In today’s briefing:
- Block Deal Sale of 2.2% of Kakao Pay by Alipay
- TOPIX Inclusions: Who Is Ready (Mar 2024)
- Alumina (AWC AU): Further Thoughts on Alcoa’s Proposal
- MVIS Australia A-REITs Index Rebalance Preview: One Deletion & Capping Changes
- Locals Driving Corporate Reforms and 10 Korean Companies Recently Announcing Share Cancellations
- MVIS Australia Equal Weight Index Rebalance Preview: Three Close Deletions
- Feb Rebalance – JSE Auction Analytics (SA Upweighted in ACWI and EM)
- Bondalti/Ercros: Fair Offer
- Tuhu Car Lock-Up Expiry – Would Need Some Selling to Improve Liquidity when US$1.5bn Comes Unlocked
- ARM Holdings IPO Lock-Up Expiry – A US$127bn Lockup Release Might Be Too Tempting to Pass On
Block Deal Sale of 2.2% of Kakao Pay by Alipay
- After the market close on 5 March, it was reported that Alipay will sell a 2.2% stake (2.95 million shares) in Kakaopay (377300 KS) in a block deal sale.
- A key component of this block deal sale is that there will be a lock up period of 90 days post the sale date.
- We would avoid this block deal sale. There is a high probability of Kakao Pay’s share price falling below the block deal price of 38,380 won after 90 days.
TOPIX Inclusions: Who Is Ready (Mar 2024)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- There were no Section Transfers announced in January or February so currently there are no live TOPIX Inclusion events but there are some pre-event names to be monitored closely.
- The upcoming TOPIX flows in end-April 2024 will be more complicated than the other quarterly rebalances as there will be more flows due to the annual liquidity factor review.
Alumina (AWC AU): Further Thoughts on Alcoa’s Proposal
- I have received several questions from readers on Alcoa (AA US)’s non-binding proposal for Alumina Ltd (AWC AU) in the context of the current gross spread of 9.2%.
- The questions primarily concerned Citic Resources Holdings (1205 HK) voting intentions, the probability of a bump and the likelihood of Aloca shareholders supporting the transaction.
- CITIC Resources’ lack of public endorsement of the transaction is due to HKEx listing requirements and not an indication of a NO vote risk.
MVIS Australia A-REITs Index Rebalance Preview: One Deletion & Capping Changes
- With the review period for the March rebalance complete, Abacus Storage King (ASK AU) could be deleted from the index and there will be capping changes.
- The index changes will lead to a one-way turnover of 3.6% resulting in a one-way trade of A$21m. There are three stocks with over A$4m to trade.
- Goodman Group (GMG AU) is an inclusion to a global index in March and that buying will far outweigh the selling from the Vaneck Vectors Australian Property ETF (MVA AU).
Locals Driving Corporate Reforms and 10 Korean Companies Recently Announcing Share Cancellations
- In a recent discussion with a client, one of the questions that was raised was regarding the impact the local investors are having on the corporate governance reforms in Korea.
- The number of local investors in the Korean stock market has jumped in the past few years from 5.3 million in 2017 to 14.4 million in 2022.
- All in all, I think Korea is about 3-5 years behind Japan in various corporate governance reforms. So it has a lot of catching up to do.
MVIS Australia Equal Weight Index Rebalance Preview: Three Close Deletions
- With the review period complete, there are 3 stocks that are close to the deletion zone and could be removed from the index at the March rebalance.
- Even if there are no constituent changes, capping changes will lead to one-way turnover of 4.4% and a one-way trade of A$97m.
- There are 9 stocks with over A$5m to trade from passive trackers but the impact on the stocks is not very high.
Feb Rebalance – JSE Auction Analytics (SA Upweighted in ACWI and EM)
Indices were rebalanced in the closing auction last week Thursday.
Turnover on the JSE for the day was R25.6bn, R12.9bn traded in the closing auction (50%).
Turnover at the November rebalance was R40.6bn.
Bondalti/Ercros: Fair Offer
- Ercros (ECR SM), a venerable Spanish chemical company has received a €3.6/share, cum dividend, offer from Bondalti. The premium is 40.6%, implied equity €329.17 million and implied EV €421 million.
- The offer represents 6x EV/Fwd NTM EBITDA, typical mid-cycle multiple for commodity chemicals, 12.9x Fwd P/E. The offer price accounts for an improving H2. The shares suffer from low liquidity.
- Therefore the top shareholders will be glad to cash in. How long does the Spanish government take to authorise FDI will be the primary concern. Gross spread is 4.7%. Long.
Tuhu Car Lock-Up Expiry – Would Need Some Selling to Improve Liquidity when US$1.5bn Comes Unlocked
- Tuhu Car (9690 HK) was listed in Hong Kong on 26th Sept 2023 after raising US$151m. The IPO had been a 100% primary offering.
- Tuhu is an integrated online and offline platform for automotive services in China.
- Trading with a very small float of 1.8%, in its upcoming six-month lockup expiry, >90% of Tuhu’s pre-IPO investors, cornerstones and management combined stakes will come off six-month lockup expiry.
ARM Holdings IPO Lock-Up Expiry – A US$127bn Lockup Release Might Be Too Tempting to Pass On
- Softbank raised around US$4.9bn via selling some of its stake in ARM Holdings (ARM US)’ US IPO. Its remaining 90% stake will be released from its IPO linked lockup soon.
- ARM develops and licenses high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
- In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.
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