ConsumerDaily Briefs

Consumer: Alibaba Group, Yamada Denki, Nayuki Holdings, Ijm Plantations, China Youran Dairy Group Ltd, Coupang, Gajah Tunggal and more

In today’s briefing:

  • Alibaba (9988 HK): Potential Passive Inflow Post MSCI Listing Switch
  • Yamada Denki and Otsuka Kagu Do The Deed – A Quick Merger
  • Nayuki (奈雪) Pre-IPO – PHIP Updates – 4Q20 Results Shows Improvement
  • IJM Plantations’ Potential MGO from Kuala Lumpur Kepong
  • China Youran Dairy IPO: Peer Comparison
  • Nayuki (奈雪) Pre-IPO – Industry Landscape and Peer Comparison
  • CPNG: Some Thoughts on Coupang’s Cost Structure
  • Morning Views Asia: China SCE, Gajah Tunggal

Alibaba (9988 HK): Potential Passive Inflow Post MSCI Listing Switch

By Brian Freitas

Post the switch in listing from Alibaba Group (BABA US) to Alibaba Group (9988 HK) in the MSCI Standard indices, the number of shares registered in Hong Kong CCASS has continued to increase and last night crossed the threshold for an ad hoc index rebalance that will be implemented at the close of trading on 16 July. The announcement of the ad hoc rebalance should be made on 13 July.

We estimate passive trackers indexed to the Hong Kong Hang Seng Index (HSI INDEX), Hang Seng China Enterprises Index (HSCEI INDEX) and the Hang Seng Tech Index (HSTECH INDEX) will need to buy 46.05m shares (HK$9.58bn; 2 days of ADV) at the close on 16 July.

Based on current numbers, there will be no recapping done at the July rebalancing but there could be outflows from the stock at the September review when the stocks are capped.

The passive inflow in July could keep the stock supported versus its peers and the main indices, but the stock could trade weaker in August on expected passive outflows due to capping.


Yamada Denki and Otsuka Kagu Do The Deed – A Quick Merger

By Travis Lundy

Otsuka Kagu Ltd (8186 JP) had cash problems in 2019 which required a saviour. Yamada Denki (9831 JP) stepped in as that saviour, injecting cash and buying shares, leaving Kumiko Otsuka in charge of the previous family battleground company.

As Michael Causton wrote six months ago in Otsuka Kagu to Be Absorbed by Yamada Denki as Family CEO Departs, that family control did not last as the recovery and rebound did not work as well as it might have, despite the substantial rebound in furniture sales in the WFH era.  

Back then, Michael said, 

The departure of the founding family signals that Otsuka will likely become a wholly owned subsidiary sooner rather than later. On acquisition, Yamada provided a large cash injection to help with the chain’s operations, but with Otsuka having sold off most of its major assets, reducing fixed assets to just ¥164 million compared to ¥3.1 billion in 2010, and with sales still only growing slowly, it now looks as if Yamada will need to inject even more. Delisting the company and taking over complete control of strategy and operations is the only option left.

That was prescient. 

Today, Yamada Denki and Otsuka Kagu announced plans to merge. The Otsuka Kagu shareholder meeting is in 7 weeks (record date was 30 April), and the merger is scheduled to be effective in 12 weeks. 

A foreshortened timeframe on an ‘easy’ smallcap deal. 


Nayuki (奈雪) Pre-IPO – PHIP Updates – 4Q20 Results Shows Improvement

By Zhen Zhou, Toh

Nayuki Holdings (NYK HK) is looking to raise US$500m in its upcoming Hong Kong IPO. 

Nayuki is the operator of Nayuki teahouses, a premium modern teahouse chain in China. The company had a network of 491 Nayuki teahouses across 61 cities in China as of December 2020. As per CIC, Nayuki is the most extensive premium modern teahouse network in China in terms of the number of cities covered.

We had previously covered the IPO in:


IJM Plantations’ Potential MGO from Kuala Lumpur Kepong

By Arun George

Kuala Lumpur Kepong (KLK MK) made an offer to acquire Ijm Corp Bhd (IJM MK)/IJMC’s entire stake in Ijm Plantations (IJMP MK)/IJMP for RM3.10 per share in cash, subject to potential dividend adjustments. The offer price is a 26% premium to the unaffected price of RM2.46 per share (prior to the trading halt on 8 June).

IJMC is IJMP’s largest shareholder and owns 494.9 million shares, representing 56.2% of outstanding shares. The proposed acquisition implies a cost of RM1.53 billion ($371.7 million). KLK’s offer is subject to IJMC’s acceptance and execution of the definitive agreement (SPA) on or before 5.00 p.m. on 11 June 2021 or such a mutually extended date, failing which the offer will lapse. IJMC has stated that is agreeable to finalise the terms with KLK to meet the offer deadline. 

IJMP is listed on the Main Markets of Bursa Malaysia. In Malaysia, the threshold for triggering a mandatory general offer (MGO) is the offeror and concert parties owning 33% or more of the voting shares. If the SPA becomes unconditional, KLK will be required to extend a mandatory general offer to acquire all the remaining IJMP shares for a cash offer price of RM3.10 per share, subject to potential dividend adjustments.  

A key condition precedent for the SPA is approval by both IJMC and KLK shareholders at their respective EGMs. We think that the deal should gain EGM approval as it is attractive to both IJMC and KLK shareholders. Overall, at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (SPA becoming unconditional).  


China Youran Dairy IPO: Peer Comparison

By Oshadhi Kumarasiri

China Youran Dairy Group Ltd (9858 HK) announced the indicative price range of its IPO on 7th June 2021 at HK$6.98-8.66 per share, which implies a market cap and EV range of HK$26.5-32.9bn and HK$34.0-39.6bn respectively.

China’s fragmented upstream dairy market consolidation process is led by two main players and the current market leader, Youran, is our first choice when it comes to exposure to this attractive investment theme.


Nayuki (奈雪) Pre-IPO – Industry Landscape and Peer Comparison

By Zhen Zhou, Toh

Nayuki Holdings (NYK HK) is looking to raise US$500m in its upcoming Hong Kong IPO. 

Nayuki is the operator of Nayuki teahouses, a premium modern teahouse chain in China. The company had a network of 491 Nayuki teahouses across 61 cities in China as of December 2020. As per CIC, Nayuki is the most extensive premium modern teahouse network in China in terms of the number of cities covered.

We had previously covered the IPO in:


CPNG: Some Thoughts on Coupang’s Cost Structure

By Henry Kwon

CPNG’s business model is based on speedy delivery to its customers with a focus on top line growth. Margin deterioration in 1Q21 should be understandable given that room for further individual employee productivity improvements at this point is likely to be little. Questions regarding CPNG’s cost pressures and the ability to expand margins is likely to linger in the back of investors’ minds, however, so 2Q earnings is likely to become a focal point on this issue.

Since June 1, CPNG’s shares have declined by 8.55% while the S&P 500 has risen by 0.42%, underperforming the index by 8.96% in the same time frame. After declining to an intra-day low of $30.65 on May 13, CPNG initially broke above its 78.6% Fibonacci retracement level of $38.86 on May 24 but failed to reach its 61.8% retracement of $45.30. It has currently retreated to below the 78.6% retracement level. Given CPNG’s short listing history, charting technical support/resistance levels represents a challenge, but a close above $39.00 would be constructive in the short term.


Morning Views Asia: China SCE, Gajah Tunggal

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.


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