In today’s briefing:
- 2024 High Conviction: Buy Hollysys
- StubWorld: Rumoured Interest In PCCW’s Fibre
- CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon
- T&K Toka (4636 JP): Bain Decision Time as Progress Made on a Pre-Condition
- Breaking Down Korean Regulators’ Official Details on New Short Selling System
- ChiNext/ChiNext 50 Index Rebalance: Adds Outperforming Deletes Now
- Another Day Ending in Y, Another Low-Balled Takeover – This Time Glosel (9995)
- Wuxi Lead GDR Listing – Early Look – Another One in the Pipeline, Will Be Net Cash Post-Deal
- Ecopro Materials: Overshooting Share Price and Upcoming End of Lockup in December
- EQD | KOSPI 200 Stalling: Where to Go LONG on the Pullback?
2024 High Conviction: Buy Hollysys
- Despite Hollysys Automation (HOLI US) receiving a myriad of proposals over the past three years, nothing moved forward. Calling an SGM to spill the board would change that status quo.
- But Hollysys’ board stonewalled the SGM, pinning its reason – and a proposed injunction – on the subjective ownership of Ace Lead, and in turn, its 6.7% holding in Hollysys.
- That injunction was dismissed last week. An SGM will now be held late January. A firm merger proposal is expected in the middle of next month. This is a buy.
StubWorld: Rumoured Interest In PCCW’s Fibre
- Reportedly, Chinese investors, as well as Middle Eastern sovereign wealth funds, have expressed interest in acquiring a “significant ” minority stake in PCCW Ltd (8 HK)‘s fibre ops.
- Preceding my comments on PCCW are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon
- There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 8 December.
- This is yet another index inclusion for Hygon Information Technology C (688041 CH) – the stock continues to move higher on expected passive buying over the next two weeks.
- Over the last 6 months, the adds have underperformed the deletes but there has been a significant improvement in performance over the last 2 months.
T&K Toka (4636 JP): Bain Decision Time as Progress Made on a Pre-Condition
- T&K Toka Co Ltd (4636 JP) has satisfied the precondition of selling its Hangzhou Toka Ink stake to hold less than 30%. The offer is targeted for early January.
- Due to Dalton’s stake building, the shares have consistently traded above Bain’s pre-conditional JPY1,400 offer. Bain can either launch the tender with unchanged terms or bump the offer.
- A bump is likely as, despite the irrevocables, satisfying the minimum acceptance condition is challenging. The Board will struggle to recommend the offer if the shares remain above terms.
Breaking Down Korean Regulators’ Official Details on New Short Selling System
- Concerning the newly imposed 90-day mandatory repayment period for institutional investors, the elimination of the recall risk during this period is not included in this improvement plan.
- The right to re-establish the same short-selling position after the 90-day repayment period is unlimited. We should pay attention to the potential of this creating new trading events.
- Institutions borrowing stocks from overseas are not subject to the 105% collateral ratio. However, everyone is subject to the 90-day repayment period, even for investors who borrow stocks from overseas.
ChiNext/ChiNext 50 Index Rebalance: Adds Outperforming Deletes Now
- There will be 6 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index. Implementation is at the close on 8 December.
- There is a lot of overlap between the adds and deletes across both indices with the one-way trade across both indices estimated to be CNY 2.4bn.
- The adds and deletes have drifted lower over the last few months. However, the adds have outperformed the deletes significantly in the last month.
Another Day Ending in Y, Another Low-Balled Takeover – This Time Glosel (9995)
- Today, Macnica Fuji Electronics Hol (3132 JP) (Macnica Holdings) announced that it would launch a tender offer to buy 100% of Glosel (9995 JP), a semiconductor trading company.
- Glosel is special because it has three main assets. 1) 61% of net assets are inventory (<3mo), 2) 34% of net assets are net receivables (<3mos), 3) 8+% is securities.
- For that, Glosel’s Board decided 0.71x book was OK. Nah. The register is reasonably wide open, and this is a delayed start. Someone might get noisy, but < 50/50 bet.
Wuxi Lead GDR Listing – Early Look – Another One in the Pipeline, Will Be Net Cash Post-Deal
- Wuxi Lead Intelligent Equipmen (300450 CH) is looking to raise around US$300m in its upcoming Switzerland GDR listing.
- As per media reports, Wuxi Lead was said to be looking to raise US$495m via a Swiss GDR issuance, having secured approval to sell up to 78.3m shares.
- Given the decline in its share price over the year, the eventual deal size could come to around US$300m as of its current last close.
Ecopro Materials: Overshooting Share Price and Upcoming End of Lockup in December
- In this insight, we discuss the upcoming end of lockup in December for Ecopro Materials and why we believe Ecopro Materials’ share price will be much lower in 6-12 months.
- A combination of the potential inclusion in KOSPI Fast Entry plus the temporary ban on short selling of stocks in Korea has helped to push up Ecopro Materials’ share price.
- However, despite this sharp share price run-up, we think the risk-reward is horrible on this stock in terms of bigger downside risk in the next 6-12 months.
EQD | KOSPI 200 Stalling: Where to Go LONG on the Pullback?
- The KOSPI 200 INDEX has been rising for 4 weeks, it’s OVERBOUGHT and may soon perform a quick pullback, followed possibly by another rally.
- The upcoming pullback is likely to be short-lived, in this insight we analyze where the pullback can reach, and where it should be possible to go LONG again.
- The price area to watch is 330-326: if the index reaches there, the LONG trade odds will be good (assuming the uptrend will continue into the end of the year).
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