In today’s briefing:
- HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (March 2023)
- K-Pop Battle, Round 2: Kakao’s Tender Offer For S.M. Entertainment
- InvoCare (IVC AU): TPG’s A$12.65/Share NBIO
- InvoCare (IVC AU): TPG’s Non-Binding Offer
- Olam Group (OLG SP): EGM on 29 March Another Step to Realize Value
- Major Hang Seng Indices Capping Flows Decided (HSCEI, HSI, HSTECH)
- Calbee: New CEO Seems Ready To Make Necessary Action
- [NIO Inc. (NIO US) Rating Change]: DG for Weak Momentum and Margin Pressure into Q3
- PT Nippon Indosari Corpindo (ROTI IJ) – Bring on the Baker
- DXN Holdings Pre-IPO – The Positives – Diverse and Growing Portfolio. Strong Long-Term Record
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (March 2023)
- The March rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
- The largest inflows will be on Li Auto (2015 HK), Meituan (3690 HK), XPeng (9868 HK), JD.com (9618 HK), Alibaba (9988 HK), BYD (1211 HK) and Kuaishou Technology (1024 HK).
- The largest outflows will be on Tencent (700 HK), HSBC Holdings (5 HK), Baidu (9888 HK), Xiaomi Corp (1810 HK), NetEase (9999 HK), CNOOC (883 HK) and SMIC (981 HK).
K-Pop Battle, Round 2: Kakao’s Tender Offer For S.M. Entertainment
- Fresh after the courts rejected new share issuance, Kakao (035720 KS) has launched an Offer for S.M.Entertainment (041510 KS), less than a week after HYBE (352820 KS)‘s deal closed.
- Kakao, holding 4.9%, is seeking to lift its stake to ~40% via a tender offer at ₩150,000/share, a 25% premium to HYBE’s offer price.
- The key question is – will HYBE counter? I would not be so sure.
InvoCare (IVC AU): TPG’s A$12.65/Share NBIO
- Invocare Ltd (IVC AU) has received an unsolicited, preliminary, non-binding indicative offer from TPG Global to acquire the company at A$12.65/share in cash.
- TPG has also acquired 17.8% of the shares in Invocare Ltd (IVC AU) via a combination of stock and derivatives.
- With the company now in play, there could be competing offers. Already owning 17.8% of the company, TPG is now invested in ensuring they gain control.
InvoCare (IVC AU): TPG’s Non-Binding Offer
- PE outfit TPG has taken a 17.8% stake in InvoCare Ltd (IVC AU), Australia’s leading funeral services provider, and also pitched a A$12.65/share non-binding indicative Offer via a Scheme.
- The Indicative proposal is subject to the completion of satisfactory due diligence, and FIRB.
- InvoCare, which has struggled to generate consistent profits in recent years, is mulling the proposal. Pricing is around the Covid cliff.
Olam Group (OLG SP): EGM on 29 March Another Step to Realize Value
- Olam Group (OLG SP) has despatched the EGM circular to get shareholder approval for the next step in the restructuring exercise to unlock value – Olam Agri IPO.
- The Olam Agri IPO through a dual primary listing (SGX ST and Saudi Arabia) involves a primary (IPO shares are 20% of enlarged shares) and secondary (25% vendor sale) offering.
- The EGM marks a key step in the strategy to unlock value. Our SoTP valuation is S$2.13 per share, which is a 28% upside to the last close price.
Major Hang Seng Indices Capping Flows Decided (HSCEI, HSI, HSTECH)
- On 24 February 2023, the Hang Seng Indices released their changes for the March rebalance. No changes in HSI, which was unexpected, and small changes elsewhere.
- Capping flows and the rule changes on treatment of Dual Primary Listed stocks are responsible for the interesting flows. Yesterday’s closing prices are used for final capping.
- Li Auto (2015 HK) and XPeng (9868 HK) are the interesting trades. Still.
Calbee: New CEO Seems Ready To Make Necessary Action
- After failing to take Calbee Inc (2229 JP) forward for 4+ years, CEO Mr. Shuji Ito is retiring at the end of the next quarter.
- He is being replaced by the current COO and the former EVP of Calbee’s Overseas business Mr. Makoto Ehara.
- From what he has done since he was appointed the COO and in the Overseas business, we are hopeful that he will turn Calbee’s fortunes around in the medium term.
[NIO Inc. (NIO US) Rating Change]: DG for Weak Momentum and Margin Pressure into Q3
- We expect NIO to see a share loss in 2023 due to 1) late delivery of its key models; 2) conservative channel expansion plan; 3) uncompetitive pricing.
- We see headwinds for NIO’s 2023 GPM, including 1) ~10% discount on its legacy models in Q1; 2) weaker product mix toward low-price ET5 into Q3.
- 3) limited expansion of scale economy due to diminished momentum. ● DG to SELL for weak momentum and ongoing margin pressure into 3Q22.
PT Nippon Indosari Corpindo (ROTI IJ) – Bring on the Baker
- PT Nippon Indosari Corpindo (ROTI IJ) booked results well above market expectations despite pressure from wheat flour and packaging costs, with greater efficiencies and cost savings boosting operating margins.
- Modern trade continues to be the growth driver but general trade continues to grow plus the company’s new Sari Kue cake products showed a strong performance at the margin.
- PT Nippon Indosari Corpindo (ROTI IJ) should see further positive growth in 2023, with the potential for improving margins as input costs subside. Valuations are significantly below historical levels.
DXN Holdings Pre-IPO – The Positives – Diverse and Growing Portfolio. Strong Long-Term Record
- DXN Holdings (2080694D MK) is looking to raise up to US$200m in its upcoming Malaysia IPO.
- DXN Holdings (DXN) is a global health-oriented and wellness direct selling company.
- In this note, we will talk about the positive aspects of the deal.
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