In today’s briefing:
- Shin Kong (2888.TW) And Taishin (2887.TW) Agree to Merge, But It Isn’t Clean, And It’s A Bad Price
- Asia Cement (743 HK): 26th August Vote. Shareholders Should Reject Terms
- Yamaha Motors (7272 JP) – Secondary Offering as Toyota Sells Down – Easy To Digest
- Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
- Henlius (2696 HK): Was There Any Doubt?
- Shinko Electric (6967) Deal Approval Delayed; From Here, Big Gap-, Small Break-, Some Delay-Risk
- KRX Value-Up Index Will Have Two Separate Indices, Excellent & Promising, With 150 Constituents
- Huafa Property (982 HK): Buy With Both Hands
- Shinko Electric (6967 JP): Tender Start Timelines Delayed
- PDD (PDD US): Stock Plunged After Excellent 2Q24 Result – Your Time to Buy
Shin Kong (2888.TW) And Taishin (2887.TW) Agree to Merge, But It Isn’t Clean, And It’s A Bad Price
- After rumours were rekindled a week earlier, on 22 August 2024, Taishin Financial Holding (2887 TT) and Shin Kong Financial Holding (2888 TT) announced they would merge.
- The ratio is 0.6022 shares of Taishin for every share of Shin Kong putting NEWCO assets at about the level of Taiwan #3 CTBC Financial. That’s bad.
- There’s history here. LOTS of history. This would need approvals from the FSC and FTC, but CTBC is already a spoiner, and the SKFH Board Meeting was anything but clean.
Asia Cement (743 HK): 26th August Vote. Shareholders Should Reject Terms
- Back on the 5th June, Chinese cement play Asia Cement China (743 HK) announced a rubbish HK$3.22/share Offer from its parent Asia Cement (1102 TT).
- This best & final cash Offer was a ~ 45% premium to undisturbed, and a 37% discount to FY23’s net cash. It’s a 39% discount to 1H24’s net cash.
- The Scheme Doc is now out, with a 26th August independent shareholder vote. And payment (if it were to occur) on 20th September. The IFA (unsurprisingly) says fair and reasonable.
Yamaha Motors (7272 JP) – Secondary Offering as Toyota Sells Down – Easy To Digest
- On Firday 23 August, Yamaha Motor (7272 JP) announced that three cross-holders would sell about 4.6% of the shares out in a secondary sale.
- MS&AD was expected. Toyota was probably expected. Yamaha Corp is a bit of a surprise. But it also frees up Yamaha Motor to sell down cross-holdings (top 2 are Toyota/Yamaha).
- Given the price/guidance/dividend yield and limited size, this should be quite easy to place.
Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
- Zomato (ZOMATO IN) has a market cap of over US$27bn but is not a member of the NIFTY Index and S&P BSE SENSEX Index since it is not an F&O member.
- Once SEBI’s proposed and enhanced stock inclusion thresholds are implemented, Zomato (ZOMATO IN) should be added to the F&O segment of the market.
- Passive NIFTY Index and S&P BSE SENSEX Index will have to buy a lot of Zomato stock at subsequent rebalances. The impact will be higher given the lower real float.
Henlius (2696 HK): Was There Any Doubt?
- Roughly six weeks ago, Shanghai Henlius Biotech (2696 HK) announced the scrip option condition was met. Just that Shanghai Fosun Pharmaceutical (2196 HK) (the Offeror) was weighing its options
- This situation mirrored L’Occitane (973 HK)‘s (eventual) scrip option. And in place of Pleasant Lake in that transaction; Henlius has Loyal Valley Capital (5.8309% shareholder) behind the scenes.
- Late Friday, Henlius updated the terms of Fosun’s Offer to now include the scrip option alternative. We expected nothing less. 1H24 results will also be out later today.
Shinko Electric (6967) Deal Approval Delayed; From Here, Big Gap-, Small Break-, Some Delay-Risk
- Today after the close, Shinko Electric Industries (6967 JP) offered a progress report on the approvals for the JIC Consortium Tender Offer originally “scheduled” to start in late August 2024.
- “Procedures and Steps Necessary under the competition laws of Vietnam and China have not been completed” so the Tender Offeror expects to commence the Tender Offer in/after late January 2025.
- The announcement appears to suggest no update is likely for another five months or until the Tender Offer starts. That will introduce questions of further delay.
KRX Value-Up Index Will Have Two Separate Indices, Excellent & Promising, With 150 Constituents
- KRX plans to launch the Value-Up Index as two separate indices: the “Excellent Value-Up Index” and the “Promising Value-Up Index.”
- The universe will include 150 constituents from KOSPI 200 and KOSDAQ 150. Allocation between indices is undecided, with sector limits on number and weight confirmed.
- The key indicators (ROE, PBR, shareholder return rate) remain unchanged. The Promising Index’s weights are undisclosed, but the Excellent Index favors financial and automotive stocks.
Huafa Property (982 HK): Buy With Both Hands
- A state-owned Offeror pitching a lifetime high Offer Price – with a solid premium – for an illiquid company? Sounds like a slam dunk.
- Yet property manager Huafa Property Services Group (982 HK) has perennially traded wide to Huafa Industrial Co., Ltd. Zhuhai (600325 CH)‘s terms. This is not justified.
- The Scheme Meeting/SGM is tomorrow (28 August), with payment on (or before) the 30 September. Or a gross/annualised return of 4%/46%. Buy here. Then buy some more.
Shinko Electric (6967 JP): Tender Start Timelines Delayed
- Shinko Electric Industries (6967 JP) pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The tender start has been delayed from late August to around late January 2025.
- The delay was due to outstanding China SAMR and Vietnam regulatory approvals. The stretched timeline suggests that SAMR will likely conditionally approve the deal.
- While Ibiden Co Ltd (4062 JP)’s underperformance lowers the deal’s break price, timing, not break risk, remains the key concern. At the last close, the gross/annualised spread was 3.7%/7.5%.
PDD (PDD US): Stock Plunged After Excellent 2Q24 Result – Your Time to Buy
- The stock plunged today after the announcement of excellent performance for 2Q24.
- In 2Q24, revenue grew by 86% YoY and the operating margin improved 10 percentage points YoY.
- We believe investors should buy, as it is just a tactic from major stock sellers.
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