In today’s briefing:
- Shift Up IPO Book Building Results Analysis
- Hollysys (HOLI US): Ascendent Finally Obtains Regulatory Approvals
- HSCEI Index Rebalance Preview: Two Changes Likely in September
- Shift Up IPO: Details, Bookbuilding & Index Inclusion
- Elon Wins $56B Package Re-Vote and Shift to Texas. Now What for Tesla?
- Chenqi Technology Pre-IPO – PHIP Updates – Sales Growth Accelerated but Sustainability in Question
- Toyo Corporation (8151 JP) – Initiating Coverage
- Tech Supply Chain Tracker (02-Jul-2024): India boosts smartphone exports with iPhone manufacturers.
- Shanghai Voicecomm IPO Preview: Superior Growth Profile and Collaboration With Baidu on ERNIE Bot
- Mainland Connect NORTHBOUND Flows (To 28 June 2024): BIG Consumer Name Selling Again
Shift Up IPO Book Building Results Analysis
- Shift Up reported solid IPO book building results. Shift Up’s IPO price has been determined at 60,000 won won, which is at the high end of the IPO price range.
- According to Hankyung Business Daily, the demand ratio was 223 to 1. Shift Up will start trading on 11 July.
- Our base case valuation of Shift Up is market cap of 5.7 trillion won or target price of 95,510 won (59% higher than the IPO price of 60,000 won).
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.
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.
Elon Wins $56B Package Re-Vote and Shift to Texas. Now What for Tesla?
- Despite achieving significant milestones, Elon Musk’s $56 billion compensation package was voided in January 2024 due to a flawed approval process, ruled a Delaware judge.
- Tesla’s shareholders voted to reinstate Musk’s package in June 2024, but the lawsuit continues, and the contract’s future remains uncertain.
- Tesla faces challenges with slow EV sales growth, rising competition, and the need for lower-cost models, which may impact stock performance despite Musk’s ongoing leadership.
Chenqi Technology Pre-IPO – PHIP Updates – Sales Growth Accelerated but Sustainability in Question
- Chenqi Technology Limited (CT HK) is looking to raise US$130m in its upcoming Hong Kong IPO, after downsizing from an earlier reported float of US$300m.
- Chenqi Technology (Chenqi) is a mobility technology and service company in China, founded by the GAC Group and Tencent.
- In our previous note, we talked about the company’s historical performance. In this note, we talk about its PHIP updates.
Toyo Corporation (8151 JP) – Initiating Coverage
- Toyo Corporation is a trading company specializing in measurement technologies.
- With several initiatives and strong structural demand in the electric vehicles space in particular, we expect the company to achieve higher revenue and profitability.
- Higher recurring revenue and proprietary product ratios will support a margin improvement in the future.
Tech Supply Chain Tracker (02-Jul-2024): India boosts smartphone exports with iPhone manufacturers.
- Indian smartphone exports boosted by iPhone makers as Xiphera introduces quantum security improvements in crypto solutions
- Ola Electric pioneers solid-state batteries for electric vehicles, while SK Hynix invests $75 billion to dominate HBM Market for AI Chips
- China nationalizes rare earth resources as airlines struggle with high costs to achieve sustainable fuel goals, Foxconn denies mistreating married women in India
Shanghai Voicecomm IPO Preview: Superior Growth Profile and Collaboration With Baidu on ERNIE Bot
- Shanghai Voicecomm Information Technology Co., an IT solution provider for enterprise-level users in China, plans to price its IPO by July 10, 2024 and raise ~HK$664M.
- CICC is leading the offering in Hong Kong and the IPO is expected to be priced at HK$152.10 per H share, implying a market cap of ~HK$5.4B or ~$690M.
- Cornerstone investors have agreed to acquire ~1.8M H shares, representing 41% of the offer shares or ~5% of the total outstanding shares.
Mainland Connect NORTHBOUND Flows (To 28 June 2024): BIG Consumer Name Selling Again
- The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
- Last week saw NORTHBOUND net SELL RMB 11.8bn of A-shares. NORTHBOUND bought utilities and raw materials and sold everything else, especially consumer names. Appliances remain on the sell side.
- It is notable that net flows as a percentage of value traded are clearly “short gamma”, which is to say, sector underperformers are being sold, not bought.
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