In today’s briefing:
- MVIS Australia Equal Weight Index Rebalance: Two Deletions & Other Changes
- Conscious De-Stapling With Uplift – The Abacus Property (ABP) Storage Spinoff
- Lutronic (085370 KS): Hahn & Co Tender Offer
- Keisei Electric: Distorted Valuation Unveils Opportunity for Activist Investors
- Seino (9076) – More Seino, Seino More. Know What I Mean? Eh Eh? Seino Goes Big on Capital Policy
- HSCEI Index Rebalance Preview: Two Changes Likely in September
- MVIS Australia A-REITs Index Rebalance: Float & Capping Changes
- Hailan Holdings (2278 HK): Conditional Offer Open but Success Is Daunting
- Brookfield to Buy Network International
MVIS Australia Equal Weight Index Rebalance: Two Deletions & Other Changes
- Ansell Ltd (ANN AU) and Challenger Ltd (CGF AU) will be deleted from the MVIS Australia Equal Weight Index at the close of trading on 16 June.
- One way turnover is 5.9% resulting in a one-way trade of A$107m. Only the two deletions have more than 1 day of ADV to sell from passive trackers.
- With the passive selling between 33-50% of short interest on the deletions, there could be short covering at the close on Friday.
Conscious De-Stapling With Uplift – The Abacus Property (ABP) Storage Spinoff
- Back in February with the H1 results announcement, Abacus Property (ABP AU) announced an intention to spin off an ASX-Listed Self Storage REIT with A$3bn in total assets.
- The stock popped 7.4% to A$3.06 but is -16% since. In April they dropped their equity holding in National Storage REIT (NSR AU), in May they updated again.
- Last week they had a big new Investor Presentation saying they would go ahead. There’s a trade in here.
Lutronic (085370 KS): Hahn & Co Tender Offer
- On 9 June, skin and cosmetic treatment play Lutronic Corp (085370 KS) announced a Tender Offer from Korean PE outfit Hahn & Company.
- After acquiring 19.41% from Lutronic’s CEO at ₩ 36,700, Hahn will launch an Offer for all remaining shares at the same price.
- This Offer Price is a lifetime high. There is no minimum tendering condition.
Keisei Electric: Distorted Valuation Unveils Opportunity for Activist Investors
- Surpassing the pre-COVID average of 49%, the NAV discount currently stands at 61%, implying potential 12% market-neutral returns in the short-term through the recovery of the core transportation business.
- Activist investor influence in distributing Keisei Electric’s ¥1,980bn Oriental Land (4661 JP) stake to existing shareholders could unleash over 150% potential upside, surpassing the earlier mentioned 12% gain.
- Thus, there is high likelihood of Keisei Electric Railway Co (9009 JP)‘s continued outperformance over Oriental Land in the medium term.
Seino (9076) – More Seino, Seino More. Know What I Mean? Eh Eh? Seino Goes Big on Capital Policy
- Three years ago, Seino Holdings (9076 JP) delivered a lot of its cash back to shareholders in a big buyback. They bought back almost 15mm shares (7.5%).
- Since then, they’ve bought another 2.5%. In February, they changed their Dividend Policy to max(2.4% DOE, 30% payout ratio). Then they set a cap and floor on the dividend.
- Four months later they have a new MTMP, and a new Dividend Policy. Simple. 4.0%+ DOE. Div +70% vs last year. Oh… and there’s an 11% buyback.
HSCEI Index Rebalance Preview: Two Changes Likely in September
- Trip.com (9961 HK) and Chow Tai Fook Jewellery (1929 HK) could replace Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) at the upcoming rebalance in September.
- Estimated one-way turnover at the rebalance is 1.2% resulting in a one-way trade of HK$744m. The official capping will be done based on closing prices from 29 August.
- Short interest has been rising on the potential adds and short covering could take the stocks higher, especially Chow Tai Fook Jewellery (1929 HK).
MVIS Australia A-REITs Index Rebalance: Float & Capping Changes
- The upcoming rebalance of the MVIS Australia A-REIT Index will be implemented at the close on 16 June. There are no constituent changes, but there are float and capping changes.
- Estimated one-way turnover at the rebalance is 2.7% resulting in a one-way trade of A$16.6m. There is limited impact on the index constituents.
- The largest inflows are on Scentre Group, HomeCo Daily Needs REIT and Region Re, while the largest outflows are on Stockland, Mirvac Group, Dexus Property and Goodman Group.
Hailan Holdings (2278 HK): Conditional Offer Open but Success Is Daunting
- Hailan Holdings (2278 HK)‘s voluntary conditional offer from its controlling shareholder at HK$3.36 per share is open. The IFA opines that the offer is fair and reasonable.
- The offer is subject to a 90% minimum acceptance condition – the offeror holds at least 90% of the offer shares and the disinterested shares.
- The acceptance condition is daunting due to the high hurdle rate and the lack of a bump. The current gross spread of 5.0% equals the premium to the undisturbed price.
Brookfield to Buy Network International
- Network International Holdings (NETW LN) and a Brookfield Asset Management Lt (BAM US)-led consortium agreed on a 400p/share cash offer (64% premium, 12.9x EV/Fwd EBITDA) to be implemented via a scheme of arrangement.
- Network is no longer grossly undervalued. The 9 June closing share price of 383p represents an 89% chance of completing the deal (based on the 245p close price).
- Synergies have not been quantified, but may explain why Brookfield’s consortium has been able to trump CVC. Spread is 4.25%/8.92% (gross/annualised, assuming settlement by 15 December). Long.
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