In today’s briefing:
- Kito (6409) Shareholder Register Getting Interestinger
- Xiamen Port (3378 HK)’s Pre-Conditional Offer
- Voltas Ltd (VOLT IN) | Expected to Fight Back
- Cautiously Optimistic Following Downtrend Reversals; Japan Continues to Lead; Bottoms-Up Stock Rec’s
- A Pair Trade of Japanese General Trading Companies: Long Marubeni & Short Itochu
- Longleaf Partners Fund Q1 2022 Commentary
Kito (6409) Shareholder Register Getting Interestinger
- In mid-May 2022, Kito Corporation (6409 JP) announced KKR would launch a Tender Offer to buy out the company at a big premium. I warned about the register.
- Two large shareholders were there prior to the bid – one “engagement-style” activist and one private company in a similar industry. Both had a 9+% holding visible.
- Both have now lifted their stakes above 10% post-announcement, at a small spread to terms. This makes things more interesting.
Xiamen Port (3378 HK)’s Pre-Conditional Offer
- SOE terminal operator Xiamen International Port (3378 HK) has announced a pre-conditional Offer from Xiamen Port Holding, a Fujian SASAC-controlled entity.
- The Offer price is HK$2.25 per H-share, a 55% premium to last close. The Offer price will NOT be increased. The final dividend will be added to the cancellation price.
- Pre-Conditions include approvals from NDRC, MoC, SAFE, and CSRC. There is no tendering condition. This deal mirrors Guodian Technology (1296 HK), BCL (2868 HK), and Jin Jiang Capital (2006 HK).
Voltas Ltd (VOLT IN) | Expected to Fight Back
- Voltas Ltd (VOLT IN) had a brutal Q4FY24 especially for its UPC segment where it lost market share to rival Havells India (HAVL IN).
- There is a possibility of regaining some of the lost market share with some pricing interventions and high brand equity, however, it will be at cost of margins.
- The sector view remains bearish, however, relative to HAVL, the downside would be limited with market share gains in Air-Conditioners (ACs) as key monitorable.
Cautiously Optimistic Following Downtrend Reversals; Japan Continues to Lead; Bottoms-Up Stock Rec’s
- The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China (MCHI-US), and China Internet (KWEB-US).
- Is this just another bear market rally, or will indexes are able to make a higher low and start a new bull market? Either way, it’s a start.
- We highlight attractive stocks from a bottoms-up perspective, spanning several Sectors. Over half hail from Japan, where the TOPIX Small index is reversing its downtrend.
A Pair Trade of Japanese General Trading Companies: Long Marubeni & Short Itochu
- We discuss a pair trade among the major Japanese trading companies. We propose going long on Marubeni Corp and going short on Itochu.
- We believe Marubeni has one of the most attractive valuations among the five major Japanese trading companies in terms of ROE vs. P/B and Itochu is the least attractive.
- We like Marubeni’s strength in food and agri businesses. Itochu is more dependent on metals, minerals and energy sectors which tend to be more volatile.
Longleaf Partners Fund Q1 2022 Commentary
- Longleaf Partners Funds is a suite of mutual funds and UCITS funds that Southeastern Asset Management, the investment advisor to the Longleaf Partners Funds, created in 1987 as a way for Southeastern employees to invest alongside their clients.
- Longleaf Partners Fund declined 0.53% in the first quarter, holding up better than the S&P 500, which fell 4.60%.
- New investments have a high hurdle to qualify given our conviction in our current holdings and the steep discount of the portfolio.
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