In today’s briefing:
- Kokusai Electric IPO: Trading Debut
- Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
- Shimano (7309) | A Clear Road Ahead
- Ryohin Keikaku: Finally Fixing Its Biggest Weakness?
Kokusai Electric IPO: Trading Debut
- Kokusai Electric (6525 JP) priced its IPO at JPY1,840 per share to raise secondary proceeds of US$723 million. The shares will start trading on 25 October.
- We previously discussed the IPO in Kokusai Electric IPO: The Bull Case, Kokusai Electric IPO: The Bear Case and Kokusai Electric IPO: Lower Price Range Is Reasonable.
- The peers have modestly derated since the lowered IPO price range was announced on 10 October. However, the IPO price remains attractive. Our DCF valuation is JPY2,058.
Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
- Solactive has announced the constituent changes for the Global Lithium Index. There are 8 adds and 9 deletes with implementation at the close on 31 October.
- Estimated one-way turnover is in excess of 22% and will result in a one-way trade of US$490m. There are 11 stocks with estimated passive flows greater than 1x ADV.
- The index is not very widely tracked and there could be big moves in stocks today and over the next few days – especially where there is multiple days ADV.
Shimano (7309) | A Clear Road Ahead
- Shimano Q3 results show a 32% YoY net sales decline, led by a 38% drop in bike component sales, BUT both sales and profit beat expectations
- The company maintains cost control, sees improving gross margins, and reduces inventories, while cash flow and balance sheet remain strong
- With the upward revision in full-year guidance, we believe the market will look through the still challenging Q4 outlook and focus instead on 2024 normalization and relatively low valuation
Ryohin Keikaku: Finally Fixing Its Biggest Weakness?
- Ryohin Keikaku’s biggest weakness is its unwieldy and expensive supply chains, with hundreds of suppliers across its three main categories of household, apparel and food.
- The Muji operator just acquired a large team from one of its principle clothing supply partners, Mitsubishi, to finally streamline its supply chains and improve cost performance in clothing.
- This should have a positive impact on its cost of goods, margins and inventory levels, allowing for quicker responses to trends at a lower price at home and overseas.
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