In today’s briefing:
- JSR (4185 JP) – Activist Murakami-San Goes to 5+%! Bumpitrage? Appraisal Rights? A Technicality?
- TOPIX Inclusions: Who Is Ready (Apr 2024)
- Kokusai Electric (6525 JP): The US$4.8 Billion Lock up Expiry
- Estimating Participation Rate for Hyundai HS Tender Offer, Currently at a 5% Spread
- What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene
- Langham Hospitality Investments (1270 HK): Great Eagle (41 HK)’s Possible Scheme Privatisation
- Hyundai Motor Group Becomes the Largest Shareholder of KT Corp
- HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June
- HD Hyundai Marine Solution IPO – Peer Comparison – Not Particularly Exciting
- Tender Offer of 25% of Hyundai Home Shopping Shares by Hyundai GF Holdings
JSR (4185 JP) – Activist Murakami-San Goes to 5+%! Bumpitrage? Appraisal Rights? A Technicality?
- In what is a surprising move to me, Murakami-san has gone substantial on JSR Corp (4185 JP) with the vast majority of his stake purchased at a spread of <0.05%.
- As suggested in JIC Launches a NOT-¥1trln Tender Offer for JSR (4185). Welcome? Yes. Overwhelming? Meh, the deal price was not overwhelming. It got less so as the market rose.
- But this is an odd target. High float. No competition. Would take a lot to block or force the bumpitrage, which suggests appraisal rights or a “technicality.”
TOPIX Inclusions: Who Is Ready (Apr 2024)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- There were no Section Transfers announced in the last 3 months so currently there are no live TOPIX Inclusion events at present.
- There are currently 79 names capable of satisfying all the key section transfer requirements. Our long-term pre-event candidate CELSYS (3663 JP) is one of them.
Kokusai Electric (6525 JP): The US$4.8 Billion Lock up Expiry
- Kokusai Electric (6525 JP)’s 180-day IPO lock-up period for 71% of outstanding shares expires on 22 April. The shares exiting the lock-up period are worth US$4.8 billion.
- The likely seller will be KKR & (KKR US) as it was the sole selling shareholder in the IPO. The shares are currently trading at 2.4x the IPO price.
- Kokusai anticipates a return to growth and margin improvement in FY24. However, Kokusai trades at a material premium to peer multiples and is fully priced.
Estimating Participation Rate for Hyundai HS Tender Offer, Currently at a 5% Spread
- It is somewhat unusual that there is still a spread of over 5%. This likely reflects concerns about the relatively high intensity of allocation risk.
- Retail: 30%, Institutions: 16% of float shares (46%). Retailers may contribute 20%, institutions 10-15%. Total tender rate: 30-35%.
- In that case, it means that roughly 70% of our holdings could be tendered. And at this level, it seems reasonable enough to target the current spread of 5%.
What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene
- Hanwha received counsel indicating foreign regulators won’t oppose Austal’s acquisition. They admit it’s restricted to AUKUS countries but argue Korea’s ties ease opposition.
- Hence, Hanwha Ocean is dropping some heavy hints that even though Austal has turned down the acquisition offer for now, there’s still a chance the deal could go through.
- The pivotal factor lies in whether Hanwha Ocean can secure approval from the AUKUS countries. Should they succeed, it is anticipated that Austal would be inclined to accept the deal.
Langham Hospitality Investments (1270 HK): Great Eagle (41 HK)’s Possible Scheme Privatisation
- Langham Hospitality Inv Ss (1270 HK) received a notice from Great Eagle Holdings (41 HK), the largest unitholder, that it intends to present a detailed proposal for scheme privatisation.
- The privatisation interest is unsurprising, as the unit price has declined by 43% over the last twelve months. A tough 2023 did not help the declining sentiment.
- Our methodology for triangulating the potential offer price results in a range of HK$0.63-1.76. Our best guess is an offer of around HK$0.85, a 47% premium to the last close.
Hyundai Motor Group Becomes the Largest Shareholder of KT Corp
- Hyundai Motor Group has become the largest shareholder of KT Corp, as the National Pension Service has recently reduced its stake in KT from 8.53% previously to 7.51%.
- Despite this recent change in the largest shareholder status of KT Corp, this requires the approval from the Korean Ministry of Science and ICT.
- Although the Hyundai Motor Group (HMG) has become the largest owner in KT Corp, the most likely scenario is for HMG to remain a passive investor in KT.
HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June
- With no stocks in outright inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June.
- Capping changes will result in a one-way turnover of 5.3% leading to a round-trip trade of US$1.51bn.
- Li Auto (2015 HK) is expected to be the largest buy in June following the stock being the largest sell at the March rebalance (also due to capping).
HD Hyundai Marine Solution IPO – Peer Comparison – Not Particularly Exciting
- HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$555m in its Korean IPO.
- HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
- In our previous note, we talked about the company’s historical performance. In this note, we talk about peer comparison.
Tender Offer of 25% of Hyundai Home Shopping Shares by Hyundai GF Holdings
- On 3 April, it was reported that Hyundai G.F. Holdings will be conducting a tender offer of 3 million shares of Hyundai Home Shopping (25% of outstanding shares).
- The tender offer price is 64,200 won. The main reason for this tender offer is to meet the regulatory requirement of a holding company by 2025.
- We are positive on the tender offer of a 25% stake in Hyundai Home Shopping by Hyundai G.F. Holdings.
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