ConsumerDaily Briefs

Consumer: Naspers, Lotte Rental, Kusuri No Aoki Holdings Co L, Dohome PCL, Avenue Supermarts Ltd and more

In today’s briefing:

  • Prosus EGM Approves Partial Offer for Naspers – Next Steps Interesting, Part I
  • Lotte Rental IPO Preview
  • Japan’s Governance: Unclear Medium-Term Management Plan – Kusuri No Aoki (3549)
  • DOHOME: Expect 2Q21 Earnings to Hit the Record High
  • Lotte Rental (Feat. Car Sharing Unicorn Green Car) IPO: Offering Details & Valuation Issues
  • Result Update:Avenue Super.
  • Avenue Supermarts Ltd
  • HSIE Results Daily: Avenue Supermarts
  • Gross margin disappoints amid a steady revenue recovery

Prosus EGM Approves Partial Offer for Naspers – Next Steps Interesting, Part I

By Travis Lundy

On Friday, the Prosus (PRX NA) EGM to consider and approve the transaction and cross-shareholding which comes from Prosus launching a Proposed Voluntary Exchange Offer to shareholders of Naspers (NPN SJ) was held. 

The results look like the table below (Prosus announcement link). If we assume that the A Share holders voted for the deal, and Naspers voted for the deal, that left 316mm other votes out of the 432.5mm shares eligible to vote which is a 73% turnout. 

While this deal was never going to not get passed in the EGM, because Naspers management and Prosus management control are the same, if it had been an overwhelming loss in terms of minority shareholder support, they might have thought about reconsidering their support for the project. 

It was not an overwhelming defeat, but it was not overwhelming support either. It is 52.83% of minorities FOR, 46.51% AGAINST. Based on this nominally being a majority of the minority, one should expect this to go ahead. 

That meant that the Prospectus would be announced today. And it has been (link). And the Exchange Offer ends on 13 August 2021. The new shares of Prosus will start trading on the 16th of August on the JSE, A2X, and Euronext Amsterdam. 


Lotte Rental IPO Preview

By Douglas Kim

Lotte Rental is offering 14.4 million shares in this IPO. Lotte Rental is the largest car rental company in Korea with about 22% market share. The IPO price range is from 47,000 won to 59,000 won. The IPO deal size is from US$595 million to  US$746 million.

According to the bankers’ valuation, the expected market cap after the IPO will be 1.7 trillion won to 2.2 trillion won. The book building for the Lotte Rental IPO starts on August 3rd. Korea Investment & Securities and NH Investment & Securities are the lead underwriters of this IPO. 

Deal Specifics of the Lotte Rental IPO:
 
Lead underwriters of the IPO: 
NH Investment & Securiites, Korea Investment & Securities
Expected IPO price per share: 
47,000 won (low)/59,000 won (high)
Number of Shares for IPO:
14.42m shares (7.2m new shares and 7.2m old shares)
IPO base deal size: 
US$595 mn (low);  US$746 mn (high)
Expected common shares outstanding, fully diluted (post-IPO):  
36.63m shares
Expected market cap after IPO:
1,722 billion won (low)/2,161 billion won (high)
Book open: 
3-Aug-21
Book closed:
4-Aug-21
Listing date: 
TBD
Source: Company data
 

Japan’s Governance: Unclear Medium-Term Management Plan – Kusuri No Aoki (3549)

By Aki Matsumoto

On Wednesday, July 7, I attended the analyst meeting for the FY5/2021 financial repirting of Kusuri No Aoki (3549). The drugstore industry is still growing in this country, and according to data from the Japan Association of Chain Drug Stores (JACDS), the industry increased from 5,631 billion yen in 2010 to 8,036 billion yen in 2020 and is expected to grow to 100,000 billion yen in 2025. On the other hand, competition in this industry is becoming increasingly fierce. The number of stores has increased from 16,259 in 2010 to 21,284 in 2020, and the trade area population (people/store) has decreased from 7,846 to 5,890. It is expected that the trade area population will continue to decrease, and competition will become more intense. Considering this environment, Aoki released its current medium-term management plan.


DOHOME: Expect 2Q21 Earnings to Hit the Record High

By Research Group at Country Group Securities

We maintain a HOLD rating with a new target price of Bt28 (+6% from Previous TP at 26.5) derived from 35xPE’22E, which is close to the major listed home-improvement players in Thailand.

• We expect DOHOME to report 2Q21 net profit of Bt600m (+310%YoY, +11%QoQ) supported by (1) solid SSSG at 25%YoY from the low base in 2Q20 ,(2) strong revenue from four new stores expansion in the past 12 months, (3) gross profit margin expansion from increasing bargaining power against suppliers, DC cross-dock strategies and an increase in profit margin from steel products (roughly 40% of total sales).
• DOHOME announced the Stock Exchange of Thailand on 8th July 2021 to raise capital by Bt1.98bn through Private Placement (PP) with additional 75.5 million shares at the transaction price of Bt26.25 per share, causing a dilution effect by 3.1%. We have positive view toward the transaction as the company will benefit from a decrease in financial cost along with cleaner balance sheet. In addition, there will be no concern on capital raising for 360 days except ESOP warrant and stock dividends.

Lotte Rental (Feat. Car Sharing Unicorn Green Car) IPO: Offering Details & Valuation Issues

By Sanghyun Park

Offering size

Lotte Rental offers 14.4M shares, which account for 49.02% of the pre-IPO total shares, of which 55-75% are allocated to institutions. It will be listed on KOSPI.

Offering size
Ticker089862
BourseKOSPI
Offering14,422,000
– % of pre-IPO SO49.02%
Institutional allotment55.00~75.00%
Source: DART

Who is Lotte Rental?

