In this briefing:
- Workman Vs. Decathlon: The Upcoming Battle for Japan’s Sports Market
- Amorepacific Group and Corp Pair Trade
- StubWorld: CK Infra/Power Assets, Amorepacific, JCNC
- Mrs. Bectors Food Specialities Pre-IPO Quick Take – Sales for Its Main Segment Have Been Stagnant
- Navitas (NVT AU): A Bid Priced to Go with a Reasonable Chance of a Competing Bid
1. Workman Vs. Decathlon: The Upcoming Battle for Japan’s Sports Market
Decathlon is a category killer sans pareil and will finally open its first store in Japan in March. If Decathlon implements its store roll out well, the French sports retailer will cause a major disruption in Japan’s sports market.
Large domestic sports retailers like Xebio Holdings (8281 JP) and Alpen Co Ltd (3028 JP) will be gearing up to compete in some categories but are far behind in private label development and cost performance, and the major sports brands will have to accelerate their plans for retail stores while reviewing pricing (downwards). Sports firms like Mizuno (8022 JP), with relatively low perceived brand value, could face challenges in the newly polarised market that will emerge from Decathlon’s entry.
A major source of competition for Decathlon will come from a more unlikely retailer: the uniforms to outdoor apparel/gear firm, Workman (7564 JP). While still small, Workman is already manoeuvring to hinder Decathlon’s growth in Japan, and looks like having establishment backing to do so – and echoes the growth of Uniqlo after Gap entered the Japanese market in the 1990s and the rise and rise of Nitori (9843 JP) after IKEA’s launch in 2006.
Both Gap and IKEA have relatively small operations in Japan today compared to their early potential. Decathlon will need to expand rapidly if it is to gain sufficient share to stop Workman emerging with a clear lead in its market.
2. Amorepacific Group and Corp Pair Trade
This insight delves into make or break levels for a pair trade in being long Amorepacific Group (002790 KS) (APG) over Amorepacific Corp (090430 KS) (APC) with key hurdles/targets and floor support.
Curtis Lehnert puts forth the fundamental argument in TRADE IDEA: Amorepacific (002790 KS) Stub: A Beautiful Opportunity and we thought pivotal chart points would help round out this trade idea.
Holding floor support is vital for this trade to work. In absolute terms both APG and APC display similarly weak chart structures with risk of a final bout of weakness. APG displays a more depressed chart reading however.
3. 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%.
4. 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.
5. 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.
Navitas’ directors intend to unanimously recommend the revised proposal and have granted the BGH Consortium an exclusivity period. We believe that a binding proposal should materialise and there is also a reasonable chance of a superior proposal from a competing bidder.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
