In today’s briefing:
- ChiNext/ChiNext50 Index Rebalance Preview: Potential Changes & Basket Performance
- TOPIX Inclusions: Who Is Ready (Jul 2023)
- JSR (4185 JP) Takeover – Why So Wide? FUD and Flows
- Chindata (CD US): China Merchants Capital’s Rival Privatisation Offer
- S&P/ASX Index Rebalance Preview: Potential Changes in September
- Costa – Another Bite at the Apple for Paine Schwartz?
- Hyundai G.F. Holdings: A Holdco Creation With In-Kind Investment in HDS & Hyundai Green Food
- Posco DX’s KOSPI Transfer Listing: Hankyung Exclusive Report
- Opportunistic Deal with Grounds for a Bump-Up
ChiNext/ChiNext50 Index Rebalance Preview: Potential Changes & Basket Performance
- One third of the way through the review period, we forecast 10 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in December.
- Passive trackers are estimated to trade around +/-0.5 days ADV on most of the potential adds/deletes, though there are some deletes that will have over 1 day ADV to sell.
- The potential inclusion to one or both indices have outperformed the potential deletes by a huge margin in the 5 months. We’d wait for a pullback to re-enter positions.
TOPIX Inclusions: Who Is Ready (Jul 2023)
- 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.
- Anycolor (5032 JP) and Lifedrink (2585 JP) have already confirmed their moves to the Prime Market and are expected to have TOPIX Inclusion Events at the end of July 2023.
- More recently, Plus Alpha Consulting (4071 JP) announced their move to the Prime Market and are likely to have a TOPIX Inclusion Event at the end of August 2023.
JSR (4185 JP) Takeover – Why So Wide? FUD and Flows
- In the last week of June, Japanese government-affiliated Japan Investment Corp (“JIC”) announced it would take over JSR Corp (4185 JP). A “surprise” but perhaps not totally.
- It traded tight, then it traded back out. Then worse. Then worse again. There were good reasons for this. There were perhaps less good reasons too.
- FUD and Flows mean that it is likely to continue to trade wide for the near future.
Chindata (CD US): China Merchants Capital’s Rival Privatisation Offer
- China Merchants Capital (CMC) disclosed a competing preliminary non-binding proposal to acquire Chindata Group (CD US) at US$9.20 per ADS, a 15.0% premium to Bain Capital’s US$8.00 per ADS offer.
- Astonishingly, Chindata did not publicly disclose the CMC offer, which was sent to the special committee on 9 June, i.e., 34 days ago.
- CMC must get Bain Capital’s support due to its 92.34% voting rights. The presence of a credible competing proposal will require Bain Capital to match CMC’s offer.
S&P/ASX Index Rebalance Preview: Potential Changes in September
- We forecast 22 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
- Some of the changes are high probability while others are close to cutoffs. The impact of passive trading will be pretty large on a lot of stocks.
- Short interest on the potential deletes indicates some pre-positioning but there should still be a fair bit more to do.
Costa – Another Bite at the Apple for Paine Schwartz?
- Back in October 2022, Costa Group (CGC AU), one of Australia’s largest fresh fruit and vegetable producers, was understood to have been approached by its former major shareholder, Paine Schwartz.
- This was discussed in Costa Group’s Low-Hanging Fruit: Paine Schwartz Renews Interest. At the time, media reports speculated Paine Schwartz had no current intention of making a takeover bid.
- Last week, Paine Schwartz made an A$3.50/share NBIO by way of a Scheme. Paine Schwartz currently holds 14.84%.
Hyundai G.F. Holdings: A Holdco Creation With In-Kind Investment in HDS & Hyundai Green Food
- Last week, Hyundai Dept Store Group announced that it will establish a single holding company structure with Hyundai G.F. Holdings controlling all of the group affiliates.
- Hyundai G.F. Holdings plans to make an in-kind investment in Hyundai Department Store (HDS) to make Hyundai Green Food and Hyundai Department Store as subsidiaries.
- This in-kind investment in HDS and Hyundai Green Food by Hyundai G.F. Holdings is not a deal that adds clear-cut value to Hyundai G.F. Holdings’ shareholders.
Posco DX’s KOSPI Transfer Listing: Hankyung Exclusive Report
- Posco DX has begun the selection process for its lead underwriter for its transfer to the KOSPI market and plans to complete the transfer listing within this year.
- Considering the recent retail insanity witnessed in most local large-cap battery stocks, Posco DX will likely experience further intensified short-term price fluctuations with this new development as a catalyst.
- The likely replacement for Posco DX’s KOSDAQ 150 spot is Konan Technology, which has become a top reserved issue in Posco DX’s GICS sector (Information Technology) in the previous review.
Opportunistic Deal with Grounds for a Bump-Up
- Prior to announcement, net cash of Boiron SA (BOI FP) represented 1/3rd of market cap. Most of that cash will now be distributed, conditional on deal success.
- Although the premium is 36%, at 9.2x EV/Fwd EBIT, the offer seems cheap vs. comparables. The deal is neutral for the Boirons, whom will get a c.€126 million special dividend.
- The offer facilitates the entry of a private equity healthcare specialist. Delisting requires acceptances from 57.6% of the float. Gross spread is +0.4%. Investors may require an offer around €52.
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