In today’s briefing:
- AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote
- KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks
- CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete
- Quiddity Leaderboard SE600 Jun 23: Three ADDs/DELs Likely
- Silver Lake/Software AG: Agreed Offer
- Shockwave Medical Inc (SWAV US): Initial Thought on Takeover Talk and Probable Pricing
AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote
- Ahead of Aag Energy Holdings (2686 HK)’s vote on 27 April, the gross spread to Xinjiang Xintai Natural Gas (603393 CH)’s HK$1.85 offer sits uncomfortably high at 13.5%.
- The key risk remains that minorities vote down the scheme. Retail forums are active with mixed views on the offer. Peers have also modestly re-rated, which helps the NO camp.
- At the last close, the risk-reward profile is unfavourable as the downside to a scheme fail (-16.0%) is greater than the upside to a scheme pass (+13.5%).
KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks
- With 4 trading days left in the review period, we see three potential changes for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in June.
- Kum Yang (001570 KS), Cosmochemical (005420 KS) and Youlchon Chemical (008730 KS) could replace Dongwon Industries (006040 KS), Hwaseung Enterprise (241590 KS) and Hyundai Home Shopping Network (057050 KS).
- If approved by shareholders, the Dongkuk Steel Mill (001230 KS) split increases the probability of Youlchon Chemical (008730 KS) inclusion and Hyundai Home Shopping Network (057050 KS) could avoid deletion.
CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete
- With 4 trading days to go the review period, we see 13 potential index changes at the June rebalance that will be implemented at the close on 9 June.
- We estimate a one-way turnover of 1.94% at the June rebalance leading to a one-way trade of CNY 5.05bn.
- With the review period nearly complete, the gap between the potential adds and deletes could narrow ahead of the announcement of the changes as pre-positions are built.
Quiddity Leaderboard SE600 Jun 23: Three ADDs/DELs Likely
- In this insight, we take a look at the names leading the race to become ADDs/DELs for the STX Europe 600 and EUROSTX Indices for the March 2023 Rebalance.
- There is roughly one more month left to the base date. At present, I see around 3 ADDs/DELs in the June 2023 review.
- Separately, STX Europe 600 members Credit Suisse (CSGN SW) and Vantage Towers (VTWR GR) could possibly get deleted in the next few months triggering intra-review index changes.
Silver Lake/Software AG: Agreed Offer
- Silver Lake has announced its intention to launch a cash offer to delist Software AG at €30/share (53% premium, 12.7x EV/NTM EBITDA, 20.5x Fwd P/E), targeting 37% of the float.
- The Board is suportive and Silver Lake does not seek a domination agreement. The offer price will not be adjusted by the next dividend (€0.05, ex-date 19 May).
- My fair value estimate (EV/EBITDA based) is €26.54/share, the offer price seems adequate. The offer targets 37.6% of the float, feasible. Gross spread (incl. divi) is 0.97%, not terribly exciting.
Shockwave Medical Inc (SWAV US): Initial Thought on Takeover Talk and Probable Pricing
- Shockwave Medical Inc (SWAV US) is reportedly drawing takeover interest from Boston Scientific. Shockwave can potentially be one of Boston Scientific’s largest ever acquisitions. Probable pricing still offers upside potential.
- Shockwave has an addressable market opportunity of $8.5 billion. The company has guided for 2023 revenue of $660–680 million, which represents 35–39% YoY growth.
- Addition of Shockwave will bolster Boston Scientific’s cardiovascular portfolio. No official announcement has been made by any of the companies. There is no certainty they will lead to a deal.
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