In today’s briefing:
- JD.com (9618 HK): Index Implications of Walmart Placement
- China Traditional Chinese Medicine (570 HK): Never a Dull Moment as Profit Warning Lands
- Thoughts On Webjet (WEB AU)’s Demerger
- Eoflow: Rights Offering of 82 Billion Won and [Medtronic & Eoflow – Don’t You Forget About Me]
- Logisteed/KKR Bigly Bid for Alps Logistics (9055) Goes Live Tomorrow. Still A Shocking Multiple
- LG Electronics’ Value-Up Disclosure Today: Impact on Initial Flow Sizing for the Value-Up Index
- Trading Situation Arising from Local Pensions’ Unusual Buying of DB HiTek
- S&P/ASX Index Rebalance Preview: Review Period Nearly Done; Big Impact Changes
- TCM (570 HK): Profit Warning Is No Biggie
- Quiddity Leaderboard S&P500 Sep 24 Rebal: Palantir, Apollo, Workday Racing for Mega$ Flows
JD.com (9618 HK): Index Implications of Walmart Placement
- Media reports indicate that Walmart (WMT US) is looking to sell 144.5m shares of JD.com (JD US) to raise up to US$3.74bn. That would be substantially all of its stake.
- There will be passive buying from global index trackers at the time of settlement of the placement shares and could absorb around 12% of the placement shares.
- There will be no passive buying from HSI, HSCEI, HSTECH and HSIII trackers in the short-term. An increase in CCASS holdings should result in passive buying in December.
China Traditional Chinese Medicine (570 HK): Never a Dull Moment as Profit Warning Lands
- China Traditional Chinese Medicine (570 HK) profit warning notes that the 1H24 net profit would decrease by 60%-70% YoY due to pricing pressure, higher impairment losses and remedial taxes.
- The profit warning could pose a risk to the scheme, as the consortium can withdraw if there is an adverse material change in China TCM’s profits or prospects.
- If there were a danger of triggering the MAC clause, the consortium would not have made the regulatory submissions. The flip side is that the warning helps the shareholders vote.
Thoughts On Webjet (WEB AU)’s Demerger
- Back on the 22 May, global travel outfit Webjet (WEB AU) announced it was exploring the separation of its two divisions – Webjet and Webjet B2C – via a demerger.
- If the demerger is implemented, shareholders will receive one Webjet B2C share for every Webjet share; plus retain their existing shares in Webjet (to be renamed WEB Travel Group).
- A demerger booklet has been dispatched, with a 17th September vote on the in-specie distribution. If approved, WEB Travel (ex-entitlement) and Webjet B2C commence trading on the 23rd September.
Eoflow: Rights Offering of 82 Billion Won and [Medtronic & Eoflow – Don’t You Forget About Me]
- After the market close on 21 August, Eoflow (294090 KS) announced a rights offering capital raise of 9.1 million new shares, representing share dilution of 23%.
- Based on the expected rights offering issue price of 9,040 won, the company is expected to raise 82.2 billion won in this capital raise.
- Eoflow has monthly cash burn rate of about 3.3 billion won. If the rights offering is successful, it would have adequate capital resources for about a couple of years.
Logisteed/KKR Bigly Bid for Alps Logistics (9055) Goes Live Tomorrow. Still A Shocking Multiple
- The Logisteed/KKR entity received its approvals between the last week of July and this past week, and told Alps Logistics (9055 JP) it wanted to launch its tender 22 August.
- It will do so. Approvals were reasonably quick (as expected) and the Special Committee and Board decided nothing material had changed. No reason to change their opinion.
- This is still a HUGE price. And everyone will be out by mid-October if they want. This is an easy deal. And a GIGANTIC win for minorities.
LG Electronics’ Value-Up Disclosure Today: Impact on Initial Flow Sizing for the Value-Up Index
- LG Electronics aims for 7% growth, a 7x EV/EBITDA multiple, and a ₩1,000 DPS with a 25% payout ratio, likely disclosing details by late October or early November.
- LG Electronics’ value-up disclosure highlights major non-financial companies’ participation before the value-up index launch, driven by regulatory pressure and concerns about index inclusion.
- Samsung and Hyundai are likely to disclose value-up plans by early September, prompting an upward revision of flow size predictions for the value-up index launch.
Trading Situation Arising from Local Pensions’ Unusual Buying of DB HiTek
- From early June until yesterday, local pension funds have purchased nearly 4% of DB HiTek’s SO. This places DB HiTek in a dominant first position in their net buying list.
- The timing of local pension funds beginning to buy DB HiTek coincidentally aligns with May 22, when DB Inc was requested by the KFTC to transition into a holding company.
- Focus on potential price impact from DB Inc.’s buying and value-up index inflows. Considering a relative overweight in DB HiTek may be strategic despite some risk.
S&P/ASX Index Rebalance Preview: Review Period Nearly Done; Big Impact Changes
- With 2 trading days left in the review period, there could be 30 adds/deletes across the S&P/ASX family of indices in September.
- Passive trackers will need to trade a lot of stock in the forecast changes, with the impact being especially large for the changes to the S&P/ASX 200 and S&P/ASX 300.
- The forecast adds have hugely outperformed the forecast deletes. Borrow recall on the deletes and increased borrow availability on the adds could result in underperformance following announcement of the changes.
TCM (570 HK): Profit Warning Is No Biggie
- China Traditional Chinese Medicine (570 HK) flagged a 60-70% drop in its 1H24E net profit versus 1H23, due to reduced sales/profit of TCM concentrate, bad debt provisions, and remedial taxes.
- MAC triggers? No – Sinopharm won’t exercise such right, even if one was ostensibly triggered. I’d be surprised if Sinopharm wasn’t fully aware of TCM’s underlying operations.
- Get involved on any dips today. Trading wide at a 11.7%/38.7% gross/annualised spread, assuming Dec-end payment.
Quiddity Leaderboard S&P500 Sep 24 Rebal: Palantir, Apollo, Workday Racing for Mega$ Flows
- The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
- In this insight, we take a look at the upcoming constituent changes in the run up to the September 2024 index rebal event.
- We expect two regular changes in September 2024. There are also several live M&A events which could trigger intra-review index changes in the late-2024/early-2025.
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