In this briefing:
- Nongshim Holdings Stub Trade: Time for Holdco To Catch Up
- M1 Offer Coming – Market Odds Suggest a Bump But…
- Tesla: Down to the Wire
1. Nongshim Holdings Stub Trade: Time for Holdco To Catch Up
- Nongshim Co Ltd (004370 KS) is responsible for 70% of Nong Shim Holdings Co (072710 KS) NAV. Holdco is currently at a 54% discount to NAV. This is a 2 year low.
- Thanks to improved Korea-China relation, Opco (004320 KS) shares have nicely rebounded lately. Nongshim Holdco hasn’t caught up. This created the highest price ratio gap in 2 years. On a 20D MA, they are close to the mean. But on a 2 year mean, Holdco is currently and still severely undervalued.
- Liquidity has played a major role in the recent price gap widening. At a rebounding cycle like this, liquidity must have been a huge factor. But it shouldn’t be too long until Holdco catches up. Opco has kinda drifted sideways for a while now. This should be time for Holdco to begin a catchup.
2. M1 Offer Coming – Market Odds Suggest a Bump But…
Singapore telecom firm M1 announced on the 28th of December 2018 that Konnectivity Pte. Ltd. (a company jointly owned by Keppel Corp Ltd (KEP SP) and Singapore Press Holdings (SPH SP)) had made a Voluntary Conditional General Offer following the satisfaction of the pre-condition (IMDA approval) mentioned in the pre-conditional offer made in September.
The offer is to buy a minimum of 16.69% of the total share capital of M1 at a price of S$2.06 in order to increase the collective holding of the acquirer and its related parties from the current level of 33.32% to 50+% of fully-diluted shares (current shares out + 26.826mm Options + ~2.1mm Award shares).
The Offerors will buy all shares tendered if they get to a minimum of 50+%.
The other terms and conditions of this deal will be set out in the offer document which is expected to be despatched in mid-January 2019 (14-21 days from 28 December).
The offer price of S$2.06 translated to a premium of 26.4% to the undisturbed price before the trading halt for the pre-conditional offer. At the time of writing, the stock is trading at S$2.10 which is higher than the proposed Offer Price, indicating the market is expecting a bump or an overbid.
We’ll see.
3. Tesla: Down to the Wire
With the fourth quarter just a few hours from closing, CEO Elon Musk says he is keeping Tesla Motors (TSLA US) stores open until midnight so buyers can still get the coveted $7,500 tax credit on a new car before it gets cut in half January 1st.
This is interesting since Tesla started warning months ago that buyers need to order by October to be guaranteed delivery by December 31st since said demand was purportedly so hot the company couldn’t make its cars fast enough. It remains to be seen how many early birds rushed in, because as time passed that deadline has been extended through November and then December. I snapped this from Tesla’s website yesterday:
The takeaway here is that despite months of extraordianary sales efforts, price erosion, and declining production, Tesla’s inventory remains troublingly bloated, conditions I warned about in the third quarter as accelerating threats for the fourth quartert and likely through 2019 (see my report “Great Magic Trick Tesla; Now Do It Again,” 11/29/18).
Monthly sales trends for October and November also signalled that Tesla needs strong December performance if it still hopes to meet ambitious guidance for profits and free cash flow the company desparately needs to generate sufficiently sustainable cash flow to support operations plus hefty nearterm debt maturities, much less its burgeoning R&D and capex obligations where it’s already fallen behind.
Otherwise Tesla is likely to get really creative, again, with accounting and cash managment strategies to keep up the illusion of progress and stability.
Read more as Bond Angle Analysis continues.
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