In today’s briefing:
- The Skew in the Tsuruha-Welcia-Aeon Combination
- Fast Retailing (9983 JP): More Capping-Led Selling in September (And Maybe More in March)
- LG Electronics India IPO: The Bear Case
- Chagee IPO: Is It Worth the Risks? Peer Comparison and Valuation Analysis.
- Takashimaya (8233 JP): Full-year FY02/25 flash update
- Keepers Holdings (KEEPR PM) Concall Highlights: Solid Q4 2024, Growth Unabated In FY25
- Associated British Foods: Initiation of Coverage- Automation & Labor Efficiency As A Pivotal Factor Driving Growth!
- Vector Inc (6058 JP): Full-year FY02/25 flash update
- Demae-Can Co., Ltd. (2484 JP): 1H FY08/25 flash update
- San Holdings (9628 JP) – Century-Strong Enterprise Focused on Growth
The Skew in the Tsuruha-Welcia-Aeon Combination
- Tsuruha Holdings (3391 JP), Welcia Holdings (3141 JP), and Aeon Co Ltd (8267 JP) announced their deal whereby Tsuruha merges with Welcia in December, and Aeon gains control of MERGECO.
- Orbis Investments – owner of 9.7% of shares out – complained. I think with good reason. Tsuruha is trading a little expensive to the ratio, but there’s 7.5mos to go.
- Interestingly, there’s real skew on this trade. It’s not overly complicated, and it is worthwhile thinking about it.
Fast Retailing (9983 JP): More Capping-Led Selling in September (And Maybe More in March)
- Fast Retailing (9983 JP)‘s weight in the Nikkei 225 (NKY INDEX) has increased to 10.81% which will lead to another reduction in the CPAF in September.
- Even after the reduction in CPAF and an increase in BayCurrent Consulting‘s PAF in September, there is a possibility of Fast Retailing being capped again in March 2026.
- The continued passive selling sets up interesting trading opportunities after periods of Fast Retailing (9983 JP) outperformance versus the other index constituents.
LG Electronics India IPO: The Bear Case
- LG Electronics India (123D IN)/LGEIL, a subsidiary of LG Electronics (066570 KS), aims to raise up to US$1.5 billion through a secondary offering (15% of outstanding shares).
- In LG Electronics India 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 bottom-quartile revenue growth, revenue decline in the largest product category, dividends to the parent far exceeding FCF and significant share overhang.
Chagee IPO: Is It Worth the Risks? Peer Comparison and Valuation Analysis.
- Chagee Holdings (CHA US) ‘s IPO valuation discount to its peers, including HK-listed tea-beverage players as well as US-listed China-based coffee-beverage player, suggest a strong potential upside on listing.
- US Investor concern over impact of tariffs and caution due to lingering memories of the Luckin Coffee scandal could translate to higher risk premium for the stock.
- Expect Chagee to trade at a discount to budget beverage peers like Mixue Group (2097 HK) given its limited room for network expansion within China and likely slower overseas growth.
Takashimaya (8233 JP): Full-year FY02/25 flash update
- Total operating revenue for FY02/25 was JPY1.03tn, up 8.5% YoY, with operating profit at JPY57.5bn, up 25.2%.
- Domestic and Overseas Department Stores, along with Finance and Contract and Design segments, drove YoY revenue and profit growth.
- FY02/26 forecast anticipates revenue and profit growth, led by Domestic and Overseas Department Store segments, despite some segment challenges.
Keepers Holdings (KEEPR PM) Concall Highlights: Solid Q4 2024, Growth Unabated In FY25
- The Keepers Holdings (KEEPR PM) reported Q4 2024 revenues/profits of 11.8%/23.5% YoY. Based on current trends, they provided a outlook for FY25.
- For FY24, the company reported 13.6%/21.3% YoY revenue/profit growth, led by a 14% YoY expansion in volumes. The company declared a 0.12 peso/share dividend (~4.7% dividend yield).
- Trading at 10.6x FY24 PE, net cash, >20% ROE, and a 4.7% dividend yield based on a 50% payout is a structural play on the premiumization of alcohol consumption.
Associated British Foods: Initiation of Coverage- Automation & Labor Efficiency As A Pivotal Factor Driving Growth!
- Associated British Foods (ABF) has reported a robust financial performance for the 52 weeks ending 14th September 2024, highlighted by substantial profit and cash flow improvements across its diversified portfolio.
- Operating profit witnessed a 38% increase, with adjusted earnings per share climbing by 39%.
- Cash generation rose to GBP 1.4 billion, marking an increase of GBP 1.1 billion from the previous year, which signifies positive operational and financial strides.
Vector Inc (6058 JP): Full-year FY02/25 flash update
- Revenue reached JPY59.3bn (+0.1% YoY), with operating profit at JPY8.0bn (+15.7% YoY), and net income at JPY4.2bn (-10.4% YoY).
- PR and Advertising segment saw significant profit increase due to reversal of doubtful accounts provisions, despite flat revenue.
- Direct Marketing business impacted by food safety concerns, resulting in lower revenue and profit, despite record high sales recovery.
Demae-Can Co., Ltd. (2484 JP): 1H FY08/25 flash update
- Revenue was JPY20.9bn, a decrease of 18.3% YoY, with operating and recurring losses both at JPY1.3bn.
- Gross merchandise value was JPY84.8bn, down 13.1% YoY, with 30.4mn orders and 4.92mn active users.
- GPM improved to 20.3% for 1H, with operating expenses totaling JPY12.3bn, reflecting cost optimization efforts.
San Holdings (9628 JP) – Century-Strong Enterprise Focused on Growth
- SAN HOLDINGS is the largest domestic pure-play End-of-Life service provider, with a network of 262 funeral halls spanning 15 prefectures in Japan.
- Despite the unmistakable demographic tailwind, intensifying competition has resulted in the company accelerating its strategic growth priorities with the landmark acquisition of peer Kizuna Holdings in September 2024.
- Approaching its centenary in FY3/32, the company plans to build a nationwide operation fuelled by M&A and to expand its service offering.
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