In today’s briefing:
- 7&I (3382) – What If… A Modest Proposal
- Xingda (1899 HK): A Surprising Result as Offer Declared Unconditional
- KLCI Index Rebalance Preview: One High Probability Change; One at the Cusp
- Ping An Healthcare and Technology (1833 HK) – Privatization Ahead?
- Xingda (1899 HK): Go Figure As Offer Turns Unconditional
- Oriental Watch (398 HK) H1 FY25 and Mgmt Meeting: Resilient 14% Yield Despite Tough Environment
- Management Mindset of Believing that Company Growth Is Not the Main Objective Is Hindering Growth
7&I (3382) – What If… A Modest Proposal
- A lot of the talk around the news that Ito family scion Ito Junro had proposed to Seven & I Holdings (3382 JP) an MBO was about thwarting Alimentation Couche-Tard.
- Several mentioned that this bid – seemingly uncompetitive at the moment – would make ACT back down. I discussed the bid and its repercussions here.
- Here I suggest an alternate solution which might get everyone what they want.
Xingda (1899 HK): A Surprising Result as Offer Declared Unconditional
- On its first closing date on 15 November, Xingda International (1899 HK) declared the Chairman’s offer unconditional as the offeror and concert parties represented 60.76% of outstanding shares.
- The result was surprising. The IFA opined that the offer was not fair or reasonable, and the independent Board recommended that the shareholder not accept it.
- The CCASS movements suggest that the offer was declared unconditional mainly because friends and family supported the Chairman’s offer. The gross/annualised spread is 1.6%/92.6%.
KLCI Index Rebalance Preview: One High Probability Change; One at the Cusp
- There is a high probability of Gamuda Bhd (GAM MK) replacing Genting Malaysia (GENM MK) in the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX) in December.
- 99 Speed Mart Retail Holdings (99SPD MK) is a close add and needs small outperformance over the next week to be added. That could see Genting Bhd (GENT MK) deleted.
- Passive funds benchmarked to the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX) will need to buy 0.3-0.75x ADV on the potential adds and sell 0.9-1.3x ADV on the potential deletes.
Ping An Healthcare and Technology (1833 HK) – Privatization Ahead?
- PAGD’s business model is problematic, leading to continuous shrinking revenue scale. As PAGD will entirely lose competitiveness in the future, the management wants to find a suitable way to “exit”.
- Privatizing PAGD at low price and integrating it into the Ping An Group’s system is a good choice. In other words, Ping An hopes other shareholders to choose cash dividends.
- Due to high tax, Hong Kong Stock Connect investors would prefer to sell in advance. Arbitrageurs can wait until stock price drops then make decisions based on new conversion price.
Xingda (1899 HK): Go Figure As Offer Turns Unconditional
- Back on the 24 September, tyre component manufacturer Xingda International (1899 HK) announced a zero-premium $1.30/share cash Offer from Liu Jinlan, chairman and executive director.
- Liu and concert parties held 37.03%, and the Offer was conditional on a 50% acceptance hurdle. The IFA concluded the Offer was not fair.
- Surprisingly, 23.73% of shares out have tendered, and the Offer is now unconditional in all respects. The Offer will remain open to acceptances until the 29th November.
Oriental Watch (398 HK) H1 FY25 and Mgmt Meeting: Resilient 14% Yield Despite Tough Environment
- Oriental Watch reported H1 FY25 revenues/profits down 2.6%/-13.7 % YoY despite the tough retail sales environment, especially in HK (25% of revenues).
- The company declared a 24.6 HKD cents dividend, equivalent to a 14% dividend yield annualized on the current price.
- With 62% of the market capitalization in cash, a 7x PE, and a 14% dividend yield (assuming a consistent 100% payout), this is a name to look at.
Management Mindset of Believing that Company Growth Is Not the Main Objective Is Hindering Growth
- Listing criteria for TSE Growth Market will be raised to over 4 billion yen in market capitalization after 10 years of listing, but the details are left for further discussion.
- It is necessary to provide opportunities for founders to exit and recover their capital without relying on an IPO, for example by creating a market for unlisted shares.
- Switching to a policy of using cash for shareholder returns because of the inability to comply with TSE Growth Market listing maintenance standards is not a fundamental solution.
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