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)
Toshiba Corp (6502 JP) (Mkt Cap: $12.8bn; Liquidity: $52mn)
On 17 September it was reported that the Kioxia Holdings' IPO Price Range would be set at ¥2800-3500/share making the new offering size top out at ¥334.3bn and the market cap at IPO price be ¥1.88trln. That is a drop of 11.6-29.3%, which is a bit more aggressive than expected. It means the immediate uplift to Toshiba is considerably smaller compared to their in-price. As a backdrop, the future buybacks from selling Kioxia will not move the needle as much as investors would like, but that is a long-term condition. The short-term condition is that a lower price on Kioxia's IPO does not have as much permanent negative impact on the Adjusted EV of Toshiba as sentiment would suggest.
(link to Travis' insight: Toshiba Is A Range Trade. Still.)
Wilmar International (WIL SP) (Mkt Cap: $20.4bn; Liquidity: $46mn)
Assuming PERs of 25x YKA and 14x the rump, I see Wilmar at a 12% discount; i.e. having 14% upside. That comes before incorporating any holding company discount. For a cross-border, possibly-difficult-to-short subsidiary, holdco situation, that looks too tight.
That's not a lot of upside, if any, but it is still very much an unknown where YKA will trade. To provide some perspective, the current PER average for ChiNext is 58.5x. At that average, there is 120% upside for Wilmar from here to a "fair value". At 30x PER, you are getting the "rump" for free. Wilmar said in a briefing that the average PER valuation for listed peers on the ChiNext was 38x.
(link to my insight: Wilmar: China Ops IPO One Step Closer)
Vedanta Ltd (VEDL IN) (Mkt Cap: $6.7bn; Liquidity: $31mn)
Travis Lundy again writes about Vedanta. Several days ago it was noted in the media that VEDL affiliates were looking to borrow an additional US$600 million in order to finance the take-private of VED. That sum would be added to the US$1.75bn of short-term loan facility set up in July, and the US$1.4bn borrowed in a bond issue in late August. That brings the prima facie total to be raised to US$3.75bn or roughly ₹275bn. Considering the public holding of 1.85358bn shares, that comes to ₹148 per Vedanta Ltd. share. That would be a low price for the Reverse Book Build. A very low price. VEDL just won a court case against the government - that will bring in an additional slug of cash.
(link to Travis' insight: Vedanta : More Fuel For The Fire)
Haier Electronics Group Co (1169 HK) (Mkt Cap: $9.7bn; Liquidity: $16mn)
The 632-page Application Proof for the listing of Haier Smart Home (600690 CH)'s H-shares has now been lodged. This will be a listing by introduction. The question at the time of the Scheme announcement, as it is now - is where will the HSH (as yet unlisted) H-shares trade with respect to the HSH A-shares?
(link to my insight: Haier (1169 HK): Back To Entry Levels)
Hexaware Technologies (HEXW IN) (Mkt Cap: $1.9bn; Liquidity: $7mn)
Hexaware took it down to the wire. The Reverse Book Build got to the 90.0% threshold. The Discovered Price is clearly going to be INR 475/share.
(link to Travis' insight: Hexaware Exit Offer Reverse Book Build Gets 90% & Discovered Price - Now We Wait)
Softbank Group (9984 JP) (Mkt Cap: $125bn; Liquidity: $1.3bn)
Softbank announced NVIDIA Corp (NVDA US) will take over ARM in a US$40bn deal, comprising US$12bn in cash, 44.3 mn NVDA (~US$21.5bn), a US$5 billion earn-out based on Arm’s financial performance in the Mar-22 fiscal year, and up to $1.5bn in restricted stock units for Arm employees. The deal requires regulatory approval in the US, UK, Europe and China. That last approval could prove interesting.
(link to Mio Kato's insight: Softbank – Interpreting the Arm Sale)
Oriental Watch (398 HK) (Mkt Cap: $0.2bn; Liquidity: <$1mn)
OWH has announced a partial buyback from the company - 14.55% of shares out or 83mn shares, at HK$3.00/share, a 53.85% premium to last close. This will cost the company HK$0.25bn (US$32mn). OWH had net cash on hand of ~HK$0.65bn as at Mar 2020. Yeung Ming Biu & concert parties hold 30.85% of shares out and will not tender. That leaves 69.15% of the register subject to the buyback, implying a minimum pro-ration of 21.04%.
