In today’s briefing:
- Tsuruha (3391) – Welcia (3141) – Tsuruha Earnings In a Week – Still Good To Be Long The Ratio
- A/H Premium Tracker (To 14 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- CP ALL (CPALL TB) – Increasing Size and Diversity
- Merger Arb Mondays (17 Mar) – Seven & I, Tenma, Proto, OneConnect, Vesync, Tam Jai, Insignia
- Retail Media Can Help Pay for a ¥2 Trillion Buyback
- The TJX Companies: How Consumer Demographic Diversification Is Playing A Critical Role In Its Strategy!
- Home Depot’s Surprise Sales Rebound—But Is It Enough to Overcome a Tough 2025?
- Ping An Healthcare and Technology (1833 HK) – Updates on Performance Forecast and Valuation Outlook
- Light & Wonder Inc.: Expanding Gaming Business To Strengthen Market Reach & Capture Growth!
- Lowe’s Companies: Pro Business & Online Growth As A Strategic Growth Enabler!
Tsuruha (3391) – Welcia (3141) – Tsuruha Earnings In a Week – Still Good To Be Long The Ratio
- Tsuruha and Welcia are on the road to a merger, where Tsuruha takes over Welcia but Aeon ends up owning “more than 50% but less than 51%” of Tsuruha.
- The Price Ratio is now 4.24x. Trailing EPS ratios is >5. Forward EPS ratios are further above 5. BVPS ratio? Near 5. Welcia grows storecount. Tsuruha makes more money/store.
- Tsuruha changed its FY-end to match that of Welcia/Aeon so both will report earnings/guidance in just over 3 weeks. That will likely influence the ratio.
A/H Premium Tracker (To 14 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- AH Premia continue to fall. Spread curve torsion was a barbell this week. Narrow and wide spreads see Hs outperform. Middling spreads outperform less.
- To me, warning signs are flashing on spreads. They are at their narrowest in 5yrs and they are volatile, though volatility is coming down.
- Lots of spreads see the HA premium less than 15%. That is historically tight.
CP ALL (CPALL TB) – Increasing Size and Diversity
- A meeting with CP ALL (CPALL TB) management revealed some interesting new initiatives to drive growth as the company remains upbeat about its store expansion for 2025.
- The company is moving towards opening larger-sized stores, with more RTE and RTD offerings and some parking and food vendors outside, which will help diversify merchandise offerings..
- It is unclear what direction Seven & I’s restructuring will take, but looking through that, the company is trading on historically attractive valuations.
Merger Arb Mondays (17 Mar) – Seven & I, Tenma, Proto, OneConnect, Vesync, Tam Jai, Insignia
- 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: Tenma Corp (7958 JP), Seven & I Holdings (3382 JP), OneConnect Financial Technology (OCFT US), Soundwill Holdings (878 HK), Insignia Financial (IFL AU).
- Lowest spreads: Makino Milling Machine Co (6135 JP), Shibaura Electronics (6957 JP), Domain Holdings Australia (DHG AU), Proto Corp (4298 JP), PointsBet Holdings (PBH AU).
Retail Media Can Help Pay for a ¥2 Trillion Buyback
- Seven & I continues to seek shareholder approval for its own path, offering not just improved efficiency but a massive ¥2 trillion buyback albeit one over a long time frame.
- This is a lot, especially when the core Seven Eleven chain in Japan is still struggling to keep up with its peers on monthly growth rates.
- But this forgets retail media which is set to become a major new income stream for CVS and, judging by forecasts, would help pay for a chunk of that buyback.
The TJX Companies: How Consumer Demographic Diversification Is Playing A Critical Role In Its Strategy!
- The TJX Companies, Inc. reported robust financial performance in the fourth quarter of fiscal 2025, exceeding expectations in multiple areas.
- With net sales of $16.4 billion, which marks a 5% increase over last year’s adjusted figures, the company demonstrated consistent strength across all divisions.
- The driving factor was a 5% increase in consolidated comparable store sales, which stemmed from increased customer transactions.
Home Depot’s Surprise Sales Rebound—But Is It Enough to Overcome a Tough 2025?
- Home Depot’s latest financial results presented a mixed picture, with some encouraging signs of recovery despite a cautious outlook for the coming year.
- Total sales for fiscal 2024 rose 4.5% to $159.5 billion, though comparable sales for the year declined by 1.8%.
- However, fourth-quarter same-store sales showed improvement, rising 0.8%—breaking an eight-quarter streak of declines and exceeding analysts’ expectations of a 1.5% drop.
Ping An Healthcare and Technology (1833 HK) – Updates on Performance Forecast and Valuation Outlook
- PAGD’s 2024 performance beat expectations. The support of Ping An Group remains the key for PAGD to turning losses into profits. A breakthrough point is the Senior care services business.
- The CAGR of PAGD’s revenue could be 12%-15% from 2025 to 2027, and revenue in 2027 may reach RMB6.5-7 billion. The peak revenue scale could be just about RMB8 billion.
- Adjusted net profit could reach RMB250-300 million in 2025 and exceed RMB400 million in 2027.If based on P/S of 2-3x, revenue of RMB6.5-7 billion in 2027, valuation is RMB13-21 billion.
Light & Wonder Inc.: Expanding Gaming Business To Strengthen Market Reach & Capture Growth!
- Light & Wonder reported a solid performance in their fiscal year, demonstrating growth across multiple segments.
- The company’s strategic focus on sustainable growth has been underscored by their expansion and strengthening of product offerings, resulting in record revenues and profitability.
- The acquisition of Grover Gaming’s charitable gaming business represents a strategic entry into a high-barrier market with favorable competitive advantages.
Lowe’s Companies: Pro Business & Online Growth As A Strategic Growth Enabler!
- Lowe’s Companies demonstrated a mixed set of results during its fourth-quarter earnings call.
- Positively, the company reported sales of $18.6 billion and a slight increase in comparable sales of 0.2% for the quarter.
- Over the entire 2024 fiscal year, Lowe’s generated $83.7 billion in sales, with an adjusted operating margin of 12.3% and earnings per share of $11.99.
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