In this briefing:
- Korea M&A Spotlight: HDC Hyundai Development Consortium to Acquire Asiana Airlines?
- Daikin – Worth A Look as China Hints at Bottoming
- CITIC Envirotech Privatisation Offer’s Targeted Appeal
- CITIC Envirotech’s Privatisation Offer
- Changsha Broad Homes (长沙远大宅工) Trading – Barely Holding Up
It was reported in numerous Korean media on November 8th that the HDC Hyundai Development Engineering & Construction (294870 KS) & Mirae Asset Daewoo consortium is likely to acquire Asiana Airlines. However, there were conflicting information about the exact preliminary bid amounts made by HDC Hyundai Development consortium and others.
Although Asiana Airlines has not formally announced which consortium it now prefers, it appears that the much higher probability event is for HDC Hyundai Development & Mirae Asset Daewoo consortium to become the preferred bidder. From the point of view of Kumho Industrial, the nearly 400 billion won to 500 billion won difference in the preliminary bid from the HDC Hyundai Development versus the other two contenders is so great that it probably makes sense for them (Kumho Industrial) to go with HDC Hyundai Development consortium.
There are four major concerns on the (likely?) acquisition Asiana Airlines by the HDC Hyundai Development consortium:
- Lack of synergies & no experience in running an airliner
- Construction + Airlines = Excessive Industry Cyclicality
- Korean government not likely to save Asiana Airlines next time
Overall, although HDC Hyundai Development’s share price is down 36% YTD, there are tremendous risks of its share price falling much further in the next 12 months if the HDC Hyundai Development consortium does indeed end up acquiring the highly leveraged Asiana Airlines.
Daikin reported results on the 6th of November which were slightly below consensus at the OP line at ¥78.7bn (consensus ¥82.6bn), despite beating slightly on revenue (¥673bn vs. consensus at ¥668bn). The slight miss on margins and a 2.2% downward revision to FY revenue guidance drove the share price down about 2.6% over the next two days but we believe a slowing rate of decline in China makes a closer look appropriate.
Citic Envirotech (CEL SP) is a leading membrane-based integrated environmental solutions provider specialising in water and wastewater treatment, water supply and recycling. Last night, CKM announced a pre-conditional privatisation offer at S$0.55 per share.
At first glance, the offer price which represents a 69% and 66% premium to the 3-month and 6-month VWAP respectively, seems attractive. Overall, our valuation analysis suggests that CKM’s offer while not a knockout bid, is worth a look for investors not willing to wait around for recovery and seeking a reasonable exit.
Changsha Broad Homes (2163 HK) raised US$151m at the bottom-end of its IPO price range. We have previously covered the IPO in:
- Changsha Broad Homes IPO – Exposure to Prefabricated Construction in China
- Changsha Broad Homes (长沙远大宅工) IPO – More Dividend Paid in 2019
In this insight, we will look at the IPO deal dynamics and updated valuation.