In today’s briefing:
- SenseTime (20 HK): Index Inclusions Incoming?
- Northbound Stock Connect Expansion: Updated Details
- Acotec (6669 HK): Boston Scientific’s HK$20 Partial Offer Unconditional
- AAG Energy (2686 HK): Is Xinjiang Xintai Returning for Another Bid?
- Xingda (1899 HK): HK$1.88 Partial Offer Now Open
- AAG Energy (2686 HK) Suspended: Xinjiang Xintai Offer?
- ZJLD Group Pre-IPO Tearsheet
- MicroPort NeuroTech (2172.HK) – The Potential Risks Behind the Positive Profit Alert
- Hang Seng CEI (HSCEI) – High Probability Target at 9450/70 in 2023 (+20%)
SenseTime (20 HK): Index Inclusions Incoming?
- SenseTime Group (20 HK) was added to the Non-SDN Chinese Military-Industrial Complex Company (NS-CMIC) list on 10 December 2021. So, the stock is not a part of any global indices.
- There is a possibility that the stock is no longer restricted to U.S. investors and that could lead to multiple index inclusions over the next few months.
- Inclusion in the MSCI China Index could take place in February or May while inclusion in the FTSE All-World Index could take place in March.
Northbound Stock Connect Expansion: Updated Details
- On 19 January, the HKEX clarified the liquidity criteria as well as treatment of Differentiated Voting Rights (DVR) stocks and the criteria for current Northbound stocks to become Sell-only.
- We currently see 975 China A-shares becoming eligible for Northbound Stock Connect when the extension is implemented.
- With the extension likely to be implemented in June, there will be additions to the MSCI China Index, FTSE All-World Index and FTSE All-Cap Index in August and September.
Acotec (6669 HK): Boston Scientific’s HK$20 Partial Offer Unconditional
- As expected, Acotec Scientific Holdings (6669 HK)’s partial offer from Boston Scientific (BSX US) at HK$20 per share is now unconditional. The final closing date is 9 February.
- The current acceptances representing 78.59% of outstanding shares imply current proration is 82.71%. Current pro-ration suggests CA Medtech post-offer shares will be counted towards the public float.
- Based on the current proration of 82.71% and at the last close price of HK$19.78 per share, the breakeven price is HK$19.00 per share.
AAG Energy (2686 HK): Is Xinjiang Xintai Returning for Another Bid?
- Aag Energy Holdings (2686 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers on 26 January.
- It is likely that Xinjiang Xintai Natural Gas (603393 CH), the largest shareholder representing 56.95% of outstanding shares is seeking to privatise AAG.
- The potential bid is likely privatisation through a scheme. Multiples from Xinjiang Xintai’s previous voluntary cash offer in 2018 suggest an offer north of HK$2.00.
Xingda (1899 HK): HK$1.88 Partial Offer Now Open
- Xingda International (1899 HK)’s partial offer from a management-controlled offeror at HK$1.88 per share is now open. The IFA opines it to be fair and reasonable.
- The partial offer is conditional on the offeror/concert parties, which have a 45.60% stake, hitting 50.01% voting rights and approval by the requisite majority of shareholders on the acceptance form.
- The 4.41% minimum acceptance is not onerous. Based on a proration of 8.88% and at the last close price of HK$1.59 per share, the breakeven price is HK$1.56 per share.
AAG Energy (2686 HK) Suspended: Xinjiang Xintai Offer?
- Back on the 14 May 2018, AAG Energy Holdings (2686 HK) announced a partial offer (50.5%) from Xinjiang Xintai Natural Gas (603393 CH) at HK$1.75/share.
- This morning AAG was suspended pursuant to Hong Kong Code on Takeovers and Mergers.
- I expect a Scheme Offer from Xinjiang Xintai, which currently holds 56.98%. Potentially, Fosun (656 HK) has returned to the well.
ZJLD Group Pre-IPO Tearsheet
- ZJLD Group (ZJLD HK) is looking to raise up to US$400m in its Hong Kong IPO. The deal will be run by Goldman Sachs and China Securities.
- ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
- As per F&S, the firm was the fourth largest privately-owned baijiu company and ranked third among all baijiu companies with three or more aroma types in terms of FY21 sales.
MicroPort NeuroTech (2172.HK) – The Potential Risks Behind the Positive Profit Alert
- The spring coil centralized procurement of neuro-interventional consumables in 21 provinces led by Jilin is about to start. The result may be unexpected, which could cause uncertainty to NeuroTech’s performance.
- The promotion of import substitution in the field of neuro-intervention has not been as smooth as expected. If foreign brands win the bid, doctors would give priority to imported products.
- Since NeuroTech is in leading position among domestic peers and has core R&D capabilities in this industry, we think it still has investment value. The valuation is in comfortable range.
Hang Seng CEI (HSCEI) – High Probability Target at 9450/70 in 2023 (+20%)
- On 26 January 2023 we published our bearish multi-month Nifty Index (NIFTY INDEX) outlook. For the RV player, the Hang Seng CEI (HSCEI) is likely to present material opportunity.
- At TMA we place tremendous emphasis on momentum confirmation. Currently, LT momentum triggers confirm a sustainable multi-month to multi-quarter uptrend in the HSCEI.
- Occasionally Fibonacci retracement levels, based off different portions of a trend, coincide. These create high probability targets. 9450/70 in the HSCEI is one such high probability target in 2023.
💡 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
