Last Week in Event SPACE ...
The new Singapore Airlines (SIA SP) rights started trading earlier this week. The trade was to be long the shares super-short-term, then short the shares post ex-date, and be short from then on. If you owned the rights, sell them on the demand pop post-trading debut.
Reliance Industries (RIL IN)'s rights are a bit weird. They are "partly paid-up" rights. There is a down payment, then a capital call. It is worth understanding the details. New news this weekend shows the rights issue opens 20 May and will remain open til June 3. One quarter of the payment will need to be made then, with the rest of the payment coming later.
(This insight covers specific insights & comments involving Stubs, Pairs, Arbitrage, share Classifications, and Events - or SPACE - in the past week)
Singapore Airlines (SIA SP) (Mkt Cap: $7.9bn; Liquidity: $25mn)
The rights have started trading. A lot of equity delta is likely to come out. Travis Lundy thought there would be a squeeze on the rights vs shares (i.e. they will trade relatively rich on an intrinsic basis, even if they do not trade at a premium) on Day 1, and then they would trade cheaper to the shares later in the trading period. He expected there would be a possibility there are not enough shares to borrow to be able to fully arb the rights. The borrow has indeed, become very tight.
Travis expected the rights to trade VERY liquidly. They are low-priced with a wide bid-offer, encouraging day-trading. He said this might also make them trade a little rich early on. From a pricing perspective, the Rights MCBs are VERY tough to price and therefore the Rights MCB Entitlements are also tough to price.
(link to Travis' insight: Singapore Air Rights Entitlements - Flow Dynamics)
Reliance Industries (RIL IN) (Mkt Cap: $113bn; Liquidity: $379mn)
Following a couple of days of speculation, on 30 April, Reliance made an announcement of an intended 1:15 rights offering with the intention to raise ₹53,125 crore at an offer price of ₹1,257 a share. This is the first time in 29 years that RIL is tapping the market for equity-like capital. The promoter and promoter group led by Mukesh Ambani will need ₹26,600 crore to subscribe to its portion of the rights issue, but they confirmed they would subscribe to the full extent of their aggregate rights entitlement. In addition, they announced they will also subscribe to all the unsubscribed shares in the Issue. The shares are now ex-.
(link to Travis' insight: The Reliance Industries [RIL] Rights Offering)
Daiko Tsusan (7673 JP) (Mkt Cap: $0.1bn; Liquidity: $1mn)
Daiko Tsusan confirmed (J-only) on 11th May it had received approval to move from the MOTHERS section to the First Section of the Tokyo Stock Exchange as of 18th May. TSE1 reassignment triggers inclusion into the TOPIX Index and we expect the inclusion event will be at the close of trading 29th June 2020. Daiko Tsusan first made its TSE1 listing ambitions clear in its stock-split announcement (J-only) in October 2019. So the market has known this for a while.
(link to Janaghan's insight: TOPIX Inclusion (7673 JP): Daiko Tsusan)
I estimated Kingsoft is trading at a discount to NAV of ~62%, a shade below the one-year average. KC was up 53% since its debut the previous Friday, yet Kingsoft is trading flat. At 19%/20% of NAV/GAV, KC is a lower contributor to the NAV compared to 68%/73% for Beijing Kingsoft. As seen with many Holdcos, extracting fair value at the parent level is often left wanting from a "weak" holding. Keep in mind Kingsoft is up ~48% since last November when it announced the possibility of spinning off KC.
links to:
my insight: StubWorld: Kingsoft Not In the Cloud; CH Karnchang Tests New Lows
Ke Yan's: Buy Kingsoft Corp as a Proxy to Kingsoft Cloud's +40% Debut
CK was trading at a 51% discount to NAV, its widest inside a year. Stripping out its listed holdings, the implied stub is approaching a multi-year low. The stub comprises general construction services, such as general civil works, advanced construction technology, and project management. At the analyst briefing last month, CK announced its current construction backlog at Bt39bn, the lowest since 2011.
