In this briefing:
- Manikay Caves and Accepts KKR’s Reduced (And Now Final) Offer
- Naver Faces Macro Downside Pressure
- Malaysian Telcos: Look for Improvements to Continue in 2019.
- HK Connect Discovery – March Snapshot (WH Group, Air China)
- Dongzheng Auto Finance (东正汽车金融) Trading Update – Could Be Worth Setting up a Trade
1. Manikay Caves and Accepts KKR’s Reduced (And Now Final) Offer
Originally I had thought KKR’s offer could go higher. Instead, it came in lower at A$3.40 and KKR gave MYOB Group Ltd (MYO AU) management all of a couple of days to think about it.
The title to my subsequent piece was MYOB Caves And Agrees To KKR’s Reduced Offer.
Manikay Partners started buying up shares and by early March had reached a position of 11%. They made noise. The Scheme Booklet came out on the 14th of March. Four days later Manikay announced their position was now 13.61% and the following day Mawer announced re-upped its stake from the mid 8s to high 9% level.
The 20th saw a Scheme Update from MYO announcing receipt of a letter from KKR saying that the A$3.40 price was their “best and final offer”, making it clear under Truth in Takeovers language that Manikay was not going to get a higher price out of them.
Manikay continued to buy shares on the 20th and the 21st, getting to 16.16% of the company as filed on the 22nd.
On Monday 1 April, MYOB announced a supplemental disclosure to the Scheme documents noting KKR’s final intention, and that the directors continued to unanimously recommend the Scheme.
Today we have new news.
Manikay Caves and Agrees to KKR’s Reduced (Now Final) Offer
Earlier today a Reuters story about Manikay accepting the offer popped up and MYOB shares popped from A$3.34 to A$3.38-39 area where they closed. Partway through the day MYOB released a document on the ASX feed saying that Manikay had sent a letter saying…
In order avoid speculation regarding our voting intentions in respect of the Scheme, we are writing to inform you that we, Manikay Partners, intend to vote all the MYOB shares that we own or control FOR the upcoming Scheme, subject to there being no proposal that we consider to be superior prior to the vote.
We remain very disappointed that, despite our repeated efforts to convince you otherwise, you failed to change your recommendation in light of the material improvement in market conditions since announcement of the Scheme, among other factors. We are also disappointed that the disclosures to MYOB shareholders did not fully explain the impact of such improved market conditions on the value of MYOB.
excerpt of the letter.
2. Naver Faces Macro Downside Pressure
Naver Corp (035420 KS) is nearing tactical support for a trading buy but continues to face macro bear pressure stemming from key resistances note in the weekly RSI and MACD postures. This bear pressure is due to resume after a bounce sequence.
Naver has broken down out of triangulation after completing a corrective bounce cycle outlined in our recent update. Naver Bull Wedge to Trade Higher . We are now resuming the macro down cycle and view tactical rallies as selling opportunities as the major trend remains down.
A Kospi 200 rise above 290 will play a role in lifting Naver in the outlined tactical bounce cycle.
3. Malaysian Telcos: Look for Improvements to Continue in 2019.
The 4Q18 numbers released by the Malaysia wireless operators, showed stable trends vs 3Q. Market service revenue growth of -1.1% YoY was stable, with Maxis (MAXIS MK) the only operator able to slightly increase its market share (again). While 2H18 marked a small break in the Malaysian wireless sector recovery, guidance for 2019 looks broadly encouraging.
- Axiata (AXIATA MK) expects a “promising 2019” with revenue and profit growth momentum (across the board),
- Maxis guides for a slight improvement of revenues, albeit with EBITDA declining due to new business opportunities, and
- DIGI (DIGI MK) which is a bit more cautious, expects flat revenues.
Data usage is already very high in Malaysia, but we expect growth to continue (at a slower pace) supported by youthful demographics (younger people use more video on mobile). The Malaysian operators have done a reasonable job at monetizing data growth so far.
Chris Hoare turned more positive on Malaysian telcos in early 2019 as affordability has improved and there is a new profitable growth opportunity in fibre wholesale (with Telekom Malaysia (T MK) being forced to offer at low prices). Operating trends have also improved and we expect this to continue. In January, we upgraded Axiata to Buy and both Maxis and Digi to Neutral. None of them are “cheap” with Maxis (MAXIS MK) and DIGI (DIGI MK) on 11-13x EV:EBITDA, and Axiata on a more reasonable 6.5x.
4. HK Connect Discovery – March Snapshot (WH Group, Air China)
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 turned from outflow in February to inflow in March. Chinese investors were also buying Consumer Staples and Consumer Discretionary stocks.
Our March Coverage of Hong Kong Connect southbound flow
- HK Connect Discovery Weekly: PICC, Xinyi Solar (2019-03-08)
- HK Connect Discovery Weekly: Eligibility Adjustment (2019-03-15)
- HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)
5. Dongzheng Auto Finance (东正汽车金融) Trading Update – Could Be Worth Setting up a Trade
Dongzheng Automotive Finance (2718 HK) raised US$208m at a fixed price of HK$3.06 per share. We have covered the IPO extensively in:
- Dongzheng Auto Finance (东正汽车金融) Pre-IPO Review – Dependent on Dealership Network for Growth
- Dongzheng Auto Finance (东正汽车金融) IPO Review – Better off Buying the Parent
- Dongzheng Auto Finance (东正汽车金融) IPO Review – Relaunched at Lower Price
In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.
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