In today’s briefing:
- Toyota Group Cross-Holding Structure Primer – Holdings, Unwind Progress, Buyback Policies, Etc
- Hong Kong: Stocks Facing the Passive Boot in August
- Kokusai Electric Placement Updates – Misbehaving
- Reasons Why KT’s Foreign Room Is Likely to Fall Below the 3.75% Cutoff Level
- Big Honda (7267) Offering – Flow Timing Matters
- Samson (531 HK): MBO Via A Scheme
- Huafa Property Services (982 HK): Wide Spread Ahead of the 28 August Vote
- Thai Bev (THBEV SP): Exits Property, Boosts F&N Stake. Deal Valuation Seem Excessive
- GULF/INTUCH Merger & ADVANC/THCOM VTO’s
- Capitol Health (CAJ AU): Binding Merger with Integral Diagnostics (IDX AU)
Toyota Group Cross-Holding Structure Primer – Holdings, Unwind Progress, Buyback Policies, Etc
- Last September in the release of its new Mid-Term Management Plan, Toyota Group member Aisin (7259 JP) announced a plan to cut cross-holdings to zero. JTEKT Corp (6473 JP) followed suit.
- It started with a selldown of Denso Corp (6902 JP), then Toyota Industries (6201 JP), now Aisin. Last FY, Toyota Group cos reduced crossholdings by ¥870bn. This year will be more.
- Attached below is a general breakdown of Toyota Group cross-holdings, discussion of cross-holding policies, and analysis of what is next, and what is not.
Hong Kong: Stocks Facing the Passive Boot in August
- There are a bunch of stocks listed in Hong Kong that have underperformed the HSCEI INDEX and their peers and could be deleted from global passive portfolios in August.
- The deletion from passive portfolios will lead to a liquidity event at the end of August where passive trackers will need to sell multiple days of ADV.
- There has been a big jump in cumulative excess volume in some stocks and the A/H premium on a lot of the names has jumped over the last few months.
Kokusai Electric Placement Updates – Misbehaving
- KKR and KSP Kokusai Investments are looking to raise approximately US$1.7bn through an extended secondary follow-on offering, via selling approximately 22.3% of Kokusai Electric (6525 JP).
- We have looked at the lockup expiry and deal dynamics in our earlier notes.
- In this note, we talk about share price performance since then.
Reasons Why KT’s Foreign Room Is Likely to Fall Below the 3.75% Cutoff Level
- KT’s foreign room has been exhausted due to value-up trading inflows, NPS selling shares, and KT canceling treasury stocks.
- Hyundai Motor may sell 0.5% of its KT stake, likely to overseas investors. KT’s 700,000 share cancellation will lower foreign ownership to the low-4% range, possibly below 3.75% by November.
- Focus on the stock price surge from ETF recall requests around the effective date, and note that passive outflow corrections typically occur afterward.
Big Honda (7267) Offering – Flow Timing Matters
- The ¥500bn Offering of Honda shares is now priced (¥1,664.5/share) making it ¥497.46bn. Bookbuilding for retail – 80% of the book – is now. The price today closed at ¥1,665/share.
- The Offering has follow-on “non-discretionary” demand which is non-negligible. It is worth understanding the amounts and timing.
- The lockups and non-discretionary demand, along with Honda’s relative cheapness as a large cap OEM and likely upcoming offerings on competitors means it has support.
Samson (531 HK): MBO Via A Scheme
- Furniture trader Samson Holding (531 HK) has announced a Scheme from Shan Huei Kuo, Samson’s Chairman.
- The Cancellation price is $0.48, a 50% to last close. The premium is more pronounced if going back a month. The price is final.
- This looks done. But Samson is an illiquid micro cap.
Huafa Property Services (982 HK): Wide Spread Ahead of the 28 August Vote
- Huafa Property Services Group (982 HK)’s IFA opines that Huafa Industrial Co., Ltd. Zhuhai (600325 CH)’s HK$0.29 privatisation offer is fair and reasonable. The vote is on 28 August.
- Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection) and a headcount test. The offer price is final.
- No shareholder holding a blocking stake, low AGM minority participation rate and calm retail boards suggest low vote risk. At the last close, the gross/annualised spread is 9.4%/52.5%.
Thai Bev (THBEV SP): Exits Property, Boosts F&N Stake. Deal Valuation Seem Excessive
- Thai Beverage(THBEV SP) has proposed a share swap-deal with a promoter company to acquire additional stake in FraserAnd Neave(FNN SP) in exchange for Frasers Property at negotiated valuations, not market prices.
- Post-Completion of the swap deal with the promoter-owned entity, which requires shareholder approval, Thai Bev will hold a 69.6% stake in F&N and no stake in Fraser Property (FPL).
- If the stake swap were valued at yesterday’s closing share prices, it would imply a drop in the total stake value for Thai Bev after the proposed deal.
GULF/INTUCH Merger & ADVANC/THCOM VTO’s
- In 2021, Gulf Energy Development (GULF TB) made an offer to acquire all Intouch Holdings (INTUCH TB) shares at THB65/share. Singtel (ST SP) did not tender their then 21% stake.
- Now Gulf Energy Development (GULF) and Intouch Holdings (INTUCH) are looking to merge and that will result in VTO’s for Advanced Info Service (ADVANC TB) and Thaicom Pcl (THCOM TB).
- The merger will result in an inclusion to the SET 50 Index in the first quarter of 2025. There is the December rebalance before that.
Capitol Health (CAJ AU): Binding Merger with Integral Diagnostics (IDX AU)
- Capitol Health (CAJ AU) has entered a binding merger proposal with Integral Diagnostics (IDX AU) at 0.12849 Integral shares per Capitol share.
- The transaction will require approval from the ACCC and Capitol shareholders. Due to the minimal geographic overlap, ACCC clearance should be forthcoming.
- The offer is attractive compared to historical exchange ratios, trading ranges and peer multiples. At the last close, the gross spread was 8.0%.
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