In today’s briefing:
- Thoughts On Swire Properties (1972 HK)’s Buyback
- Trend Micro (4704) Up For Sale? Would Be a HUGE Buyout But How Huge? And Who?
- EQD | The HSI Rebound Can Reach Higher Prices in August
- Targeting Spreads by Leveraging the High Predictability of the Celltrion Merger
- Trend Micro (4704 JP): Evaluating the Privatisation Rumours
- Block Deal Sale of About 98 Billion Won Worth of Acushnet Holdings by Fila Holdings
- Last Week in Event SPACE: Toyota, Swire, Fancl, Barito Complex, Descente
- GHCL Textile Q1 FY25 Update
- Korea Small Cap Gem #30: Kiswire
- (Mostly) Asia-Pac M&A: Fuji Soft, C.I. TAKIRON, Pacific Smiles, GaPack, Asia Cement, Shinko Electric
Thoughts On Swire Properties (1972 HK)’s Buyback
- Swire Pacific (A) (19 HK), 82%-held Swire Properties (1972 HK), and Cathay Pacific Airways (293 HK) all announced interim results this week.
- Of interest was Swire Prop announcing a HK$1.5bn share buyback. Shares popped 12% on the news.
- Swire Pac remains cheap on a look-through P/B of 0.34x. However, the implied stub and simple ratio (Pac/Props) have just rolled over from multi-year peaks.
Trend Micro (4704) Up For Sale? Would Be a HUGE Buyout But How Huge? And Who?
- A Reuters article overnight says Trend Micro might be up for sale. This caused the ADRs to jump 10% overnight. The remaining co-founders are 65 and 70 this year.
- The stock has effectively gone sideways the last few years as Value Act has been activisting. Now one has to exercise one’s imagination to think about a possible sale price.
- On a DCF basis, a PE fund couldn’t reasonably do this. Multiples are too high. That means a strategic buyer would be more likely. But Who? Why? And How much?
EQD | The HSI Rebound Can Reach Higher Prices in August
- In a previous insight we forecasted a rally for the Hang Seng Index in August. The picture has not changed, a positive close above 17344.60 is still possible.
- Looking at our MRM SHORT WEEKLY model for the HSI we can see that it has not yet reached overbought levels, so it could rise further in the next weeks.
- Conversely a SHORT trade will be possible from the levels we will indicate below.
Targeting Spreads by Leveraging the High Predictability of the Celltrion Merger
- Local market views Celltrion’s shareholder survey as the start of the merger process, with a decision expected from the boards within two to three months if there’s no major opposition.
- Under Korean law, if Celltrion Pharm’s market cap is under one-tenth of Celltrion’s, the merger can proceed as a small-scale merger, allowing Celltrion to avoid shareholder approval and appraisal rights.
- We should leverage the merger’s high predictability to proactively target merger swap and appraisal rights spreads and build a strategy in advance.
Trend Micro (4704 JP): Evaluating the Privatisation Rumours
- Trend Micro Inc (4704 JP) shares rose 14.8% on Friday after Reuters reported that it is exploring a sale after attracting buyout interest.
- The interest is unsurprising due to the weak share price. Since ValueAct disclosed a stake on 8 August 2022, the shares are down 0.7% vs the Nikkei 225’s 23.6% increase.
- The lack of a controlling shareholder and increased cybersecurity M&A activity support the buyout interest. A privatisation price is likely to be around JPY9,000. Valuation is undemanding at last close.
Block Deal Sale of About 98 Billion Won Worth of Acushnet Holdings by Fila Holdings
- Fila Holdings announced that its subsidiary Magnus Holdings plans to sell a 1.8% stake in Acushnet Holdings in a block deal sale worth about 98 billion won.
- Our NAV valuation of Fila Holdings suggests an implied value per share of 49,192 won, representing 18.2% upside from current levels. Fila Holdings’ 51.9% stake in Acushnet Holdings.
- The block deal sale of Acushnet Holdings by Magnus Holdings is likely to have a positive impact on Fila Holdings as it could result in higher capital returns to shareholders.
Last Week in Event SPACE: Toyota, Swire, Fancl, Barito Complex, Descente
- The trade in Toyota Motor (7203 JP)‘s Tender offer Buyback is to understand what YOU can do in your particular position.
- Despite Swire Properties (1972 HK)‘s recent share buyback, Swire Pacific (A) (19 HK) is still preferable on a look-through P/B of 0.34x.
- Kirin bumps the Offer for Fancl (4921 JP). Given market gyration, it may represent enough of a switching opportunity to let those who still object in principle to re-allocate elsewhere.
GHCL Textile Q1 FY25 Update
- Rs. 1,000 crores allocated for growth, with Rs. 350 crores deployed. 25,000 spindles added by May 2025.
- Shift towards value-added products, including knitting, weaving, and dyed fabrics, with plans to double revenue in 3-5 years.
- Despite expansion and potential opportunities, capacity constraints and global demand shifts temper expectations in the short term.
Korea Small Cap Gem #30: Kiswire
- Kiswire Ltd (002240 KS) is the number one player for steel wire and rope products in Korea. More than 85% of its sales are generated overseas.
- The company has a consistent record of generating positive net profit. It is trading at low valuations (P/B of 0.3x and EV/EBITDA of 4.5x).
- Its average net profit from 2021 to 2023 are much higher than previous three years from 2018 to 2020, which is a testament of increasing demand for its products globally.
(Mostly) Asia-Pac M&A: Fuji Soft, C.I. TAKIRON, Pacific Smiles, GaPack, Asia Cement, Shinko Electric
- I tally 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
- Three new deals were discussed this week on Smartkarma: KKR’s tilt for Fuji Soft (9749 JP); and Itochu’s Tenders Offers for Descente (8114 JP) and C.I. TAKIRON Corporation (4215 JP).
- Key updates took place on Pacific Smiles (PSQ AU), Greatview Aseptic Packaging (468 HK), L’Occitane (973 HK), Fancl Corp (4921 JP), Shinko Electric Industries (6967 JP), and Isetan Singapore (ISET SP).
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