In today’s briefing:
- HSCI Index Rebalance and Stock Connect: Plenty of New Listings Should Be Included
- Nippon Steel’s Mandatory Offers For Thailand’s GJ Steel and G Steel
- Guodian Tech’s Privatisation Offer
- Liquidity Risk Short Candidates: HashiCorp, Fluence Energy, Rivian Auto, Domo Inc.
- Vivendi/Lagardère: A Good Deal for Bolloré
HSCI Index Rebalance and Stock Connect: Plenty of New Listings Should Be Included
- The review period for the March review of the HSCI ended on 31 December. There are a lot of new listings that should be included in the index.
- SenseTime is a high probability inclusion to the index, though it will only be added to Stock Connect in July once it completes 6 months and 20 trading days.
- Xpeng and Li Auto will be added to Stock Connect in Feb/March if they pass the velocity test. We see Li Auto as failing the test, while Xpeng is close.
Nippon Steel’s Mandatory Offers For Thailand’s GJ Steel and G Steel
- Nippon Steel Corporation (5401 JP) has announced it will acquire stakes in G J Steel Pcl (GJS TB) and G Steel Pcl (GSTEL TB).
- Nippon Steel has signed share and purchase agreements with the alternative investment unit of Ares Management Corp (ARES US), the major shareholder of both Thai electric-furnace steelmakers.
- Completion of the agreements will trigger Mandatory Tender Offers for both companies. These Offers will be unconditional.
Guodian Tech’s Privatisation Offer
- Guodian Technology & Environment Group (1296 HK) announced a pre-conditional privatisation offer from China Energy at HK$1.08 per H share, a 47.59% premium to the last close.
- The key conditions for the delisting will be approval by at least 75% independent H-shareholders (<10% of all independent H-shareholders rejection). There is no minimum acceptance condition.
- The offer is attractive in comparison to long-term historical share prices and multiples. We think that the privatisation proposal will likely succeed.
Liquidity Risk Short Candidates: HashiCorp, Fluence Energy, Rivian Auto, Domo Inc.
- Liquidity shorts can be great short candidates. The key characteristic is that the company may not be viable, economically, given their cash flows and cash requirements.
- Liquidity shorts have built-in catalysts, have moderate to higher betas, and can have strong down moves if a crisis develops. They can go bankrupt, pushing the stock price near zero.
- HashiCorp Inc (HCP), Fluence Energy (FLNC), Rivian Auto (RIVN), Domo Inc (DOMO)
Vivendi/Lagardère: A Good Deal for Bolloré
- In February 2022, Vivendi will file a public tender offer for all Lagardère shares at €24.10/share, identical to the price per share paid to Amber Capital.
- Assuming some recovery in travel retail, the implied multiple of the publishing division would be 5.5x EV/22e EBITDA, which is cheap in my view. Comparables are trading at 6.6x.
- The share price has gone below the offer price for the first time since 9 December. The 0.2% gross spread is still tight, but worth monitoring in case it widens.
Before it’s here, it’s on Smartkarma
