Alimentation Couche-Tard (ATD CN) (“ACT”) has been rejected, some news is out, and we await earnings/presentations.
- The news last week was that 7&i might sell down a stake in Seven Bank Ltd (8410 JP) and could sell its retail/superstore business to PE rather than an IPO.
- Both selldowns mean the focus on CVS everyone seems to want. That’s good news. And the shares are trading at/below ACT terms which “grossly undervalued” the company. Bullish.
WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: US$1bn to Trade
- The WisdomTree Emerging Markets SmallCap Dividend Index is a fundamentally weighted index that measures the performance of small cap stocks within Emerging Markets.
- The changes at the October rebalance were announced after market close on 4 October with implementation scheduled at the close on 16 October.
- There are 8 trading days to implementation and there are a bunch of stocks with over 2x ADV to trade.
Tokyo Metro IPO: Steady Tracks with Potential for OP Growth Through Fixed Cost Savings
- Tokyo Metro (9023 JP) operates 9 out of the 14 subway lines that provides essential public transportation services within the Greater Tokyo area.
- Many are unaware of Tokyo Metro’s cost savings, and we believe it could reach ¥110bn OP, exceeding the ¥100bn OP that most currently expect.
- Even without factoring in the cost savings, the indicative IPO price appears reasonably cheap, as it’s priced near the lower end of peer multiples.
Zhejiang Expressway (576 HK): Cheap Access to the Roaring Securities Sector
- By way of its 54.79% ownership in Zheshang Securities (601878 CH), Zhejiang Expressway Co H (576 HK) is an attractive indirect vehicle to access the mainland securities sector.
- The attributable market cap of Zheshang equals 90% of ZJE’s market cap, implying that the toll road business is almost free. However, Zheshang only contributed 16% of ZJE’s 1H24 profit.
- ZJE trades on 6.7x FY24F PER, vs. 31.3x for Zheshang and 17.6x for H-share securities companies. A stable toll road business also minimises the risk for ZJE.
ECM Weekly (7th Oct 2024) – Tokyo Metro, Rigaku, China Resources, K Bank, JD Ind, Swiggy, Lalatech
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, the roaring China/HK market led to some refilings, in what is likely to be the start of a tsunami of refilings, if the market momentum sustains.
- On the placements front, given the China/HK holidays there weren’t any deals. We instead looked at Bharti Hexacom upcoming lockup expiry.
AviChina Industry (2357 HK): Excellent Exposure to A-Share Surge
- Given its holdings in four A-share subsidiaries, AviChina Industry & Technology H (2357 HK) will benefit from the surge in their share prices as mainland markets re-open.
- These A-share all lagged benchmark Indices YTD. Avichina’s holdings in them are already valued at 2.23x its own market capitalisation.
- The historical discount range is 51-70% and currently stands at 55%, suggesting AviChina’s share price has not yet excessively priced in the post-Golden Week rally.
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