(link to my insight: Oriental Watch (398 HK): Conditional Partial Offer)
Stationery and office equipment retailer COL announced they agreed to be acquired by Central Retail (CRC TB) in a Deal that valued the company at a market cap of ~US$390mn. CRC intends to delist the shares of COL following the completion of the Deal and this will require approvals from COL shareholders and the Stock Exchange of Thailand. Once approvals have been granted, a tender offer will be launched for 100% of the shares in COL. The transaction is expected to close in 1Q 2021. The Offer price will be THB19.00 per share in cash. Both the Acquirer and Target are controlled by Thailand’s billionaire Chirathivat family.
(link to Janaghan Jeyakumar's insight: COL-Central Retail Corp: Thailand Delisting Offer Trading Tight)
Citadel Group (CGL AU) (Mkt Cap: $0.3bn; Liquidity: $2mn)
Canberra-based IT services outfit Citadel ("CGL") has entered into a Scheme with Private Equity Partners (PEP). The unsolicited cash consideration of A$5.70/share is a 43.2% premium to the last close of A$3.98/share. A scrip alternative will be made available. The proposal values CGL's equity at A$448.6mn (US$327mn). It is the intention of CGL's board to declare a fully franked special dividend of up to A$0.15/share on or shortly before the Scheme implementation date, which theoretically could enable some shareholders to receive up to A0.064/share additional benefit. The cash consideration will be reduced by the special dividend.
(link to my insight: Citadel Group: Private Equity Partners' Offer)
Cross Harbour Holdings (32 HK) (Mkt Cap: $0.5bn; Liquidity: <$1mn)
CHHL) has announced a voluntary conditional cash offer from its major shareholder. Rose Dynamics, a wholly-owned vehicle of Cheung Chung Kiu (Chairman/ED of CHHL), holding 22.69% in CHHL, has made a cash offer of $14/share, a 42.4% premium to last close. The Offer price has not been declared final. A third quarterly interim dividend may be declared in November which would be added to the Offer price. The key condition to the Offer is the Offeror holding more than 50% at the close of the Offer. The Offer is not aware of any authorisation or consent required to complete the Offer.
(link to my insight: Cross-Harbour (32 HK): Voluntary Offer. Price Not Final)
India-based integrated logistics company Allcargo announced they had received a “Delisting Proposal Letter" from members of its Promoter Group. The Promoters collectively hold 172.0mn shares representing a 70.01% stake and the Offer will be made to acquire the remaining 29.99%. The Final Offer Price will be determined upon completion of the Reverse Book Building (RBB) process. Following the completion of the transaction, the Promoters will voluntarily delist the shares of Allcargo from BSE Limited and National Stock Exchange of India Limited.
Viglacera Corp (VGC VN) (Mkt Cap: $0.45bn; Liquidity: >$1mn)
Vietnam Electrical Equipment J (GEX VN) also known as GELEX announced in June that it intended to up its stake in Viglacera Corp (VGC VN). It officially announced its intentions to buy 95 million shares or 21.2% in early July, then launched a Tender Offer at a lower price of VND 17,700 - a sharp discount to the price in the market. On 11 September it lifted its price to VND 21,100 but that was still at a discount to market. On Friday 18 September, GELEX upped its price once more to VND 23,500.
The question on people's minds should be whether the Ministry of Construction would tender its stake (or the maximum allowable portion of it). Travis expects not. The decree promulgated at end-June set a deadline of end-December for 120 SOEs or stakes and end-November for another four. Viglacera was in a separate category of 18 which were supposed to have the relevant Ministry propose a plan for the equitization of the holding. They do not need to sell their 38.85% stake in Viglacera by year-end.
(link to Travis' insight: Gelex Bumps Viglacera Bid Again. High Pro-Ration Likely)
The Tender Offer for LINE Corp (3938 JP) is done. All told the acquirers bought about 31.23mm shares. That leaves about 25mn shares out in the float. There will likely be no squeeze for shares as there was for FamilyMart Co Ltd (8028 JP). Almost all the shares in the float are held by real investors. There would have been no reason to short into the Tender and need to buy back. And there should be almost no index ownership. Those seeking Appraisal Rights and a higher price should be aware of several things if you are new to the game. First: talk to a lawyer. Second: get your procedural ducks in a row now. There are financing/leverage issues. This will be a longer zombie twilight than normal. The EGM to approve the squeezeout is expected for December 2020 and the Effective Date would likely be a month or so later. (link to Travis' insight: LINE: The Zombie Twilight Begins)
In 🇯🇵 JAPAN • Analysing The "Buffett Trade", Valuing the Sogo Shosha & The Return of Asian Inflation, Campbell Gunn analyses the "Buffett Trade". He concludes Berkshire Hathway's first major disclosed foray into Japanese equities is welcome and should prompt a debate about approaches to valuation in this market. If, in addition, the macro backdrop in Asia becomes inflationary over the next five years, the 'Buffett Trade' should prove highly profitable and prompt a broader 'Japan Trade' in which many of today's 'Deep-Value' opportunities could return to market leadership.
