In this briefing:
- Yungtay Tummy Rumblings Continue But Not Clear To What Avail
- Delta Electronics (DELTA TB): Thoughts on the IFA’s Valuation Range
- GDS Holdings (GDS US): Placing a Good Opportunity to Gain Exposure to a High Growth Story
- Smartkarma’s Week that Was in 🇯🇵/🇰🇷 : Korea’s NPS, Samsung, Toshiba, Hitachi Hi-Tech, Payments
- Samsung Electronics Share Class Trade: Common at +2σ, Expect Reversion After AGM This Week
1. Yungtay Tummy Rumblings Continue But Not Clear To What Avail
On March 6th, a day before the Hitachi Ltd (6501 JP) Taiwan elevator business Tender Offer for just over a third of Yungtay Engineering (1507 TT) was expected to close, the closing date was extended to 22 April, notably because the acquiring entity had not yet received Taiwan Ministry of Economy Investment Commission approval for the foreign investment, and the Fair Trading Commission had not yet given the green light, so there was no hope of getting it done by the next day in accordance with Taiwan’s Public Acquisition of Public Company Shares Administrative Law Article 18 Para 2. The proposed purchase price was unchanged at NT$60.
While there have been noises in the market that both Otis and Schindler, which are reported to hold roughly 5-6% each (last year’s shareholder list included UT Park View which United Technologies (UTX US)‘s 10-K showed was a wholly-owned sub) were willing to offer more than Hitachi’s offered NT$60 (and MOPS filings indicate the board approval meeting in end-January referenced a NT$63 potential bid), there was no competitive bid made public and to the authorities by five business days prior to the first bid close (which would have been 26 Feb) as per the same law Article 7 Para 2.
Since then, there have also been other ructions. While terms remain unchanged, it is worthwhile looking into what has been going on. This is still interesting and because of its various inputs, slightly disconcerting to some, and the modalities continue to surprise me.
Past coverage of this situation can be found at:
28 Oct 2018 – Going Up! Hitachi Tender for Yungtay Engineering (1507 TT)
17 Jan 2019 – Hitachi Tender for Yungtay Engineering Launches
26 Feb 2019 – Yungtay Noises Haven’t Produced a Result Yet
2. Delta Electronics (DELTA TB): Thoughts on the IFA’s Valuation Range
Delta Electronics Thai (DELTA TB) (Delta) released its opinion (Form 250-2) and the opinion of the Independent Financial Advisor (IFA) on the tender offer. Delta Electronics (2308 TT) (DEI) launched the conditional voluntary tender offer for Delta, an electronics contract manufacturer, on 26 February 2019. The tender offer of THB71.00 cash per share values Delta at an EV of THB72 billion ($2.2 billion).
The IFA valued Delta at THB62.33-67.80 per share. Unsurprisingly, both the Delta Board and the IFA concluded that the shareholders should accept the tender offer. While the tender offer’s premium to underlying value is unlikely to set the pulse racing for minority shareholders, we continue to recommend minority shareholders to accept the tender offer.
3. GDS Holdings (GDS US): Placing a Good Opportunity to Gain Exposure to a High Growth Story
Last Friday, Gds Holdings (Adr) (GDS US), the largest third-party data centre operator in China, announced the placing price of its public offering of 11.9 million ADS. At the placing price of $33.50 per share, GDS will raise net proceeds of $385.5 million which will be used for the development and acquisition of new data centres.
We are positive on GDS as the business remains in rude health due to strong revenue growth, rising margins and high revenue visibility. Overall, we would participate in the public offering at the placing price.
4. Smartkarma’s Week that Was in 🇯🇵/🇰🇷 : Korea’s NPS, Samsung, Toshiba, Hitachi Hi-Tech, Payments
Something of a slower week on Smartkarma this week (I contributed to that slowness by being away and under the weather when back) with about 120 insights published. A list of the insights to do with Japan and Korea this week are listed below.
There will be a couple more shortly.
For more detail, read on below the fold…
For me, the MUST READS of this weak are the cashless payment-related pieces by Kirk Boodry and Michael Causton shown at the bottom.
5. Samsung Electronics Share Class Trade: Common at +2σ, Expect Reversion After AGM This Week
- SamE Common/1P reached a +2σ level. On a 120D horizon, price ratio is currently at the peak. Pref discount is at 21.04%. This of course is a 120D high. We are now right at the AGM phase (Mar 20). Common gets boosted around this time. It seems true that the recent M&A stories also helped Common move over 1P.
- I don’t expect to see a continued upwardly divergence in favor of Common from this point. AGM factor should be gone this week. We still have M&A factor. This will likely be offset by shorter-term fundamentals factors such as further falling profits and DRAM design flaws.
- Div yield difference on FY19e is 0.87%p. This is even higher than last year which was a record high in 3 years. I expect SamE 1P to make a move over Common from this point.
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