In this briefing:
- PT Indofoods’ Voluntary Offer for 74% Held Sub IFAR
- StubWorld: Amorepacific Is “Cheap”, Again; Kingboard Cleans House
- PLANB: Moving Forward with VGI, the Outdoor Media Tycoon
- China Meidong (1268 HK): +59% YTD After Strong FY18 Results and Positive Outlook; Now Fairly Valued
- Wynn’s Whale Of A Deal For Crown Off the Hook
1. PT Indofoods’ Voluntary Offer for 74% Held Sub IFAR
Indofood Agri Resources (IFAR SP) has announced PT Indofood Sukses Makmur Tbk, its controlling shareholder with 74.52%, has made a voluntary conditional cash offer of $0.28/share for all IFAR shares it does not own. The offer price, which is a 7.7% premium to last close, is not final. Any dividend declared will reduce the consideration under the proposal.
The Offer is conditional on PT Indofood holding 90% of shares out at the close of the offer. There is no other condition.
There is no requirement for a downstream offer for Salim Ivomas Pratama (SIMP IJ), 73.46% held by IFAR.
IFAR’s share price has increased 27% this month – evidently, there was some news leakage ahead of the announcement – positioning its discount to NAV at ~50%, around its narrowest inside a year, but on a look-through basis, the Offer price backs out just 0.4x P/B.
The Offer price represents a premium of approximately 21.5%, 26.3%, 29.0% and 23.1% over the VWAP for 1M, 3M, 6M and 12M. IFAR traded above the Offer price as recent as May last year. One wonders if the consideration is sufficient to achieve the 90% condition.
2. StubWorld: Amorepacific Is “Cheap”, Again; Kingboard Cleans House
This week in StubWorld …
- Amorepacific Group (002790 KS)‘s discount to NAV veers towards its one-year wide level, however newsflow, liquidity and financial performance side with Amorepacific Corp (090430 KS).
- Kingboard Laminates Holdings (1888 HK)‘s more reasonable tilt for Kingboard Copper Foil Hldgs (KCF SP) has minimal bearing on the group, but one wonders when Elec & Eltek Int (ELEC SP) will similarly be taken out.
Preceding my comments on Amorepacific, Kingboard and other stubs, are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.
3. PLANB: Moving Forward with VGI, the Outdoor Media Tycoon
We maintain PLANB with a BUY rating with the target price of Bt8.30 derived from 1.5xPEG’2019E of Thai consumer discretionary sector, which implies to 36xPE’19E.
The story:
- Collaboration among the leaders in OOH industry
- Revising down EPS in 2019-21E by 9-11% due to dilution effect
Risks: Obstacles for renewing concession contracts with state-owned enterprises along with falling consumer spending and a share-price dilution effect on the back of then generally mandated raise in capital.
4. China Meidong (1268 HK): +59% YTD After Strong FY18 Results and Positive Outlook; Now Fairly Valued
China Meidong Auto (1268 HK) has been a great success story for its investors in the last two years. I first wrote about the company in May 2017 when shares were trading at 1.53 HKD. This week shares traded over 4.7 HKD. While the share price has gyrated wildly the past 24 months the underlying earnings of the company have been increasing steadily and shareholders have been rewarded with solid dividends.
FY18 results were released last month which showed strong growth in revenues (+44%) and net profits (+31%). With the importance of Lexus and Porsche increasing, FY19 should be another year of growth. The performance of BMW remains a wild card.
With the stock up 59% YTD shares are now fairly valued and trading at a 30% premium to its peers. Meidong remains a long-term favorite but has now exceeded my fair value estimate of 4.4 HKD (10x 2019 EPS). I suggest waiting for a better entry point.
5. Wynn’s Whale Of A Deal For Crown Off the Hook
After a brief pause in trading yesterday morning, Crown Resorts (CWN AU) announced it is in confidential discussions with Wynn Resorts (WYNN US) concerning an acquisition of Crown by way of a Scheme. The announcement states that Wynn has approached Crown on more than one occasion.
That was in the morning.
WYNN confirmed it and released an 8K in the early hours of the 9th saying they would not comment further.
Several hours later, WYNN apparently said it was terminating deal talks with Crown because of the “premature disclosure of preliminary discussions”.
Oops.
This will surely knock Crown shares back down after their 19.7% gain on Tuesday.
But it does not remove the reason for a deal. The Crown commentary clearly indicated that they were not averse to doing a deal. That would suggest James Packer is not either.
The proposal arrived at a unique time for both companies after the CEOs and major shareholders of both companies relinquished their roles in 2018: Packer for health reasons, and Steve Wynn after allegations of sexual harassment.
If Wynn wants to expand its footprint into the hemisphere and James Packer wants to arrange his affairs, a deal somewhere should be in the offing. This deal may just get pushed to the back burner before coming back to the fore. Several years ago, ADM launched a proposal at Graincorp. Months later there had been no apparent communication and the shares drifted off and then, all of a sudden, there was an agreed deal.
Or perhaps this opens up Crown to other suitors.
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