In today’s briefing:
- Toshiba Coin Toss Is Neither Heads Nor Tails as Both Proposals Fail
- JD.com (9618 HK): Overhang a Bigger Worry than Immediate Selling
- KOSPI200 June Index Rebalance Preview: 7 Changes as Adds Outperform Deletes
- KT (030200): MSCI Re-Inclusion Possibility with a Sharp Rise in Foreign Room
- Toshiba – Both Proposals Voted Down
- Uniti (UWL): Competitive Bidding Situation As Macquarie/PSP Proposal Emerges
- Uniti’s Indicative Bid from Connect Consortium to Set off a Bidding War?
- Yamaha Motors Buyback (7272) – Medium-Bigly Buyback Complicated by TOPIX FFW and Cross-Holdings
- No Surprise As Perth Royal Commission Finds Crown Resorts Unsuitable for WA Licence
Toshiba Coin Toss Is Neither Heads Nor Tails as Both Proposals Fail
- Toshiba EGM fails to provide a positive result as both Toshiba’s own Separation Plan and 3D Investment’s proposal to enhance privatisation bidder engagement and transparency fail.
- Activists are stuck. Management is too. 3+ years since the last big buyback and 3 new CEOs and we are back to the drawing board for both management and activists.
- But both have a head start. The Shareholder Return Plan, eventual disposition of Kioxia, and non-core asset sales would be a start. And Raymond Zage’s letter is worth a re-read.
JD.com (9618 HK): Overhang a Bigger Worry than Immediate Selling
- We do not expect there will be huge selling in JD.com Inc. (9618 HK) immediately. However, there will be an overhang on the stock in the near to medium term.
- JD.com could drop in the next few days as the ADR allotment is sold in the market. Shorts that have been built up could soak up some of the flow.
- The big worry is the US$4bn of JD.com stock that Prosus will receive. It is likely they will look to sell and use the cash to buy back their own stock.
KOSPI200 June Index Rebalance Preview: 7 Changes as Adds Outperform Deletes
- Over 3/4th of the way through the review period for the June rebalance, we see 7 potential changes to the KOSPI200 Index. Most are high probability changes.
- Potential inclusions: F&F (383220 KS), SD Biosensor (137310 KS), Meritz Fire & Marine (000060 KS), Iljin Hysolus (271940 KS), K Car (381970 KS), Hanil Cement (300720 KS), Hana Tour (039130).
- Potential deletions: Cuckoo Holdings (192400 KS), S&T Motiv (064960 KS), Nexen Tire (002350 KS), Hyundai Home Shopping (057050 KS), Cuckoo Homesys (284740 KS), Sk Discovery (006120), Grand Korea Leisure (114090).
KT (030200): MSCI Re-Inclusion Possibility with a Sharp Rise in Foreign Room
- Based on yesterday’s closing price, KT’s foreign room fell to 17.6%. MSCI’s foreign room threshold for non-constituents subject to foreign ownership limit (FOLs) is 15%.
- If KT’s foreign room stays above 15% by March 31, it will be re-included with an adjustment factor of 0.5 in May SAIR. Its float is 25%, 0.5x FOL (49%).
- Passive flow is estimated at 6.17x ADTV, assuming a 25% float. This could provide momentum to outperform the sector peers, making us consider a sector long/short setup aimed at this.
Toshiba – Both Proposals Voted Down
- Votes at Toshiba’s EGM ended up being cast in the most likely fashion with both management’s and 3D’s proposals being voted down.
- There was nevertheless considerable uncertainty and it will be interesting to see what the voting breakdowns were.
- For now, however, this just pushes out the prospect of any true resolution and we view that as negative.
Uniti (UWL): Competitive Bidding Situation As Macquarie/PSP Proposal Emerges
- Buying 13.5% below Morrison & Co’s Offer terms last week for Aussie broadband player Uniti Group Ltd (UWL AU) was the right call as a new (indicative, non-binding) proposal emerges.
- Macquarie Asset Management’s Real Assets division and Public Sector Pension Investment Board are offering to acquire Uniti for $5.00/share, via a Scheme of Arrangement, an 11% premium to Morrison’s tilt.
- The Board of Uniti is currently considering the new proposal. Morrison’s four-week exclusivity period kicked off last Friday.
Uniti’s Indicative Bid from Connect Consortium to Set off a Bidding War?
- The Connect consortium will offer A$5.00 cash per share, an 11.1% premium to the Morrison & Co indicative offer of A$4.50.
- Brookfield has joined Morrison & Co as joint bidders. This development suggests another round of bids for Uniti Group Ltd (UWL AU).
- The A$5m fee to break the Morrison/Brookfield exclusivity pales in comparison to Connect consortium’s A$340m premium to the Morrison/Brookfield offer. Expect Connect consortium to secure due diligence access.
Yamaha Motors Buyback (7272) – Medium-Bigly Buyback Complicated by TOPIX FFW and Cross-Holdings
- Yamaha Motor (7272 JP) announced a short-term buyback. 3 months, 3%. It isn’t huge but it helps with the TOPIX FFW changes to come in two weeks.
- It also helps with the extra overhang from last year’s selldown and the significant cross-holding overhang which exists.
- But the shares are very inexpensive vs peers when one looks at consensus forward earnings and EBIT, and better growth is expected too.
No Surprise As Perth Royal Commission Finds Crown Resorts Unsuitable for WA Licence
- The Perth Casino Royal Commission has found Crown Resorts (CWN AU)‘s casino in Perth, Western Australia, is “not suitable” to hold a gaming licence.
- This follows the findings in New South Wales and Victoria that two of Crown Resort’s other subsidiaries were either not suitable to be granted a casino license or not suitable.
- As with the recently announced AUSTRAC proceedings, Blackstone would have been well prepared for this latest development.
Before it’s here, it’s on Smartkarma
