In this briefing:
- HK Connect Discovery – January Snapshot
- Hyundai Heavy/DSME Event – Comprehensive Summary
- SCSK (9719 JP) Launches Buyout of Subsidiary VeriServe (3724 JP)
- JDI: Share Price Continues to Slide Following Weak Earnings Outlook Due to US-China Trade War
- SCSK (9719 JP) Launches Buyout of Subsidiary JIEC
1. HK Connect Discovery – January Snapshot
This is a monthly version of our HK Connect Weekly note, in which I highlight Hong Kong-listed companies leading the southbound flow weekly. Over the past month, we have seen the flow turning from outflow to inflow. Our previous insights published in Jan can be found in the links below. In this insight, we will focus on the month flow to get a bigger picture vs the weekly flow.
Our January Coverage of Hong Kong Connect southbound flow
- HK Connect Discovery Weekly: CR Beer, Great Wall Motors, and Kingsoft (2019-01-07)
- HK Connect Discovery Weekly: China Tower, Tencent, New China Life (2019-01-11)
- HK Connect Discovery Weekly: Tencent, Kingsoft, and Yichang HEC (2019-01-18)
- HK Connect Discovery Weekly: CRRC, Car Inc/ UCar (2019-01-25)
2. Hyundai Heavy/DSME Event – Comprehensive Summary
- Below is a comprehensive summary of the Hyundai Heavy/DSME event that engulfed the Korean market yesterday. This is a multi step process. Details of most events will be determined after one month of holdback period.
- I will provide a trade approach on each name in a follow-up post.
3. SCSK (9719 JP) Launches Buyout of Subsidiary VeriServe (3724 JP)
Today after the close, Sumitomo Corp (8053 JP) consolidated subsidiary SCSK Corp (9719 JP) announced a Tender Offer to buy out minorities in Veriserve Corp (3724 JP).
SCSK currently holds 2,900,000 shares or 55.59% of voting rights.
The Tender Offer is at ¥6,700/share which is a 43.6% premium to the last traded price of the day before the announcement (¥4,665), a 44.6% premium to the one-month average, a 28.3% premium to the 3-month average, and a 36.6% premium to the 6-month average.
The price does not seem egregiously unfair, but for investors who own it who think it has another double in it this year they might get upset.
This is one of those situations with which the currently underway METI M&A Fairness enquiry might have a problem.
And if you care about the fairness of the M&A bidding and response process, and ensuring that minority investors get their interests defended by process, have a look at the METI Fair M&A panel and its consultation paper and by all means offer your comments.
4. JDI: Share Price Continues to Slide Following Weak Earnings Outlook Due to US-China Trade War
A Japanese newspaper recently reported that JDI is expected to post a consolidated loss for the current fiscal year. However, the company claims that the newspaper report was not based on any forecast made by JDI. The company has stated that it is currently calculating topline and bottomline for the third quarter and it expects the economic slowdown in China, prolonged user lifecycles for smartphones and the US China trade war to in fact have a greater than expected impact on the company’s financial performance. While its third quarter results are to be released in mid-February 2019, consensus expects the company to turnaround its losses to make an overall net profit for the year.
5. SCSK (9719 JP) Launches Buyout of Subsidiary JIEC
Today after the close, Sumitomo Corp (8053 JP) consolidated subsidiary SCSK Corp (9719 JP) announced a Tender Offer to buy out minorities in JIEC Co Ltd (4291 JP).
SCSK currently holds 4,768,000 shares or 69.52% of voting rights.
The Tender Offer is at ¥2,750/share which is a 39.3% premium to the last traded price of the day before the announcement (¥1,974), a 38% premium to the one-month average, and a 41% premium to the 3-month and 6-month averages.
It is being done at about 7.5x TTM EV/EBITDA.
This is one of those situations with which the currently underway METI M&A Fairness enquiry might have a problem.
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