In today’s briefing:
- Oriental Watch: Increasing Visibility on H2 2022
- Time Interconnect (1729 HK): Possible Offer
- CLPH (1589 HK): Composite Doc Out. Offer Now Open
- False Breakdowns on Global MSCI Indexes as the US Dollar Weakens; Ideas Within Energy & Financials
- Macro; Rating Changes; New Issues; Talking Heads; Top Gainers & Losers
Oriental Watch: Increasing Visibility on H2 2022
- We have increasing confidence in Oriental Watch (398 HK) paying out a > 74 cent dividend for FY22 ( implied dividend >40 cents for H2 2022, full-year yield 17%).
- Current net cash (ex-of dividend payable) is 1.1 bn HKD accounting for >50% of the market capitalization ( 2.1 bn HKD ), providing a significant margin of safety.
- Expanding watch premiums for brands like Rolex and Patek Philippe due to tighter supply could result in better margins for the company, increasing upside potential.
Time Interconnect (1729 HK): Possible Offer
- Time Interconnect Technology (1729 HK) is currently suspended “pursuant to The Hong Kong Code on Takeovers and Mergers“.
- Paul Lo, the chairman, recently increased his stake to ~75% of shares out. A large parcel of shares moved into CCASS late last month.
- Paul Lo, if he is the Offeror, is unlikely to table an Offer price significantly higher than the last close, given the recent price increase. A take under is possible.
CLPH (1589 HK): Composite Doc Out. Offer Now Open
- China Logistics Property Holdings (1589 HK)‘s Composite Document has now been despatched. The Offer is open for acceptance with a first close on the 25 February.
- The Offer from JD.com is conditional on 50% acceptances, with 66.4% in the bag.
- Done deal and trading through terms. The IFA considers the Offer is fair and reasonable.
False Breakdowns on Global MSCI Indexes as the US Dollar Weakens; Ideas Within Energy & Financials
- In last week’s Int’l Compass (Jan. 27) we highlighted that the broad global indexes were breaking down, but that we were watching for potential false breakdowns.
- We are now getting those false breakdowns as major levels have been reclaimed; we view this as a net positive.
- We continue to see select areas that are attractive (namely cyclical value and defensive Sectors) and we expect markets to remain mixed.
Macro; Rating Changes; New Issues; Talking Heads; Top Gainers & Losers
US equity markets dropped sharply with the S&P and Nasdaq ending 2.4% and 3.7% lower. Sectoral losses were led by Communication Services down 6.8%, while IT and Consumer Discretionary were down over 3%. US 10Y Treasury yields rose 7bp to 1.84%. European markets were also lower with the DAX, CAC and FTSE down 1.6% 1.5% and 0.7%. Brazil’s Bovespa closed 0.2% lower. In the Middle East, UAE’s ADX was down 0.1% and Saudi TASI closed 0.4% lower. Asian markets have opened mixed with HSI and STI up 2.4% and 0.2% while Nikkei was down 0.1%. Shanghai remains closed on account of the lunar new year holidays. US IG CDS spreads were 2.6bp wider and HY CDS spreads were 11.2bp wider. US IG CDX spreads are at its widest levels since November 2020 (see the chart below). EU Main CDS spreads were 4.6bp tighter and Crossover CDS spreads were 19.3bp wider. Asia ex-Japan CDS spreads were flat.
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