In today’s briefing:
- Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer
- HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
- ESR Group (1821 HK): Offer Musings
- ESR Group (1821 HK): Starwood Capital and SSW Partners Gauging a Privatisation Bid
- Blackstone to Take I’rom (2372 JP) Private in MBO at ¥2800/Share (49% Premium)
- Aozora (8304) – Daiwa Securities Group (8601) Tie-Up – Daiwa To Buy 15+%
- Toppan Printing (7911) Accelerates Buyback Pace and Amount; But Crossholder Sales Lurk
- TSMC Surges As April Revenue Soars 60% YoY
- Softbank (9984 JP): Has Group NAV Peaked?
- CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains
Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer
- OCBC (OCBC SP) has made a voluntary unconditional general Offer for the 11.56% in Great Eastern Holdings (GE SP) not held.
- The S$25.60 cash Offer for the life/non-life insurer is a 36.9% premium to last close; and a 30% discount to its S$36.59/share embedded value (as at 31st Dec 2023).
- The Offer is unconditional in all respects. This will trade tight. A delisting Offer is next on the cards.
HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
- We do not forecast any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June but there could be capping changes for 7 stocks.
- Capping changes will result in a one-way turnover of 7.6% leading to a round-trip trade of US$2.4bn. 17 stocks will have over 0.5x ADV to trade from passive trackers.
- Li Auto (2015 HK) will have the largest inflow while there will be big outflows from Meituan (3690 HK), Xiaomi Corp (1810 HK), JD.com (9618 HK) and Tencent (700 HK).
ESR Group (1821 HK): Offer Musings
- Back in February this year, various media sources reported that the key shareholders of warehouse/fund management play ESR Group (1821 HK), were exploring options, including a privatisation.
- Long-Term holders Warburg Pincus and Canadian pension fund OMERS hold 14% and 10.7% respectively. ESR co-founders/directors Jeffrey Shen, Stuart Gibson, Charles de Portes, and Hwee Chiang collectively hold another ~23%.
- Shares in ESR were suspended this morning “pursuant to the Hong Kong Code on Takeovers and Mergers“.
ESR Group (1821 HK): Starwood Capital and SSW Partners Gauging a Privatisation Bid
- ESR Group (1821 HK) is on a trading halt. Press reports suggest a consortium featuring Starwood Capital Group and SSW Partners is considering a buyout.
- Starwood and SSW are approaching other shareholders to join the consortium. The other members are likely Warburg Pincus, OMERS, Jinchu Shen, and Hwee Chiang Lim.
- The offer is likely to be structured as a Cayman privatisation scheme. Our best guess is that an offer of at least HK$14.00 per share would be needed.
Blackstone to Take I’rom (2372 JP) Private in MBO at ¥2800/Share (49% Premium)
- Today SMO and CRO operator I’Rom Group (2372 JP) announced an MBO where Blackstone would be the sponsor.
- From outward appearances, it would seem to be an estate management exercise. It’s not particularly rich as a bid, but it isn’t awful.
- I expect this gets done as Mori-san and family and friends appear to have 58% going in. Expected to start in June.
Aozora (8304) – Daiwa Securities Group (8601) Tie-Up – Daiwa To Buy 15+%
- Pre-Open on February 1 2024, Aozora Bank Ltd (8304 JP) announced writedowns and a forecast revision, lowering full-year net profit expectations from +¥24bn to -¥28bn.
- Shares which had been trading relatively richly (and heavily shorted) fell sharply over the following days, then noted activist Murakami-san started buying in. Then he bought more and went silent.
- Today, Aozora reported full-year earnings – much worse than expected and Mar25 guidance lower than already low Street estimates. And they are selling 15% stake to Daiwa Securities Group. Oof!
Toppan Printing (7911) Accelerates Buyback Pace and Amount; But Crossholder Sales Lurk
- Toppan Printing (7911 JP) established a new Medium-Term Management Plan with targets in May 2023. 8% ROE, PBR >1.0x. More DX business. More management modernisation. More ESG. Mooooarrrrr!
- They also promised capital measures: ¥100bn of buybacks over three years. Total shareholder return of 50%+ over three years. More progress in selling down cross-holdings.
- Today the company reported better-than expected full-year revenues, OP, and Net Profit, added more to the buybacks, and shortened the buyback period to two years. Details matter.
TSMC Surges As April Revenue Soars 60% YoY
- April revenue ~NT$236.02 billion, +20.9% MoM & + 59.6% YoY
- It was the company’s second highest monthly revenue ever, made all the more remarkable by the fact that it occurred during its seasonally low first half year
- Our April YoY Taiwan monthly revenue comps are flashing green across the board with just one exception, Globalwafers
Softbank (9984 JP): Has Group NAV Peaked?
- Arm’s valuation has driven the group NAV to a new high at fiscal year-end in March; with Arm accounting for 45% of group equity value, NAV downside risk is high
- JPY depreciation has been NAV supportive, but this could reverse; SVF2 remains very exposed to financing costs, with 87% of its equity value in private companies
- Softbank shares trade at a 57% discount to the estimated NAV; yet the downside risks to Arm’s valuation, along with SVF2 valuation headwinds, should keep the discount wide
CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains
- The review period ended on 30 April, there are just over 2 weeks to announcement of the changes, and implementation will be done at the close on 14 June.
- We forecast 5 potential changes for the index in June where there could be buying of 1.6-2.6x ADV on the adds and selling of 0.7-2.6x ADV on the deletes.
- At the December 2023 rebalance, the adds outperformed the deletes in the weeks prior to announcement of the changes and then spiked post-announcement. Repeat this time?
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