In today’s briefing:
- All the Scoop on the Korea Value-Up Index
- Korea Exchange Announces The Korea Value Up Index
- China’s [Maybe] Biggish [Quasi?] Bazooka
- Tech: Japan’s Biggest IPO in 6 Years, Kioxia, Is Off. Here Is the Likely Reason
- Xingda (1899 HK): No Premium Voluntary Conditional Offer to Ward off a Hostile Holder
- Silverlake Axis (SILV SP): Circular Now Out. IFA Says Fair
- Capitol Health (CAJ AU): ACCC Overhang as Scheme Meeting Set for 31 October
- Xingda (1899 HK)’s HK$1.30/Share Offer – Say What?
- MINISO Bets Big on Yonghui. Should Investors Be Concerned About the Acquisition?
- EQD | A Very Weak KOSPI 200 Is Ready to Pull Back Again
All the Scoop on the Korea Value-Up Index
- The index focuses on qualitative factors like capital efficiency and shareholder returns, but efforts to impose sector balance may have overextended its market benchmark role.
- Some companies not fitting the ‘value-up’ narrative got included, while market favorites were sidelined by sector rankings, which is puzzling given the index’s original goal.
- Still, with rebalancing cut down to once a year, we should expect the flow impact on the index names to hit harder than initially thought compared to their sector peers.
Korea Exchange Announces The Korea Value Up Index
- Korea Exchange announced the long awaited Korea Value Up Index (“K Value Up Index”) (composed of 100 stocks) today.
- Korea Exchange used a 5-step screening process to select the 100 companies in this index including market cap, profitability, shareholder returns, market evaluation, and capital efficiency.
- This Value Up index is part of the bigger “Corporate Value Up ” program in Korea. These efforts to improve Korea’s corporate governance policies is a marathon, not a sprint.
China’s [Maybe] Biggish [Quasi?] Bazooka
- Today, in a press conference held jointly by the Governor of the PBOC, the Director of the Financial Regulatory Bureau, and Chairman of the CSRC, China announced market stimulus measures.
- The PBOC will cut RRR 50bp, the 7-day repo rate 20bp, guide effective mortgage rate cuts, and lower minimum down payments on second homes. There are other commercial RE measures.
- Three major stock market measures were announced. A RMB500bn collateral swap programme, PBOC backing RMB300bn bank loans for corps to buy stocks, and a Plan to increase Central Huijin investments.
Tech: Japan’s Biggest IPO in 6 Years, Kioxia, Is Off. Here Is the Likely Reason
- Significant peer price performance declines leaves IPO valuation stretched, the desired discount multiple to attract interest has suddenly become a premium
- Investor interest in memory semiconductors, AI derivative stocks has cooled
- Peer price sell-offs are extreme but could quickly change, reflecting the highly cyclical nature of the sector
Xingda (1899 HK): No Premium Voluntary Conditional Offer to Ward off a Hostile Holder
- Xingda International (1899 HK) has disclosed a voluntary conditional offer from Mr Liu Jinlan (Chairman) at HK$1.30 per share, which aligns with the last close price.
- The offer is conditional on the offeror and concert parties representing more than 50% of voting rights. The offeror and concert parties represent 37.03% of voting rights.
- The offer is a reaction to Mr Zhao Yue’s “hostile” emergence as a substantial shareholder. It is unattractive and will require a bump to satisfy the minimum acceptance condition.
Silverlake Axis (SILV SP): Circular Now Out. IFA Says Fair
- On the 26 August, Goh Peng Ooi, founder and executive chair, made a voluntary unconditional general Offer for the 25.9% in Silverlake Axis (SILV SP) not held.
- The Offer Doc for this S$0.36/share cash Offer was dispatched on the 26th August. The Circular is also now out, which incorporates the IFA opinion.
- Trading through terms. The first close is the 7th October. I don’t expect a bump, and the share price gradually retraces back to cash terms.
Capitol Health (CAJ AU): ACCC Overhang as Scheme Meeting Set for 31 October
- The Capitol Health (CAJ AU) IE considers Integral Diagnostics (IDX AU)’s merger proposal (0.12849 Integral shares per Capitol share) fair and reasonable.
- While ACCC informal clearance is an overhang, the evidence suggests that clearance should be secured. The shareholder vote risk is low.
- The offer terms are attractive. At the last close and for the 14 November payment, the gross/annualised spread is 4.7%/37.3%.
Xingda (1899 HK)’s HK$1.30/Share Offer – Say What?
- After tyre component manufacturer Xingda International (1899 HK) was suspended recently pursuant to the Takeovers Code, an Offer seemed more likely, not another Partial Offer.
- On cue, Liu Jinlan, chairman and executive director, plus concert parties (collectively holding 37.03%), have tabled a voluntary conditional Offer (50% acceptance hurdle). But the price? A surprising zero-premium HK$1.30/share
- However, this Offer is a pre-emptive strike against former employee Yue Zhao, who holds 9.24%; and was recently appointed ED and vice-chairman of Shougang Concord (103 HK), Xingda’s major competitor.
MINISO Bets Big on Yonghui. Should Investors Be Concerned About the Acquisition?
- MINISO‘s acquisition of a 29.4% stake in the loss-making supermarket chain Yonghui for USD 890 million has been viewed negatively by investors, leading to a sharp decline in Miniso’s stock.
- The deal’s size, combined with Yonghui Superstores (601933 CH) unprofitable track record and MINISO(9896 HK) ‘s unexpected move into the low-margin, highly competitive supermarket space, has likely fueled investor concerns.
- However, we believe the acquisition provides Miniso with a strategic opportunity for growth and diversification to a sector that remains vital in the offline retail landscape at undemanding valuations.
EQD | A Very Weak KOSPI 200 Is Ready to Pull Back Again
- The last 2 weeks have been painful for investors that were LONG the KOSPI 200 INDEX, and this week is not very promising either.
- The index has advanced less than 3% since its last WEEKLY negative Close on September 6th.
- The index is in its 3rd consecutive week up (to be confirmed this Friday at the Close) but the current pattern usually ends on the third week up and reverses.
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