In today’s briefing:
- L’Occitane (973 HK): The Rollover Option, And Alternate Listing Valuations
- Sigma Healthcare (SIG AU): ASX200 Inclusion Now, MUCH More Squeezy Fun Later. Maybe…
- SSE50 Index Rebalance Preview: Financials Continue to Outperform
- L’Occitane (973.HK) Privatization – The Offer Price Is Good Enough
- CPMC Holdings (906 HK): ORG Nearing the Cut-Off Point for Its Competing Offer
- Adbri (ABC AU): Scheme Vote on 12 June
- Hankook Tire & Technology to Become the Controlling Shareholder of Hanon Systems
- ASMedia GDR Early Look – Momentum Has Been Strong, and Raising Would Grow Its Cash Base Almost 6x
- STAR50 Index Rebalance Preview: Adds Steamroll Deletes
- Quiddity Leaderboard SSE50/180 Jun 24: US$2bn One-Way; LONGs up +9.8% Vs SHORTs in ~2 Months
L’Occitane (973 HK): The Rollover Option, And Alternate Listing Valuations
- Concurrent with its HK$34/share VGO, L’Occitane (973 HK)‘s disinterested shareholders may be entitled to a share scrip alternative. IF afforded, up to 5% of shares out can participate.
- The big unknown is whether you receive shares of the levered-up Bidco, at some as yet undetermined scrip ratio; or keep shares of L’Occitane as-is.
- To trigger the rollover option, 10% of disinterested shareholders need to express interest by the 15th May (a Hong Kong holiday btw). A deadline without details.
Sigma Healthcare (SIG AU): ASX200 Inclusion Now, MUCH More Squeezy Fun Later. Maybe…
- In early December, pharmacy distributor Sigma Healthcare (SIG AU) arranged a “transformational merger” with mega chain Chemist Warehouse (CWG). Effectively a reverse takeover designed to get CWG listed.
- SIG issued shares, raising cash, enabling it so NEWCO had high enough minimum float upon merging. Financial engineering for the win. SIG popped – a kind of IPO premium trade.
- But plenty of people are against the deal, and ACCC hasn’t yet opined (13 June is the provisional date), but on Thursday, S&P announced SIG would join ASX200 despite risks.
SSE50 Index Rebalance Preview: Financials Continue to Outperform
- With the review period nearing completion, 6 stocks are in inclusion zone and 9 are in deletion zone. However, there can be a maximum of 5 changes at a review.
- We estimate a one-way turnover of 7.1% at the June rebalance leading to a one-way trade of CNY 9.9bn (US$1.37bn). Index arb balances should increase the impact on the stocks.
- The potential inclusions (of which four are Financials) have continued to outperform the mixed bag of potential deletions. With pretty big impact on the deletes, expect further divergence.
L’Occitane (973.HK) Privatization – The Offer Price Is Good Enough
- The HK$34/share offer price is final, which exceeds all-time high closing price of HK$33.60/share since IPO in 2010. EUR6 billion is equivalent to a PE of 52.17x, higher than peers.
- Deploying China’s sinking market is “a good story full of imagination”. However, it may fail to bring expected profits considering increasing competition/potential price war, leading to uncertain future performance growth.
- For minority shareholders, this privatization provides an attractive opportunity to monetise their investments at a premium over market price. We don’t think the current “technical bull market” to be lasting.
CPMC Holdings (906 HK): ORG Nearing the Cut-Off Point for Its Competing Offer
- CPMC Holdings (906 HK) has a pre-conditional voluntary offer from Changping Industrial at HK$6.87 and potentially a competing offer from ORG Technology Co., Ltd. A (002701 CH).
- Five months after announcing its offer, Changping Industrial obtained regulatory approvals from all except SAMR, SAFE, and the Vietnam Competition Commission.
- An ORG offer seems unlikely due to a lack of progress in May and timing risk, as the Changping Industrial offer could be unconditional before the ORG obtains regulatory approvals.
Adbri (ABC AU): Scheme Vote on 12 June
- The Adbri (ABC AU) IE considers CRH (CRH US) and Barro’s A$3.20 offer fair and reasonable as it is within its A$ A$3.09-3.53 per share valuation range.
- The scheme is conditional on FIRB approval, which should be forthcoming as CRH, the offeror, is a Fortune 500 company headquartered in Ireland.
- The offer is attractive, and this is a done deal. At the last close and for the 1 July payment, the gross/annualised spread was 1.3%/8.4%.
Hankook Tire & Technology to Become the Controlling Shareholder of Hanon Systems
- On 3 May, it was reported that Hankook Tire & Technology agreed to purchase a 25% in Hanon Systems for 1.37 trillion won from Hahn & Co private equity firm.
- After this deal, Hankook Tire & Technology will own a controlling 50.5% stake in Hanon Systems.
- We have a negative view on Hankook Tire & Technology’s additional purchase of Hanon Systems, which has experienced a declining profit margins in the past several years.
ASMedia GDR Early Look – Momentum Has Been Strong, and Raising Would Grow Its Cash Base Almost 6x
- Asmedia Technology (5269 TT) is looking to raise up to US$333m in its upcoming global depository receipts (GDRs) offering.
- ASMedia recently announced its board’s resolution to offer between 4.3-5.3m shares in the form of GDRs, with the proceeds geared towards purchasing raw materials and machinery, R&D and working capital.
- Similar to previous GDR listings, the deal is a long drawn out process with the firm required to jump through a number of board/shareholder/regulatory approval loops.
STAR50 Index Rebalance Preview: Adds Steamroll Deletes
- With the review period complete, we forecast 3 changes for the SSE STAR50 (STAR50 INDEX) in June. All changes are migrations from/to the STAR 100 Index.
- One way turnover is estimated at 3.4% resulting in a one-way trade of CNY 4.5bn (US$630m). There is a lot to trade from passive trackers, especially on the inclusions.
- The potential adds have outperformed the potential deletions by ~18% over the last month with Hangzhou EZVIZ Network (688475 CH) and APT Medical (688617 CH) moving higher.
Quiddity Leaderboard SSE50/180 Jun 24: US$2bn One-Way; LONGs up +9.8% Vs SHORTs in ~2 Months
- SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
- The 12-month reference period used for the June 2024 review is now complete. The SSE 180 expected ADDs/DELs list has changed slightly since I published my last insight (link).
- In this insight, we take a look at our final expectations for index changes during the June 2024 index rebal event.
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