In today’s briefing:
- BIG ¥500bn Honda (7267) Offering Coming?
- HSCEI Index Rebalance Preview: Two Changes Likely in September
- Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Jul24)
- L’Occitane (973 HK): Tendering Now Open
- Korean Holdcos Vs Opcos Gap Trading Opportunities in 3Q 2024
- CPMC Holdings (906.HK) Privatization – Some New Information Worth the Attention
- Robosense IPO Lock-Up Expiry – US$2.8bn Lockup Expiry for 99% of the Stock, CCASS Movement
- HDFC Bank (HDFCB IN): Foreign Room Crosses 25%; Index Implications & Positioning for US$5bn+ Buying
- China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress
- HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September
BIG ¥500bn Honda (7267) Offering Coming?
- Today just before the close, Reuters came out with an article saying Japan’s four major insurers and some financial institutions would offer ¥500bn of shares in a secondary offering.
- That implies about 275-280mm shares (insurers hold ~195mm). In May, Honda announced a ¥300bn buyback with earnings, with nothing done so far.
- The supply/demand dynamics here are key. There are a lot of moving parts over time. Honda is cheaper than it looks but there are moving parts there too.
HSCEI Index Rebalance Preview: Two Changes Likely in September
- SenseTime Group (20 HK) and JD Logistics (2618 HK) are potential deletions while PICC Property & Casualty (2328 HK) and New Oriental Education & Techn (9901 HK) are potential adds.
- Estimated one-way turnover at the rebalance is 1.8% resulting in a one-way trade of HK$950m. Official capping will be based off the close of trading on 3 September.
- There will be 1-2x ADV to buy on the adds and over 2x ADV to sell in JD Logistics. The impact on SenseTime is lower given the recent surge in volume.
Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Jul24)
- This month (June) saw 1,673 Corporate Governance Reports filed and 5 new “Mgmt Conscious of Capital Cost/Stock Price” policies filed.
- We created a tool show every report, provide links to every document, and now a new diff file tool. Put in a name, see the difference between the Old/New Reports.
- We hope this took will help. It is designed to be a shelf reference. We update the tool once a month, a couple of weeks ahead of the TSE.
L’Occitane (973 HK): Tendering Now Open
- Exactly two weeks after the scrip alternative was announced, L’Occitane (973 HK)‘s Composite Document has been issued. The Offer is now open for acceptances.
- The IFA (Somerley) considers terms to be fair & reasonable. A lifetime high coupled with a scrip option – yes, this is fair.
- Keep an eye on CCASS moves prior to the first closing date, the 23rd July. I have a call with the FA tomorrow. Hit me up with any questions.
Korean Holdcos Vs Opcos Gap Trading Opportunities in 3Q 2024
- In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 3Q 2024.
- Of the 38 pair trades, 21 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.
- These pairs could generate trading opportunities in terms of their pricing gaps closing reversal (Doosan Corp vs. Doosan Enerbility; Hyundai Mobis vs Hyundai Motor).
CPMC Holdings (906.HK) Privatization – Some New Information Worth the Attention
- ORG purchased 27% of CPMC’s shares at HK$6/share in 2015.After about eight years, Baosteel’s Offer Price was only HK$6.87/share. The annualized return rate was low, which obviously cannot satisfy ORG.
- Baosteel and CPMC have been in talks for a long time – There may have been some “tacit agreement” between the two parties. The approval process is smooth so far.
- For acquisitions/consolidation between SOEs, private enterprises usually have limited chances of winning.ORG has financial pressure and the approval process face uncertainties. There would be more negotiations among CPMC, ORG, Baosteel.
Robosense IPO Lock-Up Expiry – US$2.8bn Lockup Expiry for 99% of the Stock, CCASS Movement
- Robosense Technology (2498 HK) raised around US$126m in its Hong Kong IPO in Jan 2024. The lockup on its shareholders will expire soon.
- The company provides LiDAR and perception solutions to its customers. As of March 2024, it had design wins for mass production of LiDAR products with 22 automotive OEMs and suppliers.
- In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.
HDFC Bank (HDFCB IN): Foreign Room Crosses 25%; Index Implications & Positioning for US$5bn+ Buying
- Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 54.83% and that results in foreign room crossing the ‘magical’ 25% mark.
- The increase in foreign room could lead to passive trackers of a global index needing to buy 256m shares (US$5.3bn; 11.5x ADV) at the end of August.
- There will definitely be positioning in the stock but there should still be upside in the stock. The HDFC Bank (ADR) (HDB US) line was up 4.5% overnight.
China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress
- The slow progress of privatization is related to recent high-level changes in CNPGC. Decisions on SOE deals with “strategic purpose” require careful considerations, not based on “one leader’s personal preferences”.
- Based on public information, we cannot find convincing reason to prove that CNPGC has changed its mind.There’re rumors that China TCM’s privatization is still considered important project on the agenda.
- China TCM’s has strong fundamentals to support valuation. If there is no announcement, the privatization process is expected to proceed as usual, and we continue to wait for the voting.
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September
- We see 37 potential adds (including plenty of new listings) and 25 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in September.
- We expect 32 stocks to be added to Southbound Stock Connect following the rebalance while 24 stocks could be deleted from the trading link and become Sell-only.
- There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.
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