In today’s briefing:
- Big Link REIT (823 HK) Rights Offering
- Canon ADR Cancellation – There May Be A Trade To Do
- Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs
- Dai Nippon Printing (7912) – Activism Results Going Forward Are Complicated
- Kakao Pay (377300 KS): MSCI Inclusion (Finally!)
- Absolutely GINORMOUS Citizen Watch (7762 JP) Buyback
- HYBE’s Tender Offer of SM Entertainment: Closing the Price Gap
- ECM Weekly (12th Feb 2023) – Hesai, Oasis, Mankind, Greatpower, Ruipeng, CATL, Nissan/Renault
- Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up
- Osstem Implant: Founder Choi Changes CB Sale Terms to MBK-Unison & KCGI Agrees to Sell Its Shares
Big Link REIT (823 HK) Rights Offering
- After being halted this morning before the start of trade, post-close, Link REIT (823 HK) announced a fully-underwritten Rights Offering.
- The Rights Offering intends to raise HK$18.8bn issuing 1 Right for every 5 Shares held, at a subscription price of HK$44.20, a 26% discount to TERP.
- This will take an already under-levered REIT and add more capital to it. And there is going to be selling pressure at some point.
Canon ADR Cancellation – There May Be A Trade To Do
- Last week (on 10 February), Canon Inc (7751 JP) announced it intended to delist its ADRs from the NYSE.
- Canon is the third Japanese company to do so in two months, after Eisai Co Ltd (4523 JP) announced in December and Olympus Corp (7733 JP) in January.
- No related investment opportunity but there may be a trade to do.
Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs
- MSCI announced the changes to the GIMI on Friday as part of the February QCIR. MSCI also announced a review of the free float of the Adani Group companies.
- FTSE will announce the changes to the All-World and All-Cap indices after the close of trading on Friday, 17 February. The same day is the S&P/ASX review cutoff for March.
- Yet another weekly outflow for the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) taking the YTD outflow to over US$2.5bn.
Dai Nippon Printing (7912) – Activism Results Going Forward Are Complicated
- A little over two weeks ago, western media outlets reported “sources familiar with the matter” said Elliott Management had built a “significant” stake in Dai Nippon Printing (7912 JP).
- DNP has been a “value name” for years. And years. Lots of cash, lots of real estate, and lots of cross-holdings. DNP had a plan to sell crossholdings, slowly.
- DNP had planned a March 9 presentation of its new MTMP. Elliott, reportedly with a little less than 5%, wanted faster. A few weeks later, DNP has responded with faster.
Kakao Pay (377300 KS): MSCI Inclusion (Finally!)
- MSCI will add Kakao Pay (377300 KS) to the MSCI Korea Index at the February QCIR. There are 7 trading days to implementation on 28 February.
- Local institutions and foreign investors have been sellers in the last couple of weeks and retail investors have been buying to mop up the selling.
- Cumulative excess volume indicates a fair amount of pre-positioning and we’d look to sell ahead of the passive MSCI buying.
Absolutely GINORMOUS Citizen Watch (7762 JP) Buyback
- Today, Citizen Watch (7762 JP) reported Q3 earnings, and a BIG buyback.
- It is a VERY BIG BUYBACK at up to 75mm shares (25.61% of shares out), with an allocation of up to ¥40bn (which is ~22.1% at last price).
- The buyback is to be executed over the next year. Buyback structure (undisclosed) matters and shareholder structure matters too. There is a big short. This could get really interesting.
HYBE’s Tender Offer of SM Entertainment: Closing the Price Gap
- We believe that there is a very high probability of a successful tender offer of 25% stake in SM Entertainment by HYBE.
- There is a 4.6% gap between the tender offer price and current price. There is a strong probability of this gap being closed in the next several weeks.
- There could also be an on-going interest by Kakao to try to take over the controlling interest in SM Entertainment but HYBE is not likely to give up control easily.
ECM Weekly (12th Feb 2023) – Hesai, Oasis, Mankind, Greatpower, Ruipeng, CATL, Nissan/Renault
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, Hesai Group (HSAI US) provided the first Asia linked listing for the year.
- Things were quiet on the placement front owing to the annual earnings reporting season.
Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up
- Huitongda (9878 HK) was listed on 18th Feb 2023, when it raised US$285m in its HK IPO. Its one-year lockup will expire on 17th February 2023.
- Huitongda (HTD) is a commerce and service platform serving businesses in the lower-tier retail markets of China.
- Coming up for one-year lockup expiry are HTD’s pre-IPO investors. With the exception of Alibaba and SOE backers, the bulk of HTD’s pre-IPO investors are still currently in the money.
Osstem Implant: Founder Choi Changes CB Sale Terms to MBK-Unison & KCGI Agrees to Sell Its Shares
- Due to the enormous controversy regarding Chairman Choi Gyu-Ok’s children exchange CB call options for BWs, the Choi family has decided to change and simplify this transaction structure.
- Previously, MBK-Unison decided to acquire the call option on CB that Chairman Choi gave to his children. Under revised contract, MBK-Unison agreed to acquire the convertible bond itself.
- We believe MBK-Unison consortium is getting a relative bargain in this deal and the valuation of Osstem Implant remain attractive (EV/EBITDA of 6.4x and P/E of 11.7x in 2024).
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