ConsumerDaily Briefs

Consumer: Demae-Can Co., Ltd., Tam Jai International, Sony Corp, FSN E-Commerce Ventures (Nykaa), Hanssem Co Ltd, China Education Group, Tata Consumer Products, Signature International, Hindustan Unilever and more

In today’s briefing:

  • Demae-Can – Structurally Appalling but a Good Trade
  • Tam Jai International IPO: A Big Appetite For Growth Under Toridoll’s Control
  • Sony Part 2: Arms Dealer in an Arms Race
  • Nykaa IPO: Not Perfectly Elegant
  • Hanssem Vs. Teton Capital Partners on Mandatory Tender Offer in Korea
  • China Education (839 HK): More Flows of Positive Development
  • Gross margin pressure to ease in coming quarters
  • Disposal of Bandar Enstek Land
  • Hindustan Unilever: Transforming To An Intelligent And Future Fit Organization

Demae-Can – Structurally Appalling but a Good Trade

By Mio Kato

Demae-Can once offered a sound business model in a niche for Japan and generated consistent double-digit growth with mid-teens margins, making it a relatively attractive stock for Japan. Since its push into the delivery business though, margins have collapsed, and cash-burn has reached Wework-ian proportions. Nevertheless, on a short-term basis, this could prove attractive.


Tam Jai International IPO: A Big Appetite For Growth Under Toridoll’s Control

By Oshadhi Kumarasiri

  • Rice noodle chain operator, Tam Jai International (TJI HK) completed its listing hearing and received approval for the proposed US$100.0m IPO on the Hong Kong Stock Exchange on 13th September 2021.
  • TORIDOLL Holdings Corporation (3397 JP), the biggest operator of noodle shops in Japan, took control of stagnating TamJai and SamGor restaurant chains in 2018 from its founder to restructure and turn around the noodle chains to fast growth and highly profitable businesses.
  • We like Tam Jai International under Toridoll’s management as Toridoll seems capable of taking the popular TamJai and SamGor restaurant brands global while continuing to expand TamJai’s and SamGor’s presence in the domestic market (Hong Kong).

Sony Part 2: Arms Dealer in an Arms Race

By Drawbridge Research

This is the second of three research notes covering Sony Group. Part 1 looked at Sony’s semiconductor and electronics businesses and how they have both collaborated to redefine the interchangeable-lens camera market whilst both having their own idiosyncratic growth drivers. This note covers the company’s music business, the incredible behavioural biases currently affecting its perception and the first principles of digital and analog audio that lead to this perception. Secondly, the company’s pictures business is examined with an emphasis on the fact that Sony is the only major Hollywood studio to not have invested in its own streaming service. We show how this strategy to not pursue streaming has resulted in Sony being the sole major Hollywood studio able to supply exclusive content to streaming services, with all other majors unable to due to the fact they are competing with each other in the streaming market themselves. Finally, we look at how walls continue to be broken down between Sony’s business units whilst analysing PlayStation Productions, a collaboration between Sony’s music and gaming business. PlayStation Productions aims to leverage Sony’s extensive catalogue of renowned and maturing gaming IP into Film and TV adaptions, all at a time when exclusive content is commanding a premium price.


Nykaa IPO: Not Perfectly Elegant

By Nitin Mangal

We continue our focus on the coverage of IPO bound start-ups and next is none other than FSN E-Commerce Ventures (Nykaa) (1003622D IN). However, Nykaa stands apart from the rest since it is the one of those rare finds that have a positive profitability and this is why it looks promising in nature. Another differentiating aspect is that Nykaa operates as an omni-channel entity, having as many as 73 physical stores across the country. (However, most of the revenue is generated online).

Nykaa was founded only in 2012 and has gained a strong foothold in the beauty and personal care (BPC) space especially in the last few years. According to RedSeer, the company is the largest Specialty BPC platform in India in terms of value of products sold in F21. The company manages its BPC predominantly through inventory model, not to forget that it also has its own brands which it outsources the manufacturing. Nykaa has also started the ball rolling in the fashion territory in 2018, for which it mostly acts as a market place for its consumers and vendors.

