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
- 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
- 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
- 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
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- The highest spreads are 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Resapp Health (RAP AU), Ramsay Health Care (RHC AU), Yashili International Holdings (1230 HK), Link Admin.
- Lowest gross spreads are Hwa Hong Corp (HWAH SP), Excelpoint Technology (EXLP SP), Giordano International (709 HK), MyDeal.com.au Ltd (MYD AU), Cocoaland Holdings (COLA MK), MACA Ltd (MLD AU).
Minebea Mitsumi Tender for Honda Tsushin Kogyo (6826)
- 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
- 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
- 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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