Brief Consumer: Tata Motors – DVR Deep Discount Vs ADR Small Premium and more

In this briefing:

  1. Tata Motors – DVR Deep Discount Vs ADR Small Premium
  2. StubWorld: Further Narrowing in Melco’s NAV Discount Unjustified
  3. Seven & I’s Sogo Seibu Loses Kansai Branches, Converting More Stores to SCs
  4. U.S. Equity Strategy: Value Closes the Gap on Growth
  5. Fast Retailing: Korea Boycott, an Opportunity for Investors

1. Tata Motors – DVR Deep Discount Vs ADR Small Premium

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The Tata Motors Ltd A Dvr (TTMT/A IN) Differential Voting Rights (DVR) are trading at a huge discount of around 54% to the Tata Motors Ltd (TTMT IN) ordinary shares. The premium on the Tata Motors Ltd Spon Adr (TTM US) is also beginning to perk up.

In this Insight, we look at how the DVR (Differential Voting Rights) differs from the Ordinary shares, the historical discount on the DVR and compare it to the discount on a couple of other DVRs listed in India, the movement of the ADR vs the local stock, changes in the shareholding pattern of the Ordinary shares and the DVR, and list out catalysts that could narrow the discount on the DVR line.

2. StubWorld: Further Narrowing in Melco’s NAV Discount Unjustified

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This week in StubWorld …

What catalysts are left to be extracted at Melco International Development (200 HK)‘s stub level after privatising Jumbo and disposing of the Cyprus gaming ops?

Preceding my comments on Melco are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.

3. Seven & I’s Sogo Seibu Loses Kansai Branches, Converting More Stores to SCs

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Seven & I sent in a team of senior executives to sort out Sogo Seibu three years ago resulting in recommendations that included handing off the Kansai stores and converting others to shopping centres.

The resulting restructuring is in progress, with more stores closed than any other department store chain.  Next month will also see the formal renaming of Sogo Kobe and Seibu Takatsuki as Hankyu stores. The move gives H2O Retailing (8242 JP), which owns the department stores of Hankyu Hanshin Holdings (9042 JP) the opportunity to further consolidate its position as the preeminent retailer in the Kansai region.

Seven & I meanwhile will now focus on extracting more sales and profit from some of the remaining 15 stores but is likely to want to convert or close more stores in the near future. Already, it has decided to convert its large Seibu Tokorozawa store into a shopping centre later this year. The net result will be a much smaller chain of department stores that Seven & I could well be packaging up to sell to a competitor or offload through an MBO. This could lead to an improvement in OPM.

4. U.S. Equity Strategy: Value Closes the Gap on Growth

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As the major averages break topside their respective 50-day M.A.s – a positive in its own right – we are encouraged by the shift away from growth & defensives toward the down-and-out laggards in the value arena. It is too early to tell for certain if these are anything more than short-term countertrend moves, but for now the moves we are seeing give us reason for optimism — something that was running very low just one week ago. In today’s report we highlight attractive Groups and stocks within Consumer Discretionary, Manufacturing, and Transportation: Homebuilding, Small-Cap, Auto Parts, Large-Cap, Trucking, Large-Cap, and Trucking, Small-Cap.

5. Fast Retailing: Korea Boycott, an Opportunity for Investors

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Amidst Korea’s Boycott of Uniqlo lies an opportunity to buy what could be the largest private label apparel company in few years. Fast Retailing’s share price has declined 7% since peaking in July 2019 as concerns started mounting on Uniqlo’s Korean business operations.

Fast Retailing, the parent company behind the famous Japanese brand Uniqlo is the world’s 3rd largest manufacturer and retailer of private label apparel and the largest in Japan. The company envisions becoming the largest player in the apparel industry in a few years’ time.

Fast Retailing’s main brand Uniqlo, positions itself to capture low-mid priced apparel markets around the world by providing the same or better quality to consumers at a lower or a similar price. The company already has stores in a number of countries in Asia, the US, and Europe and they have huge growth potential in most of these markets.

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