In today’s briefing:
- Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend
- Tencent Distribution of Meituan Shares Official – Impact and Index Implications
- 2023 High Conviction: Haw Par Is Cheap
- Tencent Meituan Dividend – The US$20bn Overhang – Impact, Placement, Index, Other Investees
- Halcyon Agri Suspended Ahead Of Possible Offer
- KOSPI200 Index Rebalance: Just One Change
- KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises
- KOSPI 200 & KOSDAQ 150 Rebalance Changes + KOSPI 200 & KOSDAQ 150 Exclusion Candidates in 2023
- Swire B Vs A – It Bounced Before, It Can Bounce Again – A 19 Year Low On the Ratio In Sight
- KOSPI 200 & KOSDAQ 150 Constituent Changes: Several Surprises
Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend
- Tencent (700 HK) has announced that it will pay an interim dividend via an in-specie distribution of the bulk of its holding in Meituan (3690 HK).
- Passive FTSE and MSCI trackers will receive shares in Meituan (3690 HK) from their Tencent (700 HK) holdings and they will not need to trade anything in the market.
- First it was JD.com Inc. (9618 HK), now it is Meituan (3690 HK). The market will be looking for other stocks held by Tencent (700 HK) that could be next.
Tencent Distribution of Meituan Shares Official – Impact and Index Implications
- In mid-August at mid-day, a Reuters article suggested Tencent (700 HK) would seek to divest its $24bn stake in Meituan (3690 HK) this year. The stock fell 9% that afternoon.
- The general underlying suggestion was that regulators wanted them to sell. Other articles suggested later both aspects were “untrue”
- With Q3 earnings, Tencent today announced a Jan23 distribution (Mar23 settlement) of 958,121,562 Meituan shares (1 for every 10 Tencent shares held). There are significant flow and index implications.
2023 High Conviction: Haw Par Is Cheap
- Haw Par Corp (HPAR SP) is trading around multi-year trough levels on an implied stub valuation, and on an HPAR/UOL Group (UOL SP) ratio.
- Preceding my comments on HPAR are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Tencent Meituan Dividend – The US$20bn Overhang – Impact, Placement, Index, Other Investees
- On 16th Nov 22, post-market close, along with its 3Q22 results Tencent also declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
- The share distribution follows the template of the US$16bn worth of JD.com shares that Tencent paid out after its dividend announcement at the end of 2021.
- In this note, we talk about the implications of the deal.
Halcyon Agri Suspended Ahead Of Possible Offer
- Natural rubber play Halcyon Agri (HACL SP) was suspended ahead of trading on the 14 November.
- Word on the street is that a privatisation will be announced shortly.
- The benefit of hindsight … Halcyon’s largest shareholder, SOE-backed Sinochem, recently increased its stake, paying ~S$0.45/share.
KOSPI200 Index Rebalance: Just One Change
- There will be 1 addition and 1 deletion for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the December rebalance that will be implemented on 8 December.
- Lotte Confectionery (280360 KS) was a high probability add while Samyang Holdings (000070 KS) was the second delete on the list. Hyundai Home Shopping Network (057050 KS) avoided deletion.
- Passive trackers will need to buy around 14 days of ADV on Lotte Confectionery (280360 KS) and sell nearly 13 days of ADV on Samyang Holdings (000070 KS).
KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises
- There are 11 inclusions and 11 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 8 December.
- We had forecast most of the changes (10 adds and 9 deletes), so there are a few surprises. The inclusion of SillaJen Inc (215600 KS) is the biggest one.
- The adds to the index become short sell eligible from the open of trading on 9 December while the deletions will not be short sell eligible from the same time.
KOSPI 200 & KOSDAQ 150 Rebalance Changes + KOSPI 200 & KOSDAQ 150 Exclusion Candidates in 2023
- Korea Exchange announced the KOSPI 200, KOSDAQ 150, and KRX 300 rebalance changes today. Lotte Confectionery will be added and Samyang Holdings will be deleted from the KOSPI 200 index.
- The rebalances of these Korean indices are regularly updated twice a year. The changes to these indices will be effective starting 9 December.
- The potential exclusion candidates for KOSPI 200 in 2023 include K Car, Handsome, HS Enterprise, Zinus, and Hyundai Home Shopping.
Swire B Vs A – It Bounced Before, It Can Bounce Again – A 19 Year Low On the Ratio In Sight
- Swire Pacific has been buying back Swire Pacific (B) (87 HK) and Swire Pacific (A) (19 HK) shares since August. They are now 58+% done with their HK$4bn buyback program.
- The buyback so far has been 50% B shares and 50% A shares. This still seems odd to me but they are doing what they are doing.
- B/A ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks. Now 5% cheap to average.
KOSPI 200 & KOSDAQ 150 Constituent Changes: Several Surprises
- For KOSDAQ 150, SillaJen and WCP made it to the index. As for deletions, Intron Biotechnology, Ebest I&S, and Devsisters are additional names to leave the index through regular review.
- Lotte Confectionery and Samyang Holdings do not have sizeable DTV. And they were fully expected. Nevertheless, the passive impact is so significant that the LONG/SHORT approach still seems valid.
- We should focus on KOSDAQ 150 inclusions whose return has been high due to the inflow to secure a borrow pool for short-selling on top of the preemptive rebalancing flow.
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