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)
Singapore Press Holdings (SPH SP) (Mkt Cap: $2.1bn; Liquidity: $20mn)
SPH made an announcement (media release, analyst presentation) that it would undergo a Proposed Restructuring (defined by a Business Restructuring Deed ("BRD")) which would spin off the Media Business into a Media Holdco which would be run as a not-for-profit in the form of a Company Limited by Guarantee (CLG), basically a charity in corporate form (subject to the Companies Act). The Media business has seen revenue declines in the traditional print space, and SPH Media ad revenue fell 39% from FY2018 to FY2020. Operating revenue in the past five years has halved, and in FY2020, the SPH Media business posted its first-ever loss. H1 2021 has seen the run-rate worsen further.
(link to Travis Lundy's insight: Singapore Press Own Time Own Target Restructuring Lor... (Come I Clap For You))
Hitachi Metals (5486 JP) (Mkt Cap: $8.3bn; Liquidity: $32mn)
Last week, Bain Capital Japan and Japan Industrial Partners and Japan Industrial Solutions (the "Bain Consortium") announced it would launch a Tender Offer to buy out Hitachi Metal's minority shareholders at ¥2181/share when all approvals had been received. Future dividends were cancelled. The first part of this series was in Bain Bids Up BIG For Hitachi Metals (5486) - Now We Wait. The Tender Offer is expected to start in November. That gives current holders 8+ months to wait for their cash. The Bain deal for Hitachi Metals is long-dated because of 6+ months of expected foreign investment review, anti-trust review, and Japanese national security review. Travis thinks there is a chance it could get done slightly earlier, but they have presumably researched their schedule and have better access to professional advisory related to the approvals.
(link to Travis' insight: Hitachi Metals - Should I Stay or Should I Go Now?)
Tabcorp Ltd (TAH AU) (Mkt Cap: $8.6bn; Liquidity: $18mn)
After rejecting a A$3bn offer from Entain to buy its wagering and media division, Tabcorp said on the 29 March it will undertake a strategic review to assess and evaluate all structural and ownership options to maximise value. The review includes a potential sale of the wagering & media ops or a potential demerger - via the separation of the wagering segment or the lotteries business. Tabcorp said it remained open to a bid for the wagering ops, but that $3bn was a long way from what was considered reasonable. Entain subsequently bumped its bid to A$3.5bn on the 27 April. In Tabcorp (TAH AU) - Conscious Uncoupling, I mentioned Apollo Global Management was reportedly kicking tyres. Tabcorp has now announced a non-binding proposal from Apollo of A$4bn for the wagering & media and gaming businesses; or A$3.5bn for the wagering & media ops. Tabcorp has yet to form a view on this proposal.
Entain bumped its Offer for the struggling Wagering & Media businesses and Gaming Services by ~17%, which has now been matched by Apollo. This competitive bidding situation appears to have more legs. I'd continue picking up shares around here, with an estimated ~25% upside from here, using a NAV-based calculation.
(link to my insight: Tabcorp (TAH AU): Apollo Shows Its Hand)
Invesco Office J Reit (3298 JP) (Mkt Cap: $1.6bn; Liquidity: $18mn)
On 5 April, Starwood Capital Group launched a hostile Tender Offer on Invesco Office to take over the J-REIT at ¥20,000/share, a 13% premium at the time. It was the first hostile tender offer designed to take over a REIT in Japan. This was done without notice or warning. Invesco was not pleased. For whatever reason, it took until the third day for the REIT to trade at terms. The "terms" were in fact ¥20,000/unit plus the ¥402/unit in expected dividends to be paid as of the end of the fiscal period ending 30 April 2021. It could actually come out higher if Invesco wanted to strip the REIT of excess cash but not a lot higher because leverage is pretty high.
Investors should consider their exit: Starwood, or selling to Invesco in the market. That's it. If you wait until the end, you arrive at the problem of Starwood not getting enough shares and the whole thing falls apart. This SHOULD trade at slightly below Starwood revised terms, if Starwood revises. If Starwood revises higher, there is a kind of a put option, but it is not a very solid one. It wasn't solid before with no beige knight, and with the beige knight it gets even less solid.
(link to Travis' insight: Invesco Office OPPOSES Starwood Hostile Offer and Gets a Distinctly Beige Knight)
Sichuan Languang Justbon Service Group (2606 HK) (Mkt Cap: $1.2bn; Liquidity: $7mn)
(link to my insight: Languang Justbon (2606 HK): Offer Now Open - For Up To Four Months)
Vedanta Ltd (VEDL IN) (Mkt Cap: $13.5bn; Liquidity: $59mn)
The stock has been a runaway train, up not quite 200% in the past 6 months ex-dividend after the Delisting Proposal failed. The Promoters have lifted their stake from just above 50% to just above 65% in the process. The Open Offer designed to buy 17% only got 10% and small change as many investors did not want to sell. Much of the remaining 35% did not want to sell their shares as they thought the company had better prospects.
