In today’s briefing:
- Outsourcing (2427) MBO Arrives! Bain Launches Cheeky, Opportunistic, Low(Priced) TOB
- Ecopro BM KOSPI Transfer Listing Disclosure
- Outsourcing (2427 JP): Relief as Bain Launches Tender at Unchanged Terms
- Ecopro BM (247540 KS): Index Impact of KOSDAQ to KOSPI Transfer
- Ecopro BM: Announces It Will Switch Listing from KOSDAQ to KOSPI
- Cathay Pacific – Reported Air China Interest Prompts Assessment of Structural Disadvantages
- MTAR Technologies- Forensic Analysis
- Comfortdelgro (CD): March on Chinese Tourists
- Air China (753 HK): Up Stakes in CX?
- Illinois Tool Works: A Diversified
Outsourcing (2427) MBO Arrives! Bain Launches Cheeky, Opportunistic, Low(Priced) TOB
- After an extension due to a European Foreign Subsidies Review filing, and a small ‘accident’ regarding the earnings release, we have a deal.
- The earnings release itself seemed more innocuous than articles and rumour suggested show the causes of impairments and so it seemed like there was little cause to walk/declare MAC.
- Now it will be done in 20 days. I still think this is cheeky, opportunistic, and low, and it is up to the float to decide what to do.
Ecopro BM KOSPI Transfer Listing Disclosure
- The schedule includes submitting the transfer listing application post-EGM on March 26th. KRX approval expected in 4-6 weeks due to Ecopro BM’s financial soundness. KOSPI listing follows in 2-3 weeks.
- As for KOSDAQ 150 ad-hoc change, it will be replaced with the top reserved issue. The anticipated timing for this ad-hoc change is around mid or late May.
- Following Feb 7 disclosure, stock surged over 10% in 2 days. Precedents show rallies pre-shareholder meetings, but KOSPI listing brings corrections. Today’s resolution could boost Ecopro BM short term.
Outsourcing (2427 JP): Relief as Bain Launches Tender at Unchanged Terms
- Outsourcing Inc (2427 JP) announced that the pre-condition was satisfied, and Bain’s tender offer remains unchanged at JPY1,755 per share, a 52.1% premium to the undisturbed (8 December).
- Shareholders will breathe a sigh of relief as the weak 4Q and significant impairments have raised concerns that Bain would cut its offer or walk away.
- The offer attractiveness has increased partly due to lower consensus. At the last close and for a 3 April payment, the gross/annualised spread is 2.0%/22.8%.
Ecopro BM (247540 KS): Index Impact of KOSDAQ to KOSPI Transfer
- Ecopro BM (247540 KS)‘s Board has approved the delisting of the stock from the KOSDAQ market and to list on the KOSPI market. The shareholder meeting is on 26 March.
- Historically, the KRX has taken an average of 64 days from application to approve the listing to transfer from the KOSDAQ market to the KOSPI market.
- Ecopro BM (247540 KS) will be deleted from the KOSDAQ 150 Index on its last trading day and inclusion in the KOSPI 200 Index could take place in September.
Ecopro BM: Announces It Will Switch Listing from KOSDAQ to KOSPI
- After the market close on 27 February, Ecopro BM (247540 KS) announced that it will switch its listing from KOSDAQ to KOSPI.
- Ecopro BM currently has a market cap of 23.1 trillion won. It is the largest stock in KOSDAQ right now and it would be the 17th largest stock in KOSPI.
- Lofty valuation is one of the main reasons why we continue to be bearish on Ecopro BM. It is trading at P/E of 203x in 2024 and 71x in 2025.
Cathay Pacific – Reported Air China Interest Prompts Assessment of Structural Disadvantages
- We publish a deep dive on historical margin management at Cathay Pacific following Bloomberg reports that Air China is considering raising its 29.99% stake.
- We see Cathay’s consistent underperformance of the global industry as due to structural disadvantages competing against lower cost competitors without the benefit of attractive joint ventures or M&A.
- Our deep dive comparing margin generation to ten major global peers highlights weak pricing power without sufficient offset from staff cost/other cost efficiencies as the key problem.
MTAR Technologies- Forensic Analysis
- MTAR Technologies (MTARTECH IN) is a precision engineered company that caters to customers in clean energy, Space, Defense sectors, etc.
- The company has done well over the last few years in terms of securing business, however there are concerns on the margins end, working capital and cash generation.
- There also exists a high business risk in terms of customer concentration since more than 75% of the revenues (F23) come from one single entity.
Comfortdelgro (CD): March on Chinese Tourists
- Comfortdelgro Corp (CD SP) share price has underperformed its tourism related transport operator peers.
- Key drivers are still strong, including the expected influx of Chinese tourists from visa-free travel arrangements.
- Valuation is still compelling, and it is not too late to own it.
Air China (753 HK): Up Stakes in CX?
- Speculations on Air China Ltd (753 HK) seeking control of Cathay Pacific (293 HK) reappeared recently. We think a change in CX’s ownership is just a matter of time.
- CX has been a more important profit contributor to Air China after the pandemic, and depends on pricing, Air China is expected to benefit from such acquisition.
- Both are trading on 0.5SD below their 5-year P/B average and we prefer CX in the short term, but Air China looks to be a better long-term choice.
Illinois Tool Works: A Diversified
- Generators and machine producer, Illinois Tool Works Inc.
- (ITW) has reported a modest growth amidst the unique operational challenges faced in the fourth quarter of 2023.
- In particular, the company confronted reduced demand for capital expenditure (CapEx), lean customer inventories and a strike within the automotive industry.
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