In today’s briefing:
- Prosus, Tencent, JD.com – Good Intentions but Questionable Timing
- Prosus/Naspers – Operation Ouroboros Commences, And It’s Big (Discount, Flows, Index Impact)
- FTSE GEIS Sep 2022 Index Rebalance Preview: Japan
- Link Admin: Dye & Durham’s Cuts Bid Price
- Link’s Lower Offer of A$4.30 from DND Fails to Excite
- Carsales Entitlement Offer – Well Flagged Deal for a Well Know Asset, but Last Deal Didn’t Do Well
- Sungeel HiTech IPO Valuation Analysis
- Tencent (700 HK): Impact of Prosus Selling & Passive Inflows
- SEA Lock-Up – Tencent Is once Again About to Be Free to Trim Its US$8bn Stake
Prosus, Tencent, JD.com – Good Intentions but Questionable Timing
- Today Prosus announced that it will begin an open-ended share repurchase programme of Prosus and Naspers shares which will be funded by on-market sale of Tencent shares.
- Prosus also announced that it has sold its entire shareholding in JD.com, to raise US$3.67bn, on-market in Jun 2022.
- In this note, we talk about the implication and timing of today’s announcements.
Prosus/Naspers – Operation Ouroboros Commences, And It’s Big (Discount, Flows, Index Impact)
- I wanted to write this insight over the weekend but could not finish it, but now there is new news to warrant it.
- Today, Prosus (PRX NA) announced it had sold the 131,873,028 JD.com Inc. (9618 HK) shares it received in the Tencent (700 HK) distribution. This is as expected. Proceeds were US$3.67bn.
- Also announced this morning is “the beginning of an open-ended share repurchase programme of Prosus and Naspers (NPN SJ) shares.” The details are the key to everything.
FTSE GEIS Sep 2022 Index Rebalance Preview: Japan
- The FTSE Russell September 2022 SAIR will use closing prices from 30 June to calculate the market cap cut-offs to determine the inclusions and exclusions for the All-World/All-Cap indices.
- We see 1 add for the All-World Index and 5 for the All-Cap Index. We see 3 stocks moving from All-Cap to All-World and 5 stocks moving the other way.
- There are other stocks that are close adds, upweights, downweights and deletes and price moves over the next few days will determine their status.
Link Admin: Dye & Durham’s Cuts Bid Price
- Dye & Durham (D&D) has reduced its Offer price for Link Administration (LNK AU) to $4.30/share, down from $5.50/share.
- The revised offer followed the Australian Competition and Consumer Commission’s concerns that D&D’s acquisition of Link would lead to dominance in Australia’s conveyancing market.
- To facilitate the new Offer, D&D said it is considering providing an undertaking to ACCC – presumably, but not stated, being the sale of its GlobalX business.
Link’s Lower Offer of A$4.30 from DND Fails to Excite
- Dye & Durham/DND has proposed to lower its offer from A$5.50 to A$4.30 per share. The Link Administration (LNK AU) Board will provide shareholders with an update next week.
- DND’s justification for a lower offer based on the potential undertaking to the ACCC and the current state of the financial markets smacks of opportunism.
- The proposed lower bid offers no premium to our valuation range or the undisturbed price. The Board should reject the lower offer and instead reignite interest from past suitors.
Carsales Entitlement Offer – Well Flagged Deal for a Well Know Asset, but Last Deal Didn’t Do Well
- Carsales aims to raise around US$835m (A$1.2bn) via a non-renounceable entitlement offer to part fund the purchase of remaining 51% of trader Interactive.
- While the acquisition is probably well flagged and will be earnings accretive, the last entitlement offering didn’t do well in the near term.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
Sungeel HiTech IPO Valuation Analysis
- Our base case valuation of Sungeel HiTech is target price of 70,992 won per share (49% higher than the high end of the IPO price).
- Our valuation is based on 15.9x P/E (50% discount to comps’ average multiple) using our estimated net profit of 54.9 billion won in 2023.
- Given the excellent upside, we have a Positive view of the Sungeel HiTech, which is a leading recycling specialist in Korea that extracts valuable metals from lithium-ion secondary batteries.
Tencent (700 HK): Impact of Prosus Selling & Passive Inflows
- Prosus (PRX NA)/ Naspers (NPN SJ) hold 28.78% of Tencent (700 HK) and will be selling Tencent stock to fund their own buyback due to the large discount to NAV.
- At 3-5% of Tencent (700 HK)‘s ADV, the selling will last from 9-15 years, though could take much longer (or not complete) if Prosus/Naspers’ discount to NAV shrinks considerably.
- Passive trackers will buy only around 12-14% of the incremental stock and this will lead to a big overhang on Tencent (700 HK) in the near future.
SEA Lock-Up – Tencent Is once Again About to Be Free to Trim Its US$8bn Stake
- Tencent sold US$3bn worth of SEA shares in Jan 22. The rest of its stake was locked up for six months.
- The initial stake sale by Tencent didn’t go down too well and the stock is now trading over 63% below the deal price.
- In this note, we will talk about the lock-up dynamics and recent updates.
Before it’s here, it’s on Smartkarma
