Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Shimao Services Holdings Limited / Event-Driven

Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June. The review announcement for the March 2021 review should be made on 12 February and will be effective after the close of trading on 5 March.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors.Secondary Listings and Biotech stocks listed under Chapter 18A of the Listing Rules are not eligible for inclusion in the Stock Connect program.There are a lot of stocks that will join the HSCI and subsequently included as a part of the Southbound Stock Connect program - these stocks will see buying from mainland investors and could outperform their peers and the market.There are stocks that will be deleted from the HSCI and consequently deleted from the Southbound Stock Connect buy list. There are other stocks that will remain a part of the HSCI but will be removed from the Southbound Stock Connect buy list since their average market cap drops below HKD 5bn.Read on for more details and stocks affected by the changes.

Hang Seng Indexes Company (HSIL) reviews the constituents of the Hang Seng Composite Index (HSCI) on a half yearly basis in March and September with data cut-off dates as of the end of December and June. The review announcement for the March 2021 review should be made on 12 February and will be effective after the close of trading on 5 March.Although there are almost no assets indexed to the HSCI, the index forms the basis of stocks that are eligible for Southbound Stock Connect. Stocks that are included in the HSCI and subsequently included in the Stock Connect program get inflows from mainland investors.Secondary Listings and Biotech stocks listed under Chapter 18A of the Listing Rules are not eligible for inclusion in the Stock Connect program.There are a lot of stocks that will join the HSCI and subsequently included as a part of the Southbound Stock Connect program - these stocks will see buying from mainland investors and could outperform their peers and the market.There are stocks that will be deleted from the HSCI and consequently deleted from the Southbound Stock Connect buy list. There are other stocks that will remain a part of the HSCI but will be removed from the Southbound Stock Connect buy list since their average market cap drops below HKD 5bn.Read on for more details and stocks affected by the changes.

HSCI Index Rebalance and Stock Connect: Early Look at Potential Changes

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 13 November. The constituent changes will be effective after the close of trading on 4 December.For the Hang Seng TECH Index, there are 2 inclusions and 2 exclusions.The inclusions are <a href="https://www.smartkarma.com/entities/ming-yuan-cloud-group" target="_blank" data-smartkarma-citation="entities:29268:1" rel="noopener">Ming Yuan Cloud Group (909 HK)</a> and <a href="https://www.smartkarma.com/entities/archosaur-games" target="_blank" data-smartkarma-citation="entities:28948:1" rel="noopener">Archosaur Games (9990 HK)</a>, while the deletions are <a href="https://www.smartkarma.com/entities/hengten-networks-group-ltd" target="_blank" data-smartkarma-citation="entities:3296:1" rel="noopener">HengTen Ltd (136 HK)</a> and <a href="https://www.smartkarma.com/entities/netdragon-websoft-inc" target="_blank" data-smartkarma-citation="entities:3703:1" rel="noopener">Netdragon Websoft (777 HK)</a>. One way turnover is 7.97% due to the inclusions/ exclusions, capping, and free float changes.Both inclusions have 0.67 days of ADV to buy, <a href="https://www.smartkarma.com/entities/hengten-networks-group-ltd" target="_blank" data-smartkarma-citation="entities:3296:1" rel="noopener">HengTen Ltd (136 HK)</a> has 0.6 days of ADV to sell, while <a href="https://www.smartkarma.com/entities/netdragon-websoft-inc" target="_blank" data-smartkarma-citation="entities:3703:1" rel="noopener">Netdragon Websoft (777 HK)</a> has 1 day of ADV to sell.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 13 November. The constituent changes will be effective after the close of trading on 4 December.For the Hang Seng TECH Index, there are 2 inclusions and 2 exclusions.The inclusions are Ming Yuan Cloud Group (909 HK) and Archosaur Games (9990 HK), while the deletions are HengTen Ltd (136 HK) and Netdragon Websoft (777 HK). One way turnover is 7.97% due to the inclusions/ exclusions, capping, and free float changes.Both inclusions have 0.67 days of ADV to buy, HengTen Ltd (136 HK) has 0.6 days of ADV to sell, while Netdragon Websoft (777 HK) has 1 day of ADV to sell.

Hang Seng TECH Index Rebalance: Two Changes as Assets Continue to Grow

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<a href="https://www.smartkarma.com/entities/leyou-technologies-holdings" target="_blank" data-smartkarma-citation="entities:5831:1" rel="noopener">Leyou Technologies (1089 HK)</a>’s long-drawn takeover saga has entered its final act. After market close on Thursday, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> announced a privatisation offer by way of a scheme of arrangement for Leyou. Tencent will offer HK$3.3219 per scheme share. The bid represents a premium of 30.27% over the closing price of HK$2.5500 per share on the last trading day (19 September 2019) and a premium of 4.46% over the last close price of HK$3.18 per share.As a reminder on 10 July, Leyou announced that Mr Yuk, the controlling shareholder, entered into a three months exclusivity agreement with Tencent Mobility, a wholly-owned subsidiary of Tencent, to sell his stake. In <a href="https://www.smartkarma.com/insights/tencent-ending-the-leyou-takeover-saga" target="_blank" rel="noopener">our previous note</a>, we opined that there is a high chance that this takeover saga ends with an agreement between Mr Yuk and Tencent.<div class="content-highlight">We think that this is a done deal due to the irrevocables, no other shareholder holding a blocking stake along with the attractive premium to peers multiples and historical VWAPs implied by the privatisation price.   </div>

