In today’s briefing:
- China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress
- HUGE Asics (7936) Offering – Big Guidance Boost at ATH So Feed the Ducks When They Are Quacking
- Asics (7936 JP): Huge Forecast Revision to Offset Limited Passive Buying
- ASICS Placement – Needs to Correct, but Watch Out for the Revision Impact
- China Traditional Chinese Medicine (570 HK): Update Provides Fodder for Bulls and Bears
- MMG (1208) – Rights Results Show High Take-Up, Small Unhedged Portion
- CSI300 Index Rebalance Preview: 18 Changes in Dec; Third Plenum; ETF Inflows; Short Sell Crackdown
- Japan – Yet Another Big Round of Passive Selling Expected in August
- Recently Observed Market Flow Movements Related to Korea’s Value-Up Initiatives
- Legend Biotech (LEGN US): Takeover Interest – Possible but Tough to Pull Off
China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress
- The slow progress of privatization is related to recent high-level changes in CNPGC. Decisions on SOE deals with “strategic purpose” require careful considerations, not based on “one leader’s personal preferences”.
- Based on public information, we cannot find convincing reason to prove that CNPGC has changed its mind.There’re rumors that China TCM’s privatization is still considered important project on the agenda.
- China TCM’s has strong fundamentals to support valuation. If there is no announcement, the privatization process is expected to proceed as usual, and we continue to wait for the voting.
HUGE Asics (7936) Offering – Big Guidance Boost at ATH So Feed the Ducks When They Are Quacking
- Today after the close, ASICS Corp (7936 JP) announced a very large secondary offering. It points out that as a global brand, it needs global-standard corporate governance.
- As such, it says they’ve been discussing sales with crossholders. But we knew the cross-holders were going to sell. This offering is 85mm shares, ¥210bn at last. That’s big.
- The stock has doubled year-to-date. Today they raised FY guidance BIGLY (+60% OP and NP). Now a huge offering. This seems like a “feed the ducks when they’re quacking” situation.
Asics (7936 JP): Huge Forecast Revision to Offset Limited Passive Buying
- 15 shareholders are looking to sell between 73.9-85m shares (US$1.2bn-US$1.38bn) of ASICS Corp (7936 JP) in a secondary offering that will likely be priced on 23 July.
- ASICS Corp (7936 JP) has also announced a huge upward revision to its sales and profit forecasts with EPS expected to increase 61% from earlier estimates.
- Passive buying will be extremely limited in the short-term with the downward pressure offset to a large extent by the sales and earnings revisions.
ASICS Placement – Needs to Correct, but Watch Out for the Revision Impact
- A group of shareholders aims to raise around US$1.3bn via selling around 11% of ASICS Corp (7936 JP).
- For the two large banks, this will be a cleanup of their cross-shareholding.
- In this note, we will talk about the placement and run the deal through our ECM framework.
China Traditional Chinese Medicine (570 HK): Update Provides Fodder for Bulls and Bears
- China Traditional Chinese Medicine (570 HK)’s monthly update provides ammunition to both the bulls and bears. Since falling on no news on 26 June, the spread has widened to 31.8%.
- The bull view is that while the timelines are delayed, the privatisation remains on track as the update shows ongoing progress in satisfying the pre-condition.
- The bear view is that progress remains glacial, as the consortium wants to withdraw from a binding offer by failing to satisfy the pre-condition before the long stop date.
MMG (1208) – Rights Results Show High Take-Up, Small Unhedged Portion
- Friday post-close, MMG (1208 HK) released the results of its Rights Offering. 3.4654bn Rights Shares at HK$2.62 saw 98.18% take-up. New Rights Shares officially start trading on 16 July.
- The other 1.82% (63.1mm Rights Shares) saw 6.383bn excess Rights Shares applications. EAFs were allocated evenly, so applicants got 0.99% of what they bid for, but hey, free money?
- The new Rights Shares are expected to commence trading on 16 July. Even better, there was good fundamental news out late Sunday which should add to the general wellbeing.
CSI300 Index Rebalance Preview: 18 Changes in Dec; Third Plenum; ETF Inflows; Short Sell Crackdown
- There could be 18 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 5 spots.
- We estimate one-way turnover of 3.3% at the rebalance leading to a one-way trade of CNY 22.07bn (US$3bn). There are a lot of stocks with multiple days ADV to trade.
- The potential adds have outperformed the potential deletes. There were ETF inflows last week amid a short selling crackdown as the Third Plenum kicks off.
Japan – Yet Another Big Round of Passive Selling Expected in August
- There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in August.
- The deletion from passive portfolios will lead to a liquidity event at the end of August where passive trackers will need to sell multiple days of ADV.
- Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.
Recently Observed Market Flow Movements Related to Korea’s Value-Up Initiatives
- Nine companies disclosed value-up plans, with four official and five pending disclosures. Initially, these announcements boosted stock prices, but long-term correlations were inconclusive. Yet, shareholder returns notably rose in H1.
- NPS increased stakes in three of the nine recently announced value-up companies. They share traits in value-up trading (large caps & low PBR), potentially guiding our strategy as NPS enters.
- BlackRock’s Hong Kong branch has recently engaged with six Korean asset management firms for potential entrustment of its Asian fund’s Korean investment portion, focusing on the value-up policy.
Legend Biotech (LEGN US): Takeover Interest – Possible but Tough to Pull Off
- Legend Biotech Corp (LEGN US) shares increased 12% on Friday as a Street Insider report claimed it received takeover interest and hired Centerview Partners to help review the offer.
- Genscript Biotech (1548 HK), the largest shareholder, shares rose 25%. Genscript responsded that it is not aware of any reasons for these share price movements and any inside information.
- The chances for an offer are low as the offeror would face several hurdles. Nevertheless, without an offer, the upcoming CARVYKTI commercial production in 2H24 will support the share price.
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