In today’s briefing:
- TCM (570 HK): Sinopharm’s $4.60/Share Offer
- Dow Jones Industrials (INDU) Index Rebalance: Amazon (AMZN) Replaces Walgreen Boots (WBA)
- Gree (3632 JP) – Overnight Offering in Asset-Rich Value Trap as KDDI Sells Out
- China Traditional Chinese Medicine (570 HK): Sinopharm-Led Pre-Conditional Offer at HK$4.60
- FnGuide Semiconductor Top10 Index Rebalance Preview: One Change Likely; Close Among Potential Adds
- The Launch of 1st Corporate Value Up ETF on 27 February – Focus on Low PBR and Cash Flow
- FnGuide Top10 Equal Weight Index Rebalance Preview: Celltrion Could Replace Samsung SDI
- HK CEO & Director Dealings (23 Feb 2024): Fast Retailing, Far East Consortium, Pharmaron Beijing
- Reddit IPO Preview
- Alteogen (196170 KS): Modified License Agreement For Major Platform Technology Is A Hard Catalyst
TCM (570 HK): Sinopharm’s $4.60/Share Offer
- $4.60/Share. That’s the number – by way of a Scheme – that only matters. Below the recently rumoured $6/share, and $5.10/share a little over three years ago. Terms are final.
- As widely expected, the Offeror is SASAC-managed China National Pharmaceutical Group Corporation (CNPGC), indirectly owning 32.46% in China Traditional Chinese Medicine (570 HK) (TCM) via Sinopharm Group Hongkong,
- Optically, the Offer price appears light. But this should still get up. TCM is trading rich to peers. No other competing bidder will emerge. Expect regulatory pre-cons to be fast-tracked.
Dow Jones Industrials (INDU) Index Rebalance: Amazon (AMZN) Replaces Walgreen Boots (WBA)
- Amazon.com Inc (AMZN US) will replace Walgreens Boots Alliance (WBA US) in the Dow Jones Industrial Average (INDU INDEX) at the close on 23 February.
- Passives will need to sell a lot of Walmart (WMT US) following the 3:1 stock split and buy a lot of Amazon.com Inc (AMZN US).
- Given the ad hoc nature of the rebalances and the short timeline between announcement and implementation, the stocks could move over the rest of the week.
Gree (3632 JP) – Overnight Offering in Asset-Rich Value Trap as KDDI Sells Out
- Today after the close, KDDI Corp (9433 JP) and Gree Inc (3632 JP) announced that KDDI would offer its 8,000,000 shares in Gree in an international offering through Mizuho Intl.
- The deal comes at a decently large discount and the stock is quite downtrodden. Especially when compared to its venture assets and cash, assuming invested amount is remotely viable.
- The problem is that too much of revenue isn’t earning much, so this sits in a Value Trap category. Shareholder structure makes it difficult to do buybacks.
China Traditional Chinese Medicine (570 HK): Sinopharm-Led Pre-Conditional Offer at HK$4.60
- China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
- The pre-condition relates to various Chinese regulatory approvals. As SOE entities own the offeror, regulatory approvals will be a formality. The offer price is final.
- Ping An Insurance (H) (2318 HK), which holds a blocking stake, will be supportive. The offer is fair when the previously (higher) rumoured offers are adjusted for the market downturn.
FnGuide Semiconductor Top10 Index Rebalance Preview: One Change Likely; Close Among Potential Adds
- ISC Co Ltd (095340 KS) could replace Wonik Ips (240810 KS) in the FnGuide Semiconductor Top10 Index at the April rebalance.
- Jusung Engineering (036930 KS) is ranked just behind ISC Co Ltd (095340 KS) and could be added to the index instead depending on relative price performance.
- Shorts on ISC Co (095340 KS) have been stable over the last few months while there has been big covering on Wonik Ips (240810 KS) and Jusung Engineering (036930 KS).
The Launch of 1st Corporate Value Up ETF on 27 February – Focus on Low PBR and Cash Flow
- Samsung Asset Management announced today that it will be launching the first Corporate Value Up ETF on 27 February. It will focus on low PBR and positive cash flow generators.
- This ETF which will be called KoAct Dividend Growth Active ETF. There are about 45 stocks that are expected to be included in this ETF.
- Among the 92 companies in KOSPI 200 that are trading at less than 1x PBR, those that generate positive free cash flow are outperforming significantly.
FnGuide Top10 Equal Weight Index Rebalance Preview: Celltrion Could Replace Samsung SDI
- The Samsung KODEX Fn Top10 Equal Weight ETF (395170 KS) tracks the FnGuide Top 10 Equal Weight Index and has an AUM of US$241m.
- We expect Celltrion Inc (068270 KS) will replace Samsung SDI (006400 KS) in the index at the March rebalance.
- There will be 0.26x ADV to buy in Celltrion Inc (068270 KS) while passives will need to sell 0.17x ADV of Samsung SDI (006400 KS).
HK CEO & Director Dealings (23 Feb 2024): Fast Retailing, Far East Consortium, Pharmaron Beijing
- The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
- Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
- The key stocks mentioned in this regular insight are Fast Retailing (9983 JP), Hang Lung (10 HK), Far East Consortium International (35 HK), and Pharmaron Beijing (3759 HK).
Reddit IPO Preview
- Reddit is getting ready for an IPO in the United States in the next several weeks. It is expected that this IPO will be completed in March.
- The company was previously valued at US$10 billion in a funding round in 2021. It is expected that the company could sell about 10% of its shares in this IPO.
- Reddit may be seeking a valuation of at least US$5 billion in this IPO, which would be nearly half its valuation it received in 2021 in a private funding round.
Alteogen (196170 KS): Modified License Agreement For Major Platform Technology Is A Hard Catalyst
- Alteogen Inc (196170 KS) has modified the existing license agreement with Merck. Revised terms of the agreement grant Merck exclusive global right to ALT-B4 for a specific product group, pembrolizumab.
- Under the terms of the revised agreement, Alteogen will receive an upfront payment of $20M from Merck. Alteogen will also receive additional milestone payment of up to $432M.
- Approval of Alteogen’s first proprietary product, Tergase (expected in early 2024) will be the next major catalyst for the company.
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