In today’s briefing:
- TCM (570 HK): Profit Warning Is No Biggie
- Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
- Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…
- Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding
- Weekly Deals Digest (01 Sep) – ESR, Canvest, China TCM, CPMC, Shinko, Silverlake, Terumo, Midea
- Quiddity STAR 50/100 Sep 24 Rebalance: 100% Hit Rate; US$1bn+ One-Way Flows
- STAR50/STAR100 Index Rebalance: Adds Rally, Deletes Drop as Positioning Builds Up
- Hamamatsu Photonics Placement – Peculiar Timing
- Bajaj Housing Finance IPO: Offering Details & Index Inclusion
- CPMC Holdings (906.HK) Privatization Update – ORG Is Pushing Baosteel to Raise Its Offer
TCM (570 HK): Profit Warning Is No Biggie
- China Traditional Chinese Medicine (570 HK) flagged a 60-70% drop in its 1H24E net profit versus 1H23, due to reduced sales/profit of TCM concentrate, bad debt provisions, and remedial taxes.
- MAC triggers? No – Sinopharm won’t exercise such right, even if one was ostensibly triggered. I’d be surprised if Sinopharm wasn’t fully aware of TCM’s underlying operations.
- Get involved on any dips today. Trading wide at a 11.7%/38.7% gross/annualised spread, assuming Dec-end payment.
Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
- Zomato (ZOMATO IN) has a market cap of over US$27bn but is not a member of the NIFTY Index and S&P BSE SENSEX Index since it is not an F&O member.
- Once SEBI’s proposed and enhanced stock inclusion thresholds are implemented, Zomato (ZOMATO IN) should be added to the F&O segment of the market.
- Passive NIFTY Index and S&P BSE SENSEX Index will have to buy a lot of Zomato stock at subsequent rebalances. The impact will be higher given the lower real float.
Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…
- On 30 August, 7&i shareholder Artisan Partners (holder since 2019, now at 1%) wrote an open letter to the Board of Directors of Seven & I Holdings (3382 JP)
- There are several comments in bold. “It is imperative that the board of directors negotiate with ACT immediately to achieve the best possible outcome for shareholders” is one.
- The letter is a bit preachy, a bit fluffy, and a bit misleading in parts. But it requests the Company brief shareholders on the negotiations by 19 September 2024.
Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding
- Today after the close we got news that after a year-plus of Hamamatsu Photonics Kk (6965 JP)‘s sliding stock price, Toyota Motor (7203 JP) is selling their 5+% stake.
- The offering is standard. Probably prices 9 Sep 2024. HP’s amended buyback program and probable index upweights offset most of the offering size over the next several months.
- So investors have to decide whether they want to catch the falling knife.
Weekly Deals Digest (01 Sep) – ESR, Canvest, China TCM, CPMC, Shinko, Silverlake, Terumo, Midea
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: Midea Group Co Ltd A (000333 CH) premarketing its H Share listing, Terumo Corp (4543 JP) placement and 99 Speed Mart Retail Holdings (99SPD MK) US$530 million IPO.
- Event-Driven developments: ESR Group (1821 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), CPMC Holdings (906 HK), Shinko Electric Industries (6967 JP).
Quiddity STAR 50/100 Sep 24 Rebalance: 100% Hit Rate; US$1bn+ One-Way Flows
- The September 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 30th August 2024.
- There will be 2 changes for the STAR 50 index and 6 changes for the STAR 100 index.
- The STAR 50 and STAR 100 rebalances will collectively trigger one-way flows of more than US$1bn during the September 2024 index rebal event.
STAR50/STAR100 Index Rebalance: Adds Rally, Deletes Drop as Positioning Builds Up
- There are 2 constituent changes for the STAR50 INDEX and 6 changes for the STAR100 Index at the September rebalance that will be implemented at the close on 13 September.
- There are no surprises for the SSE STAR50 (STAR50 INDEX) while there are 3 surprise adds for the STAR100 Index with the profitability criterion being ignored.
- The adds to the SSE STAR50 (STAR50 INDEX) have outperformed the deletes over the last month and positioning is larger in some stocks compared to others.
Hamamatsu Photonics Placement – Peculiar Timing
- Toyota Motor (7203 JP) aims to raise around US$190m via selling over a 4% stake in Hamamatsu Photonics Kk (6965 JP).
- This is another cross-shareholding unwind and hence, won’t be a huge surprise. Although given the recent share price weakness, the timing appears peculiar.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
Bajaj Housing Finance IPO: Offering Details & Index Inclusion
- Bajaj Housing Finance (BHF IN) is looking to list on the exchanges by selling INR 65.6bn of stock at a valuation rumoured to be between INR 560-590bn.
- The anchor allocations will be completed later this week, and the stock is expected to start trading on 16 September.
- Bajaj Housing Finance (BHF IN)‘s maximum float will be around 10% and that will limit inclusion to just one global index in the following 6 months.
CPMC Holdings (906.HK) Privatization Update – ORG Is Pushing Baosteel to Raise Its Offer
- Huarui Offer has been approved by SAMR, which marks a solid step forward.Meanwhile, ORG’s management stated that the reduction of Huangshan Novel shares is to raise funds to acquire CPMC.
- While Baosteel may want to “test the waters”, the signals ORG is sending is it will make every effort to advance the acquisition of CPMC and is accelerating the process.
- The return on Huarui Offer isn’t attractive.We recommend waiting for Baosteel to raise its Offer, or simply choosing to add more positions in China TCM, whose privatization is more lucrative.
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