Daily Consumer: StubWorld: CK Infra/Power Assets, Amorepacific, JCNC and more

In this briefing:

1. StubWorld: CK Infra/Power Assets, Amorepacific, JCNC
2. Mrs. Bectors Food Specialities Pre-IPO Quick Take – Sales for Its Main Segment Have Been Stagnant
3. Navitas (NVT AU): A Bid Priced to Go with a Reasonable Chance of a Competing Bid
4. Korea Single-Sub Holdco Daily Alert: Halla Is Ripe for Trade At -1.6σ, Amore Reduced to +0.8σ
5. Yaskawa Electric: We Are Probably Now Close to the Bottom for This LT Structural Growth Story

1. StubWorld: CK Infra/Power Assets, Amorepacific, JCNC

This week in StubWorld …

• What’s up with Ck Infrastructure Holdings (1038 HK) reducing its stake in Power Assets Holdings (6 HK)?
• Trading around its lowest implied stub inside the past five years, improving sentiment toward cosmetic stocks should support an Amorepacific Group (002790 KS) setup.

Preceding my comments on CKI/PAH, Amorepacific and JCNC 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 as a % – of at least 20%.

2. Mrs. Bectors Food Specialities Pre-IPO Quick Take – Sales for Its Main Segment Have Been Stagnant

Mrs Bectors Food Specialities (814506Z IN) (BFS) plans to raise around US$100m+ in its India IPO via a sell-down of secondary shares.

As per Technopak, BFS is one of the leading manufacturers in the non-glucose biscuit segment in Northern India. It is also one of the largest supplier of buns to the quick-service restaurants and a leading supplier of breads in Delhi NCR and Maharashtra. In addition to its Indian operations, exports account for 30% of the revenue.

Despite providing a host of numbers, the company has failed to provide clear statistics on the growth of revenue of its main segment, domestic biscuits. If one tries to back out this numbers from the other statistics it seems to imply that revenue has been flat for five years. Despite showing some revenue and PATMI growth over the past five years, cash flow from operations as well have been stagnant. 

3. Navitas (NVT AU): A Bid Priced to Go with a Reasonable Chance of a Competing Bid

Navitas Ltd (NVT AU), an Australian-listed education company, is subject to a revised bid. On 15 January 2019, the BGH Consortium bid against itself by offering a revised proposal of A$5.825 cash per share, 6% higher than its previous rejected offer.

4. Korea Single-Sub Holdco Daily Alert: Halla Is Ripe for Trade At -1.6σ, Amore Reduced to +0.8σ

• Halla has the widest gap now on a 20D MA. It is at -159% of σ. It was down 130pp yesterday alone. It is currently close to yearly mean. Poongsan is also below -1 σ, down 80pp yesterday. BGF and Nexen are above +1 σ.
• Amore quickly reduced the gap yesterday. It is at 78% of σ, down 150pp. Amore Holdco stayed relatively strong yesterday. Holdco is at 78% of σ. But I wouldn’t expect a further decline. Price ratio is still close to yearly low. Holdco discount can be misleading as its two unlisted holdings are severely undervalued.
• I’d trade Halla with a very short-term horizon for quick mean reversion. I wouldn’t look at long-term horizon on Halla. Single sub dependency is relatively low. Price ratio is a little above yearly mean. 46% holdco discount doesn’t seem to be particularly cheap either.
• BGF, I’d continue to hold onto my long position on Holdco. I explained it in the previous BGF insight. Nexen and Poongsan, I’d wait for a bit wider divergence.

5. Yaskawa Electric: We Are Probably Now Close to the Bottom for This LT Structural Growth Story

Following Yaskawa’s second downward revision at 3Q earnings, we are shifting towards a more positive stance on the stock, even from a long-term perspective. We had been negative on the stock from late 2017 and as the stock tumbled we maintained that it was still too early buy for the long-term, though by mid-late 2018 we did (incorrectly) feel that there was the potential for a short term rally due to the severity of underperformance.

With the stock selling off harshly in the recent market fall but rebounding following its weak earnings we feel that much of the bad news is now priced in and expectations have corrected to the point where this is once again interesting on the long side.