In today’s briefing:
- Japan Best Rescue (2453) MBO at ¥1,000; High Premium, Low Multiple, No Money For Synergies or Growth
- Ajinomoto (2802) Secondary Offering (Cross-Holder Unwind) Matched Against Large Buyback
- Shidax (4837) – Mgmt Lowers F’casts So Family Can MBO Minorities Cheap. Offensive Governance.
- Vinda International (3331 HK): Essity’s Stake Attracts More Potential Bidders
- StubWorld: Takara Trading “Rich” As Bio Cuts Forecast Earnings
- KOSPI200 Rebalance in December 2023 Highlighted by Locals
- KT&G: A New Shareholder Return Policy Worth 2.8 Trillion Won Over Next 3 Years
- Zeekr Pre-IPO – The Positives – Has Been Growing Very Fast While Meeting Its Targets
- China Feihe (6186 HK): Year-Of-The-Dragon Trade
- Japan Best Rescue System (2453 JP): MBK Partners Backed MBO Tender Offer at JPY1,000
Japan Best Rescue (2453) MBO at ¥1,000; High Premium, Low Multiple, No Money For Synergies or Growth
- This MBO by MBK is a strong premium because of a low recent price, but it pays a low P/FCF multiple for growth, and no synergies counted.
- Yet another MBO where insiders and friends take advantage of structural inferiority of minority shareholders. Something Should Be Done.
- What do Minority Shareholders in Japan Say When They Meet Death? “OK, Today it is then.” (with apologies to Game Of Thrones).
Ajinomoto (2802) Secondary Offering (Cross-Holder Unwind) Matched Against Large Buyback
- Today after the close, Ajinomoto Co (2802 JP) announced a large secondary offering of 14.3mm shares (2.75% of shs out). At last price that is ¥82bn.
- At the same time, they announced a 10mm share (1.92%) ¥40bn buyback to be conducted from the delivery date of the Offering through 31 March 2024.
- Over time, there would be some index upweight as float increases. On a net basis, this is a small deal on a low vol stock with a semiconductor story lurking.
Shidax (4837) – Mgmt Lowers F’casts So Family Can MBO Minorities Cheap. Offensive Governance.
- Shidax had a Good Governance Moment last year. The stock is up 40-odd% since last year’s GGM, but now the Board, so good last year, has tripped up.
- The family and main shareholder – part of last year’s GGM – have decided to bully the Board into accepting an MBO at the wrong price.
- Management lowers forecasts without telling anyone. Bidders say “Synergies LaLaLa!” Board says “Ohh la la!” Nobody counts the synergies. Bidder buys at low multiple of newly lowered forecasts. Minorities Lose.
Vinda International (3331 HK): Essity’s Stake Attracts More Potential Bidders
- Bloomberg reported Asia Pulp & Paper is the latest party to have expressed interest in acquiring Essity (ESSITYB SS)’s controlling Vinda International (3331 HK) stake at more than HK$20 per share.
- Vinda has three substantial shareholders. We think the most likely structure is a bidder acquiring Essity’s stake, which would trigger a mandatory general offer.
- Vinda’s recent update points to improving growth and margins. Peers and historical multiples imply a fair price range of HK$21-26 per share, a 7-32% premium to the last close.
StubWorld: Takara Trading “Rich” As Bio Cuts Forecast Earnings
- On an implied stub and simple ratio, Takara Holdings (2531 JP) is at a decade-plus high to 60.9%-held Takara Bio Inc (4974 JP).
- Preceding my comments on Takara are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
KOSPI200 Rebalance in December 2023 Highlighted by Locals
- This article discusses the potential inclusions and exclusions of KOSPI200 rebalance inDecember 2023 (especially those that are highlighted by the locals).
- Stocks that are expected to be added to the KOSPI200 index include Posco DX, HD Hyundai Electric, Sam-A Aluminum, TCC Steel, and Dentium.
- Stocks that are expected to be excluded in the KOSPI200 index Include Zinus, Handsome, Cuckoo Homesys, Taekwang Industrial, and Hyundai Home Shopping.
KT&G: A New Shareholder Return Policy Worth 2.8 Trillion Won Over Next 3 Years
- KT&G announced a new shareholder return policy worth 2.8 trillion won (including dividend payout of 1.8 trillion won and treasury shares purchase/cancellation of 1.0 trillion won) over next three years.
- In addition, the company plans to cancel about 7.5% of the company’s existing treasury shares which represents about 142 billion won (1.2% of outstanding shares).
- Although this 2.8 trillion won in shareholder return policy is large, the company could have announced even larger shareholder return policy, including cancellation of its entire treasury shares.
Zeekr Pre-IPO – The Positives – Has Been Growing Very Fast While Meeting Its Targets
- Zeekr, a premium EV brand by Geely Auto (175 HK) , aims to raise around US$500m in its US listing.
- Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
- In this note, we talk about the positive aspects of the deal.
China Feihe (6186 HK): Year-Of-The-Dragon Trade
- China Feihe (6186 HK) saw major derating (from around 20x PE to the current high-single-digit PE) coupled with sizable earnings drop (-28% yoy in 2022/-25% yoy in 1H23) since 2022.
- The investment thesis or trade thesis here is a play on the rise of new born babies in 2024, the year of the dragon in China.
- The margin of safety here is also high given a 7% forward dividend yield (Feihe has pledged to increase dividend payout ratio going forward).
Japan Best Rescue System (2453 JP): MBK Partners Backed MBO Tender Offer at JPY1,000
- Japan Best Rescue System Co (2453 JP)/JBR has recommended an MBK Partners-backed MBO tender offer of JPY1,000 per share, a 53.8% premium to the undisturbed price (13 November).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
- Irrevocables to accept the offer represent a 53.62% ownership ratio. The minimum acceptance condition requires a 28.1% minority acceptance rate, which is helped by the significant premium.
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