In today’s briefing:
- HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
- United Malt/Malteries Soufflet: I’ll Drink To That!
- EQD | Introducing the Market Reversal Matrix (MRM): Predict Trend Reversal with Bayesian Models
- CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes
- Musgrave Minerals (MGV AU): Ramelius’ Offer Edges past Westgold’s Offer
- (Mostly) Asia M&A, June 2023: DDH1, Dali Foods, NWS Holdings, JSR Corp, Lutronic, Chindata
- Healthway Medical (HMED SP): OUE Healthcare’s Delisting Offer
HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
- Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
- The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
- With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.
United Malt/Malteries Soufflet: I’ll Drink To That!
- Back on the 28 March, United Malt Group Ltd (UMG AU) entered into a NBIO with Malteries Soufflet at an Offer Price of $5.00/share, a 45.3% premium to undisturbed.
- After a lengthy due diligence process, the two companies have now entered into a binding agreement of A$5.00/share, by way of a Scheme. UMG’s board has unanimously recommended the bid.
- The Offer is subject to FIRB and other regulatory approvals. Malteries Soufflet and UMG are the second and fourth-largest maltsters in the world.
EQD | Introducing the Market Reversal Matrix (MRM): Predict Trend Reversal with Bayesian Models
- A market-timing device that classifies historical trend patterns/reversals in “buckets”, to generate a “matrix” showing the market’s average trend reversal “behavior” at the end of each trend “type”.
- A purely statistical approach: using Bayesian Models to determine the probability of DAILY or WEEKLY trend reversal at precise LONG/SHORT support prices at fixed points in time.
- The analogy with the game of Blackjack: knowing the probability of a trend reversal can be 30% or 90% (not always =50%) can be a significant edge for the investor.
CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes
- Two thirds of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
- There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.
- The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.
Musgrave Minerals (MGV AU): Ramelius’ Offer Edges past Westgold’s Offer
- Musgrave Minerals (MGV AU) has recommended a cash and scrip off-market takeover offer from Ramelius Resources (RMS AU) at 1 RMS share for every 4.21 MGV shares + A$0.04 cash.
- RMS’ offer is attractive compared to adjusted exchange ratios and peer multiples. The offer, which has a 50.1% minimum acceptance condition, has secured commitments from shareholders representing 12.13% of shares.
- At the last close, RMS’ offer is 14.9% higher than Westgold Resources (WGX AU)’s rival scrip off-market takeover offer of 1 WGX share for every 5.37 MGV shares.
(Mostly) Asia M&A, June 2023: DDH1, Dali Foods, NWS Holdings, JSR Corp, Lutronic, Chindata
- For the month of June, 13 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$9bn.
- The average premium for the new deals announced (or first discussed) in June was 42%.
- This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.
Healthway Medical (HMED SP): OUE Healthcare’s Delisting Offer
- Healthway Medical Corp (HMED SP) received a delisting proposal from OUE Lippo Healthcare (IHC SP) at S$0.048 per share, a 45.5% premium to the undisturbed price (28 June).
- The key conditions are HMED shareholder approval and the offeror and concert parties representing >50% of voting rights (satisfied due to irrevocables).
- The offer price is attractive. The EGM is likely to be held in late September. The current price of S$0.046 implies a gross spread of 4.3%.
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