In today’s briefing:
- Hitachi Transport (9086) – KKR Deal Is Here And There Are Index Implications
- Aruhi (7198) Forecast Reduction, Tender Extended, Watch for Index and Trading Flow
- StubWorld: PCCW Coming Up “Cheap”
- KOSPI 200 & KOSDAQ 150: Rule Clarifications & Rebalancing Predictions
- Sembcorp Marine & Keppel O&M: Revised Terms & Index Implications
- Lifestyle (1212 HK): Timing Is Everything As Shareholders Go To Vote on 21 Nov
- Keppel & Sembcorp Marine Revise Transaction, Improve Terms to SMM
- Keppel: Keppel O&M and Sembcorp Marine’s Revised Terms
- Hang Lung Group’s All-Time Low P/B As Hang Lung Props Rolls Over
- Lowball Offer Fell Through
Hitachi Transport (9086) – KKR Deal Is Here And There Are Index Implications
- The KKR deal for Hitachi Transport System (9086 JP) is here.
- Some were worried KKR would walk. That was never a worry. Some worried Russia wouldn’t approve. There was always a way.
- This deal should trade tight. New money might be better allocated elsewhere. Arbitrageurs and investors should be wary of the index effects of the TOPIX FFW adjustment tomorrow at close.
Aruhi (7198) Forecast Reduction, Tender Extended, Watch for Index and Trading Flow
- Aruhi Corp (7198 JP) is under Tender Offer by SBI Holdings (8473 JP) which wants to buy back in and expand the offering through SBI and Shinsei Bank (8303 JP).
- The Tender Offer was expected to close on Monday, and Aruhi earnings were expected on the 10th of November. Today Aruhi changed its forecasts, so SBI extended the tender.
- This engenders a bit of 🧐👀 on my part, but we gotta go with the flow. Discussion ensues. And watch for trading opportunities.
StubWorld: PCCW Coming Up “Cheap”
- PCCW Ltd (8 HK) is coming up “cheap” on my monitor, both from a discount to NAV and implied stub angle.
- Preceding my comments PCCW / HKT Ltd (6823 HK) and Bank of Kyoto (8369 JP) are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
KOSPI 200 & KOSDAQ 150: Rule Clarifications & Rebalancing Predictions
- The 2nd screening only deals with those who have passed the 1st screening. The 2nd screening does NOT include the first company to cross the threshold.
- Lotte Confectionery will be the only addition to the KOSPI 200. Samyang Holdings or Hyundai Home Shopping Network will leave the index.
- There will be ten changes in the KOSDAQ 150: eight regular & two special entries. WCP’s special entry still seems uncertain due to the GICS classification issue.
Sembcorp Marine & Keppel O&M: Revised Terms & Index Implications
- Sembcorp Marine (SMM SP) will now acquire Keppel O&M from Keppel Corp (KEP SP) at an 8% lower consideration at a revised exchange ratio of 46:54 vs 44:56 earlier.
- The simplified transaction structure is expected to reduce consent and approval requirements and could reduce completion time by up to 2 months. Expected completion now is December or Jan.
- At a proforma market cap of S$7bn, there could be selling in Sembcorp Marine from MSCI Singapore and FTSE Straits Times Index (STI) (STI INDEX) trackers at the time of implementation.
Lifestyle (1212 HK): Timing Is Everything As Shareholders Go To Vote on 21 Nov
- Back on the 5 August, Thomas Yau, Lifestyle International Holdings (1212 HK)‘s controlling shareholder, tabled a Scheme at HK$5/share, a 62.3% premium to last close.
- The Scheme Doc is now out with the Court Meeting on the 21st of November. The outcome of this transaction will pivot off the reassessed net asset value of HK$10.60/share.
- Trading at a gross spread of 9.6% using yesterday’s close, reflecting the perceived opportunistic nature of the Offer. Yet Hong Kong’s 2018 visitor glory days remain a long way off.
Keppel & Sembcorp Marine Revise Transaction, Improve Terms to SMM
- Today, Keppel Corp (KEP SP) and Sembcorp Marine (SMM SP) made an announcement of revised structure and revised terms.
- Under revised terms, Sembcorp will issue fewer shares to Keppel, and it will be a takeover rather than Scheme of Arrangement. Keppel will deliver more shares to shareholders, keeping less.
- Just like the first announcement, there is a little here for everyone. Keppel doesn’t do a great job of selling it but it is still win-win.
Keppel: Keppel O&M and Sembcorp Marine’s Revised Terms
- The agreed equity value exchange ratio between Keppel O&M and Sembcorp Marine (SMM SP) was revised from 56%:44% to 54%:46%.
- For Keppel Corp (KEP SP) shareholders, the revised terms will lower the overall value but in a shorter deal completion, higher EPS accretion and higher in-specie distribution of SMM shares.
- The deal is expected to close by the end of the year. Our revised Keppel SoTP valuation is S$8.17 per share, which is 23% above the last close.
Hang Lung Group’s All-Time Low P/B As Hang Lung Props Rolls Over
- Hang Lung Group (10 HK) is currently trading at a miserly 0.15x P/B, its lowest level since records began.
- It has also been somewhat of a forgetful week for 59.5%-held Hang Lung Properties (101 HK), down 12%, following Wednesday’s 7% decline.
- HLG’s discount to NAV has retraced back to levels last seen during the 2020 Covid lows.
Lowball Offer Fell Through
- Borsa Italiana reported a take-up in bid for Tod’s of c. 48.91%. DeVa Finance and (concerted) LVMH would have controlled 86.95%, below the 90% minimum acceptance condition and pulled out.
- The offer price seemed cheap on any measure (the shares traded above it since the offer period kicked off). A 20% share price drop means it looks good value now.
- If the Della Valles merged Tod’s with Deva Finance, they would offer c. €37/share. Either way, it should pay off to set up a long position in the stock now.
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