In today’s briefing:
- Kito (6409) Goes Private. Again. This Time With KKR, But Watch the Register
- NIFTY100 Index Rebalance Preview: Five Potential Changes in September
- Block Deal Sale of Hyundai Heavy Industries
- SK Telecom Nearing Zero Foreign Room & May Spark Alternative Trading for KT Corp
- CVC Sizes Up Brambles (BXB AU)
- Hyundai Heavy Liquidation by KSOE & Passive Flow Tightening Recalculations
- CVC to Lob an Offer for Brambles?
- KRX New Deal Index Rebalance Preview: Buying on KMW; Selling on AfreecaTV
- Brookfield/HomeServe Close to Reaching an Agreement
Kito (6409) Goes Private. Again. This Time With KKR, But Watch the Register
- Kito Corporation (6409 JP) was taken private in 2003. It was re-IPOed by Carlyle in 2007 but Konecranes stayed an investor until 2016. Then it unwound.
- Today, Kito announced the best results since pre-covid and forecasts for growth. They also announced KKR unit Crosby would launch a Tender to buy them out at a 62% premium.
- Shareholder structure is highly unusual, and interesting to boot, especially looking at the most recent arrival in the top two. The fact there is a break fee is… telling.
NIFTY100 Index Rebalance Preview: Five Potential Changes in September
- We are past the halfway mark in the review period for the September rebalance of the NIFTY100 Index. We see five potential changes which should be announced end August.
- There is a high probability of Tata Power (TPWR IN), Indian Railway Catering and Tourism (IRCTC IN), Bharat Electronics (BHE IN) and Mphasis Ltd (MPHL IN) being added to the index.
- High probability deletions are Lupin Ltd (LPC IN), Jubilant Foodworks (JUBI IN), Zydus Lifesciences Ltd (ZYDUSLIF IN), Punjab National Bank (PNB IN) and Steel Authority of India (SAIL IN).
Block Deal Sale of Hyundai Heavy Industries
- After the market close today, Korea Shipbuilding & Offshore Engineering announced that will sell 1.7% of its shares (1.5 million shares) in Hyundai Heavy Industries in a block deal.
- The block deal sale is expected to take place on the morning of 17 May. The block deal price is expected to be 120,650 won.
- We would take this deal as we believe this sale is likely to have a short term positive impact on HHI and increase the free float of HHI.
SK Telecom Nearing Zero Foreign Room & May Spark Alternative Trading for KT Corp
- What immediate impact will SKT’s zero foreign room have? The recent trading theme that the local market is paying attention to is the alternative purchase of KT instead of SKT.
- The recent driving force behind SKT’s foreign buying is the growing market preference for defensive stocks with high dividend yields. And KT also meets this condition.
- However, SKT’s foreign room may turn around temporarily: 1. SKT’s deletion possibility from the MSCI through a special change and 2. the FTSE investability down-weight at the June QIR.
CVC Sizes Up Brambles (BXB AU)
- Brambles Ltd (BXB AU) has confirmed that it has had a preliminary engagement with Luxembourg-based CVC in regard to an unsolicited proposal to acquire all of its shares.
- No formal proposal has yet been received. No price was made public although various media reports indicate a A$20bn bid, which may or may not hinge off an EV figure.
- In is 3Q22 trading update, Brambles upgraded its FY22 revenue and earnings guidance, despite ongoing cost inflation and pallet shortages.
Hyundai Heavy Liquidation by KSOE & Passive Flow Tightening Recalculations
- KSOE will sell 1.5M shares, equivalent to 1.70% of SO, at an expected discount rate of 5%. After the disposal, KSOE’s stake will fall to 78.02%.
- The need to increase float shares (and loan balance) due to the MSCI inclusion and the KOSPI 200 up-weight should be considered as the company’s pre-emptive response to the market.
- But even with today’s disposal, the MAXIMUM real-world float will be 11.29%. An additional passive inflow equivalent to 1.73% of SO will occur until June 9th, 5.13x ADTV.
CVC to Lob an Offer for Brambles?
- Brambles Ltd (BXB AU) responded to press speculation by stating it had preliminary discussions with CVC Capital on a privatisation proposal. The shares rose 11.2% to close at A$11.60.
- The AFR’s rumour of “a bid valuing Brambles at more than $20 billion, including debt” would imply an offer price around A$11.50, a 10% premium to the undisturbed price.
- As the Australian takeover premium ranges from 20% to 40%, we think that a bid of around A$13 per share (25% takeover premium) will be necessary for due diligence access.
KRX New Deal Index Rebalance Preview: Buying on KMW; Selling on AfreecaTV
- The review period for the September rebalance of the KRX New Deal indices started on 1 May and will run till 31 July. Implementation is on 8 September.
- Intellian Technologies (189300) could replace Danal Co Ltd (064260) in the Internet index, while KMW Co Ltd (032500 KS) could replace AfreecaTV (067160 KS) in the top 3 index stocks.
- Nexon Games (225570 KS) could replace Devsisters (194480 KS) in the Game Index, though the flows are small on the stocks given the small benchmarked AUM.
Brookfield/HomeServe Close to Reaching an Agreement
- Media reports that HomeServe and Brookfield are close to reaching an agreement. Since news of the approach broke, the share price of HomeServe has increased by c. 52%.
- My fair value estimate (DCF based) is 1,206p, which could presumably be enough for the founder to sell its 12.1% stake (enough to prevent a squeeze-out).
- At1,206p (71% premium to the price prior to disclosures), a financial buyer could obtain a 15.3% cumulative IRR by year 8. Long HSV LN.
Before it’s here, it’s on Smartkarma
