Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<p>Yesterday <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> published its annual results in which it disclosed the NAV was 58.22 USD on 31/12/20. Contrast this with the 33 USD buyout offer tabled earlier this week. Something is<em> seriously</em> off here. Before one goes any further,<a href="https://www.jardines.com/assets/files/Investors/Reports/strategic/js-ar2019.pdf" target="_blank" rel="noopener"> please re-read the Corporate Governance (pages 136-141) of Jardine Strategic's 2019 annual report.</a> It will be good to contrast what is written there with what is happening in real-life.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/193/684/original/image_59443962741615508974779.png?1615508975" class="editor-image img-responsive" data-smartkarma-image-id="193684"></figure><p>The buzzword "du jour" for all investors is ESG. For the avoidance of doubt this stands for:</p><p><strong>Environmental, Social, and Governance.</strong></p><p>In the currently proposed buyout of <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> by <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a> the entire board of both companies (largely the same people) is showing the investment community what it <em>really</em> thinks about the G in ESG. Given the transaction was advised by both <a href="https://www.smartkarma.com/entities/jpmorgan-chase-co" target="_blank" data-smartkarma-citation="entities:277:1" rel="noopener">JPMorgan Chase &amp; Co (JPM US)</a> and <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC Holdings (5 HK)</a> we now also know how "ingrained" the ESG ethos is in practice at those banks.</p><p>Given the +/-85% ownership of Jardine Strategic by Matheson, one would expect that Matheson could not vote on the proposed transaction and only Jardine Strategic minorities would have an actual vote to deem this offer "fair and reasonable" and give it their thumbs up/down at an SGM. Not in this case. Matheson is intending to use its 85% votes to "ram" this offer across the finish line. Which explains why Matheson expects this deal to close by the end of April 2021. Some changes take decades at Jardine, others clearly don't.</p><p>It is astonishing that not a single person in these large banking institutions has stood up to Jardine's board and challenged them on the "fairness", "correctness" and "governance" of its proposed 33 USD offer. It is not because you have found some loophole, as made clear by <strong>David Webb</strong>, in your byzantine listings between Bermuda-Singapore-London that you are required to put your <strong>"Gangster"</strong> hat on and use it. The <strong>"Governance"</strong> hat could have been used, a fair buyout of Strategic shareholders could have been chosen but...it was not. The 33 USD offer price might have been a 20% premium to last Friday's closing price but other than that it was a completely arbitrary number unrelated to its Net Asset Value.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/193/672/original/image_53585158121615504013720.png?1615504014" class="editor-image img-responsive" data-smartkarma-image-id="193672"></figure><p>Any ESG fund worth their name in salt should therefore shun Jardine and any of its subsidiaries as the directors at Jardine are mostly the same directors at <a href="https://www.smartkarma.com/entities/dairy-farm-intl-hldgs-ltd" target="_blank" data-smartkarma-citation="entities:7427:1" rel="noopener">Dairy Farm Intl Hldgs (DFI SP)</a>, <a href="https://www.smartkarma.com/entities/mandarin-oriental-intl-ltd" target="_blank" data-smartkarma-citation="entities:4773:1" rel="noopener">Mandarin Oriental Intl (MAND SP)</a>, <a href="https://www.smartkarma.com/entities/hongkong-land-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15465:1" rel="noopener">Hongkong Land (HKL SP)</a>  and <a href="https://www.smartkarma.com/entities/jardine-cycle-carriage-ltd" target="_blank" data-smartkarma-citation="entities:347:1" rel="noopener">Jardine Cycle &amp; Carriage (JCNC SP)</a>. If you do invest in any of the above know one thing: the ESG statements in their annual reports are not worth the paper they are written on. Buyer beware.</p>

