Last Week in Event SPACE ...
(This insight covers specific insights & comments involving Stubs, Pairs, Arbitrage, share Classifications, and Events - or SPACE - in the past week)
Evergrande Real Estate Group (3333 HK) (Mkt Cap: $26.6bn; Liquidity: $52mn)
Evergrande confirmed media reports it would launch an equity placement - a so-called top-up placement - for 490 million shares at a price of HK$16.50-17.20, or an 11.1-14.7% discount to the last traded price of $19.34/share. This offer is to raise up to US$1.087bn in funds with US$250mm more from the upsize option if done at the lower end of the range. It ended up placing only 260mm shares at the low end of the range.
(link to Travis' insight: Evergrande Equity Placement - Musical Shares)
Link Administration Holdings (LNK AU) (Mkt Cap: $1.8bn; Liquidity: $9mn)
Link announced it had received a conditional, non-binding indicative proposal from a consortium comprising PEP and the Carlyle Group, by way of a Scheme. The indicative cash price is A$5.20/share, a 30% premium to last close. Perpetual, holding 9.65% of shares out, said it would vote for a firm Offer of $5.20/share and above. This is a non-binding proposal and there is no guarantee a firm offer will unfold. But this is a business with which PEP is well acquainted, having orchestrated and developed Link's initial business 15 years ago.
(link to my insight: Link Admin/PEP: All Together Now. Again)
NTT Docomo Inc (9437 JP) (Mkt Cap: $119bn; Liquidity: $226mn)
Travis expects that out of the US$40bn of stock in the float, some $12-15bn is going to change hands then tender those shares into the NTT (Nippon Telegraph & Telephone) (9432 JP) Offer, another $5-10bn will tender their shares, and then another $15+bn of shares will not tender and will instead be squeezed out. This number is surprisingly large and it means some very interesting flows will occur.
(link to Travis' insight: NTT Docomo: The Three Arbs and the Great Re-Allocation Trade)
Metlifecare Ltd (MET NZ) (Mkt Cap: $.8bn; Liquidity: $5mn)
At MET's Scheme Meeting on the 2 October, 90.7% of the votes case voted for the Scheme. 9.14% (or 14.96mn shares) voted against. Of those naysayers, 1,000 shares were held by ResIL Investments Limited, who has, in a detailed letter, flagged what it perceives as breaches in the Takeovers Code, with reference to the valuation methodology in the Scheme Booklet. Those perceived breaches have been submitted to the Takeovers Panel. The High Court hearing was subsequently delayed from the 15 October until the 20 October to enable the Panel to decide on whether to issue a ‘no objection’ statement.
(link to my insight: Metlifecare: Statutory Vacuum)
Vedanta Ltd (VEDL IN) (Mkt Cap: $4.8bn; Liquidity: $46mn)
It has been announced that the Delisting Offer for Vedanta Limited "failed in terms of Regulation 19(1) of the Delisting Regulations." This was due to the time limit being breached with unconfirmed orders still visible in the queue. If the unconfirmed orders had been confirmed by 7pm IST a week ago Friday, things would have been different. As it is, the Offer did not attract 1.341bn shares of confirmed orders and therefore did not achieve 90% support. Even if they'd had an extra day or two, it is not clear that they could have obtained enough shares to offset Life Insurance Corporation of India's insistence on INR 320/share as being fair (FWIW, Travis is not sure they are wrong, but it is high).
links to:
Travis' insights: Vedanta Delisting Proposal/Offer Fails (We Think) & VEDL Delisting Fail Day1 - Reading Between the Lines of the Trading Data
Brian Freitas's insight: Vedanta (VEDL IN): A Failed Delisting Will Now Pressure The Stock
OptiComm Ltd (OPC AU) (Mkt Cap: $0.5bn; Liquidity: $1mn)
In this ongoing competitive bidding situation, earlier this week Aware Super made an off-market takeover offer at $6.50/share, including a fully-franked $0.10/share dividend. The Offer was subject to a minimum acceptance condition of 50.1% - flipping from a Scheme previously - and no MACs. Uniti Group Ltd (UWL AU)tabled a $6.67/share Offer three days later, comprising $5.20/cash (including a fully-franked $0.10/share dividend) and 1.07 new Uniti shares. OPC considers Uniti's revised Offer a superior proposal to Aware's.
(link to my insight: OptiComm: Uniti Sees Aware And Raises)
Wipro Ltd (WPRO IN) (Mkt Cap: $26.6bn; Liquidity: $3.3mn)
The company has announced it is to buy up to 237.5mm shares at INR 400/share, spending INR 95 billion or ~US$1.3bn. That is 4.16% of shares out. This is a bit smaller than last year's record US$1.7bn buyback and as always, promoter Mr. Azim Premji and almost all of this related shares are expected to participate. This is the fourth time in five years Wipro has decided to conduct a Buyback Offer. Generically, buyback offers are often ways to allow the promoter to cash out or a way to have the promoter increase his stake by not participating. In rare cases, they offer a decent chance for large public shareholders to participate profitably.
