Daily BriefsEvent-Driven

Event-Driven: Beijing Digital Telecom, Toshiba Corp, Aggreko PLC, Japara Healthcare, Boryung Pharmaceutical and more

In today’s briefing:

  • Beijing Digital (6188 HK): Offer Now Open. IFA Says Fair
  • TOPIX Inclusion Trade Summary: April 2021
  • Aggreko: Shareholders’ Meeting, Spread Turned Positive
  • Japara Healthcare (JHC AU): Here Comes The Calvary
  • KOSPI Lockup Releases – Boryung Pharm, CJ CGV, Meritz Securities, & IBK

Beijing Digital (6188 HK): Offer Now Open. IFA Says Fair

By David Blennerhassett

On the 1 February, Zhuhai Huafa, wholly-owned by Zhuhai SASAC, entered into a share purchase agreement (SPA) to acquire domestic shares in mobile device manufacturer Beijing Digital Telecom (6188 HK) from Di Er Tong and Digital Science & Technology, collectively the controlling shareholders of Beijing Digital. The SPA, which encompassed 37.99% of shares out, was completed. on the 7 April, and a mandatory general offer (MGO) was triggered with an Offer price of HK$3.8429 per H-Share.

The Composite Document has now been despatched and the Offer is open for acceptances. The IFA says fair and reasonable. The MGO has a 50% tendering condition – attached to ALL voting rights of Beijing Capital.

The first close is the 21 May. Trading wide to terms.  The question is whether this Offer will turn unconditional.

As always, more below the fold. 

TOPIX Inclusion Trade Summary: April 2021

By Janaghan Jeyakumar, CFA

In January and February 2021 we saw a large wave of TSE1 Section Transfers as many small cap names rushed to get promoted before the new (and more stringent) Section Transfer Requirements were implemented (application deadline November 1, 2020). In contrast, not a single TSE1 Section Transfer was announced in the months of March and April 2021. 

However, during the month of April, we witnessed TSE’s Annual Liquidity Factor Review which caused dozens of stocks to enjoy Index Upweights during the April-end Inclusion Event collectively amount to an estimated upweight size of approximately US$1bn. 

Below is a look at the performance of the TOPIX-related event trades covered by Quiddity in the Pre-event, Live-event, and Post-event categories during the month of April 2021.  

Aggreko: Shareholders’ Meeting, Spread Turned Positive

By Jesus Rodriguez Aguilar

The resolution to approve the scheme for the recommended cash acquisition of Aggreko PLC (AGK LN) was passed at the Court Meeting and the special resolution to implement it was passed at the EGM. Still awaiting antitrust clearance and foreign investment clearance.

In the meantime, there has no been further news of interloper risk (Platinum Equity was mentioned by Bloomberg in early March) and no further news regarding shareholders opposing the deal. Thus spread (negative at the time of my last Insight Aggreko – PE Consortium: Recommended Cash Acquisition) has been steadily decreasing and is now positive.

This, I believe, is a great outcome for the shareholders of Aggreko, as the charts below show.

The offer price represents 20x Fwd P/E, above its 10 year average of 16.1x, and 14.1x EV/EBITA, again above 10 year average of 9.9x (source: Capital IQ consensus).

Gross spread is 2%, c. 8% annualised assuming a 3 month completion (although it is expected to become effective at the beginning of Q3). Recommendation is long Aggreko, TP 880p.

Japara Healthcare (JHC AU): Here Comes The Calvary

By David Blennerhassett

An Australian Royal Commission on aged care providers was issued on the 26 February 2021 with 148 recommendations to address what was deemed a weak and ineffective regulatory arrangement, including a new aged care act, the introduction of a system of star rating system for facilities, and some form of aged care levy for the funding of the system. The government also made an initial pledged of $452mn in additional funding.

The share price reaction to the report from the three key aged-care Aussie listed operators – Regis Healthcare (REG AU), Estia Health (EHE AU), and Japara Healthcare (JHC AU) – was largely one of “meh”. Nevertheless, the ongoing speculation as to the Royal Commission findings, in tandem with COVID, had resulted in Japara’s shares trading down 75% in the last five, and ~60% a-piece for Regis and Estia in the same time frame, at that time.

Neither company, to date, has comprehensively addressed the conclusions of the report.

The New News

JHC announced this morning it had received an unsolicited, indicative, conditional, and non-binding Offer from Little Company of Mary Health Care – otherwise known as Calvary – by way of a Scheme, at A$1.04/share.

JHC said it is reviewing its options.

My initial reaction is that this is an opportunistic bid. This is the third Offer in this space in the last year. Metlifecare Ltd (MET NZ) was eventually taken private.  Regis fielded an Offer from its co-founder and Washington H. Soul Pattinson And Co. (SOL AU) in September last year, which was subsequently withdrawn, despite a bump in terms. Regis has outperformed the market since.

More below the fold.

KOSPI Lockup Releases – Boryung Pharm, CJ CGV, Meritz Securities, & IBK

By Sanghyun Park

Below are the lockup releases scheduled for May among the KOSPI-listed stocks. We have four names from KOSPI 200, immediate short-selling targets after May 3. 

KOSPITickerRelease dateShares released% of SOKOSPI 200
Metalabs Co Ltd0903705/10112,6550.18%
Industrial Bank of Korea0241105/1129,379,0343.98%72
Kyochon F&B Co Ltd3397705/1218,519,96174.13%
Daiyang Metal Co Ltd0091905/127,326,00724.78%
BK Tops Co Ltd0307905/154,671,07735.58%
Industrial Bank of Korea0241105/1857,523,3577.79%72
A Plus Asset Advisor Co Ltd2449205/206,170,44027.29%
KH Feelux Co Ltd0331805/213,383,4592.61%
Jooyon Tech Co Ltd0443805/211,236,0932.26%
Koramco Energy Plus REIT Co Ltd3571205/3048,300,00069.38%
Boryung Pharmaceutical Co., Ltd0038506/13,420,0006.56%176
IGIS Residence REIT Co Ltd3505206/32,640,00012.82%
Myoung Shin Industrial Co Ltd0099006/823,844,21058.47%
Metalabs Co Ltd0903706/11234,2080.37%
JR Global REIT3489506/1668,600,00041.43%
MERITZ SECURITIES CO LTD0085606/1758,651,0268.68%97
Metalabs Co Ltd0903706/18286,9020.45%
Kyobo Securities Co., Ltd.0306107/928,653,29644.32%
Kukbo Co Ltd0011407/97,299,27013.59%
Industrial Bank of Korea0241107/1012,412,2041.68%72
Ascendio Co Ltd0121707/15378,0360.61%
Thelma Therapeutics Co Ltd0155407/301,100,5288.18%
SoluM Co Ltd2480708/23,037,3046.19%
Prestige Biopharma Ltd9502108/513,446,25022.37%
CJ CGV Co Ltd0791608/82,054,5105.85%167
Source: KRX & KSD

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