In today’s briefing:
- Merger Arb Mondays (23 Dec) – Seven & I, Fuji Soft, NEC Networks, Pentamaster, Goldlion, Henlius
- Ping An Healthcare and Technology (1833 HK) – Cash Dividend Or Scrip Dividend?
- 2025 High Conviction: DFI Retail – Churning Free Cash by Turning the Right Levers
- Analyzing the Regulatory Loophole in Kaspi’s Acquisition of D-Market’s Controlling Stake and Potential Outcomes
- Vesync (2148 HK): A Potential Privatisation?
- Strategic Transactions and Legal Developments: HEPS, ACC:OL, ABCP, BELFB, NWOR:L, EMBRAC, AVAP:L
- EQD | Hong Kong Index Options Weekly – HSI and HSCEI December 16-20
- Ricegrowers (SunRice ASX:SGLLV) Interview Transcript 23 December 2024
- Ricegrowers Ltd – Branded focus paying off
Merger Arb Mondays (23 Dec) – Seven & I, Fuji Soft, NEC Networks, Pentamaster, Goldlion, Henlius
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Arcadium Lithium (LTM AU), Seven & I Holdings (3382 JP), Get Nice Financial Group Ltd (1469 HK), ESR Group (1821 HK), Goldlion Holdings (533 HK).
- Lowest spreads: Lifestyle China (2136 HK), Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP).
Ping An Healthcare and Technology (1833 HK) – Cash Dividend Or Scrip Dividend?
- Hopson Development (754 HK) is cash-strapped and it will most likely choose cash dividend, which would increase the likelihood that Glorious Peace’s shareholding ratio will increase to more than 50%.
- If PAGD’s share price is higher than HK$6.12, there is arbitrage opportunity. Since Ping An may hope other shareholders to choose cash dividends, future stock price may fall below HK$6.12
- A risk point is Ping An can actually wait for other shareholders to make their choices before making the final decisions based on the stock price situation at that time.
2025 High Conviction: DFI Retail – Churning Free Cash by Turning the Right Levers
- DFI Retail Group Holdings (DFI SP), a leading retail player in Asia, is navigating sector headwinds through strategic pivots and cost cuts to drive superior margins and returns.
- After hitting a 10-year low in early August, DFI Retail’s stock rebounded, driven by strong 1H2024 earnings that reflected the impact of management’s initiatives.
- With an attractive dividend yield, strong cash flow, and a positive earnings growth outlook, DFI Retail offers a low-risk, high-return opportunity for investors in 2025.
Analyzing the Regulatory Loophole in Kaspi’s Acquisition of D-Market’s Controlling Stake and Potential Outcomes
- D-Market’s controlling stake is being sold to Kaspi, acquiring Class A shares at $7.57 and Class B at $4.75.
- Turkish law mandates a takeover offer for minority shares, but HEPS’s ADR structure exempts it from this requirement.
- Activism efforts aim to increase HEPS’s shareholders to 500, potentially forcing Kaspi to include minority shareholders.
Vesync (2148 HK): A Potential Privatisation?
- Vesync (2148 HK)‘s suspension may suggest privatisation by the Yang family (68.8% stake). With US$192m public float and US$216m net cash, out-of-pocket cash needed is limited.
- 1H24 is decent with a 37.5% earnings growth and 3.3pp margin expansion. The consensus forecast of 4.8% growth in 2H24 is conservative, providing a good opportunity for privatisation.
- Benchmarking the take-out price to the 3-year average P/B will mean a 33% upside while the sector’s average PER multiple implies ~70% higher than the pre-suspension price.
Strategic Transactions and Legal Developments: HEPS, ACC:OL, ABCP, BELFB, NWOR:L, EMBRAC, AVAP:L
- D-Market Electronic Services & Trading’s (HEPS) controlling stake is being sold to Kaspi, exploiting a regulatory loophole to avoid a mandatory takeover offer.
- Aker Carbon Capture (ACC:OL) sold its business, leaving a cash shell trading at a 20% discount to net cash.
- Ambase (ABCP) is litigating over an Equity Put Right, with summary judgment motions scheduled, potentially impacting share price.
EQD | Hong Kong Index Options Weekly – HSI and HSCEI December 16-20
- Sleepy week highlighted by small closing price ranges that were among the 3-5 quietest of the year.
- Volumes across both indexes were down about 1/3 from the prior week.
- Despite low volumes open interest expanded across out-of-the-money options for both Puts and Calls.
Ricegrowers (SunRice ASX:SGLLV) Interview Transcript 23 December 2024
- RaaS interviewed Ricegrowers Group CFO Dimitri Courtelis following the company’s H1 FY25 results.
- This is a full transcript of the interview.
Ricegrowers Ltd – Branded focus paying off
- RaaS has published an update on and interview with FMCG agri-group Ricegrowers which trades as SunRice (ASX:SGLLV) following the release of its interim report last week in which it delivered RaaS-adjusted EBITDA of $67.9m (+10%) in line with our forecasts and NPAT of $31.2m (+4%), below our forecasts due to a higher than expected tax rate (28% vs our 22%).Branded sales represent ~70% of total SGLLV sales, with the benefits of new brands, brand extensions and increased ranging evident in the H1 FY25 result.
- Across Rice Food, Riviana and CopRice EBITDA growth far outpaced revenue growth, with EBITDA margins for Rice Food +400bps, +330bps for CopRice and +140bps for Riviana.
- SGLLV added SavourLife and Simply Delish to the portfolio over the half and can be expected to add and extend further brands in pursuit of its 2030 revenue target of $3.0b.
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