(link to Travis' insight: How Indian Buyback Offers Work - The Wipro Example)
Shanghai Prime Machinery H (2345 HK) (Mkt Cap: $0.2bn; Liquidity: <$1mn)
Shanghai Prime Machinery Company, a manufacturer of turbine blades, bearings, fasteners, has announced a pre-conditional privatisation Offer from its parent, SOE-Shanghai Electric Group Company (2727 HK) / Shanghai Electric Group Company (601727 CH). The cancellation price is HK$1.60/share, a 68.4% premium to last close. The price will not be increased.
(link to my insight: Shanghai Prime (2345 HK): Delisting Offer From Parent)
Showa Corp (7274 JP) (Mkt Cap: $1.7bn; Liquidity: $8mn)
Honda Motor (7267 JP) announced the successful completion of the three tender offers for subsidiary/affiliates Keihin Corp (7251 JP), Showa, and Nissin Kogyo (7230 JP). The results are a little surprising in that all the names managed to get to 92+%. This indicates that some of the passive-tracking TOPIX holders sold into the tender, or their shares were tendered by being borrowed.
(link to my insight: Honda Tenders Done - Now For The Residuals)
Allied Properties (H.K.) (56 HK) (suspended)
After the sanctioning of APL's was thrice delayed by the High Court and further updates from the company shed no light on the issues faced, what was inconceivably feared became apparent last Friday night when the Court declined to sanction the Scheme. Here is the High Court judgment. It is ultimately a frustrating read, one in which some of the Offeror's (Allied (373 HK)) preparatory work was sloppy or poorly prepared. But the great double-take in this ruling is a large portion of the judgment devoted to the headcount test at the Scheme vote.
Will Allied Appeal? They should. There are grounds for appeal, especially concerning the irrelevancy of the headcount test which likely influenced the judge's final opinion. If Allied pass, for whatever reason, shareholders could seek leave to appeal by intervening as interested parties - but I am not a lawyer.
(link to my insight: Allied Properties (56 HK): Amateur Hour)
Ricoh Company Ltd (7752 JP) (Mkt Cap: $4.5bn; Liquidity: $22mn)
On 19 April Travis wrote about Ricoh's big buyback potential, saying the timing was right in Ricoh's BIG Buyback Potential - The Timing Is Right. He followed up three weeks later with Ricoh Redux: Get Long Vs Comps just before the earnings announcement which I expected would deliver on the share buyback. But we didn't get it. No buyback. But the trade was to buy Ricoh against a basket of Canon Inc (7751 JP) and Konica Minolta (4902 JP). That trade has done well at +26.2% and +19.6% in 23 weeks and 21 weeks respectively.
(link to Travis' insight: Ricoh (Reductively) - Reduced Bullishness So Take Off the Trade)
In Softbank – How Does AMD’s Resurgence and Xilinx Deal Impact the Nvidia-Arm Deal?, Mio Kato discusses the rumoured Advanced Micro Devices (AMD US) / Xilinx Inc (XLNX US) deal, and how that may affect NVIDIA Corp (NVDA US)'s takeover of Arm Holdings (ARM LN), and in turn Softbank Group (9984 JP) holding in Nvidia.
Wilmar International (WIL SP) / Yihai Kerry Arawana Holdings Co Ltd (YKA CH)
YKA commenced trading on the Shenzhen Stock Exchange (ChiNext Board) this past Thursday. Priced at RMB25.70/share, shares closed at RMB56/share on the opening day. And Wilmar's reaction? Down 6.4% in what appears to be a "sell the news" trade. I now see Wilmar's discount to NAV at 55%. Wilmar is cheap here.
Since Wilmar's shares rolled over after the Archer Daniels Midland Co (ADM US)'s placement and EB issuance in August, the uncertainty as to the timing of YKA's IPO has been removed; as has the valuation for YKA. CPO prices (accounting for ~20% of Wilmar's operating profit) are also up and re-testing pre-COVID levels.
(link to my insight: Wilmar Is A Buy After YKA’s Listing)
Kingboard Chemical (148 HK) / Kingboard Laminates Holdings (1888 HK)
I see KBC's discount to NAV at 55% against a one-year average of 58%. The implied stub, however, has fallen to a historic low after KBL announced an intention to list on Shenzhen's Chi-Next board.
What could KBL command on Chi-Next? KBL is trading at a trailing and forward PER of 15.9x and 10.9x. KBL can probably command upwards of 3x that on Chi-Next looking at the average for electronic materials manufacturers. If placing around 10% of new shares, it is feasible KBL could raise ~HK$10bn. That's pretty positive. But there is no guarantee a listing will occur, nor where it will trade. KBL can already be accessed via the Shanghai and Shenzhen Southbound Connect programs.
The stub looks to have overshot. From a 10-year view, it has never been lower. It is, however, a weakish stub with KBL accounting for 40%/34% of NAV/GAV - but KBL accounts for 90% of KBC's market cap. I'd set up the stub here with a view to mean reversion of ~HK$5.40/share (the 12-month average).