(link to my insight: StubWorld: Kingsoft Not In the Cloud; CH Karnchang Tests New Lows)
GMO Internet (9449 JP) (Mkt Cap: $2.6bn; Liquidity: $15mn)
In mid-February 2020, upon releasing full-year earnings, GMO announced a buyback programme which looked big but had some interesting and distinguishing characteristics given where the shares were and what the ownership structure was. This was discussed in GMO Internet (9449) Buyback - Bigger Than It Looks, Smaller Than It Looks. Q1 earnings were out on the 12th. Revenues were up 14.6% yoy, OP is up 65%, and Net Profit is +11.4%. The stock gained more than 10% yesterday on the highest volume since Q1 earnings last year, and fell back a bit today. Then, after announcing the progress programme-to-date of its buyback on 12 May (1.28mm shares for ¥2.48bn), the company announced a ToSTNeT-3 buyback, of up to 3.153mm shares and up to ¥8bn.
(link to Travis' insight: GMO Buyback - Approaching The End But.... )
As discussed in Done Deal As Li & Fung's Offer Get up, the resolution to approve Li & Fung Ltd (494 HK)'s Scheme was approved by the Scheme Shareholders at the Court Meeting. Turnout was 2,513.6mn shares (of Disinterested Shareholders), or 44.2% of those independent shareholders eligible to vote on the Scheme resolutions. Of those shares present or via proxy, 97.14% voted for the Scheme, and only 1.26% of All Disinterested Shareholders, voted against. Silchester, with 10.9% of shares out, clearly did not vote against the Scheme. But it is not clear it voted For the Scheme. The "majority in number" headcount test was also comfortably satisfied. There was some twitchy trading the day before the vote as discussed in Li & Fung: Nervous Action Ahead of Scheme Vote. Share ceased to trade this past Friday.
Bank Permata (BNLI IJ) (Mkt Cap: $2.3bn; Liquidity: $1mn)
(link to Travis' insight: Permata Bank Q1 Announced; MTO Likely On Its Way)
Allied Properties Hk (56 HK) (Mkt Cap: $1.6bn; Liquidity: <$1mn)
On the 20 April, Allied Group Limited (373 HK) (AGL) made an Offer for APH, by way of a Scheme, at $1.92/share, a 34.2% premium to last close. The Offer is Final. The consideration will be split between a $0.42/share Scheme Consideration and $1.50 Scheme Dividend. An interim dividend of HK$0.08/share for the year ended 31st December, 2019, whose names appear on the register on the 8th May, was also added, taking the total payout to $2/share. In the initial announcement, it was guided for completion around October. APH has now announced that the "Executive has granted its consent to extend the date of despatch of the Scheme Document to a date no later than 30th June, 2020." This suggests everything could be wrapped up late August, a full six weeks ahead of the prior indicated schedule.
(link to my insight: Allied Prop (56 HK)'s Accelerated Offer)
(link to Travis' insight: Seino Holdings (9076) - Delivering Cash Back in BIG BUYBACK, May Be an MBO Candidate)
Vedanta Ltd (VEDL IN) (Mkt Cap: $4.4bn; Liquidity: $39mn)
VEDL announced that Vedanta Resources (VED LN) has expressed its intention to acquire all the public shareholding in VEDL and delist the shares from the stock exchanges, followed by the delisting of the ADRs from the NYSE. VED and other members of the promoter group hold 50.14% of the outstanding shares in VEDL. The Indicative Offer Price is INR 87.50 per share. The Board of VEDL will meet on 18 May to review the due diligence report of the Merchant banker and to approve or reject the delisting proposal.
