In today’s briefing:
- Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry
- CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar
- MBK’s Dual Tenders for Korea Zinc and Youngpoong Precision: The Largest Deal Ever in Korea
- Shinko Electric (6967 JP) Takeover – Time To Buy Dips, and Ibiden (4062 JP)
- Midea HK Listing: Valuation Insights
- Fuji Soft (9749) – Fuji Softer
- StubWorld: Young Poong & MBK Jostle For Control Of Korea Zinc (010130 KS)
- NAV Analysis of Young Poong and Three Potential Scenarios of Choi Family’s Strategy to Fight Back
- Hulic (3003) Launches TOB to Take Out Raysum (8890) – HUGE Win for Good Governance And Activism
- Clearing up Legal Confusion on Counter Offers and Getting a Clear Read on the Korea Zinc Tender
Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry
- Media reports indicate that Midea Group (000333 CH) has priced its H-shares IPO at HK$54.8/share, the top of the range. That is a 19.85% discount to the A-shares.
- Reports also indicate that the IPO was oversubscribed multiple times with Hillhouse and GIC putting in large orders. That could result in the Offer Size Adjustment Option being exercised.
- The exercise of the Offer Size Adjustment Option will take the IPO raise to HK$31bn (US$3.98bn) and index inclusion in some of the larger indices will become a lot easier.
CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar
- There could be 17 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 3 spots.
- We estimate one-way turnover of 2.9% at the rebalance leading to a one-way trade of CNY 21.96bn (US$3.1bn). There are 22 stocks with over 3x ADV to trade.
- Impact on the stocks has increased as creations in ETFs linked to the CSI 300 Index continue. That flow will reverse from the deletions in the next few months.
MBK’s Dual Tenders for Korea Zinc and Youngpoong Precision: The Largest Deal Ever in Korea
- MBK launches a tender offer to acquire 14.6% of Korea Zinc at ₩660,000 per share, a ₩2T deal with an 18.7% premium. Offer runs from September 13 to October 4.
- On top of that, MBK’s also rolling out a tender offer for Young Poong Precision at ₩20,000 per share—a hefty 113% premium over yesterday’s close.
- Spread action is possible if the Choi family counters, driving volatility. The market’s watching for a higher bid, which could create trading opportunities amid rising spread volatility.
Shinko Electric (6967 JP) Takeover – Time To Buy Dips, and Ibiden (4062 JP)
- Late last month, Shinko Electric Industries (6967 JP) announced that the JIC consortium Tender Offer due to be launched by end-August would be delayed. Next update? January 2025.
- Everyone was expecting a delay, but that caused the stock to fall. Then tech/AI fell out of bed, Ibiden crashed, then China export restrictions noise/pushback caused further delay.
- I saw a 9% gross spread yesterday and thought “Geez”, that’s a buy.” A day later, it’s 6%. Still wide, still interesting. And that has set a boundary.
Midea HK Listing: Valuation Insights
- Chinese home appliance maker Midea has announced the terms for its IPO. The company plans to raise $3.46bn at an indicative price range of HK$52.0-54.8 per share.
- The company has a diversified product portfolio, well-balanced exposure to domestic as well as overseas markets and a growing robotics business.
- As we expected, the HK offering is priced at around 25% discount to it’s A-shares and our analysis suggests that Midea’s HK offering is priced attractively.
Fuji Soft (9749) – Fuji Softer
- When Bain came out saying they would bid more, with preparation to launch in November, KKR launched early to see if they could get the jump, discussed here.
- The stock popped when the Bain’s bid was obviously serious, and supported by the Founding Family, but it went to Bain’s “5% higher” plus another 5%. I was bearish.
- But I signalled willingness to change my mind if the stock price dropped. It has dropped.
StubWorld: Young Poong & MBK Jostle For Control Of Korea Zinc (010130 KS)
- MBK has teamed up with Young Poong (000670 KS) to secure control of Korea Zinc (010130 KS) via Partial Tender Offers for Korea Zinc and Young Poong Precision (036560 KS).
- Preceding my comments on Young Poong, Korea Zinc, and Young Poong Precision are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
NAV Analysis of Young Poong and Three Potential Scenarios of Choi Family’s Strategy to Fight Back
- We have significantly raised the NAV of Young Poong to 965,193 won (up 105% than previously). Our current NAV estimate of the company is 150% higher than current price.
- Some traders have been positioning for Young Poong to be deleted from the KOSPI200 in the next round of rebalancing. Young Poong is not likely to be deleted from KOSPI200.
- We also provide three potential scenarios of the Choi family’s strategy to fight back to gain control of Korea Zinc.
Hulic (3003) Launches TOB to Take Out Raysum (8890) – HUGE Win for Good Governance And Activism
- The change in control of Raysum Co Ltd (8890 JP) has a complex backstory. But one week shy of two years ago, Oasis launched a buyout to own 65%.
- The company had a strong MTMP. Oasis paid ¥1,700/share to own 65%. The MTMP came through, there was an offering, and it stayed near ¥3,000/share.
- Now Hulic Co Ltd (3003 JP) has come out with a Tender Offer to buy the company for ¥5,913/share. That’s a 94% premium and 3.5x what Oasis paid 2yrs ago.
Clearing up Legal Confusion on Counter Offers and Getting a Clear Read on the Korea Zinc Tender
- Since Choi and his affiliates can’t buy shares directly, his only play is to recruit more white knights to boost his stake.
- He needs at least 6% from the 23% free float, costing over ₩800 billion. This hefty price tag is why the stock hasn’t moved much from the tender offer price.
- The market isn’t ruling out Hyundai getting aggressive to secure Korea Zinc’s nickel, making this a hot trading point during the tender offer.
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