In today’s briefing:
- SenseTime (20 HK): Lock-Up Expiry Will Bring BIG Passive Flow
- HSCI Index Rebalance and Stock Connect: Potential Changes in June and September
- JAPAN ACTIVISM: Silchester Goes After Shiga Bank
- Schroders: Dual Share Class Unification
- JAPAN ACTIVISM: Silchester Goes After Chugoku Bank
- Selected European Holdcos and DLCs: April ‘22 Report
SenseTime (20 HK): Lock-Up Expiry Will Bring BIG Passive Flow
- SenseTime Group (20 HK) currently has a float of 1.4%. That will increase to 46% at the end of June as pre-IPO and cornerstone investor lock-ups end.
- The Hang Seng Tech Index FAF increase and potential inclusion in the Hang Seng China Enterprises Index will require passive trackers to buy 700m shares early September.
- Economic stimulus in China, outlook for China tech, lock-up expiry, inclusion in Southbound Connect and flows from passive trackers will drive the stock for few months and provide trading opportunities.
HSCI Index Rebalance and Stock Connect: Potential Changes in June and September
- We see seven new listings as potential inclusions to the HSCI in June. One is already a part of Connect while five will be added to Southbound Stock Connect.
- We see 19 potential changes to the HSCI in September. Seven of the deletions are on market cap, four on liquidity, and eight due to prolonged trading suspension.
- Some of the potential deletions have large Southbound holdings and some of these could be trimmed over the next couple of months.
JAPAN ACTIVISM: Silchester Goes After Shiga Bank
- In early February 2022, Silchester International Investors (according to its website) sent letters to four low-ROE-earning Japanese regional banks proposing a new dividend policy.
- The management and boards of each bank rejected the policy proposal though two of the four had upped their proposed dividend or changed policy prior, and two upped it afterwards.
- While Bank of Kyoto (8369 JP) is the biggie, Shiga Bank (8366 JP) is another one with significant equity holdings.
Schroders: Dual Share Class Unification
- Schroders has announced the conversion of non-voting shares into voting shares. Holders of voting shares will receive a bonus issue of three additional ordinary shares for every 17 ordinary shares held.
- Lo and behold, upon announcement and assuming the bonus shares, the value of the holdings of the Schroders family rose by £504 million to £3,933 million, a cool 15% increase.
- The conversion is highly likely to proceed. The adjusted gross spread is 2%. Recommendation is long non-voting/short voting shares.
JAPAN ACTIVISM: Silchester Goes After Chugoku Bank
- In early February 2022, Silchester International Investors (according to its website) sent letters to four low-ROE-earning Japanese regional banks proposing a new dividend policy.
- The management and boards of each bank rejected the policy proposal though two of the four had upped their proposed dividend or changed policy prior, and two upped it afterwards.
- While Bank of Kyoto is the biggest equity portfolio, Chugoku Bank (8382 JP) is a relatively large, provincial, regional bank, with middling equity portfolio. Different shape. Different situation.
Selected European Holdcos and DLCs: April ‘22 Report
- Discounts to NAV of holdcos have generally widened during April: Alba, tightened to 37.4%; GBL widened to 31.8%; Heineken Holdings widened to 20%; Industrivärden C widened to 12.1%;
- Investor B widened to 11.5%; Porsche Automobile Holding widened to 29.9%. There is just one DLC left in this report, Rio Tinto, which widened to 11.8%.
- Recommended trades: GBL vs. listed assets, Industrivärden C vs. listed assets, Investor B vs. listed assets; Porsche vs. VW (long 1 PAH3 GR/short 0.5136 VOW GR), Rio Tinto (DLC).
Before it’s here, it’s on Smartkarma
