In today’s briefing:
- Cash-Rich Exedy (7278) Sees Huge Offering Offset by Huge Buyback – Watch For Short-Term Games
- Infocom (4348 JP) – The Meaning of ‘Binding Bids’ and ‘¥250bn’
- HYBE: Block Deal Sale of SM Entertainment
- Offshore China ETFs Rebalance Preview: Three Changes in June; Cutoff Today
- Alibaba/JD.com: Thoughts On The Recent Convertible Bond Issuance
- Exedy Corporation Placement – Relatively Large One, Although Buyback Should Aid Share Price
- Yuanta Taiwan Div+ ETF Rebalance Preview: 5 Changes as Names Move Around; US$2.35bn Round-Trip Trade
- Huafa Property Services (982 HK)’s Knockout Offer
- Activism Takes On CMCDI (133 HK)
- Huafa Property Services (982 HK): Scheme Offer at HK$0.29
Cash-Rich Exedy (7278) Sees Huge Offering Offset by Huge Buyback – Watch For Short-Term Games
- Toyota equity affiliate Aisin (7259 JP) last September said it would sell all its crossholdings. That now includes a 36.5% stake in Exedy Corp (7278 JP).
- Today, they announced an offering of all the shares (when including the greenshoe). That is nearly ¥50bn. That is offset by a ¥15bn buyback which could reduce the offering size.
- Games may be played, but there is considerable accretion, and Exedy will see higher float and still-high net cash.
Infocom (4348 JP) – The Meaning of ‘Binding Bids’ and ‘¥250bn’
- A variety of articles of recent from private media sources have suggested that Teijin Ltd (3401 JP) has its 55% stake in Infocom Corp (4348 JP) up for auction.
- According to earlier articles, binding Second Round bids were due last week. According to an article out late last week, binding bids have been made, with some “around ¥250bn.”
- What that means for price may depend on what the “around ¥250bn” means. A brief exploration below.
HYBE: Block Deal Sale of SM Entertainment
- After the market close on 27 May, HYBE (352820 KS) announced that it will conduct a block deal sale of 0.75 million to 0.94 million shares of SM Entertainment.
- The block deal sale price discount is 4% to 5.5% discount to the closing price on 27 May (95,800 won).
- One of the major positive, recent issues facing the Korean K-Pop related stocks has been the potential easing of Korean content restrictions by China.
Offshore China ETFs Rebalance Preview: Three Changes in June; Cutoff Today
- Based on the close of 24 May, there could be three changes for the iShares A50 China (2823 HK)/ CSOP China A50 (HKD) (2822 HK) in June.
- COSCO SHIPPING (601919 CH), CRRC (601766 CH) and China National NuclearPower (601985 CH) could replace LONGi GreenEnergy (601012 CH), CSC Financial (601066 CH) and China Tourism Group DutyFree (601888 CH).
- There are a couple of stocks that are close adds and could become adds if they outperform higher ranked stocks in trading today.
Alibaba/JD.com: Thoughts On The Recent Convertible Bond Issuance
- Alibaba Group Holding (9988 HK) and JD.com (9618 HK) both announced the issuance of convertible debt last week (Alibaba on May 23 and JD.com on May 21).
- Both have mentioned that the reasons for the issuance are the low funding cost (0.25% coupon for JD.com and 0.5% for Alibaba) and to fund their current share repurchase program.
- I think the convertible debt structures makes sense and it is beneficial for both companies to buy back as much as possible at the current share price.
Exedy Corporation Placement – Relatively Large One, Although Buyback Should Aid Share Price
- Aisin (7259 JP) is looking to raise US$290m from selling its entire stake in Exedy Corp (7278 JP).
- While the selldown doesn’t seem to be particularly well-flagged, this appears to be another cross-shareholder unwind in Japan.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Yuanta Taiwan Div+ ETF Rebalance Preview: 5 Changes as Names Move Around; US$2.35bn Round-Trip Trade
- With the review period now complete, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
- Price changes and changes to dividend estimates have led to names dropping off the list of potential adds and deletes over the last week.
- Constituent changes, capping and funding flows will lead to a one-way turnover of 12.7% and a one-way trade of US$1.17bn. There are 12 stocks with over 4x ADV to trade.
Huafa Property Services (982 HK)’s Knockout Offer
- After entering a trading halt on the 16th May pursuant to the Takeover’s Code, property manager Huafa Property Services (982 HK) has now announced a privatisation by way of a Scheme.
- The cancellation price of A$0.29/share is a 30.63% to last close, a 70.59% premium over the 30-day average close, and a life-time high price. The price is final.
- The Offeror, Zhuhai Huafa, a state-owned enterprise wholly-owned by Zhuhai SASAC, plus concert parties hold 42.63% of shares out. Clean deal.
Activism Takes On CMCDI (133 HK)
- In January this year, Argyle Street, a (now) 8% shareholder of China Merchants China Direct Investments (133 HK) (CMCDI), a closed-end investment company, proposed a solution to boost shareholder value.
- Two months later, Rydal Value Fund (stake unknown) also proposed a means to boosting shareholder value along similar lines.
- CMCDI is currently trading at a ~63% discount to NAV. But it is up 78% since Argyle’s initial proposal, and recently touched a six-year high. Argyle is still buying.
Huafa Property Services (982 HK): Scheme Offer at HK$0.29
- Huafa Property Services Group (982 HK) announced a privatisation offer from Huafa Industrial Co., Ltd. Zhuhai (600325 CH) at HK$0.29 per share, a 30.6% premium to the undisturbed price.
- Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection) and a headcount test. No shareholder holds a blocking stake.
- The offer, which has been declared final, is attractive compared to historical share prices and peer multiples. This is a done deal, with payment likely in November.
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