Daily BriefsEvent-Driven

Event-Driven: Heineken Holding NV, Simplex Holdings, Invesco Office J Reit, Ecopro HN, Samsung Electronics Pref Shares, SK Telecom and more

In today’s briefing:

  • StubWorld: Heineken And The Lager Picture
  • TOPIX Inclusion: Simplex Holdings (4373 JP)
  • Invesco Office – Last Index Deletion and Residual Arb
  • Ecopro Tender: Swap Ratio Finalized, Still Juicy Spread, & We Can Buy/Tender Now
  • Samsung Electronics Yearend Special Dividend Possibility Checkup
  • SK Square & SK Telecom – Valuation Analysis Post Split

StubWorld: Heineken And The Lager Picture

By David Blennerhassett

In a double dose of StubWorld this week …

In arguably the simplest holding company structure out there, the ratio of the parent (Heineken Holding NV (HEIO NA)) over the Opco (Heineken NV (HEIA NA)) is currently around a nine-year low. 

Preceding my comments on Heineken are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.


TOPIX Inclusion: Simplex Holdings (4373 JP)

By Janaghan Jeyakumar, CFA

Japan-based systems integration company Simplex Holdings (4373 JP) was listed in the First Section (which will, in future, be named the “Prime Market”) of the Tokyo Stock Exchange (TSE) on 22nd September 2021.

When a company gets listed on the TSE First Section, it subsequently gets included in the TOPIX Index and as a result, TOPIX-tracking funds will have to purchase the stock during an Inclusion Event which presents interesting trading opportunities for active investors to generate sharp market-neutral returns in the space of few trading days. Alternatively, this can also be considered as a key point in time where short-term IPO investors could decide if they wanted to exit their positions by utilising this liquidity event.

Below is a look at the timeline and the parameters of the Inclusion Event and the potential trading opportunities surrounding it. 


Invesco Office – Last Index Deletion and Residual Arb

By Travis Lundy

The long and sordid history of the takeover of Invesco Office J Reit (3298 JP) was widely covered in these pages. The most recent event was the significant index deletion on 30 August 2021. 

The 30th rolled around and that produced a significant spike in volume, but a lot of the required trading volume appears to have been traded off-market. 

Since then, the shares have traded just below terms with the VWAP just above ¥22,700, which is just below the ¥22,750 takeover price. 

The NEW Nitty Gritty

Sorry it is Friday and I could not resist.. and we actually have to go back to the old.

After the close on the 30th, the Invesco Office J Reit (3298 JP) announced its plans to hold an EGM before the end of October which would approve an extension of the fiscal year so as to not trigger the adverse local tax treatment as per the previous insight (Invesco Office Index Deletion Monday 30 Aug) and others. It held that EGM today, and today unitholders agreed to consolidation and squeezeout. 

The announcement (Japanese, English) confirms that the consolidation (reverse stock split) of 2,200,662 units to 1 will take place on 12 November 2021, and that the last day of trading of the investment units will be 8 November 2021. 

There are other details about payment for the units inside, and astute investors will remember that this particular announcement triggers another index event. 

More on this below.


Ecopro Tender: Swap Ratio Finalized, Still Juicy Spread, & We Can Buy/Tender Now

By Sanghyun Park

Swap ratio finalized

Ecopro (acquirer) finalized the swap price at ₩95,441 on October 7. It was based on the VWAP for the three trading days from October 5 to 7. The discount rate applied in this case was 0%.

FYI, Ecopro HN (the target company)’s swap price was finalized at ₩110,500 based on the formula below.

  • September 3 is the reference date.
  • It was calculated through Min [Close on September 3, Average(Close on September 3, 1W VWAP, 1M VWAP)].
  • It is in accordance with the regulations of KRX.

So, the swap ratio got finalized at 1.1577833, meaning that you will swap your one share of Ecopro HN with 1.1577833 shares of Ecopro. The target number of shares remains the same at 6,121,973 shares, worth ₩676.5B.

Overview
AcquirerEcopro Co., Ltd. (086520)
– Qty.7,087,918
– Swap price₩95,441
 
Target companyEcopro HN Co Ltd (383310)
– Qty.6,121,973
– Swap price₩110,500
Swap ratio1.1577833
Target volume as % of SO40.00%
Target value₩676,477,981,838
BankerDaishin
Source: DART

Samsung Electronics Yearend Special Dividend Possibility Checkup

By Sanghyun Park

3Q provision results

Samsung Electronics disclosed its provisional 3Q results in a regulatory filing. Its quarterly sales are 73 trillion won, and operating profit is 15.8 trillion won.

The operating profit is almost in line with the consensus of 15,831.1 billion won of the 22 local brokerages compiled by FnGuide, although the sales are slightly short of hitting the consensus, which I don’t think would be a big deal.

Hence, Samsung Electronics’ provisional earnings for this quarter were exactly within the market’s expectations, so they did not significantly affect the share price immediately after the announcement.


SK Square & SK Telecom – Valuation Analysis Post Split

By Douglas Kim

Sum of the value of SK Square and SK Telecom post split – Using our base case valuations of SK Square and SK Telecom post split, the combined market caps of these two companies would be 30.2 trillion won, which is 38% higher than the current market cap of 21.9 trillion won.

  • Our base case valuation of SK Square (post split) is 48% higher than the initial  value of SK Square.
  • Our base case valuation of SK Telecom (post split) is 31% higher than the initial value of SK Telecom. 

Our base case valuation of SK Square is an implied market cap of 12.8 trillion won, which would be 48% higher than the initial market cap of 8.6 trillion won for SK Square (using current market cap of 21.9 trillion won for SK Telecom and split ratio of (0.607:0.393). Our base case valuation of SK Square uses a 40% holdco discount rate. The biggest component of the NAV include SK Square’s stake in SK Hynix (13.7 trillion won), ADT Caps (2.5 trillion won), and 11st (2.2 trillion won).

Our base case valuation of SK Telecom (post split) is implied market cap of 17.5 trillion won, which would be 31% higher than the initial market cap (adjusted for split ratio) of 13.3 trillion won for the company. We have used EV/EBITDA ratio of 5x using our estimated EBITDA of 4.5 trillion won for the company in 2022.


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