Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>The new market structure of the Tokyo Stock Exchange (TSE) consisting of Prime and Standard Sections is about to become functional in a few months.</li>
<li>Some companies have already announced their desired Market Sections under this new structure. However, some companies are yet to make such announcements.</li>
<li>In this insight, we take a look at those who are yet to make such announcements to identify attractive TOPIX Inclusion Pre-event candidates. </li>
</ul>


The new market structure of the Tokyo Stock Exchange (TSE) consisting of Prime and Standard Sections is about to become functional in a few months.
Some companies have already announced their desired Market Sections under this new structure. However, some companies are yet to make such announcements.
In this insight, we take a look at those who are yet to make such announcements to identify attractive TOPIX Inclusion Pre-event candidates. 


Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Equity Bottom-Up

<p>There are few discount supermarkets in Japan and the largest by far is Kobe Bussan’s Gyomu Super franchise chain.</p>
<p>Despite its no frills presentation and reliance on frozen foods, over the past 12 months, prices that are <em><strong>up to half</strong></em> that charged at mainstream chains have drawn in more customers and across a wider age range.</p>
<p>The company is now expecting yet another record performance this year.</p>
<p><strong>When we first recommend Kobe Bussan in October 2018, the share price stood at around ¥780 and has risen to ¥4,080 since. This isn't cheap but given the five year growth potential, we remain bullish about the fundamentals long-term.</strong></p>

There are few discount supermarkets in Japan and the largest by far is Kobe Bussan’s Gyomu Super franchise chain.
Despite its no frills presentation and reliance on frozen foods, over the past 12 months, prices that are up to half that charged at mainstream chains have drawn in more customers and across a wider age range.
The company is now expecting yet another record performance this year.
When we first recommend Kobe Bussan in October 2018, the share price stood at around ¥780 and has risen to ¥4,080 since. This isn't cheap but given the five year growth potential, we remain bullish about the fundamentals long-term.

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Last Week in Event SPACE: SOHO China, Evergrande, Kerry Logistics, Milton, CBA, NTT

Travis Lundy

<p><a href="https://www.smartkarma.com/entities/mcdonald-s-holdings-co-japan" target="_blank" data-smartkarma-citation="entities:985:1" rel="noopener">Mcdonald's Holdings Co Japan (2702 JP)</a> today <a href="https://ircms.irstreet.com/contents/data_file.php?template=1585&amp;brand=74&amp;folder_contents=36934&amp;src_data=312469&amp;filename=pdf_file.pdf" target="_blank" rel="noopener">reported</a> Q2 revenues which were +12.5% year on year, OP which was up 13.1%yoy, and Net Profit which was up 13.9%yoy. For H1 as a whole, revenues were up 8.6% (+10.2% including franchised stores) and OP and NP were up 16.9% and 18.7%, respectively, vs the year prior period. </p><p>The company also raised its <a href="https://ircms.irstreet.com/contents/data_file.php?template=1585&amp;brand=74&amp;folder_contents=36934&amp;src_data=312462&amp;filename=pdf_file.pdf" target="_blank" rel="noopener">forecasts</a> for the full year from the forecast at the end of Q1 which was ¥299.5bn in revenue to ¥312bn; the OP forecast was lifted from ¥32bn to ¥34bn. The NP forecast was lifted from ¥20.4bn to ¥21bn.</p><p>We basically knew this was going to be the case a couple of weeks ago because of the comments made in the analyst call on 28 July after parent <a href="https://www.smartkarma.com/entities/mcdonald-s-corp" target="_blank" data-smartkarma-citation="entities:1425:1" rel="noopener">Mcdonald's Corp (MCD US)</a> earnings were released.</p><p>What we do not have yet is any indication of the company's intent with regard to the TSE's market structure changes come April 2022. </p><p>But we should have another block to be sold by MCDs. I would expect 3.8mm shares to close out the sale of shares. I would expect it imminently. </p><p>That will be the end of MCD's selldown of MCDs Japan shares... but not quite. </p><p>More below.</p>

Mcdonald's Holdings Co Japan (2702 JP) today reported Q2 revenues which were +12.5% year on year, OP which was up 13.1%yoy, and Net Profit which was up 13.9%yoy. For H1 as a whole, revenues were up 8.6% (+10.2% including franchised stores) and OP and NP were up 16.9% and 18.7%, respectively, vs the year prior period. The company also raised its forecasts for the full year from the forecast at the end of Q1 which was ¥299.5bn in revenue to ¥312bn; the OP forecast was lifted from ¥32bn to ¥34bn. The NP forecast was lifted from ¥20.4bn to ¥21bn.We basically knew this was going to be the case a couple of weeks ago because of the comments made in the analyst call on 28 July after parent Mcdonald's Corp (MCD US) earnings were released.What we do not have yet is any indication of the company's intent with regard to the TSE's market structure changes come April 2022. But we should have another block to be sold by MCDs. I would expect 3.8mm shares to close out the sale of shares. I would expect it imminently. That will be the end of MCD's selldown of MCDs Japan shares... but not quite. More below.

