In today’s briefing:
- Jardine Matheson (JM SP): MSCI Blues
- HLB Capital Increase: Offering Terms & Trading Dynamics
- 2022 JPX Nikkei 400 Rebal Update – Going the Right Way
- S&P/ASX Index Rebalance Preview: Adds Outperform Deletes As Review Period End Nears
- Nearmap’s A$2.10 Per Share Indicative Offer from Thoma Bravo
- Giordano’s Conditional Offer Open, Price Declared Final, Unlikely to Meet 50%+ Voting Threshold
- Nikkiso (6376 JP) BIG Asset Sale Leads to Biggish Buyback
- POSCO International + POSCO Energy = A Value Enhancing M&A Deal
- ANZ Renounceable Entitlement Offer – Could Be a Relatively Large (A$550-750m) Retail Shortfall
- Nearmap: Thoma Bravo’s Bird’s Eye View
Jardine Matheson (JM SP): MSCI Blues
- Jardine Matheson Holdings (JM SP) (JMH) has shed ~8% since MSCI said it was cutting the conglomerate’s weighing in two indices.
- The reweighting follows the cancellation of the 59% shareholding in JMH held by Jardine Strategic Holdings (JS SP), which was privatised last year.
- I see the discount to NAV at ~40%, right at the 12-month -2 STD level. JMH bought back ~149mn shares in the 1Q22, paying ~US$59/share, 17% above the current price.
HLB Capital Increase: Offering Terms & Trading Dynamics
- This offering is a 100% stockholder allocation with forfeited shares going to the public. There will be 9.56M new shares at a capital increase of nearly 9%.
- We should note that the largest shareholder may again do the same trick. He may block-deal a 1% stake and use the proceeds to participate in this offering.
- A massive release volume and a 25% discount rate may cause a severe pricing distortion, leading to arb trading openings.
2022 JPX Nikkei 400 Rebal Update – Going the Right Way
- As designed, the JPX-Nikkei400 Index is something of a disaster. It aims to be slightly ‘smart’ vs other cap-weighted indices like TOPIX, but tracking error vs TOPIX is de minimus.
- This year, in week 1, the ADD vs DELETE performance is positive. If we sector-hedge the ADDs vs DELETEs, it’s doing even better.
- This is probably due to relatively low pre-positioning, and cares. Momentum suggests one could be long ADDs vs DELETEs. And there is the perennial trade to watch out for.
S&P/ASX Index Rebalance Preview: Adds Outperform Deletes As Review Period End Nears
- There are 4 trading days to go in the review period for the September rebalance of the S&P/ASX indices. Announcement is on 2 September with implementation on 16 September.
- There could be 6 changes to the S&P/ASX 200 (AS51 INDEX), increasing to 8 if AVZ Minerals (AVZ AU) continues to be halted and if Link Administration (LNK) is privatised.
- The potential adds have outperformed the potential deletes over the last month. Short interest has increased on a few potential deletes. There will be pre-positions built up.
Nearmap’s A$2.10 Per Share Indicative Offer from Thoma Bravo
- Nearmap Ltd (NEA AU) disclosed a non-binding indicative offer of A$2.10 per share from Thoma Bravo. The offer price represents a 39.1% premium to the last trading day price.
- Thoma Bravo has secured a 7-day exclusivity to firm up an offer. Thoma Bravo is a credible bidder and agreed to acquire Ping Identity Holding Corp (PING US) last week.
- Nearmap also revealed other non-binding expressions of interest. The exclusivity could flush out other bids. We think that offer is reasonable. At the last close, the gross spread is 11.4%.
Giordano’s Conditional Offer Open, Price Declared Final, Unlikely to Meet 50%+ Voting Threshold
- Giordano International (709 HK)’s voluntary conditional from the Cheng Yu Tung family (24.57% of outstanding shares) at HK$1.88 per share is open with a first closing date of 5 September.
- Crucially, the offeror will not increase the offer price. In combination with an ongoing retail recovery, the low-ball offer has little chance of meeting the 50%+ minimum acceptance threshold.
- While the IFA says the offer is fair and reasonable, key directors will not accept the offer. A deal break implies, at most, another 10% downside to the last close.
Nikkiso (6376 JP) BIG Asset Sale Leads to Biggish Buyback
- Nikkiso Co Ltd (6376 JP) announced an unusual buyback today. It is worth paying attention.
- In March, Nikkiso announced the sale of a subsidiary to Atlas Copco AB (ATCOA SS), noting the sale proceeds would used to pay down debt (Debt/EBITDA in high single digits).
- The company today announced Q2 earnings, and a large buyback, which should be taken as a positive surprise given the debt load.
POSCO International + POSCO Energy = A Value Enhancing M&A Deal
- On 12 August, Posco International stated that it plans to merge with one of POSCO Holdings’ energy affiliate called POSCO Energy which is a major LNG provider in Korea.
- We believe the merger between POSCO International and POSCO Energy is value enhancing. The shareholders of POSCO International are getting a sweet deal in POSCO Energy at attractive valuations.
- This M&A deal is likely to boost the market cap of the combined companies and raise the rank of POSCO International in important indices such as KOSPI200.
ANZ Renounceable Entitlement Offer – Could Be a Relatively Large (A$550-750m) Retail Shortfall
- ANZ announced a US$2.4bn (A$3.5bn) raising via a renounceable entitlement offer to part fund the purchase of Suncorp Bank in Jul 2022.
- The institutional part of the entitlement offer saw a strong take up and the shares have held up well since the deal was announced.
- In this note, we will talk about the upcoming retail shortfall bookbuild and other updates since our last note.
Nearmap: Thoma Bravo’s Bird’s Eye View
- Mapping technology outfit Nearmap Ltd (NEA AU) has fielded a non-binding indicative offer from San Francisco-based PE firm Thoma Bravo.
- Thoma Bravo is offering A$2.10/share, a 39% premium to last close, and an 83% premium to when Nearmap was first approached in early July.
- Due diligence is at an advanced stage. Curiously, Nearmap has agreed to pay Thoma Bravo up to US$3mn if a transaction agreement does not result.
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