Nykaa has a strong operational characteristics, there is hardly any doubt; however, one needs to look beyond it to get a more comprehensive view of the financials and governance. There are a few concerns on the accounting front that should not be overlooked. We also find stains on the governance, primarily related to remuneration of MD. Further, there were several small risk factors which were disclosed, that had acted as a resistance force in the past.


Hanssem Vs. Teton Capital Partners on Mandatory Tender Offer in Korea

By Sanghyun Park

For those who aren’t familiar with this Hanssem deal, here is a quick summary:

  • In July, Hanssem’s major shareholder signed an MOU to sell a 30.21% stake to IMM PE for 1.5 trillion won.
  • And Lotte Shopping will participate as a strategic investor (SI) by investing 299.5 billion won in a fund created by IMM PE for the acquisition.

Here is the link to the news article about the MOU (source: Korea Times). 

Here is the link to the news article about Lotte Shopping investing in the fund created by IMM PE for the acquisition (source: JoongAng Daily).

Now, an unexpected event occurred in this deal that was expected to be completed smoothly. Teton Capital Partners, Hanssem’s second-largest shareholder, has taken legal action.

Teton Capital first purchased Hanssem shares in October 2009. At that time, the stock price of Hanssem was 9,900 won. Teton expanded its stake to 5% in September 2011 and became subject to the disclosure of changes in its stake. As of the end of June this year, Teton’s stake was 8.43%.

So what are the legal actions Teton Capital has taken? The Korea Times article below summarizes this well.

Here is the link to the news article about Teton Capital taking legal actions.

The key reason for Teton Capital’s legal action is the MANDATORY TENDER OFFER.

Yes, Teton requests the court to legally guarantee a mandatory tender offer to minority shareholders in this deal.


China Education (839 HK): More Flows of Positive Development

By Osbert Tang, CFA

We take the recent newsflow on business development at China Education Group (839 HK) positively. While the market may still skeptical towards the company due to the sector’s regulatory worries, CEG is standing in a better position than many of its peers given its focus on the vocational and higher education segment. In our view, the beaten-down performance of CEG’s share price is not justified, and it is an interesting time to look at its long-term promising outlook now.   

The 58% increase in approval higher education enrollment quota for 2021/2022 academic year, upside from contribution of the newly added Chengdu Jincheng College, support from banks and IFC through provisions of seven-year loan facilities at low pricing, rapid execution of M&A and further potential pipeline acquisitions all lend support to CEG’s business prospects amid a turbulent time. Our belief is that at 13.5x PER for FY22, CEG is inexpensively priced relative to growth.


Gross margin pressure to ease in coming quarters

By Motilal Oswal

Tea price inflation has impacted TCP’s performance since the last four quarters. However, we expect gross margin to improve from 2QFY22 onwards as tea prices have declined (down 32% from their peak in Aug’20 to INR175/kg in Aug’21). In this note, we have analyzed the impact of the fall in tea prices on TCP in the near term. Here are the key insights:…

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Disposal of Bandar Enstek Land

By TA Securities Holdings Bhd

Disposal of Bandar Enstek Land Last Traded: RM0.925 […] Ace Logistic for the proposed disposal by Signature of 3 parcels of freehold lands at Bandar Enstek, measuring 447k sf, 373k sf and 434k sf for cash considerations of RM19.5mn, RM16.2mn and RM18.9mn, respectively. […] Meanwhile, the repayment of bank borrowings is expected to generate interest savings of RM1.6mn per year, which equivalent to 9.5% of […] Net gearing (x) Net cash Net cash Net cash Net cash Net cash […] Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Hindustan Unilever: Transforming To An Intelligent And Future Fit Organization

By Axis Direct

We marginally revise our FY23E/24E and maintain BUY with a revised TP of Rs. 3,100 (earlier Rs. 2,670) as we raise our target PE to 56x FY24E EPS (earlier 50x FY24E EPS).

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

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