In this briefing:
- Ruhnn (如涵) Trading Update – Worst First-Day Performance Out of Recent US ADR Listings
- Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact
- Alibaba (BABA): Weakest Business Line Transfers Risk to Suppliers and Cuts Headcount, 38% Upside
- Summit Ascent’s Slippery Slope
- Manikay Caves and Accepts KKR’s Reduced (And Now Final) Offer
1. Ruhnn (如涵) Trading Update – Worst First-Day Performance Out of Recent US ADR Listings
Ruhnn Holding Ltd (RUHN US) raised US$125m at US$12.50 per share, the mid-point of the price range. We have previously analyzed the IPO in:
- Ruhnn (如涵) IPO Review – Expensive Influence
- Ruhnn (如涵) Pre-IPO Review- Significant Concentration Risk
In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.
2. Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact
Naspers (NPN SJ) recently announced another attempt to reduce the holdco discount which has remained stubbornly high despite previous attempts by management to reduce it. Since the announcement there has been movement, so perhaps this time it really is different!
So what is being done? Naspers will spin off its international internet assets, which account for >99% of its value, into a newco. They will then list 25% of newco on the Euronext in Amsterdam by issuing these shares to Naspers’ shareholders. The intention is to create a vehicle which can attract increased foreign and tech investors without the complication of a South African listing. The company believes this has been a key factor behind the wide holdco discount. The move also reduces Naspers weighting in South African indices which is another contributing factor.
Alastair Jones sees the announcement as a positive, although there are still issues with the main listing being in South Africa. He still believes a buyback would be the most effective way to reduce the discount, but Naspers is also keen to keep investing.
3. Alibaba (BABA): Weakest Business Line Transfers Risk to Suppliers and Cuts Headcount, 38% Upside
* Youku, the online TV subsidiary of BABA, is transforming its risk of loss to content providers.
* Youku is dismissing employees.
* We believe both of Youku’s decisions are positive for cost control and the operating margin will recover in FY2020.
* The P/E band suggests a price target HKD250, which is 38% upside above the market price.
4. Summit Ascent’s Slippery Slope
Back in September 2017, Lawrence Ho, Summit Ascent Holdings (102 HK)‘s major shareholder, reduced his stake to 18.75% from 27.06% (at between $1.13-$1.60/share, but mainly at the low end of this range), according to Hong Kong Exchange disclosure of interest filings. The share price of this Russian integrated gaming play declined 34% to $1.06/share in the following five trading days. Who bought those shares was not disclosed – CCASS shows these shares moving out of VC Brokerage into at least 10 different brokerage accounts.
Shortly after, Howard Klein quoted one insider in his insight Melco Resorts: A Gem Hiding in Plain Sight Offers an Entry Point After a Recent Dip that the sell-down wasn’t likely a sign “Ho has lost confidence in the area.“
On the 15 December, Ho announced a complete exit from Summit, selling 17.37% of shares out. Concurrently Ho resigned from his NED and chairman positions. Those shares moved from VC Brokerage to Sun Hung Kai Investments on the 20 December 2017. Shares traded unchanged on the news.
At the same time, First Steamship (2601 TT) disclosed it held 12.67% on the 18 December 2017. Concurrently, Kuo Jen Hao was appointed as NED and Chairman of the Board, with effect from 28 December 2017. Kuo is also the chairman and the general manager of First Steamship. First Steamship gradually increased its stake to 19.11% as at 24 October 2018.
The New News
Yesterday, Summit Ascent announced it has been informed that First Steamship and Kuo are in talks to sell their entire shareholdings. No numbers were disclosed. This stake sale would not trigger an MGO and there was no reference to the release of an announcement pursuant to the Codes on Takeovers and Mergers and Share Buy-Backs in Hong Kong. Shares are up 24%.
With increased liquidity surrounding the news, this looks like a great opportunity to exit.
5. 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.
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