In today’s briefing:
- MSCI Feb 2023 QCIR: Mostly In-Line; Couple of Surprises
- Adani Group – MSCI Will Treat Very Adani Funds as a Very Special Case
- Toshiba – The Nikkei Finally Speaks
- Toshiba (6502 JP): Formal Offer Lodged, Now for the Hard Part
- Haw Par Corp Is Still Trading Cheap
- CATL GDR Listing Early Look – Past Deals Have Done Well. Valuations Somewhat Justifiable
- Korea Spin-Offs: Details and KOSPI200 Index Impact
- Renesas – Good Results, Great Cashflow, Another Buyback, But Drift.
- Kingston Financial (1031 HK) Scheme: That Is a Pass
- HYBE to Acquire a 39.8% Stake in SM Entertainment
MSCI Feb 2023 QCIR: Mostly In-Line; Couple of Surprises
- MSCI has announced the changes for the February QCIR. For Asia Pacific, there are 20 adds and 14 deletes for the MSCI Standard Index with the most changes in China.
- There are no surprises on the adds or deletes. However, there are a couple of stocks that are surprises on not being added to or deleted from the index.
- The largest impact will be on Ebos Group Ltd (EBO NZ) – though there will be pre-positioning on the stock.
Adani Group – MSCI Will Treat Very Adani Funds as a Very Special Case
- Shortly after the Hindenburg Report came out, MSCI said it was seeking feedback from clients. They got it, and last night announced they would conduct a special review.
- They concluded some holders heretofore in the float might not be float. They announce results tonight. That can only be bad news for Adani Group companies.
- We don’t know numbers yet, but passive inclusion was one reason why stocks skyrocketed. Few of the companies will be unaffected. Some could be heavily affected.
Toshiba – The Nikkei Finally Speaks
- The Nikkei was out this morning with its belated take on JIP securing financing.
- The article was nevertheless rather negative in its tone causing Toshiba to drop as much as 3.6% before recovering most of those losses.
- We aren’t entirely sure it should have but Toshiba Tec does pique our interest.
Toshiba (6502 JP): Formal Offer Lodged, Now for the Hard Part
- The Nikkei reports that Japan Industrial Partners (JIP), the preferred bidder, has finally secured financing and submitted a final offer to Toshiba Corp (6502 JP)’s Board.
- Nikkei notes that JIP expects to spend about JPY2 trillion on the acquisition suggesting an offer price around JPY4,750 per share, -4% below the undisturbed price of JPY4,957.60 (21 April).
- The hard part now is getting the Board to accept the unremarkable offer and the banks’ conditions. If the Board succumbs, the next challenge is to get shareholders to accept.
Haw Par Corp Is Still Trading Cheap
- Last November I highlighted Haw Par Corp (HPAR SP)‘s multi-year trough levels on an implied stub valuation, and on an HPAR/UOB (UOB SP) ratio.
- That trade has panned out well as the ratio steadily increased. But it remains below the 200 MDA.
- A recovery in Tiger Balm sales is expected in Haw Par’s full-year results later this month. UOB’s financials, and UOL (UOL SP)‘s, are also due out this month.
CATL GDR Listing Early Look – Past Deals Have Done Well. Valuations Somewhat Justifiable
- CATL (A) (300750 CH) is looking to raise up to US$6bn in its upcoming Swiss GDR listing. Bookrunners on the deal are CICC, China Securities, Goldman Sachs, and UBS.
- The relatively large listing comes after the firm has been undertaking a series of capital raisings, since it’s A-share debut back in Jun 2018, to fund its expansion.
- In this note, we discuss GDR timelines, and the firm’s recent financial performance/valuations.
Korea Spin-Offs: Details and KOSPI200 Index Impact
- Hyundai Dept Store Co (069960 KS), Hyundai Greenfood (005440 KS) and Oci Co Ltd (010060 KS) will spin-off divisions and list them prior to the next rebalance in June.
- The equity spin-offs will result in passive flows prior to the trading suspension as well as on relisting of the stocks post the spin-off.
- We expect one change to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in April as one stock will be deleted due to low market cap following the spin-off.
Renesas – Good Results, Great Cashflow, Another Buyback, But Drift.
- Renesas Electronics (6723 JP) today reported full-year 2022 earnings with revenues 0.032% higher than the high end of guidance, which was better than consensus. OP was not as good.
- They have guided Q1 only, with revenues up 0.2-4.6%, and non-GAAP GPM -3.9% to 54.5%, and OPM -6.6% to 32.5%. But they also announced a Tender Offer Buyback.
- The buyback is smaller than I’d like, but the company has added cash despite last year’s tender offer and repaying bank borrowings. Lots to like here.
Kingston Financial (1031 HK) Scheme: That Is a Pass
- Kingston Financial (1031 HK)’s scheme resolution was approved at today’s scheme meeting – 99.89% of independent share votes cast FOR (0.09% of all independent shareholders AGAINST).
- The scheme comfortably passed the headcount test with 44 FOR and 13 AGAINST the scheme (56 FOR and 20 AGAINST on a look-through basis).
- The last trading is on 10 February. At the last close and for the 3 March payment, the gross and annualised spread to the offer is 3.4% and 69.3%, respectively.
HYBE to Acquire a 39.8% Stake in SM Entertainment
- On 10 February (prior to market open), Seoul Economic Daily reported that HYBE will conduct a tender offer of SM Entertainment shares taking over the controlling ownership of the company.
- HYBE agreed to acquire a 14.8% stake from SM Entertainment’s founder Lee Soo-Man at 120,000 won per share, which represents a 21.8% premium to the closing price on 9 February.
- HYBE is also conducting a tender offer to minority shareholders and it plans to acquire up to 25% additional shares at 120,000 won per share, representing 717 billion won.
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