In today’s briefing:
- Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling
- SM Entertainment: Tender Offer Allocation Ratios Announced
- Target & Timing for Flow Trading Position Setup in NICE I&S KOSPI Transfer Event
- Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
- Cosmo Energy (5021) – It’s Even More On
- Golden Energy (GER SP): DSS Vote on 2 May; Appraiser Unconvincingly States that Offer Is Fair
- Origin Energy (ORG AU): Brookfield/EIG Binding Offer; ACCC Approval the Key Risk
- AAG Energy (2686 HK): Pre-Condition Satisfied as Doubts Sets In
- Origin Energy And Brookfield/MidOcean Enter Into Scheme Deed
- Estia Health: Bain’s Non-Binding Proposal
Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling
- Following the settlement of Meituan (3690 HK) shares from Tencent (700 HK)‘s in-specie dividend, nearly all the shares are now in CCASS.
- Meituan (3690 HK) has underperformed Tencent (700 HK) by nearly 50% and Alibaba Group (9988 HK) by 27% since the announcement of the in-specie dividend.
- Short interest is higher over the last couple of months but is far lower than the selling that could come through, especially on the Prosus (PRX NA) holding.
SM Entertainment: Tender Offer Allocation Ratios Announced
- Korea Investment & Securities announced the final competition rate for the tender offer of SM Entertainment by Kakao Group (8,333,641 shares of SM Entertainment at 150,000 won per share).
- The competition ratio of the tender offer was 2.2655436 to 1. Accordingly, the allocation ratio was set at 44.1395170%.
- At the current price of 95,100 won, SM Entertainment’s shares are undervalued by about 25% to 45% over the next 6-12 months, in our view.
Target & Timing for Flow Trading Position Setup in NICE I&S KOSPI Transfer Event
- NICE I&S will likely complete the transfer schedule in early May, meaning that an ad-hoc change may occur before the regular rebalancing of the KOSDAQ 150 in June.
- If this gets completed before SK Oceanplant’s transfer listing schedule, the top reserved issue in NICE’s GICS sector (INDUSTRIALS) will be included. It is Sun Kwang (003100 KS).
- As evidenced in the case of LX Semicon, we should set up a preemptive position for potential ADDITION at the time of the T or T-1 KRX corporate action announcement.
Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
- The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
- There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
- Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.
Cosmo Energy (5021) – It’s Even More On
- In mid-January, things between activist Yoshiaki Murakami and Cosmo Energy Holdings (5021 JP) came to a head. Cosmo announced a large buyback and possible takeover defence measures.
- The buyback was a beefy chunk of the float because of the expected profit payout. On 9 February, Cosmo lowered its NP guidance by 40%. FY22 div stays at ¥150/share.
- Last Thursday, Cosmo presented its NEW Mid-Term Management Plan. ROE targets similar. Profit targets up. Minimum div goes up; payout ratio goes up. More comes if financial health targets met.
Golden Energy (GER SP): DSS Vote on 2 May; Appraiser Unconvincingly States that Offer Is Fair
- The Dian Swastatika Sentosa (DSSA IJ)/DSS EGM to gain shareholder approval will be held on 2 May. The DSS appraiser (unsurprisingly) opines that the Widjaja family offer is fair.
- The appraiser valued Golden Energy & Resources (GER SP) at S$0.980. However, the valuation approach is sorely lacking, particularly for the value excluding the Golden Energy Mines (GEMS IJ) stake.
- Our SoTP valuation is S$1.29 per share, 32% above the revised offer. We continue to think another bump is required to get this deal done.
Origin Energy (ORG AU): Brookfield/EIG Binding Offer; ACCC Approval the Key Risk
- Origin Energy (ORG AU) has entered into a binding proposal with Brookfield/EIG. The offer terms are changed to A$5.78 and US$2.19 per share. The offer is worth A$8.912 excluding dividends.
- Since the announcement of the first indicative offer on 10 November 2022, the average implied value of the revised offer is A$8.97 per share vs A$9.00 for the previous offer.
- ACCC approval will be the key overhang and is expected to take around six months. At the last close, the gross spread to the offer is 9.1%.
AAG Energy (2686 HK): Pre-Condition Satisfied as Doubts Sets In
- Aag Energy Holdings (2686 HK) noted that the pre-condition for Xinjiang Xintai Natural Gas (603393 CH) privatisation offer at HK$1.85 per share has been satisfied (which was expected).
- The gross spread has widened to 16.4% due to concerns that the recent solid FY22 results, lack of dividends and the skinny premium would nudge minorities to vote NO.
- It remains unclear if the dissatisfied retail minorities have enough votes to block the scheme. The downside remains low as the shares are trading 5% below the undisturbed price.
Origin Energy And Brookfield/MidOcean Enter Into Scheme Deed
- In the wake of the Aussie government’s gas price intervention, the Brookfield/MidOcean consortium reduced its Offer for Origin Energy (ORG AU) to ~A$8.90/share, down from A$9.00/share, on the 22 Feb.
- At the time, Origin appeared supportive. Origin and Brookfield/MidOcean have now entered into a Scheme Implementation Deed.
- Some subtle – and more favourable to all investors – changes have been made to terms. Pricing is attractive. ACCC is the big question mark.
Estia Health: Bain’s Non-Binding Proposal
- Aged care provider Estia Health (EHE AU) has appointed UBS to advise on Bain Capital’s $3.00/share non-binding proposal.
- The indicative Offer arrives a little over two months after Kerry Stokes-backed Seven Group Holdings (SVW AU) off-loaded its 10% stake at ~ $2.00/share.
- Separately, Regal Fund announced it has taken a 7% stake.
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