Daily Consumer: UFO Moviez-Q2FY19 Results Update and more

In this briefing:

1. UFO Moviez-Q2FY19 Results Update
2. Som Distelleries-Q2FY19 Results Update
3. Tsuruha Holdings/Toyota Motor Pair on a Stronger JPY
4. CapitaLand Ltd – Premium Price for Ascendas-Singbridge
5. Full List of Korea’s Single-Sub Holdcos with Current Sigma % – Quick Thought on Amorepacific

1. UFO Moviez-Q2FY19 Results Update

Ufo Moviez India (UFOM IN) Q2FY19 results were in line with our expectations. While revenues declined by 4% YoY in Q2 FY19, PAT also declined by 4% YoY in the same period primarily due to the impact of D-Cinema sunset. We have mentioned in our earlier reports (click here and here) that the company is phasing out its distributor revenues from the Hollywood studio that may only last till FY20. We analyze the result.

2. Som Distelleries-Q2FY19 Results Update

Som Distilleries And Breweries (SDB IN) Q2FY19 results were in line with our expectations. While revenues witnessed a flat growth, PAT declined by 37% YoY in Q2 FY19 primarily due to seasonality impact on the beer volumes and higher depreciation on the new Karnataka plant. We analyze the results.

3. Tsuruha Holdings/Toyota Motor Pair on a Stronger JPY

Running thorough ideas presented by Campbell Gunn in his stronger yen insight Japan: What to Buy & Sell if the ¥ Rises to 90 , we found a compelling pair trade set up in the form of long Tsuruha Holdings (3391 JP) and short Toyota Motor (7203 JP) as the relative chart is moving into an exhaustive low that sets up a good reaction rise to the tune of 20%.

In absolute terms we see Toyota Motor moving into a top while Tsuruha shows risk of a final low to work into this pair position but has a very compelling bullish chart set up as Toyota fade from resistance.

4. CapitaLand Ltd – Premium Price for Ascendas-Singbridge

CapitaLand Ltd announced yesterday that it will be acquiring Ascendas-Singbridge (“ASB”) from Temasek Holdings.

The agreed enterprise value for ASB was S$10,907 mil and the equity value of ASB payable to Temasek Holdings was S$6,036 mil.

This is a transaction that makes good strategic sense. CapitaLand and ASB’s businesses, sector and geographical exposures complement each other well.  Any tangible benefits from the synergies are likely to be seen over the mid to long term.  The increase in AUM and addition of new capital recycling platforms will make CapitaLand more appealing as a real estate fund manager to institutional investors and sovereign wealth funds.

However, the acquisition consideration for ASB is not cheap. CapitaLand is acquiring ASB at a price-to-book ratio of 1.15x. But this is a necessary step that CapitaLand has to take in order to execute its CapitaLand 3.0 strategy. 

From an investor’s perspective, concerns on the valuation of the deal, CapitaLand’s worsening credit metrics, and execution of the integration plan are likely to affect CapitaLand’s short-term share price performance. Management needs to demonstrate the ability to extract quantifiable synergistic value from the acquisition in order to justify the premium paid but this can only happen over the longer term.

5. Full List of Korea’s Single-Sub Holdcos with Current Sigma % – Quick Thought on Amorepacific

• This is the complete list of Korea’s single-sub holdcos with current sigma %. Three local holdcos are currently standing out: Amorepacific Group (002790 KS): +231.84% of σ, Hanjin Kal Corp (180640 KS): -113.10% of σ and Youngone Holdings (009970 KS): +86.63% of σ.
• Amorepacific appears very tempting for stub trade. The Amore duo now has the widest price divergence on a 20D MA among Korea’s single-sub holdcos. But I would wait on this name. Locally, signals of improving fundamentals are being heard on the local cosmetics stocks. Holdco has traditionally been more susceptible to fundamentals changes. It is very possible that Amore duo leads to upwardly mean reversion in favor of Holdco in the short-term.