In today’s briefing:
- Keppel : Thinking About Keppel/SMM MergeCo and NEW KEPPEL Pro-Forma Opportunities
- Suchuang Gas’ Privatisation Offer in Limbo as Additional Resumption Guidance Disclosed
- FTSE China 50 Index Rebalance Preview: Two Changes Could Increase to Three
- Hitachi Transport (9086) Takeover Deal Imminent
- SK Chemical’s CEO Sells All His Shares of SK Bioscience
- HS/Sawada: Khan Bank IPO Decided, and Earnings in A Week To Show Sharp Gain in BVPS/Liquidity
- Auction of China ZhengTong’s Dongzheng Stake Set for 18 May; Potential MGO
- Dongzheng (2718 HK): 18th May Liquidation Of ZhengTong’s Stake
- National Aviation Services/John Menzies: Agreed Final Offer
Keppel : Thinking About Keppel/SMM MergeCo and NEW KEPPEL Pro-Forma Opportunities
- 20 months ago, Temasek walked away from a deal to buy control of Keppel Corp (KEP SP) as the O&M business saw large writedowns and covid stoppage losses.
- The story? A possible Keppel O&M and Sembcorp Marine (SMM SP) merger. SMM was recapped and spun out of Sembcorp Industries (SCI SP) then recapped again.
- Now it’s crunch time. Keppel & SMM hope to update investors on a merger plan by end of April. This insight looks at what to look out for.
Suchuang Gas’ Privatisation Offer in Limbo as Additional Resumption Guidance Disclosed
- CR Gas (1193 HK)’s privatisation bid for Suchuang Gas Corp (1430 HK) was derailed by the trading suspension due to the disclosure of previously unaccounted for pledges/guarantees by subsidiaries.
- The controlling shareholders have attempted to keep the offer alive by agreeing to fully indemnify CR Gas for losses related to the pledges/guarantees.
- The long stop date of the offer was extended to 31 August 2022. The key risk is that the timeframe to fulfil the resumption guidance exceeds the long stop date.
FTSE China 50 Index Rebalance Preview: Two Changes Could Increase to Three
- As of the last close, we expect Li Auto (2015 HK) and PICC Property & Casualty H (2328 HK) to replace Smoore International (6969 HK) and Sunny Optical (2382 HK).
- There are some reasonably large capping changes that will result in one-way turnover estimated at 4.25% and will result in a one-way trade of HK$2,090m.
- Short interest has spiked recently on Smoore International (6969 HK), while there has been short covering on the other potential inclusions and exclusion.
Hitachi Transport (9086) Takeover Deal Imminent
- The Nikkei Leak Article of the Hitachi Transport takeover price is out. That suggests board meetings and deal announcement are imminent
- The price suggested in the article comes out to be just under ¥8,000.
- Past deals between KKR and Hitachi for Hitachi subs (and the language of the article on deal structure) suggest the minority Tender Offer Price could be different.
SK Chemical’s CEO Sells All His Shares of SK Bioscience
- After the market close on 21 April, it was reported that SK Chemical’s CEO Jeon Kwang-Hyun sold all his shares (21,852 shares) of SK Bioscience from April 19th to 21st.
- The fact that the CEO of SK Chemical, the controlling shareholder of SK Bioscience, sold all his stake in the latter company does not bode well for SK Bioscience.
- The CEO of SK Chemical selling all his shares in SK Bioscience and increasing reluctance in getting more COVID booster shots suggest further downside risk for SK Bioscience.
HS/Sawada: Khan Bank IPO Decided, and Earnings in A Week To Show Sharp Gain in BVPS/Liquidity
- It looks like the Khan Bank IPO in Mongolia is on.
- HS Holdings (former Sawada) will own <50% shortly. That will trigger de-consolidation of Khan Bank in Q2.
- That could be meaningful. Right now, the entire capital structure is in flux because of recently announced/booked/closed asset sales and now this. Earnings are out 28 April.
Auction of China ZhengTong’s Dongzheng Stake Set for 18 May; Potential MGO
- On 16 April, the Shanghai Financial Court published the details for the auction of China Zhengtong Auto Services Hldg (1728 HK)’s 71.04% stake in Dongzheng Automotive Finance (2718 HK).
- If the auction is successful and results in any person and a group of persons acting in concert holding 30%+ of the voting rights, it will result in an MGO.
- The base bid implies an MGO price of HK$1.294 per H Share, a 112.1% premium to the last close. The auction will be held from 18 May to 19 May.
Dongzheng (2718 HK): 18th May Liquidation Of ZhengTong’s Stake
- After both stocks were suspended on the 19 April, the forced liquidation of China Zhengtong (1728 HK)‘s stake in Dongzheng (2718 HK) will occur, via auction, on the 18 May.
- That minimum bid price is HK$1.294/share, or a 112% premium to last close.
- ZhengTong’s stake is 71.04% of shares out. A mandatory general offer – conditional or unconditional – may materialise from the auction process.
National Aviation Services/John Menzies: Agreed Final Offer
- The contracts, presence in airports and relationships make John Menzies a difficult business to replicate. NAS has a direct stake of 19% and undertakings and letters of intent for 33.3%.
- The 608p final offer represents a 107% premium to the 3-month VWAP and 6.1x EV/Fwd EBITDA, and is 10% above my fair-value estimate (551p/share, DCF based WACC 9.0%, 4.5x EBITDA exit multiple).
- The offer is highly likely to close. Gross spread is 1.48% with an estimated annual return of 4.78% (assuming settlement by 15 August). Reiterate long MNZS LN.
Before it’s here, it’s on Smartkarma
