In today’s briefing:
- MOG Digitech (1942 HK): What the Flow Is Going On?
- Toshiba Tender Offer Ends Today – Upcoming Index Selldown Schedule
- Newcrest-Newmont Merger: Fancy Index Shenanigans
- Kokusai Electric (6525 JP) IPO: Listing in October, TPX Inclusion in November, Global Indices Later
- Intage Holdings (4326 JP): NAVF Selldown and Proration for NTT’s Partial Offer
- Midea A/H Listing – Early Look – Probably Raising Acquisition Currency
- KRX Plans to Introduce Float Market Cap & Extreme Price Increases to KOSPI 200 Screening
- LG Corp: Updated NAV Analysis & Outperformance Likely Driven by Value Investors
- Costa Backs Paine Schwartz’s Lower Bid
- Costa Group (CGC AU): Binding Proposal Comes with Risks
MOG Digitech (1942 HK): What the Flow Is Going On?
- MOG Holdings (1942 HK) has been skyrocketing in price since the start of the year. Remarkably, there is little change in the number of shares that trade daily.
- MOG Holdings (1942 HK) has a market cap of US$6.44bn and trades at a modest Price/Sales ratio of 75x and an equally modest Price to Book Value of 89.5x.
- Liquidity has improved to the point where the stock could be added to some indices. However, there is a precedent of stocks not being added following market participant feedback.
Toshiba Tender Offer Ends Today – Upcoming Index Selldown Schedule
- The JIP Tender Offer for Toshiba Corp (6502 JP) closes today. I expect that we will see results announced as early as late tonight, but by law, by latest tomorrow.
- There will be at least three major index downweights, and possibly deletions, most likely in the following five trading days.
- This shows the approximate maximum share and dollar amounts to be sold, and approximate dates.
Newcrest-Newmont Merger: Fancy Index Shenanigans
- Back in February, Newmont Proposes Taking Newcrest Back Into The Fold. Newmont bumped, there was due dili, then Newcrest Backs Newmont’s US$19bn Offer in May.
- More recently, we have Newcrest: Shareholder Vote On 13th Oct, with a prescribed schedule. That makes things fun.
- There will be considerable movement of shares, and that will mean opportunity. Both up and down. I see US$3bn to buy, then A$1.5bn or more to sell a bit later.
Kokusai Electric (6525 JP) IPO: Listing in October, TPX Inclusion in November, Global Indices Later
- Kokusai Electric (6525 JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 25 October.
- At the reported indicative IPO price of JPY 1890/share, Kokusai Electric (6525 JP) will be valued at JPY 435bn (US$2.94bn).
- The stock should be added to the TPX INDEX at the close on 29 November where trackers will need to buy over 14% of the stock issued in the IPO.
Intage Holdings (4326 JP): NAVF Selldown and Proration for NTT’s Partial Offer
- Nippon Active Value Fund PLC (NAVF LN)’s jointly-held shareholding in Intage Holdings (4326 JP) has declined from 11.28% to 9.52% of outstanding shares (disclosed on 20 September).
- NAVF wants to take as much money off the table as possible as NTT (Nippon Telegraph & Telephone) (9432 JP)’s partial offer price represents an all-time high.
- Our revised minimum proration is 53.31%. NAVF’s action suggests that the minimum acceptance condition, which requires a 20% minority acceptance rate, should be satisfied.
Midea A/H Listing – Early Look – Probably Raising Acquisition Currency
- Midea Group Co Ltd A (000333 CH), one of the world’s largest home appliance producers, aims to raise up to US$5bn in its H-share listing.
- Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
- In this note, we look at its past performance and other deal dynamics that might impact the listing.
KRX Plans to Introduce Float Market Cap & Extreme Price Increases to KOSPI 200 Screening
- In addition to full market cap and trading value, float-adjusted market cap will be added as a quantitative screening tool.
- Regarding extreme price increases, KRX plans to utilize the deviation between the average daily market capitalizations for two, three, and six months leading up to the screening base date.
- We should consider designing trading setups that target stocks with relatively low free-float rates and high price volatility in recent months.
LG Corp: Updated NAV Analysis & Outperformance Likely Driven by Value Investors
- Our NAV analysis of LG Corp suggests an implied market cap of 16.9 trillion won or 107,217 won per share which is 28.4% higher than current share price.
- We believe that LG Corp could announce another share buybacks representing 2-3% of outstanding shares in the next 6-12 months.
- Another reason that could result in LG Corp’s shares outperforming other major LG related shares is due to the value investors increasing capital allocation to higher dividend paying LG Corp.
Costa Backs Paine Schwartz’s Lower Bid
- On the 18 September, Costa Group Holdings (CGC AU) announced A$3.20/share best and final Offer from Paine Schwartz Partners (PSP) down from the A$3.50/share NBIO in July.
- Costa’s shares wobbled – would they, won’t they be supportive? A break price beyond the undisturbed price loomed. Vanguard kicked out a chunk of shares below A$3.
- This morning Costa and PSP entered into a Scheme Implementation Deed. The transaction is expected to close in 1Q24. Key conditions are Costa’s shareholder vote and FIRB/SAMR/EU approval.
Costa Group (CGC AU): Binding Proposal Comes with Risks
- Costa Group Holdings (CGC AU) has entered a scheme implementation deed with Paine Schwartz Partners (PSP) led consortium at A$3.20 per share.
- The key conditions are regulatory and shareholder approval. China SAMR regulatory approval poses a risk, primarily related to timing. Costa anticipates completion in 1Q24.
- The headcount test related to the retail vote remains a risk. The risk/reward is unfavourable as the deal break downside (10%+) outweighs the offer’s upside (3.6% at last close).
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