In today’s briefing:
- CK Hutchison (1 HK): Political Turbulence
- Tsuruha (3391) – Welcia (3141) – Tsuruha Earnings In a Week – Still Good To Be Long The Ratio
- HKBN (1310 HK): MBK Ups Stake Via VLN Conversion
- Ramelius/Spartan Merger: MergeCo Close to ASX100 Index Inclusion
- HK Connect SOUTHBOUND Flows (To 14 Mar 2025); Big Volumes, Big Net; Tech and Banks Still Leading
- Spartan Resources (SPR AU): A Rumoured Merger with Ramelius Resources (RMS AU)
- A/H Premium Tracker (To 14 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- Merger Arb Mondays (17 Mar) – Seven & I, Tenma, Proto, OneConnect, Vesync, Tam Jai, Insignia
- Weekly Deals Digest (16 Mar) – Rio Tinto, De Grey, HKBN, ESR, Seven & I, Makino, Tenma, JXAM
- SelfWealth (SWF AU): 22nd April Scheme Vote
CK Hutchison (1 HK): Political Turbulence
- On 13 March, Ta Kung Pao, a Hong Kong newspaper owned by the Chinese government and Communist Party, denounced CK Hutchison Holdings (1 HK)’s planned port transaction.
- The opinion piece is mainly political rhetoric, as even if China managed to block the deal, it would still not address the underlying concerns expressed in the article.
- In the near term, the shares will likely be under pressure from a nationalistic backlash. Nevertheless, deal or no deal, the valuation remains undemanding.
Tsuruha (3391) – Welcia (3141) – Tsuruha Earnings In a Week – Still Good To Be Long The Ratio
- Tsuruha and Welcia are on the road to a merger, where Tsuruha takes over Welcia but Aeon ends up owning “more than 50% but less than 51%” of Tsuruha.
- The Price Ratio is now 4.24x. Trailing EPS ratios is >5. Forward EPS ratios are further above 5. BVPS ratio? Near 5. Welcia grows storecount. Tsuruha makes more money/store.
- Tsuruha changed its FY-end to match that of Welcia/Aeon so both will report earnings/guidance in just over 3 weeks. That will likely influence the ratio.
HKBN (1310 HK): MBK Ups Stake Via VLN Conversion
- China Mobile (941 HK) has made a pre-conditional HK$5.23/share voluntary Offer for HKBN Ltd (1310 HK). However, a possible separate Offer from I Squared continues to make the news.
- In an unusual move, MBK, via Twin Holding, has converted HK$970.5mn of VLNs, at a whopping HK$11.60/share conversion price, lifting MBK’s stake to 16.39% on a fully diluted basis.
- Speculation is rife that MBK provides an irrevocable to I Squared for its enlarged shareholding. Maybe. I still don’t see China supporting a U.S.-based infrastructure firm over an SOE .
Ramelius/Spartan Merger: MergeCo Close to ASX100 Index Inclusion
- Ramelius Resources (RMS AU) and Spartan Resources /Australi (SPR AU) have signed a binding Transaction Implementation Deed to enter into a ‘Transformational Combination’.
- For each share of Spartan Resources (SPR AU) held, shareholders will receive A$0.25 in cash and 0.6957 Ramelius Resources (RMS AU) shares, implying a value of A$1.78/share for Spartan Resources.
- The merger is expected to complete late July/ early August, and the merged entity could be added to the S&P/ASX 100 Index in September.
HK Connect SOUTHBOUND Flows (To 14 Mar 2025); Big Volumes, Big Net; Tech and Banks Still Leading
- Gross SOUTHBOUND volumes dropped again somewhat but still high at HK$625bn. NET buying by SOUTHBOUND was HK$61bn which is HUGE.
- The flows here are still striking. >25% of the top 100 most liquid Southbound eligible stocks saw SOUTHBOUND buy more than 10% of weekly traded volume to March 12.
- A summary of important China-related stock news as I saw it this week is included.
Spartan Resources (SPR AU): A Rumoured Merger with Ramelius Resources (RMS AU)
- The AFR reports that Ramelius Resources (RMS AU) and Spartan Resources /Australi (SPR AU) are in advanced talks about a low-premium merger through a scheme of arrangement.
- A merger will result in synergies due to more significant gold production and lower costs. By adding ore to Mount Magnet, Spartan could fix Ramelius’ near-term production gap.
- My analysis suggests an exchange ratio of around 0.82x (0.82x RMS share per SPR share). This implies an SPR price of A$1.80, a 12.8% premium to the last close.
A/H Premium Tracker (To 14 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- AH Premia continue to fall. Spread curve torsion was a barbell this week. Narrow and wide spreads see Hs outperform. Middling spreads outperform less.
- To me, warning signs are flashing on spreads. They are at their narrowest in 5yrs and they are volatile, though volatility is coming down.
- Lots of spreads see the HA premium less than 15%. That is historically tight.
Merger Arb Mondays (17 Mar) – Seven & I, Tenma, Proto, OneConnect, Vesync, Tam Jai, Insignia
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Tenma Corp (7958 JP), Seven & I Holdings (3382 JP), OneConnect Financial Technology (OCFT US), Soundwill Holdings (878 HK), Insignia Financial (IFL AU).
- Lowest spreads: Makino Milling Machine Co (6135 JP), Shibaura Electronics (6957 JP), Domain Holdings Australia (DHG AU), Proto Corp (4298 JP), PointsBet Holdings (PBH AU).
Weekly Deals Digest (16 Mar) – Rio Tinto, De Grey, HKBN, ESR, Seven & I, Makino, Tenma, JXAM
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: JX Advanced Metals (5016 JP) to list on 19 March.
- Event-Driven developments: Rio Tinto Ltd (RIO AU), De Grey Mining (DEG AU), HKBN Ltd (1310 HK), ESR Group (1821 HK), Seven & I Holdings (3382 JP), Tenma Corp (7958 JP).
SelfWealth (SWF AU): 22nd April Scheme Vote
- On the 27th Feb 2025, online trading player SelfWealth Ltd (SWF AU entered into Scheme with Singaporean-based wealth manager Svava.
- Svava tabled a A$0.28/share Offer, in cash, by way of a Scheme, trumping Bell Financial (BFG AU)‘s A$0.25/share earlier bid. Svava also has a 18.83% stake.
- The Scheme Booklet is now out, with a Scheme Meeting on the 22nd April. Expected implementation on the 7th May. The IE (Grant Thorton) says fair & reasonable.
Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
Unlock all research summaries