In today’s briefing:
- Razer Inc (1337 HK): Pre-Conditions Done
- Noritsu Koki (7744) – PAAAAYDAAAAY!
- JMDC (4483 JP) – A Change of Ownership, and Future Path
- Meituan: New Regulation on Food Delivery Commission to Slowdown Growth and Delay Profits
- KOSPI 200: LG Energy Solution Inclusion and Dongwon F&B Exclusion
- Razer’s Offer Spread Risk/Reward – Pre-Conditions Fulfilled
- Hoya – We Are Increasingly Confident About a Semi Capex Decline
- KPIT Tech: Earnings and Growth Visibility Remain Strong
- Breaking Estimates Short Candidates: Robinhood Mkts, Seagen, Zimmer Biomet, Cerence
- Employment Hero Nets $130m, Buys Australian HR Tech Firm
Razer Inc (1337 HK): Pre-Conditions Done
- Razer Inc (1337 HK) has announced the remaining pre-conditions have now been fulfilled.
- The next step is the Scheme vote, which may be held in early May, with possible completion in early June.
- Despite SAMR approval last month, this transaction continues to trade wide to terms on concerns retail investors will disrupt the headcount test.
Noritsu Koki (7744) – PAAAAYDAAAAY!
- Noritsu Koki (7744 JP) just sold two-thirds of its stake in subsidiary JMDC Inc (4483 JP) to Omron Corp (6645 JP) for ¥112bn – pretty good for a ¥61bn marketcap.
- This is the payday for those who have been long NK as a proxy for JMDC and possibly short JMDC against it. Now the shape of the company is different.
- A closer look at the pro-forma financial profile is warranted. It’s a lot of money. BUT… if you look today and buy today you do NOT get the special div!
JMDC (4483 JP) – A Change of Ownership, and Future Path
- JMDC Inc (4483 JP) or formerly Japan Medical Device Corp was incubated then IPOed by Noritsu Koki (7744 JP). Noritsu Koki is now selling two-thirds of its stake to OMRON.
- OMRON’s heft should help JMDC grow better with larger clients. That’s the bet OMRON is making too.
- The sale by Noritsu Koki reduces potential overhang from a share sale which heretofore had been a possibility.
Meituan: New Regulation on Food Delivery Commission to Slowdown Growth and Delay Profits
- Meituan (3690 HK) share price is down more than 20.0% from Thursday’s close following announcement on new regulations for food delivery platforms.
- New regulation states that food delivery platforms should further reduce the service fee charged from restaurants to lower operating costs for food and beverage businesses.
- Meituan’s food delivery business makes about 88% of its revenues from commissions while the remainder comes from online marketing services.
KOSPI 200: LG Energy Solution Inclusion and Dongwon F&B Exclusion
- On 22 February, the KRX announced that LG Energy Solution (373220 KS) will be included in numerous local indices including KOSPI 200, KOSPI 100, and KRX 100 effective 3/11/2022.
- This has been widely expected by the market. Due to the inclusion in KOSPI 200, investors will be able to short LG Energy Solution starting 11 March.
- Once Dongwon F&B is excluded from the KOSPI 200 index, this could be a key buying opportunity on this stock, given the company’s solid fundamentals.
Razer’s Offer Spread Risk/Reward – Pre-Conditions Fulfilled
- Razer Inc (1337 HK) announced that all the pre-conditions were fulfilled. The scheme document will be released after the FY21 results (scheduled on or before 17 March).
- The headcount test is a key challenge. While the deal’s success benefits from the de-rating of technology shares, it is also undermined by Logitech International SA (LOGN SW)’s strong 3Q.
- The shares are broadly fairly valued at last close both on a SoTP and deal probability basis. We would be buyers up to HK$2.5 per share (implies 65% deal probability).
Hoya – We Are Increasingly Confident About a Semi Capex Decline
- We spoke to Hoya today to understand market trends in both the semi and healthcare areas.
- Overall, business conditions remain strong although momentum appears stronger for the Life Care segment.
- More pertinently, we interpret some of the commentary on the semi capex side as suggesting some downside risk to overall spend.
KPIT Tech: Earnings and Growth Visibility Remain Strong
- Despite the elevated valuation, KPIT remains a high conviction idea for us as we see potential for 21%+ earnings CAGR over the next decade.
- Given the strong growth visibility, KPIT can sustain its current elevated valuation of 12x P/B and thus an investment in it can offer 21%+ CAGR over the next decade.
- Even if its exit valuations were to decline by 1/3rd at the end of the decade, it can still offer 16%+ CAGR.
Breaking Estimates Short Candidates: Robinhood Mkts, Seagen, Zimmer Biomet, Cerence
- This model uncovers companies facing recent sharp cuts in estimates. These shorts can have very disparate characteristics.
- The key judgement involves whether the negative revisions are temporary or if they are indications of ongoing weakness in the business.
- Breaking Estimates stocks often continue to decline after the cuts. This week we flag Robinhood Mkts, Seagen, Zimmer Biomet, Cerence
Employment Hero Nets $130m, Buys Australian HR Tech Firm
- Employment Hero, an Australia-based human resources tech platform, has raised US$130 million
- With this round, the startup’s valuation has nearly reached unicorn status at AU$1.25 billion (US$901.5 million).
- Employment Hero helps businesses manage their workforce through the changing nature of work by helping teams stay connected through fully integrated HR solutions.
Before it’s here, it’s on Smartkarma
