In today’s briefing:
- Mar25 Nikkei 225 Rebal: Considering Fast Retailing Capping…. Again…
- HSTECH Index Rebalance Preview: $800m Round-Trip Trade
- Choi Family Launches a Counter Tender Offer for Young Poong Precision
- HSCEI Index Rebalance Preview: High & Low Probability Changes
- Choi Drops a Counter-Tender for Young Poong Precision at ₩30,000 Before the Market Bell Tomorrow
- Namoi Cotton (NAM AU): Well Played LDC
- Young Poong Precision (036560 KS): Choi’s Opening Salvo
- ADNOC/Covestro: Fair Offer at €62
Mar25 Nikkei 225 Rebal: Considering Fast Retailing Capping…. Again…
- At end-September, the Nikkei 225 semi-annual review imposed a “cap” on Fast Retailing (9983 JP) in the Average, applying a 0.9 coefficient to the Price Adjustment Factor.
- At its current weight, Fast Retailing will be capped again in March 2025. If the stock outperforms Nikkei 225 by another 3% before 31 January 2025, it could be double-capped.
- And an additional 16% would mean ¥1.1trln of sales in March. But like last time, this is a rubber band which stretches. Too far, and selling pressure is obvious.
HSTECH Index Rebalance Preview: $800m Round-Trip Trade
- The review period for the December rebalance of the Hang Seng TECH Index (HSTECH INDEX) ended on 30 September.
- We do not forecast any constituent changes for the index. Capping changes will lead to a one-way turnover of 2.15% and a round-trip trade of HK$6.1bn (US$785m).
- If any stocks have outsized moves on expectations of being added to or deleted from the index, there could be opportunities to enter trades.
Choi Family Launches a Counter Tender Offer for Young Poong Precision
- Choi family has launched a counter tender offer for Young Poong Precision at the tender offer price of 30,000 won (20% higher than MBK’s 25,000 won tender offer price).
- The tender offer involves a plan to acquire 3,837,500 shares (24.36% of outstanding shares) of Young Poong Precision.
- All eyes are on the court’s decision on the injunction application for ‘prohibition of acquisition of treasury stocks by Korea Zinc’, which is expected to be announced on 2 October.
HSCEI Index Rebalance Preview: High & Low Probability Changes
- PICC Property & Casualty H (2328 HK) inclusion and Longfor Properties (960 HK) deletion are high probability changes for the Hang Seng China Enterprises Index (HSCEI INDEX) in December.
- There is a lower probability of China Resources Power (836 HK) being added and of Sino Biopharmaceutical (1177 HK) being deleted at the rebalance.
- There has been big short covering in PICC Property & Casualty (2328 HK) over the last couple of months while shorts would have covered Longfor Properties (960 HK) recently.
Choi Drops a Counter-Tender for Young Poong Precision at ₩30,000 Before the Market Bell Tomorrow
- Choi aims to acquire 3.84 million shares (24.36%) of Young Poong Precision at ₩30,000 each, with a tender period from October 2 to November 1, managed by Hana Securities.
- Seoul Economic Daily may not be as prominent, but they reliably scoop this type of news, making it likely Choi will announce their counter-tender for Young Poong Precision tomorrow.
- MBK targets the full 49.14% stake, while the Choi family seeks about half, creating proration risk, which may still make MBK’s lower offer more appealing to shareholders.
Namoi Cotton (NAM AU): Well Played LDC
- A$0.77/Share. That’s Louis Dreyfus Company (LDC)’s revised unconditional bid. Plus it now holds 47.66% after Samuel Terry Asset Management, Namoi’s largest shareholder, tendered into the revised term.
- Expect Namoi Cotton Co Operative (NAM AU)‘s board to shortly back LDC’s Offer. LDC’s Offer is $0.02/share above Olam Agri’s conditional bid.
- After LDC first approached Namoi in November last year, this is now done. Expect Olam to tender its stake, and fold its tent.
Young Poong Precision (036560 KS): Choi’s Opening Salvo
- The Choi family have launched a Tender Offer to acquire 3.937mn shares (25%) of Young Poong Precision (036560 KS) (YPP) at ₩30,000/share, 20% above MBK/Young Poong (000670 KS)‘s revised terms.
- YPP’s key attraction is its 1.85% stake in Korea Zinc (010130 KS), which is the ultimate prize in this tussle between the Choi and Jang families.
- Choi’s Offer runs from today (2nd October) to 21 October. There is no minimum acceptance threshold. If successful, the Choi’s stake increases to 60.45% from 35.45% currently.
ADNOC/Covestro: Fair Offer at €62
- At last, Covestro signed an Investment Agreement with ADNOC for an all-cash €62.00/share offer (same as June proposal), 54% premium to June 2023, €11.7 billion implied equity value..
- The offer represents 9.1x EV/Fwd NTM EBITDA (vs. peers at 8.3x), 7.4x 26e EBITDA and 1.8x P/BVPS. The share price implies 6.4% gross spread and 66% probability of deal completion.
- The agreement is well-crafted and now has a strong likelihood of reaching a successful completion, although there is a lengthy period before completion and likely political opposition. Long.
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