Daily BriefsEvent-Driven

Daily Brief Event-Driven: SenseTime (20 HK): Lock-Up Expiry Done; Stock Connect Done; Passive Inflows Next and more

In today’s briefing:

  • SenseTime (20 HK): Lock-Up Expiry Done; Stock Connect Done; Passive Inflows Next
  • Yashili’s Pre-Condition EGM Set for 16 August
  • The Cayman Islands to Remove the Headcount Test on 31 August
  • Merger Arb Mondays (01 Aug) – Genex, Yashili, Link Admin, VNET, Ramsay, Alliance Aviation
  • Minebea Mitsumi Tender for Honda Tsushin Kogyo (6826)
  • Remgro/Mediclinic: Healthier Offer
  • Untangling ACS Holding Chain

SenseTime (20 HK): Lock-Up Expiry Done; Stock Connect Done; Passive Inflows Next

By Brian Freitas

  • SenseTime Group (20 HK) stock has been crushed following the lock-up expiry at the end of June with the stock now trading 40% below the IPO price.
  • The company has recently bought back stock providing some support. More importantly, SenseTime Group (20 HK) was included in Southbound Stock Connect on 29 July.
  • We expect a big increase in the free float adjustment factor (FAF) in the Hang Seng Indexes at the September rebalance that will provide some much needed passive inflows.

Yashili’s Pre-Condition EGM Set for 16 August

By Arun George

  • The approval by Yashili International Holdings (1230 HK) independent shareholders of the proposed transactions at the 16 August EGM is a pre-condition to the HK$1.20 per share privatisation proposal.
  • Shareholders will pass the ordinary resolutions at the EGM so that they can vote on the attractive privatisation proposal. The key risk is timing around the satisfaction of the pre-conditions.
  • China Mengniu Dairy Co (2319 HK)’s offer remains attractive in the context of multiples and historical share prices. At the last close, the gross spread to the offer is 10.1%.

The Cayman Islands to Remove the Headcount Test on 31 August

By Arun George

  • After a prolonged delay, the Cayman Islands legislative gazette was published on 29 July, which stated that the amended Cayman Islands Act would come into force on 31 August. 
  • The Act will remove the headcount test for schemes, eliminating a layer of uncertainty for controlling shareholders wishing to privatise listed Cayman-incorporated companies.
  • In light of this development, we look at current active privatisations, past failed privatisations and rumoured transactions which stand to gain a new lease of life from this Act.

Merger Arb Mondays (01 Aug) – Genex, Yashili, Link Admin, VNET, Ramsay, Alliance Aviation

By Arun George


Minebea Mitsumi Tender for Honda Tsushin Kogyo (6826)

By Travis Lundy

  • Electronics Parts and Devices manufacturer Minebea Mitsumi (6479 JP) has announced a 25% premium Tender Offer to take over connector-maker Honda Tsushin Kogyo (6826 JP)
  • It is not an overwhelming bid, but is supported by Panasonic Corp (6752 JP) which owns an equity affiliate stake, and crossholders and friendly shareholders hold a lot.
  • This looks like it will complete, despite being a little light on price. 

Remgro/Mediclinic: Healthier Offer

By Jesus Rodriguez Aguilar

  • After four prospective offers from a Remgro-led consortium, Mediclinic’s Board is to recommend the latest one: 504p/share in cash, cum dividend. The PUSU deadline has been extended until 5 August.
  • The offer values Mediclinic at c. 10x EV/Fwd EBITDA, both above the median of comparables and the failed offer for Spire. At 35% premium, it seems reasonable, but not overly generous.
  • After four proposals, I doubt the consortium will increase its offer, and investors will be happy to part with the cash. Gross spread is 3.92%. Long MDC LN.

Untangling ACS Holding Chain

By Jesus Rodriguez Aguilar

  • ACS is simplifying  its corporate structure: it has acquired the minorities in CIMIC, increased its stake in Hochtief and is buyer for any shares in Hochtief owned by Atlantia.
  • Thiess is now acquiring MACA and could also be a candidate for acquisition by the parent.
  • I see value in ACS. Further rationalisation in the holding structure would be a catalyst for the reduction of the discount.

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