In today’s briefing:
- Techtronic Industries (669 HK): JR Puts Down That Tool
- Star Entertainment (SGR AU): A$800m Equity Raise to Buy Some Time
- Oasis Management Invests in KT&G
- Star Entertainment’s A$800mn Buffer
- Never-Seen Price Pattern Detected in a Split-Off Event Granting Appraisal Rights in Korea
- Boustead Projects: Boustead Singapore Bumps. Still Underwhelming
- Trophy Asset
- Quiddity Leaderboard for SET Jun 23: DTAC-TRUE Intra-Review Changes
- Nitro (NTO AU): Potentia Comes Good with a Three-Part Offer
- Ihara Science (5999 JP) – Here Comes The Bumpitrage
Techtronic Industries (669 HK): JR Puts Down That Tool
- Jehoshaphat Research (JR) argues the case that Techtronic Industries (669 HK) has been engaged in “snowballing” to maintain margin growth.
- JR flags TTI is the only public company in the world (with over $1bn in revenues) exhibiting positive sequential gross margin change in every semi-annual period over ten years.
- Short interest had been picking up ahead of the short sell report. Shares fell 19% before being suspended in the afternoon session.
Star Entertainment (SGR AU): A$800m Equity Raise to Buy Some Time
- Star Entertainment Group (SGR AU) is looking to raise A$685m via an ANREO of 3 shares in The Star for every 5 shares at a fixed price of A$1.2/share.
- The A$1.2/share price is a 21.1% discount to the last close and a 14.3% discount to the Theoretical Ex-Rights Price (TERP) of A$1.4/share.
- Short interest is near the highs and there is an index deletion pending. We’d look to buy the stock on a move lower, especially closer to index deletion.
Oasis Management Invests in KT&G
- It was reported on 22 February in numerous local Korean media that Oasis Management has invested about 1.5% stake in KT&G Corporation (033780 KS).
- This investment in KT&G is reportedly Oasis Mgmt’s first investment in Korea. For now, Oasis Mgmt has not made any public announcement about its investment in KT&G.
- With Oasis Mgmt investing 1.5% stake in KT&G, we believe it is increasingly likely that it could start its activist campaign on KT&G sometime in 2023.
Star Entertainment’s A$800mn Buffer
- Star Entertainment Group (SGR AU)‘s announced it intends to raise $800mn after reporting a statutory $1.26bn 1H23 loss.
- This equity raising will be broken down into a A$685mn non-renounceable entitlement Offer and a A$115mn institutional placement. The equity raising is fully underwritten.
- Star also announced it has secured covenant relief through to June 2025. Star’s immediate focus is to get its house in order and prove its suitability to hold casino licences.
Never-Seen Price Pattern Detected in a Split-Off Event Granting Appraisal Rights in Korea
- A rather unusual price movement came out on February 20 for HLB. On the first trading day after the board of directors’ decision, the price reached the upper daily limit.
- The short covering got to a temporarily excessive level in the process of securing appraisal rights should be the reason that led to the upper limit.
- We should design a trading setup targeting excessive short covering-triggered price overheating in split-off events. At this point, the most likely candidate to pursue a split-off is DB Hitek.
Boustead Projects: Boustead Singapore Bumps. Still Underwhelming
- On the 6 Feb, Boustead Projects (BOCJ SP), a high-spec facilities designer and builder, announced an unconditional Offer from Boustead Singapore Limited (BOCS SP) at S$0.90/share.
- The Offer price was low-balled. Taking into account net cash of S$154mn, this was being done cheaply. It needed to be bumped and shares traded up to S$0.99 in expectation.
- BOCS has now bumped to S$0.95/share and declared terms final. Not a great outcome for minorities.
Trophy Asset
- At 6.2x EV/Sales, ManU’s shares are trading well above any other listed European football club, which may increase if the Glazers manage to cash in at a trophy asset valuation.
- Suitors are queuing and prospective bids as high as about £5 billion ($6 billion, 8.4x EV/Sales) been made to restore the club to its former glory.
- Unlimited wealth and investments in players don’t guarantee winning a European Champions League, but Manchester United is still a unique asset, with more chances than not of changing hands.
Quiddity Leaderboard for SET Jun 23: DTAC-TRUE Intra-Review Changes
- The completion of the Total Access Communication (DTAC TB) – True Corp Pcl (TRUE TB) merger could cause an intra-review change next week.
- There could be two more index changes in the regular review in June 2023.
- In this insight, we take a look at the current rankings of potential ADDs and potential DELs and their recent price and volume performance.
Nitro (NTO AU): Potentia Comes Good with a Three-Part Offer
- Potentia has returned with an improved three-part offer for Nitro Software Ltd (NTO AU). The base offer of A$2.17 is 0.9% higher than Alludo’s A$2.15 offer.
- The offer could rise to A$2.20 or A$2.25 per share based on hitting additional conditions. There is a clear path for the final offer to reach A$2.20 per share.
- A A$2.25 per share offer is unlikely due to the onerous 25% scrip acceptance condition. At the last close, the gross spread to the likely final A$2.20 offer is 0.5%.
Ihara Science (5999 JP) – Here Comes The Bumpitrage
- In my first piece, Ihara Science (5999 JP) Sees the Chairman Launch an MBO. I Might Expect Excitement I noted that the price was too low. I expected activist efforts.
- The price did not trade below the Tender Offer Price after it opened for trading. That was a sign this wasn’t going to go easy.
- This morning I am made aware of a letter from one of the “active if not activist” shareholders saying the price is too low. Hint: It is.
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