In today’s briefing:
- MSCI Japan Index Rebalance: Covering to Come After Large Short Buildup
- Tabcorp & The Lottery Co Spin-Off – Valuation Grids and Index Treatment
- Ya Gotta Have Faith (4295). Or Not. Chance for Someone To Get A Big Position in a Net Cash Co
- Hwa Hong’s Conditional Offer Amid Family Tussle
- Virtus Health & BGH: Truth in Takeovers
- Hwa Hong’s Voluntary Conditional Offer at S$0.370
- Block Deal Sale of Woori Financial Group
- Sampyo Cement: Likely Exit from KOSDAQ150 & Move to KOSPI
- FTSE UK: Quiddity Leaderboard for June 2022 2.0
- BBVA/Garanti: End of Offer Period
MSCI Japan Index Rebalance: Covering to Come After Large Short Buildup
- There are 22 deletions for the MSCI Japan Index at the May SAIR. The changes were expected and there is large short buildup on quite a few of the stocks.
- Over the last month, the largest increase in shorts as a percentage of passive selling was on Mercari Inc, Ryohin Keikaku, Tokyo Century Corp, Sohgo Security Services, Pola Orbis Holdings.
- The deletions have underperformed the TOPIX by 22% over the last 6 months and by 10% over the last two months. Position for a bounce post implementation.
Tabcorp & The Lottery Co Spin-Off – Valuation Grids and Index Treatment
- Tabcorp Ltd (TAH AU) will soon spin out its Lottery and Keno business, to be called The Lottery Corp (TLC AU). TAH shares go ex-TLC on 24 May.
- The question is where do they trade. What is in the price? What is not? What are the potential index implications?
- This insight provides a grid of index implications and pro-forma valuations (EV/EBITDA, PER, Dividend Yield) for each and both and the combined entity.
Ya Gotta Have Faith (4295). Or Not. Chance for Someone To Get A Big Position in a Net Cash Co
- Faith Inc (4295 JP) is a very smallcap contents management and platform business. As a business, one could give it a miss forever, but it is cash-rich.
- The company is doing a very large buyback, and for someone who decided they’d be interested, there is a large block for sale.
- The thing is… one would have to act quickly and aggressively.
Hwa Hong’s Conditional Offer Amid Family Tussle
- Ong Choo Eng and his son Ong Eng Yaw, together with Roswell Assets, Dymon Asia Private Equity, and Crytalic Star have launched a voluntary Offer for Hwa Hong (HWAH SP).
- The S$0.37/share Offer is a nine-year high and a 27.6% premium to last close. It has not been declared final.
- However, it appears not all of the founding members of the company are on the same page. The family fissure became public after the last independent director resigned this month.
Virtus Health & BGH: Truth in Takeovers
- With under three weeks until Virtus Health (VRT AU) shareholders vote on CapVest’s Offer, BGH continues to gradually push out the tendering period for its own Offer.
- The outcome of the Scheme Meeting is all but a foregone conclusion assuming BGH sticks to its guns and is not supportive; which then potentially rekindles this competitive bidding situation.
- This insight discusses the constraints BGH needs to adhere to in “truth in takeover” statements. There are still a handful of moving parts to unfold in this transaction.
Hwa Hong’s Voluntary Conditional Offer at S$0.370
- Hwa Hong Corp (HWAH SP) announced a voluntary conditional cash offer from Mr Ong Choo and partners at S$0.370 per share, a 27.6% premium to the last close.
- The offer is the culmination of a brewing family feud which pits Mr Ong Choo against the families of his five brothers.
- The offer price is a 9-year share price high. We estimate around 60% of the public float needs to accept the offer to meet the 50%+ minimum acceptance condition.
Block Deal Sale of Woori Financial Group
- After the market close today, it was announced that KDIC will sell its 1.81% stake of Woori Financial Group.
- The block deal price will range from 15,229 won to 15,700 won (0 to 3% discount) and we would take the deal even at little discount.
- Woori Financial Group’s share price continues to trade at deep valuation multiples as it is trading at P/B of 0.4x and P/E of 3.9x (using 2022 consensus earnings estimates).
Sampyo Cement: Likely Exit from KOSDAQ150 & Move to KOSPI
- Sampyo Cement which is currently included in KOSDAQ150 is likely to be removed from this index in the coming months as the company wants to move to KOSPI.
- If Sampyo Cement is excluded from KOSDAQ150, we estimate there could be about 9 billion won worth of passive funds which could exit the stock. ADTV is 1.6 billion won.
- Therefore, we believe Sampyo Cement’s shares could face further weakness in the next several months. It will hold an EGM to vote on the move to KOSPI on 4 July.
FTSE UK: Quiddity Leaderboard for June 2022 2.0
- The FTSE UK Index Series is a widely tracked family of indices representing the performance of the UK public equity market. These indices are reviewed on a quarterly basis.
- In FTSE UK Index Series: Leaderboard for June 2022, I discussed the potential constituency changes for FTSE 100 and FTSE 250 for the upcoming June 2022 index review.
- Below is an updated look at these potential index changes.
BBVA/Garanti: End of Offer Period
- Until last week, BBVA had already secured a 71.1% stake in Garanti. The deadline to accept BBVA’s takeover bid ends on 18 May. Settlement will take place on 19 May.
- Gross spread is 0.2%. Recently, the offer price has acted as a support for the share price, which may drop if BBVA doesn’t reach the squeeze-out threshold. Tender.
- The squeeze-out threshold is 98% (95% for delisting). My understanding is that the squeeze-out price is arithmetic average of the daily VWAP in the 30 days before threshold disclosure.
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