Tan Chong International Executes Major Sale of Subaru Shares and Options: What Investors Must Know

Key Takeaways for Investors

• Significant Disposal of Subaru Shares: Tan Chong International, through its wholly-owned subsidiary Redcliffe Investments, has disposed of 708,100 Subaru shares in open market transactions, raising approximately JPY2,196.3 million (about HK\$115.6 million).
• Sale of Call Options: Redcliffe Investments also sold call options over 500,000 Subaru shares to Nomura Singapore, collecting total premiums of JPY57.8 million (about HK\$3.0 million). If these options are exercised, the total proceeds could reach JPY1,626.4 million (about HK\$85.6 million).
• Aggregate Transaction Size: When aggregated, the total value of the transactions is approximately JPY3,880.5 million (about HK\$204.2 million), pushing the combined deal over the 5% “discloseable transaction” threshold under Hong Kong listing rules.
• Financial Impact: The company expects to record a gain of around HK\$18.5 million in other comprehensive income from these disposals, which could influence the Group’s financials.
• Strategic Portfolio Realignment: The moves are described as a way to lock in attractive returns and rebalance the investment portfolio, taking advantage of favorable Subaru share prices.

Detailed Transaction Overview

1. Sale of Call Options

Redcliffe Investments sold covered call options to Nomura Singapore, covering a total of 500,000 Subaru shares with expiration dates ranging from 10 November 2025 to 9 December 2025. The strike prices and premiums were determined via arm’s length negotiation to maximize returns. Should Nomura Singapore exercise these options, Redcliffe must deliver the shares against payment of the strike price, amounting to JPY1,626.4 million. The premium income of JPY57.8 million is locked in regardless of whether the options are exercised.

2. Disposal of Subaru Shares

In a series of open market transactions, Redcliffe Investments has sold 708,100 Subaru shares at an average price of JPY3,101.7 (about HK\$163.2) per share. The total proceeds from these disposals amount to JPY2,196.3 million. The counterparties’ identities are unknown due to the open market nature of the sales, but are confirmed to be independent third parties.

3. Financial Effect and Use of Proceeds

The company projects a gain of approximately HK\$18.5 million from the share disposals, which will be reflected in its other comprehensive income. The aggregate proceeds from both the call options and disposals will be used for general working capital, providing additional liquidity.

4. Listing Rules and Regulatory Implications

While neither transaction independently triggered disclosure requirements, the aggregate size of related transactions within a 12-month period meant Tan Chong International had to make this disclosure under Hong Kong Stock Exchange rules. The combined value exceeds 5% but is below the 25% threshold, making this a “discloseable transaction” rather than a more serious notifiable event.

5. Rationale and Strategic Implications

The disposal and option sales are positioned as prudent moves to lock in gains and capitalize on strong Subaru share prices. The Board views these as opportunities to enhance returns and rebalance the investment portfolio, with terms deemed fair and on normal commercial terms.

After these transactions, Redcliffe Investments retains 10,699,900 Subaru shares. If all call options are exercised and shares delivered, this holding would reduce to 10,199,900 shares.

About the Key Entities

• Tan Chong International: A diversified group involved in motor vehicle distribution and aftersales, industrial equipment, property, vehicle seat manufacturing, and transportation services across Asia.
• Redcliffe Investments: The investment and property holding arm of the company, based in Hong Kong.
• Nomura Singapore: A subsidiary of Nomura Holdings, providing institutional and private financial services.
• Subaru: Listed on the Tokyo Stock Exchange, Subaru is a major Japanese manufacturer of automobiles and aerospace products, with a net profit of JPY384.6 billion for the year ended March 2024.

Potential Price Sensitive Implications

• Material Change in Investment Portfolio: The sale and option transactions represent an ongoing reduction in Tan Chong’s exposure to Subaru, which could affect future earnings sensitivity to Subaru’s stock performance.
• One-off Gains: The reported HK\$18.5 million gain is a positive boost to other comprehensive income, though not immediately to profit or loss.
• Indication of Strategy: The company’s willingness to realize gains and rebalance its holdings may signal a more active investment management approach, which could be viewed favorably or unfavorably by different investor segments.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should refer to the official company announcement and consult their financial advisors before making investment decisions. The information is based on the latest company disclosure as of the date indicated and may be subject to change or audit adjustment.

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