In today’s briefing:
- Treasury Wine Estates (TWE AU): Passive Selling Adds to Tariff Woes
- Merger Arb Mondays (07 Apr) – Seven & I, Makino, HKBN, OneConnect, Dada, Insignia, Domain, Dropsuite
- Komeri (8218) Rare, Tariff-Proof Domestic Growth Idea at a Steep Discount
- Chagee Holdings (CHA US) IPO: The Bear Case
- HK-Listed Apparel & Footwear Screener: Tariff Drag On The Sector
- Goldlion Holdings (533 HK) Privatization – Updates on Valuation Outlook Based on 2024 Results
- Political Problems Are Preventing a Solution to the Problem of Declining Birthrates
Treasury Wine Estates (TWE AU): Passive Selling Adds to Tariff Woes
- Given its portfolio mix, Treasury Wine Estates (TWE AU) does not expect a material impact on its business from the blanket 10% tariff on all goods imported from Australia/New Zealand.
- However, there is a high probability that Treasury Wine Estates (TWE AU) will be deleted from a global index in May and that will lead to large selling from passives.
- There has been an increase in short interest and an increase in other positioning. Trading will be volatile but there could be a downward bias over the next few weeks.
Merger Arb Mondays (07 Apr) – Seven & I, Makino, HKBN, OneConnect, Dada, Insignia, Domain, Dropsuite
- We 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: Seven & I Holdings (3382 JP), Insignia Financial (IFL AU), ENN Energy (2688 HK), OneConnect Financial Technology (OCFT US), Smart Share Global (EM US), Soundwill Holdings (878 HK).
- Lowest spreads: Sinarmas Land (SML SP), Makino Milling Machine Co (6135 JP), Millennium & Copthorne Hotels Nz (MCK NZ), Shibaura Electronics (6957 JP), Tonami Holdings (9070 JP).
Komeri (8218) Rare, Tariff-Proof Domestic Growth Idea at a Steep Discount
- Komeri plans to expand their addressable market by 75% and to double their current market share to 21%.
- Same store sales of the company’s Pro Stores rose an average of more than 7% in the past 8 quarters, and selling area is expanding at more than 25% annually.
- Yet Komeri trades at just 11x earnings, compared to about 16x for Topix and 18x for the median retail stock.
Chagee Holdings (CHA US) IPO: The Bear Case
- Chagee Holdings (CHA US), a leading premium tea drinks brand, is seeking to raise US$400-500 million through a Nasdaq IPO.
- In Chagee Holdings (CHA US) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on unsustainable growth rates, pressure on KPIs, signs of margin pressure, increasing S&M expenses and weakening forward growth indicators.
HK-Listed Apparel & Footwear Screener: Tariff Drag On The Sector
- Tariff introductions in Vietnam were 46%, PRC 34%, Bangladesh 37%, Indonesia 32%, etc, have rocked the textile complex, and share prices have reacted negatively.
- The companies with the maximum revenue exposure to the US market are Stella International (1836 HK), with 47%, Crystal International (2232 HK), with 38%, and Lever Style (1346 HK), with 58%.
- We anticipate that the negative sentiment will continue to hinder the sector until a reasonable negotiation occurs. In the meantime, there are no beneficiaries in this trade war.
Goldlion Holdings (533 HK) Privatization – Updates on Valuation Outlook Based on 2024 Results
- 2024 results is significantly below expectations. While revenue had negative growth, SG&A expenses remain high.Coupled with net fair value losses after tax on investment properties, we saw ugly net profit.
- As consumer confidence won’t improve in short term, coupled with competition/corporate strategy lag, we adjusted next three-year growth based on 2024 results. This may increase the success rate of privatization.
- Reasonable valuation of Goldlion is 9-14x P/E due to short-term headwinds.If performance picks up due to effective expansion in online channels or popular products launched, P/E may improve to 12-15x.
Political Problems Are Preventing a Solution to the Problem of Declining Birthrates
- Eliminating income limits on child allowances seems to be the right policy because the wealthier families have more children. However, it lacks viewpoints toward the growing number of unmarried people.
- It seems effective to solve the problem of the growing income disparity and the child-rearing/housework being disproportionately placed on women, and taking appropriate measures for those who desire diverse lifestyles.
- Policies don’t reach the ever-increasing number of singles. Rather than solutions to declining birthrate, priority is given to policies that distribute money to those who are more certain to vote.
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