In today’s briefing:
- Merger Arb Mondays (11 Jul) – Link Admin, Ramsay Health, Giordano, VNET, DTAC/True, Hwa Hong
- KOSPI200 Dec Index Rebalance Preview: Stocks Nearing the Inclusion Zone
- FEMSA/Valora Holding: Fair Offer and Possible Counterbid
- Mahindra & Mahindra – Equity Infusion at a ‘Too Good’ to Be True Valuation
- Suprajit Engineering – Replicating Indian Success on the Global Platform
Merger Arb Mondays (11 Jul) – Link Admin, Ramsay Health, Giordano, VNET, DTAC/True, Hwa Hong
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- The highest spreads are 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Link Administration (LNK AU), Australian Unity Office Fund (AOF AU).
- The lowest gross spreads are Hwa Hong Corp (HWAH SP), Excelpoint Technology (EXLP SP), Uniti Group Ltd (UWL AU), Giordano International (709 HK), MyDeal.com.au Ltd (MYD AU).
KOSPI200 Dec Index Rebalance Preview: Stocks Nearing the Inclusion Zone
- A third of the way through the review period, we see one potential change. There are four stocks that are close to inclusion zone and could lead to more changes.
- Currently, Miwon Specialty Chemical Co (268280 KS) is an add while Hyundai Home Shopping Network (057050 KS) is a delete.
- Samyang Foods (003230 KS), Lotte Confectionery (280360 KS), Unid Co Ltd (014830 KS) and Miwon Commercial (002840 KS) are close adds currently.
FEMSA/Valora Holding: Fair Offer and Possible Counterbid
- Valora has agreed to a CHF 260/share cash offer (52% premium, 7.6x EV/Fwd EBITDA, 24.7x Fwd P/E) from FEMSA, which intends to use it as a platform for European expansion.
- I consider the offer as fair (my DCF valuation of Valora is CHF 252.2/share, WACC 8.5%, 1.7% implied perpetuity growth rate).
- Valora should benefit from FEMSA’s know-how and added scale. A counterbid could be possible from the likes of Migros and Coop.
Mahindra & Mahindra – Equity Infusion at a ‘Too Good’ to Be True Valuation
- Demand trend and outlook: M&M is seeing strong demand for its products and expects this growth momentum to continue, backed by a robust order book (~170k).
- It has launched the new Scorpio N in June’22, which is further expected to propel overall bookings.
- Furthermore, we expect tractor volume to grow at low single digits in FY23, driven by the good monsoon season and higher rural incomes.
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Suprajit Engineering – Replicating Indian Success on the Global Platform
- Exports to drive growth ahead of industry in Automotive Cables business: SEL is the market leader in Automotive Cables with a ~75% market share in 2W OEMs (48% of segment revenue) and ~32% in 4W OEMs (18% of segment revenue).
- While we believe that in 2W and 4W OEMs, the company will grow in line with industry growth, the next leg of outperformance will be led by pick-up in exports.
- Exports contribute ~18% to the Auto Cable revenue.
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.
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