In today’s briefing:
- SJM Holdings (880 HK) Rights Issue – Capital Raise, Unappreciated, but Interesting Trading Dynamics
- Hoya (7741) – Record Revenues/Earnings, a Small Buyback, but Nikkei 225 Flows May Dominate
- CK Group Wants to Sell Its Stake in AMTD Group
- MicroStrategy (MSTR US): Saylor Mirrors Bitcoin’s Fall
- ResApp’s Revised Offer from Pfizer Still Faces Headcount Test Risk
- FTSE China 50 Index Rebalance Preview: One Change in Range, Couple Others Close
- Della Valle/Tod’s: Lowball Minorities Buyout
- Bunka Shutter (5930 JP) – Big Buyback Vs Big CB Means No Accretion, Minimal Flow Impact
SJM Holdings (880 HK) Rights Issue – Capital Raise, Unappreciated, but Interesting Trading Dynamics
- SJM Holdings (880 HK) announced earnings on Monday and a HK$3bn Rights Issue last night designed to inject capital into Macau gaming licensee SJM Resorts.
- An increase in share capital is required to pre-qualify for then tender process where the Macau Govt would allocate a 10-year gaming concession starting 1 Jan 2023.
- 54.7% SJM Holder/Parent Sociedade de Turismo e Diversões de Macau (STDM) had previously extended a loan to SJM designed to allow SJM to inject capital to SJM Resorts.
Hoya (7741) – Record Revenues/Earnings, a Small Buyback, but Nikkei 225 Flows May Dominate
- Hoya Corp (7741 JP) today announced great Q1 earnings and a bullish above-consensus revenue forecast for this fiscal year. It also announced a small share buyback.
- However, the dominant factor in flows near-term will be pre-positioning for a possible Nikkei 225 inclusion in September. That is what will push the stock around. In or not.
- Hoya has recently outperformed a Peer Basket despite forward expected EPS and EBIT not seeing relative improvement. That suggests some relative risk if it doesn’t get selected for Nikkei 225.
CK Group Wants to Sell Its Stake in AMTD Group
- AMTD Digital’s stock price has started to sink and now there are news that the Cheung Kong (CK) Group (HK) wants to sell its stake in AMTD Group Co.
- The discussion of the CK Group disposing its stake in AMTD Group altogether is likely to further negatively impact AMTD Digital’s share price.
- Li Ka-Shing and his family probably want to distance themselves from all the unnecessary media attention given to AMTD Digital (HKD US) and AMTD Idea Group (AMTD US).
MicroStrategy (MSTR US): Saylor Mirrors Bitcoin’s Fall
- Microstrategy Inc (MSTR US)‘s Michael Saylor will now assume the new role of Executive Chairman and Phong Le, MSTR’s President, will serve as the company’s new CEO.
- As Executive Chairman, Saylor will focus more on MSTR’s bitcoin acquisition strategy and related bitcoin advocacy initiatives.
- With one of the most bullish and influential players in the industry now focusing on crypto, this should be considered bullish, according to some media reports. That’s a desperate takeaway.
ResApp’s Revised Offer from Pfizer Still Faces Headcount Test Risk
- Pfizer Inc (PFE US) upped its Resapp Health (RAP AU) offer from A$0.146 per share to A$0.208 per share, in line with the independent expert’s preferred value of A$0.208 per share.
- The NO vote camp from defiant retail shareholders forced Pfizer to up its offer. Unfortunately, a vocal NO camp is still present despite Pfizer’s revised higher offer.
- At the last close, the gross spread is 9.5%. The risk/reward profile is unfavourable as ResApp is a highly-held retail stock, posing a headcount test risk to the scheme.
FTSE China 50 Index Rebalance Preview: One Change in Range, Couple Others Close
- Shenzhou Intl Group Holdings (2313 HK) is a high probability deletion in September, while JD Health (6618 HK) is currently the highest ranked non-constituent stock.
- There are a couple of other stocks that are close to the inclusion/exclusion thresholds and price changes over the next few weeks will determine if there are any more changes.
- Short interest on JD Health (6618 HK) is high in terms of days to cover and as a percentage of free float. Covering could take the stock higher.
Della Valle/Tod’s: Lowball Minorities Buyout
- The Della Valles offer €40/share (1.8 EV/Fwd Sales, c.20% premium) to buy out the minorities (LVMH stays a 10% shareholder). Minimum acceptance condition is 90%, aiming at 60.9% of float.
- Tod’s is in turnaround mode (my valuation assumes it’ll be successful). A DCF valuation gives €52.21/share, a break-up valuation could reach €57.12/share, while a simpler 2.0x EV/Fwd Sales throws €43.02/share.
- The shares trade above the offer and a sweetening may be needed; the offer price seems cheap on any measure. A template could be the acquisition of Creval. Long.
Bunka Shutter (5930 JP) – Big Buyback Vs Big CB Means No Accretion, Minimal Flow Impact
- Today Bunka Shutter (5930 JP) reported iffy, if predictably seasonal Q1 earnings, and FY22 forecasts. They also announced a big buyback which caused the stock to pop, then come back.
- It came back because the stock has a decently large slightly in-the-money CB with 13 months to maturity. A big pop will get a big re-hedge.
- Over the next year, despite the large buyback, EPS accretion and net buyback flow impact should be minimal. And the stock isn’t as cheap as it “looks.”
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