In today’s briefing:
- Thinking About the Ito-En (2593 JP) MSCI Index Exclusion Event
- Samsung C&T Shareholder Return: Directly Related to Lee Family’s Inheritax Tax Issue
- O2Micro Wraps Up. GSMG Capitulates
- Adways (2489 JP) – Really, Really Big News for a SmallCap
- SciClone Pharma (6600 HK): Inexpensive Ahead Of New Therapies Rolling Out
- Trend Micro (4704 JP) – Value Act’s Activism Starts To Show, But It’s Still Small Potatoes
- Keppel (KEP SP): Keppel O&M/Sembcorp Marine Transaction Moves Towards Completion
- Toyo Construction (1890 JP): The Board Uses the Smokescreen of a Special Committee
- EQD | TSMC (TSM US): Revisiting the Call Ratio and Vol Pair Trade with AAPL US
- EQT/Va-Q-Tec: Deal Will Complete
Thinking About the Ito-En (2593 JP) MSCI Index Exclusion Event
- Ito En Ltd (2593 JP) is a slightly strange stock in the grand scheme of things.
- It is expensive for its growth, and the shareholder register is such that it is subject to the whims and vagaries of forces over which investors may have no control.
- This time, it is MSCI. Stock prices go up, stocks go in the indices. Stock prices fall, they come out. It’s coming out this month. So who buys?
Samsung C&T Shareholder Return: Directly Related to Lee Family’s Inheritax Tax Issue
- The target volume is 24,718,099 ordinary shares (13.2%) and 159,835 preferred shares (9.8%). That is, C&T will cancel all of its treasury shares in the next five years.
- C&T’s decision to cancel treasury shares clearly indicates that the family’s fundraising strategy is focused on stake sales rather than dividend increases.
- The number of shares inherited will be the volume Lee Seo-hyun will sell in the short term as this is within the range that minimizes the tax liability through LIFO.
O2Micro Wraps Up. GSMG Capitulates
- At the EGM held on January 31, O2Micro International (OIIM US)’s shareholders approved the Merger Agreement. Completion was subject to satisfying certain conditions, which appeared rudimentary.
- An equity corporate action notice released yesterday (15 February) indicates the last day of trading will be the 24 February, with an effective date of 27 Feb.
- O2Micro is currently at a 2.7% gross spread. At the other end of the spectrum, Glory Star New Media (GSMG US) is at a staggering 79% spread, despite shareholder approval.
Adways (2489 JP) – Really, Really Big News for a SmallCap
- Adways Inc (2489 JP) is an ad agency, ad platform, marketing platform, and a variety of sub-platforms serving certain mobile, PC, marketing, and app development niches.
- They released earnings last Friday, but today released other – follow-on information.
- Included was a buyback – up to 5.7mm shares (13.57% of shares out) for up to ¥2bn (9% of mktcap) – over the next 5.5 months. Seems big. Look closer.
SciClone Pharma (6600 HK): Inexpensive Ahead Of New Therapies Rolling Out
- Shareholders have given SciClone Pharmaceuticals (6600 HK)‘s buyback the go-ahead which will result in the major shareholder holding (upward of) 31.63%, and the freedom to creep.
- As such, a concentrated shareholder register, primarily comprising entities that privatised SciClone in 2017, gets even more concentrated.
- Trading inexpensively ahead of the launch of a new (and approved) drug, SciClone is worth a second look.
Trend Micro (4704 JP) – Value Act’s Activism Starts To Show, But It’s Still Small Potatoes
- Trend Micro Inc (4704 JP) is an interesting, but odd little company in an interesting odd little niche. They make cybersecurity products and are good at it.
- Last summer, well-known activist Value Act Capital showed up on the tape in August with an 8.7% position.
- What had been good dividend payout ratios are now cemented. Now there is a big buyback to return cash. Look for more. And as always, details matter.
Keppel (KEP SP): Keppel O&M/Sembcorp Marine Transaction Moves Towards Completion
- Sembcorp Marine (SMM SP) shareholders voted overwhelmingly for the merger between Keppel O&M and Sembcorp Marine. The transaction is expected to close by 28 February.
- The divestment of Keppel O&M will further move Keppel Corp (KEP SP) towards a more asset-light and recurring earnings model, providing a helpful tailwind to hit its 15% ROE target.
- Pre-Dividend in specie distribution, our Keppel SoTP valuation based on Sembcorp Marine’s reference issue price (S$0.122) and last close (S$0.136) is S$8.49 and S$8.72 per share, respectively.
Toyo Construction (1890 JP): The Board Uses the Smokescreen of a Special Committee
- Toyo Construction (1890 JP) will set up a special committee to evaluate YFO’s JPY1,100 offer. The Board will decide “after respecting the content of the decision of the special committee.”
- YFO rightly points out the special committee is a ruse and is an attempt by the Board to demonstrate ‘a fair process’ for the predictable decision to reject its proposal.
- The Board’s anxious move shows that protracted conflict is shifting in favour of YFO. At the last close, the gross spread to the tender offer is 10.3%.
EQD | TSMC (TSM US): Revisiting the Call Ratio and Vol Pair Trade with AAPL US
- We published last November about buying upside via selling call ratios and also about a vol pair trade idea versus AAPL US.
- Buffet has surprisingly exited the bulk of his stake in the chip maker causing concern that the value investor no longer sees value
- We update on the position and consider what to do next
EQT/Va-Q-Tec: Deal Will Complete
- The offer price is attractive for shareholders, even more so following an enthusiastic recommendation from the Board and a profit warning during the acceptance period.
- The main hurdle was always the acceptance rate, but at 62.46% on the last count, it is just shy of the minimum threshold condition of 62.5%.
- Some shareholders may feel tempted to explore the benefits of a domination agreement (as in participating in future synergies, with liquidity risk). Spread (gross/annualised) is 1.73%/6.11%. Long and tender.
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