In today’s briefing:
- HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn
- Snow Peak (7816 JP): Bain Contemplating Backing an MBO at JPY1,200
- Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise
- Shiseido (4911 JP): Japan On Track While China Was Weak
- STTF Index Rebalance Preview: One High Probability Change in March
- ECM Weekly (19th Feb 2024) – Toei Ani, KB Fin, IIF, Trial, Juniper, Bharti Hexacom, Octillion Energy
- China Consumption Weekly (19 Feb 2024): Ant Group, Great Wall Motor, JD.com, Baidu, Autohome
HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn
- As expected, Tongcheng Travel Holdings (780 HK) will replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 March.
- Estimated one-way turnover is 3.9% leading to a round-trip trade of HK$7.74bn (US$988m). There is nearly 14x ADV to buy in Tongcheng Travel Holdings (780 HK).
- Positioning in Tongcheng Travel (780 HK) does not appear to be very high, while positioning in GDS Holdings (9698 HK) is very high with a couple of deletions coming up.
Snow Peak (7816 JP): Bain Contemplating Backing an MBO at JPY1,200
- The Nikkei reports that Snow Peak Inc (7816 JP) is set to disclose a Bain-sponsored MBO this week “in the range of 1,200 yen per share.”
- Mergermarket first disclosed a potential MBO on Friday. Snow Peak responded that while it is true that we are considering going private, no decision has been made at this time.
- The rumoured JPY1,200 offer price is light vs historical trading ranges but attractive vs peer and historical multiples. The probability of an offer materialising is high.
Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise
- There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the March rebalance. There are some surprises.
- Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.
- There is huge short interest on East Buy Holding (1797 HK) and there could be some short covering ahead of the inclusion of the stock in the index.
Shiseido (4911 JP): Japan On Track While China Was Weak
- Shiseido Company (4911 JP) reported 4Q23 results last week. Overall, operating profit of Y40bn in FY23 was Y5bn higher than previous company guidance of Y35bn.
- However, Shiseido’s China business weakened materially in 4Q23, and 2024/25 guidance seems a bit light.
- I believe FY24 should not be used as a base for valuation because the nuclear wastewater impact is likely to linger a while longer during FY24.
STTF Index Rebalance Preview: One High Probability Change in March
- Emperador (EMI SP) fails the liquidity test and could be sold by the SPDR Straits Times Index ETF (STTF SP) in March.
- Emperador (EMP PM) will also be sold by global index trackers in March and the stock should remain under pressure for the next few weeks.
- Frasers Centrepoint Trust (FCT SP) is ranked ahead of CapitaLand Ascott Trust (CLAS SP) by 9% on full market cap and should be added to the ETF in March.
ECM Weekly (19th Feb 2024) – Toei Ani, KB Fin, IIF, Trial, Juniper, Bharti Hexacom, Octillion Energy
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, Trial Holdings (5882 JP) was back in the market, a year after ditching its previous attempt, while Juniper Hotels is trying to ride the India wave.
- For placements, more signs of REIT coming back to life, this time in Japan. A relatively large deal in Toei Animation (4816 JP) as well was launched.
China Consumption Weekly (19 Feb 2024): Ant Group, Great Wall Motor, JD.com, Baidu, Autohome
- Overseas traveling revenue recovered strongly in China during the Chinese New Year.
- Great Wall Motor’s vehicle deliveries increased by 69% in January 2024.
- JD.com plans to raise the salaries for customer service employees by 30% in 2024.
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