In this briefing:
- Friday Deadline Looms As MYOB Snubs KKR’s Reduced Offer
- Korean Government and Hyundai Motor Group’s Grand Ambitions to Expand Hydrogen Fuel Cell Vehicles
- NTT Buybacks Will Roll On
- Softbank Corp: When Does It Become a Buy?
- SoftBank Group (9984 JP): SoftBank Corp IPO Has Failed to Meaningfully Narrow the Holdco Discount
1. Friday Deadline Looms As MYOB Snubs KKR’s Reduced Offer
A last-minute lump of coal in the stocking from accounting software and services provider MYOB Group Ltd (MYO AU)?
Kohlberg Kravis Roberts has reduced its indicative offer to $3.40 from $3.77 after sifting through MYOB’s books, with MYOB announcing:
Following completion of due diligence and finalisation of debt funding commitments, KKR has revised the offer price to $3.40 per share. … The board has informed KKR that it is not in a position to recommend the revised proposal, however it remains in discussions with KKR regarding its proposal. (my emphasis)
KKR’s revised non-binding proposal is scheduled to expire at 5pm Friday, providing a day and change for MYOB to sound out shareholders as to the next move. Either the lower tilt is grudgingly accepted, or MYOB rejects and KKR walks away (for now), or goes hostile.
Either way, with MYOB’s VWAP above the revised proposal on all but 6 days since the initial announcement on the 8 October and $3.47/share on average, there won’t be a lot of Ho Ho Ho’ing.
Shares are down 11% as I type, implying 13% upside and 11% downside (using the ASX performance-adjusted price) or ~18% downside when pegged to peers. That’s not an attractive risk/reward heading into year-end.
2. Korean Government and Hyundai Motor Group’s Grand Ambitions to Expand Hydrogen Fuel Cell Vehicles
- On December 18th, the Korean government announced numerous measures to reduce fine dust levels, including a significant increase in the number of hydrogen powered vehicles, including expanding hydrogen vehicles to 65,000 units by 2022 (cumulative).
- The Korean government wants to encourage the growth of hydrogen powered economy and position the country as one of the global leaders in this segment. The Korean government plans to spend about 3.5 trillion won to support the Korean auto industry. The Korean government’s new plan is to expand the hydrogen vehicles to 65,000 units by 2022, which is a big increase from the previous plan of expanding the hydrogen vehicles to 15,000 units by 2022.
- The Hyundai Motor Group also recently announced a grand plan to expand its fuel cell vehicles with the announcement of its ‘FCEV Vision 2030.’ The Hyundai Motor Group plans to increase its annual production capacity for fuel cell systems to 0.7 million units by 2030, with plans to invest about $7 billion in the next 10 years to develop hydrogen fuel cell systems.
3. NTT Buybacks Will Roll On
There is an extensive history of writing on the NTT (Nippon Telegraph & Telephone) (9432 JP) family (and indeed Japan telecom sector) buybacks – their modalities and methods, impacts, legal and accounting requirements, competition, push-me-pull-you effect, etc.
One of the longstanding features of buybacks for NTT is that NTT is subject to the NTT Law which requires (for the moment) that the government hold at least one-third of the shares outstanding in NTT.
Today, the Nikkei carried an article noting that the Japanese government’sFY2019 budget currently being formed proposes a sale of JPY 160bn of shares to help fund any revenue impact from the upcoming consumption tax rate hike from 8% to 10% next October. The article helpfully notes that they plan on selling when NTT is buying back shares.
This news is not unexpected to Smartkarma readers of the ongoing series. And there are implications and read-throughs.
4. Softbank Corp: When Does It Become a Buy?
Although we were bearish on the IPO initially and turned increasingly so following the relatively poor reception among retailers that was discussed in Softbank IPO: Signs Point to Risk of Early IPO Price Break, we were still a touch surprised at the extent of the drop today, with the stock finishing down 14.53% to close at the lows with 271.5m shares changing hands. With a rising dividend yield and looming buying from passive funds on the on hand and a potentially large overhang from retailers who may have been looking to flip for a profit on the other, we discuss what would turn us more bullish below.
5. SoftBank Group (9984 JP): SoftBank Corp IPO Has Failed to Meaningfully Narrow the Holdco Discount
Softbank Group (9984 JP)’s market cap has consistently traded below its NAV. A popular expectation was that the Softbank Corp (9434 JP) IPO should be a catalyst to narrow the conglomerate discount (holdco discount). On its trading debut today, SoftBank Corp’s shares fell 14.5% from its IPO price of JPY1,500 to JPY1,282 per share – the worst first-day decline ever for a major IPO in Japan since the Japan Display (6740 JP) IPO in 2014.
In our previous research, we stated that the SoftBank Corp IPO is unlikely to meaningfully narrow SoftBank’s holdco discount. Our updated SoftBank SoTP analysis which reflects SoftBank Corp’s trading debut suggests that SoftBank’s holdco discount has not meaningfully narrowed.
