In today’s briefing:
- Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry
- The New FEFTA List (With 7&I (3382) As “Core”) Is Not a Big Hurdle for Couche-Tard
- Hulic (3003) Launches TOB to Take Out Raysum (8890) – HUGE Win for Good Governance And Activism
- Auckland Airport (AIA NZ) Placement: Index Impact
- MV Australia Equal Weight Index Rebalance: One Add, Two Deletes, Capping to Drive Flow
- Midea Group H Share Listing (300 HK): Trading Debut
- Seven & I Holdings (3382 JP): Core Designation Does Not Change Couche-Tard’s Calculus
- Pre-IPO Midea Group H Share – Here Are the Risks Behind
- Auckland Airport Placement – Large NZ$1.4bn Raising, with ACC’s Overhang to Contend With
- Insights on the Odds of MBK Ramping up the Tender Price by 20%
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.
The New FEFTA List (With 7&I (3382) As “Core”) Is Not a Big Hurdle for Couche-Tard
- On Friday 13 September, the Ministry of Finance of Japan released revisions to the list (Japanese, English) of company classifications under the Foreign Exchange and Foreign Trade Act (FEFTA)
- It appears 72 names were newly upgraded to “Core” (“3”), 21 newly listed companies (since the last list in Nov 2021) were labeled “3”, and six lost their Type3 designation.
- Seven & I Holdings (3382 JP) saw breathless news articles Friday suggesting a foreign takeover became more difficult. Not really.
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.
Auckland Airport (AIA NZ) Placement: Index Impact
- Auckland Intl Airport (AIA NZ) has announced an underwritten placement of NZ$1.2bn and a non-underwritten retail offer to raise NZ$200m.
- The stock is trading near the low end of its range over the last few years and the 7% discount from the last close should attract investor interest.
- We estimate passive trackers will need to buy around 13.5% of the placement shares coinciding with the settlement date on 20 September.
MV Australia Equal Weight Index Rebalance: One Add, Two Deletes, Capping to Drive Flow
- Pro Medicus Ltd (PME AU) will be added to the MV Australia Equal Weight Index while IGO Ltd (IGO AU) and nib holdings (NHF AU) will be deleted.
- Constituent changes, float changes and capping changes result in a one-way turnover of 6.9% leading to a round-trip trade of A$330m.
- Shorts are pretty big in Pro Medicus Ltd (PME AU) while there has been a recent spike in short interest for IGO Ltd (IGO AU).
Midea Group H Share Listing (300 HK): Trading Debut
- Midea Group Co Ltd A (000333 CH) priced its H Share at HK$54.80 to raise HK$31,014 million (US$4.0 billion) in gross proceeds. The H Share will be listed tomorrow.
- The H Share listing price implies an AH discount of 21.4% at the A Share price of RMB63.51. This compares to Haier Smart Home (6690 HK)‘s AH discount of 13.8%.
- Futu grey market data shows that the H Shares closed 5.1% higher at HK$57.60. Our valuation analysis suggests that the H Share listing price is attractive.
Seven & I Holdings (3382 JP): Core Designation Does Not Change Couche-Tard’s Calculus
- On 13 September, the Ministry of Finance of Japan added 7&I to a list of “core” designated companies based on results of voluntary inquiries to all listed companies.
- Several media reports suggest that the change in 7&I’s designation to core would complicate the proposed acquisition by Alimentation Couche-Tard (ATD CN). The core designation will not change Couche-Tard’s strategy.
- The change to 7&I’s designation to core will paradoxically push Couche-Tard to firm up its revised offer. An undemanding valuation protects the downside of a no-deal situation.
Pre-IPO Midea Group H Share – Here Are the Risks Behind
- For the reasons why Midea is eager to IPO in HK, investors shouldn’t just look at the surface of its glory, but delve into the “real motives” behind capital operations.
- The policy of subsidizing the trade-in of home appliances belongs to “early overdraft of demand” and is unsustainable. Valuation logic for the performance increment brought by such policy is P/B.
- If Midea cannot achieve the expected breakthroughs in To B business or internationalization in 2025-2026 to hedge against the weak domestic business, Midea’s performance/valuation in following years would inevitable decline.
Auckland Airport Placement – Large NZ$1.4bn Raising, with ACC’s Overhang to Contend With
- Auckland Intl Airport (AIA NZ) is looking to raise NZ$1.4bn (US$863m) in its primary follow-on offering. The offering includes a NZ$1.2bn underwritten placement, together with a NZ$200m non-underwritten retail offer.
- The underwritten placement alone is a large one for the stock to digest at 168 days of three month ADV.
- In this note, we run the deal through our ECM framework and comment on deal dynamics.
Insights on the Odds of MBK Ramping up the Tender Price by 20%
- MBK can cut their target volume to 12% and, with 2 trillion won, raise the tender price to ₩800,000, leaving them a 20% cushion.
- MBK’s tight schedule aims to hit the 6.98% target while minimizing price volatility and market risk by shortening the offer window.
- MBK plans to sweeten the deal by about 20%, similar to Hankook, aiming for a 6.98% target with a 20% price hike from the start.
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