(link to Brian's insight: Vedanta Ltd - Opportunistic Move to Go Private)
Nichii Gakkan Co (9792 JP) (Mkt Cap: $1bn; Liquidity: $4mn)
On Friday, medical and healthcare support and services company Nichii announced a Bain entity had decided to launch an MBO, and that the Board of Directors had decided to support the transaction. This was not put up for auction or any kind of beauty contest. It came in at a price which was lower than the market price when the transaction was first considered positively by the Private Equity person involved. The document from the Board of Nichii Gakkan says that the deal feasibility is not impacted by the novel coronavirus and its onset in Japan. This is not surprising. The prospects of medical service and support companies do not suffer when medical care becomes more meaningful, precious, or expensive.
(link to Travis' insight: Nichii Gakkan MBO: Great Deal for the Buyers (Not so Much for Minorities))
Northeast Pharmaceutical A (000597 CH) (Mkt Cap: $1bn; Liquidity: $23mn)
Fangda Steel, the largest shareholder in Northeast Pharm with 28.64% of shares out, is seeking to raise its stake by 10% via a partial Tender Offer, in an RMB700mn transaction. The Tender Offer is RMB7.72/share, a 3.7% premium to the close. The minimum pro-ration is 14%. Prima facie, this doesn't appear an Offer worth a second glance. However, recent partial Offers in China have shown remarkably high pro-rations.
(link to my insight: Northeast Pharm (000597 CH): Partial Offer)
Yamada Denki (9831 JP) (Mkt Cap: $3.6bn; Liquidity: $24mn)
Yamada Denki announced it would buy back up to 40mn shares for up to ¥20.36bn, i.e. at a price of ¥509/share. That is up to 4.87% of shares out on top of the roughly 2.67% of shares out already bought back in the first 43 days. It is also, by itself, about 10% of the Real World Float, which suggests that it is not aimed at buying "float", but aimed at buying out an existing large holder. If the company buys back all the rest of the shares in the next 11 months, that will be <4% of ADV given the last twelve months of volume as a reference.
(link to Travis' insight: Yamada Denki BIG ToSTNeT-3 Buyback)
Golden Land Prop Dvlp (GOLD TB) (Mkt Cap: $0.6bn; Liquidity: <$1mn)
Almost a year ago to the day, shareholders of Frasers Property (Thailand) Pcl (FPT TB) approved at its EGM the acquisition of GOLD by means of a voluntary tender offer (VTO) at Bt8.50/share. There was an intention to delist GOLD although it required FPT securing 90%+ in the VTO process, in the first step towards that delisting. At the close of the Offer, FPT held 94.5%. GOLD has now announced that FPT intends to make a tender offer to delist GOLD's shares at THB 8.50. The purchase of shares may commence this month, suggesting payment by July-end.
(link to my insight: Golden Land (GOLD TB): Delisting Offer)
Sequent Scientific (SEQ IN) (Mkt Cap: $0.3bn; Liquidity: <$1mn)
Sequent, India's largest pure-play animal healthcare company, announced that The Carlyle Group had entered into binding agreements with promoter shareholders to acquire a majority stake in the company. In accordance with SEBI's takeover regulations, this transaction triggered a mandatory open offer for 26% of total shares. Together, these transactions will allow the Acquirer to increase their stake in the company up to 74% and the Acquirer will become the new promoter of the company. The Deal will be conditional on receiving regulatory approvals and is expected to close in 3Q20. The Offer price will be INR86.00 per share in cash. Sequent's shares last closed at 82.20.
(link to Janaghan's insight: Partial Tender Offer for Sequent Scientific)
Kaneshita Construction Co (1897 JP) (Mkt Cap: $0.1bn; Liquidity: <$1mn)
One business day after the company on the previous Friday recorded a sharp gain in revenue, OP, and net profit in Q1 (it's a December-end company), raising full-year estimates, the company is now looking to buy back another large stake - up to 200,000 shares or 8.8% of shares outstanding - at today's closing price of ¥4,405/share, as announced after the close.
(link to Travis' insight: Another HUGE Buyback at Kaneshita Construction (1897) - MBO Coming?)
