In today’s briefing:
- L’Occitane (973 HK): Share Alternative a Crucial Step Towards the Offer Being Declared Unconditional
- Hengdeli Holdings (3389 HK): Negative EV Play Halted
- Quiddity Leaderboard HSTECH Sep 24: No Changes but US$425mn One-Way Flows Due to Capping
- Quiddity Leaderboard HSCEI Sep 24: Two Changes Possible; US$256mn One-Way
- L’Occitane (973.HK) – The Privatization Is About to Succeed
- Closing Lufax
- Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – June 2024
- Persistent Weakness in Chinese Real Estate Will Drag Iron Ore Prices Down
L’Occitane (973 HK): Share Alternative a Crucial Step Towards the Offer Being Declared Unconditional
- L’Occitane (973 HK) announced the share alternative at an exchange ratio of 10 rollover shares for each offer share, subject to a cap of 5% of outstanding shares.
- The share alternative option will help the offer and was likely required to get Pleasant Lake Partners’ support (3.25% of outstanding shares). There is minimal vocal opposition to the offer.
- Irrevocables/Letters of support represent 49.83% of disinterested shares. An attractive offer and the share alternative facilitate meeting the minimum acceptance condition, which requires an 80% disinterested acceptance rate (ex. irrevocables).
Hengdeli Holdings (3389 HK): Negative EV Play Halted
- Watch accessory play Hengdeli Holdings (3389 HK) is currently suspended pursuant to the Takeovers Code.
- Potentially founder Zhang Yuping (holding 17%), CEO Tony Cheung (16%) and/or Swatch Group (UHR SW) (9.94%) may table an Offer. My money is on Zhang.
- This is a very illiquid name. What is interesting is that Hengdeli has net cash of HK$1.3bn – as at 31 December 2023 – against a market cap of HK$0.59bn.
Quiddity Leaderboard HSTECH Sep 24: No Changes but US$425mn One-Way Flows Due to Capping
- The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
- In this insight, we take a look at the rankings of potential ADDs and potential DELs for the September 2024 index rebal event.
- We do not see any index changes in September 2024 but there could be one-way flows of US$425mn due to capping.
Quiddity Leaderboard HSCEI Sep 24: Two Changes Possible; US$256mn One-Way
- The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
- In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI index rebal event in September 2024.
- Based on the current data, I see two ADDs and two DELs.
L’Occitane (973.HK) – The Privatization Is About to Succeed
- So far, about 49.8% of disinterested shares from Irrevocable Undertakings/Non-binding Letters of Support would accept the Share Offer. Success is within reach based on a “good enough” privatization price.
- The Share Alternative is mainly aimed at investors who are hoping for the future re-listing of L’Occitane in the overseas markets – They can still get a vantage point.
- However, re-listing seems still distant/uncertain. The value of Rollover Shares in the future remains uncertain. Investors would face risks if they choose the Share Alternative. The Cash Alternative is preferred.
Closing Lufax
- It has come to my attention that Lufax management has recently altered the terms of their convertible debt: Based on the terms and conditions of the Ping An Convertible Promissory Notes, as a result of the Special Dividend, the Conversion Price will be adjusted from US$12.
- Based on the terms and conditions of the Ping An Convertible Promissory Notes, as a result of the Special Dividend, the Conversion Price will be adjusted from US$12.76 per Share as at the date of this circular to US$2.32 per Share upon settlement of the Special Dividend, and thus, upon full conversion, the Ping An Convertible Promissory Notes can be converted into a maximum number of 421,077,586 Shares (the “Conversion Shares”).
- The Company considers that the adjustment formula is in line with market practice for anti-dilution provisions in convertible securities.
Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – June 2024
- We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
- Our top picks are Perfect Medical Health (1830 HK), The Keepers Holdings (KEEPR PM), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and Ginebra San Miguel (GSMI PM).
- While HK stocks have weak data, we persist in being long these names, keeping in mind their long-term outlook and deep value.
Persistent Weakness in Chinese Real Estate Will Drag Iron Ore Prices Down
- Chinese real estate investments fell 10.1% in the first five months of 2024 YoY. New home prices fell at the fastest pace in more than 9.5 years in May.
- Fresh bank lending in China rebounded well expectations in May. Chinese banks issued 950B yuan (v/s 1.36T yuan issued last May) in new loans last month.
- China’s consumer inflation held flat in May amid feeble domestic demand, uneven economic recovery, and consumer confidence weakness.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