Leyou Technologies (1089 HK)’s long-drawn takeover saga has entered its final act. After market close on Thursday, Tencent Holdings (700 HK) announced a privatisation offer by way of a scheme of arrangement for Leyou. Tencent will offer HK$3.3219 per scheme share. The bid represents a premium of 30.27% over the closing price of HK$2.5500 per share on the last trading day (19 September 2019) and a premium of 4.46% over the last close price of HK$3.18 per share.As a reminder on 10 July, Leyou announced that Mr Yuk, the controlling shareholder, entered into a three months exclusivity agreement with Tencent Mobility, a wholly-owned subsidiary of Tencent, to sell his stake. In our previous note, we opined that there is a high chance that this takeover saga ends with an agreement between Mr Yuk and Tencent.We think that this is a done deal due to the irrevocables, no other shareholder holding a blocking stake along with the attractive premium to peers multiples and historical VWAPs implied by the privatisation price.   

Tencent Launches a Privatisation Bid for Leyou

<a href="https://www.smartkarma.com/entities/leyou-technologies-holdings" target="_blank" data-smartkarma-citation="entities:5831:1" rel="noopener">Leyou Technologies (1089 HK)</a>’s long-drawn takeover saga is likely heading to a finale. <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> is set to announce an agreement with Mr Yuk, Leyou’s controlling shareholder with a 69.20% stake, to acquire this stake at HK$3.30-3.40 per share, according to Bloomberg. As a reminder on 10 July, Leyou announced that Mr Yuk entered into a three months exclusivity agreement with Tencent Mobility, a wholly-owned subsidiary of Tencent, to sell his stake. If the stake sale completes, it can result in the possible acquisition and privatization of Leyou by Tencent. <div class="content-highlight">The rumoured price range values Leyou’s healthy premium to peers, which should satiate Mr Yuk’s valuation aspirations. On the other hand, Tencent will get hold of valuable IP and strong game development capabilities which will increase the geographic diversification of its games revenue. Consequently, we think that there is a high chance that this takeover saga ends with an agreement between Mr Yuk and Tencent.  </div>

Leyou Technologies (1089 HK)’s long-drawn takeover saga is likely heading to a finale. Tencent Holdings (700 HK) is set to announce an agreement with Mr Yuk, Leyou’s controlling shareholder with a 69.20% stake, to acquire this stake at HK$3.30-3.40 per share, according to Bloomberg. As a reminder on 10 July, Leyou announced that Mr Yuk entered into a three months exclusivity agreement with Tencent Mobility, a wholly-owned subsidiary of Tencent, to sell his stake. If the stake sale completes, it can result in the possible acquisition and privatization of Leyou by Tencent. The rumoured price range values Leyou’s healthy premium to peers, which should satiate Mr Yuk’s valuation aspirations. On the other hand, Tencent will get hold of valuable IP and strong game development capabilities which will increase the geographic diversification of its games revenue. Consequently, we think that there is a high chance that this takeover saga ends with an agreement between Mr Yuk and Tencent.  

APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>-backed Epic Games said <a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple Inc (AAPL US)</a> threatened to terminate Epic Games' developer account after Apple removed Fortnite from the App Store due to its violation of policies regarding in-app purchases.
In this note, we look at what has transpired so far, the implications, and share our thoughts on the matter.

Tencent Holdings (700 HK)-backed Epic Games said Apple Inc (AAPL US) threatened to terminate Epic Games' developer account after Apple removed Fortnite from the App Store due to its violation of policies regarding in-app purchases.
In this note, we look at what has transpired so far, the implications, and share our thoughts on the matter.

Quick Take on Apple Terminating Epic Games Developer Account

Hong Kong

Archosaur Games Inc. operates as a game development company. The Company provides mobile game development, production, marketing, and other services. Archosaur Games markets its products throughout China.

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Archosaur Games (9990 HK)

HSCI Index Rebalance and Stock Connect: Early Look at Potential Changes

While the HSCI does not have assets benchmarked to it, the index review is closely watched since the index forms the basis of stocks that are a...

Brian Freitas

Hang Seng TECH Index Rebalance: Two Changes as Assets Continue to Grow

The first review of the Hang Seng TECH index has 2 inclusions and 2 deletions. Assets benchmarked to the index are north of US$1.1bn and will...

Brian Freitas

Tencent Launches a Privatisation Bid for Leyou

Leyou Technologies (1089 HK)’s long-drawn takeover saga has entered its final act. After market close on Thursday, Tencent Holdings (700 HK)...

Arun George

Tencent Ending the Leyou Takeover Saga?

Leyou Technologies (1089 HK)’s long-drawn takeover saga is likely heading to a finale. Tencent Holdings (700 HK) is set to announce an agreement...

Arun George

Quick Take on Apple Terminating Epic Games Developer Account

Tencent Holdings (700 HK)-backed Epic Games said Apple Inc (AAPL US) threatened to terminate Epic Games' developer account after Apple removed...

Zhen Zhou, Toh

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