In today’s briefing:
- Jardine Matheson (JM SP): MSCI Blues
- S&P/ASX Index Rebalance Preview: Adds Outperform Deletes As Review Period End Nears
- Tencent (700 HK) To Divest Meituan (3690 HK) – Impact and Index Implications
- JAFCO (8595) Vs Murakami – It’s On, So We Wait
- Yashili’s Pre-Condition EGM Approval Secured
- Tencent’s Potential Sale of Meituan Stake – Read Across to Other Stocks & Index Implications
- CSI300 Index Rebalance Preview: Outperformance Continues & Could Keep Going
- ANZ Renounceable Entitlement Offer – Could Be a Relatively Large (A$550-750m) Retail Shortfall
- CTG Duty Free H-Share Listing: Not Even Attractive at the Lower End
- Is It Time To Buy China?
Jardine Matheson (JM SP): MSCI Blues
- Jardine Matheson Holdings (JM SP) (JMH) has shed ~8% since MSCI said it was cutting the conglomerate’s weighing in two indices.
- The reweighting follows the cancellation of the 59% shareholding in JMH held by Jardine Strategic Holdings (JS SP), which was privatised last year.
- I see the discount to NAV at ~40%, right at the 12-month -2 STD level. JMH bought back ~149mn shares in the 1Q22, paying ~US$59/share, 17% above the current price.
S&P/ASX Index Rebalance Preview: Adds Outperform Deletes As Review Period End Nears
- There are 4 trading days to go in the review period for the September rebalance of the S&P/ASX indices. Announcement is on 2 September with implementation on 16 September.
- There could be 6 changes to the S&P/ASX 200 (AS51 INDEX), increasing to 8 if AVZ Minerals (AVZ AU) continues to be halted and if Link Administration (LNK) is privatised.
- The potential adds have outperformed the potential deletes over the last month. Short interest has increased on a few potential deletes. There will be pre-positions built up.
Tencent (700 HK) To Divest Meituan (3690 HK) – Impact and Index Implications
- Reuters this afternoon carried an article that Tencent (700 HK) was seeking to divest “US$24bn” (17%) of $78bn market cap delivery company Meituan (3690 HK) by year-end to mollify domestic regulators.
- Tencent would seek to launch a share sale within 2022 “if market conditions are favourable.” Meituan shares tanked 9%, immediately.
- The article suggests disposal via block sale (faster than negotiating with a private buyer), odd given Tencent’s Q1 2022 experience with the JD.com unwind. But it leads to BIG flows.
JAFCO (8595) Vs Murakami – It’s On, So We Wait
- Entities related to noted Japanese activist Murakami Yoshiaki have bought 11.5-15% of Jafco Co Ltd (8595 JP) in recent weeks; JAFCO has gotten upset and announced defensive measures.
- Murakami wants JAFCO to sell its large stake in Nomura Research Institute Ltd (4307 JP) and buy back shares. JAFCO is saving that stake for a rainy day.
- The shares have popped. There is a poison pill EGM Record Date coming. It’s worth thinking through the implications.
Yashili’s Pre-Condition EGM Approval Secured
- Yashili International Holdings (1230 HK) independent shareholders unanimously approved the proposed transactions at the 16 August EGM, a crucial step for China Mengniu Dairy Co (2319 HK)’s HK$1.20 offer.
- The remaining pre-condition is the completion of the 25% Yashili acquisition. The completion conditions suggest that this pre-condition is low risk and will likely be completed soon.
- The value test is only applicable to the scheme. At last close and for a November completion, the gross and annualised spread to the offer is 8.1% and 29.6%, respectively.
Tencent’s Potential Sale of Meituan Stake – Read Across to Other Stocks & Index Implications
- Tencent (700 HK)‘s reported sale of its Meituan (3690 HK) stake led to a selloff on Meituan and on other companies that Tencent has invested in.
- There are 10 listed companies where Tencent (700 HK)‘s holding is over US$1bn. Some stakes are more likely to be sold than others.
- A complete stake sale will benefit some companies more than others since they are part of a wider array of indices and that will bring in passive flow.
CSI300 Index Rebalance Preview: Outperformance Continues & Could Keep Going
- Past the midway mark in the review period, we see 18 potential changes to the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the December rebalance.
- We estimate a one-way turnover of 3.32% at the December rebalance leading to a one-way trade of CNY 8.55bn.
- The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index over the last few months, with the outperformance widening over the last few weeks.
ANZ Renounceable Entitlement Offer – Could Be a Relatively Large (A$550-750m) Retail Shortfall
- ANZ announced a US$2.4bn (A$3.5bn) raising via a renounceable entitlement offer to part fund the purchase of Suncorp Bank in Jul 2022.
- The institutional part of the entitlement offer saw a strong take up and the shares have held up well since the deal was announced.
- In this note, we will talk about the upcoming retail shortfall bookbuild and other updates since our last note.
CTG Duty Free H-Share Listing: Not Even Attractive at the Lower End
- CTG Duty Free Group has filed for a HKEx listing and plans to raise net proceeds of US$1.98bn at the midpoint of the IPO price range of HK$143.5-165.5 per share.
- The company’s indicative IPO price range is at a 27-37% discount to the company’s last close of RMB194.75 per share.
- In this insight, we discuss our key concerns on CTG’s financials and our thoughts on the company’s valuation.
Is It Time To Buy China?
- Investors are overly pessimistic, but China may already be a contrarian ‘buy’
- Latest economic data show positive surprises. GDP momentum is rising but investor positioning data evidence another big cut in exposure to China
- Monetary policy stable and supportive. No sign of credit bust, or boom. Great potential for policy ‘pivot’ later in 2022
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