In today’s briefing:
- Toshiba Coin Toss Is Neither Heads Nor Tails as Both Proposals Fail
- JD Logistics Placement – Not Wholly Convinced, JD’s US$700m Support Helps
- Toshiba – Both Proposals Voted Down
- Comfortdelgro (CD): Restriction Easing, Green And Low EV/EBITDA.
- MonotaRo: A Rare Winner in E-Commerce
- Shimadzu (7701 JP): Excessive Valuation Gone, Business Doing Well
- CIMC Enric (3899 HK): Still Running on the Fast Lane
Toshiba Coin Toss Is Neither Heads Nor Tails as Both Proposals Fail
- Toshiba EGM fails to provide a positive result as both Toshiba’s own Separation Plan and 3D Investment’s proposal to enhance privatisation bidder engagement and transparency fail.
- Activists are stuck. Management is too. 3+ years since the last big buyback and 3 new CEOs and we are back to the drawing board for both management and activists.
- But both have a head start. The Shareholder Return Plan, eventual disposition of Kioxia, and non-core asset sales would be a start. And Raymond Zage’s letter is worth a re-read.
JD Logistics Placement – Not Wholly Convinced, JD’s US$700m Support Helps
- JD Logistics (JDL) aims to raise around US$1.1bn, with US$400m coming via an institutional placement. The balance will be funded by issuing shares at the same price to JD.com.
- We have covered the stock extensively, links to our previous notes are below.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
Toshiba – Both Proposals Voted Down
- Votes at Toshiba’s EGM ended up being cast in the most likely fashion with both management’s and 3D’s proposals being voted down.
- There was nevertheless considerable uncertainty and it will be interesting to see what the voting breakdowns were.
- For now, however, this just pushes out the prospect of any true resolution and we view that as negative.
Comfortdelgro (CD): Restriction Easing, Green And Low EV/EBITDA.
- The latest announcement by the SG Multi-Task Force to further relax COVID-19 restrictions is a major positive catalyst.
- Its hybrid taxi accounted for more than 50% of its entire fleet as of end-December 2020. It remains on track to replace all diesel taxis with hybrid models by 2023.
- Investors will be paying a discounted valuation for the cash flow if they own Comfortdelgro Corp (CD SP) compared to its peers which trades at a much higher EV/EBITDA.
MonotaRo: A Rare Winner in E-Commerce
- Among many e-commerce names, MonotaRO Co Ltd (3064 JP) is one of the most promising with operating profitability predicted to improve by 200 bps to 14.0% by 2023.
- Unlike many e-commerce players, the company doesn’t strain itself financially while pursuing revenue growth through expansion.
- At 35.8x OP, MonotaRo is not cheap to be outright bullish. However, it is a reasonable long hedge to allow you to short a lot of other names in e-commerce.
Shimadzu (7701 JP): Excessive Valuation Gone, Business Doing Well
- Sales of analytical and measuring instruments, medical systems and industrial machinery are all doing well. Aircraft equipment lags, but should improve next fiscal year.
- Guidance has been raised three times and now calls for an 8% increase in sales and a 23% increase in operating profit in FY Mar-22.
- Not compellingly cheap, but worth looking at from a long-term perspective.
CIMC Enric (3899 HK): Still Running on the Fast Lane
- Cimc Enric Holdings (3899 HK) posted a set of encouraging result for FY21. It achieved a 37.4% YoY growth in 2H21 even after a 77.5% growth in 1H21.
- Management suggests that gross margin will improve in this year as measures have been taken to cope with the factors that lead to the 2.3pp contraction in FY21.
- Hydrogen energy is a bright spot – though contribution is still small, it expects to at least double its revenue in FY22, and remains bullish on the long term prospects.
Before it’s here, it’s on Smartkarma
