In today’s briefing:
- Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
- Midea Group HK IPO Valuation Analysis
- Taking Advantage of Terumo (4543) Weakness And After-Offering Flow
- Joban Kosan (9675) – Fortress Buys Out a Fukushima Tourism Asset
- Itochu’s Big Plans for Descente – Shame Investors Won’t Get a Look In
- CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar
- Midea HK Listing: Valuation Insights
- Exploring Why Samsung Electronics’ Pref Discount Narrowing Took a Sharp Turn Yesterday
- Hanwha Galleria Tender Results Are in with No Proration Issue Despite a Fat Spread. What’s Next?
- Puig Brands (PUIG SM): 50/50 Global Index Inclusion for Largest Spanish IPO Since 2015
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 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.
Taking Advantage of Terumo (4543) Weakness And After-Offering Flow
- Terumo Corp (4543 JP) was able to hang in well after the announcement, up until the day or two before pricing date, then the shares were walloped into Pricing.
- After pricing, they have fallen and erased most of the discount. That’s an opportunity.
- The shares have underperformed Peers, and there is flow to come. This deal was, as advertised, smaller than it first appeared.
Joban Kosan (9675) – Fortress Buys Out a Fukushima Tourism Asset
- In the annals of foreign buyers of Japanese tourism-related real estate assets, there have been a few good examples, and several disasters. Yesterday, we got a new suitor for assets.
- Fortress SPV Ontario GK will attempt to buy out Fukushima-based Joban Kosan (9675 JP) through a double Tender Offer.
- There is a history here of a bump on an MBO on an associated company. That may have caused it to trade at a premium on Day 1. It’s unrelated.
Itochu’s Big Plans for Descente – Shame Investors Won’t Get a Look In
- Itochu’s Textile division continues to execute the directive from its CEO to expand reach and coverage in the fashion and lifestyle sectors, with sports one of the major target categories.
- It will completely absorb Descente as part of this plan, meaning the brand is likely to become one of the largest in the portfolio.
- The ongoing tender offer will likely succeed giving Itochu a bargain and investors no stake in the future.
CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar
- There could be 17 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 3 spots.
- We estimate one-way turnover of 2.9% at the rebalance leading to a one-way trade of CNY 21.96bn (US$3.1bn). There are 22 stocks with over 3x ADV to trade.
- Impact on the stocks has increased as creations in ETFs linked to the CSI 300 Index continue. That flow will reverse from the deletions in the next few months.
Midea HK Listing: Valuation Insights
- Chinese home appliance maker Midea has announced the terms for its IPO. The company plans to raise $3.46bn at an indicative price range of HK$52.0-54.8 per share.
- The company has a diversified product portfolio, well-balanced exposure to domestic as well as overseas markets and a growing robotics business.
- As we expected, the HK offering is priced at around 25% discount to it’s A-shares and our analysis suggests that Midea’s HK offering is priced attractively.
Exploring Why Samsung Electronics’ Pref Discount Narrowing Took a Sharp Turn Yesterday
- Samsung’s preferred shares lagged significantly behind the common shares yesterday, showing the largest daily sigma move we’ve seen in a while.
- Samsung’s delayed value-up announcement, despite regulatory pressure, has fueled speculation about a potential Biologics stake purchase from C&T.
- It’s time to pause the trade on Samsung’s preferred discount narrowing that I highlighted in early August. The main inflection point will be when Samsung makes its value-up announcement.
Hanwha Galleria Tender Results Are in with No Proration Issue Despite a Fat Spread. What’s Next?
- Hanwha Galleria’s tender offer, led by Kim Dong-sun, closed today with a subscription rate just over 80%, according to the local brokerage after market close.
- Retail investors in small caps like Hanwha Galleria often skip tender offers, hoping for price gains. Kim Dong-sun may try to buy the remaining 10-15% soon, possibly via open-market buys.
- Watch for signs that Kim Dong-sun might go for a second tender to take Galleria private. He might be aiming to avoid taxes and boost his stake’s value.
Puig Brands (PUIG SM): 50/50 Global Index Inclusion for Largest Spanish IPO Since 2015
- Puig Brands (PUIG SM) will be added in SXXP and SXXE at the close of 20 September 2024. Forecasted demand is ~1.6m shares, ~$36m and ~2.7 ADV.
- The security is at risk of failing the fcap threshold hence inclusion in November 2024 due to a recent price drop and a substantial portion of shares outstanding being unlisted.
- The company closely exceeds the minimum public voting rights and its inclusion is expected in December 2024. Forecasted demand is ~4.5m shares, ~$101m and ~7.5 ADV.
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