Lai Sun Development (488 HK) (LSD) announced a conditional takeunder for Lai Fung Holdings (1125 HK) (LFH) at $8.99/share versus the last price of $9.73. The Offer was also an 85% discount to the revalued NAV. The IFAs said the Offer was not fair. But esun holdings (571 HK)'s disinterested shareholders still went ahead and approved the sale of its 50.99% stake in LFH, as discussed in ESun (571 HK): It Beggars Belief. The deal is now unconditional in all respects, so that's that.
In Korea M&A Spotlight: A Merger Between Hanil Cement & HLK Holdings, Douglas discussed the Hanil Holdings (003300 KS) announcement that Hanil Cement Co Ltd/New (300720 KS) will merge with HLK Holdings (HLK), vertically integrating the cement subsidiaries of the Hanil Group. Hanil Cement becomes the surviving company and HLK Holdings will cease as a company. The merger ratio is 1 share of Hanil Cement to 0.5024632 shares of HLK. After this merger is completed, Hanil Holdings will have a 73.32% stake in Hanil Cement. In addition, Hanil Cement will secure an 84.24% stake in Hanil Hyundai Cement and include it as a subsidiary.
In ARRK-Mitsui Chem Merger: Done Deal, Janaghan discussed Mitsui Chemicals (4183 JP) announcement of a merger deal to buy out minorities in Arrk Corp (7873 JP). The share exchange ratio will be 0.0511 Mitsui Chem Share for 1 Arrk Corp Share. The effective date of the share exchange is scheduled to be 1st August 2020. The deal requires approval from Target shareholders representing at least two-thirds of total shares outstanding and the Acquirer already directly owns 74.66% of total shares outstanding. They will vote for. The exchange ratio offered is a 4-year high. It is also 34.3% higher than the 3-month average price ratio of 0.038. This will be a straight-forward rate-of-return trade involving no deal risk. It is simply illiquid.
Over the last couple of months, the premium on Wipro Ltd Adr (WIT US) has gone from around 7% to reach a high of 31% and is trading at just over 24% as of the US close. Over the same period, the local stock Wipro Ltd (WPRO IN) is down 24.33% and the INR (USDINR CURNCY) is weaker by 5.64% against the USD (USD CURNCY). In Wipro (WIT) - Soaring ADR Premium Should Come Back to Earth, Brian looked at the historical premium on the ADR, shareholding patterns on the local stock and the ADR, availability of local shares to Foreign Portfolio Investors (FPI), and look at catalysts that could cause the premium on the ADR to return to the 5-8% range.
In Liquid Universe of European Ordinary and Preferred Shares: May Report, Jesus looks at eight share classes (pref vs. ords) throughout Europe, with trade recommendations thereon.
The next rebalance for the FTSE China 50 index will be effective 22 June and the changes will be announced on 3 June. Passive funds will need to trade at the close on 19 June. At the current time, Brian sees a high probability of Alibaba Hlth Infrmtn Tchnlgy (241 HK) being included in the index and of China Communications Construction (1800 HK) being deleted, and a lower probability of Hansoh Pharmaceutical (3692 HK) being included and New China Life Insurance (1336 HK) being excluded. As discussed in FTSE China 50 Rebalance Preview - One High Probability Change, One on the Cusp, China Communications Construction (1800 HK) and New China Life Insurance (1336 HK) are also possible deletes from the Hang Seng China Enterprises Index (HSCEI INDEX) June rebalance, the results of which will be announced this Friday, 15 May.
MSCI has announced the results of the May 2020 Semi-Annual Index Review (SAIR). The changes will be implemented at the close on 29 May and will be effective 1 June.
