In today’s briefing:
- TCM (570 HK): A Spoonful Of Sugar …
- Midea Group (000333 CH): Index Implications at US$3bn Issue Size
- Sun Corp (6736) – The Future Is Bright
- (Mostly) Asia-Pac M&A: TCM, BusinessOn Comm, Orora, Ramsay Health Care, Namoi Cotton, APM, CPMC
- Ola Electric (OLAELEC): EV Maker Receives Turbo Boost from Lock-Up Expiries for Index Inclusion
- HK Connect SOUTHBOUND Flows (To 16 Aug 2024); Big Net Buying On “Tiny” Overall Volume, ETFs Big
- Mainland Connect NORTHBOUND Flows (To 16 Aug 2024): Banks Bought, Industry & Materials Sold
- PropertyGuru (PGRU US): EQT’s US$6.70 Offer Is A Done Deal
- HSCEI Index Rebalance: Three In-Line Changes, Two Big Surprises
- Thoughts on Capturing the 7% Doosan Swap Spread
TCM (570 HK): A Spoonful Of Sugar …
- A 14.8% gain month-to-date, including this past Monday’s 6.5% pop – you just knew something positive was taking place behind closed doors. And leaking its way into the public.
- So it was no real surprise to read in the latest monthly update announcement on the HKEx that various regulatory approvals are almost, but not quite, satisfied.
- The wording in the announcement strikes a positive tone. Even remaining conservative on the timeline, this could be wrapped up before year-end.
Midea Group (000333 CH): Index Implications at US$3bn Issue Size
- Midea Group Co Ltd A (000333 CH) has got approval to list on the HKEX (388 HK) and reports are that the listing could be up to US$3bn.
- That issue size is around half of the maximum that the company can issue. But it would still need cornerstone investors and a nice discount on the H-shares.
- The stock will still get included in some indices even with the scaled down size, and inclusion in Southbound Stock Connect is a given.
Sun Corp (6736) – The Future Is Bright
- The reason why Sun Corp (6736 JP) has traditionally traded at a large discount to its potential outcome is the possibility of inefficient or delayed value realisation.
- Materially ALL of the value of the company is in its holding in Cellebrite DI (CLBT US). True Wind Capital, the SPAC sponsor of CLBT, just bought 19% of SunCorp.
- They bought that for the CLBT, or the value realisation thereof. And now with the slightly surprising Tender Offer result, the chances of a better outcome are now higher.
(Mostly) Asia-Pac M&A: TCM, BusinessOn Comm, Orora, Ramsay Health Care, Namoi Cotton, APM, CPMC
- I tally 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal
- Two new deals were discussed this week: JTower (4485 JP) and BusinessOn Communication (138580 KS)‘s Tender Offers. Orora (ORA AU) approached by Lone Star. Ramsay Health Care (RHC AU) Offer also rumoured.
- Key updates took place on China Traditional Chinese Medicine (570 HK), Namoi Cotton Co Operative (NAM AU), APM Human Services (APM AU), and CPMC Holdings (906 HK).
Ola Electric (OLAELEC): EV Maker Receives Turbo Boost from Lock-Up Expiries for Index Inclusion
- Ola Electric (OLAELEC IN) is likely to get added at the March 2025 review following the lock-up expiry in November 2024 which increases the fcap way above the fcap threshold.
- Current fcap for February 2025 review is ~$1.2bn following the lock-up expiry in November 2024. Inclusion is based on whether fcap passes the prevailing fcap threshold.
- The lock-up expiry in February 2025, increases the probability of addition in May 2025 review if it fails inclusion in February.
HK Connect SOUTHBOUND Flows (To 16 Aug 2024); Big Net Buying On “Tiny” Overall Volume, ETFs Big
- SOUTHBOUND was again a net buyer, for HK$16.6bn this week (now 28wks in a row of net buying), on VERY LOW two-way volumes.
- Gross volumes were very low. Net volumes were decent. There were three ETFs in the top 5 SOUTHBOUND net buys this past week suggesting position unwinding.
- Top net buys other than the ETFs were China Mobile and Tencent (now 14 out of 15 days seeing net SOUTHBOUND buying)
Mainland Connect NORTHBOUND Flows (To 16 Aug 2024): Banks Bought, Industry & Materials Sold
- The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
- Last week saw NORTHBOUND net SELL RMB 5.0bn of A-shares. NORTHBOUND volumes were very, very low overall.
- HK large caps again outperformed Mainland large caps generally. Tech (HSTECH vs Star50 and ChiNext) saw even better HK outperformance.
PropertyGuru (PGRU US): EQT’s US$6.70 Offer Is A Done Deal
- PropertyGuru (PGRU US) entered into a definitive merger agreement with EQT (EQT SS) at US$6.70 per share, a 51.9% premium to the undisturbed price of US$4.41 (21 May).
- The shareholder vote is done (two-thirds voting threshold) due to TPG Inc (TPG US)/KKR & Co (KKR US)’s support and drag-along rights relating to REA Group Ltd (REA AU)’s shares.
- This is a clean deal as there is no dissenting condition or requirement for country antitrust approvals. At the last close and for end-of-year payment, the gross/annualised spread is 2.3%/6.4%.
HSCEI Index Rebalance: Three In-Line Changes, Two Big Surprises
- J&T Global Express (1519 HK) and New Oriental Education (9901 HK) will replace JD Logistics (2618 HK) and SenseTime (20 HK) in the HSCEI at the close on 6 September.
- The inclusion of J&T Global Express (1519 HK) is a big surprise and the stock could move higher over the next couple of weeks.
- The non-inclusion of PICC Property & Casualty H (2328 HK) is another surprise since we had the stock highly ranked in the universe.
Thoughts on Capturing the 7% Doosan Swap Spread
- Consider a two-phase strategy: go long on Bobcat spot and short futures until November 1. If Robotics’ price drops significantly, close the setup.
- If things go well, close the Bobcat futures short before November 1 and hold an unhedged Bobcat long until the listing date on November 25.
- Hold an unhedged long position during this trading suspension period because cancellation risk will be gone and Robotics may get stable inflows from MSCI inclusion.
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