In today’s briefing:
- JIC Launches a NOT-¥1trln Tender Offer for JSR (4185). Welcome? Yes. Overwhelming? Meh.
- Chow Tai Fooks’ Offer For NWS (659 HK). Buy NWD (17 HK)
- The Prosus/Naspers Ouroboros Spits Out Its Tail (Unwinds Cross-Holding to Go Back to Old Pair)
- LQ45 Index Rebalance Preview (July): Review Period Nearly Complete
- What Arb Trading Opportunities Should We Target in SK Innovation’s Rights Offering?
- NWS Holding (659 HK): Pre-Conditional VGO from the Cheng Family
- Dali Foods (3799 HK): Founder’s Privatisation Offer at HK$3.75
- Redox (RDX AU) IPO – Offering Details & Index Inclusion
- Tryt IPO – The Negatives – Margins Have Consistently Narrowed and Gearing Could Cap Growth
- PCOMP Index Rebalance Preview: Just the Ad Hoc Change
JIC Launches a NOT-¥1trln Tender Offer for JSR (4185). Welcome? Yes. Overwhelming? Meh.
- Japan Investment Corp (JIC) has launched a Tender Offer on top photoresist maker JSR Corp (4185 JP), at ¥4,350/share.
- That is a decent price, but it is not overwhelming. Furthermore, process for determining (and understanding) “fair” remains inadequate.
- Significant foreign ownership, a high price, Japanese equity excitement, etc, all make this a situation where we likely see a pop (the last bit), a fade, then a re-drift better.
Chow Tai Fooks’ Offer For NWS (659 HK). Buy NWD (17 HK)
- Chow Tai Fook (CTFE) has made a voluntary cash Offer for New World Development (17 HK)‘s (NWD) 60.88%-held NWS Holdings (659 HK) at HK$9.15/share, a 22.2% premium to undisturbed.
- CTFE and connected parties hold 45.24% of NWD, therefore the parent is effectively injecting ~US$2.75bn of cash into NWD for its NWS stake.
- The Offer is subject to regulatory approvals in Hong Kong and Bermuda. These will not be an issue given CTFE is NWD’s ultimate shareholder.
The Prosus/Naspers Ouroboros Spits Out Its Tail (Unwinds Cross-Holding to Go Back to Old Pair)
- In mid-September 2019, Naspers (NPN SJ) listed Prosus (PRX NA) on international markets, but the law required Naspers own 70+% of Prosus and it created a dual-layer NAV Discount Trade.
- In summer 2021, they announced an Exchange Offer, where Naspers holders could get Prosus, and Prosus would end up owning 49% of Naspers, creating a cross-holding circularity – an Ouroboros.
- In summer 2022, they launched open-ended buyback programmes, and they’ve bought back a lot. NOW they are unwinding the Ouroboros, going back to the pre-EO structure. buybacks will continue.
LQ45 Index Rebalance Preview (July): Review Period Nearly Complete
- The review period for the LQ45 Index ends on 30 June. The changes should be announced in the last week of July, becoming effective after the close on 31 July.
- Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
- The impact of passive trading will be higher on the deletions than the inclusions since lower liquidity stocks are replaced with higher liquidity stocks.
What Arb Trading Opportunities Should We Target in SK Innovation’s Rights Offering?
- We should seize the arbitrage trading opportunities between SSF and subscription rights during the rights trading window. SK Innovation’s SSF is highly liquid, being traded at nearly 0.5x spot.
- The key is to catch the timing of basis widening. SK Innovation traditionally experiences significant intraday basis fluctuations, making it a crucial factor in maximizing our profitability.
- The ex-date play, betting on the tendency for prices to close above the base price on the ex-date, may not hold significant appeal. This pattern has become less pronounced recently.
NWS Holding (659 HK): Pre-Conditional VGO from the Cheng Family
- Nws Holdings (659 HK) announced a pre-conditional voluntary general offer from the Cheng family at HK$9.15 or HK$9.47 per share (with a potential 2HFY2023 dividend of HK$0.32 per share).
- The pre-condition related to regulatory approval from the Insurance Authority of Hong Kong and the Bermuda Monetary Authority is a formality due to the Cheng family’s current sway over NWS.
- The key condition is approval by independent New World Development (17 HK) shareholders which is likely as the offer is attractive, reduces NWD’s gearing and results in a special dividend.
Dali Foods (3799 HK): Founder’s Privatisation Offer at HK$3.75
- Dali Foods Group (3799 HK) disclosed a scheme privatisation offer from the founder at HK$3.75 per share, a 37.9% premium to the undisturbed price (HK$2.72 on 20 June).
- Key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake.
- The price is final. While the offer price is unattractive compared to peer multiples and historical share prices, this looks like a done deal.
Redox (RDX AU) IPO – Offering Details & Index Inclusion
- Redox (RDX AU), a leading chemical and ingredients distributor, is looking to raise A$402m (US$268m) in its IPO and is expected to start trading on the ASX on 3 July.
- With the float expected to be over 30%, the stock is eligible for inclusion in the S&P/ASX indices but limited trading history could only mean S&P/ASX300 inclusion in March 2024.
- With 70% of the shares subject to lock-up arrangements, buying from ASX300 passive trackers will be small and there will be limited inclusion in other indices too.
Tryt IPO – The Negatives – Margins Have Consistently Narrowed and Gearing Could Cap Growth
- Tryt Inc (9164 JP) is looking to raise about US$460m in its Japan IPO.
- Tryt Inc (Tryt) offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
- In this note, we will talk about the not so positive aspects of the deal.
PCOMP Index Rebalance Preview: Just the Ad Hoc Change
- With a couple of trading days to the end of the review period, we do not forecast any changes for the Philippines Stock Exchange PSEi Index (PCOMP INDEX) in August.
- However, there could be an ad hoc change if Metro Pacific Investments Co (MPI PM) is delisted. The stock now trades above the tender offer price.
- Bloomberry Resorts (BLOOM PM) is the highest ranked non-constituent and the stock has started to move higher again, likely driven in part by potential index inclusion.
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