In today’s briefing:
- Canvest (1381 HK): Evaluating A Privatisation
- ITC Hotels: Index Implications of Demerger from ITC Ltd (ITC IN)
- HSCEI Index Rebalance Preview: Increase in Velocity Could Lead to 3 Changes in March
- Sun Art Retail (6808 HK): BABA Takes Massive Hit After Inking SPA @ HK$1.38
- Australia: Six Stocks in Passive Selling Crosshairs for February
- Korean Holdcos Vs Opcos Gap Trading Opportunities in 1Q 2025
- Canvest (1381 HK): Attractive Spread with Steady Progress in Precondition Satisfaction
- Bloks Group IPO (0325.HK): Global Offering, The Initial Price Range Is Seen As Attractively Valued
- Gap Trade Opportunities in Korean Prefs Vs Common Share Pairs in 1Q 2025
- NZ: Contact Energy (CEN NZ) Hotter Than Mercury (MCY NZ) As Catalyst Looms
Canvest (1381 HK): Evaluating A Privatisation
- Since waste-to-energy play Canvest Environmental Protection (1381 HK) announced a possible privatisation from Grandblue Environment (600323 CH) at $4.90/share (a 20.7% premium to undisturbed), shares are up just 6.4%.
- There’s a lot to pack in here, not the least being this is an indicative Pre-Conditional Offer.
- But the fact the announcement mentions rolling over a specific number of shares of the controlling shareholders (7.23%), suggests negotiations are well advanced. So we explore.
ITC Hotels: Index Implications of Demerger from ITC Ltd (ITC IN)
- ITC Ltd (ITC IN) will demerge its Hotels business with the ex-date set as 6 January and shareholders receiving 1 share of ITC Hotels for 10 shares of ITC Ltd.
- ITC Ltd (ITC IN) shareholders will own 100% of ITC Hotels – 60% will be owned directly and 40% will be owned through their shareholding in ITC Ltd (ITC IN).
- There will be a lot of selling in ITC Hotels within a few days of listing from different passive index trackers and that could provide buying opportunities for those interested.
HSCEI Index Rebalance Preview: Increase in Velocity Could Lead to 3 Changes in March
- BeiGene and ZTO Express Cayman are potential inclusions for the Hang Seng China Enterprises Index in March while Sino Biopharmaceutical and Li Ning are potential deletions.
- There is a lower probability of Yum China Holdings (9987 HK) replacing Sunny Optical Technology Group (2382 HK) in the index in March.
- There could be a few more index inclusions for ZTO Express Cayman in March and the stock could outperform its peers over the next few months.
Sun Art Retail (6808 HK): BABA Takes Massive Hit After Inking SPA @ HK$1.38
- HK$1.38/Share. That’s the takeaway as Alibaba Group (9988 HK) enters an SPA to offload its 78.7% stake in Sun Art (6808 HK) at HK$1.38/share, a 44.4% discount to last close.
- The buyer, Paragon Shine, an entity under Chinese PE outfit DCP Capital, is paying ~HK$12.3bn compared to BABA’s HK$28.1bn purchase of a 51% stake in October 2020.
- Should the SPA complete, an unconditional MGO is triggered. Minorities tendering can receive up to HK$1.58/share. But the question is: why would BABA be cashing out at this price?
Australia: Six Stocks in Passive Selling Crosshairs for February
- Up to six Aussie stocks could be deleted from global passive portfolios in February. The final list of deletions depends on stock performance over the next 2-3 weeks.
- If deleted, passive trackers will need to sell between A$370m-A$500m in the stocks. Impact is high at between 7-24 days of ADV.
- The potential deletions have underperformed the S&P/ASX 200 (AS51 INDEX) over every time period from 1 week to 3 months. Positioning is still low in a few stocks.
Korean Holdcos Vs Opcos Gap Trading Opportunities in 1Q 2025
- In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 1Q 2025.
- The recent martial law cancellation and numerous impeachments of acting Presidents have raised political uncertainty in Korea resulting in widening of some gaps among numerous holdcos and opcos in Korea.
- Of the 38 pair trades, 25 of them involved holdcos outperforming opcos in the past six months and the other 13 opcos outperforming holdcos in the same period.
Canvest (1381 HK): Attractive Spread with Steady Progress in Precondition Satisfaction
- Grandblue Environment Co A (600323 CH) continues to make steady progress in satisfying the precondition for its HK$4.90 privatisation offer for Canvest Environmental Protection Group (1381 HK).
- Two of the five preconditions are satisfied, and another will be satisfied by 20 January. The long stop date of 17 July provides ample time to satisfy the remaining two.
- Although the peers have materially re-rated, the offer implies a premium compared to peer multiples. Vote risk remains low, aided by selling by a shareholder with a blocking stake.
Bloks Group IPO (0325.HK): Global Offering, The Initial Price Range Is Seen As Attractively Valued
- Shanghai-Based Bloks Group, a leader of assembly character toys in China, has announced the initial price range for its IPO in Hong Kong.
- The offering is expected to be between HK$55.65 and HK$60.35, implying a market cap of ~HK$14B or ~$1.8B at the midpoint of the price range.
- Assuming IPO offer price of HK$58.00, UBS AM Singapore, Greenwoods AM and Fullgoal Investors have agreed to invest ~HK$388M or ~$50M in the offering.
Gap Trade Opportunities in Korean Prefs Vs Common Share Pairs in 1Q 2025
- In this insight, we discuss numerous gap trade opportunities involving Korean preferred and common shares in 1Q 2025.
- Among the 27 major pair trades (prefs vs. common shares), 20 of the pref stocks outperformed their common shares counterparts in 2024.
- The 27 Korean preferred stocks’ average prices declined by 1% from end of 2023 to end of 2024 (excluding dividends), outperforming their common counterparts which were down on average 3.7%.
NZ: Contact Energy (CEN NZ) Hotter Than Mercury (MCY NZ) As Catalyst Looms
- Contact Energy (CEN NZ) has outperformed Mercury NZ Ltd (MCY NZ) over the last month off the back of expected passive flows in February.
- Despite the outperformance, Contact Energy (CEN NZ) trades at a lower forward PE compared to Mercury NZ Ltd (MCY NZ), though it does trade at a higher Price to Book.
- There could be large passive inflows to Contact Energy (CEN NZ) and large passive outflows from Mercury NZ Ltd (MCY NZ) in February.
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