Lotte Rental is the number one car rental company in Korea. Lotte Rental has 220 branches and sales offices nationwide and operates 210,000 vehicles.

In 1990, Kumho Asiana Group partnered with Hertz to establish Lotte Rental. Since then, it has grown into the largest car rental company in Korea. In 2010, Kumho Group sold it to KT for ₩300B. Five years after KT acquired it, it was again sold to Lotte Group for ₩1.2T, and the corporate name was changed to the current Lotte Rental. Meanwhile, in 2020, Lotte Rental solidified its No. 1 position in the industry by acquiring the rental car division owned by Hanjin.

Lotte Rental is currently engaged in car rental and used car sales, and office/construction equipment rentals.

As of the first quarter of 2021,

  • Car rental sales accounted for 62.07% of total sales.
  • Used car sales accounted for 28.77% of total sales.
  • Office/construction equipment rentals accounted for 9.16% of total sales.

Split

This IPO is a split offering with a primary of 50% and a secondary of 50%. As a result, this offering will see a capital increase rate of 24.5% with a shareholding dilution of 19.7%. This event is free of any additional options: cornerstone, clawback, or greenshoe.

Split
Primary %50.00%
Secondary %50.00%
Capital increase rate24.51%
Dilution19.68%
Source: DART

Schedule

The book opens on August 3 (for both local and overseas investors) and runs for two days until August 4. The allotment will be on August 6, finalizing an offering price. The subscription falls on August 9.

Schedule
Book open2021. 8. 3
Book close2021. 8. 4
Allotment2021. 8. 6
Subscription2021. 8. 9
Payment2021. 8. 12
ListingTBA
Source: DART

Pricing

This IPO also uses EV/EBITDA. The corporate value was determined after selecting only two local rental companies:

  1. SK Rent A Car (068400)
  2. AJ Networks (095570)

The respective EV/EBITDA multiples are 5.47x for SK Rent A Car and 5.44x for AJ Networks, giving an average of 5.46x.

Valuation peers: EV/EBITDASK Rent A Car Co LtdAJ Networks Co LtdNote
Ticker068400095570
Reference market cap₩657.7B₩272.6BA = a) × b)
Shares outstanding47,285,84046,822,295a)
Reference share price: MIN[1M Avg, 1W Avg, 1D Close]₩13,910₩5,823b)
Net debt, as of 1Q21₩1,569.0B₩911.2BB
Enterprise value (EV)₩2,226.7B₩1,183.8BC = A + B
EBITDA: 2Q20~1Q21₩407.0B₩217.5BD = c) + d)
Operating profit: 2Q20~1Q21₩71.2B₩18.3Bc)
Depreciation & Amortization: 2Q20~1Q21₩335.8B₩199.2Bd)
EV/EBITDA5.47x5.44xE = C / D
Average EV/EBITDA5.46x
Source: DART
The averaged EV/EBITDA multiple of 5.46x was applied to Lott Rental’s EBITDA of ₩1,120.6B from the second quarter of last year to the first quarter of this year. As a result, we have a price per share of ₩77,708, giving a market cap of ₩2.85T.
Lotte Rental: EV/EBITDA
EBITDA: 2Q20~1Q21₩1,120.6BA
EV/EBITDA5.46xB
Enterprise value (EV)₩6,114.4BC = A X B
Net debt₩3,267.7BD
Market cap₩2,846.7BE = C – D
Post-IPO total shares36,634,063F
Price per share₩77,708G = E / F
Source: DART
The indicative price band lies between ₩47,000 and ₩59,000. This is obtained by applying a discount rate of 24.07% to 39.52% to the market cap of ₩2.85T calculated through EV/EBITDA. This much discount gives an EV/EBITDA multiple of 4.45x to 4.84x.
Indicative price bandLowHigh
Price₩47,000₩59,000
Base deal size₩677.8B₩850.9B
– Institutional allotment₩372.8B₩468.0B
Implied market cap₩1,721.8B₩2,161.4B
– Discount39.52%24.07%
EV/EBITDA4.45x4.84x
Source: DART

Result Update:Avenue Super.

By Axis Direct

We believe is fairly valued given store revenue growth while store expansion may moderate in the near to medium term due to the pandemic-induced uncertainties and consequent lockdown restrictions. We increase our target price to Rs 3,110/share (prev – Rs 2,890/share) valuing at 40x FY24E EV/EBITDA

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.

Avenue Supermarts Ltd

By ICICI Securities Limited

Accelerated store addition to spur revenue growth the D-Mart’ brand with a core focus on value retailing. D-Mart, through its proven business model, has been able to maintain consistent profitability and remains an exceptional performer in its peer group. D-Mart has progressively enhanced its return ratios (RoIC: 20%+) despite…

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HSIE Results Daily: Avenue Supermarts

By HDFC Securities

We maintain our SELL recommendation on DMART with a revised DCF-based TP of INR 2,260/sh (earlier 2,160/sh), implying 34x Jun-23E for the standalone business + 4x Jun-23E sales for DMART Ready. Note: the target price change is a function of EPS change (+3%; led by lower cost of retailing) for FY23 and DCF rollover (+2%) to Jun-23. Avenue Supermarts: While D-MARTs revenue recovery came in line with expectations, its profitability disappointed. Revenue grew 31% to INR 50.3bn (in-line), while curbs on non-essential sales during the second COVID-led lockdown put pressure on its gross margin (GM), which contracted 129bps to 12.4% (HSIE: 13.5%).

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.

Gross margin disappoints amid a steady revenue recovery

By Motilal Oswal

The revenue recovery in DMART has been much better than that during the previous lockdown, growing 33% YoY (13% below pre-COVID levels). Gross margin declined by 110bp YoY, despite the base quarter having seen a…

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