In today’s briefing:
- Rio Tinto (RIO AU/LN): Shareholders To Vote On Merits Of Unification
- Toyota Industries (6201) – Thinking About How To Value a ¥6trln Bid
- FnGuide Top10 Index Rebalance Preview: Big Flow in Large Cap Stocks
- Meilan Airport (357 HK): Possible Unconditional MGO at HK$10.62
- Hainan Meilan Intl Airport (357 HK): Hainan SASAC’s Left/Right Pocket MGO
- StubWorld: On Valuing Toyota Industries (6201)’s Stub Ops
- SONY (6758) | Going into Earnings
- Kayou IPO Preview: 250%+ Growth + FCF of $500M+ in 2024, Leader in the Trading Card Sector in China
- Lee Myung-Hee Transfers All of Her 10.2% Stake In Shinsegae to Her Daughter Chung Yoo-Kyung
- HEW: Good News From Less News
Rio Tinto (RIO AU/LN): Shareholders To Vote On Merits Of Unification
- Palliser Capital, which reportedly holds ~$300mn in Rio Tinto Ltd (RIO AU/LN) shares across its dual-head structure, has campaigned for near-on a year to unify the primary listing in Australia.
- Palliser’s reasonings (and others) to unify make sense, such as access to stock-based mergers and eliminating franking wastage. A recent independent assessment from Grant Thornton is also supportive of unification.
- Shareholders will vote on the resolution on 3rd April for UK-listed shares and 1st May for Australian-listed shares. The UK line holds the key to the vote outcome.
Toyota Industries (6201) – Thinking About How To Value a ¥6trln Bid
- Toyota Industries is a relatively complicated business. It owns lots of shares of Toyota and other companies. It has a financing business, and runs ¥500+bn of EBITDA.
- As of 31 March 2025, the “Enterprise Value” of the Operating and Financing Business together was about ¥2.2trln. The “Asset Ownership Business” was at ¥2.8trln (1yr ago it was ¥4trln).
- If you think buying the Operating Business at 6x EBITDA is appropriate, that means the Asset Ownership Business block buy gets done at 31-March-2025 prices. Worth thinking about.
FnGuide Top10 Index Rebalance Preview: Big Flow in Large Cap Stocks
- The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of around US$660m.
- We currently forecast two potential changes at the next rebalance in June – both are high probability changes.
- The trade has performed well historically with positive performance till implementation followed by reversion post implementation in most cases.
Meilan Airport (357 HK): Possible Unconditional MGO at HK$10.62
- Haikou Meilan International Airport Company entered an SPA with Hainan Island Construction (600515 CH) to sell its Hainan Meilan International Airport (357 HK) 50.19% stake at RMB9.85 per share (HK$10.62).
- The SPA completion requires several regulatory approvals, which are low-risk, particularly as Hainan SASAC is the largest shareholder of the offeror and the seller.
- Under Rule 26.1 of the Takeovers Code, upon completion, the offeror will be required to make an unconditional mandatory cash offer at HK$10.62 per share. The MGO price is final.
Hainan Meilan Intl Airport (357 HK): Hainan SASAC’s Left/Right Pocket MGO
- Hainan Meilan International Airport (357 HK) has announced a potential change of control, via the domestic shares.
- Haikou Meilan’s major shareholder, Hainan Airport Industrial, has entered into a SPA with Hainan Island (600515 CH) to sell its 50.19% stake, the completion of which triggers an unconditional MGO.
- The H-share Offer price will be HK$10.62/share. That’s not compelling; but it’s not meant to be as Hainan Airport Industrial and Hainan Island Construction are ultimately controlled by Hainan SASAC.
StubWorld: On Valuing Toyota Industries (6201)’s Stub Ops
- Yes, I agree with Travis Lundy that the ¥6tn headline price tag for Toyota Industries (6201 JP) backs out a ~6x forward EBITDA for the unlisted stub ops.
- Preceding my comments on the Toyota Group are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
SONY (6758) | Going into Earnings
- Content-Driven growth: Strong performance in music and gaming supports Sony’s shift toward high-margin content, insulating it from trade and macro headwinds.
- Upcoming catalysts: Spin-off of Sony Financial and potential restructuring could unlock value and address the long-standing conglomerate discount.
- Attractive valuation: Trading at 14x EV/EBIT with defensive sector exposure, Sony remains undervalued relative to global peers despite YTD outperformance.
Kayou IPO Preview: 250%+ Growth + FCF of $500M+ in 2024, Leader in the Trading Card Sector in China
- Kayou Inc., early-mover in the trading card industry in China, filed for an IPO in Hong Kong. The company sells trading cards, toys, figures, badges, pens, and notebooks, among others.
- Kayou Inc. received capital of ~$135M from HongShan Capital and Tencent Holdings in 2022. Mr. Li Qibin founded trading card and collectible toy firm in 2011.
- Founder led company has delivered 250%+ growth and FCF of $500M+ in 2024. The market opportunity is large enough to support sustained high growth for Kayou for several years.
Lee Myung-Hee Transfers All of Her 10.2% Stake In Shinsegae to Her Daughter Chung Yoo-Kyung
- On 30 April, Lee Myung-Hee (Chairwoman of Shinsegae Group) decided to transfer all of her 10.2% stake in Shinsegae (004170 KS) as a gift to her daughter Chung Yoo-Kyung.
- After this gift, Chung Yoo-Kyung’s ownership in Shinsegae will rise from 18.95% to 29.16%.
- We are positive on this share transfer of 10.2% stake in Shinsegae from mother (Lee Myung-Hee) to her daughter Chung Yoo-Kyung on the share price impact on Shinsegae.
HEW: Good News From Less News
- Economic data and Trump’s declarations do not support dovish fears, with the economy showing resilience despite the initial US tariff shock and the UK stamp duty rise. EA inflation pressure remains unbroken.
- The Federal Reserve is expected to maintain steady rates next week due to lack of hard evidence for a cut. Similarly, the Bank of England is likely to continue its course with a quarterly 25bp rate cut, influenced by the strength of sterling and falling commodity prices.
- Any future rate cuts by both the Federal Reserve and the Bank of England would require more substantial evidence.
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