In today’s briefing:
- JOYY (JOYY US): Rumoured Privatisation
- HSCEI Index Rebalance Preview: Zhongsheng (881 HK) Should Go This Time
- NIFTY Bank Index Rebalance Preview: Canara Bank Could Replace Bandhan Bank
- Allkem + Livent = Arcadium : Updated Expected Index Flows
- HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March
- Selected European HoldCos and DLC: December’23 Report
- KRX’s Mandatory English Disclosure Debut: A Detailed Guide on Utilizing This Without Confusion
- HS Holdings (8699) – New Year, New Issues So Lots of Value But Buyer Beware!
- Plane Crash at Haneda Airport; Negative for Japan Airport Terminal and Japan Airlines
- Hyundai Hyms IPO Preview
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.
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.
NIFTY Bank Index Rebalance Preview: Canara Bank Could Replace Bandhan Bank
- Canara Bank (CBK IN) could replace Bandhan Bank Ltd (BANDHAN IN) in the NSE Nifty Bank Index (NSEBANK INDEX) at the March rebalance.
- Passive trackers will need to buy 2 days of ADV on Canara Bank (CBK IN) while selling over 1 day of ADV on Bandhan Bank Ltd (BANDHAN IN).
- The impact is even higher where passives will need to buy nearly 6x delivery volumes in Canara Bank and sell 3x delivery volumes in Bandhan Bank Ltd.
Allkem + Livent = Arcadium : Updated Expected Index Flows
- Allkem Ltd (AKE AU) saw its last day of trading on 21 December. There was large volume at the close as one major index provider gave it the boot.
- Another delayed their treatment at the last minute, and eliminated a cross-flow.
- But there is still a lot of net buy flow tomorrow (3 Jan) and the next day in the US. Perhaps more than I expected.
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March
- We see 30 potential adds (including plenty of new listings) and 28 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in March.
- We expect 26 stocks to be added to Southbound Stock Connect following the rebalance while 25 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.
Selected European HoldCos and DLC: December’23 Report
- The discounts to NAV of covered holdcos have mainly widened during December. Discounts to NAV: C.F.Alba, 49.1% (vs. 47.1%); GBL, 36.6% (vs. 34.9%); Heineken Holding, 16.7% (vs. 14.5%);
- Industrivärden C, 5.4% (vs.4.9%); Investor B, 13.5% (vs. 14.6%); Porsche Automobile Holding, 37.1% (vs. 39.9%). The spread of Rio DLC widened to 24.2% (vs.17.2%).
- What seems interesting: in holding trades, Porsche SE/vs. listed assets and the Rio DLC: long RIO LN/short RIO AU.
KRX’s Mandatory English Disclosure Debut: A Detailed Guide on Utilizing This Without Confusion
- KRX’s lack of a standardized English translation platform may lead to non-standardized terminology and varying translation quality. KRX stresses cross-checking Korean and English disclosures due to potential errors.
- The 3-day lag between Korean and English disclosures poses timeliness challenges, requiring consistent cross-checking. Overall, the process for foreign investors using Korean market disclosure sites remains largely unchanged.
- The common procedure should still be to first check disclosures using English titles, then convert to Korean for reading. If English disclosures exist, utilize them for cross-checking.
HS Holdings (8699) – New Year, New Issues So Lots of Value But Buyer Beware!
- Under the requirements of the Amended Mongolian Banking Law (Feb 2021), Khan Bank (KHAN MO) needed to IPO. It did, and HS Holdings (8699 JP)‘s stake fell to 49.77%.
- It was de-consolidated. They were locked up for 6mos. The look-through financials are easier now. The company has bought back stock and trades at <0.5x book.
- But the Mongolian Banking Law required one more thing. All D-SIBs had to get all shareholders below 20% by 31 December 2023. It’s not clear that happened.
Plane Crash at Haneda Airport; Negative for Japan Airport Terminal and Japan Airlines
- Japan Airline’s Flight JL516 operated by a two-year-old Airbus A350-900 burst into flames upon landing at Haneda Airport, apparently hitting a small Japanese Coast Guard aircraft
- 379 passengers and crew were safely evacuated, but five of six crew on a Japanese coast guard aircraft were unaccounted for
- Haneda Airport runaways are all closed, aircraft heading to Haneda are diverted to other airports or flights aborted altogether
Hyundai Hyms IPO Preview
- Hyundai Hyms is getting ready to complete its IPO in KOSDAQ in January. The total IPO offering amount is 43.5 billion to 54.9 billion won.
- The company is offering 8.7 million shares in this IPO, of which 40% are old shares and 60% are new shares.
- Hyundai Hyms specializes in shipbuilding equipment. Hyundai Hyms’s main business includes shipbuilding equipment and related services.
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