McDs Japan (2702) Update: Q1 Strong As Expected, No TSE1 News

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Devyani International / Equity Capital Markets

<div><p>Devyani International Limited (DIL), Yum Brand’s largest franchisor in India, aims to raise around US$250m via its Indian IPO. The IPO will be a mix of primary and secondary shares. </p></div><div><p>DIL operates a chain of quick service restaurants (QSRs) in India. Its core business is to operate KFC, Pizza Hut and Costa Coffee in India. It operated 655 stores across 155 cities in India, as of Mar 2021. These include 264 KFC stores, 297 Pizza Hut stores and 44 Costa Coffee stores. It also operates stores in Nepal and Nigeria for KFC and Pizza Hut. In addition, it also runs its own brands Vaango, Food Street, Masala Twist, Ile Bar, Amreli, and Ckrussh Juice Bar in India. Yum owns over 4% stake in the company.</p></div><div><p>We covered various aspects of the deal in our previous notes, <a href="https://www.smartkarma.com/insights/devyani-pre-ipo-might-not-do-another-burger-king-india-but-should-be-good" target="_blank" rel="noopener">Devyani Pre-IPO - Might not do another Burger King India but should be good</a>,  <a href="https://www.smartkarma.com/insights/devyani-pre-ipo-peer-comparison-slots-in-neatly" target="_blank" rel="noopener">Devyani Pre-IPO - Peer Comparison - Slots in Neatly</a> and <a href="https://www.smartkarma.com/insights/devyani-pre-ipo-thoughts-on-valuation" target="_blank" rel="noopener">Devyani Pre-IPO - Thoughts on Valuation.</a></p></div><div><p>In this note, we will talk about the IPO pricing.</p></div>

Devyani International Limited (DIL), Yum Brand’s largest franchisor in India, aims to raise around US$250m via its Indian IPO. The IPO will be a mix of primary and secondary shares. DIL operates a chain of quick service restaurants (QSRs) in India. Its core business is to operate KFC, Pizza Hut and Costa Coffee in India. It operated 655 stores across 155 cities in India, as of Mar 2021. These include 264 KFC stores, 297 Pizza Hut stores and 44 Costa Coffee stores. It also operates stores in Nepal and Nigeria for KFC and Pizza Hut. In addition, it also runs its own brands Vaango, Food Street, Masala Twist, Ile Bar, Amreli, and Ckrussh Juice Bar in India. Yum owns over 4% stake in the company.We covered various aspects of the deal in our previous notes, Devyani Pre-IPO - Might not do another Burger King India but should be good,  Devyani Pre-IPO - Peer Comparison - Slots in Neatly and Devyani Pre-IPO - Thoughts on Valuation.In this note, we will talk about the IPO pricing.

Devyani IPO - Still Some Upside on Un-Adjusted EBITDA Basis

Japan

McDonald's Holdings Company (Japan), Ltd. operates a hamburger fast food restaurant chain throughout Japan.  The Company operates its own stores and franchise stores.

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Mcdonald's Japan (2702 JP)

TOPIX Inclusions: Who Is READY? 4.0

In this insight, we take a look at potential pre-event candidates who could move to the First Section of the Tokyo Stock Exchange in the next few...

Janaghan Jeyakumar, CFA

Kobe Bussan: Achieving New Records

Japan's discount food market is booming. The biggest discount supermarket operator is Kobe Bussan. The share price has around 6-fold since we first...

Michael Causton

Last Week in Event SPACE: SOHO China, Evergrande, Kerry Logistics, Milton, CBA, NTT

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

McDs Japan (2702) Update: Q1 Strong As Expected, No TSE1 News

McDs shares are up this AM. The earnings surprise was not a surprise so the forecast upgrade shouldn't be, but we are likely just a day or three...

Travis Lundy

Devyani IPO - Still Some Upside on Un-Adjusted EBITDA Basis

Devyani International Limited (DIL), Yum Brand’s largest franchisor in India, aims to raise around US$250m via its Indian IPO. The IPO will be a...

Sumeet Singh

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