In today’s briefing:
- Merger Arb Mondays (08 Jul) – China TCM, L’Occitane, A8 Media, GA Pack, Asia Cement, Hollysys, MMA
- S&P/ASX 100/200 Index Adhoc Rebalance: Potential Replacements for Altium (ALU AU)
- Shanghai Henlius Biotech Update (2696.HK) – The Story Behind Privatization
- KOSDAQ150 Index Rebalance Preview: For Now, A Dozen Changes in December
- Softbank Corp (9434) – Accounting for the Accounting Is Complicated Redux – So Be Bearish
- STAR100 Index Rebalance Preview: Outright Adds Outperforming Outright Deletes
- Exploring the Kakao Corp and Krafton Deal Potential for Kakao Games
- Honda (7267) : Offering’s Underwhelming Global Index Implications
- Quiddity Leaderboard for Hang Seng Index Sep 24: New Economy? Clean Energy? or Shipping?
- LQ45 Index Rebalance Preview (July): Identifying Potential Index Changes
Merger Arb Mondays (08 Jul) – China TCM, L’Occitane, A8 Media, GA Pack, Asia Cement, Hollysys, MMA
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), A8 New Media (800 HK), Greatview Aseptic Packaging (468 HK), Asia Cement China (743 HK).
- Lowest spreads: Fancl Corp (4921 JP), Great Eastern Holdings (GE SP), Chilled & Frozen Logistics Holdings (9099 JP), Tatsuta Electric Wire & Cable (5809 JP), Kfc Holdings Japan (9873 JP).
S&P/ASX 100/200 Index Adhoc Rebalance: Potential Replacements for Altium (ALU AU)
- With all regulatory approvals received, the Scheme Meeting for Renesas Electronics (6723 JP)‘ acquisition of Altium Ltd (ALU AU) will take place on 12 July.
- If approved at the Scheme Meeting and at the Second Court Hearing, Altium Ltd (ALU AU) will stop trading from the close on 19 July.
- The replacements for Altium Ltd (ALU AU) in the ASX100/200 indices could be announced late this week with implementation at the close on 19 July.
Shanghai Henlius Biotech Update (2696.HK) – The Story Behind Privatization
- Fosun’s preferred arrangement for Henlius is to list the Company in A-shares.Since IPO in A-shares failed and Henlius has begun to generate profits, Fosun finally feels the need for privatization.
- Due to its “flaws”, undervaluation of Henlius in the Hong Kong stock market is difficult to fundamentally change. So, for conservative/cautious investors, Fosun’s one-time acquisition at a 30% premium is attractive.
- The Potential Share Alternative Offer seems a good option, but it is uncertain whether investors are still willing to believe in Fosun’s “good story” – the future re-listing is uncertain.
KOSDAQ150 Index Rebalance Preview: For Now, A Dozen Changes in December
- With just over a third of the review period complete, there could be 12 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the December rebalance.
- Even with 12 potential changes, there is sector balance with over half the changes in the Information Technology sector. Passive trading impact varies from 0.04-4.1x ADV.
- The potential adds have outperformed the potential deletes and the KOSDAQ 150 Index (KOSDQ150 INDEX) since the start of the year with a big move higher since mid-May.
Softbank Corp (9434) – Accounting for the Accounting Is Complicated Redux – So Be Bearish
- Telecom companies are traditionally “easy” to value. They have assets, debt, depreciation, earnings, cashflow. Lots of people like to use EV/EBITDA to measure.
- In comparing Japan’s telcos, I believe when Softbank Corp (9434 JP) is in the mix, one has to use forward PERs. EV/EBITDA is too fraught with complications.
- Softbank is currently at its most expensive multiple since listing on a Price to Forward Earnings basis, and relative to its major Peers. And KDDI has a big buyback now.
STAR100 Index Rebalance Preview: Outright Adds Outperforming Outright Deletes
- The review period for the September rebalance ends 30 July. We expect the changes to be announced 30 August with the implementation taking place after the close on 13 September.
- We forecast 6 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX).
- Excluding the migrations, the potential adds have outperformed the potential deletes since the start of the calendar year and there could be further outperformance over the next few weeks.
Exploring the Kakao Corp and Krafton Deal Potential for Kakao Games
- Kakao has begun talks with potential buyers for Kakao Games, with Krafton leading discussions directly using its own investment team.
- Despite official denials, it’s viewed as procedural. Local markets anticipate the deal due to no direct refutation beyond formal announcements.
- A three-month compliance period from disclosure makes this quarter challenging, but completion announcement potential exists by Q4 this year.
Honda (7267) : Offering’s Underwhelming Global Index Implications
- Despite the significant offering size, passive fund demand is unlikely to materialize due to non-strategic selling shareholders.
- Company’s number of shares and free float in the main global indices are forecasted to remain the same before and after the offering.
- Upcoming buybacks can lead to a decrease in float shares which can even cause passive fund supply at a subsequent quarterly review.
Quiddity Leaderboard for Hang Seng Index Sep 24: New Economy? Clean Energy? or Shipping?
- In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes for the Hang Seng Index in September 2024.
- The index changes for the September 2024 index rebal will be announced on 16th August 2024.
- The HSI selection process is highly subjective and does not follow clear-cut rules. This insight is simply an attempt to provide readers with an overall understanding of the possible scenarios.
LQ45 Index Rebalance Preview (July): Identifying Potential Index Changes
- The review period for the LQ45 Index July rebalance ended 30 June. The changes should be announced the last week of July, becoming effective after the close on 31 July.
- Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
- For a change, the impact on the potential inclusions will be higher since they will join the index with higher weights compared to the potential deletions.
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