In today’s briefing:
- StubWorld’s: Amorepacific’s Multi-Year Lows
- BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling
- Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster
- SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
- Quiddity JPX-Nikkei 400 Rebal 2024: End-Oct 2023
- Tietto (TIE AU): Zhaojin Makes An Offer
- Quiddity A/H Premium Tracker (To Oct27): Volatility Off, Spreads Still Volatile. GreatWall Q3!
- Kum Yang – Submits An Agenda to Expand Issuance Limit of CB and BW to 10 Trillion Won
- Tietto Minerals (TIE AU): Zhaojin’s Conditional Off-Market Takeover Offer
- Mankind Pharma Lock-Up – A US$1.1bn+ Lockup Release
StubWorld’s: Amorepacific’s Multi-Year Lows
- Both the implied stub for Amorepacific Group (002790 KS) and the simple ratio (Group/Amorepacific Corp (090430 KS)) are around lifetime low levels.
- Preceding my comments on Amorepacific 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%.
BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling
- Nippon Electric Glass (5214 JP) is going through a rebuilding year. Lots of restructuring expenses and I expect there will be more.
- The company today announced the outline of its next Mid-Term Management Plan for the 5 years to 2028. It will announce details in early Feb 2024 with results.
- In that, there is ¥50bn of buybacks through Dec2026, of which ¥20bn will be made in the next 4mos. That is about 11-14% of ADV assuming the price jumps.
Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster
- A small specialty adhesives maker – Teraoka Seisakusho (4987 JP) has had an MBO proposed and approved. At 0.54x book. NetCash+securities+2.5mos of net A/R+inventory = 99% of Takeover Market Cap.
- Borrow 2x EBITDA, pay out the cash and securities, and this is being done at <0.3x remaining book. The takeover is 100+% bank funded. It’s ridiculous.
- For this to get stopped, however, someone has to go activist on a smallcap where retail owns the entire float and friends and family own 55% to start.
SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
- Two thirds of the way through the review period, we see one change for the SET 50 Index in December with KCE Electronics (KCE TB) replacing Ngern Tid Lor (TIDLOR TB).
- There is one close change where I-TAIL (ITC TB) could replace Srisawad Power 1979 (SAWAD TB) in the index.
- Delta Electronics Thailand (DELTA TB) is unlikely to be deleted while Berli Jucker (BJC TB) fails liquidity and is unlikely to be added.
Quiddity JPX-Nikkei 400 Rebal 2024: End-Oct 2023
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2024 based on trading data as of end-October 2023.
Tietto (TIE AU): Zhaojin Makes An Offer
- SOE-Backed Zhaojin Mining Industry H (1818 HK), China’s fourth largest integrated gold producer, has tabled a non-binding Offer for Aussie-listed West African gold miner Tietto Minerals Ltd (TIE AU).
- The A$0.58/share cash Offer is a 36% premium to undisturbed. Zhaojin is seeking 50.1% of shares out, with 7.02% already held.
- Conditions include a raft of PRC and Côte d’Ivoire regulatory approvals. None of these should face opposition.
Quiddity A/H Premium Tracker (To Oct27): Volatility Off, Spreads Still Volatile. GreatWall Q3!
- The New and Better (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- Last week the portfolio bounced back, erasing the previous week’s losses. Southbound continues to see net inflows and this week all H/A Pair sectors saw Hs outperform except Energy.
- High-Div SOEs continue to be weak. Banks, Pharma, Industrials, and Utilities spreads continue to be Very Volatile. Quiddity Favourite Great Wall Motor (2333 HK) up 7% after Q3 results Friday.
Kum Yang – Submits An Agenda to Expand Issuance Limit of CB and BW to 10 Trillion Won
- On 30 October, Kum Yang announced that it has submitted an agenda to expand the issuance limit of CB and BW to 10 trillion won.
- This increase in the limit of CB and BW issuance to 10 trillion won would mean potential capital raise through these methods that are nearly 2x its entire market cap.
- Kum Yang may be trying to raise large amount of capital (several trillion won) which could result in significant dilution risk for the existing shareholders.
Tietto Minerals (TIE AU): Zhaojin’s Conditional Off-Market Takeover Offer
- Tietto Minerals Ltd (TIE AU) has disclosed a conditional proposal from Zhaojin Mining Industry H (1818 HK) at A$0.58 per share, a 36.5% premium to the undisturbed price of A$0.425.
- The offer is conditional on China and Cote d’Ivoire regulatory approvals (should be forthcoming) and a 50.1% minimum acceptance condition (which can be waived).
- The offer is light compared to peer resource multiples and recent share prices. The presence of large Chinese shareholders is a stumbling block for a rival offer.
Mankind Pharma Lock-Up – A US$1.1bn+ Lockup Release
- A group of shareholders raised around US$530m in Mankind Pharma(MP) IPO in May 2023. The pre-IPO shareholders will be released from their lockup soon.
- MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
- In this note, we will talk about the lock-up dynamics and recent updates.
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