In today’s briefing:
- HSTECH Index Rebalance Preview: ASM Pacific (522) Could Replace Ping An Health (1833); US$1bn Trade
- Furukawa Battery (6937) – Ugly Process in Virtual Take-Under Take-Private
- Midea Group (000333 CH): CSRC Approval ✓; IPO Size Will Depend on H-Share Discount
- Sep24 S&P500 Index Rebal – Two Changes Expected; $6bn One-Way Flow and Two Spinoffs?
- Hyundai Motor India Pre-IPO – Thoughts on Valuation
- FXI Rebalance Preview: One High Probability Change; One More Possible
- Tohokushinsha (2329 JP) – 3D Investment Partners Proposes Take-Private
- FSS Orders Doosan Group to Resubmit the Merger Plan – “Merger Plan Is Not Illegal, But Is It Fair?”
- Korea’s New IPO Bookbuilding & Lockup Results Disclosure Rule, Effective from August
- Clarifications Regarding the FSS’s Unexpected Revision Request for the Doosan Mergers
HSTECH Index Rebalance Preview: ASM Pacific (522) Could Replace Ping An Health (1833); US$1bn Trade
- ASM Pacific Technology (522 HK) is expected to replace Ping An Healthcare and Technol (1833 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the September rebalance.
- Constituent changes and capping changes will result in a one-way turnover of 3.7% and that will result in a round-trip trade of HK$7.8bn (US$1bn).
- Short interest is near the lows on both stocks but there has been a recent tick higher for ASM Pacific Technology (522 HK).
Furukawa Battery (6937) – Ugly Process in Virtual Take-Under Take-Private
- Today after the close, Advantage Partners announced the intention to launch a TOB to take over Furukawa Battery (6937 JP) at ¥1,400 – a 26% premium to last.
- This will require substantial time to obtain regulatory and foreign investment clearances so it is anticipated the Tender Offer will be launched at end-March 2025. I expect that is conservative.
- The price paid to minorities is a premium. But the price paid by the buyer is actually a takeunder. And it gets worse from there.
Midea Group (000333 CH): CSRC Approval ✓; IPO Size Will Depend on H-Share Discount
- The CSRC has approved Midea Group Co Ltd A (000333 CH)‘s application to issue H-shares to be listed on the HKEX (388 HK).
- Under the approval, Midea Group Co Ltd A (000333 CH) can issue up to 650.85m shares. Depending on the H-share discount, that could raise up to HK$43.6bn (US$5.6bn).
- The IPO is likely to be smaller and will depend on market conditions and the discount demanded on the H-shares. That in turn will determine index inclusion for the H-shares.
Sep24 S&P500 Index Rebal – Two Changes Expected; $6bn One-Way Flow and Two Spinoffs?
- The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
- In this insight, we take a look at the upcoming constituent changes in the run up to the September 2024 index rebal event.
- We expect two regular changes during September. More interestingly, a couple of SP500 members are working on spin-offs which could trigger some high-impact deletions over the next few months.
Hyundai Motor India Pre-IPO – Thoughts on Valuation
- Hyundai Motor (005385 KS) is looking to raise around US$3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
- HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
- In our previous notes, we have looked at the company’s past performance and undertaken a peer comparison. In this note, we talk about valuations.
FXI Rebalance Preview: One High Probability Change; One More Possible
- A month out from cutoff for the September rebalance, we see one potential change for the iShares China Large-Cap (FXI) (FXI US).
- China Tower (788 HK) is a potential inclusion while China International Capital Corporation (3908 HK) should be deleted from the ETF.
- Shorts have been dropping in China Tower (788 HK) and are near their lows while increasing in China International Capital Corporation (3908 HK).
Tohokushinsha (2329 JP) – 3D Investment Partners Proposes Take-Private
- 3D Investment Partners, known to be activist-ish-y, purchased 18% of Tohokushinsha Film (2329 JP) in the 12 months to March 2024. They started a public activism campaign in February.
- The company has started down a better governance track, but now 3D has made a takeover proposal to Tohokushinsha, which will consider it under Special Committee.
- There are a couple of possible outcomes here which are interesting to consider. There are no other spoilers possible except those friendly to founders and management.
FSS Orders Doosan Group to Resubmit the Merger Plan – “Merger Plan Is Not Illegal, But Is It Fair?”
- On 24 July, the Financial Supervisory Service (FSS) ordered the Doosan Group to resubmit the merger plan.
- It is rare for FSS to reject companies’ merger reports but there has been an exception this time since this deal is egregiously negative to many minority investors.
- Doosan Group needs to resubmit a revised merger plan within next three months. Otherwise, the securities report involving the merger plan of the Doosan Group companies will be considered withdrawn.
Korea’s New IPO Bookbuilding & Lockup Results Disclosure Rule, Effective from August
- FSS’s leaked IPO guidelines include new, highly attention-grabbing additions: specifically, the disclosure of extra information from the bookbuilding and lockup results not mentioned in May.
- Institutions submitting prices outside the indicative band must be disclosed by KRX investor type. Additionally, average placed price information for lockup-pledged investors must be disclosed.
- FSS will distribute new IPO guidelines this week and apply them from next month. Major IPOs like K Bank must disclose more detailed bookbuilding and lockup results, impacting trading dynamics.
Clarifications Regarding the FSS’s Unexpected Revision Request for the Doosan Mergers
- The FSS requested Doosan Robotics to revise the prospectuses for both the Share Swap with Doosan Bobcat and Merger with Doosan Enerbility.
- Although the FSS’s wording seems aggressive, it does not request the cancellation. Authorities are displeased but lack political momentum to derail Doosan’s restructuring.
- The FSS asks Doosan to clarify merger synergies, warn of Robotics’ overvalued stock price and potential decline, and highlight the collaborative robot market’s growth risks.
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