In today’s briefing:
- IDX30/LQ45/IDX80 Index Rebalance: 4 Days to Implementation
- SenseTime (20 HK): Index Inclusions Incoming?
- Northbound Stock Connect Expansion: Updated Details
- JAFCO Tender Offer Results – Low Pro-Ration Surprise, Murakami Overhang
- Adani Enterprises FPO Update: Hindenburg, Anchors, and Righteous Indignation
- Acotec (6669 HK): Boston Scientific’s HK$20 Partial Offer Unconditional
- Where To Go With Warrego?
- AAG Energy (2686 HK): Is Xinjiang Xintai Returning for Another Bid?
- Xingda (1899 HK): HK$1.88 Partial Offer Now Open
- Nitto Denko Q3 Results and Buyback Announced
IDX30/LQ45/IDX80 Index Rebalance: 4 Days to Implementation
- There are 3 changes for the IDX30 Index, 6 changes for the LQ45 Index, and 7 changes for the IDX80 Index at the rebalance to be implemented on 31 January.
- Largest passive inflows are expected to be on Sumber Alfaria Trijaya Tbk Pt (AMRT IJ) and Surya Esa Perkasa (ESSA IJ).
- With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.
SenseTime (20 HK): Index Inclusions Incoming?
- SenseTime Group (20 HK) was added to the Non-SDN Chinese Military-Industrial Complex Company (NS-CMIC) list on 10 December 2021. So, the stock is not a part of any global indices.
- There is a possibility that the stock is no longer restricted to U.S. investors and that could lead to multiple index inclusions over the next few months.
- Inclusion in the MSCI China Index could take place in February or May while inclusion in the FTSE All-World Index could take place in March.
Northbound Stock Connect Expansion: Updated Details
- On 19 January, the HKEX clarified the liquidity criteria as well as treatment of Differentiated Voting Rights (DVR) stocks and the criteria for current Northbound stocks to become Sell-only.
- We currently see 975 China A-shares becoming eligible for Northbound Stock Connect when the extension is implemented.
- With the extension likely to be implemented in June, there will be additions to the MSCI China Index, FTSE All-World Index and FTSE All-Cap Index in August and September.
JAFCO Tender Offer Results – Low Pro-Ration Surprise, Murakami Overhang
- Jafco Co Ltd (8595 JP) announced the results of its Tender Offer Buyback today. They wanted to buy 16.8mm shares including 13.9mm from Murakami-san. He sold 9.63mm. Oops.
- Pro-Ration was 69.25% which means that Murakami entities are still long about 4.276mm shares or 5.83% of shares out.
- There should be some index selling, and some Murakami Overhang. There may be more overhang at recent prices.
Adani Enterprises FPO Update: Hindenburg, Anchors, and Righteous Indignation
- The Adani Enterprises (ADE IN) Further Public Offering (“FPO”) expected to raise Rs 200bn has its first leg publicly complete with anchor investors taking Rs 59.849bn.
- Noted shortseller Hindenburg Research published a long report suggesting Adani Enterprises and indeed the Adani Group were over-priced according to fundamentals and were the result of a “con.”
- Now the book build starts. Deal structure and Adani Group CFO comments continue to suggest that Liquidity is a Bug, not a Feature.
Acotec (6669 HK): Boston Scientific’s HK$20 Partial Offer Unconditional
- As expected, Acotec Scientific Holdings (6669 HK)’s partial offer from Boston Scientific (BSX US) at HK$20 per share is now unconditional. The final closing date is 9 February.
- The current acceptances representing 78.59% of outstanding shares imply current proration is 82.71%. Current pro-ration suggests CA Medtech post-offer shares will be counted towards the public float.
- Based on the current proration of 82.71% and at the last close price of HK$19.78 per share, the breakeven price is HK$19.00 per share.
Where To Go With Warrego?
- It’s a fair bet Hancock Prospecting and Mineral Resources (MIN AU) are actively discussing the final stages for Warrego Energy (WGO AU) behind the scenes.
- It is unlikely MinRes aggressively builds a ~19% stake in a company subject to a two-way takeover battle, and declares its position “strategic” with no intention of making an Offer.
- This stake may be a bargaining chip from MinRes to keep Hancock on the sidelines in its tilt for Norwest Energy NL (NWE AU).
AAG Energy (2686 HK): Is Xinjiang Xintai Returning for Another Bid?
- Aag Energy Holdings (2686 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers on 26 January.
- It is likely that Xinjiang Xintai Natural Gas (603393 CH), the largest shareholder representing 56.95% of outstanding shares is seeking to privatise AAG.
- The potential bid is likely privatisation through a scheme. Multiples from Xinjiang Xintai’s previous voluntary cash offer in 2018 suggest an offer north of HK$2.00.
Xingda (1899 HK): HK$1.88 Partial Offer Now Open
- Xingda International (1899 HK)’s partial offer from a management-controlled offeror at HK$1.88 per share is now open. The IFA opines it to be fair and reasonable.
- The partial offer is conditional on the offeror/concert parties, which have a 45.60% stake, hitting 50.01% voting rights and approval by the requisite majority of shareholders on the acceptance form.
- The 4.41% minimum acceptance is not onerous. Based on a proration of 8.88% and at the last close price of HK$1.59 per share, the breakeven price is HK$1.56 per share.
Nitto Denko Q3 Results and Buyback Announced
- Nitto Denko (6988 JP) today announced Q3 results, lower full-year guidance with one-quarter left to go, sharply undercutting implied Q4 results vs the Street.
- The company also announced a buyback of 4.1-4.7% of shares out over the next 6mos. Assuming the share price falls in reaction, this could be closer to the top end.
- The buyback is non-negligible as a portion of Likely Real World Float and as such the situation is worth a look – for those with a position and those without.
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