In Familymart: What's Next? And Will Mitsubishi React?, Michael Causton asks now that Itochu has succeeded in its bid, the question remains whether Mitsubishi Corp (8058 JP) will now look to consolidate its own food retail assets like Lawson Inc (2651 JP) and Life Corp (8194 JP).
I estimated Genting was trading at a ~56% discount to NAV, its 12-month low and +2STD against a one-year average of ~46%. The implied stubs for GENS and GENM (simply netting of each separately) are both at multi-year lows. Stripping out the holding in GENS, the implied stub is now at the same negative level it has (modestly) rebounded off five times since March. GENT continued to underperform even after GENM announced it will subscribe for up to US$150mn of preferred stock in 49%-held Empire Reports, which operates a casino resort outside of New York.
(link to my insight: StubWorld: Genting's NAV Discount Plumbs New 2020 Low)
In this insight, I explored the mechanics of Section 238 of the Cayman Companies Law, the case history of four appraisal rights judgments, and what dissenting shareholders may expect when taking their merger objections to Court.
(link to my insight: Homecoming For Chinese Companies: Appraisal Rights & Fair Value)
51 Job Inc Adr (JOBS US) (Mkt Cap: $5.3bn; Liquidity: $11mn)
HR solutions provider 51job announced it has received a preliminary non-binding Proposal from DCP Capital Partners to acquire all of its shares for US$79.05/common share. The Proposal represents a premium of 18.82% to 51job's 30-day VWAP, and a premium of 16.05% to 51job's last close. Pricing appears opportunistic after 51job was down 20% YTD, ahead of the Offer. Currently, trading through terms at US$79.42. There are no super-voting rights in 51job. Directors hold 22.8% of shares including Rick Yau (co-founder, CEO) with 19.2%. The major shareholder is Recruit Holdings (6098 JP) with 35%.
Nam Tai Property Inc (NTP US) (Mkt Cap: $0.4bn; Liquidity: $1mn)
IsZo Capital LP released a press release saying they had delivered to Nam Tai "verified requests" to convene a meeting of the Company's shareholders from shareholders holding more than 40% of the shares outstanding. The threshold for doing so is 30%. This should get over the line.
(link to Travis' insight: Nam Tai Property - An Interesting Activist Situation)
Gift Inc (9279 JP) (Mkt Cap: $0.2bn; Liquidity: $2mn)
TSE Mothers-listed noodle restaurant chain Gift Inc announced (J-only) on Friday after market close it had received approval to move to TSE1 as of 18th September 2020. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 29th October 2020. Jaanghan estimates the Inclusion to be 0.52-0.63mn shares which translates to a Inclusion Size of ¥0.85-1.02bn and an impact of 12-14 days of volume - a small-sized impact.
(link to Janaghan's insight: TOPIX Inclusion (9279 JP): Gift Inc)
Gremz Inc (3150 JP)(Mkt Cap: $0.4bn; Liquidity: $2mn)
Gremz announced (J-only) a tachiaigai bunbai (equity offering) today stating that they intend to work towards achieving the Section Transfer requirements to move from TSE2 to TSE1. The shares for sale will be coming from controlling shareholder Masaomi Tanaka's holdings. The Offering will place up to 878,000 shares with a maximum limit of 800 shares per buyer. The Offering is scheduled to take place from 25th September to 2nd October 2020. The Offer Price will be set at a discount to the last close prior to the Offer Date. Usually the Offer Date is the first day in the period. This is a pre-event stage of the TOPIX Inclusion - based on the current section transfer requirements and the company's float, market cap, shareholder count, and financials, I believe they will be able to qualify for TSE1 assignment.
