In this briefing:
- Japan Display: Squeezing Up 36% As Chinese Investment Could Solve Balance Sheet Troubles
- Wonik Merger Swap: Div-Adjusted Yield Is Now at 4.17% – Cancellation Risk Is Slim
- Starbucks (SBUX): China Strategy Reaped by Luckin’s Parasitical Tactic, a Visit and Case Study
- Share Classifications: Mid-December 2018 Snapshot
- Red Hat Sets January 16, 2019 Special Meeting Date to Vote on IBM Deal.
1. Japan Display: Squeezing Up 36% As Chinese Investment Could Solve Balance Sheet Troubles
As we mentioned in a comment in Japan Display: Cost Structure Improvement Is Good but Shipment Delay and IPhone XR Cloud Outlook the NHK reported last night that JDI was in talks with a Chinese consortium to secure something in the region of ¥50bn in funding (more than its market cap yesterday) for a more than 33% stake in the company. The Nikkei shed light on the identities of some of the consortium this morning mentioning investment fund Silk Road, Minth Group Ltd (425 HK) and Shenzhen O Film Tech Co A (002456 CH). Bloomberg has also mentioned that the consortium could invest a further ¥500bn to establish a new facility in China for the production of OLED panels.
We spoke to the company this morning to get colour on these announcements.
2. Wonik Merger Swap: Div-Adjusted Yield Is Now at 4.17% – Cancellation Risk Is Slim
- Wonik IPS (240810 KS) / Wonik Tera Semicon (123100 KS) merger got shareholder approval yesterday. Spread now stands at 4.28%. Spread peaked at 5.12% on Dec 12. Dividend-adjusted spread is 4.17%.
- Tera Semicon is a bit of a concern. Its stock purchase price is 1.38% higher than current price. Worst case would be half of the minority shareholders claiming rights. Even if so, this would be less than ₩60bil. The company is liquid enough to absorb it.
- Local institutional arb traders have been seen doing this trade, at least partly. I’d make this trade when spread widens to 5~6%. I expect it to get to this level very soon.
3. Starbucks (SBUX): China Strategy Reaped by Luckin’s Parasitical Tactic, a Visit and Case Study
- We believe Luckin copies SBUX’s site selection, but chooses low rental places close to Starbucks shops.
- Starbucks plans to add delivery business to raise margins and comparable store sales, but Luckin has focused on delivery since inception.
- Starbucks needs the China market as its growth momentum, but we believe Luckin’s parasitical tactic will be a major resistance.
4. Share Classifications: Mid-December 2018 Snapshot
This weekly share class summary is a companion insight to Travis Lundy‘s H/A Spread & Southbound Monitor – most recently discussed in H/A Spread & Southbound Monitor – Going Into Year End.
This share class monitor provides a snapshot of the premium/discounts for various share classifications around the region, and comprises four sets of data:
1. 82 ADRs
2. 105 Korean Prefs
3. 22 Regional Dual Classes
4. 7 Foreign/Local Thai shares
The average premium/discount for each set over a one-year period is graphed below.
For a granular breakdown of each set, PDFs are attached at the bottom of this insight.
5. Red Hat Sets January 16, 2019 Special Meeting Date to Vote on IBM Deal.
As discussed in my previous research piece, Red Hat (RHT US) Files Preliminary Merger Proxy for Its Acquisition by IBM (IBM US) , the timing of the shareholder vote to approve the merger with IBM would depend on the SEC’s review of the draft merger proxy filed on November 30, 2018. Red Hat has now set a meeting date of January 16, 2018. In this update I discuss the latest implications.
