In today’s briefing:
- Japan Post Bank – A Double on Spread Expansion and More on a Buyback?
- CIMIC (CIM AU) Takeover Offer: Should Get Done; Index Implications
- Hochtief’s Unconditional Offer For CIMIC
- VW Gains On Potential Porsche IPO. PAH3 Gains Even More
- CIMIC (CIM AU) Replacement in ASX200
- LG Energy’s KOSPI 200 Float Is 15%: Weight Adjustment Trading for Other Constituents
- Bardoc – St Barbara Merger: Scheme Booklet Out; Still Wide + ASX200 Index Kicker
- LG Electronics: Impact of Restructuring the Solar Panel Business
- CIMIC in an Off-Market Takeover Bid by Hochtief
- SEPI to Raise Stake in Indra
Japan Post Bank – A Double on Spread Expansion and More on a Buyback?
- Japan Post Bank is down 15.2% since its earnings results as quarterly profit declined noticeably.
- This was driven by falls in income from PE investments and a reduction in gains on forex from maturing investments.
- While that is a sharp fall for the name, its overall risk profile, exposure to rising rates and cheap valuations make it extremely attractive in our view.
CIMIC (CIM AU) Takeover Offer: Should Get Done; Index Implications
- Hochtief AG (HOT GR) holds 78.58% of CIMIC Group Ltd (CIM AU) and has made an offer to acquire the remaining shares at A$22/share.
- Hochtief will squeeze out the remaining shareholders once it holds more than 90% of the shares in CIMIC Group Ltd (CIM AU).
- We think the offer is fair and expect the stock to open close to A$22/share tomorrow. There could be ad hoc inclusion to the ASX200 index in May or June.
Hochtief’s Unconditional Offer For CIMIC
- Actividades de Construcción y Servicios (ACS SM) , via 52.3%-held Hochtief (HOT GR), is offering $22/share for all CIMIC (CIM AU) shares it does not own. The Offer is unconditional.
- The Offer Price is a 33% premium to last close. The price will not be increased.
- Hochtief intends to exercise its right to on-market purchases. CIMIC’s board has yet to comment on the Offer.
VW Gains On Potential Porsche IPO. PAH3 Gains Even More
- Volkswagen (VOW GR) said it was in advanced talks with its controlling shareholder, the Porsche-Piëch family, over IPOing the iconic Porsche car brand.
- VW gained as much as 10.2%, lagging Porsche Automobil Holding Se (PAH3 GR)‘s intra-day-high of 15.2%.
- Proceeds from a potential IPO would ostensibly support VW’s electric vehicle roll-out. But expect the founding families to be also looking to fill their boots.
CIMIC (CIM AU) Replacement in ASX200
- Hochtief AG (HOT GR) has finally launched an unconditional offer for the rest of CIMIC Group Ltd (CIM AU) (where it already owns 78.58%).
- As David Blennerhassett writes in Hochtief’s Unconditional Offer For CIMIC, this should be a done deal. Completion would free up a place in the S&P/ASX200.
- This looks to be one of the earlier Q2 intra-quarter changes, but there are technicalities.
LG Energy’s KOSPI 200 Float Is 15%: Weight Adjustment Trading for Other Constituents
- The local street hears KRX has bumped it up to 14.68%. With the 1% rounding applied, it becomes 15%.
- It is extremely rare for a Fast Entry to come in with a float market cap of +₩10T. So, we will see significant weight adjustments for the other constituents.
- As we move towards the implementation date, we can consider basket-shorting those high-impact names for LG Energy’s long hedge.
Bardoc – St Barbara Merger: Scheme Booklet Out; Still Wide + ASX200 Index Kicker
- The Scheme Booklet for the Bardoc Gold – St Barbara Deal was published today. The Scheme Meeting will be held virtually at 1:00pm (Perth time) 30th March 2022.
- The Independent Expert has concluded that, in the absence of a Superior Proposal, the Scheme is fair and reasonable and therefore in the best interests of Bardoc Scheme Shareholders.
- Below is a discussion on the developments since my previous insight Bardoc Gold – St Barbara Merger.
LG Electronics: Impact of Restructuring the Solar Panel Business
- On 23 February, LG Electronics announced that it will exit the solar panel business due to lack of competitiveness as it has been losing money in this business.
- This restructuring will have a positive impact on LG Electronics. We applaud its strategy of focusing on what it does best and exiting businesses where it is not competitive.
- Assuming operating loss of 80 billion won and a 9% cost of capital, this would result in perpetuity value losses of 889 billion won.
CIMIC in an Off-Market Takeover Bid by Hochtief
- Hochtief AG (HOT GR) announced an unconditional off-market takeover offer for CIMIC Group Ltd (CIM AU) at A$22.00 cash per share, a 33.4% premium to the last close price.
- The offer’s implied forward EV/EBITDA multiple is at a discount to peer multiples. However, the offer is attractive compared to historical and transaction multiples.
- The offer presents a reasonable exit for minorities tired of the weak share price due to years of troubled contracts.
SEPI to Raise Stake in Indra
- SEPI will increase its stake in Indra Sistemas Sa (IDR SM) by 9.25% (22.2 days of trading volume) up to 28%, which should have a positive impact on the share price.
- Indra has dropped 9.4% on market fears that the Government might interfere in the company’s strategy. Nevertheless, this in my view, provides an entry point.
- My DCF valuation of Indra is €12.12/share, which implies 44% upside. I believe share purchases should act as a short-term catalyst for the share price.
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