In today’s briefing:
- Giordano (709 HK): Cheng Family Offer Or Cashing Out?
- Kakao Pay Block Sale: It Seems Alibaba Is Liquidating Investments to Fund Loss Making Ventures
- WM Motor Pre-IPO Tearsheet
- Lotte Chilsung Beverage: Block Deal Sale by Hotel Lotte
- Uniti Group: 15th July To Vote On Morrison/Brookfield’s Scheme
- Uniti’s Scheme Meeting on 15 July, IE’s Opinion
- Tuhu Car Pre-IPO – The Negatives – Remains Unprofitable and Have Been Racking up Its Payables
- Kakao Pay: Comp Valuation Analysis Suggests Additional 40% Downside Risk
- TMT Quick Hits: INTC/AMD, NFLX/ROKU
- Diamond Hill Long-Short Fund 2022 Market Commentary
Giordano (709 HK): Cheng Family Offer Or Cashing Out?
- Giordano International (709 HK) was suspended this morning pursuant to Hong Kong’s Takeovers Code.
- The Cheng Yu Tung family is the largest shareholder with 24.37%, as it has been since December 2015. A possible Offer ahead of a (potentially) improving retail outlook?
- And just for some (possible) added excitement, David Webb holds 5.1%.
Kakao Pay Block Sale: It Seems Alibaba Is Liquidating Investments to Fund Loss Making Ventures
- Ant Financial Services Group (6688 HK) is declaring a dividend at a time when regulators have forced the company to increase its capital base.
- Moreover, Ant’s financial performance doesn’t support a dividend payment of RMB 11.8bn in the short term.
- We think the sale of 5.0m Kakao Pay (377300 KS) shares today was forced upon Ant through the lack of usual funding sources at Alibaba Group (9988 HK)’s disposal.
WM Motor Pre-IPO Tearsheet
- WM Motor Technology Co Ltd (WMT CH) is looking to raise about US$1bn in its upcoming Hong Kong IPO. The deal will be run by Haitong International, CMBI and BOCI.
- WM Motor is a smart EV player in China. As of the latest practicable date, it had a total of four main EV models (with various versions of each model).
- As per the CIC, it was the first EV automaker in China to have established its own manufacturing facilities from the outset.
Lotte Chilsung Beverage: Block Deal Sale by Hotel Lotte
- After the market close today, Lotte Chilsung Beverage Co announced that there will be a block deal sale of the company (200,000 shares), representing 2.15% of total outstanding shares.
- The discount rate range is 185,250 won to 189,150 won, which are 3% to 5% discount from the closing price today (195,000 won).
- We have a Positive view on Lotte Chilsung Beverage and we would take this deal.
Uniti Group: 15th July To Vote On Morrison/Brookfield’s Scheme
- The Scheme Booklet for Morrison/Brookfield/CSC’s Offer for Uniti Group Ltd (UWL AU) has now been despatched. The Scheme Meeting will be held on the 15th July.
- The Independent Expert considers the terms to be fair and reasonable with a fair value range between A$4.65-A$5.20 compared to the Offer price of $5.00/share.
- Trading tight to terms, as it has done since parties entered into the Scheme Implementation Deed.
Uniti’s Scheme Meeting on 15 July, IE’s Opinion
- Unsurprisingly, the independent expert (IE) considers the consortium’s offer of A$5.00 per share to be fair and reasonable. We think that IE’s valuation approach is sound.
- The key condition is approval from Uniti Group Ltd (UWL AU) shareholders and regulatory authorities (FIRB). The scheme meeting is scheduled for 9:30 am on 15 July.
- We continue to think that offer is attractive. At the last close price and for the 4 August implementation date, the gross and annualised spread is 0.8% and 5.1%, respectively.
Tuhu Car Pre-IPO – The Negatives – Remains Unprofitable and Have Been Racking up Its Payables
- Tuhu Car (2007986D HK) is looking to raise up to US$400m in its upcoming Hong Kong IPO.
- Tuhu is an integrated online and offline platform for automotive services in China.
- The firm remains loss making with no signs of being profitable in the near/medium term given its aggressive growth strategy.
Kakao Pay: Comp Valuation Analysis Suggests Additional 40% Downside Risk
- Our base case valuation of Kakao Pay is market cap of 7.1 trillion won or 53,767 won per share, which represents an additional 40% downside risk from current levels.
- Our base case valuation is based on 5x EV/Sales multiple and applying this to the consensus estimated sales of 898 billion won in 2023.
- The fact that the share price ended 15.6% lower (much bigger than block deal discount range of 8.5% to 11.8%) suggests a lower probability of an MSCI Korea index inclusion.
TMT Quick Hits: INTC/AMD, NFLX/ROKU
- Intel warned that conditions outlined in 1Q22 have worsened, key to see what AMD says tomorrow.
- Netflix – Roku rumor doesn’t make much sense, we think its more likely Roku cut off insider selling because it is looking to acquire Starz.
- Netflix churn is rising among longtime customers – going to ad-supported Peacock and Paramount. We think another guide down is coming in 2Q22.
Diamond Hill Long-Short Fund 2022 Market Commentary
- Diamond Hill invests on behalf of clients through a shared commitment to its valuation-driven investment principles, long-term perspective, capacity discipline and client alignment.
- The Diamond Hill Long-Short Fund’s returns were just about flat—slightly positive— in Q1.
- After a strong rebound in 2021, global GDP growth is expected to moderate in 2022.
- From current levels, equity market returns over the next five years are likely to be below historical averages.
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