In today’s briefing:
- CSRC and PCAOB “Agree” On Audit Terms – Now PCAOB Will Try To Prove a Negative
- Ramsay and KKR’s Game of Cat and Mouse
- KODEX FnGuide Battery ETF Rebalancing Checkup
- Merger Arb Mondays (29 Aug) – Ramsay, DTAC/True, Pendal, Link Admin, Ramsay, Infomedia, ResApp, MACA
- Jeju Air Rights Offering Worth 320 Billion Won Diluting Existing Shareholders
CSRC and PCAOB “Agree” On Audit Terms – Now PCAOB Will Try To Prove a Negative
- Friday in US time, the China Securities Regulatory Commission (CSRC), China’s MOF, and the US Public Company Accounting Oversight Board (PCAOB) “agreed” on a Statement of Protocol.
- This SoP sets the outlines for PCAOB access to inspect/investigate audit papers and accounting firms in China and HK for companies listed in the US.
- The releases’ difference in language is to be expected – different constituencies – but as PCAOB Chair Williams said, “Now we will find out whether those promises hold up.”
Ramsay and KKR’s Game of Cat and Mouse
- Ramsay Health Care (RHC AU) disclosed that the KKR & Co Inc (KKR US) consortium withdrew its indicative proposal but remains committed to the alternative proposal, which the Board earlier rejected.
- The alternative proposal, while inferior to the indicative proposal, is still attractive and better than the status quo of no deal. The Board will engage for an improved offer.
- The value gap between the parties is not huge, and a deal is possible. The upside (20% to alternative proposal) vs downside (-9% to undisturbed price) is worth a punt.
KODEX FnGuide Battery ETF Rebalancing Checkup
- I recommend focusing on the ceiling regression play. In this regard, SK Innovation has the most notable regression spread, and we should use Samsung SDI as a hedge against it.
- As for constituent change, SungEel HiTech is firmly positioned with a market cap of ₩1.34T and a float rate of 50%. And it belongs to the Waste batteries keyword.
- But, it is unclear whether SungEel will be in the top 25 in scoring. We should patiently wait until confirmation as it’s still a worthy candidate requiring our attention.
Merger Arb Mondays (29 Aug) – Ramsay, DTAC/True, Pendal, Link Admin, Ramsay, Infomedia, ResApp, MACA
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Infomedia Ltd (IFM AU), Ramsay Health Care (RHC AU), Resapp Health (RAP AU), True Corp Pcl (TRUE TB).
- Lowest spreads MACA Ltd (MLD AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), Excelpoint Technology (EXLP SP), MyDeal.com.au Ltd (MYD AU), China Vast Industrial Urban Development (6166 HK)
Jeju Air Rights Offering Worth 320 Billion Won Diluting Existing Shareholders
- On 26 August, Jeju Air (089590 KS) announced a rights offering worth 320 billion won, representing 39% of its market cap.
- The expected rights offering price is 11,750 won (29% lower than its current price of 16,550 won) and the expected rights offering shares are 27.23 million shares.
- Overall, we are negative on this rights offering mainly because we believe it is likely to result in too much dilution for the existing shareholders.
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