In today’s briefing:
- Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
- Midea Group H Share Listing (300 HK): Valuation Insights
- Seven & I Holdings (3382 JP): State of Play
- SENSEX Index Rebalance Preview: Trent Could Replace Bajaj Finserv; BUT F&O Adds Could Change That
- Midea Group HK IPO Valuation Analysis
- Midea Real Estate (3990 HK): Now Trading Ex-In-Specie
- Timing a Trade to Capitalize on KT’s November Global Index Deletion and the ETF Recall
- TOPIX Inclusions: Who Is Ready (September 2024)
- PC Partner (1263 HK): Goodbye Hong Kong; Hello Singapore
- NEXTDC Placement – Good Track Record but Seems Opportunistic
Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
- The Midea Group (300 HK) IPO is being offered at a price range of HK$52-54.8/share, a discount of 20.9%-25% to Midea Group. That will raise US$3.28bn-US$3.46bn for the company.
- Midea Group (300 HK) will not get Fast Entry to the HSCI but will be added to Southbound Stock Connect on 14 October once the price stabilisation period has ended.
- Midea Group (300 HK) should get Fast Entry to one global index and that could lead to inclusion in the iShares China Large-Cap (FXI) (FXI US) too.
Midea Group H Share Listing (300 HK): Valuation Insights
- Midea Group Co Ltd A (000333 CH) has launched its H Share listing at HK$52.00-54.80 per share. Pricing will be on 13 September, and the listing on 17 September.
- We previously discussed the listing in Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health and Midea Group H Share Listing: AH Discount Views.
- Our valuation analysis suggests that the H Share listing range is attractive. We would participate in the listing.
Seven & I Holdings (3382 JP): State of Play
- Despite Seven & I Holdings (3382 JP)‘s rejection, Alimentation Couche-Tard (ATD CN) remains prepared to enter collaborative and friendly discussions to focus on finding greater value for 7&i shareholders.
- Couche-Tard’s options are to return with a revised offer, go hostile or walk away. Couche-Tard will likely test the Board’s resolve by returning with a higher offer.
- The Board’s options are to go through the motions (appointing IFAs), conduct a market check or launch a more aggressive action plan to placate restive shareholders.
SENSEX Index Rebalance Preview: Trent Could Replace Bajaj Finserv; BUT F&O Adds Could Change That
- As things stand, Trent Ltd (TRENT IN) could replace Bajaj Finserv (BJFIN IN) in the S&P BSE SENSEX Index (SENSEX INDEX) at the close on 20 December.
- Addition to the F&O list could see Zomato (ZOMATO IN) added to the index instead. That could then result in two changes to the S&P BSE SENSEX Index in December.
- Trent Ltd (TRENT IN) is also an inclusion to the NIFTY Index (NIFTY INDEX) later this month and the pool of shares available for active investors is getting smaller.
Midea Group HK IPO Valuation Analysis
- We would subscribe to the HK offering of Midea Group due to its attractive valuations, strong fundamentals, and meaningful price discount relative to the A shares.
- We believe a premium valuation relative to the comps is appropriate for Midea Group due to its higher sales growth, EBIT margin, and ROE.
- Pricing of this offering is expected to be completed on 13 September and listing on 17 September.
Midea Real Estate (3990 HK): Now Trading Ex-In-Specie
- Back on the 23 June 2024, property developer Midea Real Estate Holding (3990 HK) announced the in-specie distribution of its core ops, either in unlisted scrip, or HK$5.90/share in cash.
- The in-specie involved distributing 97.8% of Midea’s assets (involved in property development and sales); accounting for 95% of revenue and ~91% of profit. All figures as at FY23.
- Midea went ex yesterday, closing down just HK$4.87/share. Midea, ex-in-specie, is currently trading at a trailing 0.6x P/B, and 2.3x PER. Pricing looks full.
Timing a Trade to Capitalize on KT’s November Global Index Deletion and the ETF Recall
- KT’s foreign room is likely staying below 3.75% for November, setting up an ETF recall play. We’ve seen short-term buying pressure in similar past index reshuffles.
- The ETF recall impact peaks right after the announcement. KT’s May downweight saw a 5% spike in two trading days post-announcement.
- KT’s price moves more with downweights than SK Telecom’s because of higher overseas borrowing demand. This trend should hold, so setting up a position before the November announcement makes sense.
TOPIX Inclusions: Who Is Ready (September 2024)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- SUNWELS Co (9229 JP) and Macbee Planet (7095 JP) moved to the Prime market in July 2024 and their TOPIX Inclusion events took place at the end of August 2024.
- We currently have CELSYS (3663 JP), Japan Eyewear Holdings (5889 JP), and Core Concept Technologies Inc (4371 JP) in our TOPIX Inclusions pre-event watchlist.
PC Partner (1263 HK): Goodbye Hong Kong; Hello Singapore
- On the 18th June, personal computer parts and accessories play PC Partner (1263 HK) (PCP) announced a SGX listing was under consideration; and a possible withdrawal of the HKEx listing.
- PCP’s 30th August announcement provided clarity on a step-by-step approach for the HKEx withdrawal. I recently held zooms with the SFC and SGX for added clarification.
- PCP’s exchange relocation is predicated on PCP’s operational expansion into new markets, in particular, Southeast Asia. How and when the SGX becomes the preferred trading exchange remains an unanswered question.
NEXTDC Placement – Good Track Record but Seems Opportunistic
- Nextdc Ltd (NXT AU) aims to raise around US$366m via a fully underwritten institutional placement, along with another US$133m via a non-underwritten SPP.
- The company has undertaken a number of deals in the past, most of which have done ok. Although this one appears to be a bit opportunistic.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
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