In today’s briefing:
- 7&I (3382) – In Limbo, Dipping, But Stories Coming Together
- EQD | Toyota (7203 JP // TM US) – Option Opportunities Amid Tariff Tension
- Fosun Tourism (1992 HK)’s Scheme Buyback Vote On The 4th March
- Pre-IPO Guming Holdings – Thoughts on Valuation
- ECM Weekly (10th Feb 2025) – Haitian, Guming, LG CNS, Dr Agarwal, Ola, Brainbees, Kaynes, Whirlpool
- Tam Jai Intl (2217 HK): Is It Privatisation or Takeover?
- Yum China (9987 HK): 2025 Outlook. Modest Growth and Margin Upside Amid Sector Headwinds
- EQD | JB Hi-Fi (JBH AU) Faces Volatile Trading After Earnings Announcement
- Softcare Pre-IPO Tearsheet
- Geo Holdings (2681 JP): Q3 FY03/25 flash update
7&I (3382) – In Limbo, Dipping, But Stories Coming Together
- In the past month we have seen Seven & I Holdings (3382 JP) earnings, confirmation of the York Holdings timeline, stories about Apollo, KKR, and CP Group providing MBO financing.
- We’ve also seen Itochu confirm the financing request from the Ito family, and two American banks tapped to provide LBO financing.
- York Holdings itself gets created this month, and a buyer decided “in spring” with a Group Buyer/Outcome possibly decided by the May AGM. Looks skewed to me.
EQD | Toyota (7203 JP // TM US) – Option Opportunities Amid Tariff Tension
- Japanese Prime Minister Shigeru Ishiba’s meeting with US President Trump shines the spotlight on potential US tariffs on Japanese cars. Toyota Motor’s (7203 JP) high implied volatility expresses elevated risk.
- Risk analysis suggests a range of option strategies. Implementation is challenging due to low liquidity in the Japanese market.
- Option liquidity is higher in the US traded Toyota Motor Corp Spon ADR (TM US) which is the preferred route of implementation.
Fosun Tourism (1992 HK)’s Scheme Buyback Vote On The 4th March
- On the 10th December 2024, Fosun Tourism (1992 HK) announced a Scheme buyback, with a Cancellation Price of $7.80/share (not declared final), a chunky 95% premium to undisturbed.
- Assuming the Scheme gets up, Fosun International (656 HK) and concert parties would hold 100% in Fosun Tourism.
- The Scheme Doc is now out, with a Court Meeting on the 4th March, and expected settlement on the 26th March. The IFA (Altus Capital) says “fair and reasonable”.
Pre-IPO Guming Holdings – Thoughts on Valuation
- If based on the market value of HK$20.246 billion to HK$23.185 billion in this IPO, a single store market value is about HK$2-2.4 million, higher than that of Baicha Baidao.
- Our forecast of 2024 net profit is RMB1.4 billion. Based on IPO price range of HK$8.68-9.94 per share, P/E is about 13.5-15.5x. There is still some upside room for valuation.
- Investors may need more “safety margins” on valuation due to the pressure of performance growth after IPO.The higher the IPO price, the greater the risk of future valuation downward revisions.
ECM Weekly (10th Feb 2025) – Haitian, Guming, LG CNS, Dr Agarwal, Ola, Brainbees, Kaynes, Whirlpool
- 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, neither of the two listings performed last week, while more are lining up to list across the region.
- On the placements front, given the ongoing earnings season there weren’t any deals. We did look at lockups and other possible upcoming deals.
Tam Jai Intl (2217 HK): Is It Privatisation or Takeover?
- Tam Jai Intl (2217 HK)‘s suspension has led to speculation about a privatisation or takeover. Its huge net cash, equal to 115% of market capitalisation, makes it appealing.
- Its controlling shareholder Toridoll Holding Limited owns a 74.61% stake and there is no shareholder with more than a 5% interest. This makes a deal seemingly simple.
- Assuming priced at the average P/B of 1.63x, this means HK$1.90, or 110% premium to the latest close, which is costly to the major shareholder.
Yum China (9987 HK): 2025 Outlook. Modest Growth and Margin Upside Amid Sector Headwinds
- Yum China Holdings (9987 HK) posted robust year-over-year operating profit growth in 4Q2024 on the back of low single digit sales increase and operating efficiencies.
- Despite significant sector headwinds, Yum China has managed to outperform peers and grow ahead of sector in 2024 by swiftly adapting to shifting consumer preferences.
- Yum China’s value-for-money QSR model with mid-tier pricing amidst tough sector outlook implies limited margin upside, a likely single-digit sales growth outlook, and a modest dividend yield for 2025.
EQD | JB Hi-Fi (JBH AU) Faces Volatile Trading After Earnings Announcement
- JB Hi-Fi Ltd (JBH AU) announced HY 2025 results this morning. Price increases 5.5% in early trading but gains were lost by noon.
- Sales Up 9.8% to A$ 5.67m; EPS up 8.0% to A$ 2.611; interim dividend up A$ 0.12 to A$ 1.70. Results are in-line/slight beat.
- Volatile trading can make for opportunities. Investors can speculate on a positive Post Announcement Earnings Drift (PEAD) or consider option strategies, as implied volatility remains elevated.
Softcare Pre-IPO Tearsheet
- Softcare (SOFT HK) is looking to raise at least US$300m in its upcoming Hong Kong IPO. The deal will be run by CICC, CITIC and GF Securities.
- SC is principally engaged in the development, manufacturing and sales of baby and feminine hygiene products, focusing on the fast-growing emerging markets, including Africa, Latin America and Central Asia.
- As of September 30, 2024, SC had 18 sales branches in 12 countries, and an extensive sales network across over 2,500 wholesalers, distributors, supermarkets, and other retailers in total.
Geo Holdings (2681 JP): Q3 FY03/25 flash update
- Revenue decreased by 3.4% YoY to JPY316.2bn, with a decline in new game console demand impacting sales.
- Gross profit increased by 7.0% YoY to JPY127.3bn, while operating profit margin fell to 3.1% due to higher SG&A expenses.
- Sales of secondhand goods rose 12.5% YoY to JPY140.4bn, driven by increased secondhand market demand and store expansions.
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