In today’s briefing:
- Vinda (3331 HK): Tanoto’s Firm Offer
- A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.
- The Psychology of Money: A Book Review
- MBK Partners Raises Tender Offer Price of Hankook and Co to 24,000 Won
- Index Rebalance & ETF Flow Recap: HSTECH, SIG/CWG, KQ150, REPT BATTERO
- Tomony Holdings (8600 JP) – Regional Bank NEW SHARE Issue – Not What You Want To See, But Buy Anyway
- Yuanta/P-Shares Taiwan Div+ ETF: Day 1 Flows & Stock Moves
- Merger Arb Mondays (18 Dec) – Shinko Electric, Benefit One, Toyo, CPMC, Vinda, Costa, Volpara
- 2024 High Conviction Idea: More Downside for Meituan
- Hankook & Co Tender: Clues to Gauge Cancellation Risk Obtained Through Local Channels So Far
Vinda (3331 HK): Tanoto’s Firm Offer
- Back on the 27 April, personal hygiene play Vinda International (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership.
- That spurred, allegedly, a variety of suitors including Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, DCP Capital, and Indonesia’s Tanoto family.
- And the Tanoto’s have now emerged with a HK$23.50 pre-conditional Offer. The key risk is PRC regulatory approval . Elsewhere, this is a done deal.
A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.
- The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished.
- Time to go long Hs vs As for the new year at 52wk wide discounts. 3 Short H/A pairs now switched to long. 3 new pairs long this week.
The Psychology of Money: A Book Review
- In this insight, I review a fantastic book written by Morgan Housel called The Psychology of Money (published in 2020).
- “The most important part of every plan is planning on your plan not going according to the plan.”
- Three parts of the book were particularly outstanding including letter to author’s son, the story of Rick Guerin, and how mice helped the Russians to defeat the mighty German army.
MBK Partners Raises Tender Offer Price of Hankook and Co to 24,000 Won
- After market close on 15 December, MBK Partners raised the tender offer price of Hankook & Company by 20% to 24,000 won, which is now 51.4% higher than current price.
- With Cho Yang-Rae’s recent acquisition of shares, Cho Hyun-beom, Cho Yang-rae, and related parties now own about 45.6% of Hankook & Co, up from 42.9% previously.
- MBK Partners has requested an official investigation by the FSS, claiming that Cho Yang-rae and HY have violated the Capital Markets Act by recently purchasing shares of Hankook & Co.
Index Rebalance & ETF Flow Recap: HSTECH, SIG/CWG, KQ150, REPT BATTERO
- It was a busy week with rebalance implementations at the close of trading on Thursday in Korea and then across the region on Friday.
- The SET 50 Index changes should be announced this week and the Yuanta TW Div+ ETF will continue to implement the changes till Thursday.
- There were inflows to China ETFs during the week while there were big outflows from Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) ETFs.
Tomony Holdings (8600 JP) – Regional Bank NEW SHARE Issue – Not What You Want To See, But Buy Anyway
- On 5 December, Tomony Holdings (8600 JP) – a holding company for two regional banks based in Tokushima Prefecture and Kagawa Prefecture – announced (gasp!) a NEW SHARE OFFERING.
- It offered 28mm shares + 4.2mm greenshoe – a share count increase of 20%. At 0.27x book. This IS unusual. Especially when banks are being asked to produce better ROC.
- The deal priced at ¥366. We’re there now. Banks have been sold. It is worth looking at where we are and what could happen next. It’s cheap.
Yuanta/P-Shares Taiwan Div+ ETF: Day 1 Flows & Stock Moves
- The Yuanta/P-shares Dividend Plus ETF (0056 TT) started to rebalance its holdings on Friday and will continue to do so for the next 4 trading days.
- Stocks with buy flows dropped 0.51% on average on Friday while the stocks with sell flows dropped 0.92%. On a flow weighted basis, the numbers were -0.21% vs -0.75%.
- Since the start of November, the adds have outperformed the deletes and the TWSE INDEX. There has been significant outperformance in just the last week.
Merger Arb Mondays (18 Dec) – Shinko Electric, Benefit One, Toyo, CPMC, Vinda, Costa, Volpara
- 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 – Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Lithium Power International (LPI AU), Benefit One Inc (2412 JP).
- Lowest spreads Tietto Minerals Ltd (TIE AU), Azure Minerals (AZS AU), IJTT Co., Ltd. (7315 JP), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Shidax Corp (4837 JP).
2024 High Conviction Idea: More Downside for Meituan
- We don’t consider Douyin an existential threat to Meituan, but we see the company’s growth increasingly be constrained by its business model itself.
- We believe Meituan will disappoint the market with regard to its bottom line growth in 2024, barring major overhaul of its new initiative businesses.
- Meituan will have to make tough choice between growth and profitability and either scenario won’t bode well for its valuation. We value the company at RMB410 billion, meaning 18% downside.
Hankook & Co Tender: Clues to Gauge Cancellation Risk Obtained Through Local Channels So Far
- Critical now is estimating MBK’s achievable volume in the tender offer, a key indicator for assessing cancellation risk. Evidence suggests few allies for Cho Hyun-beom, prompting MBK’s strategic persistence.
- MBK can secure 23.58%, but NPS’s involvement is pivotal. If neutral, MBK aims for 19.55%, below the minimum. MBK proceeds with a revised offering price, anticipating NPS participation.
- Though the FSS investigation may favor MBK, a successful tender offer depends on achieving 87% participation. The higher-than-expected likelihood of success hints at a strong upward stock adjustment from Monday.
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