In today’s briefing:
- Last Week in Event SPACE: Toyota, Swire, Fancl, Barito Complex, Descente
- Trend Micro (4704 JP): Evaluating the Privatisation Rumours
- SK Innovation: Considering on Using Its Treasury Shares to Inject Capital into SK On
- Merger Arb Mondays (12 Aug) – China TCM, Canvest, GA Pack, Fuji Soft, Fancl, Descente, Takiron
- Taiwan Dual-Listings Monitor: TSMC Strong Spread Rebound Into Short Zone; ASE Remains Broken Down
- WeRide (WRD US) IPO: The Bull Case
- Flow Developments to Watch as the Release of the Value-Up Index Approaches
- Korea Zinc: Impressive Capital Return Plans and a Big Price Gap Between Korea Zinc and Young Poong
- Swire Properties (1972 HK): Buyback to Offset Passive Selling
- Taiwan Top 50 ETF Rebalance Preview: One Change Right at the Cusp
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.
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.
SK Innovation: Considering on Using Its Treasury Shares to Inject Capital into SK On
- SK Innovation is considering on using its treasury shares to inject capital into its EV battery making subsidiary SK On.
- The appraisal rights exercise price is 111,943 won per share (15% higher than current price). Many minority shareholders are likely to exercise their appraisal rights in SK Innovation.
- We remain Bearish on SK Innovation. We continue to be negative on the SK Innovation and SK E&S merger. Plus, we are concerned about the continued weakness at SK On.
Merger Arb Mondays (12 Aug) – China TCM, Canvest, GA Pack, Fuji Soft, Fancl, Descente, Takiron
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Malaysia Airports Holdings (MAHB MK), Asia Cement China (743 HK).
- Lowest spreads: Fuji Soft Inc (9749 JP), Second Chance Properties (SCE SP), Descente Ltd (8114 JP), C.I. TAKIRON Corporation (4215 JP), Fancl Corp (4921 JP).
Taiwan Dual-Listings Monitor: TSMC Strong Spread Rebound Into Short Zone; ASE Remains Broken Down
- TSMC: +16.1% Premium; Strong Spread Rebound, Potential Opportunity to Short the Spread
- UMC: +1.6% Premium; Consider Shorting the Spread at This Level
- ASE: +3.8% Premium; Uncertainty Remains on the Sustainability of the Recent Breakdown
WeRide (WRD US) IPO: The Bull Case
- WeRide (WRD US), a provider of autonomous driving products and services, seeks to raise between US$200 to US$300 million through a Nasdaq IPO.
- WeRide is the most commercially successful L4 autonomous driving company globally, measured by commercialization revenue in 2021, 2022 and 2023.
- The bull case rests on a large TAM, strong product capabilities, near-term mass commercialization, articulation of a path to profitability, improving earnings quality and presence of blue-chip investors.
Flow Developments to Watch as the Release of the Value-Up Index Approaches
- The plan is to select 20 large-cap companies from around 30 with value-up disclosures by late August, then gradually expand the index’s constituents.
- Investors seeking both dividends and value-up benefits must buy stocks individually, as ETFs lack tax advantages, potentially triggering fund shifts from dividend ETFs to value-up stocks.
- We can target stocks in dividend ETFs not making value-up disclosures, as they may face overhang risk during fund migration to the value-up index.
Korea Zinc: Impressive Capital Return Plans and a Big Price Gap Between Korea Zinc and Young Poong
- On 7 August, Korea Zinc (010130 KS) announced several impressive capital return plan that should help to increase shareholder value.
- The separation of Korea Zinc between the Choi and Jang families has been in progress in the past several years. The exact timing of when this occurs remains uncertain.
- Our NAV Analysis of Young Poong is NAV per share of 470,065 won, representing a 52% upside from current levels.
Swire Properties (1972 HK): Buyback to Offset Passive Selling
- Swire Properties (1972 HK) was trending lower on expectations of deletion from a global index in August. Short interest has jumped a lot over the last few months.
- The announcement of the buyback last week took the stock higher. The increased real float from the index deletion will be offset by the buyback.
- Swire Pacific (A) (19 HK)‘s ownership of Swire Properties (1972 HK) will increase from 82% to 83.5% following the buyback and cancellation of the shares. Privatisation at some point?
Taiwan Top 50 ETF Rebalance Preview: One Change Right at the Cusp
- Using the last close, there could be one change for the Taiwan Top 50 ETF in September with Pharmaessentia Corp (6446 TT) replacing Nanya Technology (2408 TT).
- There is one other constituent that is close to deletion zone while there are a couple of non-constituents that could move into inclusion zone over the next couple of weeks.
- Short interest has been dropping in Pharmaessentia Corp (6446 TT) and increasing in Nanya Technology (2408 TT) over the last few weeks.
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