Most Read: Cafe De Coral Holdings, Tencent, Infratil Ltd, Playmates Toys, Chindata Group, Challenger Technologies, TVS Motor , Estia Health and more

• Fenbi Ltd (2469 HK) was added to the Hang Seng Composite Index (HSCI) at the close Friday and will be added to Southbound Stock Connect from open of trading today.
• We see 22 potential adds, 19 potential deletes, couple of close deletes, 5 deletes on prolonged suspension and 4 close liquidity deletes for the HSCI in September.
• There are 11 potential deletions where holdings via Stock Connect are more than 20% of shares outstanding. There could be some unwinding of positions over the next couple of months.

• Tencent has been busy distributing shares in some of its investments over the past two years, with JD.com’s distribution announced in 2021 and Meituan’s in 2022.
• In our earlier note in 2022, Tencent Investee Selldown – The US$120bn Global Overhang, we had looked at its overall investment portfolio.
• With two of its large investments spun-out, we now re-look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how. 

• Infratil Ltd (IFT NZ) is acquiring Brookfield Asset Management Lt (BAM US)‘s 49.95% stake in One NZ for NZ$1.8bn. This will be partly funded through a NZ$850m placement.
• There will be a NZ$750m underwritten placement at NZ$9.2/share (an 8.9% discount to the last close) and a retail offering of NZ$100m.
• There will be passive buying from index trackers post the completion of the placement and the settlement of the shares and that will remove some of the overhang.

In this next installment of our #webinar Wednesdays, we welcome Smartkarma Insight Provider, Nicolas Van Broekhoven, as he shares his thoughts and insights on three different small cap stock ideas. From Hong Kong to Canada, tune in as Nicolas delves deeper into stock ideas from across the globe.

The webinar will be hosted on Wednesday, 14 June 2023, 17:00 SGT/HKT.

Nicolas Van Broekhoven was on the buyside for 15 years, and most recently at a medium-sized boutique asset management firm. Having grown up in Europe, attending university in the US and living in Singapore for the last 7 years, this has given him a broad scope on the world and investing in general. He considers himself as a generalist investor with a preference for small and mid-cap companies and special situations. However, a large cap that has gone temporarily out of favor might also pique his interest. His style of investing could be categorized as more of value investor, rather than growth at any cost. Learning from Charlie Munger on the importance of quality of a company has been of tremendous value over the years. Nicolas likes businesses with real earnings, cash flows, dividends, book value and insider ownership.

• Chindata Group (CD US) disclosed a preliminary non-binding proposal from Bain Capital at US$8.00 per ADS, a 27.4% premium to the undisturbed price of US$6.28 per ADS.
• For privatisation to succeed, shareholders representing two-thirds of the shares present and voting need to approve the deal. The offeror represents 87.39% of the total voting power. 
• While the offer is unattractive, Bain Capital’s voting rights ensure that the vote will pass. The key risks are regulatory approvals and timing. 

• Infratil Ltd (IFT NZ) aims to raise around US$456m (NZ$750m) via an institutional placement.
• Proceeds from the placement will be used to acquire the remaining stake on One New Zealand from Brookfields.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• After consumer electronics retailer Challenger Technologies (CHLG SP) announced a voluntary unconditional cash offer of S$0.56/share on the 30 May, it has closed through terms every day. 
• At a 3.1% and 4.3% to undisturbed and one-month VWAP, the Offer was low-balled. The Offeror (Dymon Asia and Challenger’s CEO Loo Leong Thye) have now bumped to S$0.60/share. 
• The price has been declared final. It is still only a 9.1% premium to undisturbed. But it is a lifetime high. 

• We see 8 stocks moving from MidCap to LargeCap, 9 stocks moving from LargeCap to MidCap, 9 stocks from SmallCap to MidCap, and 10 stocks from MidCap to SmallCap.
• Following a strong listing, Mankind Pharma (6596876Z IN) should be added to the Large Cap segment of the market in July.
• The expected migrations from SmallCap to MidCap have outperformed the other migrations by a huge margin over the last couple of months and there could be profit taking ahead.

• Estia Health (EHE AU) has received a revised non-binding indicative proposal from Bain Capital at A$3.20 per share, a 6.7% premium to the previously rejected offer of A$3.00 per share.
• The revised offer is attractive in comparison to historical share prices and multiples. The offer is also attractive in comparison to the Japara Healthcare (JHC AU) precedent transaction.   
• Bain has been granted exclusive due diligence. Bain’s reengagement suggests a committed bidder. Expect a binding offer. At the last close, the gross spread is 10.3%.

• On the 23 March, aged care provider Estia Health (EHE AU) announced Bain Capital’s $3.00/share non-binding proposal. 12 days later, Estia rejected this indicative Offer. 
• Bain has returned with a A$3.20/share proposal, inclusive of a fully franked dividend up to A$0.12/share. A process deed has been entered into, and exclusive due diligence has been granted. 
• Trading at a gross spread of 10.7% with an indicative completion in early 4Q23.