In today’s briefing:
- Link Admin: Dye & Durham’s Deal All But Dead
- ACCC’s Concerns Likely to End in a Link-DND Deal Bust
- Nexon Buyback May Signal End To Near-Term Relative Outperformance
- Finding Alpha with the End of Mandatory Lock-Up Periods Data from Korea Securities Depository
- Viva China: M&A of Global Footwear Brands at Discount & Its Stake in Li Ning Is More than Market Cap
- Kinetic & Globalvia/Go-Ahead: Recommended Offer
- Thai Life Insurance: Offering Details & Index Entry Timeline
- KRX Autos (KODEX ETF) Rebalancing: Watch Iljin HySolus, Halla Holdings, & DTR Automotive
- Liquid Universe of European Ordinary and Preferred Shares: June ‘22 Report
Link Admin: Dye & Durham’s Deal All But Dead
- This transaction is looking increasingly toast. The ACCC has outlined significant preliminary competition concerns with Dye & Durham’s (D&D) proposed acquisition of Link Administration (LNK AU).
- Separately, Link’s subsidiary, Link Fund Solutions Limited, has been notified that an application for a “Group Litigation Order” has been filed in the English High Court.
- Link has to exit PEXA for this transaction to proceed. But how badly do D&D want PEXA? Will they walk? Time to look at Link fundamentally, separate from D&D’s Offer.
ACCC’s Concerns Likely to End in a Link-DND Deal Bust
- The ACCC’s Statement of Issues noted “significant preliminary competition concerns” in relation to Dye & Durham/DND’s acquisition of Link Administration (LNK AU). The findings will be announced on 8 September.
- There is no easy fix. We think that satisfying the ACCC requires a PEXA Group (PXA AU) stake disposal which could trigger a material adverse clause.
- Link aims to proceed with the 13 July scheme meeting but this is a broken deal. While our SoTP suggests upside, there are no short-term positive catalysts.
Nexon Buyback May Signal End To Near-Term Relative Outperformance
- Nexon (3659 JP) founder Kim Jung Ju tried to sell his holdco in 2019, didn’t, now shares are higher, but he passed suddenly in Q1. The stock popped.
- Inheritance tax issues for the estate are complicated, but the buyback just executed might signal a “pause” for a while.
- In the meantime, recent underperformance in terms of Peer-relative earnings forecasts suggests the stock could drift.
Finding Alpha with the End of Mandatory Lock-Up Periods Data from Korea Securities Depository
- We discuss ways of finding alpha with the end of mandatory lock-up periods data from Korea Securities Depository (KSD) which comes out at the end of each month.
- Key companies that are highlighted in this monthly data have been typically underperforming the market much more than the market overall this year.
- Among these stocks, some of the big underperformers this year include Kakao Pay (377300 KS), HYBE (352820 KS), WYSIWYG Studios (299900 KS), and DearU (376300 KS).
Viva China: M&A of Global Footwear Brands at Discount & Its Stake in Li Ning Is More than Market Cap
- Viva China Holdings is a deep value stock with several key catalysts. Viva China Holdings’10.36% stake in Li Ning (2331 HK) alone is worth 152% of its market cap.
- In addition, Viva China Holdings is making solid acquisitions in the global footwear/apparel sector such as Clarks, which is one of the most well known footwear brands in the U.K.
- A major ongoing risk factor is the recent major lockdowns in Shanghai and other cities in China, which is intent on pursing a zero COVID policy.
Kinetic & Globalvia/Go-Ahead: Recommended Offer
- Although Gerrard Bidco offers a 1500p package (likely settlement on 2 September), the shares are trading c. 6% above in the expectation of a counteroffer.
- At 7.7x EV/Fwd EBIT, consideration is below the 8.6x EV/Fwd EBIT offered by DWS for struggling rival Stagecoach. FirstGroup is trading at 11.9x EV/Fwd EBIT after rebuffing I Squared Capital Advisors’ approach.
- I do not believe shareholders will accept the current offer. Kelsian could counterbid up to 1715p (Stagecoach takeout multiple), 14% above current offer (c. 7.3% spread, 42% estimated annual return).
Thai Life Insurance: Offering Details & Index Entry Timeline
- Thai Life Insurance (124744Z TB) is looking to raise US$1bn in its IPO by selling up to 2.207bn shares. This will value the company at around US$5.18bn.
- Inclusion in the SET50 INDEX will depend on the float exceeding 20% and a rally that leads to its market cap exceeding 1% of the SET INDEX market cap.
- Fast Entry to the MSCI Thailand and FTSE All-World indices is not likely. MSCI inclusion could take place at the November SAIR and FTSE inclusion at the December QIR.
KRX Autos (KODEX ETF) Rebalancing: Watch Iljin HySolus, Halla Holdings, & DTR Automotive
- The ETF operator’s room to play around in index weighting is relatively minimal. Rebalancing is completed in one trading day. So, the actual passive impact was more intense and substantial.
- The rebalancing result based on the average float-adjusted MC from May 2 to yesterday: Additions Iljin Hysolus, Halla Holdings, & DTR Automotive / Deletions Nexen Tire, Kumho HT, & Seoyon
- Their estimated passive impact is more significant than that of the previous rebalancing. It is substantial enough to consider a preemptive position build-up for them.
Liquid Universe of European Ordinary and Preferred Shares: June ‘22 Report
- Discounts have generally widened across our liquid universe, in line with the recent market losses.
- Recommendations long ords / short prefs: BMW, Fuchs Petrolub, Investor AB, SSAB.
- Recommendations long prefs / short ords: Sixt, VW, Danieli, MFE, Grifols, Atlas Copco, Ericsson Handelsbanken, Roche, Schroders.
Before it’s here, it’s on Smartkarma
