In today’s briefing:
- Poly Culture (3636 HK)’s Pre-Conditional Merger By Absorption
- Perfect Medical 1830 HK: High Conviction (8% Div Yield, Improving Outlook)
- Government Pressures Korean Instant Noodles & Flour Makers to Lower Prices
- Independence of BOD Is Necessary, but Can Independence of Subordinate Companies Really Be Ensured?
Poly Culture (3636 HK)’s Pre-Conditional Merger By Absorption
- After shares were suspended on the 20 June, art and culture play Poly Culture Group Corp H (3636 HK) has announced a pre-conditional privatisation at HK$8.88 per H-share.
- This Offer, from SOE Poly Group, is by way of a Merger by Absorption, which incorporates a Scheme-like vote. There is no tendering condition.
- The premium to last close is 77.6%; and a 112.5% premium to the five-day closing average.
Perfect Medical 1830 HK: High Conviction (8% Div Yield, Improving Outlook)
- Perfect Medical Health (1830 HK) reported a steady earnings growth of 3.5% YoY for FY23 despite the interruption of operations in China.
- Since its listing, the company has consistently maintained a ROCE of >25%, with FY23 being no exception. Net cash and investments at 738 mn HKD represent 18% of market capitalization.
- The company declared a final dividend of 17 cents (Full year dividend FY23: 30 HKD cents Vs. FY22: 25 cents), representing an 8% yield with a 118% payout ratio.
Government Pressures Korean Instant Noodles & Flour Makers to Lower Prices
- In the past week, several leading Korean instant noodle makers including Nongshim, Samyang Foods, and Ottogi announced that they will be reducing instant noodle and snack prices starting July.
- This government pressure to lower instant noodle and snack prices are likely to negatively impact companies including Nongshim, Samyang Foods, and Ottogi Corp.
- We believe the share prices of the three major instant noodle makers including Nongshim, Samyang Foods, and Ottogi could face further underperformance relative to KOSPI in the next 3-6 months.
Independence of BOD Is Necessary, but Can Independence of Subordinate Companies Really Be Ensured?
- While many listed companies have already established formal standards, TSE plans to establish rules with higher hurdles to ensure the independence of listed subsidiaries and other dependent companies.
- It would make more sense for TSE to question why the parent company maintains the subsidiary’s listing, and minority shareholders of both parent and subsidiary would be more interested.
- Certainly TSE’s “independence criteria” for independent directors is loose, which has negatively impacted the operation of the Board of Directors, so it would be effective to re-establish the criteria.
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