In today’s briefing:
- L’Occitane (973.HK) Privatization – The Offer Price Is Good Enough
- Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
- L’Occitane (973 HK): On Activism And The Scrip Alternative
- Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June
- L’Occitane (973 HK): Dilemma as the Share Alternative Pre-Condition Met
- Sep24 Nikkei 225 Rebal – Still 1 ADD (Ryohin Keikaku), 1 DELETE, and 1 Very Large Very Dark Horse
- Block Deal Sale of 3% Stake in HD Hyundai Heavy Industries
- Potential Samsung Life Insurance Block Deals, Likely to Be Triggered by E Mart
- Naspers X Prosus (NPN, PRX): Market Reacts Negatively to Appointment of CEO
- Japan Post Bank – It’s like a Closed End Mutual Fund More Than Ever
L’Occitane (973.HK) Privatization – The Offer Price Is Good Enough
- The HK$34/share offer price is final, which exceeds all-time high closing price of HK$33.60/share since IPO in 2010. EUR6 billion is equivalent to a PE of 52.17x, higher than peers.
- Deploying China’s sinking market is “a good story full of imagination”. However, it may fail to bring expected profits considering increasing competition/potential price war, leading to uncertain future performance growth.
- For minority shareholders, this privatization provides an attractive opportunity to monetise their investments at a premium over market price. We don’t think the current “technical bull market” to be lasting.
Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
- Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
- If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
- We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.
L’Occitane (973 HK): On Activism And The Scrip Alternative
- In the 29th April HK$34/share VGO announcement, a share scrip alternative may be afforded if 10% of L’Occitane (973 HK)‘s disinterested shareholders expressed interest by the 15th May
- That pre-condition has been satisfied. However, we are none the wiser whether you receive shares of the levered-up Bidco, at some undetermined scrip ratio; or keep shares of L’Occitane as-is.
- Some shareholders, like Butler Hall, considered terms low-balled. They now have the option to rollover. But there are still other large activists on the register, whose intentions are not known.
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June
- Post market close tomorrow, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 7 June.
- There were no constituent changes to the index in March. We highlight ten profitable and eligible stocks that could be added to the index in June.
- Changes to the Hang Seng Industry Classification System (HSICS) could lead to inclusions for the Information Technology industry while there could also be inclusions for the underweighted Healthcare industry.
L’Occitane (973 HK): Dilemma as the Share Alternative Pre-Condition Met
- L’Occitane (973 HK) announced that the share alternative pre-condition was satisfied. However, The share alternative offer is at the offeror’s discretion and with the consent of the financing parties.
- The share alternative offer poses a dilemma due to the requirement to satisfy the minimum acceptance condition while not breaching the upper limit of the share alternative offer.
- The share alternative offer is a play on higher multiples by relisting the business. At HK$50.00, L’Occitane would trade in line with its median global beauty peers’ multiples.
Sep24 Nikkei 225 Rebal – Still 1 ADD (Ryohin Keikaku), 1 DELETE, and 1 Very Large Very Dark Horse
- The Sep 2024 Nikkei 225 Review data set is mostly done, and one can interpolate results relatively accurately. It still leaves us with one ADD, one DELETE, and capping fun.
- Recently, Yanai-san sold more Fast Retailing (9983 JP). There is more Real World Float- more active holders own more stock (which may mean less interest to buy later).
- There is a dark horse candidate which is on investor radar for other reasons. It would not be out of the question, but the precedent is old, and different.
Block Deal Sale of 3% Stake in HD Hyundai Heavy Industries
- HD Korea Shipbuilding & Offshore Engineering (009540 KS) plans to sell 2.66 million shares (3% of outstanding shares) of HD Hyundai Heavy Industries (329180 KS) in a block deal sale.
- We would avoid participating in this block deal sale and we have a Negative view of HD Hyundai Heavy Industries (329180 KS) over the next one year.
- After this block deal sale, we believe there could be concerns about HD Korea Shipbuilding & Offshore Engineering potentially selling additional shares of HD HHI in the next 2-3 years.
Potential Samsung Life Insurance Block Deals, Likely to Be Triggered by E Mart
- Talks circulate that E-Mart may sell its 5% stake in Samsung Life Insurance, valued around ₩1T, due to fundraising needs linked to SSG.com investors’ put options.
- Initially, Starbucks Korea was a potential sale, but U.S. HQ approval makes it unfeasible. Shinsegae L&B and Food weren’t enough to raise funds, leading E-Mart to focus on Samsung Life.
- E-Mart’s block deal timing is uncertain due to potential legal disputes over unmet put option conditions, yet recent local market discussions suggest E-Mart may avoid legal battles.
Naspers X Prosus (NPN, PRX): Market Reacts Negatively to Appointment of CEO
- Naspers and Prosus have announced the appointment of Fabrício Bloisi as Group CEO, effective from 1 July 2024. Unlike his predecessor, Bloisi has an entrepreneurial background.
- Prosus and Naspers have sold off on the news. Prosus is down 1.7%, widening the discount by 80bps. Naspers is down 1.3%, widening the discount by 50bps.
- Since Bob van Dijk stepped down in September last year, both discounts have narrowed.
Japan Post Bank – It’s like a Closed End Mutual Fund More Than Ever
- Japan Post Bank (7182 JP) saw its net profit surge from non-recurring gains, which was from the sale of stocks.
- The company’s cost of funds worsened more than the improvement in its yields, and we believe this remains an issue related to hedging costs.
- Unrealized gains on foreign bonds remains significantly higher now than a year ago and this may again be the driver for earnings, but still with very low ROA.
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