In today’s briefing:
- HKBN (1310 HK): China Mobile Is the Latest to Show Interest
- Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion
- YFO Goes Hard for Board Spill – Independents AND Executives
- Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma
- Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?
- Quiddity Leaderboard ASX Jun 23: DHG Could Underperform Peers
- ZJLD Group (6979 HK): Index Inclusion Possibility & Timelines
- Oishi Group: IFA Backs ThaiBev’s Offer
- Sega Sammy Holdings/Rovio Entertainment: Agreed Offer
HKBN (1310 HK): China Mobile Is the Latest to Show Interest
- Reuters reported that China Mobile (600941 CH) is exploring a potential buyout of HKBN Ltd (1310 HK). The shares surged 12.3% to HK$6.57, above I Squared’s rumoured HK$6.00 offer.
- To get an idea of the appropriate offer price, we examine shareholding dealings from substantial shareholders. Our analysis suggests that a scheme offer of around HK$8.50 would likely be required.
- PAG is also a rumoured bidder. The flurry of interest around HKBN suggests a good probability that one of the bidders will come through with a formal offer.
Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion
- We should expect significant changes in KT’s ADR premium approaching the implementation date as foreign institutions leading the passive flow for MSCI Korea constituents have typically preferred ADRs.
- Looking at the previous two occasions, the ADR disparity widened from the midpoint of the review period. And this trend continued for a while after the implementation.
- Although KT’s ADR disparity has not yet significantly expanded, we may witness a similar pattern this time as well, given that it has been continuously moving in the premium recently.
YFO Goes Hard for Board Spill – Independents AND Executives
- At end-March, Toyo Construction (1890 JP) started playing hardball against YFO. They rejected the EGM call; they sent a letter to METI crying “FEFTA Breach!”, and raised the div BIGLY.
- The new div at ¥63/share was meant to get the share price over ¥1,000/share so the YFO bid at that price would not be meaningful. So far, no luck.
- But YFO, which had threatened to propose a new slate, came out today with a list of nine, including two who would be executive directors. 👀👀
Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma
- In May 2022, Yamada Denki (9831 JP) announced a very large buyback. GINORMOUS – in fact – at 23.9% of shares out ex-Treasury if maximum shares were bought.
- So far, YDH is 83.5% through, and at the recent pace, they will end it 8 May having bought 183-184mm shares (21.9% of TSO) spending 86.6% of funds allocated.
- That’s why the announcement lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.
Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?
- Softbank Vision Funds 1 and 2 were the biggest combined holdings at December 2022, accounting for 30% of group equity value; SVF private companies accounted for 73% of equity value
- To December-end 2022, public companies in SVF2 were marked down by 52% versus investment cost, whereas SVF2 private companies were marked down by a more modest 33% versus investment cost
- We believe that SVF2 private company valuations are at risk of further markdowns in 4QFY22 results, with many of these investments made close to the period of peak pandemic valuations
Quiddity Leaderboard ASX Jun 23: DHG Could Underperform Peers
- In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run up to the June 2023 Rebalance.
- Based on the latest data, I do not expect any changes for ASX 20, ASX 50, and ASX 100.
- I expect Neuren Pharmaceuticals (NEU AU) to be added to ASX 200 and Domain Holdings Australia (DHG AU) to be deleted from ASX 200.
ZJLD Group (6979 HK): Index Inclusion Possibility & Timelines
- ZJLD Group (ZJLD HK) is looking to raise between US$775m-US$933m (including the oversubscription option) in its IPO by selling 564.3m shares at a price range of HK$10.78-HK$12.98/share.
- ZJLD Group (ZJLD HK) will not get Fast Entry to any indices but should be added to the HSCI and Stock Connect in September.
- Peer performance has not been great this year and that could weigh on the ZJLD Group (ZJLD HK) listing.
Oishi Group: IFA Backs ThaiBev’s Offer
- On the 10th March, Thai Beverage (THBEV SP) proposed taking 79.66%-held Oishi Group PCL (OISHI TB) private, at an Offer price of THB 59/share, a 26.9% premium to last close.
- This Delisting Offer requires a shareholder vote which will take place on the 3<May. Payment may occur mid-to-late August.
- In its report yesterday, the IFA reckons “that the shareholders should approve of the voluntary delisting“.
Sega Sammy Holdings/Rovio Entertainment: Agreed Offer
- Sega with better reputation and deeper pockets than Playtika, announces a €9.25/share recommended cash offer; 63% premium to Playtika’s announcement; it represents 2.1x EV/Fwd Revenue, 12.3x EV/Fwd EBITDA, 21.6x Fwd P/E.
- Acceptance condition is over 90%, and irrevocables are 49.1%, so 80.4% of the float is needed, which is high. I value Rovio using DCF (9% WACC, 1.5% perpetuity growth rate).
- My fair value base case estimate is €8.80/share (€9.45/bull case). I thus update my TP to €9.25. Spread is 0.59%/1.22% (gross/annualised), which is not massive.
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