In today’s briefing:
- TCM (570 HK): Likely Rush for The Exits As Deal Busts
- Horizon Robotics (9660 HK) IPO: The Bear Case
- A/H Premium Tracker (To 18 Oct 2024): AH Premia Drop Sharply; High Premia May Contract More
- HK Connect SOUTHBOUND Flows (To 18 Oct 2024); Net Flows Big, Selling in Brokers, Buying in Props
- Weekly Deals Digest (20 Oct) – China TCM, GA Pack, Tokyo Metro, Rigaku, CR Beverage, Horizon Robotic
TCM (570 HK): Likely Rush for The Exits As Deal Busts
- China Traditional Chinese Medicine (570 HK) (TCM) has been a frustrating deal, for a deal that shouldn’t be frustrating.
- As feared from its 16th October monthly update, the inability to secure investor group consents appears to have torpedoed the transaction. Will we eventually find out why this got stonewalled?
- This deal lapse changes the Hong Kong M&A landscape; if you can’t rely on SOE transactions to get up, what next? The immediate question now is downside support on Monday.
Horizon Robotics (9660 HK) IPO: The Bear Case
- Horizon Robotics (9660 HK), a provider of autonomous driving products and services, is seeking to raise up to US$696 million through a HKEx IPO.
- In Horizon Robotics (9660 HK) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on high related parties’ revenue, customer concentration risk, pricing pressure, uncertain path to profitability, high cash conversion cycle and FCF burn.
A/H Premium Tracker (To 18 Oct 2024): AH Premia Drop Sharply; High Premia May Contract More
- Huge volumes traded on the mainland, Southbound volumes dropped, AH Premia contracted a little bit, but not much. Things are starting to stabilise.
- Average AH pairwise volatility is super high. Intracorrelation of spreads quite low. Lots of room to market-make wide spreads/high premia. High premia may continue to contract on speculation.
- Continuing different onshore and offshore opinion regarding the nature and vibe of Chinese stimulus will continue to lead to interesting dispersion. Identify the trend, then market make around it.
HK Connect SOUTHBOUND Flows (To 18 Oct 2024); Net Flows Big, Selling in Brokers, Buying in Props
- This past week saw mainland investors trade HK$476bn of stock. Not as big as last “week” but still big. BABA buying has slowed, but net buying was still HK$24.4bn
- The buying is starting to see a longer tail of net positive names, and properties this week saw big net buying, even before the Sunac placement which added more.
- High-Div SOEs are seeing outflows as beta sees inflows. I expect this to continue.
Weekly Deals Digest (20 Oct) – China TCM, GA Pack, Tokyo Metro, Rigaku, CR Beverage, Horizon Robotic
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: Tokyo Metro (9023 JP), Rigaku Holdings (268A JP), Horizon Robotics (9660 HK), China Resources Beverage (2460 HK) and Hyundai Motor India (1342Z IN) IPOs.
- Event-Driven developments: China Traditional Chinese Medicine (570 HK), Greatview Aseptic Packaging (468 HK), Sun Art Retail (6808 HK), Fuji Soft Inc (9749 JP), Dyna Mac Holdings (DMHL SP).
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