In today’s briefing:
- JOYY (JOYY US): Rumoured Privatisation
- Japan – Increasing Shorts on Some Interesting Stocks
- Merger Arb Mondays (01 Jan) – Weiqiao Textile, IRC, IJTT, JSR, Shinko Electric, Hollysys, OreCorp
- A/H Premium Tracker (To 29 Dec 23): STAY Long Hs Vs As, Wide Premia in Renewables Look Vulnerable
- Last Week in Event SPACE: Fujitsu General, Swire Pacific, Li Ning, IJJT
- (Mostly) Asia M&A, Dec 2023: Vinda, Adbri, Perpetual, CPMC, Sigma Health, Shinko Electric
- HSCEI Index Rebalance Preview: Zhongsheng (881 HK) Should Go This Time
- APR IPO Preview
- Taiwan Dual-Listings Monitor: TSMC Premium Remains High; ADR Short Interest Spiked
- Insiders Related Daisy Partners Sells About 270 Billion Won of Ecopro Co and Ecopro BM
JOYY (JOYY US): Rumoured Privatisation
Back in May 2016, a buyout group comprising Xiaomi Corp (1810 HK)‘s founder Lei Jun terminated its US$2.5bn Offer for JOYY (YY US), on account of heightened regulatory scrutiny. At the time, Lei was JOYY’s chairman. The buyout group also comprised CEO David Xueling Li. The non-binding Offer price for ~64% of shares out not held by the buyout group was US$68.50/share.
Fast forward to 16 November last year, Baidu (9888 HK) announced it had entered into definitive agreements with JOYY to acquire its domestic video-based entertainment live streaming business in China (“YY Live”), for US$3.6bn.
Two days later, Muddy Water had a slightly less favourable take on Baidu “buying growth”.
JOYY and certain of its current and former officers and directors were named as defendants in a federal putative securities class action filed on the 20 November 2020, alleging that they made material misstatements and omissions in documents filed with the SEC regarding certain of the allegations contained in the MW report.
On the 8 February, JOYY disclosed the conclusion of the independent review, which concluded that the allegations raised and conclusions reached in that MW report about JOYY’s YY Live business were not substantiated.
The Baidu sale has been substantially completed, with certain customary matters remaining to be completed – namely SAMR.
The New News
Reuters is reporting that Chairman David Li and Lei Jun are reloading an Offer for JOYY. Reportedly they are looking to offer US$75-$100/share, or a market cap of US$7.8bn at the top end of that range.
More below the fold.
Japan – Increasing Shorts on Some Interesting Stocks
- There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios early next year.
- The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
- Shorts have started to increase on some of the stocks and there will be further positioning as we near the liquidity event.
Merger Arb Mondays (01 Jan) – Weiqiao Textile, IRC, IJTT, JSR, Shinko Electric, Hollysys, OreCorp
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – Irc Ltd (1029 HK), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Adbri (ABC AU), Probiotec Ltd (PBP AU).
- Lowest spreads – Tietto Minerals Ltd (TIE AU), A2B Australia (A2B AU), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Pact Group Holdings (PGH AU).
A/H Premium Tracker (To 29 Dec 23): STAY Long Hs Vs As, Wide Premia in Renewables Look Vulnerable
- The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND flows flat/light and NORTHBOUND flows a significant net buy, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 200+bp.
- STILL time to go long Hs vs As for the new year. 52wk wide discounts were just last week. Wide A/H premia in renewables space look vulnerable.
Last Week in Event SPACE: Fujitsu General, Swire Pacific, Li Ning, IJJT
- The BIG Risk is that Fujitsu Ltd (6702 JP) sells its stake in Fujitsu General (6755 JP) to someone in a below-market tender offer.
- Swire Pacific (A) (19 HK) may still see more outperformance from its latest buyback. But it’s up ~29% since the company announced it was buying both the As and Bs.
- Li Ning (2331 HK)‘s shares continue to edge up after its founder recently increased its stake.
(Mostly) Asia M&A, Dec 2023: Vinda, Adbri, Perpetual, CPMC, Sigma Health, Shinko Electric
- For the month of December 2023, 16 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$10bn.
- The average premium for the new deals announced (or first discussed) in December was 44.7%. The average YTD is 39% (117 deals).
- This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.
HSCEI Index Rebalance Preview: Zhongsheng (881 HK) Should Go This Time
- Zhongsheng Group (881 HK) pops up as a potential deletion yet again and a much lower rank raises the probability of deletion to just short of a near certainty.
- With BeiGene (6160 HK) failing the Velocity Test for Tradeable Indexes, Zhongsheng Group (881 HK)‘s deletion from the index should result in China Unicom Hong Kong (762 HK)‘s inclusion.
- Estimated one-way turnover at the rebalance is 1.47% resulting in a one-way trade of HK$946m. Passives will need to trade over 2.5x ADV on both stocks.
APR IPO Preview
- APR is getting ready to complete an IPO in KOSPI in February 2024. The IPO price range is from 147,000 won to 200,000 won.
- According to the bankers’ valuation, the company’s valuation is expected to range from 1.1 trillion won to 1.6 trillion won post IPO.
- The company’s best selling product is its skin care beauty device product called Medicube Age-R.
Taiwan Dual-Listings Monitor: TSMC Premium Remains High; ADR Short Interest Spiked
- TSMC: 9.2% Premium — Spread Fell But Remains Historically High; Short Interest Spiked for ADRs
- UMC: Trading at -1.2% Discount — Still Uncompelling, Wait for Lower Levels
- ASE: Drops to 7% Premium — Could Soon Be at a Level to Go Long
Insiders Related Daisy Partners Sells About 270 Billion Won of Ecopro Co and Ecopro BM
- On 29 December, Ecopro Group announced large selling of Ecopro Co Ltd (086520 KS) and Ecopro BM (247540 KS) by Daisy Partners worth 272 billion won in December.
- Daisy Partners is a company 100% owned by Chairman of Ecopro Group Lee Dong-Chae and his family members.
- Daisy Partners is likely to sell more shares in Ecopro Co and Ecopro BM in the next several years to increase the foundation’s capital to about 500 billion won.
💡 Before it’s here, it’s on Smartkarma
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