In today’s briefing:
- LG Energy Flow Crunch with Additional Passives: K200/MSCI Up-Weight & LIT Inclusion
- Softbank – So The Arm IPO Isn’t Looking All That Hot Then?
- A Detailed Summary of Hanwha Solutions Demerger & Tender Offer
- Pine Care Group (1989.HK) – Hard to Make Profits Due to Industry Characteristics; Here Is What to Do
- Last Week in Event SPACE: Toshiba, Oz Minerals, Link Admin, Sands China
- Hong Kong Buybacks Weekly (Sep 23rd): Buyback at One Year High
- Porsche AG: IPO Set for Success
- FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Market Consultation Could Cause Massive Flows
- Toshiba Bidders Switching Partners May Be Bullish
- FTSE TWSE 50 & 100 Quiddity Leaderboard Dec 22: Greatek in a Pickle
LG Energy Flow Crunch with Additional Passives: K200/MSCI Up-Weight & LIT Inclusion
- LG Energy’s locked shares approach 96-97% of SO. Now, we will see an additional passive flow equivalent to another 1% of SO: KOSPI 200/MSCI Standard up-weights and LIT inclusion.
- Each passive impact is also substantial. The MSCI up-weight alone will cause an impact equivalent to 2.44x ADTV. It would be 2.20x for the KOSPI 200 and 1.03x for LIT.
- For the KOSPI 200 December review, the event-driven flow will likely focus on up-weights, including LG Energy. For LIT, we should consider an aggressive LONG/SHORT with LG Chem.
Softbank – So The Arm IPO Isn’t Looking All That Hot Then?
- Apparently prospects for a high valuation on a potential Arm IPO are so staggeringly, AI-rifically good that Masayoshi Son is now sounding out Samsung on a strategic partnership.
- Samsung itself has not been having the greatest time of late with Micron and SK Hynix making serious inroads against its prior technological leadership in memory.
- So as desperate and desperate-er ponder an alliance we can only be thoroughly convinced that this move absolutely, positively has nooooothing to do with trying to prop up share prices.
A Detailed Summary of Hanwha Solutions Demerger & Tender Offer
- There is no unlocking of treasury shares, so a flow betting on dramatic value accretion will not occur. For tendering, the proration risk appears to be relatively high.
- Passive trackers will sell at the close on February 24 and repurchase (likely only for Solutions) at the close on March 31. The flow size would be around 5.5x ADTV.
- ECO risk wouldn’t be a concern as the new rule will grant appraisal/preemptive rights to the existing shareholders. Also, Hanwha hinted at the possibility of choosing private placement over ECO.
Pine Care Group (1989.HK) – Hard to Make Profits Due to Industry Characteristics; Here Is What to Do
- Although Pine Care’s revenue kept growing in recent years, its net loss widened, with declining profitability. Single customer risk, high debt and cash flow pressure are also hidden dangers.
- The elderly care service is characterized by high investment, long payback period, high risk, low profit margin/rate of return, strong public welfare attributes, etc. So, Pine Care’s outlook is challenging.
- We recommend investors to view Chinachem’s acquisition of Pine Care rationally, unless Pine Care could demonstrate some positive signals in Mainland business, which is the key for future valuation expansion.
Last Week in Event SPACE: Toshiba, Oz Minerals, Link Admin, Sands China
- The only way that noisy shareholders in Toshiba Corp (6502 JP) can be eliminated, allowing management and employees to focus on “making Toshiba stronger” is to arrange a privatisation.
- BHP Group Ltd (BHP AU) approached OZ Minerals Ltd (OZL AU) with a bid of A$25/share. Oz very quickly rejected. There are hints now that A$30 may be the price.
- After 23 months of negotiations with various parties, culminating in a protracted on-again, off-again, negotiation with Dye & Durham, Link Administration (LNK AU) is now without an Offer.
Hong Kong Buybacks Weekly (Sep 23rd): Buyback at One Year High
- We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Sep 23rd based on HKEx daily reports.
- In the past 7 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Aia (1299 HK), Ck Asset (1113 HK).
- In the past 30 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Aia (1299 HK), Xiaomi (1810 HK).
Porsche AG: IPO Set for Success
- Volkswagen sets the price range for the Porsche AG IPO between €76.50 and €82.50. The books are covered several times. Porsche AG will begin trading on September 29.
- Through a holding chain, the Pïech and Porsche families will control 25% of the votes of Porsche AG directly and 39.975% indirectly (total of 64.975%), with just a 24.275% economic interest.
- The IPO looks set for success, with possible DAX inclusion, and pricing likely towards the top-end. This should favour Volkswagen’s re-rating and tighten the discount to NAV of Porsche SE.
FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Market Consultation Could Cause Massive Flows
- The FTSE Taiwan Dividend+ Index is a fascinating index. The rebalance works the opposite way from most float market cap-weighted indices, but maintains a grounding in positive fundamentals.
- It has issues, shown in the recent non-constituent review which nonetheless saw ~10% one-way flow. And more flows has meant more impact to changes.
- FTSE Russell has commenced a consultation closing shortly, with the goal of increasing members from 30 to 50. This provides for some interesting potential changes.
Toshiba Bidders Switching Partners May Be Bullish
- When the Bidding started, at least 10 parties were in the data room. It ended up with 4 parties moving from Round1 to Round2 where binding bids come.
- The Final Four: Brookfield, Bain, JIC+JIP, and CVC. Bidders advancing to Round2 weren’t allowed to join together. But JIC+JIP are apparently splitting, and now JIC wants to partner with Bain.
- They’d need an exception but this keeps four in the same format. It also likely makes more bids competitive.
FTSE TWSE 50 & 100 Quiddity Leaderboard Dec 22: Greatek in a Pickle
- In this insight, we take a look at the names leading the race to become ADDITIONs/DELETIONs for the Taiwan 50 and Taiwan Mid-Cap 100 Indices for the December 2022 Rebalance.
- Based on current prices, Via Technologies (2388 TT) is an ADD and AP Memory Technology (6531 TT) is a DEL to the Taiwan Mid-Cap 100 index.
- While there are currently no ADDs/DELs expected for the Taiwan 50 index, there are a couple of names that are close to triggering index changes in the December 2022 review.
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