Yesterday Jardine Strategic Holdings (JS SP) published its annual results in which it disclosed the NAV was 58.22 USD on 31/12/20. Contrast this with the 33 USD buyout offer tabled earlier this week. Something is seriously off here. Before one goes any further, please re-read the Corporate Governance (pages 136-141) of Jardine Strategic's 2019 annual report. It will be good to contrast what is written there with what is happening in real-life.The buzzword "du jour" for all investors is ESG. For the avoidance of doubt this stands for:Environmental, Social, and Governance.In the currently proposed buyout of Jardine Strategic Holdings (JS SP) by Jardine Matheson Holdings (JM SP) the entire board of both companies (largely the same people) is showing the investment community what it really thinks about the G in ESG. Given the transaction was advised by both JPMorgan Chase &amp; Co (JPM US) and HSBC Holdings (5 HK) we now also know how "ingrained" the ESG ethos is in practice at those banks.Given the +/-85% ownership of Jardine Strategic by Matheson, one would expect that Matheson could not vote on the proposed transaction and only Jardine Strategic minorities would have an actual vote to deem this offer "fair and reasonable" and give it their thumbs up/down at an SGM. Not in this case. Matheson is intending to use its 85% votes to "ram" this offer across the finish line. Which explains why Matheson expects this deal to close by the end of April 2021. Some changes take decades at Jardine, others clearly don't.It is astonishing that not a single person in these large banking institutions has stood up to Jardine's board and challenged them on the "fairness", "correctness" and "governance" of its proposed 33 USD offer. It is not because you have found some loophole, as made clear by David Webb, in your byzantine listings between Bermuda-Singapore-London that you are required to put your "Gangster" hat on and use it. The "Governance" hat could have been used, a fair buyout of Strategic shareholders could have been chosen but...it was not. The 33 USD offer price might have been a 20% premium to last Friday's closing price but other than that it was a completely arbitrary number unrelated to its Net Asset Value.Any ESG fund worth their name in salt should therefore shun Jardine and any of its subsidiaries as the directors at Jardine are mostly the same directors at Dairy Farm Intl Hldgs (DFI SP), Mandarin Oriental Intl (MAND SP), Hongkong Land (HKL SP)  and Jardine Cycle &amp; Carriage (JCNC SP). If you do invest in any of the above know one thing: the ESG statements in their annual reports are not worth the paper they are written on. Buyer beware.

G Stands for Governance: When Jardine Makes a Mockery of ESG; JS Publishes 58.22 USD NAV on 31/12/20

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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<p><em><strong>Corrigenda: There is an error in this Insight. Please note the correction.</strong></em></p>
<p><em><strong>Correction: There is NO “headcount” test at the Jardine Strategic special general meeting. The vote is therefore done. Apologies for the misinterpretation.</strong></em></p>
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<p>Whilst I did not believe that the Keswicks - the controlling family - had any need to <em>immediately</em> restructure the <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a> / <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> organisation, the ultimate restructuring of the group was most likely to be done in a way where value for the family was maximised.</p>
<p>A buyout offer for Strategic would allow Matheson to capture value from minorities if the buyout offer was made below NAV. It is a cheaper alternative to a full buyout of Matheson. It maintains the group ownership levels in Strategic-held subsidiaries. And the family’s ownership in the group (which would be just Matheson and its direct subsidiaries) increases to ~43%, up from ~17.5% by my estimate currently.</p>
<p>And now we have a long-awaited <a href="https://links.sgx.com/FileOpen/JMH%20J.ashx?App=Announcement&amp;FileID=651169" target="_blank" rel="noopener">transaction</a>. And just like that it is also done and dusted.</p>
<blockquote>
<p>Jardine Matheson Holdings Limited has today announced its plans for the simplification of the parent company structure of the Group. This will result in a single holding company with a conventional ownership structure and a further increase in the Group’s operational efficiency and financial flexibility.</p>
</blockquote>
<p>Under the terms of the Acquisition, Strategic shareholders (other than Matheson) will receive US$33.00/share in cash.</p>
<p>The Acquisition will be implemented by way of an Amalgamation under the Bermuda Companies Act, which requires approval by a majority (the headcount test) of at least 75% of the votes cast by Strategic shareholders. Matheson, holding 940,903,135 Strategic shares - representing 84.89% of shares out - is entitled to vote on the amalgamation resolution, all but assuring Strategic shareholder approval.</p>
<p>Apart from playing the Strategic arb, the key questions are where Matheson should trade, and what next for key listed subsidiaries.</p>
<p>More below the fold.</p>


Corrigenda: There is an error in this Insight. Please note the correction.
Correction: There is NO “headcount” test at the Jardine Strategic special general meeting. The vote is therefore done. Apologies for the misinterpretation.