(link to my insight: StubWorld: Kingboards' All-Time Low Implied Stub; PICC Trading Rich)
Shareholders of PLC approved yesterday with more than 99% of the votes to end the dual structure. Shareholders of NV approved the decision last month with more than 99% of the votes. Unification is expected to become effective on 29 November 2020, with dealings in new Unilever PLC shares (including new Unilever PLC Shares represented by ADS) commencing on 30 November 2020.
links to:
Jesus Rodriguez Aguilar's insight: Unilever's DLC Unwinding: Shareholder Approval, Timetable, Listing Considerations
Brian's insight: Unilever Unification - Index Impact
In Big Stock Swaps Between Naver & 3 CJ Group Companies - Why?, Douglas Kim discusses various local media reported that Naver Corp (035420 KS) and three CJ Group related companies, including CJ Logistics (000120 KS), CJ ENM (035760 KS), and Studio Dragon (253450 KS) are considering strategic stock swaps. In other words, Naver would receive a certain number of shares of CJ Logistics, CJ ENM, and Studio Dragon in exchange for a certain number of Naver shares. If the stock swap deals are completed, the total amount of stock deals is expected to be about ₩800bn-₩1tn.- upwards of US$875mn.
In SK Telecom Plans to Spin Off Mobility Business & Partner with Uber, Douglas discusses reports that SK Telecom (017670 KS) plans to spin-off its mobility business and potentially partner with Uber (UBER US) to launch a multi-service mobility platform.
(link to Mio's insight: Huya – Generous for Douyu and the New Global Streaming Landscape Gets Interesting)
In Kakao Games - KOSDAQ150 December Inclusion and Lock Up Expiry, Brian takes a look at whether Kakao Games (293490 KS)will, or will not be included in the KOSDAQ150 index in the December review ending on 30 October.
S&P/NZX 50 Index Rebalance. S&P SJI announced the deletion of Metlifecare Ltd (MET NZ) following its acquisition by Asia Pacific Village Group Limited. Pacific Edge (PEB NZ) will be included in the index to keep the number of constituents at 50. The changes will be effective after the close of trading on 20 October. Brian's insight: S&P/NZX 50 Index Rebalance: Pacific Edge IN With A Lot to Buy.
MSCI Nov20 Index Rebalance Preview. At the current time, Brian sees 6 potential inclusions and 7 potential exclusions across Malaysia, Indonesia, Thailand and the Philippines. There will be a very large impact on most of the potential deletes with over 30 days of ADV to sell, while there are a few potential inclusions with over 10 days of ADV to buy. Brian's insight: MSCI Nov20 Index Rebalance Preview - ASEAN EM Edition.
STI Index Rebalance. FTSE Russell today confirmed that Keppel DC REIT (KDCREIT SP) will take the vacant spot in the FTSE Straits Times Index (STI) (STI INDEX) created by the merger of Capitaland Commercial Trust (CCT SP) and Capitaland Mall Trust (CT SP). With Frasers Logistics & Industrial Trust (FLT SP) losing out in a close race, it will have a chance to replace Sembcorp Industries (SCI SP) at the regular rebalance in December. At rank 39, SCI has ranked just ahead of SPH REIT (SPHREIT SP) and Starhub Ltd (STH SP) and is 14% away from the deletion zone. Brian's insight: STI Index Rebalance: KDCREIT Included, FLT Misses Out.
Big Hit Entertainment (1255064D KS) listed on the KRX this week. Currently ranked 33 among the eligible KOSPI universe, Big Hit could be included in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the December rebalance depending on the price movements over the next 2 weeks. Brian's insight: The KOSPI200 Could Have a 'Big Hit' in December.
MSCI Nov20 Index Rebalance Preview. At the current time, Brian expects Apollo Hospitals Enterprise (APHS IN), SBI Cards (SBICARD IN) and Larsen & Toubro Infotech (LTI IN) to be included in the Standard Index, while we see Rural Electrification (RECL IN) and Bosch Ltd (BOS IN) as potential deletions. Brian's insight: MSCI Nov20 Index Rebalance Preview - India.
My ongoing series flags large moves (~10%) in CCASS holdings over the past week or so, moves which are often outside normal market transactions. These may be indicative of share pledges. Or potential takeovers. Or simply help understand volume swings.
Often these moves can easily be explained - the placement of new shares, rights issue, movements subsequent to a takeover, lock-up expiry, amongst others. For those mentioned below, I could not find an obvious reason for the CCASS move.
Name | % chg | Into | Out of |
Starriose (1616 HK) | 15.75% | Citi | ML |
The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.
Name | % chg | Into | Out of |
Weihai Bank (9677 HK) | 36.98% | Huatai | Outside of CCASS |
Baozun (9991 HK) | 10.87% | JPM | CS |
$kmtKNT (1025 HK) | 10.39% | Std Chart | Outside of CCASS |
Ming Yuan Cloud Group (909 HK) | 15.65% | Futu | Outside of CCASS |
Channel Micro (2115 HK) | 10.09% | Fruit Tree | Outside of CCASS |
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