Smartkarma Daily Briefs

• Media reports indicate that Walmart (WMT US) is looking to sell 144.5m shares of JD.com (JD US) to raise up to US$3.74bn. That would be substantially all of its stake.
• There will be passive buying from global index trackers at the time of settlement of the placement shares and could absorb around 12% of the placement shares.
• There will be no passive buying from HSI, HSCEI, HSTECH and HSIII trackers in the short-term. An increase in CCASS holdings should result in passive buying in December.

• Back on the 22 May, global travel outfit Webjet (WEB AU)  announced it was exploring the separation of its two divisions – Webjet and Webjet B2C – via a demerger. 
• If the demerger is implemented, shareholders will receive one Webjet B2C share for every Webjet share; plus retain their existing shares in Webjet (to be renamed WEB Travel Group).
• A demerger booklet has been dispatched, with a 17th September vote on the in-specie distribution. If approved, WEB Travel (ex-entitlement) and Webjet B2C commence trading on the 23rd September.  

• LG Electronics aims for 7% growth, a 7x EV/EBITDA multiple, and a ₩1,000 DPS with a 25% payout ratio, likely disclosing details by late October or early November.
• LG Electronics’ value-up disclosure highlights major non-financial companies’ participation before the value-up index launch, driven by regulatory pressure and concerns about index inclusion.
• Samsung and Hyundai are likely to disclose value-up plans by early September, prompting an upward revision of flow size predictions for the value-up index launch.

• 99 Speed Mart Retail Holdings (99SPD MK), a leading grocery retailer in Malaysia, is seeking to raise US$530 million at RM1.65 per share.
• In 99 Speed Mart IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on lacklustre outlet KPIs, indications of margin pressure, significant pre-IPO dividends and a significant secondary offering.

• 99 Speed Mart Retail Holdings (99SPD MK) is looking to raise US$530m in its Malaysia IPO. The IPO will be a mix of primary and secondary shares.
• 99 Speed Mart Retail Holdings (99 Speedmart) operates the “99 Speedmart” chain of mini-market outlets, retailing daily necessities across Malaysia. 
• In our previous notes, we looked at the firm’s past performance. In this note, we undertake a peer comparison and discuss our thoughts on valuation.

• On 21 August, SM Entertainment announced that it will sell its non-core assets including its controlling stakes in SK C&C and KeyEast.
• The combined sales amount could be about 110 billion won or more, representing 7% or more of SM Entertainment’s market cap. 
• Sale of SM C&C and KeyEast is likely to have a positive impact on SM Entertainment by selling its non-core assets and improving its balance sheet for higher shareholder returns.

• Expedia Group, in its second-quarter 2024 earnings, exhibited a dual-faced performance characterized by significant achievements and emerging challenges that mirror the broader complexities of the travel industry.
• The management has focused on revitalizing core brands, particular emphasis on enhancing execution within the company’s consumer segment, and fine-tuning their long-term strategic direction.
• Under her leadership, Expedia Group has seen a robust growth in room nights and gross bookings indicating a strong recovery trajectory from previous downturns.

• China East Education (667 HK)‘s 1H24 result is impressive with a 58% YoY increase in adjusted net profit. Good cost control is a key contributing factor. 
• Profitability has improved in all business segments. Its strategy to focus on higher-value courses has led to further improvement in annualised tuition per student. 
• The 1H24 result equals 68% of the full-year consensus, implying an upside in market expectations. Its net cash, at 35% of market capitalisation, is unmatched by peers.

• The increase in net profit from the previous year outpaced the growth in dividends, which increased cash on hand for listed companies to a record high level. 
• Since the equity ratio of manufacturing sector is over 40% and there’s little room for debt repayment, there’s room for a considerable increase in dividends in conjunction with share repurchases.
• If free cash flow isn’t used to invest in growth and return profits to shareholders, rather than to pay small dividends to shareholders, cash on hand will continue to increase.

I recently spoke with Bogumil Baranowski, a fellow value investor and friend of mine, who shared his approach to finding attractive investments in industries facing temporary challenges but benefiting from long-term positive trends.

The luxury goods industry exemplifies this strategy. While short-term concerns such as potentially weakening consumer demand due to recessionary fears exist, these are outweighed by the long-term rise in global income and wealth levels.

Dexelance, the company I am discussing today, is currently attractively priced and stands to benefit from the enduring growth of the luxury goods sector.