In today’s briefing:
- Merger Arb Mondays (06 May) – China TCM, L’Occitane, Hollysys, Shinko, QV Equities, Qantm IP, Adbri
- CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes
- China TCM (570.HK) Update – Despite Doubts, This Privatization Seems “Mandatory”
- China Healthcare Weekly (May.5) – Overvaluation in Primary Market, RDC to Be Hot Spot, Yiling Pharma
Merger Arb Mondays (06 May) – China TCM, L’Occitane, Hollysys, Shinko, QV Equities, Qantm IP, Adbri
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU), Southern Cross Media (SXL AU), Qantm Intellectual Property (QIP AU), Probiotec Ltd (PBP AU), China TCM.
- Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Roland DG Corp (6789 JP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU), Jastec Co Ltd (9717 JP).
CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes
- With the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index – Shang (SH000905 INDEX) at the close on 14 June.
- We estimate a one-way turnover of 9.3% at the rebalance resulting in a one-way trade of CNY10.88bn (US$1.5bn). The Industrials and Information Technology sectors gain at the expense of Materials.
- The potential adds have outperformed the potential deletes by 8% over the last 3 months. There could be further outperformance over the next few weeks.
China TCM (570.HK) Update – Despite Doubts, This Privatization Seems “Mandatory”
- Some investors have concerns that the privatization may fail. We also noticed that Morgan Stanley raised China TCM’s target price to HK$5.4. However, the privatization of China TCM seems “mandatory”.
- At this stage, some background information is worth the attention, which will help investors better understand the logic behind this privatization and thus resolve the “confusion”.
- According to regulatory requirements, it’s expected that both CNPGC and Taiji will integrate resources in pharmaceutical manufacturing and distribution sectors, so as to solve horizontal competition issue between the two.
China Healthcare Weekly (May.5) – Overvaluation in Primary Market, RDC to Be Hot Spot, Yiling Pharma
- Due to the overvaluation of pharmaceutical companies in the primary market, only foreign markets are able to “digest” such high valuation. So, various promising drugs are acquired by foreign investors.
- The field of RDC/RLT has attracted our attention, which could become the next hot area. Since nuclides are the most important bottleneck, domestic related enterprises will usher in opportunities.
- Shijiazhuang Yiling Pharmaceutical’s performance would continue to be under pressure in 24H1 but would rebound in 24H2 after “destocking”. Valuation/share price have not yet bottomed out. Don’t rush to bottom-fish.
💡 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