(link to Janaghan's insight: TOPIX Inclusion Pre-Event Trade (3150 JP): Tachiaigai Bunbai Announced. It's GREEN)
FTSE GEIS December 2020. Based on current market prices, Brian Freitas sees a high probability of Smoore International (6969 HK), SK Biopharmaceuticals (326030 KS), Hygeia Healthcare Group (6078 HK) and Sri Trang Gloves (STGT TB) being included in the FTSE All-World index. Kangji Medical (9997 HK) and Mindspace Business Parks REIT (MBP IN) could be added to the All-World index if their stock prices increase by around 15% by 11 November, else they will be added to the FTSE All-Cap index. There are a few other HK listed stocks that could be added to the FTSE All-Cap index: Akeso Biopharma Inc (9926 HK), Yeahka Limited (9923 HK), Archosaur Games (9990 HK) and Peijia Medical (9996 HK). (link to Brian's insight: FTSE GEIS December 2020 - Potential IPO Inclusion)
SET50 Index Rebalance Preview. Brian sees a high probability of Bangkok Commercial Asset Management (BAM TB) being included in the SET50 index and of Thanachart Capital (TCAP TB) being deleted from the index. There is a lower probability of Com7 PCL (COM7 TB) and CK Power PCL (CKP TB) being included in the index and of Banpu Power PCL (BPP TB) and WHA Corp Pcl (WHA TB) being excluded. There is a chance that TTW Pcl (TTW TB) fails the liquidity test in which case it will be deleted from the index, and WHA Corp Pcl (WHA TB) stays in the index. (link to Brian's insight: SET50 Index Rebalance Preview: Three Changes for Now, Could Be One More)
HSCEI Index Rebalance Preview. Brian sees a high probability of China Overseas Land & Investment Ltd (688 HK), JD.com (HK) (9618 HK), Alibaba Health Information Technology (241 HK), Haidilao (6862 HK), China Feihe (6186 HK), Semiconductor Manufacturing (981 HK) and Evergrande Real Estate Group (3333 HK) being included in the Hang Seng China Enterprises Index (HSCEI INDEX), and of China Taiping Insurance Hldgs (966 HK), China Telecom Corp Ltd (H) (728 HK), China Minsheng Banking H (1988 HK), China Vanke Co Ltd (H) (2202 HK), Fosun International (656 HK), China Citic Bank Corp Ltd H (998 HK) and China Shenhua Energy Co H (1088 HK) being deleted from the index. Depending on price movements between now and 30 September, NetEase (9999 HK) and Hansoh Pharmaceutical (3692 HK) could be included in the index, which would see Want Want (151 HK) and PICC Property & Casualty H (2328 HK) being deleted. (link to Brian's insight: HSCEI Index Rebalance Preview - December 2020: HUGE Number of Changes and Turnover Expected)
In Liquid Universe of European Ordinary and Preferred Shares: September Report, Jesus looked at seven share classes (pref vs. ords) throughout Europe, with trade recommendations thereon.
Levo Chan Weng-lin, chief executive of Macau's junket brand Tak Chun Group, bought a 20.65%t stake (~US$173mn) in Macau Legend Development (1680 HK) last Friday according to the HKEx disclosures. Shares remain suspended pursuant to the Hong Kong Code on Takeovers and Mergers.
Fujitsu Ltd (6702 JP) extended the closing date for the Tender Offer on Fujitsu Frontech (6945 JP) from 14 Sep to 29 Sep on 11 Sep, AFTER the Tender had gone ex- and one trading day prior to the close. The reason for the Tender Offer Registration Statement Amendment explained in the document was that a "Special Related Party" had held 30,400 shares as at the beginning of the Tender Offer, and not 30,200 as originally stated. An honest mistake it would seem.
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 |
China Ronzhong (3963 HK) | 20.55% | BOCI | Outside CCASS |
Sunac China Holdings (1918 HK) | 21.91% | Citi | MS |
Worldgate Global Logistics L (8292 HK) | 16.67% | Astrum | Outside CCASS |
Zhicheng (8511 HK) | 73.48% | Easy | Outside CCASS |
Shi Shi (8181 HK) | 25.70% | HSBC | Kingston |
Amvig Holdings (2300 HK) | 44.15% | UBS | Outside CCASS |
Nexion Technologies Ltd (8420 HK) | 22.83% | Kim Eng | Outside CCASS |
China Youzan Limited (8083 HK) | 11.86% | GF Sec | Outside CCASS |
The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.
Name | % chg | Into | Out of |
Tailam (6193 HK) | 20.07% | BoC | Outside CCASS |
Platt Nera (1949 HK) | 75.00% | Easy | Chaorshang |
MabPharm (2181 HK) | 49.95% | HSBC | St Chart |
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