In today’s briefing:
- Merger Arb Mondays (25 Nov) – Seven & I, Fuji Soft, ID&EH, Arcadium, Henlius, Canvest, GAPack
- HSTECH Index Rebalance: Midea (300 HK) Replaces Weibo (9898 HK); US$1.5bn Round-Trip Trade
- Meiji Holdings Placement – Momentum Leading into This Cross-Shareholding Selldown Isn’t the Greatest
- HK Connect SOUTHBOUND Flows (To 22 Nov 2024); Volumes Much Lower But Broad-Based Buying Continues
- FineToday Holdings (289A JP) IPO: The Bear Case
- MT/Meituan (3690 HK) 3Q24 Earnings Preview: Upside Narrowed to 50%
- Nameson Holdings (1982 HK) H1 FY25: 16-17% Dividend Yield Intact
- CaiNiao Q2FY: Pressure on Profitability Has Intensified | X-Border Competition the Likely Culprit
Merger Arb Mondays (25 Nov) – Seven & I, Fuji Soft, ID&EH, Arcadium, Henlius, Canvest, GAPack
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Shanghai Henlius Biotech (2696 HK), Canvest Environmental Protection Group (1381 HK), Get Nice Financial Group Ltd (1469 HK), Shinko Electric Industries (6967 JP), Arcadium Lithium (LTM AU).
- Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Nec Networks & System Integr (1973 JP), Fuji Soft Inc (9749 JP), Xingda International (1899 HK), Elematec Corp (2715 JP).
HSTECH Index Rebalance: Midea (300 HK) Replaces Weibo (9898 HK); US$1.5bn Round-Trip Trade
- In a surprise, Midea Group (300 HK) will replace Weibo (9898 HK) in the Hang Seng TECH Index (HSTECH INDEX) after the close of trading on 6 December.
- Estimated one-way turnover at the rebalance is 4.5% resulting in a round-trip trade of HK$11.72bn (US$1.51bn). Passives need to buy 9x ADV in Midea Group (300 HK).
- The Midea Group Co Ltd A (000333 CH) / Midea Group (300 HK) premium could drop due to the index inclusion providing an entry point into an AH expansion trade.
Meiji Holdings Placement – Momentum Leading into This Cross-Shareholding Selldown Isn’t the Greatest
- A group of investors are looking to raise US$264m from trimming a portion of their stakes in Meiji Holdings (2269 JP).
- While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
- In this note, we will talk about the placement and run the deal through our ECM framework.
HK Connect SOUTHBOUND Flows (To 22 Nov 2024); Volumes Much Lower But Broad-Based Buying Continues
- SOUTHBOUND gross trading activity dropped sharply but net SOUTHBOUND buying remains very strong and very broad-based.
- The trend continues to be net buying of tech though Friday saw a lot of profits taken in Tech names by SOUTHBOUND holders.
- I expect HK-listed tech to continue getting bought. Alibaba, Tencent, Xiaomi, etc are safe havens against Trump tariffs as they don’t compete in the US. Still.
FineToday Holdings (289A JP) IPO: The Bear Case
- FineToday Holdings Co Ltd (289A JP) is a Japanese personal care business seeking to raise up to US$500 million. It will be listed on 17 December.
- In FineToday Holdings (289A JP) 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 the weak 3Q24 revenue performance, mid-tier revenue growth, leveraged balance sheet, share overhang and pre-IPO dividend.
MT/Meituan (3690 HK) 3Q24 Earnings Preview: Upside Narrowed to 50%
- The stock has risen 84% in one year, but we still believe there is an upside of 49%.
- We believe the operating margin will continue to improve significantly in 3Q24.
- We also believe the growth rates of all main businesses should be healthy in 3Q24.
Nameson Holdings (1982 HK) H1 FY25: 16-17% Dividend Yield Intact
- Nameson Holdings (1982 HK) results for H1 FY25 revenue/net profit showed a slight growth of 2.2%/3.1% YoY, with margin expansion being offset by lower other income.
- The company declared a 9.8 cent interim dividend (current share price = 82 cents), maintaining a 75% payout ratio, which gives us confidence that a 16-17% yield can be maintained.
- At 4.9x FY25 PE (see: Nameson Holdings (1982 HK): 17% Dividend Yield Can Be Sustained and Improved Long-Term ), this is a very steady yield play.
CaiNiao Q2FY: Pressure on Profitability Has Intensified | X-Border Competition the Likely Culprit
- CaiNiao’s Q2FY Y/Y revenue growth moderated to just +8%, and EBITA declined by -94% Y/Y
- We believe X-border volume remains strong, but X-border price has plummeted
- Considering CaiNiao’s & Alibaba’s Q2FY results, unclear who makes money in X-border
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