In today’s briefing:
- A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.
- Tomony Holdings (8600 JP) – Regional Bank NEW SHARE Issue – Not What You Want To See, But Buy Anyway
- Merger Arb Mondays (18 Dec) – Shinko Electric, Benefit One, Toyo, CPMC, Vinda, Costa, Volpara
- Yuanta/P-Shares Taiwan Div+ ETF: Day 1 Flows & Stock Moves
- Hankook & Company (000240 KS): MBK Raises Partial Offer to KRW24,000
- HK Connect SOUTHBOUND Flows (To 15Dec23); CNOOC/Telecom/Mobile All Now To The Buy Side, Tencent NOT
- Hankook & Co Tender: Clues to Gauge Cancellation Risk Obtained Through Local Channels So Far
- Mainland Connect NORTHBOUND Flows (To 15 Dec 23): Mindray Consistently Bought, Midea Sold
- Adbri (ABC AU) Warms To CRH/Barro’s Offer
- Liquid Universe of European Ordinary and Preferred Shares: December‘23 Report
A/H Premium Tracker (To 15 Dec 23): Time To Go Long Hs Vs As.
- The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished.
- Time to go long Hs vs As for the new year at 52wk wide discounts. 3 Short H/A pairs now switched to long. 3 new pairs long this week.
Tomony Holdings (8600 JP) – Regional Bank NEW SHARE Issue – Not What You Want To See, But Buy Anyway
- On 5 December, Tomony Holdings (8600 JP) – a holding company for two regional banks based in Tokushima Prefecture and Kagawa Prefecture – announced (gasp!) a NEW SHARE OFFERING.
- It offered 28mm shares + 4.2mm greenshoe – a share count increase of 20%. At 0.27x book. This IS unusual. Especially when banks are being asked to produce better ROC.
- The deal priced at ¥366. We’re there now. Banks have been sold. It is worth looking at where we are and what could happen next. It’s cheap.
Merger Arb Mondays (18 Dec) – Shinko Electric, Benefit One, Toyo, CPMC, Vinda, Costa, Volpara
- 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 – Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Lithium Power International (LPI AU), Benefit One Inc (2412 JP).
- Lowest spreads Tietto Minerals Ltd (TIE AU), Azure Minerals (AZS AU), IJTT Co., Ltd. (7315 JP), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Shidax Corp (4837 JP).
Yuanta/P-Shares Taiwan Div+ ETF: Day 1 Flows & Stock Moves
- The Yuanta/P-shares Dividend Plus ETF (0056 TT) started to rebalance its holdings on Friday and will continue to do so for the next 4 trading days.
- Stocks with buy flows dropped 0.51% on average on Friday while the stocks with sell flows dropped 0.92%. On a flow weighted basis, the numbers were -0.21% vs -0.75%.
- Since the start of November, the adds have outperformed the deletes and the TWSE INDEX. There has been significant outperformance in just the last week.
Hankook & Company (000240 KS): MBK Raises Partial Offer to KRW24,000
- MBK Partners has increased its Hankook & Company (000240 KS) partial tender offer to KRW24,000 per share, 20.0% and 51.4% above its previous offer and the last close, respectively.
- While the offer is attractive, we estimate that the minimum acceptance condition of 19.3 million shares (20.35% of outstanding shares) requires an 84.3% minority acceptance rate.
- The minority acceptance rate is challenging unless MBK can secure a ruling preventing share purchases from Cho Yang-rai, who disclosed a 2.72% stake on 14 December and opposes the tender.
HK Connect SOUTHBOUND Flows (To 15Dec23); CNOOC/Telecom/Mobile All Now To The Buy Side, Tencent NOT
- SOUTHBOUND flows showing reversion tendencies continues for a fourth week. Hs rebound vs their As on the week – especially the liquid ones.
- SOUTHBOUND saw HK$9.9bn of OUTflows on the week to 15 Dec, ALL of which was net sales of Tracker Fund of Hong Kong (2800 HK) and Tencent (700 HK).
- High-Div SOEs again saw action. This time with both CNOOC Ltd (883 HK) and China Telecom (728 HK) seeing net buying as a percentage of volume.
Hankook & Co Tender: Clues to Gauge Cancellation Risk Obtained Through Local Channels So Far
- Critical now is estimating MBK’s achievable volume in the tender offer, a key indicator for assessing cancellation risk. Evidence suggests few allies for Cho Hyun-beom, prompting MBK’s strategic persistence.
- MBK can secure 23.58%, but NPS’s involvement is pivotal. If neutral, MBK aims for 19.55%, below the minimum. MBK proceeds with a revised offering price, anticipating NPS participation.
- Though the FSS investigation may favor MBK, a successful tender offer depends on achieving 87% participation. The higher-than-expected likelihood of success hints at a strong upward stock adjustment from Monday.
Mainland Connect NORTHBOUND Flows (To 15 Dec 23): Mindray Consistently Bought, Midea Sold
- The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts to play with.
- Last week saw NORTHBOUND net sell RMB 18.6bn of A-shares on slightly lighter activity. Friday saw large NORTHBOUND net buys early in the day but ended a net sell.
- Looking at the change in the weekly position charts over the last year is striking (easiest in the Sectors table to start). Still.
Adbri (ABC AU) Warms To CRH/Barro’s Offer
- Construction play Adbri (ABC AU) has entered into a process and exclusivity deed with CRH (CRH US) and 42.7%-shareholder Raymond Barro (Chairman) in order to progress to a firm transaction.
- CRH/Barro’s non-binding indicative proposal of $3.20/share (in cash), by way of a Scheme, is a 41% premium to last close. The proposal is best & final.
- Subject to DD being carried out by CRH, this looks done.
Liquid Universe of European Ordinary and Preferred Shares: December‘23 Report
- Since mid-November, spreads have generally widened across our European liquid universe of ordinary and preferred shares (9 have tightened, 10 widened).
- Recommended trades long preferred / short ordinary shares: Media-for-Europe, Sixt, Volkswagen (still the most interesting situation).
- Recommended trades long ordinary / short preferred shares: Fuchs, Henkel, SSAB Svenska Stal.
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