In this briefing:
- Wesfarmers Puts Out A Bid for Lynas
- Yunji IPO Preview: Balance Sheet Points to Waning Engagement
- HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)
- Leong Hup Pre-IPO – Hard to Pinpoint What’s Going to Be the Revenue Driver Going Forward
- Zozo: Never Meet a Margin Call
1. Wesfarmers Puts Out A Bid for Lynas
This morning, Wesfarmers Ltd (WES AU) announced an indicative, non-binding proposal to the Board of Directors of Lynas Corp Ltd (LYC AU) to acquire Lynas at A$2.25/share, payable in cash in the form of a Scheme of Arrangement.
This is a 44.7% premium to the one-day price and a 36.4% premium to the 60-day price.
It is, however, a 0% premium to the price at which Lynas was trading on 3 December 2018, the day before the Malaysian Minister for Energy, Science, Technology, Environment and Climate imposed two pre-conditions on the rolling over of the processing licence (later in 2019), and it is a 3.2% premium to the one-year average as of 4 December 2018. On December 5th, the shares fell to A$1.65 and they have not recovered.
David Blennerhassett gave an overview of the license renewal issues and timeline in Lynas: Between a Hard Place and Just Rock just a few weeks ago. It is definitely worth a read as background for those not up to speed on the situation.
This is very early, non-binding, conditional in the extreme, and conditional non-binding offers are a graveyard of Australian arbitrageurs. The Offer is not all that attractive to boot. But I expect the stock will go up anyway, and that may make for some interesting trading opportunities.
2. Yunji IPO Preview: Balance Sheet Points to Waning Engagement
Yunji Inc. (YJ US) is a leading membership-based social e-commerce platform in China which primarily sells merchandise through its Yunji app. Yunji is also referred to as a multi-level revenue sharing platform as the business model is based on providing incentives to members to promote products and invite new members through their social networks. Yunji is seeking to raise $200 million through a Nasdaq IPO.
Our analysis of the balance sheet points to waning member engagement which does not bode well for Yunji’s long-term sustainable growth in a highly competitive market.
3. HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)
In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.
In this insight, we highlight the WH Group, which led the inflows last week.
4. Leong Hup Pre-IPO – Hard to Pinpoint What’s Going to Be the Revenue Driver Going Forward
Leong Hup International (LEHUP MK) (LHI) plans to raise up to US$400m in its Malaysian IPO. LHI is one of the largest integrated poultry producer in Southeast Asia.
LHI was listed on Bursa Malaysia from 1990 to 2012. Since delisting, it has consolidated its Southeast Asia operations under a single entity and is now looking to relist the larger entity.
While revenue has been growing steadily, margins have been volatile. In addition, its difficult to pinpoint which products are performing well in which geographies. The feedmills business seems to be a more consistent performer as compared to the livestock business. It’s also a larger revenue contributor in the faster growing regions.
5. Zozo: Never Meet a Margin Call
Yusaku Maezawa is once again in the news. This time due to speculation that he is auctioning off at least part of his art collection at Sotheby’s in Hong Kong on April 1st.
Following on from the share buyback that was conducted in May last year which:
- Allowed Maezawa to sell 6m out of his then 118.227m shares into a buyback that totalled just 6.35m shares.
- Led to a ¥38.3bn swing in net cash from +¥24.6bn to -¥13.8bn (the buyback totaled ¥24.4bn)
- Was conducted at the same time that share options for up to 31m shares were issued, of which Maezawa could have been allocated more than 90%.
this looks a lot like a sudden need to raise cash.
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