In today’s briefing:
- DIDI Decides To Delist – Now It Gets Messy
- Renesas (6723 JP) – On Top of Peer-Beating Growth, and Valuation… Watch for Buybacks
- DiDi to Vote on US Delisting on 23 May
- Hyundai Heavy Industries: Passive Inflow Timeline (MSCI & K200) & Position Closing Timing
- Recap on WISE Theme Indexes (TIGER ETFs) Rebalancing Trading on April 14
- Korea FOL (Foreign Ownership Limit) Stock List: MSCI Flow Trading on KT & SKT
- Beenos Valuation: SOTP Suggests Plenty of Upside Potential
- Twitter Launches Its Poison Pill – Now We Wait
- Edizione & KKR/Atlantia: Defensive and Generous Takeout Offer
DIDI Decides To Delist – Now It Gets Messy
- The company was told a year ago that it had data problems. It was then told in June it had serious data problems and was given 15 days to fix.
- It did not. It listed itself, against the wishes of the regulators. Then it got in serious hot water. And it has only been getting hotter.
- A hoped-for HK Listing By Introduction was nixed 5 weeks ago. Now the Company is simply going to delist to try to solve its problems behind closed doors before relisting.
Renesas (6723 JP) – On Top of Peer-Beating Growth, and Valuation… Watch for Buybacks
- A bit over a year ago Renesas Electronics (6723 JP) announced its transaction to buy Dialog Semiconductor (DLG GR) for €4.8bn (roughly ¥624bn) and the transaction closed end-August 2021.
- In September, Renesas announced a “Progress Update” covering various business segments, expectations for supply in the sector, and eventual “shareholder return” policy.
- This past week the Nikkei carried an article talking about a possible stock buyback later this year. I explore.
DiDi to Vote on US Delisting on 23 May
- DiDi Global (DIDI US) will hold an EGM on 23 May to vote to delist the ADS from the NYSE. The shares will not be listed on another exchange before delisting.
- Due to the regulatory restrictions, DiDi is losing market share and pricing power to competitors in China. The 4Q21 results were poor.
- Directors and key pre-IPO investors together account for 48.2% of outstanding shares, suggesting that the ordinary resolution will pass.
Hyundai Heavy Industries: Passive Inflow Timeline (MSCI & K200) & Position Closing Timing
- The typical approach for the MSCI rebalancing trading is to close the position around the announcement. However, HHI is waiting for another passive inflow event right after MSCI SAIR.
- KOSPI 200 rebalancing trading usually starts six weeks before implementation. It means early May, which coincides with the closing timing of the MSCI rebalancing trading position.
- Suppose the sentiment for the local shipbuilding sector will remain neutral. In that case, KOSPI 200 flow makes us consider pushing back the position closing for the MSCI flow trading.
Recap on WISE Theme Indexes (TIGER ETFs) Rebalancing Trading on April 14
- In general, the projection hit rate for the top market cap constituents was sufficiently high. And the correlation between their stock price direction and passive flow was also high.
- However, the projection hit rate for the constituents with a small market cap was relatively low.
- If we traded the proposed tradable names with an equal-weighted Long/Short basket, we would have achieved a return of 1.76%. Even excluding Hanjin Kal, we would have achieved 1.31%.
Korea FOL (Foreign Ownership Limit) Stock List: MSCI Flow Trading on KT & SKT
- SKT has a good chance of being deleted with the current level of foreign room. If it gets deleted, it will likely experience a passive outflow of 3.02x ADTV.
- KT Corp will also face the Price Cutoff Date, which should re-test KT’s foreign room status. The chances that it will eventually fail the inclusion also seem pretty high.
- We need to engage in short-term trading aimed at the possibility that they will face a price correction around the MSCI May SAIR result announcement.
Beenos Valuation: SOTP Suggests Plenty of Upside Potential
- Leading up to the GoTo IPO, Beenos Inc (3328 JP) shares rallied more than 80% to ¥2,364 per share, possibly expecting substantial listing gains from the “conservatively” priced GoTo IPO.
- GoTo (GOTO IJ) opened around 18% above its IPO price on 11th April 2022, but Beenos fell by around 7% and 8% on 11th and 12th April 2022 respectively.
- It may be too late to ride the GoTo IPO rally, but exposure to a high-profile company like GoTo brings visibility, resulting in a much narrower NAV discount.
Twitter Launches Its Poison Pill – Now We Wait
- Twitter Inc (TWTR US) announced a poison pill in a press release Friday with details in an 8-K Monday. It will dividend out one right/share on record date 25 April.
- The right would allow Rightsholders, under certain conditions, to purchase $420 of shares for $210. That number is not a coincidence.
- Some will get upset by this, but there is a lot of fine print. And I review how the poison pill fits into Delaware hostile defence standards.
Edizione & KKR/Atlantia: Defensive and Generous Takeout Offer
- On 14 April, a consortium led by Edizione launched a defensive delisting takeover bid for Atlantia for €23/share (which won’t be adjusted for the €0.74 dividend payable before end of acceptance).
- The premium is 24.4% (before takeover rumors), and represents 8.9x EV/Fwd Revenue and 14.1x EV/Fwd EBITDA (Capital IQ consensus). The offer price is 16% higher than my SOTP valuation (€19.82/share).
- It is almost a knock-out bid with minimal interloper risk. Gross spread to the aggregate amount is 4%, annualised return is 18% (assuming 13 July settlement). Recommendation is long ATL IM.
Before it’s here, it’s on Smartkarma
