In today’s briefing:
- Fast Retailing (9983) Capping Decision This Week – Single or Double Dose?
- Lifestyle China (2136 HK): Expectations of a Deal Break with a Vote on 20 February
- India Food Delivery | Old Habits Die Easy
- China Consumption Weekly (27 Jan 2025): Alibaba, JD.com, Kuaishou, NIO, Honor, Apple
- Dada Nexus (DADA US): JD.com’s Light Non-Binding Offer at US$2 Per ADS
- Asian Dividend Gems: Cosco Capital
- Smithfield Foods, Inc. (SFD): Price Sensitivity Emerges in Another IPO
- Weekly Update (APTV, MRP, MEDXF)
- WH Group (288 HK) Is Stretched As Smithfield Mulls IPO Price Reduction
- The Beat Ideas: BCL Industries, An Ethanol Play
Fast Retailing (9983) Capping Decision This Week – Single or Double Dose?
- Unless Fast Retailing (9983) underperforms Nikkei 225 by 10% by Friday close, there will be a capping exercise at the next Nikkei 225 Rebalance at the end of March 2025.
- The evolution of tech stock movement in Japan in the next day or three is important to watch. There will be effects.
- The setup very near-term could be pretty interesting, and worth watching.
Lifestyle China (2136 HK): Expectations of a Deal Break with a Vote on 20 February
- Lifestyle China (2136 HK)’s IFA opines that Mr Thomas Lau’s HK$0.98 privatisation offer is fair and reasonable. The vote is on 20 February.
- The IFA analysis is flawed. The revised and final offer is light compared to precedent transactions, peer multiples and historical trading ranges.
- The high AGM minority participation rates remain a vote risk, mainly as retail seems firmly against the offer. The 14.0% gross spread is high but justified.
India Food Delivery | Old Habits Die Easy
- Gen Z consumers prioritize price over brand loyalty, affecting restaurateurs’ pricing strategies.
- Increasing platform dominance and discounting culture hinder profitability for restaurants in the competitive food delivery landscape.
- Food delivery companies are pivoting from mere consumer tech-enabled logistics businesses to data-driven market-dominant behemoths.
China Consumption Weekly (27 Jan 2025): Alibaba, JD.com, Kuaishou, NIO, Honor, Apple
- Consumers accused that Alibaba and JD.com took national consumption subsidies.
- Kuaishou’s new year sales GMV (Gross Merchandise Value) increased by 71%.
- Honor Smartphone CEO resigned largely due to the IPO plan.
Dada Nexus (DADA US): JD.com’s Light Non-Binding Offer at US$2 Per ADS
- Dada Nexus (DADA US) disclosed a non-binding proposal from JD.com Inc (ADR) (JD US) at US$2.00 per ADS, a 41.8% premium to the undisturbed price of US$1.41 (24 January).
- The offer is light compared to the IPO price (US$16.00), average sell-side price targets (US$2.19) and historical trading ranges.
- The shareholder vote is low-risk (two-thirds voting threshold), as JD.com represents 63.2% of the voting power. The key risk is the timing of a binding proposal.
Asian Dividend Gems: Cosco Capital
- Cosco Holdings’ stakes in Puregold Price Club and The Keepers Holding is worth US$1.1 billion, which is 176% higher than Cosco’s current market cap.
- Cosco Capital’s dividend yield and dividend payout have been increasing nicely in the past several years from 1.5% in 2021 to 3% in 2022 and 8.8% in 2023.
- We found Cosco Capital using Smartkarma’s Smartscore Screener. We used three criteria including market cap, dividend score of 4 or more, and total SmartScore of 4 or more.
Smithfield Foods, Inc. (SFD): Price Sensitivity Emerges in Another IPO
- Sources have stated that the deal is experiencing “pushback” from the buy-side on the price.
- Fresh on the mind of IPO investors is the underperforming energy deal, Venture Global (VG)
- Price sensitivity in the deal is a stark signal to exercise caution on this IPO at this time
Weekly Update (APTV, MRP, MEDXF)
- Aptiv PLC (APTV), an automotive technology supplier, announced on January 22, 2025, that it plans to split into two distinct companies.
- Aptiv will spin-off its electrical systems business.
- The RemainCo will concentrate on technological components, including sensor-to-cloud solutions and autonomous driving software.
WH Group (288 HK) Is Stretched As Smithfield Mulls IPO Price Reduction
- On the 21st January 2025, WH Group (288 HK), the world’s largest pork producer, announced Smithfield had made a public filing of the “Preliminary Prospectus” with the SEC.
- A US$23-US$27/share indicative price range backed out a possible market cap for Smithfield of US$9.0bn-US$10.6bn, at the high end of my estimate, and more than twice its 2013 privatisation value.
- Reportedly, WHG are now guiding that Smithfield is likely to be priced at $20/share. Expect WHG to sell off here.
The Beat Ideas: BCL Industries, An Ethanol Play
- BCL Industries (BCLIL IN) is pivoting from volatile edible oils to a robust grain-based ethanol portfolio, leveraging its local sourcing advantage for upcoming capacity expansions.
- Government incentives and rising domestic demand are fueling higher margins, making BCL’s dedicated distilleries and fungible capacities key drivers in India’s booming ethanol sector.
- Its reliable execution, targeted capacity expansions, and pivot away from low-margin oils emphasize BCL’s potential as a high-growth, stable margin player in a rapidly evolving industry.
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