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In today’s briefing:
- Furukawa Battery (6937) – Ugly Process in Virtual Take-Under Take-Private
- Furukawa Battery (6937 JP): Long-Dated Pre-Conditional Offer at JPY1,400
- Sun Corporation (6736 JP): The Uphill Struggle for True Wind’s Revised Partial Offer
- The Beat Ideas: Garware Technical Fibre- A Niche Technical Textile Player
- Midea Group (000333 CH): CSRC Approval ✓; IPO Size Will Depend on H-Share Discount
- Narrative and Numbers | Trent Ltd (TRENT IN) | FY24
- Prosus (PRX-NA): Profitable Growth, Elevated Discount
- What Is Needed for More Engagement to Be Effective Is to Reduce Policy Shareholdings
- Hyundai Motor India Pre-IPO – Thoughts on Valuation
- Leon’S Furniture Ltd (LNF.) – Tuesday, Apr 23, 2024
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Furukawa Battery (6937) – Ugly Process in Virtual Take-Under Take-Private
- Today after the close, Advantage Partners announced the intention to launch a TOB to take over Furukawa Battery (6937 JP) at ¥1,400 – a 26% premium to last.
- This will require substantial time to obtain regulatory and foreign investment clearances so it is anticipated the Tender Offer will be launched at end-March 2025. I expect that is conservative.
- The price paid to minorities is a premium. But the price paid by the buyer is actually a takeunder. And it gets worse from there.
Furukawa Battery (6937 JP): Long-Dated Pre-Conditional Offer at JPY1,400
- Furukawa Battery (6937 JP) recommended a pre-conditional tender offer from Advantage Partners, Tokyo Century Corp (8439 JP) and Furukawa Electric (5801 JP) consortium at JPY1,400, 22.6% premium to the undisturbed price.
- The precondition is approval under the competition laws of Japan and Thailand. The offer is long-dated and anticipated to commence in March 2025.
- While not a knockout bid, the required minority acceptance rate is not onerous. A long-dated offer presents a free option on a bump due to earnings upside or a counteroffer.
Sun Corporation (6736 JP): The Uphill Struggle for True Wind’s Revised Partial Offer
- True Wind has increased its partial offer for Sun Corp (6736 JP) by 8.0% to JPY4,750 and lowered the minimum number of shares to be purchased from 3.8 to 3.3m.
- True Wind’s offer has inadvertently spotlighted the valuation disparity vs the Cellebrite DI (CLBT US) stake, resulting in the shares trading through terms.
- True Wind’s revised offer will struggle to succeed as the 8% price uplift is materially lower than the 19% value increase in the Cellebrite stake (since the offer announcement).
The Beat Ideas: Garware Technical Fibre- A Niche Technical Textile Player
- Garware Technical Fibres (GTFL IN) focuses on value-added products and has increased R&D investment significantly, with substantial growth in sports nets and geo-synthetics.
- The company’s strong export market presence, high-margin profile, and diversification will improve the margins in the future.
- With refocus on the domestic market and growing demand for value-added products, Garware Technical Fibres (GTFL IN) is poised for significant growth with capex coming online.
Midea Group (000333 CH): CSRC Approval ✓; IPO Size Will Depend on H-Share Discount
- The CSRC has approved Midea Group Co Ltd A (000333 CH)‘s application to issue H-shares to be listed on the HKEX (388 HK).
- Under the approval, Midea Group Co Ltd A (000333 CH) can issue up to 650.85m shares. Depending on the H-share discount, that could raise up to HK$43.6bn (US$5.6bn).
- The IPO is likely to be smaller and will depend on market conditions and the discount demanded on the H-shares. That in turn will determine index inclusion for the H-shares.
Narrative and Numbers | Trent Ltd (TRENT IN) | FY24
- Trent Ltd (TRENT IN) is a leading retail company in India known for its diverse range of fashion and lifestyle brands like Westside and Zudio.
- With its own labels, operating efficiencies, and leverage at work, Trent has been able to expand its margins substantially.
- We anticipate the strong operational performance to continue. We believe it will take a couple of years for peers to catch up to Trent’s execution prowess.
Prosus (PRX-NA): Profitable Growth, Elevated Discount
- The removal of their cross-holding structure has had a negligible effect on the respective discounts to NAV for Prosus NV (PRX NA) and Naspers (NPN SJ).
- We have seen a remarkable turnaround in Prosus’s operating performance during FY2024 and the market will focus on whether the new CEO can achieve his ambitions for “profitable growth”.
- The open-ended share repurchase program will continue as long as the discount remains “elevated”.
What Is Needed for More Engagement to Be Effective Is to Reduce Policy Shareholdings
- Few companies file their annual securities reports prior to AGM, and since they are filed 1-2 days prior to AGM, there’s insufficient time for a thorough review of useful information.
- Profitable companies that gain the support of overseas investors further increase their return on capital through engagement, and the gap between them and those that don’t will continue to widen.
- Since reducing policy shareholdings will reduce the percentage of voting rights that unconditionally favor company proposals, engagement will be more effective and speed up the process of management improvement.
Hyundai Motor India Pre-IPO – Thoughts on Valuation
- Hyundai Motor (005385 KS) is looking to raise around US$3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
- HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
- In our previous notes, we have looked at the company’s past performance and undertaken a peer comparison. In this note, we talk about valuations.
Leon’S Furniture Ltd (LNF.) – Tuesday, Apr 23, 2024
- Leon’s is a Canadian retailer of furniture and appliances that is majority-owned by the Leon’s family.
- The company has a history of delivering high returns on net tangible capital and compounding earnings per share at a steady rate.
- Leon’s holds a significant amount of undervalued real estate assets on their books, and has expressed intentions to monetize these assets through sale or development to potentially create value for the company.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.