Whilst I did not believe that the Keswicks - the controlling family - had any need to immediately restructure the Jardine Matheson Holdings (JM SP) / Jardine Strategic Holdings (JS SP) organisation, the ultimate restructuring of the group was most likely to be done in a way where value for the family was maximised.
A buyout offer for Strategic would allow Matheson to capture value from minorities if the buyout offer was made below NAV. It is a cheaper alternative to a full buyout of Matheson. It maintains the group ownership levels in Strategic-held subsidiaries. And the family’s ownership in the group (which would be just Matheson and its direct subsidiaries) increases to ~43%, up from ~17.5% by my estimate currently.
And now we have a long-awaited transaction. And just like that it is also done and dusted.

Jardine Matheson Holdings Limited has today announced its plans for the simplification of the parent company structure of the Group. This will result in a single holding company with a conventional ownership structure and a further increase in the Group’s operational efficiency and financial flexibility.

Under the terms of the Acquisition, Strategic shareholders (other than Matheson) will receive US$33.00/share in cash.
The Acquisition will be implemented by way of an Amalgamation under the Bermuda Companies Act, which requires approval by a majority (the headcount test) of at least 75% of the votes cast by Strategic shareholders. Matheson, holding 940,903,135 Strategic shares - representing 84.89% of shares out - is entitled to vote on the amalgamation resolution, all but assuring Strategic shareholder approval.
Apart from playing the Strategic arb, the key questions are where Matheson should trade, and what next for key listed subsidiaries.
More below the fold.

Jardine Matheson: Collapsing The Circularity

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

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<p>In this flash Webinar, we welcome Insight Providers <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a>, <a href="https://www.smartkarma.com/profiles/brian-freitas" target="_blank" data-smartkarma-citation="accounts:4091" rel="noopener">Brian Freitas</a> and <a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> to discuss the recently announced acquisition of <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> by <a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a>.  </p>
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<h3>The webinar was hosted on Monday, 8 March 2021, 10:30 SGT/HKT.</h3>
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<p></p>
<p>Subscribe and listen on the go:</p>
<p><iframe src="https://open.spotify.com/embed-podcast/episode/19mOcuaxsIixnUOTCWeTTf" width="100%" height="232" frameborder="0" allowtransparency="true" allow="encrypted-media"></iframe></p>


In this flash Webinar, we welcome Insight Providers Angus Mackintosh, Brian Freitas and David Blennerhassett to discuss the recently announced acquisition of Jardine Strategic Holdings (JS SP) by Jardine Matheson Holdings (JM SP).  


The webinar was hosted on Monday, 8 March 2021, 10:30 SGT/HKT.


Subscribe and listen on the go:


Smartkarma Flash Webinar | Jardine Matheson Acquires Jardine Strategic

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

<p><a href="https://www.smartkarma.com/entities/sheng-siong-group-ltd" target="_blank" data-smartkarma-citation="entities:6824:1" rel="noopener">Sheng Siong (SSG SP)</a> has been the stocks to benefit from the COVID-19 induced lockdown as Singaporeans are allowed to WFH instead of WFO thus they do more grocery shopping and also stockpiled in case of the reduced food supply due to the longer than expected pandemic. The company has recorded a substantial and never-seen-before YoY revenue growth <em>(Q1: 30.7%, Q2: 75.8%, and Q3: 28.9%)</em>. </p>
<p>The tides seemed to have turned though:</p>
<ul>
<li>Singapore statistics bureau reported that the revenue increase from supermarkets and convenience stores has slowed down while F&amp;B sales have grown from SGD 397 million to SGD 629 million <em>QoQ</em>, reflecting the change in consumers' behavior to start going out again. </li>
</ul>
<p>Although its valuation has peaked in Q2, Sheng Siong's share price has not decreased by much thus it is the right time book profit as the large revenues growth is unlikely to sustain going forward. </p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/171/873/original/image_38476675561605505587235.png?1605505587" class="editor-image img-responsive" data-smartkarma-image-id="171873"></figure>

Sheng Siong (SSG SP) has been the stocks to benefit from the COVID-19 induced lockdown as Singaporeans are allowed to WFH instead of WFO thus they do more grocery shopping and also stockpiled in case of the reduced food supply due to the longer than expected pandemic. The company has recorded a substantial and never-seen-before YoY revenue growth (Q1: 30.7%, Q2: 75.8%, and Q3: 28.9%). 
The tides seemed to have turned though:

Singapore statistics bureau reported that the revenue increase from supermarkets and convenience stores has slowed down while F&amp;B sales have grown from SGD 397 million to SGD 629 million QoQ, reflecting the change in consumers' behavior to start going out again. 