Travis believes the upside/downside skew of potential stock price performance over the next 6-12 months still is above 1, but this is in large part due to what I expect will be dampened downside volatility. 10% of the stock is in the hands of LIC (who is not selling) and ADRs (who don't seem to sell). Another 5% or so is in the hands of passive funds that don't need to sell. The remaining mutual fund holders and individual holders had a chance to sell everything at Rs 235/share a bit over a month ago and chose not to. There is, practically speaking, VERY little float, and if VEDL makes it back into NIFTY at some point, there will be a further squeeze.
(link to Travis' insight: Vedanta Now Caught Up With Peers - A Different Skew Ahead)
IHH Healthcare (IHH MK) (Mkt Cap: $11.9bn; Liquidity: $5mn)
On the 29 November 2018, Khazanah Nasional sold a 16%, US$2.01bn stake IHH to Mitsui & Co Ltd (8031 JP), elevating Mitsui's long-time mid-teens stake to 32.9% - allowing Mitsui to become IHH's largest shareholder - with Khazanah's holding declining to 26%. Mitsui's stake is a shade below Malaysia's 33% mandatory takeover threshold. Reportedly Mitsui is now exploring a deal to take IHH private, and has been sounded out by private equity outfits as to a potential transaction. According to media reports, Khazanah has been approached to sell its stake.
(link to my insight: IHH Healthcare (IHH MK): More Medicine For Mitsui?)
Chong Hing Bank (1111 HK) ("CHB") (Mkt Cap: $1.7bn; Liquidity: <$1mn)
On the 25 October 2013, CHB announced an agreement with Yue Xiu (the investment arm of the Guangzhou municipal government) to acquire a maximum of 75% of the bank for a consideration of HK$11.5bn (HK$35.7/share, a 2.1x P/B). The deal was subject to approval from the HKMA. It was Yue Xiu's intention to maintain the bank's listing. The Partial Offer for CHB closed on the 5 February 2014. Shares closed on the 5 May at HK$10.56/share (and 0.4x P/B), down ~70% from the Partial Offer Price. Other family-run banks Bank of East Asia (23 HK) and Dah Sing Banking (2356 HK) have similarly languished, down 33% and 42% respectively in the last five years. CHB was suspended at 10.45am on the 6 May, but not before gaining 30% to close at HK$13.76/share.
(link to my insight: Chong Hing Bank (1111 HK): Takeover Talk As Shares Pop)
Mainstream Group Holdings Ltd (MAI AU) (Mkt Cap: $0.3bn; Liquidity: $1mn)
Between 09th March and 29th April, Janaghan Jeyakumar maintained a Bullish stance on the situation and saw MAI shares rise from A$1.23 to A$2.65 during that period. On 2nd May, he turned Bearish on the situation claiming that "as a Bump Option, this is not as attractive as the previous four instances" (in Mainstream (MAI AU): More-Than-Double in Less than 2 Months After Apex Bump).
(link to my insight: Mainstream (MAI AU): Bidding War Continues as SS&C Overbids for the 4th Time)
Back on the 13 December 2018, Can One Bhd (CAN MK) announced a proposed MGO for Kian Joo Can Factory (KJC MK) at RM3.10/share, a 52.7% premium to last close. The Offer closed on the 30 April with Can-One holding 97.48%, and it moved to compulsory mop up the remaining shares. Can-One has now announced an unconditional mandatory takeover from its director Yeoh Jin Hoe and persons acting in concert with him. The Offer Price is RM2.50/share, a 15.82% discount to last close. Not altogether surprisingly, it is not the intention of the joint offerors to delist the company, nor exercise their right to compulsory acquire shares. Link to my insight: Can-One (CAN MK)? Yeoh Can Lah!.
JD Logistics (JDL HK) is looking to raise US$4bn in its upcoming Hong Kong IPO and JD.com Inc. (9618 HK) holds an 81% stake in the company prior to the IPO. In JD.com (京东) HoldCo Valuation Quick Note - Impact of JD Logistics (京东物流) IPO, Zhen Zhou, Toh looks at the impact of JD Logistics’ IPO on JD.com’s valuation. And in JD Logistics IPO: Fast Entry Possibilities into MSCI, FTSE, China 50, HSCEI, HSTECH, HSCI, Brian Freitas discusses JD Logistics possible fast entry in the MSCI, FTSE, China 50, HSCEI, HSTECH, and HSCI.
