In today’s briefing:
- Toshiba – How Much Risk Is There On A Deal Break?
- KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks
- End of Mandatory Lock-Up Periods for 54 Companies in Korea in November 2022
- China VAST’s Vote on 23 November
- Nitro Attracts a Competing Offer from KKR’s Alludo
- Chiho (976 HK): Possible Restructuring May Trigger Offer
- ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion
- Iberdrola/PNM Resources: One to Watch
Toshiba – How Much Risk Is There On A Deal Break?
- With Toshiba giving up its deal premium on news that the JIP consortium was struggling to secure financing it is worth assessing how much downside risk there is.
- Prospects are deteriorating rapidly and we believe valuations for Kioxia and the HDD business are likely to lead the way down.
- We estimate that there is still a premium of about 20-25% being assessed for the possibility of a deal but that there is fundamental risk beyond this.
KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks
- With the review period complete, we see 11 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
- Most of the potential changes are high probability ones, but there are some stocks that are very close to market cap and liquidity cutoffs.
- The impact of passive trading will be much higher on the potential deletes as compared to the potential inclusions, though trade notionals are higher for the potential adds.
End of Mandatory Lock-Up Periods for 54 Companies in Korea in November 2022
- We discuss end of the mandatory lock-up periods for 54 stocks in Korea in November 2022, among which 2 are in KOSPI and 52 are in KOSDAQ.
- These 54 stocks on average could be subject to further selling pressures in November and could underperform relative to the market.
- Among these 54 stocks, the top 5 market cap stocks include Enchem, Sebit Chem, DearU, Sillajen, and Sampyo Cement. They could be exposed to greater selling pressures in November.
China VAST’s Vote on 23 November
- China Vast Industrial Urban Development (6166 HK)‘s scheme document is out with the court meeting scheduled for 23 November. The IFA considers the offer to be fair and reasonable.
- Key conditions include approval by at least 75% of independent shareholders (<10% rejection). Shareholders with blocking stakes either provided irrecovables or will likely support the offer.
- The offer is not great but headcount test is not applicable. At last close and for the 14 December payment, the gross and annualised spread is 0.8% and 6.7%, respectively.
Nitro Attracts a Competing Offer from KKR’s Alludo
- Nitro Software Ltd (NTO AU) has received a competing proposal from Alludo. The offer is A$2.00 via a scheme or an off-market takeover at A$2.00, with a 50.1% minimum acceptance condition.
- Unsurprisingly, the Board rejected Potentia’s A$1.80 per share off-market takeover offer. Potentia has three options – lift its offer, do nothing or sell into Alludo’s offer.
- While Alludo’s offer is 11.1% above Potentia’s offer, it is far from a knockout bid. Therefore, there is a good chance that Potentia returns with improved terms.
Chiho (976 HK): Possible Restructuring May Trigger Offer
- Metal recycler Chiho Environmental Group Limited (976 HK) was suspended this morning pursuant to Hong Kong’s Takeovers Code.
- For more than a year, the controlling shareholder group has been implementing a potential restructuring. The ultimate controlling shareholder is Tu Jianhua, an executive director of Chiho.
- This long drawn-out reorganisation may finally result in an Offer for Chiho.
ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion
- At the end of the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
- Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. The impact on the potential deletions is higher on average.
- The potential adds have outperformed the potential deletes over the last six months, though there has been a sharp narrowing of the gap over the last few weeks.
Iberdrola/PNM Resources: One to Watch
- Iberdrola SA has not abandoned its strategic plan in the United States, which includes the acquisition of PNM Resources through its American subsidiary Avangrid Inc.
- Iberdrola is convinced that the transaction will be unblocked in the coming weeks, either because the appeal prospers or because of changes in the regulator.
- I retain my TP of $50.3 cash takeout price (consideration offered by Avangrid/Iberdrola) vs. my $49.8/share median implied valuation. My TP represents 8.5% upside plus a 2.9% dividend yield.
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