In today’s briefing:
- Shinko Electric (6967) – Break/Gap Risk Early July 2024 Update
- ESR Group (1821 HK): Consortium’s Expansion Talks Suggest Progress
- StubWorld: Barito Renewables (BREN IJ) – This Too Shall Pop
- Yangzijiang Shipbuilding (YZJSGD SP): Cheaper than Peers with Index Inclusion Kicker
- Japan Cross-Shareholding – Summary Matrix – Over US$100bn of Selling in 118 Companies
- EQT/Keywords Studios: Scheme of Arrangement
- Sermsuk (SSC TB): THBEV’s Delisting Offer
Shinko Electric (6967) – Break/Gap Risk Early July 2024 Update
- When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
- Nearly 6mos ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 16+wks ago, recommended taking profits.
- Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Gross spread is now 4.6% but time is shorter so annualised is 10+% even out to December launch.
ESR Group (1821 HK): Consortium’s Expansion Talks Suggest Progress
- Bloomberg reports that the bidding consortium is in talks to bring in other partners, such as QIA, PIF, and CPP Investment Board, to aid in privatising ESR Group (1821 HK).
- Warburg Pincus and OMERS have blocking stakes for a Cayman scheme. Warburg Pincus is seemingly supportive, and the consortium’s expansion talks suggest confidence in meeting OMERS’ price expectations.
- Our best guess is that an offer is around HK$14.00. ESR’s current valuation is undemanding, with its forward EV/EBITDA multiple at a 40% discount compared to the median peers’ multiple.
StubWorld: Barito Renewables (BREN IJ) – This Too Shall Pop
- Barito Pacific (BRPT IJ)‘s 64.7% stake in Barito Renewables Energy (BREN IJ) (now Indonesia’s largest company by market cap), is worth 8x its market cap. That’s unsustainable.
- Preceding my comments on the Barito complex are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Yangzijiang Shipbuilding (YZJSGD SP): Cheaper than Peers with Index Inclusion Kicker
- The rally in Yangzijiang Shipbuilding (YZJSGD SP) over the last month should result in the stock being added to global passive portfolios late next month.
- Yangzijiang Shipbuilding (YZJSGD SP) trades cheaper than peers on forward PE but there has been a big rally in the stock over the last month.
- There has been an increase in cumulative excess volume since mid-May and there will be positioning for the event, but there could be further gains in the stock.
Japan Cross-Shareholding – Summary Matrix – Over US$100bn of Selling in 118 Companies
- Following up on our earlier cross-shareholding work, in this note we look to summarize our work so far by looking at where most of the selling will likely come.
- Of the seven companies that we have looked at so far, collectively they have around US$102bn worth of shares to sell in 118 companies.
- Of these, they have a combined stake of over US$1bn in 23 companies.
EQT/Keywords Studios: Scheme of Arrangement
- On 3 July, PUSU deadline, Bidco and Keywords Studios (KWS LN) have agreed to an acquisition to be carried out through a scheme of arrangement.
- Shareholders will receive 2,450p/share in cash, cum dividend, 66.7% premium, for 22.4x Fwd P/E. There’s a minimal number of irrevocables and just 7.57% of capital in letters of intent.
- I think the price is reasonable considering the recent challenges affecting the value of the stock, and deal will close. Spread is 2.45%/6.3% (gross/annualised, assuming settlement by 29 November). Long.
Sermsuk (SSC TB): THBEV’s Delisting Offer
- Thai Beverage (THBEV SP) is proposing to take 64.67%-held Sermsuk PCL (SSC TB) private by way of a voluntary Delisting Offer.
- The Offer price is THB 63/share, a 27.9% premium to last close.
- This Delisting Offer requires a Scheme-like shareholder vote. Payment may occur late 4Q24. This is an illiquid arb.
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