In today’s briefing:
- China ADRs Delisting – Tide Is Turning – Non-HK Listed ADRs Are Already Outperforming
- MACA: Thiess’ Unsurprising Bump. NRW’s Move, If Any
- Link Net’s MTO of IDR4,800 from Axiata Open from 30 August
- SENSEX Index Rebalance Preview: Adani Green Could Replace Dr. Reddy
- MACA’s Revised Thiess Offer Makes an NRW Rival Offer Increasingly Unlikely
- ResApp’s Scheme Meeting on 7 September Still Faces Headcount Test Risk
- Hanjin Kal Club Deal: Shorting on Waning Proxy Fight & Flow Trading on MSCI Inclusion
China ADRs Delisting – Tide Is Turning – Non-HK Listed ADRs Are Already Outperforming
- On 26th Aug 2022, PCAOB and CSRC announced that they had entered into an agreement granting US authorities access to investigate public accounting firms headquartered in China and HK.
- On 2nd Apr 2022, CSRC put out a draft for public comments on the revision of certain provisions which would allow easier access by overseas regulators to China ADRs audits.
- In this note, we’ll talk about the latest developments and its implications.
MACA: Thiess’ Unsurprising Bump. NRW’s Move, If Any
- Back on the 26th July, diversified contractor MACA Ltd (MLD AU) announced a friendly off-market cash offer from fellow contractor Thiess, at A$1.025/share, a 28.1% premium to the undisturbed price.
- The Bidder’s Statement was dispatched on the 9 August. After rejecting NRW Holdings (NWH AU)‘s non-binding proposal (implied consideration of $1.085/share), MACA dispatched the Target Statement on the 25 August.
- Thiess has now lifted its all-cash Offer to A$1.075/share – a 34.4% to undisturbed. MACA is trading marginally through the revised terms. The first closing date is the 12 September.
Link Net’s MTO of IDR4,800 from Axiata Open from 30 August
- On 22 June, Axiata Group (AXIATA MK) and XL Axiata (EXCL IJ) completed the acquisition of a combined 63.45% interest in Link Net (LINK IJ) for approximately RM2.63 billion (IDR8.72 trillion).
- Today, Axiata announced that the mandatory tender offer (MTO) runs from 30 August to 28 September. The MTO price is IDR4,800 with no minimum acceptance condition.
- At the current price of IDR4,740 per share, the gross and annualised spread for a mid-October payment is 1.3% and 9.1%, respectively.
SENSEX Index Rebalance Preview: Adani Green Could Replace Dr. Reddy
- We are two-thirds of the way through the review period for the December review of the S&P BSE SENSEX Index (SENSEX INDEX). Changes become effective at the close 16 December.
- We see Adani Green Energy (ADANIGR IN) as the highest ranked non-constituent in inclusion zone, while Dr. Reddy’s Laboratories (DRRD IN) is the lowest ranked constituent in deletion zone.
- Passive trackers will need to trade over 10 days of delivery volume on Adani Green Energy (ADANIGR IN) and Dr. Reddy’s Laboratories (DRRD IN), so the impact will be significant.
MACA’s Revised Thiess Offer Makes an NRW Rival Offer Increasingly Unlikely
- Theiss has improved its MACA Ltd (MLD AU) offer from A$1.025 to A$1.075 per share. The offer is conditional on 90% minimum acceptances, FIRB approval and no prescribed occurrences.
- Theiss increased its shareholding to 15.90% of outstanding shares due to acceptances from MACA founders and directors. This is a stumbling block to a potential NRW Holdings (NWH AU) scheme.
- While the value of NRW’s default option remains higher than Thiess’ revised offer, it is increasingly unlikely that NRW will start a bidding war.
ResApp’s Scheme Meeting on 7 September Still Faces Headcount Test Risk
- Resapp Health (RAP AU)’s scheme meeting date has been set for 7 September. Pfizer Inc (PFE US)’s A$0.208 per share is its best and final offer.
- The Board hoped that the threat of a discounted equity raise and Pfizer’s final offer would sway the retail shareholders’ NO vote camp. However, there remains a vocal NO camp.
- The headcount test remains a key risk. The upside (9.5% spread to the offer) vs downside (likely equity raise at a huge discount) is an unfavourable risk/reward profile.
Hanjin Kal Club Deal: Shorting on Waning Proxy Fight & Flow Trading on MSCI Inclusion
- Bando sold all of its 17% stakes through a club deal. Of this, about 3.8% went to LX Pantos. The remaining 13% found a new home among several institutional investors.
- Outright shorting for Hanjin Kal seems to require a bit more cautious approach. That’s because there is still no definitive information on the owners of the 13% stake.
- If the price correction does not go as harshly as expected and expectations for a proxy battle resurface, we should consider switching to flow trading aimed at MSCI inclusion.
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