In this briefing:
- Share Classifications: Mid-December 2018 Snapshot
- Hengan Intl. (1044 HK): Our Analysis Suggests that Bonitas’ Allegations Have Some Substance
- Celltrion / Celltrion Healthcare Pair Trade: Ratio Should Move in Favor of Healthcare
- Red Hat Sets January 16, 2019 Special Meeting Date to Vote on IBM Deal.
- Trade Me (TMZ NZ): Hellman & Friedman Could Again Counter-Bid Apax, but Modestly
1. Share Classifications: Mid-December 2018 Snapshot
This weekly share class summary is a companion insight to Travis Lundy‘s H/A Spread & Southbound Monitor – most recently discussed in H/A Spread & Southbound Monitor – Going Into Year End.
This share class monitor provides a snapshot of the premium/discounts for various share classifications around the region, and comprises four sets of data:
1. 82 ADRs
2. 105 Korean Prefs
3. 22 Regional Dual Classes
4. 7 Foreign/Local Thai shares
The average premium/discount for each set over a one-year period is graphed below.
For a granular breakdown of each set, PDFs are attached at the bottom of this insight.
2. Hengan Intl. (1044 HK): Our Analysis Suggests that Bonitas’ Allegations Have Some Substance
Hengan Intl Group (1044 HK), China’s leading sanitary towel and nappy producer, has been targeted by a short seller, Bonitas Research. Hengan has denied Bonitas’ allegations to which Bonitas has responded that Hengan’s response was weak and evasive. The shares have continued to slide suggesting that investors are less than convinced with Hengan’s rebuttal.
The aim of our note is to analyse alternative financial metrics to judge if Bonitas’ allegations are groundless or have some substance. Overall, our analysis suggests that Bonitas’ claims have some substance and investors should not be so quick to dismiss them.
3. Celltrion / Celltrion Healthcare Pair Trade: Ratio Should Move in Favor of Healthcare
- I initiated a pair trade (short Celltrion / long Healthcare) on Oct 22. Yield peaked at 16.66% on Nov 22. It now stays at 8.75%.
- The ongoing FSS investigation is hammering both. Healthcare is hurting a bit more because it is more directly exposed. The market is overreacting to it. Given what has happened to Samsung Biologics Co., (207940 KS), it is very unlikely that this will be a serious risk.
- I’d hold onto this position longer to regain a mid-teen yield. Current ratio is slightly above 20D MA, but still below yearly median.
- Healthcare’s KOSPI move is still lurking. Temasek’s Healthcare selling was done lately. Celltrion merger is also rising to the surface. We have more factors pushing up the ratio in favor of Healthcare.
4. Red Hat Sets January 16, 2019 Special Meeting Date to Vote on IBM Deal.
As discussed in my previous research piece, Red Hat (RHT US) Files Preliminary Merger Proxy for Its Acquisition by IBM (IBM US) , the timing of the shareholder vote to approve the merger with IBM would depend on the SEC’s review of the draft merger proxy filed on November 30, 2018. Red Hat has now set a meeting date of January 16, 2018. In this update I discuss the latest implications.
5. Trade Me (TMZ NZ): Hellman & Friedman Could Again Counter-Bid Apax, but Modestly
Trade Me (TME NZ), the largest online auction platform operating in New Zealand, has entered into a scheme implementation agreement with Apax Partners. Apax Partners has upped its bid for Trade Me from NZ$6.40 to $6.45 a share, to match Hellman & Friedman’s bid.
Hellman & Friedman has until the shareholder vote scheduled for April 2019, to make a binding offer which is superior to Apax Partners, according to press reports. While Hellman & Friedman will likely have one last roll of the dice with an improved bid, we continue to believe that that the formal “winning” bid is unlikely to present a material bump.
