In this briefing:
- Guangxin Reloads A Peculiar Low-Ball Offer For Xingfa Aluminium
- BGF Holdco/Sub Trade: Sub Overbuying Wouldn’t Last Another Day
- Oslo Børs, Euronext and Nasdaq – Shootout at the NOK Corral
- StubWorld: Hang Lung’s Implied Stub At Extreme Levels
1. Guangxin Reloads A Peculiar Low-Ball Offer For Xingfa Aluminium
Xingfa Aluminium (98 HK) has announced its major shareholder, Guangxin Aluminium (a wholly-owned Guangdong SASAC vehicle), has acquired 5,000 shares, lifting its stake to 30.001%, triggering a mandatory general offer. The offer price is $5.60, a premium of just 2.94% to last close.
Guangxin, together with certain management of Xingfa, attempted to take Xingfa private at $3.70/share back in 1H17. That scheme failed comprehensively, which was a good outcome for minorities as FY17 net income increased 28%. 1H18 profit was also a 25% improvement over the corresponding period.
The offer price is in line to where Xingfa traded last October and 23% below the recent peak back in mid-June 2018. It is also 37% below where China Lesso Group Holdings (2128 HK) acquired its 26.3% stake in April last year.
At a guess, this low-ball offer provides an exit for large(r) investor with regards to Xingfa’s low liquidity. But no irrevocables have been given and the Offer remains conditional on Guangxin holding 50% of the voting votes.
As expected, Xingfa is currently trading 1.4% through terms. For those interested in small-cap, illiquid stocks, I would buy around these levels to play the back-end, or the (remote) possibility of a bump. The offer has not been declared final.
2. BGF Holdco/Sub Trade: Sub Overbuying Wouldn’t Last Another Day
- BGF Sub had a 5.39% gain on better-than-expected 4Q18 results. Holdco stayed flat. As a result, we had a 2+σ jump from 95% of σ to -133% of σ. This is the widest jump in 120D. Holdco discount is currently at 47% to NAV.
- On a 120D horizon, price ratio is still well below 120D mean. Despite recent gains, Holdco price relative to Sub is nearly 20+%p down since 120D ago. 4Q results seem to be encouraging. But local sentiments are still heavily divided on Sub’s fundamentals. 4Q results aren’t strong enough to turn the tide drastically.
- Sub has been one of the most heavily shorted stocks in Korea lately. Yesterday’s huge gain might have been a short covering. This shouldn’t be a structural price pushing up for Sub. Sub staying below -1σ wouldn’t last another day. I expect a quick mean reversion at this point.
3. Oslo Børs, Euronext and Nasdaq – Shootout at the NOK Corral
Oslo Bors VPS Holding ASA (OSLO NS) based in Oslo, Norway, is an owner and operator of marketplaces for the trading of financial instruments as well as settlement, securities registration and information services. It includes Oslo Børs, the central marketplace for the listing and trading of equities, equity certificates, ETPs, fixed income instruments and derivative products in the Norwegian market, and VPS, the only central securities depository in Norway.
OSLO NS is the target of competing tender offers from Euronext NV (ENX FP) and Nasdaq Inc (NDAQ US). Euronext owns 5.3% and has irrevocables for 45.2% of OSLO NS shares, for 50.5% total. It launched an Offer to acquire all shares at NOK 145, and just raised that to NOK 158 on February 11, 2019. Nasdaq has irrevocables for 35.2% of OSLO NS shares and has launched an Offer to acquire all OSLO NS shares at NOK 152 per share. Nasdaq’s Offer received the unanimous recommendation of Oslo Børs VPS’s Board when it was announced. As things stand there are two deep-pocketed bidders, each with a large slug of shares in their corner at loggerheads.
Has this contest for a Norwegian company reached a Mexican standoff[i] between an American powerhouse and a Franco/Dutch European champion? Or will the dust clear after pistols at dawn, providing a clear view of a winner? Read on for the Good, The Bad and the Ugly.
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[i] According to the Oxford English Dictionary, a Mexican standoff is “A deadlock, stalemate, impasse; a roughly equal (and frequently unsatisfactory) outcome to a conflict in which there is no clear winner or loser; (also formerly) a massacre in cold blood.”
4. StubWorld: Hang Lung’s Implied Stub At Extreme Levels
This week in StubWorld …
- Hang Lung (10 HK) has lagged 57.6%-held Hang Lung Properties (101 HK) after announcing full-year results, resulting in the implied stub touching 2 STD away from the average.
- An update on Intouch Holdings (INTUCH TB)‘s stub investments via its venture capital arm, InVent.
Preceding my comments on HLG and Intouch are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.
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