In today’s briefing:
- TCM (570 HK): Sinopharm’s $4.60/Share Offer
- China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait
- China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks
- China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What
- Timee Pre-IPO – The Positives – Exponential Growth Since Inception
- Malaysia Airports (MAHB MK)’s Offer: Buckle Up!
- Tax-Loss Selling In Australia 2024 – Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)
- Sawai Group (4887) – BIGLY Buyback To “Drastically” Change Capital Structure
- Hyundai Motor India Pre-IPO – The Negatives – Not All Hunky-Dory
- Quiddity Leaderboard MV J-Gold Miners Sep 24: Mergers Mean Possible Up-And-Out DELETEs
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.
China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait
- The approval/filing process of China TCM’s privatization is complicated and would take some time, but there’re almost no cases of disapproval. It also depends on the adequacy of materials submitted.
- Due to the extension of time for the despatch of Scheme Document, this process would be delayed for more months.But we should receive clear information by October at the latest.
- For arbitrageurs, China TCM is an investment opportunity of high success rate, which becomes more attractive if HK stock market is depressed.It’s better suited to idle funds considering potential risks/returns.
China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks
- On 21 February, 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 wide gross spread (7.0%) reflects risks around the re-rating of peers, the slow pace of satisfying the pre-condition, the completion timetable and Ping An’s blocking stake.
- The key risk is the deal close timing due to the slow pace of regulatory approvals, which increases the chance that the vote will held after the August interim.
China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What
- On no news, China Traditional Chinese Medicine (570 HK) shares declined 12% today. We spoke to several readers to gauge the likely reasons for the fall.
- The speculation is that the fall could be due to forced liquidation, Sinopharm’s new Chairman pulling the offer, the consortium unravelling, SAMR issues and Ping An blocking the deal.
- There is clearly news behind today’s fall, but none of the above rumours seem credible. The risk/reward is attractive as the upside (25% spread) outweighs the downside (18% to undisturbed).
Timee Pre-IPO – The Positives – Exponential Growth Since Inception
- Timee Inc (215A JP) is looking to raise US$290m from its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
- Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
- In this note, we will talk about the positive aspects of the deal.
Malaysia Airports (MAHB MK)’s Offer: Buckle Up!
- Back on the 15th May, Khazanah Nasional, the EPF, the Abu Dhabi Investment Authority, and GIP, offered to buy shares not already owned in Malaysia Airports (MAHB MK) at RM11.00/share.
- The premium to undisturbed appears reasonable. The price is a life-time high. The 90% acceptance hurdle was not insurmountable, and the consortium had the flexibility to lower the %.
- But the Offer is now facing unexpected political pushback, amid protests against the Israel-linked bid.
Tax-Loss Selling In Australia 2024 – Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)
- The original trade was discussed at end-April in Tax-Loss Selling in Australia 2024 – Historical Analysis and A Trade Basket then updated here and here.
- That has done OK. The LIQUID basket has delta neutral performance of +8.4% over 2mos; LIQUID+LESSLIQUID +7.2%; If one did a mixed basket (3x L+LL + 1x Illiquids) it’s +8.6%.
- Now it is time to reverse the trade, buying the basket you were short, and running it against index for the next 6-8 weeks.
Sawai Group (4887) – BIGLY Buyback To “Drastically” Change Capital Structure
- Two years ago, generic pharmaceuticals co Sawai Group Holdings (4887 JP) traded at 10x PER, 6% ROE, and far below book. 10mos ago the price got back to 1x PBR.
- By then, their US sub had partly been put into “Current Assets AFS” as it was for sale. By Dec23, it was completely there. In Jan, a “business review” announcement.
- The US business sale led to a loss, but growth this year, and a new MTMP in early June. Monday, we got a HUGE buyback announcement. Today, an 8+% pop.
Hyundai Motor India Pre-IPO – The Negatives – Not All Hunky-Dory
- 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 this note, we talk about the not-so-positive aspects of the deal.
Quiddity Leaderboard MV J-Gold Miners Sep 24: Mergers Mean Possible Up-And-Out DELETEs
- The MV J-Gold Miners index represents the performance small-cap gold and silver mining companies listed around the world.
- This index is reviewed semi-annually in March and September. During these reviews, names can be added or deleted from the index.
- In this insight, we take a look at the potential ADDs and DELs and our flow expectations for the index rebal event in September 2024.
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