On the 17 September 2020, IR solutions provider 51job announced it had received a preliminary non-binding Proposal from DCP Capital Partners to acquire all of its shares for US$79.05/common share, a premium of 18.82% to 51job's 30-day VWAP, and a premium of 16.05% to 51job's last close. The company formed a special committee on the 21 September to evaluate the proposal and an independent financial advisor was appointed on the 30 September. Then crickets. Not even a mention in its 2020 annual report on the 23 April this year. One would have thought given the material nature of this proposal warranted at least a one-liner.
Trading at a gross spread of 15.9% - at the time of my insight. I previously speculated a bump was possible. That still remains a possibility. With a seasoned player such as Ocean Link now in the mix, plus the CEO joining the consortium, a definitive agreement looks more assured. Pricing under the Offer appears okay.
Anshin Guarantor Service (7183 JP) (Mkt Cap: $0.1bn; Liquidity: $1mn)
After the close on Friday (30th April 2021), Japan-based rental payment guarantor Anshin announced (J-only) they had received approval to move from the MOTHERS Section to the First Section (Prime) of the Tokyo Stock Exchange as of 12th May 2021. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to occur at the close of trading on 29th June 2021.
(link to Janaghan's insight: TOPIX Inclusion: Anshin Guarantor Service (7183 JP))
(link to Janaghan's insight: TOPIX Inclusion: Kibun Foods (2933 JP))
SET50 June Index Rebalance Preview. With 42 trading days complete in the review period and 17 trading days to go, Brian sees a high probability of Sri Trang Gloves (Thailand) Public Company Limited (STGT TB) and IRPC PCL (IRPC TB) being included in the index, while there is a high probability of VGI PCL (VGI TB) and TOA Paint (Thailand) (TOA TB) being deleted from the index. There is a lower probability of Sri Trang Agro Industry (STA TB) being included in the index and of Bangkok Commercial Asset Management (BAM TB) being deleted from the index. Gulf Energy Development Public Company (GULF TB)'s offer for Intouch Holdings (INTUCH TB) could be a wild card if the SET decides to pre-emptively delete INTUCH from the index. Link to Brian's insight: SET50 June Index Rebalance Preview: No Change to Index Methodology; 3 Potential Constituent Changes.
FTSE China 50 Index Rebalance Preview. Using the last market cap, we see Xiaomi Corp (1810 HK) and Cosco Shipping Holdings Co., Ltd (H) (1919 HK) being included in the index, while the most probable deletion candidates are Evergrande Real Estate Group (3333 HK) and China Merchants Securities Co Ltd (H) (6099 HK). Country Garden Services Holdings (6098 HK) and Citic Ltd (267 HK) are close adds and their inclusion would put China Tower (788 HK) and Geely Auto (175 HK) at risk of deletion from the index. Link to Brian's insight: FTSE China 50 Index Rebalance Preview: Two Changes for Now; Two More Are Close.
SK IE Technology IPO. SK IE Technology (361610 KS)'s fast entry into the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) is virtually guaranteed. With 35% of the institutional tranche having no lock-up, the FTSE investability weight will be 15.04% and MSCI will use a FIF of 20%. A rally of 85-90% will have SK IE getting Fast Entry into the MSCI Standard and FTSE All-World indices. Link to Brian's insight: SK IE Technology IPO: KOSPI200 Inclusion Certain; Rally Needed for MSCI & FTSE.
FTSE China A50 Index Rebalance Preview. Using data from 30 April, we see 2 potential inclusions Chongqing Zhifei Biological Products (300122 CH) and Haier Smart Home (600690 CH). The stocks that would be deleted from the index are Offcn Education Technology (002607 CH) and CSC Financial Co Ltd (601066 CH). Chongqing Zhifei was included in the index at the September 2020 review and deleted at the December 2020 review. The stock could now be included in the index again following the run-up in the stock price. Link to Brian's insight: FTSE China A50 Index Rebalance Preview: One High Probability Change; One on the Cusp
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 |
Sheng Yuan Holdings (851 HK) | 26.47% | Sheng Yuan | Yuanyin |
Matric (1005 HK) | 15.65% | Canfield | Wintone |
Golden Ponder (1783 HK) | 30.00% | Chaoshang | Outside of CCASS |
Source: HKEx |
The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.
Name | % chg | Into | Out of |
First Service (2107 HK) | 13.34% | Haitong | Outside of CCASS |
Channel Micron (2115 HK) | 12.43% | UOB | Outside of CCASS |
Source: HKEx |
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