In today’s briefing:
- MMG (1208 HK) – $1.1bn+ Rights Offering – Expect Regular Rights Trading Dynamics
- Impact on SK Inc Post Record Divorce Ruling for SK Group Chairman Chey Tae-Won
- Shinko Electric (6967) – Break/Gap Risk Early June 2024 Update
- Kakao Pay Lockup Expiry – US$1bn Overhang from Alipay
- HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)
- StubWorld: What Now With Langham (1270 HK)?
- MSC May Rebalance: SA & China Net Sells, NPN, PRX & Tencent Sold Down on Buybacks
- HSI/HSCEI/HSTECH June 2024 Rebal Final Re-Capping (Or Re-Re-Capping) Flows
- MMG (1208 HK): US$1.2bn Highly Dilutive Rights Issue
- Northern Minerals (NMI AU): Chinese Investors Forced To Exit
MMG (1208 HK) – $1.1bn+ Rights Offering – Expect Regular Rights Trading Dynamics
- Mmg Ltd (1208 HK) today announced a 2:5 Rights Offering to raise US$1.15bn at HK$2.62/share in order to pay down debt from their recent Botswanan copper mine acquisition.
- It was a sizeable acquisition, and the near-term EV/EBITDA of the acquisition is 10x or above. The longer-term EV/EBITDA is in the 3s based on expansion later this decade.
- The Rights Offering is underwritten, supported by its 67.5% owner. SOUTHBOUND holds 10+%. There are short dynamics, arb dynamics, “don’t wanna spend more” dynamics. There’s a path here.
Impact on SK Inc Post Record Divorce Ruling for SK Group Chairman Chey Tae-Won
- We discuss the outlook for the likely impact on SK Inc post record divorce ruling for the SK Group Chairman Chey Tae-Won and his estranged wife Roh So-Young.
- Last week, a South Korean appellate court ordered Chairman Chey to pay 1.38 trillion won to Roh. Chey is appealing this case and the Supreme Court’s ruling is still pending.
- It is in the best interest of SK Inc to raise the overall value of the company since the payment of the divorce is mostly based in cash.
Shinko Electric (6967) – Break/Gap Risk Early June 2024 Update
- When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
- Nearly 5mos ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 12wks ago, recommended taking profits.
- Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Spreads are now 2.6% wider than at narrowest. In May, gap risk narrowed as Shinko underperformed Ibiden.
Kakao Pay Lockup Expiry – US$1bn Overhang from Alipay
- Alipay will come out of its placement linked lockup for its remaining stake in Kakaopay (377300 KS) today.
- Alipay (i.e. Alibaba Group (9988 HK)) had earlier sold some of its stake in Jun 2022 and Mar 2024. It still has over US$1bn worth of shares left to sell.
- In this note, we talk about the deal dynamics and run the deal through our ECM framework.
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)
- The June rebalance of the HSI, HSCEI INDEX, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
- The round-trip trade across all stocks across the four indices is estimated at HK$32bn (US$4.1bn).
- Li Auto, Alibaba, NetEase, Zijin Mining, SenseTime and BYD Electronics are the largest buys while Tencent, Meituan, JD.com, Kuaishou Technology, Xiaomi and HSBC Holdings are the largest sells.
StubWorld: What Now With Langham (1270 HK)?
- Unexpectantly, Great Eagle Holdings (41 HK) said it would not proceed with an Offer; and Hong Kong hotel-play Langham Hospitality (1270 HK) promptly cratered. But why the flip flop?
- Preceding my comments on GE, Langham and Champion REIT (2778 HK), are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
MSC May Rebalance: SA & China Net Sells, NPN, PRX & Tencent Sold Down on Buybacks
- MSC indices were rebalanced in the closing auction on Friday. Turnover for the day on the JSE was R41.9bn, R25bn traded in the closing auction (60%).
- Turnover at the February rebalance was R25.6bn. Most SA constituents were pushed lower in the closing auction and for the day, consistent with the downweighting of SA Inc.
- China was downweighted in the ACWI and EM indices for a second straight quarter, reducing the country weight in ACWI by 6bps to 2.69%.
HSI/HSCEI/HSTECH June 2024 Rebal Final Re-Capping (Or Re-Re-Capping) Flows
- The HSI added BYD Electronics (285 HK) and deleted Country Garden Services (6098 HK). HSCEI added Zijin Mining Group Co Ltd H (2899 HK) deleted Xinyi Solar Holdings (968 HK)
- HSTECH had no changes, but lots of flow. The index team sets capping levels, then resets them a three days before the actual rebalancing. There were some capping/recapping changes.
- Below we offer tables showing all the changes and flows across the indices for each stock, ranked by Flows, ADV, and Ticker. And a spreadsheet with all the relevant data.
MMG (1208 HK): US$1.2bn Highly Dilutive Rights Issue
- Mmg Ltd (1208 HK) will raise HK$9.1bn (US$1.2bn) through 2 rights shares for every 5 existing shares rights offering. The rights price is HK$2.62, a 24.7% discount to the TERP.
- The rights proceeds will be used to repay existing debt, which will allow it to use other funds to better support the ongoing development of the operating mines.
- MMG shares should continue to decline heading into the ex-rights date. The shares go ex-rights on 11 June, and the rights start trading from 24 June to 2 July (inclusive).
Northern Minerals (NMI AU): Chinese Investors Forced To Exit
- Back in February last year, the Aussie Treasurer prohibited Yuxiao Fund from buying an additional 9.92% in Northern Minerals (NTU AU) which would have increased its stake to 19.9%.
- On the 20th November 2023, Yuxiao sought the removal of Nicholas Curtis as director of the rare-metal play at an EGM; however Curtis resigned his post and the EGM cancelled.
- The Aussie Treasurer has now made orders requiring Yuxiao and four (deemed) associated investors to sell their holdings (~10.4% all-in) within 60 days.
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