In today’s briefing:
- Link Admin/D&D Deal Appears Toast As The Woodford Shoe Drops
- VNET’s Opportunistic US$8.20 Bid from the Founder
- Canon Buyback Done, Ricoh’s Done Shortly, Back To Your Regularly Scheduled Program
- Socionext Pre-IPO – Could Expect a Further Bump in Profitability, Although Some Hidden Risks Remain
- Link’s Scheme on Life Support as the FCA Lands a Heavy Blow
- NEC (6701) | Even Higher Conviction
- 111 Inc’s Low-Balled Homecoming Is A Done Deal
- Netdragon Websoft – Ms Tang Yu Becomes World’s First Virtual Humanoid Robot CEO
- Taiwan Dual-Listings – TSMC Premium Almost Wiped Out, UMC & ChipMOS ADRs Trading at Discounts
- Supports to Be Tested Again Following CPI? Stick With Solar Stocks, Buying Manufacturing Names
Link Admin/D&D Deal Appears Toast As The Woodford Shoe Drops
- The UK Financial Conduct Authority will approve Dye & Durham’s Offer for Link Administration (LNK AU) provided it backstops restitution and/or redress payments that the FCA may levy on …
- … Link Fund Solutions Limited (LFSL) in relation to its management of the Woodford Fund. The amount? Up to a maximum ~A$523mn.
- The FCA decision is not final. LFSL does not agree with its view. If D&D does not accept this commitment then a condition under the Scheme may not be satisfied.
VNET’s Opportunistic US$8.20 Bid from the Founder
- 21Vianet Group (VNET US) disclosed a privatisation proposal from the founder at US$8.20 per ADS, a 2.5% premium to The Hina Group/Industrial Bank’s offer of US$8.00 (disclosed on 11 April).
- The data centre industry continues to be a hotbed for M&A. Bloomberg reported on 27 July that MBK Partners is mulling an offer for VNET.
- The offer is unattractive, and Mr Cheng, with 28.79% of voting rights, will need the support of other substantial shareholders. This latest offer underlines the current mispricing of the shares
Canon Buyback Done, Ricoh’s Done Shortly, Back To Your Regularly Scheduled Program
- Canon Inc (7751 JP) has announced two buyback programs this year of ¥50bn each. Ricoh Company Ltd (7752 JP) announced one in May for ¥30bn.
- The result is 2.9% bought back vs 4.4%. The accretion nod goes to Ricoh. But so does the overhang nod going forward. Effissimo+Crossholders is 40% for Ricoh. Mid20s for Canon.
- Buyback impact-related trade timing has worked for Canon. Ricoh’s buyback ends imminently. There may be a trade to do here.
Socionext Pre-IPO – Could Expect a Further Bump in Profitability, Although Some Hidden Risks Remain
- Socionext (6526 JP) is looking to raise up to US$285m in its Japan IPO.
- Socionext is a fabless semiconductor provider in Japan. Sales and profitability has been on an overall uptrend, and design wins in earlier fiscal years should materialize in the coming periods.
- However, the firm has generated a substantial portion of revenue from a related party and is reliant on a particular foundry for its front-end manufacturing.
Link’s Scheme on Life Support as the FCA Lands a Heavy Blow
- FCA approval, a condition precedent, will be granted subject to a condition that Link Administration (LNK AU) makes funds available to cover any redress payments related to the Woodford matters.
- The FCA’s maximum redress payment is £306 million. The timeline and amount of the final FCA fine remain unknown. Dye&Durham/DND and Link will struggle to find a resolution.
- With a 30 September end date, the deal is teetering on collapse. The share price may prove attractive for long-term value investors as it reflects a sizeable FCA fine.
NEC (6701) | Even Higher Conviction
- NEC’s buyback announcement sends a clear message that the MTP is on track and management feel the stock is undervalued
- The recent IR DAY increased our conviction in the financial model. We were impressed with the improving pipeline of Open RAN customers
- The stock is significantly undervalued, trading below book value, with improving ROE
111 Inc’s Low-Balled Homecoming Is A Done Deal
- 111 Inc (YI US), an online healthcare platform operator in China, announced an unsolicited preliminary non-binding proposal from Gang Yu and Junling Liu – both co-founders and co-chairmans.
- Yu and Liu are offering US$3.66/ADS, a 20% premium to the undisturbed price.
- Yu and Liu control 92.1% of the votes. There is no shareholder vote on this transaction should a firm Offer unfold.
Netdragon Websoft – Ms Tang Yu Becomes World’s First Virtual Humanoid Robot CEO
- NetDragon Websoft announced that it has appointed Ms. Tang Wu (a virtual humanoid robot powered by AI) as its new CEO which would be the first ever in the world.
- The company’s education revenue increased by 71.2% YoY to reach 2.4 billion RMB in 1H 2022. Profitability of the edtech business is also improving.
- Despite the company’s lower valuation multiples than its peers combined with catalysts including improving edtech business, we are cautious on its shares mainly due to the overall market related risks.
Taiwan Dual-Listings – TSMC Premium Almost Wiped Out, UMC & ChipMOS ADRs Trading at Discounts
- Taiwan ADR premiums vs. their local shares have generally decreased across the board.
- Is TSMC’s high ADR premium a thing of the past?
- UMC and ChipMOS ADRs are both trading at historically rare discounts to their Taiwan shares.
Supports to Be Tested Again Following CPI? Stick With Solar Stocks, Buying Manufacturing Names
- Key supports that we highlighted in last week’s Compass (Sept. 7) held strong, including 3900-3910 on the SPX, $293 on the Nasdaq 100 (QQQ), $177-178 on the Russell 2000 (IWM).
- We got the bounce where bulls needed to hold, but these levels could be tested again following this morning’s hotter-than-expected CPI report.
- As long as the aforementioned supports continue to hold, we continue to believe the lows are likely in for this bear market — something we noted throughout late-July and August.
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