In today’s briefing:
- Frasers Hospitality Trust – Scheme Doc Out
- Canon (7751) – Buyback Progress Update
- Discussing Kakao Bank Block Deal Trading Dynamics
- HSI Index Rebalance: Another Small Step Towards 80 Members, But BIG Impact
- PTB Group’s Binding Offer from PAG
- A Block Deal Sale of 3.1% of Kakao Bank by KB Kookmin Bank
- HSCEI Index Rebalance: SenseTime (20 HK) Added As FAF Increases Dramatically
Frasers Hospitality Trust – Scheme Doc Out
- A little long in the tooth but the Scheme Doc for Frasers Hospitality Trust (FHT SP) was released this morning.
- It is the standard multi-hundred page document (in this case 502 pages). And it does little other than tell the same weak story as the announcement did.
- But the price is unchanged and the Scheme Meeting is 10 September 2022. This looks like it will be a done deal.
Canon (7751) – Buyback Progress Update
- Canon Inc (7751 JP) announced a buyback on 5 August. That was its 17th ¥50bn buyback in 15 years. And its first “second buyback within a single year” since 2014.
- History suggests outperformance of Peers until the end of the buyback (and it has done well here), then underperformance post-buyback.
- Consensus forward EPS and EBIT ratios vs Peers suggest Canon shares have more to catch up, but some of that would involve reclaiming historical “quality premium.”
Discussing Kakao Bank Block Deal Trading Dynamics
- It seems clear that Kakao Bank’s situation is not good as the block deal risk exposure has increased. Additional disposable volume is 15% owned by the non-strategic institutional shareholders.
- The factor that will reverse this, flow-wise, is MSCI’s float adjustment. But chances are low. So, we’d better maintain a short position betting on Kakao Bank’s further correction.
- Nevertheless, if that happens, Kakao Bank will welcome additional passive flows equal to the amount of passive money currently parked, which is a major event causing a significant passive impact.
HSI Index Rebalance: Another Small Step Towards 80 Members, But BIG Impact
- The inclusion of China Shenhua Energy Co H (1088 HK), Chow Tai Fook Jewellery (1929 HK), Hansoh Pharmaceutical (3692 HK) and Baidu (9888 HK) takes us to 73 index constituents.
- Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 5.09% and will result in a one-way trade of HK$10,562m.
- There are large shorts on Chow Tai Fook Jewellery (1929 HK) and Hansoh Pharmaceutical (3692 HK) and there could be some short covering from now to implementation.
PTB Group’s Binding Offer from PAG
- Ptb Group Ltd (PTB AU) entered a scheme implementation deed (SID) with Precision Aviation Group (PAG). The offer comprises A$1.595 + dividend up to A$0.03 per share (total of A$1.625).
- The offer price is attractive. The key conditions are shareholder approvals and FIRB approval. The scheme meeting is on 16 November.
- This is a done deal. At last close and for the 2 December payment, the gross and annualised spread to the offer + div is 3.8% and 13.5%, respectively.
A Block Deal Sale of 3.1% of Kakao Bank by KB Kookmin Bank
- On 19 August, KB Kookmin Bank sold a 3.1% stake (14.76 million shares) in KakaoBank (323410 KS).
- The block deal sale price was 28,704 won, which was 8% discount to the previous day’s closing price.
- We continue to have a Negative view of Kakao Bank, due to further overhang on more share sales, concerns about partial ban of simple remittance, and unattractive valuations.
HSCEI Index Rebalance: SenseTime (20 HK) Added As FAF Increases Dramatically
- SenseTime Group (20 HK)‘s Free-Float Adjustment Factor (FAF) increases from 3% to 40% following lock-up expiry and the stock will replace China Pacific Insurance (2601 HK) in the HSCEI INDEX.
- Using prices from the close on 19 August, estimated one-way turnover is 3.82% and will result in a one-way trade of HK$2,751m at the close on 2 September.
- Increase in the FAF on a couple of stocks saves them from index deletion in September but is probably not enough to save them from index deletion in December.
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