In today’s briefing:
- Mellby Gård/Duni: Start of Mandatory Offer Period
- STAR50 Index Rebalance Preview: Bigger Tracking AUM = Bigger Impact
- Haier Smart Home (6690 HK): Healthy Growth Despite Challenges
- The First Thing Managers Should Do Is Disclose Their Cost of Capital and Their Company’s Return
Mellby Gård/Duni: Start of Mandatory Offer Period
- On 14 August, Mellby Gård crossed the 30% threshold and announced a mandatory offer for all shares of Duni AB (DUNI SS) at SEK 98.6/share. The offer period started 12 September.
- The offer represents 0.41% premium to prior day to threshold crossing. Mellby Gård doesn’t seem interested in completing a takeover, rather being able to increase its stake after offer completion.
- The offer represents 0.41% premium, 6.8x EV/Fwd EBITDA, 11.1 Fwd P/E (vs. 5-year averages of 8.8x and 15.4x). Gross spread is 2.1%, I wouldn’t get involved above SEK 95.
STAR50 Index Rebalance Preview: Bigger Tracking AUM = Bigger Impact
- The review period for the December rebalance ends 31 October. We expect the changes to be announced 24 November with the implementation taking place after the close on 8 December.
- We expect the index committee to continue using a 6-month minimum listing history resulting in one change to the index.
- One way turnover is estimated at 1.6% resulting in a one-way trade of CNY 2,259m. The impact on the deletion will be much larger than that on the inclusion.
Haier Smart Home (6690 HK): Healthy Growth Despite Challenges
- The weak share price of Haier Smart Home (6690 HK) looks unjustified given its healthy 1H23 result and solid financial position with net cash equals 11% of share price.
- We anticipate product advancement and innovation will allow HSH to gain more market share. Its high-end brand Casarte will sustain as an important driver for earnings performance.
- Gross margin looks to have room to expand due to better cost dynamics with digitalisation and AI initiatives. Continued growth in developing overseas market is also positive.
The First Thing Managers Should Do Is Disclose Their Cost of Capital and Their Company’s Return
- While 4% of the number of companies mentioned in annual securities reports regarding P/B, half of companies have P/B of below 1x, which suggests managers still lack sense of urgency.
- Many companies that mention P/B in their annual securities reports rely on share repurchases, and their presentation of strategies to increase cash flow is weak.
- Clearly stating the cost of capital will lead to more appropriate ROE and ROIC targets and disclosure of specific measures to achieve them.
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