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In today’s briefing:
- SK Square: Will Alibaba Acquire 11st?
- Itochu Buying Descente (8114) – ANTA Selldown Offset Or Creeping Takeover?
- Quiddity A/H Premium Weekly (15-Sep): Utilities, Insurance, China Mobile, BYD
- Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, CSI500, STAR50, FnGuide Top10
- SK Telecom (017670 KS): Foreign Room & Passive Inflows
- Wharf Holdings (4 HK): Improved Liquidity & Passive Buying
- Last Week in Event SPACE: Japan Post, Sun Hung Kai, LVS/Sands China, Kenedix REIT Complex, JFE
- Merger Arb Mondays (18 Sep) – Eoflow, Costa, Liontown, Pact, T&K Toka, IMAX, Poly Culture
- ECM Weekly (17th Sep 2023) – ARM, VNG, Doosan, Tuhu, IMotion, Seibu Giken, RR Kabel, Viva, Innovent
- SET50 Index Rebalance Preview: Two Potential Changes in December
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SK Square: Will Alibaba Acquire 11st?
- Maeil Business Daily reported that Alibaba Group Holding (9988 HK) is considering on acquiring a controlling stake in 11st, which is a leading e-commerce platform owned by SK Square
- In 2018, 11st was valued at 2.7 trillion won by financial investors. However, the current valuation of 11st is estimated to have declined to about 1 trillion won (US$760 million).
- We estimate that the probability of Alibaba acquiring 11st is about 60-70%.
Itochu Buying Descente (8114) – ANTA Selldown Offset Or Creeping Takeover?
- Four years after Itochu got to 40.0% of votes in Descente (8114) in a hostile Tender Offer, Descente partner ANTA, which supported Itochu at the time started selling its stake.
- A few months later, Itochu started buying shares of Descente in the market. As of 7 Sep, Itochu had bought Descente shares 81 days straight (9.7% of ADV).
- This begs the question: Is Itochu ensuring they maintain voting control as ANTA sells? Or are they buying to lift their stake prior to another bid?
Quiddity A/H Premium Weekly (15-Sep): Utilities, Insurance, China Mobile, BYD
- The Brand-Spanking New (6 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
- We used to do it and decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 41 Trade Recommendations.
- The last five weeks (since the instantiation of the new Monitor and Portfolio 6 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%.
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, CSI500, STAR50, FnGuide Top10
- It was a busy Friday with a bunch of indices rebalancing at the close and big volumes trading on a lot of stocks.
- Brilliance China Automotive (1114 HK) had a good week with the stock rallying on Thursday and Friday on huge volumes amid expectations of upcoming passive buying.
- A quiet week for ETFs with mainland China ETFs seeing some outflows after the huge inflows over the last couple of months.
SK Telecom (017670 KS): Foreign Room & Passive Inflows
- Foreign room in SK Telecom (017670 KS) increased above 15% in July and is currently just above 16%. Foreign investors have resumed buying again and foreign room is moving lower.
- Foreign room staying above 15% for another month could result in passive buying at the end of November. SK Telecom (017670 KS) has outperformed peers over the last few weeks.
- Foreign buying over the next month could lead to foreign room dropping below 15% in which case there will be no passive inflows. But the stock could be higher.
Wharf Holdings (4 HK): Improved Liquidity & Passive Buying
- Improved liquidity and a higher stock price could see passive trackers buying Wharf Holdings (4 HK) within the next couple of months.
- Wharf Holdings (4 HK) trades cheaper than the average and median of its peers on EV/Sales, EV/EBITDA and price to book value.
- Wharf Holdings (4 HK) has already started to move higher and there could be a bigger move in the stock over the next month.
Last Week in Event SPACE: Japan Post, Sun Hung Kai, LVS/Sands China, Kenedix REIT Complex, JFE
- The Japan Post Holdings (6178 JP)/ Japan Post Bank (7182 JP) ratio looks more attractive as JPB climbs with other banks as the possibility of Offering-induced retail overhang increases.
- The ACCC has until 28 September 2023 to make its decision on Origin Energy (ORG AU). Expect ACCC to be supportive – they haven’t built a strong “against” case.
- There should be more for the Kenedix REIT complex on a fundamental basis, a future equity capital raise accretion basis, and because of significant net buying for index purposes.
Merger Arb Mondays (18 Sep) – Eoflow, Costa, Liontown, Pact, T&K Toka, IMAX, Poly Culture
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Symbio Holdings (SYM AU), Costa Group Holdings (CGC AU), Orecorp Ltd (ORR AU), Mason Group Holdings (273 HK), JSR.
- Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Pacific Current (PAC AU), Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP).
ECM Weekly (17th Sep 2023) – ARM, VNG, Doosan, Tuhu, IMotion, Seibu Giken, RR Kabel, Viva, Innovent
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- In the IPO space, ARM’s IPO seems to have set the ball rolling for the traditionally busy year end across the region.
- In the placement space, finally a Hong Kong placement mangaed to hold up, even as a large Aussie one gave way.
SET50 Index Rebalance Preview: Two Potential Changes in December
- There could be two changes for the SET50 INDEX with JMT Network Services (JMT TB) and I-TAIL (ITC TB) replacing Srisawad Power (SAWAD TB) and Ngern Tid Lor (TIDLOR TB).
- With no further inclusions on the Market Surveillance Measure list, Delta Electronics Thai (DELTA TB) should be safe at the December rebalance.
- There are a couple of stocks that are close to passing/failing the liquidity tests and that could result in further changes to the index.