In today’s briefing:
- Li Ning (2331 HK): Buying A HKD2.2bn Office Building – Now A Corporate Governance Discount?
- Denso Corp Placement – Quick Update – In Better Shape Now, Size Concern Remains
- A Review of Tender Offers of Korean Companies in 2023
- Exploring the Possibility of an LG Energy Solution Block Deal
- GoTo (GOTO IJ) – TikTok Taking Tokopedia
- Costa Group (CGC AU): Wide Spread Ahead of the 30 January Vote
- Rept Battero IPO: Valuation Insights
- Costa Group’s Shareholder Vote Set. Get Involved
- DOMS Industries Ltd IPO- Forensic Analysis
- Beiersdorf: Success Based On Strong Portfolio Of Internationally Leading Brands
Li Ning (2331 HK): Buying A HKD2.2bn Office Building – Now A Corporate Governance Discount?
- Li Ning (2331 HK) announced yesterday that the company has acquired a HK office project, the Harbour East, from Henderson Land, for a total consideration of HKD2.2bn.
- The acquisition is quite unexpected given that Li Ning has had a clean corporate governance track record.
- The company now trades at 11x foward PE, assuming no growth in 2023 and 2024 earnings. It is now a value stock, though the visibility is very low.
Denso Corp Placement – Quick Update – In Better Shape Now, Size Concern Remains
- On 28th Nov 2023, Toyota Motor (7203 JP) announced that it would sell around 9.4% of Denso Corp (6902 JP) in order to reduce its cross-shareholding.
- The shares hadn’t corrected much till our last note on 7th Dec 2023, they have since corrected by 6% .
- We have covered the deal background and deal dynamics in our earlier notes. In this note, we talk about the recent share price movement, as compared to prior deals.
A Review of Tender Offers of Korean Companies in 2023
- We review the major tender offers of Korean companies in 2023. Some of the major M&A tender offers that have closed this year include Osstem Implant and SM Entertainment.
- Among the 15 companies targeted for tender offers, there are 5 companies including Osstem Implant, SM Entertainment, Lutronic Corp where the purpose of the tender offers is for M&A.
- There were a total of 18 companies that submitted tender offer results announcements in 2023 (as of 11 December), up 157% YoY.
Exploring the Possibility of an LG Energy Solution Block Deal
- The prevailing sentiment in Yeouido signals a shift of companies, originally preparing for EB issuances, toward block deals. Local brokerages are competing to identify potential block deals involving major issuers.
- The local market anticipates LG Chem opting for a short-term block deal, considering the potential reduction of the LG Energy stake below 80% to alleviate global minimum corporate tax burdens.
- Timing is a challenge, but based on corrections before July’s EB issuance, we could proactively plan for January. Abundant liquidity in LG Energy’s futures eases trading instrument concerns.
GoTo (GOTO IJ) – TikTok Taking Tokopedia
- GoTo Gojek Tokopedia (GOTO IJ) has announced that it will sell a controlling 75.01% stake in Tokopedia to TikTok in order to create Indonesia’s leading e-commerce platform.
- There had been earlier indications that a deal was in the offing but the size of TikTok’s stake was surprising plus it has committed to invest US$1.5bn in Tokopedia.
- GoTo will retain a 24.99% non-dilutive stake and will receive an ongoing revenue stream from Tokopedia in line with its scale and growth contributing directly to its EBITDA.
Costa Group (CGC AU): Wide Spread Ahead of the 30 January Vote
- The Costa Group Holdings (CGC AU) IE considers Paine Schwartz Partners’ A$3.20 offer fair and reasonable as it is towards the upper end of its A$2.62-3.28 valuation range.
- The scheme requires China SAMR and European Commission approvals. SAMR approval poses a timing risk but the scheduling of the scheme meeting reflects PSP’s confidence in securing the approvals.
- While not a knockout bid, the profit warning should help sway the retail vote in favour of the scheme. At the last close, the gross spread was 8.1%.
Rept Battero IPO: Valuation Insights
- REPT BATTERO Energy (1998104D CH), a leading EV battery manufacturer, has launched an HKEx IPO to raise up to US$306 million. Pricing is on 14 December.
- We previously discussed the IPO in Rept Battero IPO: The Bull Case and Rept Battero IPO: The Bear Case.
- There are no cornerstone investors. Our valuation analysis suggests that the IPO price range is unattractive. Therefore, we would pass on the IPO.
Costa Group’s Shareholder Vote Set. Get Involved
- On the 22 September, Costa Group Holdings (CGC AU) backed Paine Schwartz Partners’ (PSP) revised (and reduced) A$3.20/share best and final Offer.
- Costa’s Scheme Meeting has now been tabled for the 30 December, with implementation expected on the 26 February. The IE is supportive and Costa’s board unanimously recommends the transaction.
- This appears done. Key conditions are Costa’s shareholder vote and SAMR approval. I can’t see SAMR getting into a bind over berries.
DOMS Industries Ltd IPO- Forensic Analysis
- Doms (DOMS IN) IPO opens for subscription soon. The INR 12 bn IPO includes INR 3.5 bn fresh issue and the remaining as offer for sale.
- The company is a prominent player in the Indian stationary market and has one of the most diverse product portfolio with a market share of 12% in F23.
- DOMS ticks right in majority of the boxes when it comes to operations and B/S health. One must still be cautious regarding dependence on FILA group, and faster depreciating rates.
Beiersdorf: Success Based On Strong Portfolio Of Internationally Leading Brands
- The investment case revolves around the Company’s strong long-term fundamentals
- An attractive and complementary skincare-focused brand portfolio centred on flagship Nivea brand in the mass segment, Eucerin in the growing dermocosmetics category and La Prairie in the higher-margin luxury segment.
- Less expensive option than L’Oréal to gain exposure to an attractive skincare portfolio. The Company’s business model should prove resilient in a more challenging marker environment
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