In today’s briefing:
- Kokusai Electric (6525 JP): The US$4.8 Billion Lock up Expiry
- HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June
- Langham Hospitality Investments (1270 HK): Great Eagle (41 HK)’s Possible Scheme Privatisation
- Hyundai Home Shopping (057050 KS)’s Partial Offer
- Best World (BEST SP): Not the Best Exit Offer
- Suruga Bank (8358 JP) – New Div, New Buyback, New KPIs, New 6yr High Price
- Great Eagle Seeks To Delist Langham Hospitality (1270 HK)
- Nidec (6594) | Forget the EV Slump
- Oriental Watch 398 HK: Slow 4Q FY24, Resting On A 14% Yield, With 70% of Mkt Cap in Cash
- HD Hyundai Marine Solution IPO – Thoughts on Valuation
Kokusai Electric (6525 JP): The US$4.8 Billion Lock up Expiry
- Kokusai Electric (6525 JP)’s 180-day IPO lock-up period for 71% of outstanding shares expires on 22 April. The shares exiting the lock-up period are worth US$4.8 billion.
- The likely seller will be KKR & (KKR US) as it was the sole selling shareholder in the IPO. The shares are currently trading at 2.4x the IPO price.
- Kokusai anticipates a return to growth and margin improvement in FY24. However, Kokusai trades at a material premium to peer multiples and is fully priced.
HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June
- With no stocks in outright inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June.
- Capping changes will result in a one-way turnover of 5.3% leading to a round-trip trade of US$1.51bn.
- Li Auto (2015 HK) is expected to be the largest buy in June following the stock being the largest sell at the March rebalance (also due to capping).
Langham Hospitality Investments (1270 HK): Great Eagle (41 HK)’s Possible Scheme Privatisation
- Langham Hospitality Inv Ss (1270 HK) received a notice from Great Eagle Holdings (41 HK), the largest unitholder, that it intends to present a detailed proposal for scheme privatisation.
- The privatisation interest is unsurprising, as the unit price has declined by 43% over the last twelve months. A tough 2023 did not help the declining sentiment.
- Our methodology for triangulating the potential offer price results in a range of HK$0.63-1.76. Our best guess is an offer of around HK$0.85, a 47% premium to the last close.
Hyundai Home Shopping (057050 KS)’s Partial Offer
- Yesterday, the 3rd April, Hyundai G.F. Holdings (005440 KS) announced it would conduct a Tender Offer for 3mn shares, or 25% of Hyundai Home Shopping Network (057050 KS) (HHSN).
- A successful Tender would lift Holdings stake to 50% from 25% currently, satisfying the 30% holding company threshold introduced in 2022.
- Minimum proration is 33%. Shares popped 13.8% on the news. That looks a bit too aggressive.
Best World (BEST SP): Not the Best Exit Offer
- Best World International (BEST SP) has disclosed an exit offer through selective capital raising and delisting. The offer of S$2.50 is a 42.9% premium to the undisturbed price of S$1.75.
- The key conditions are approval for the selective capital reduction (at least 75% of eligible shareholders) and delisting resolution (a majority holding not less than 75% in value).
- The headcount test is a risk. The offer is light as only 66.7% of retained earnings will be distributed and the consideration will be covered 1.6x by the net cash.
Suruga Bank (8358 JP) – New Div, New Buyback, New KPIs, New 6yr High Price
- 10+ Months ago, Suruga Bank Ltd (8358 JP) announced it would sell a large chunk of its treasury shares to Credit Saison and would then buy back ¥22bn of stock.
- I liked the odds in Suruga Bank (8358) To Sell, Then Buy Back 17% of the Bank, but HOW Is Key. They spent the ¥22bn. The stock rose a lot.
- Today, we get a div hike for H2 (implying a div hike for this year too), another buyback, a huge share cancellation, and new KPIs. As always, details matter.
Great Eagle Seeks To Delist Langham Hospitality (1270 HK)
- Hong Kong hotel-play Langham Hospitality (1270 HK) was spun-off from Great Eagle (41 HK) on the 30 May 2013. Now GE intends to take the company back into the fold.
- Covid was devastating to the hospitality sector. As were the 2019 demonstrations. Langham’s share price never recovered, and is currently trading at a lifetime low and a P/B of 0.21x.
- No price was mentioned in the announcement. Expect a healthy premium to undisturbed, should a firm Offer unfold. But I wouldn’t expect a knockout price.
Nidec (6594) | Forget the EV Slump
- Nidec faces challenges amid global EV sales decline, with shares and valuations reflecting market pessimism.
- Anticipated catalysts include forthcoming guidance, potential MTP reassessment, and a strategic acquisition opportunity.
- At 18x EBIT, Nidec looks a compelling play on secular themes of electrification, automation, and energy efficiency.
Oriental Watch 398 HK: Slow 4Q FY24, Resting On A 14% Yield, With 70% of Mkt Cap in Cash
- Oriental Watch (398 HK) has begun Q4 2024 slowly, with its SSSG dropping by double-digit levels in all its major markets (HK/China and Macau).
- As the year almost draws to a close, we expect profits to drop 10-15% YoY for FY24 and the company to pay out 100%, resulting in a 14% dividend yield.
- The company also has 1.2 bn HKD of net cash, representing 70% of its market capitalization. Additionally, it has 700 mn HKD of investment property.
HD Hyundai Marine Solution IPO – Thoughts on Valuation
- HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$551m in its Korean IPO.
- HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
- In our previous notes, we talked about the company’s historical performance and undertook a peer comparison. In this note, we share our thoughts on valuation.
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