In today’s briefing:
- China Traditional Chinese Medicine (570.HK) – New Information on Privatization
- TCM (570 HK): Sinopharm’s $4.60/Share Offer
- Azure (AZS AU): MinRes’ Discounted Exit
- Sea Will Release Its Q4 2023 Earnings Report Soon
- From Nvidia Results to See Supply Chain Stories?
- The Launch of 1st Corporate Value Up ETF on 27 February – Focus on Low PBR and Cash Flow
- CSR (CSR AU): Saint Gobain’s $9/Share NBIO
- Delta Electronics (DELTA TB / 2308 TT): More Downside from Here
- Quiddity Leaderboard S&P 500 Mar 24: Big Index Flows Possible for Workday and KKR
- FnGuide Semiconductor Top10 Index Rebalance Preview: One Change Likely; Close Among Potential Adds
China Traditional Chinese Medicine (570.HK) – New Information on Privatization
- Since China TCM doesn’t deny the rumors so far after the trading halt, privatization is becoming likely this time.Rumor said formal negotiations may not begin until after the Lantern Festival.
- CNPGC may not want to pay high prices on privatization.Weak sentiment/share price may help with the negotiations.But the key is to obtain the consent of other shareholders, especially Ping An.
- There’s underlying logic for Taiji Group to drive this privatization. A price of higher than HKD5.1 is possible. If the price could reach HKD6 (or higher), it has exceeded expectations.
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.
Azure (AZS AU): MinRes’ Discounted Exit
- JPMorgan is placing MinRes (MIN AU)‘s 14.5% stake in Azure Minerals (AZS AU) at A$3.42/share, a 5% discount to last close and a 7.6% discount to the A$3.70/share Scheme price.
- It was reported last month that MinRes, who paid up to ~A$4.00/share for some of its stake, was looking to exit. But cash now vs. ~8% more in two months?
- Given the recent rout in lithium and nickel prices, one wonders if a MAC landmine lurks. Or, quite simply, MinRes just needs the cash. Expect Azure to fall tomorrow.
Sea Will Release Its Q4 2023 Earnings Report Soon
Shopee – Sea’s largest business unit and Southeast Asia’s largest e-commerce platform – has reported negative EBITDA for most of the 8 or so years since its launch.
Investors now however appear to be looking for earnings growth. In 7 of the last 9 quarterly earnings reports, investors have rewarded the company every time it has reported earnings growth (its share price has gone up in the day after the release), and penalized when it has not.
Based on our analysis (and subject to the disclaimer included below), we expect Shopee’s GMV and Revenue to improve in Q4 2023 (as compared to the previous quarter) along with its EBITDA, although earnings will likely remain in negative territory.
From Nvidia Results to See Supply Chain Stories?
- Post 35% price gain in a quarter, many good news we expected and other analysts expected already factored into the share price. We believe the risk/reward not attractive here.
- TSMC guides stronger 1Q24 and 2024, helped by Nvidia and copy cat AI GPU/ASIC orders. We see greater opportunities for alternative copy cat solutions like AMD and Alchip.
- We attribute Nvidia customers’ sales discrepancy to AI server is cannibalizing non-AI server and Nvidia is allocating more GPUs to premium price paying customers in 1H24 and reverse in 2H24.
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.
CSR (CSR AU): Saint Gobain’s $9/Share NBIO
- Cie De Saint-Gobain (SGO FP) is offering CSR (CSR AU) shareholders A$9/share by way of a Scheme, a 34% premium to last close. That’s a knockout price.
- The Offer is indicative. Confirmatory due diligence is ongoing. CSR board has, not surprisingly “unanimously resolved to pursue the offer at an agreed price of A$9.00“.
- A firm offer would be subject to FIRB and shareholder approval. Neither should pose an issue. Assuming a firm Offer is shortly forthcoming, this could be wrapped up late-July
Delta Electronics (DELTA TB / 2308 TT): More Downside from Here
- Delta Electronics Thailand (DELTA TB) still trades at a higher market cap than Delta Electronics (2308 TT) though the gap has been narrowing over the last few months.
- Delta Electronics Thailand (DELTA TB)‘s real float is around 18% and foreign investors hold 94.07% of the shares outstanding.
- Delta Electronics Thailand (DELTA TB) has traded weak following the placement in October and there could be further downside versus Delta Electronics (2308 TT).
Quiddity Leaderboard S&P 500 Mar 24: Big Index Flows Possible for Workday and KKR
- 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.
- The index is reviewed quarterly. The next review will be in March 2024 and the evaluation date for the rankings for the constituent selection process is 29th February 2024.
- In this insight, we take a look at Potential ADDs and Potential DELs for the rebalance. We estimate US$13.1bn one-way flow on 3 ADDs and 3 DELs.
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).
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