In today’s briefing:
- Shinko Electric (6967) – Break/Gap Risk Update
- JSR (4185) – Deal Done, Now Back End Arbs Need To Be Card Counters
- Hang Lung Group: Thoughts On HLP’s Scrip Dividend
- Hang Lung Properties (101 HK): Scrip Div Helps the Family to Chip Away at Minorities
- Lynas (LYC AU): Gina’s Stake Revives MP Materials Merger
- ChiNext/ChiNext50 Index Rebalance Preview: Plenty of Overlap Between the Indices
- Hollysys (HOLI US): This Is A Buy
- Lock&Lock Tender Offer: Different Trading Angles Compared to Recent Ssangyong C&E Case
- Lock & Lock: Affinity Equity Partners Offers a Tender Offer of a 30% Stake at 8,750 Won Per Share
- Quiddity Leaderboard ASX Jun 24: A Couple of Intra-Review Changes Likely
Shinko Electric (6967) – Break/Gap Risk 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.
- 12wks 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 5wks ago, reco’d trimming.
- Shinko had outperformed Ibiden, and gross spreads had come in 5+% on JSR’s approval. Spreads are now 3% wider than their narrowest, but gap risk has widened as Shinko outperforms.
JSR (4185) – Deal Done, Now Back End Arbs Need To Be Card Counters
- Today after the close, the results of the JSR Corp (4185 JP) Tender Offer were announced. Bidco JICC-02 obtained 84.36% of the shares out in the Tender Offer.
- That means imminent index downweights, delayed index downweights, and theoretically another selldown on the last day of listed existence.
- News which came up since the start of the Tender Offer make this a little more difficult than it might have otherwise been.
Hang Lung Group: Thoughts On HLP’s Scrip Dividend
- And eagle-eyed reader spotted Hang Lung Properties (101 HK)‘s scrip dividend option for the FY23 final dividend. That’s the first time I’ve seen HLP provide this alternative.
- Over the years, the Chan family and Hang Lung (10 HK) have chipped away at HLG’s and HLP’s minorities. HLP and HLG are currently trading at all-time low P/Bs.
- This scrip dividend, which takes a page out of Jardine Matheson (JM SP)‘s playbook, would boost HLG’s stake in HLP to ~63% from 61.24% currently; if opting only for scrip.
Hang Lung Properties (101 HK): Scrip Div Helps the Family to Chip Away at Minorities
- In its final results on 30 January, the Hang Lung Properties (101 HK) board declared a final dividend of HK$0.60 per share, which can be paid in cash or by scrip.
- The Chan family’s share of outstanding shares has steadily increased from 53.15% in 2013 to 61.89%. The scrip dividend could increase the family to 63.57% of post-dividend outstanding shares.
- The Chan family have plenty of headroom to chip away at minorities before breaching the 25% public float requirements. HPL’s valuation is undemanding, but a privatisation offer is unlikely.
Lynas (LYC AU): Gina’s Stake Revives MP Materials Merger
- Lynas Corp Ltd (LYC AU) is the proverbial Aussie battler. Post the 2018 general elections, the new Malaysian government put Lynas on notice it may halt it rare-earth operations.
- Since then, Lynas’ Malaysian facility, which cuts into China’s near-monopoly on processing elements for defense/aerospace/EV/electronics industries, has (mostly) operated without substantial disruptions. Profit peaked in FY22; but has since rolled-over.
- Gina Rhinehart’s Hancock has now disclosed a 5.82% stake in Lynas; having disclosed a 5.3% stake in MP Materials (MP US) earlier this month. Lynas confirmed discussions with MPM in February.
ChiNext/ChiNext50 Index Rebalance Preview: Plenty of Overlap Between the Indices
- Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
- There are overlapping names for the two indices and some of the stocks will also have flows from the CSI Smallcap 500 Index – Shang (SH000905 INDEX) trackers.
- The potential adds have outperformed the potential deletes between 9-10% for both indices over the last month with the deletes dropping a lot more than the adds.
Hollysys (HOLI US): This Is A Buy
- On the 8th February 2024, 85% of Hollysys Automation (HOLI US) shareholders present and via proxy, voted for Ascendent Capital’s Offer. After three-plus years, the end was finally in sight.
- Then crickets. The merger was to complete in the 1Q. On the 15th April, HOLI released an accountant resignation notice. No word on dissenters or regulatory approvals. Shares sold off.
- The accountant resignation is a nothing burger. HOLI should lift their game and provide more transparency on the outstanding merger conditions. Still, the spread is attractive. This is a buy.
Lock&Lock Tender Offer: Different Trading Angles Compared to Recent Ssangyong C&E Case
- The tendering price is ₩8,750, roughly 7% higher than the last close. However, Affinity’s commitment makes this event noteworthy.
- Lock&Lock requires Affinity to target 30%. To reach 95%, securing 25% is needed, much higher than SsangYong C&E, indicating potential price volatility.
- A second public offering is likely due to the widening gap between the ownership threshold and actual acquisition percentage in Lock&Lock. This could impact prices significantly during the tendering period.
Lock & Lock: Affinity Equity Partners Offers a Tender Offer of a 30% Stake at 8,750 Won Per Share
- On 17 April, Affinity Equity Partners offered a tender offer of a 30% stake in Lock & Lock at 8,750 won per share.
- The tender offer period is from 18 April to 14 May. The number of shares that are included in this tender offer is 13.14 million shares (30.33% of outstanding shares).
- Lock & Lock’s share price could trade higher close to the tender offer price of 8,750 won as the date as the end of the tender offer period approaches.
Quiddity Leaderboard ASX Jun 24: A Couple of Intra-Review Changes Likely
- In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run-up to the June 2024 index rebal event.
- There are up to two intra-review changes possible between now and the June 2024 review which could triggered by the Silver Lake (SLR AU) and Boral (BLD AU) deals.
- Separately, I see one ASX 20 change and two ASX 100 changes for the regular rebalance in June 2024.
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