In today’s briefing:
- EOFlow (Further) Tests Investor Patience
- KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added
- Asahi Group Placement – Follow Up – Shaping up for a Christmas Cheer
- T&K TOKA (4636 JP): Imminent TOB Launch? Imminent Bump Needed?
- CSI Medical Service Index Rebalance: Chunky Flows for Some Stocks
- Asahi Group (2502 JP): The Current Playbook
- 2024 High Conviction: Buy Hollysys
- StubWorld: Rumoured Interest In PCCW’s Fibre
- CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon
- Breaking Down Korean Regulators’ Official Details on New Short Selling System
EOFlow (Further) Tests Investor Patience
- Back on the 25 May, when Medtronic Plc (MDT US) enter into a SPA with EOFlow (294090 KS)‘s CEO, with a follow-on Tender Offer, the whole construct looked pretty clean.
- Then in August Insulet Corp (PODD US) launched its lawsuit, which in hindsight, should have been expected. Then earlier this month, news surfaced concerning a stock-backed loan to the CEO.
- Now the CEO is selling, presumably to repay his collateralized loan. Shares are down 38% since the resumption of trading, and are now at a whopping 122% spread to terms.
KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added
- The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 8 December.
- Fenbi Ltd (2469 HK) and YSB (9885 HK) will be added to the index and there are no deletions.
- There is a big lock-up expiry in YSB (9885 HK) soon after the index inclusion and this could be an opportunity to access liquidity in the stock.
Asahi Group Placement – Follow Up – Shaping up for a Christmas Cheer
- A group of shareholders aims to raise US$1.3bn (JPY197.8bn) by selling their respective stakes in Asahi Group Holdings (2502 JP) via an extended secondary follow-on.
- We have covered the background of the deal in our earlier note, Asahi Group Placement – Relatively Small One when Compared to Previous Large JP Secondary Selldowns.
- In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.
T&K TOKA (4636 JP): Imminent TOB Launch? Imminent Bump Needed?
- In August, T&K Toka Co Ltd (4636 JP) announced a TOB by Bain with a clearance hurdle of selling a 3.51% stake in Hangzhou Toka Ink (SH:688571) before launch.
- Friday, the company announced that they put up a 3.6% stake for auction, with the sale to be executed that day. That likely triggers an early launch of the TOB.
- The TOB Price is offensively cheap at 0.63x “official” book, and 0.53x book adjusted for equity affiliate price. The shares have traded through terms since launch. This should get bumped.
CSI Medical Service Index Rebalance: Chunky Flows for Some Stocks
- There are 4 changes for the CSI Medical Service Index that will be implemented at the close on 8 December.
- The constituent changes plus capping result in one-way turnover of 5.9% and in a one-way trade of CNY 1.86bn (US$261m).
- Some stocks will have passive flows from global trackers at the end of November while there will be flows from other local passive trackers at the close on 8 December.
Asahi Group (2502 JP): The Current Playbook
- Since the US$1.3 billion secondary placement announcement, Asahi Group Holdings (2502 JP)’s shares are down -6.2% from the undisturbed price of JPY5,804 per share (16 November).
- Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Asahi’s shares have followed the pattern of previous large placements.
- The offering will likely be priced on 28 November. Investors participating in previous large Japanese placements tend to secure positive returns.
2024 High Conviction: Buy Hollysys
- Despite Hollysys Automation (HOLI US) receiving a myriad of proposals over the past three years, nothing moved forward. Calling an SGM to spill the board would change that status quo.
- But Hollysys’ board stonewalled the SGM, pinning its reason – and a proposed injunction – on the subjective ownership of Ace Lead, and in turn, its 6.7% holding in Hollysys.
- That injunction was dismissed last week. An SGM will now be held late January. A firm merger proposal is expected in the middle of next month. This is a buy.
StubWorld: Rumoured Interest In PCCW’s Fibre
- Reportedly, Chinese investors, as well as Middle Eastern sovereign wealth funds, have expressed interest in acquiring a “significant ” minority stake in PCCW Ltd (8 HK)‘s fibre ops.
- Preceding my comments on PCCW are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon
- There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 8 December.
- This is yet another index inclusion for Hygon Information Technology C (688041 CH) – the stock continues to move higher on expected passive buying over the next two weeks.
- Over the last 6 months, the adds have underperformed the deletes but there has been a significant improvement in performance over the last 2 months.
Breaking Down Korean Regulators’ Official Details on New Short Selling System
- Concerning the newly imposed 90-day mandatory repayment period for institutional investors, the elimination of the recall risk during this period is not included in this improvement plan.
- The right to re-establish the same short-selling position after the 90-day repayment period is unlimited. We should pay attention to the potential of this creating new trading events.
- Institutions borrowing stocks from overseas are not subject to the 105% collateral ratio. However, everyone is subject to the 90-day repayment period, even for investors who borrow stocks from overseas.
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