In today’s briefing:
- Bharti Singtel Possible Selldown/Holdco Trade – Singtel Appears to Be Ready for Cashing in US$1-2bn
- FTSE GEIS Korea: Rebalancing Week Trades
- Kansai Paint (4613) – Huge Buyback Launched
- Ramsay Health’s Offer Spread Risk/Reward
- FnGuide Top 10 (TIGER ETF) Rebalancing Review & Preview: LG Energy’s Potential Inclusion
- Virtus Health: Offer From BGH Now Ostensibly Unconditional
- Dongyue (189 HK): Fast-Growing FCEV Play… With Baggage
- Samsung Electronics Yearend Special Dividend Projections
- LQ45 Index Rebalance Preview (July 2022): Candidates for Change
- ResApp Draws a Revised Binding Offer from Pfizer
Bharti Singtel Possible Selldown/Holdco Trade – Singtel Appears to Be Ready for Cashing in US$1-2bn
- Various recent media reports have indicated that Singtel aims to sell 2-4% of its stake in Bharti Airtel. Singtel has officially dismissed the reports as media speculation.
- There have been subsequent reports in the Indian media about the founder, Sunil Mittal, looking to raise around US$2bn in debt, to finance an increase in his stake in Airtel.
- In this note, we talk about the possible deal and its implications.
FTSE GEIS Korea: Rebalancing Week Trades
- We typically estimate the size of the FTSE All Cap tracking fund to be around $600B. However, empirically, one-third of this was witnessed in Korean stocks during the rebalancing week.
- Estimating each passive flow based on this, we should expect LG Energy to receive the most significant flow at 1.16x ADTV from this point until the closing of this Friday.
- As for Kakao Pay, the FTSE announced an increase in the investability to 15.8% (due to Alipay’s block deals), offering a passive inflow of 0.36x ADTV.
Kansai Paint (4613) – Huge Buyback Launched
- Kansai Paint (4613 JP) today announced a very large buyback.
- Given the shareholder structure, the 11.2% buyback may not have the direct market impact that one might think, but there are still ways to play this.
- Kansai Paint starts from a near 5-year low against three of four large competitors. And we have accretion and likely cross-holding unwinding. It’s not a bad story.
Ramsay Health’s Offer Spread Risk/Reward
- Ramsay Health Care (RHC AU)‘s gross spread to KKR & Co Inc (KKR US)’s offer (less the interim dividend) of A$87.52 has widened touching an all-time high of 17.0% today.
- Despite the longer-than-expected due diligence, rising rates and market volatility, the evidence suggests that KKR remains committed. The expectation is for a binding proposal by June end.
- At the last close, the risk/reward profile is favourable as the downside due to a deal break (-10% estimated decline) is lower than the upside (+17%) from a binding offer.
FnGuide Top 10 (TIGER ETF) Rebalancing Review & Preview: LG Energy’s Potential Inclusion
- Among the local theme ETFs in Korea, the TIGER (FnGuide) Top 10 has the highest win rate on rebalancing flow trade.
- LG Energy deserves the most attention at the next rebalancing event. If LG Chem disposes of some of its LG Energy shares, LG Energy can bypass those on the borderline.
- In this case, Shinhan, the one on the borderline at this point, will face a passive flow of -0.65x ADTV, while LG Energy will receive +0.25x.
Virtus Health: Offer From BGH Now Ostensibly Unconditional
- BGH now has >90% of the voting power in Virtus Health (VRT AU). In a somewhat friendly gesture, BGH has bumped the Offer by A$0.005/share.
- The increased Offer Price will apply to all shareholders who accept the Offer, including shareholders who have already accepted the Offer. The Offer has been extended to the 27 June.
- A special fully-franked dividend of up to A$0.30/share should now kick in – an announcement is expected shortly. The Offer remains conditional.
Dongyue (189 HK): Fast-Growing FCEV Play… With Baggage
- Dongyue Group (189 HK) is a leader in the manufacturing of fluorochemicals and organosilicons, and the largest player in second-generation refrigerants.
- FY21 profit was up 69% yoy. The company just announced profit in the first five months of 2022 recorded an increase of 170%+ compared to the corresponding period last year.
- The trade pushback centers on corporate governance issues, both in Hong Kong and in the PRC.
Samsung Electronics Yearend Special Dividend Projections
- This year’s consensus OCF is at least ₩75T, and CAPEX is ₩45T, less than last year. As a result, we will likely reach an FCF of ₩30T.
- Then the yearend special DPS would be ₩764, which provides dividend yields of 2.97% (Ord) and 3.22% (Pref), respectively, even based on the conservative OCF estimates.
- This is a sufficiently attractive dividend yield for Pref. Hence, unless the SEC’s price enters a sharp uptrend, the bullish Pref will likely continue.
LQ45 Index Rebalance Preview (July 2022): Candidates for Change
- The review period for the LQ45 Index ends on 30 June. The changes should be announced in the last week of July, becoming effective after the close on 29 July.
- Potential adds are Bank Jago Tbk PT (ARTO IJ), Adaro Minerals (ADMR IJ), Bumi Resources Minerals Tbk (BRMS IJ), Transcoal Pacific Tbk PT (TCPI IJ) and Mitratel (MTEL IJ).
- Potential deletions are Pembangunan Perumahan (Persero) (PTPP IJ), Pabrik Kertas Tjiwi Kimia (TKIM IJ), Media Nusantara Citra (MNCN IJ), Gudang Garam (GGRM IJ) and Chandra Asri Petrochemical (TPIA IJ).
ResApp Draws a Revised Binding Offer from Pfizer
- Pfizer Inc (PFE US)’s revised binding proposal will vary based on the results of the clinical validation study of Resapp Health (RAP AU)’s COVID Algorithm (expected around 20 June).
- If the confirmatory data condition is satisfied, the offer is A$0.207 (130.0% premium to undisturbed price). If not satisfied, the offer is A$0.146 (62.2% premium to undisturbed price).
- The offers are within the IE’s valuation range. At the last close, the risk/reward is favourable as the potential upside (A$0.207 offer: +25.5%) exceeds the downside (A$0.146 offer: -11.5%).
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