In today’s briefing:
- HSCEI Index Rebalance Preview: High & Low Probability Changes
- Korea Zinc: Plans to Buy Back and Cancel Shares Worth 2.7 Trillion Won + Team Up with Bain Capital
- Kusuri No Aoki (3549) Big Buyback – Accretive, And May Involve Musical Shares
- MBK Hikes Youngpoong Precision Tender Price to ₩30,000: Tender Deadline Extended to the 14th
- Rigaku IPO – Peer Comparison – Compensating for Smaller Scale with Better Growth and Margins
- MBK Raised Korea Zinc’s Tender Price to ₩830K and Dropped the Hard Floor, Keeping the Upper Hand
- MPHB Capital (MPHB MK)’s Offer Stalls At the Finish Line
- MBK Raises Tender Offer Price of Korea Zinc to 830,000 Won
- SET50 Index Rebalance Preview: Four Changes as Adds Outperform Deletes
- China Consumer Plays Listed In Japan
HSCEI Index Rebalance Preview: High & Low Probability Changes
- PICC Property & Casualty H (2328 HK) inclusion and Longfor Properties (960 HK) deletion are high probability changes for the Hang Seng China Enterprises Index (HSCEI INDEX) in December.
- There is a lower probability of China Resources Power (836 HK) being added and of Sino Biopharmaceutical (1177 HK) being deleted at the rebalance.
- There has been big short covering in PICC Property & Casualty (2328 HK) over the last couple of months while shorts would have covered Longfor Properties (960 HK) recently.
Korea Zinc: Plans to Buy Back and Cancel Shares Worth 2.7 Trillion Won + Team Up with Bain Capital
- Korea Zinc plans to repurchase and cancel shares worth 2.663 trillion won. Korea Zinc’s partner Bain Capital also plans to purchase around 430 billion won for a 2.5% stake.
- Korea Zinc plans to buy back shares at 830,000 won per share, which is 11% higher than MBK’s revised up tender offer price of 750,000 won.
- Choi family/Bain Capital’s efforts to conduct a massive share buyback and cancellation at higher prices than the market price goes against the globally accepted market practices.
Kusuri No Aoki (3549) Big Buyback – Accretive, And May Involve Musical Shares
- The drugstore space in Japan is super-interesting. The stories, the mergers, the activists. And of course, the defence against activists.
- In Feb-2024, Aeon did a deal with an activist to cause a future deal between Tsuruha and Welcia. Aeon also owns a stake in Kusuri no Aoki Holdings (3549 JP).
- The Aoki brothers (CEO and VP) exercised warrants in August and re-arranged their holdings. Now the family owns 34.7%. Today, after Q1 earnings, the company announced a 5+% buyback.
MBK Hikes Youngpoong Precision Tender Price to ₩30,000: Tender Deadline Extended to the 14th
- MBK is raising its tender offer for Young Poong Precision to ₩30,000 per share, matching Choi’s offer and extending the deadline to October 14. Filing expected tomorrow before market open.
- MBK targets 6.84 million shares, surpassing Choi’s 3.94 million cap. No hard floor, no cancellation risk, but MBK holds an edge in proration.
- The buzz is whether MBK will raise its Korea Zinc bid beyond 900,000 KRW, as Choi prepped with a 950,000 KRW offer. A bid hike and extension seem likely.
Rigaku IPO – Peer Comparison – Compensating for Smaller Scale with Better Growth and Margins
- Rigaku Holdings (268A JP) is looking to raise US$762m in its Japan IPO.
- Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
- In our earlier notes, we looked at the firm’s past performance. In this note, we undertake a peer comparison.
MBK Raised Korea Zinc’s Tender Price to ₩830K and Dropped the Hard Floor, Keeping the Upper Hand
- MBK ditched the hard floor, eliminating cancellation risk. With a 15% GGT rate, there’s a 4% spread, so if you can secure volume, the deal looks solid.
- MBK’s tender offer has less volume than Choi’s buyback (18%), increasing proration risk, but Choi’s deal also faces legal headaches, leaving some cancellation risk.
- Tax implications differ: MBK’s offer incurs capital gains tax, while Choi’s buyback is subject to dividend tax. Foreign investors may prefer MBK’s 0% withholding tax, impacting participation.
MPHB Capital (MPHB MK)’s Offer Stalls At the Finish Line
- On the 28 May, credit service provider MPHB Capital (MPHB MK) announced that controlling shareholder and chairman Tan Sri Surin Upatkoon intended to delist the company via a selective capital reduction.
- Shareholders approved the RM1.70/share (87.21% FOR, 8.34% AGAINST) terms. The Offer required the Court to sign off on the SCR, and that’s when matters unravelled.
- ISM Sdn Bhd, MPHB’s minority partner in six JVs, filed an intervening application on the grounds that sanctioning the SCR may affect its rights in an ongoing legal dispute.
MBK Raises Tender Offer Price of Korea Zinc to 830,000 Won
- On 4 October, MBK Partners announced that it is raising its tender offer price of Korea Zinc from 750,000 won to 830,000 won, matching Choi family’s tender offer price.
- As the price and conditions have changed, the tender offer period for Korea Zinc by MBK Partners and Young Poong will be extended by 10 days until 14 October.
- Unless the Choi family makes another counter offer, upping the tender offer price even further, MBK/Young Poong is in a better position to win this M&A war for Korea Zinc.
SET50 Index Rebalance Preview: Four Changes as Adds Outperform Deletes
- A third of the way through the review period for the December rebalance of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX), we see four potential index changes.
- Passive trackers will need to buy between 0.5-4.3 days of ADV on the inclusions and sell between 0.1-2.9 days of ADV on the deletions.
- The forecast adds have outperformed the forecast deletes and the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) over the last 5 months.
China Consumer Plays Listed In Japan
- Nippon Paint Holdings (4612 JP) is a branded decorative paint player. China made up nearly 40% of the operating profit of the company.
- Saizeriya (7581 JP) is a Japanese restaurant chain of fast casual Italian food, with currently the majority of operating profit and growth coming from China.
- Shiseido Company (4911 JP) is a Japanese beauty company that relies heavily on China.
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