Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Tsi Holdings, Workman Co Ltd, Sinotrans, Onward Holdings, Sanyo Shokai, Keymed Biosciences Inc and more

In today’s briefing:

  • Japan Apparel Diversification: TSI Tries New Markets
  • Workman Wins as Decathlon Closes Japan Stores
  • Sinotrans (598 HK): How Much Value Can Be Unlocked from Its First REIT?
  • Japan Apparel Reset: Onward Looks to E-Commerce for Growth
  • Sanyo Shokai: More Unfulfilled Promises
  • Keymed Biosciences (2162.HK) – The Potential for Doubling Valuation and the Corresponding Risks

Japan Apparel Diversification: TSI Tries New Markets

By Michael Causton

  • TSI seems to be following a strategy of diversify or die. It is using its vast cash resources to invest in and build new businesses with some success.
  • But it also has a couple of compelling brands in strong growth sectors, particularly in golf, providing growth of nearly 50% last year in one case.
  • This isn’t enough to sustain overall growth however and more needs to be done to get on to a more secure footing.

Workman Wins as Decathlon Closes Japan Stores

By Michael Causton

  • Decathlon entered the Japanese retail market in 2017 with the opportunity to take a significant share of a growing sports and athleisure sector.
  • But the French firm is already retreating: it will close its two stores and focus on online and wholesaling. 
  • The market is poorer for but it does leave the market wide open for Workman – which built a consumer chain to combat Decathlon – to become dominant.

Sinotrans (598 HK): How Much Value Can Be Unlocked from Its First REIT?

By Osbert Tang, CFA

  • Sinotrans (598 HK) has confirmed its plan to issue infrastructure REIT using six warehouse logistics assets as underlying assets, and they represents 7.6% of its total warehouse area.
  • The proposed issuance may boost its value by HK$0.16/share, or 7.3% of share price. Should all 4m sq.m. of warehouse assets are securitised, this may nearly double the stock’s price.
  • Since Jun, Sinotrans has repurchased 14m H-shares, suggesting positive view on outlook. There will be more to come, and as the shares will be cancelled, EPS will be enhanced. 

Japan Apparel Reset: Onward Looks to E-Commerce for Growth

By Michael Causton

  • All of Japan’s big apparel firms have radically restructured but there is a lot more work to be done.
  • Onward has done a great job of transitioning to e-commerce but this is not enough to sustain the business and provide new sources of growth.
  • Trading will improve but slowly and more dynamism is needed in brand development and marketing.

Sanyo Shokai: More Unfulfilled Promises

By Michael Causton

  • Sanyo Shokai has posted losses in every year since FY2016 despite promising a return to profit on an annual basis too.
  • Its latest 3-year plan is typically optimistic but, equally typically, lacks real substance as to just where this growth will come from.
  • Of all Japan’s larger apparel firms, Sanyo Shokai has the least promising outlook and that is saying something.

Keymed Biosciences (2162.HK) – The Potential for Doubling Valuation and the Corresponding Risks

By Xinyao (Criss) Wang

  • Due to doctors’ poor diagnosis/limited affordability, commercialization prospects of China autoimmune disease market could be much lower than expected. Internationalization is inevitable, but Keymed is lack of cash for MRCT.
  • For CM310 and CM326, their total sales in China could be less than RMB2 billion. For CMG901, it is hard to say if Claudin 18.2 (ADC) would finally be successful.
  • As long as Keymed can successfully develop either CM310 or CM326 (key premise), even temporarily only commercializing in the domestic market, the Company has the potential to double in valuation.

Related tickers: Tsi Holdings (3608.T), Workman Co Ltd (7564.T), Sinotrans (0598.HK), Onward Holdings (8016.T), Sanyo Shokai (8011.T)

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