In today’s briefing:
- Lifedrink Company (2585 JP) Ascends to TSE Prime and TOPIX But An Offering Produces Overhang
- Challenger Technologies (CHLG SP): Unconditional and Final Offer at S$0.60
- Rakuten’s Seiyu Sell off Will Boost Netsuper Business
- Challenger Tech: Offer Bumped & Declared Final
- Russell 2000 Breakout Attempt Underway; Small-Cap Breadth Improving; KRE, KBE, XRT Test Key Levels
- Selected European HoldCos and DLC: May’23 Report
Lifedrink Company (2585 JP) Ascends to TSE Prime and TOPIX But An Offering Produces Overhang
- On 1 June, Lifedrink (2585 JP), which listed in early 2022, announced it would move to TSE Prime in late June, leading to a TOPIX inclusion in late July.
- The offset to that was an announcement of an offering, whereby the PE Fund which brought the company to market would sell up to 3.87mm shares, effectively doubling float.
- The offering is larger than the TOPIX inclusion. The stock fell the next day, rebounded, then rebounded 11% Monday. Now it’s up more and hit a lifetime closing high.
Challenger Technologies (CHLG SP): Unconditional and Final Offer at S$0.60
- Challenger Technologies (CHLG SP) has disclosed a final voluntary unconditional offer from Dymon Asia and the Loo Family at S$0.60 per share, a 7.1% premium to the previous S$0.56 offer.
- As predicted, the offer followed the recent SGX unconditional offer playbook – a lowball offer followed by declaring the offer final after a cursory bump.
- The modest offer premium will still leave minorities aggrieved. Hitting the 90% compulsory threshold implies a minority acceptance rate of 31.3%. At the last close, the gross spread is 3.4%.
Rakuten’s Seiyu Sell off Will Boost Netsuper Business
- Rakuten sold its 20% stake in Seiyu to KKR at the end of May, divesting from direct ownership in physical supermarkets.
- This provides a much needed injection of cash for Rakuten’s digital projects and should also help the online platform build trust with other supermarket chains interested in joining its platform.
- Both companies reaffirmed their commitment to build the largest online food retail platform within the next two years.
Challenger Tech: Offer Bumped & Declared Final
- After consumer electronics retailer Challenger Technologies (CHLG SP) announced a voluntary unconditional cash offer of S$0.56/share on the 30 May, it has closed through terms every day.
- At a 3.1% and 4.3% to undisturbed and one-month VWAP, the Offer was low-balled. The Offeror (Dymon Asia and Challenger’s CEO Loo Leong Thye) have now bumped to S$0.60/share.
- The price has been declared final. It is still only a 9.1% premium to undisturbed. But it is a lifetime high.
Russell 2000 Breakout Attempt Underway; Small-Cap Breadth Improving; KRE, KBE, XRT Test Key Levels
- The S&P 500 broke above 4200 and the 2-month megaphone pattern on Friday, and is already approaching the 4300-4325 area which we have anticipated would cap upside for 2023.
- While we would be cautious at these levels given our expectation for inflation to remain elevated, we cannot get too bearish if the S&P 500 is above 4165-4200.
- Breadth remains weak within the S&P 500, but we are starting to see breadth improvement within small-cap Russell 2000 (IWM). More on that below, IWM targets include $190 and $200-202.
Selected European HoldCos and DLC: May’23 Report
- Discounts to NAV of covered holdcos have generally tightened during May. Discounts to NAV: C.F.Alba, 50.1%; GBL, 40.5% (!); Heineken Holding, 16.0%; Industrivärden C, 5.2%; Investor B, 11.6%; Porsche Automobile Holding, 45.1%.
- The spread of Rio Tinto DLC widened to 17.2%. Rio Tinto is a candidate for an Australian top hat structure.
- Recommended trades: Heineken Holding/Heineken, Porsche SE/vs. listed assets and Rio DLC.
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