In today’s briefing:
- WuXi XDC (2268 HK): Index Inclusion Possibility & Timelines
- Japan Best Rescue (2453) MBO at ¥1,000; High Premium, Low Multiple, No Money For Synergies or Growth
- Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting
- Shidax (4837) – Mgmt Lowers F’casts So Family Can MBO Minorities Cheap. Offensive Governance.
- CSI300 Index Rebalance Preview: 13 Potential Changes in December
- Vinda International (3331 HK): Essity’s Stake Attracts More Potential Bidders
- StubWorld: Takara Trading “Rich” As Bio Cuts Forecast Earnings
- KOSPI200 Rebalance in December 2023 Highlighted by Locals
- KT&G: A New Shareholder Return Policy Worth 2.8 Trillion Won Over Next 3 Years
- Japan Best Rescue System (2453 JP): MBK Partners Backed MBO Tender Offer at JPY1,000
WuXi XDC (2268 HK): Index Inclusion Possibility & Timelines
- WuXi XDC Cayman (1877628D HK) is looking to raise up to HK$4.07bn (US$521m) in its IPO by selling 197.6m shares at HK$20.6/share, valuing the company at HK$24.67bn (US$3.16bn).
- WuXi XDC Cayman (1877628D HK) will not get Fast Entry to any indices but should be added to the HSCI and to Southbound Stock Connect in March.
- Inclusion in other indices will take longer with the highest probability of index inclusion starting in September 2024.
Japan Best Rescue (2453) MBO at ¥1,000; High Premium, Low Multiple, No Money For Synergies or Growth
- This MBO by MBK is a strong premium because of a low recent price, but it pays a low P/FCF multiple for growth, and no synergies counted.
- Yet another MBO where insiders and friends take advantage of structural inferiority of minority shareholders. Something Should Be Done.
- What do Minority Shareholders in Japan Say When They Meet Death? “OK, Today it is then.” (with apologies to Game Of Thrones).
Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting
- Last week, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May, and the Circular on 26 June.
- The company applied, got CSRC approval on 5 Nov, announced the issuance on 6 Nov, and shares went ex- on 10 November. It’s probably unneeded, but it’s there.
- The stock is cheap. The company will boost its payout ratio. And it isn’t that “heavy” a deal. The Rights Trading Dynamics may be interesting.
Shidax (4837) – Mgmt Lowers F’casts So Family Can MBO Minorities Cheap. Offensive Governance.
- Shidax had a Good Governance Moment last year. The stock is up 40-odd% since last year’s GGM, but now the Board, so good last year, has tripped up.
- The family and main shareholder – part of last year’s GGM – have decided to bully the Board into accepting an MBO at the wrong price.
- Management lowers forecasts without telling anyone. Bidders say “Synergies LaLaLa!” Board says “Ohh la la!” Nobody counts the synergies. Bidder buys at low multiple of newly lowered forecasts. Minorities Lose.
CSI300 Index Rebalance Preview: 13 Potential Changes in December
- With the review period for the December rebalance of the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) complete, there could be 13 changes for the index.
- We estimate one-way turnover of 1.94% at the December rebalance leading to a one-way trade of CNY 6.98bn. There are a lot of stocks with over 1x ADV to trade.
- Over the last 6 months, the potential adds and potential deletes have tracked each other and underperformed the index. Positioning has led to outperformance in the last week.
Vinda International (3331 HK): Essity’s Stake Attracts More Potential Bidders
- Bloomberg reported Asia Pulp & Paper is the latest party to have expressed interest in acquiring Essity (ESSITYB SS)’s controlling Vinda International (3331 HK) stake at more than HK$20 per share.
- Vinda has three substantial shareholders. We think the most likely structure is a bidder acquiring Essity’s stake, which would trigger a mandatory general offer.
- Vinda’s recent update points to improving growth and margins. Peers and historical multiples imply a fair price range of HK$21-26 per share, a 7-32% premium to the last close.
StubWorld: Takara Trading “Rich” As Bio Cuts Forecast Earnings
- On an implied stub and simple ratio, Takara Holdings (2531 JP) is at a decade-plus high to 60.9%-held Takara Bio Inc (4974 JP).
- Preceding my comments on Takara 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%.
KOSPI200 Rebalance in December 2023 Highlighted by Locals
- This article discusses the potential inclusions and exclusions of KOSPI200 rebalance inDecember 2023 (especially those that are highlighted by the locals).
- Stocks that are expected to be added to the KOSPI200 index include Posco DX, HD Hyundai Electric, Sam-A Aluminum, TCC Steel, and Dentium.
- Stocks that are expected to be excluded in the KOSPI200 index Include Zinus, Handsome, Cuckoo Homesys, Taekwang Industrial, and Hyundai Home Shopping.
KT&G: A New Shareholder Return Policy Worth 2.8 Trillion Won Over Next 3 Years
- KT&G announced a new shareholder return policy worth 2.8 trillion won (including dividend payout of 1.8 trillion won and treasury shares purchase/cancellation of 1.0 trillion won) over next three years.
- In addition, the company plans to cancel about 7.5% of the company’s existing treasury shares which represents about 142 billion won (1.2% of outstanding shares).
- Although this 2.8 trillion won in shareholder return policy is large, the company could have announced even larger shareholder return policy, including cancellation of its entire treasury shares.
Japan Best Rescue System (2453 JP): MBK Partners Backed MBO Tender Offer at JPY1,000
- Japan Best Rescue System Co (2453 JP)/JBR has recommended an MBK Partners-backed MBO tender offer of JPY1,000 per share, a 53.8% premium to the undisturbed price (13 November).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
- Irrevocables to accept the offer represent a 53.62% ownership ratio. The minimum acceptance condition requires a 28.1% minority acceptance rate, which is helped by the significant premium.
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