Daily Brief Consumer: Mandom Corp, Pacific Industrial, Mandarin Oriental International, Honda Motor, Alibaba, Toho Co Ltd, TSE Tokyo Price Index TOPIX, The Keepers Holdings and more

• I summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads: Mayne Pharma (MYX AU), Smart Share Global (EM US), AUB Group Limited (AUB AU), Dongfeng Motor (489 HK), ENN Energy (2688 HK), Digital Holdings Inc (2389 JP).
• Lowest spreads: Bright Smart Securities (1428 HK), Mandom Corp (4917 JP), Seven West Media (SWM AU), Pacific Industrial (7250 JP), Toyota Industries (6201 JP), Jinke Smart Services (9666 HK). 

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments: CNGR Advanced Material (2579 HK) prices at the low end of the range, Klook (KLK US) seeks to raise US$400 million.
• Event-Driven developments: Pacific Industrial (7250 JP), Forum Engineering Inc (7088 JP), Fujitec Co Ltd (6406 JP), Itochu Shokuhin (2692 JP), Maruwn Corp (9067 JP), Star Micronics (7718 JP). 

• The vote on Mandarin Oriental International (MAND SP)’s privatisation offer from Jardine Matheson Holdings (JM SP) (US$2.75 cash + US$0.60 special dividend) is on 8 December. 
• While the OCB sale completion (a scheme condition) carries timing risk, the Board continues to expect to complete the OCB sale by 31 December.
• The offer is conceivably light as Jardine’s dividends from the OCB sale comfortably cover the scheme cost. However, the offer remains reasonable on several fronts, and the vote is low-risk.  

• Context: This Insight follows up on previously highlighted relative value opportunities, using a statistical methodology based on mean-reversion to identify opportunities in paired securities.
• Highlights: Currently ten pair trade opportunities across four markets and four sectors persist.
• Why read: Statistical analysis offers a unique perspective on relative value. Gain insights into actionable statistical pair trade opportunities and monitor performance of previously highlighted pairs.

• Concurrent with the sale of 13 floors of OCB to Alibaba, Jardine Matheson (JM SP) is seeking to privatise Mandarin Oriental (MAND SP) at US$3.35/share by way of a Scheme.
• The Offer Price is a 52.3% premium to undisturbed, and a 53.7% premium to NAV. Clean deal. And MAND has consistently traded tight to terms. 
• The Scheme Doc is now out for MAND. The Court Meeting is the 8th December. As with Jardine Strategic Holdings (JS SP)‘s 2021 takeover, there is no independent assessment report. 

• Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
• On the IPO front, all markets were in full throttle mode going into the year end.
• On the placements front, there were a number of deals across the region.

• Leading Market Position in a Resilient Sector: Toho is a dominant player in Japan’s food service distribution industry, a sector characterized by stable, albeit low-margin, demand. Its comprehensive business model, encompassing distribution, cash & carry, and food solutions, provides a significant competitive advantage.
• Strategic Growth Initiatives Driving Profitability: The company’s mid-term management plan, ‘SHIFT-UP 2027,’ focuses on key growth areas including expansion in the Greater Tokyo Area, increasing the share of higher-margin private brand (PB) products, and pursuing strategic M&A, which are expected to enhance profitability.
• Attractive Shareholder Returns and Valuation: Toho demonstrates a strong commitment to shareholder returns, targeting a 40% dividend payout ratio. The stock trades at a compelling valuation relative to its peers, supported by robust growth in earnings and dividends over the past three years.

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• Dominant integrated entertainment enterprise in Japan, underpinned by a powerful intellectual property (IP) portfolio, most notably the globally recognized ‘Godzilla’ franchise.
• Clearly defined growth strategy, “TOHO VISION 2032,”focuses on strengthening its four core pillars (Film, Theatre, Real Estate, and Anime), with a significant emphasis on international expansion and digital innovation.
• Stable financial performance is augmented by the lucrative and less volatile Real Estate division, providing a solid foundation for investments in the inherently cyclical content creation business.

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• Since TSE’s request, many companies have introduced share buybacks as a measure, and as a result of investors demanding accountability for how these shares are used, share cancellations have increased.
• Companies that frequently cancel treasury stock demonstrate superior capital profitability. Companies with high capital profitability also exhibit strong scores in growth strategy, cash holdings, dividend policy, and treasury stock cancellation.
• More companies are expected to consider cash allocation within overall goal of enhancing corporate value, encompassing growth strategy, cash holding policy, and dividend policy, in order to improve capital profitability.

• The Keepers Holdings (KEEPR PM) delivered a softer 3QFY25, with volume growth decelerating to 4% from ~22% in 1HFY25. Demand was impacted by calamities (earthquakes, typhoons) affecting on-premise consumption. 
• Q4 began with a strong October rebound, as Halloween nearly doubled sales. While it’s early in the quarter, management remains bullish about the demand trajectory for the upcoming celebratory season.
• The recent graft scandal investigations and weak demand-related pullback have brought the stock to an attractive 8.7x PE for FY25e, with ROCEs >20%, a div yield >5% and net cash.