In today’s briefing:
- HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September
- ENM Holdings (128 HK): Privatisation Bid at HK$0.58 Per Share
- Merger Arb Mondays (05 Jun) – Golden Eagle Retail, ENM, AAG, Yashili, Golden Energy, Challenger Tech
- China Healthcare Weekly (Jun.2) – New Era for Medical Device, Shareholders’ Reduction in CXO, Cstone
- Shanghai Pharmaceuticals Holding (601607.CH/2607.HK) – The Situation of Undervaluation Would Change
- TS Lines Pre-IPO | Like Wan Hai Lines, but Smaller | Intra-Asia Update | Approaches to Valuation
- Morning Views Asia: NagaCorp Ltd
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September
- Fenbi Ltd (2469 HK) was added to the Hang Seng Composite Index (HSCI) at the close Friday and will be added to Southbound Stock Connect from open of trading today.
- We see 22 potential adds, 19 potential deletes, couple of close deletes, 5 deletes on prolonged suspension and 4 close liquidity deletes for the HSCI in September.
- There are 11 potential deletions where holdings via Stock Connect are more than 20% of shares outstanding. There could be some unwinding of positions over the next couple of months.
ENM Holdings (128 HK): Privatisation Bid at HK$0.58 Per Share
- Enm Holdings (128 HK) announced a privatisation offer from Chime Corporation at HK$0.58 per scheme share, a 54.7% premium to the undisturbed price of HK$0.375 per share (24 May).
- The key condition is the scheme be approved by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). No shareholder holds a blocking stake. The offer price is final.
- Detractors will argue the offer is low due to ENM’s net cash (75% of the market cap). However, the offer is reasonable compared to historical multiples and share prices.
Merger Arb Mondays (05 Jun) – Golden Eagle Retail, ENM, AAG, Yashili, Golden Energy, Challenger Tech
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Enm Holdings (128 HK), United Malt Group Ltd (UMG AU), Estia Health (EHE AU), HKBN Ltd (1310 HK), Hailan Holdings (2278 HK).
- Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Challenger Technologies (CHLG SP), Lian Beng (LBG SP), SBI Shinsei Bank (8303 JP), Newcrest Mining (NCM AU).
China Healthcare Weekly (Jun.2) – New Era for Medical Device, Shareholders’ Reduction in CXO, Cstone
- In the second half of this year, innovative device companies could be listed on the SSE STAR Market one after another, which is a systematic opportunity.
- Shareholders’ reduction in CXO will continue. Then, CXO could become a company mainly controlled by various funds, with the original owners all cashing out and leaving, such as WuXi AppTec.
- We analyzed some key points of CStone Pharmaceuticals (2616 HK). We remain conservative about the Company, and its stock price may continue to remain weak.
Shanghai Pharmaceuticals Holding (601607.CH/2607.HK) – The Situation of Undervaluation Would Change
- Different from peers whose pharmaceutical assets are scattered in different listed companies, all assets/resources of SH Pharma are integrated within the Company. The intrinsic value of this model is greater.
- SH Pharma is in a traditional industry, facing weak profitability and negative policy impacts, Thus, the Company lacks attractiveness and imagination space for investors, leading to long-term undervaluation.
- Considering the transformation to more high-margin businesses, SH Pharma’s performance/profitability would improve. Since China hopes to establish a valuation system with Chinese characteristics, there’s valuation repair opportunity for SH Pharma.
TS Lines Pre-IPO | Like Wan Hai Lines, but Smaller | Intra-Asia Update | Approaches to Valuation
- In terms of fleet characteristics, market exposure, and recent financial performance, we believe T.S. Lines (TSL HK) and Taiwan’s Wan Hai Lines (2615 TT) are directly comparable
- WHL has more exposure to the Transpacific, but still boasts a much larger Intra-Asia operation owing to its scale advantage (fleet and revenue about four times the size of TSL)
- Given the similarities we outline in this insight, we believe TSL’s shares should trade at EV/Fleet and EV/Revenue multiples in line with WHL’s; no premium is justified, in our view
Morning Views Asia: NagaCorp Ltd
Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.
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