In today’s briefing:
- Keisei Electric Investor Activism Update: The Vote Count Could Shake Keisei’s Board
- L’Occitane (973 HK): Conditional Offer Opens
- Hollysys (HOLI US): Ascendent Finally Obtains Regulatory Approvals
- HSCEI Index Rebalance Preview: Two Changes Likely in September
- Quiddity JPX-Nikkei 400 Rebal 2024: Final Expectations
- HK Connect SOUTHBOUND Flows (To 28 June 2024); Still a Net Buy, but Less Strong. Financials Dominate
- CPMC Holdings (906.HK) Privatization – Some New Information Worth the Attention
- Shift Up IPO: Details, Bookbuilding & Index Inclusion
- STAR50 Index Rebalance Preview: Two Changes & Over US$1.2bn to Trade
- Boeing/Spirit AeroSystems: All-Stock Deal
Keisei Electric Investor Activism Update: The Vote Count Could Shake Keisei’s Board
- Palliser’s proposal failed to meet the challenging two-thirds threshold at the AGM. Given the ownership landscape, this outcome was anticipated.
- Palliser nearing 50% approval at Keisei’s AGM could signify a triumph, potentially leading to significant pressure on management and a positive shift in share price performance.
- Keisei Electric Railway Co (9009 JP)‘s valuation, now attractively low post a 33% drop and with a potential OP guidance hike, presents minimal downside at a 26.0x EV/OP multiple.
L’Occitane (973 HK): Conditional Offer Opens
- The L’Occitane (973 HK) IFA opines that Reinold Geiger’s conditional voluntary cash (HK$34.00) or scrip offer (10 rollover shares for each share, subject to a cap) is fair and reasonable.
- Irrevocable/Letters of support have nudged lower from 49.83% (17 June) to 47.66% of disinterested shares due to Southeastern Asset Management selling its shares.
- Nevertheless, the scrip option, an attractive offer and no vocal opposition should facilitate achieving the minimum acceptance condition. At the last close, the gross spread was 2.4%.
Hollysys (HOLI US): Ascendent Finally Obtains Regulatory Approvals
- Six months after announcing a binding proposal, Ascendent has obtained all the Chinese regulatory approvals for its US$26.50 Hollysys Automation Technologies (HOLI US) offer.
- The gross spread was wide due to the information vacuum, which has resulted in various conspiracy theories and rumours circulating.
- The two remaining conditions required for close are the maximum dissenting cap (should be waived) and minimum net cash condition (satisfied). At the last close, the gross spread was 22.5%.
HSCEI Index Rebalance Preview: Two Changes Likely in September
- SenseTime Group (20 HK) and JD Logistics (2618 HK) are potential deletions while PICC Property & Casualty (2328 HK) and New Oriental Education & Techn (9901 HK) are potential adds.
- Estimated one-way turnover at the rebalance is 1.8% resulting in a one-way trade of HK$950m. Official capping will be based off the close of trading on 3 September.
- There will be 1-2x ADV to buy on the adds and over 2x ADV to sell in JD Logistics. The impact on SenseTime is lower given the recent surge in volume.
Quiddity JPX-Nikkei 400 Rebal 2024: Final Expectations
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index provider in August every year. The reference period for the August 2024 index rebal event is now complete.
- In this insight, we take a look at our final expectations for ADDs and DELs.
HK Connect SOUTHBOUND Flows (To 28 June 2024); Still a Net Buy, but Less Strong. Financials Dominate
- SOUTHBOUND was again a net buyer, for HK$9.3bn this week, on smallish two-way volumes. Banks were a big buy.
- It is not clear how much of this is H/A discounts, expected dividend tax removal, shareholder return KPIs for SOE CEOs, upcoming Third Plenum policy, or national team buying…
- But valuations are acceptable. Flows are good. Policy changes are afoot. SOUTHBOUND may continue to see inflows – national team and otherwise.
CPMC Holdings (906.HK) Privatization – Some New Information Worth the Attention
- ORG purchased 27% of CPMC’s shares at HK$6/share in 2015.After about eight years, Baosteel’s Offer Price was only HK$6.87/share. The annualized return rate was low, which obviously cannot satisfy ORG.
- Baosteel and CPMC have been in talks for a long time – There may have been some “tacit agreement” between the two parties. The approval process is smooth so far.
- For acquisitions/consolidation between SOEs, private enterprises usually have limited chances of winning.ORG has financial pressure and the approval process face uncertainties. There would be more negotiations among CPMC, ORG, Baosteel.
Shift Up IPO: Details, Bookbuilding & Index Inclusion
- Shift Up (462870 KS) will raise KRW 435bn (US$315m) in its IPO, valuing the company at KRW 3,482bn (US$2.52bn). Listing is expected later this month.
- Competition for the shares has been fierce with institutional investors indicating demand for 226x the number of shares on offer at prices higher than the top end of the range.
- Inclusion in the KOSPI 200 looks likely in June 2025, while inclusion in global indices is likely in December. But there could be some passive inflows in September.
STAR50 Index Rebalance Preview: Two Changes & Over US$1.2bn to Trade
- The review period for the September rebalance ends 31 July. We expect the changes to be announced 30 August with the implementation taking place after the close on 13 September.
- We expect the index committee to continue using a 6-month minimum listing history resulting in two changes to the index.
- One-Way turnover is estimated at 3.5% resulting in a one-way trade of CNY 4.5bn (US$618m). Passive trackers will need to trade 4-8x ADV on the index changes.
Boeing/Spirit AeroSystems: All-Stock Deal
- On July 1, Boeing Co (BA US) announced a definitive agreement to acquire Spirit Aerosystems Holdings, Inc (SPR US) in an expected all-share deal valued at c.$4.7 billion, or $37.25/share.
- Consideration is calculated using a floating exchange ratio ($37.25 divided by 15-day VWAP) with a collar. 0.20466 using Boeing’s last closing share price, which implies 3.9% dilution for Boeing’s shareholders.
- The offer price is 6.4% above consensus price target median ($35), and reasonable, reflecting some control premium. The valuation represents 10.1x EV/2025 EBITDA based on IBES estimates. Long spread.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
