In today’s briefing:
- MMG (1208 HK) Rights Trading Dynamics
- MMG (1208 HK): Rights Trade Playbook
- Commodity Analysis – Crude Oil WTI Futures
- VALE US: Exposure to High-Grade Iron Ore With >8% Dividend Yield
MMG (1208 HK) Rights Trading Dynamics
- The MMG (1208 HK) rights, designed to raise US$1.15bn to pay off loans to the parent for the purchase of a large copper asset, start trading 24 June 2024.
- There is some risk up for grabs, and it is likely to trade according to standard Hong Kong Rights Trading Dynamics. Shorts are down somewhat, but covering should be expected.
- There is path-dependency to the Rights Trading, and while they trade for 7 trading days through Tuesday next, one should expect the volume to trade this week.
MMG (1208 HK): Rights Trade Playbook
- On 4 June, MMG (1208 HK) announced plans to raise HK$9.1bn (US$1.2bn) through 2 rights shares for every five existing shares rights offering, with a rights price of HK$2.62.
- Since the rights issue announcement, MMG shares have declined by 16.2% to the undisturbed price and by 8.0% compared to the TERP of HK$3.48 per share.
- MMG’s trading pattern has diverged from Link REIT/Yuexiu’s rights trading due to the statement on 18 May that the Peruvian mine is not liable for a 30% withholding tax.
Commodity Analysis – Crude Oil WTI Futures
- According to Graph 1, during the period February 28th , 2024 – May 31st , 2024, a mixed trend was reflected in the prices of crude oil futures amid fluctuations.
- During the period under consideration, there was a notable increase in the price of crude oil until April 8th , 2024, whereas thereafter crude oil prices followed a downward trend returning to the levels seen at end of February 2024.
- The MA- 10 was recorded to perform higher than MA-20 from the beginning, whereas on April 23rd the MA-20 took over and started trading above the MA 10 until the end of the period under consideration.
VALE US: Exposure to High-Grade Iron Ore With >8% Dividend Yield
- We like Vale (VALE US) for its exposure to high-grade iron ore (95% of EBITDA) and capital return discipline, with a current dividend yield of 8% and 3.5x EV-EBITDA.
- The cash flows from the iron ore business could be used to invest in base metals, such as copper, nickel, etc., to enhance the portfolio.
- The key risk remains the overhang from the Mariana Dam disaster being settled for ~25.7 billion USD (vs. the current market cap of 50 billion USD).
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