In MSCI Japan May20 Index Review - Big Changes Brian highlighted there are 9 additions and 9 deletions to the MSCI Japan Standard index with an estimated turnover of 1.07%. The inclusions are Cosmos Pharmaceutical (3349 JP), GLP J-REIT (3281 JP), Ito En Ltd (2593 JP), Kobe Bussan (3038 JP), Lasertec Corp (6920 JP), Miura Co Ltd (6005 JP), Nihon M&A Center (2127 JP), Scsk Corp (9719 JP) and TIS (3626 JP). The deletions are Aeon Financial Service Co Lt (8570 JP), Alps Alpine (6770 JP), Credit Saison (8253 JP), IHI Corp (7013 JP), J Front Retailing (3086 JP), Konica Minolta (4902 JP), Mitsui Osk Lines (9104 JP), Sankyo Co Ltd (6417 JP) and Toyo Seikan Group Holdings L (5901 JP).
In MSCI Korea May20 Index Review - Smaller Than Expected Brian highlighted there are 2 additions and 5 deletions to the MSCI Korea Standard index with an expected turnover of 0.98%. The inclusions are Celltrion Pharm (068760 KS) AND Duzonbizon (012510 KS). The deletions are Hanwha Life Insurance (088350 KS), HDC Hyundai Development Co-Engineering & Construction (294870 KS), Kcc Corp (002380 KS), Medy Tox Inc (086900 KS) and Oci Co Ltd (010060 KS).
In MSCI ASEAN May20 Index Review - Big Turnover in Indonesia Brian highlighted there are 6 deletions to the MSCI Indonesia Standard index, 3 additions and 1 deletion for the MSCI Thailand index, 1 deletion from the MSCI Malaysia index, and 1 addition and 1 deletion for the MSCI Philippines index. The inclusions are Asset World Corporation (AWC TB), Bangkok Commercial Asset Management (BAM TB), Krungthai Card (KTC TB) in Thailand and Puregold Price Club (PGOLD PM) in the Philippines. The deletions are Bank Tabungan Negara Persero (BBTN IJ), Tambang Batubara Bukit Asam (PTBA IJ), Bumi Serpong Damai (BSDE IJ), Jasa Marga (Persero) (JSMR IJ), Pabrik Kertas Tjiwi Kimia (TKIM IJ) and Pakuwon Jati (PWON IJ) in Indonesia, Banpu Public (BANPU TB) in Thailand, AirAsia Berhad (AIRA MK) in Malaysia, and Security Bank (SECB PM) in the Philippines.
In MSCI India May20 Index Review - On Target Brian highlighted there are 5 additions and 4 deletions to the MSCI India Standard index. The inclusions are Biocon Ltd (BIOS IN), Indraprastha Gas (IGL IN), Jubilant Foodworks (JUBI IN), Tata Global Beverages (TGBL IN) (now Tata Consumer Products) and Torrent Pharmaceuticals (TRP IN). The deletions are Ashok Leyland (AL IN), Mahindra & Mahindra Fin Services Ltd. (MMFS IN), Shriram Transport Finance (SHTF IN) and Tata Power (TPWR IN).
Kinden Corp (1944 JP) announced a buyback this past January of up to 12mm shares or 5.5% of shares out. Since then, they have bought back not quite two-thirds of that amount, buying while the buying has been good. The company has spent ¥12.5bn out of the ¥20bn allocated. So far this has been a win. The company has a LOT of excess cash and so can be expected to do this again and again. Very stable underlying business which is gaining market share. This stock is probably the wrong price.
PW Medtech announced it has sold a 2.61% take, reducing its holding in China Biologic Products (CBPO US) to 13.83%.
BBI Life Sciences (1035 HK)'s Scheme scraps in - 7.4% of ALL independent shareholders voted against the deal. Shares have ceased trading. Payment or around the 15 June.
The agreement to acquire an 85.73% in Holcim Philippines (HLCM PM) by San Miguel (SMC PM) has lapsed.
In its monthly announcement in compliance with the Takeovers Code, Haier Electronics Group Co (1169 HK) said the Offeror continues to explore a privatisation proposal.
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.
The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.
Name | % chg | Into | Out of |
Huali University Group (1756 HK) | 75.00% | UBS | Outside CCASS |
Pujiang (2060 HK) | 16.42% | I Win | Outside CCASS |
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