Although its valuation has peaked in Q2, Sheng Siong's share price has not decreased by much thus it is the right time book profit as the large revenues growth is unlikely to sustain going forward. 


Sheng Siong (SSG): Sustainable High Growth?

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<p>This week in StubWorld ...</p>
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<p><a href="https://www.smartkarma.com/entities/jardine-matheson-holdings-ltd" target="_blank" data-smartkarma-citation="entities:19718:1" rel="noopener">Jardine Matheson Holdings (JM SP)</a> is trading "cheap" at a 32% discount to NAV, adjusting for cross-holding. <a href="https://www.smartkarma.com/entities/jardine-strategic-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15081:1" rel="noopener">Jardine Strategic Holdings (JS SP)</a> is even wide at 51% discount to NAV, also adjusting for cross-holdings. Is the time ripe for the Keswicks to collapse the structure? Would a move back to Hong Kong help narrow the discount?</p>
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<p><a href="https://www.smartkarma.com/entities/jardine-cycle-carriage-ltd" target="_blank" data-smartkarma-citation="entities:347:1" rel="noopener">Jardine Cycle &amp; Carriage (JCNC SP)</a> was trading cheap on a NAV and stub basis this time last month (<a href="https://skr.ma/15ciq" target="_blank" rel="noopener">StubWorld: Matheson Buybacks As Ratio Mean Reverts; JCNC Looking Cheap</a>). It is now even cheaper. Time for a JCNC breakout.</p>
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<p>Preceding my comments on Jardines, are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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This week in StubWorld ...



Jardine Matheson Holdings (JM SP) is trading "cheap" at a 32% discount to NAV, adjusting for cross-holding. Jardine Strategic Holdings (JS SP) is even wide at 51% discount to NAV, also adjusting for cross-holdings. Is the time ripe for the Keswicks to collapse the structure? Would a move back to Hong Kong help narrow the discount?

Jardine Cycle &amp; Carriage (JCNC SP) was trading cheap on a NAV and stub basis this time last month (StubWorld: Matheson Buybacks As Ratio Mean Reverts; JCNC Looking Cheap). It is now even cheaper. Time for a JCNC breakout.


Preceding my comments on Jardines, are the weekly setup/unwind tables for Asia-Pacific Holdcos.




These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.




StubWorld: Would Jardines Move Back To HK?

Hong Kong

DFI Retail Group is a leading pan-Asian retailer operating supermarkets, hypermarkets, convenience stores, health and beauty stores, home furnishings stores, and restaurants. The company manages a portfolio of well-known brands including Wellcome, 7-Eleven, Mannings, Guardian, and IKEA. DFI Retail Group was founded in 1886 and is headquartered in Quarry Bay, Hong Kong.

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DFI Retail Group (DFI SP)

G Stands for Governance: When Jardine Makes a Mockery of ESG; JS Publishes 58.22 USD NAV on 31/12/20

ESG is the buzzword "du jour". When the G in ESG gets put to the test in the recent Jardine Strategic buyout the 33 USD offer price looks extremely...

Nicolas Van Broekhoven

Jardine Matheson: Collapsing The Circularity

Only the headcount test stands in the way of the Strategic's privatisation completion. Elsewhere, Mandarin Oriental looks inexpensive, as does JCNC.

David Blennerhassett

Smartkarma Flash Webinar | Jardine Matheson Acquires Jardine Strategic

Join a webinar with Angus Mackintosh, Brian Freitas and David Blennerhassett to discuss the announced acquisition of Jardine Strategic by Jardine...

Smartkarma Research

Sheng Siong (SSG): Sustainable High Growth?

Singapore statistics reported that the revenue increase from supermarkets, CSs has slowed down while F&B sales have grown 60% QoQ, reflecting a...

Henry Soediarko

StubWorld: Would Jardines Move Back To HK?

This week in StubWorld ... Jardine Matheson Holdings (JM SP) is trading "cheap" at a 32% discount to NAV, adjusting for cross-holding. Jardine...

David Blennerhassett

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