In today’s briefing:
- S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
- China ADRs Delisting – Friday Could Be Judgment Day for over US$800bn Mcap of Stocks
- HSTECH: Index Handling Changes & Flows in March
- Haidilao’s Imminent SpinOff of the Super Hi Overseas Business – Index Treatment and Implications
- Toyo (1890) Says “We Reject”. YFO Says “But We Didn’t Talk”. Medium-🌶🌶🌶 Hostile Activism To Ensue
- Acotec/Boston Scientific: Even Higher Proration
- Toyo Construction (1890 JP): Pot Shots and Warning Shots
- Yashili (1230 HK): Monthly Update Suggests that Pre-Condition Satisfaction in the Final Leg
- CSI REITs Index: An Investable Benchmark Launches Today
- Recent IPOs Carrying Putback Option in Korea: Market’s Attention Is on WCP
S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
- We currently see one change each for the ASX20 and ASX100 indices, 4 changes for the S&P/ASX 200 and 10 adds/ 6 deletes for the ASX300 Index in March.
- There could be an addition to the S&P/ASX 200 (AS51 INDEX) in January following Pendal Group (PDL AU)‘s acquisition by Perpetual Ltd (PPT AU).
- PEXA Group (PXA AU) is a potential inclusion to the S&P/ASX 200 (AS51 INDEX) if Link Administration (LNK AU)‘s in-specie distribution of PEXA shares to its shareholders is approved.
China ADRs Delisting – Friday Could Be Judgment Day for over US$800bn Mcap of Stocks
- PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.
- The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.
- In this note, we’ll talk about the latest developments, possible outcomes and implications.
HSTECH: Index Handling Changes & Flows in March
- Hang Seng Indexes has changed the index handling treatment for Secondary Listings and Dual Primary Listings from the next rebalance in March.
- The change could result in Tencent Music Entertainment Group (1698 HK) replacing Ming Yuan Cloud Group (909 HK) in the index.
- There could be passive buying on Li Auto (2015 HK) and XPeng (9868 HK) due to an increase in the index shares with outflows on other index constituents.
Haidilao’s Imminent SpinOff of the Super Hi Overseas Business – Index Treatment and Implications
- On 11 July, Haidilao (6862 HK) announced it would propose to spin off its international restaurant business (13-15% of revenue) to shareholders and employees. Shareholders approved in August.
- There were interim announcements and indeed interim reports with some information, but not a lot. But Super Hi International Holding was headed for separate listing in HK.
- Last week, Haidilao said it was going ahead with a Listing by Introduction pending listing approval by HKEX. Haidilao shares go ex- 16 December. Index providers have announced treatment.
Toyo (1890) Says “We Reject”. YFO Says “But We Didn’t Talk”. Medium-🌶🌶🌶 Hostile Activism To Ensue
- In March, Toyo Construction (1890 JP) agreed to be bought out by INFRONEER Holdings (5076 JP) for ¥770/share. One activist objected, and bought 28%. They then said they’d pay ¥1,000.
- The Infroneer deal failure started an acrimonious back and forth. The hostility lessened over the summer, but despite activist Yamauchi Family Office’s protestations of love, no deal as of November.
- Today saw another press release, delaying things. The contents are 🌶🌶🌶. NOW things are getting more interesting. Hostility is back. Medium-spicy. Three 🌶 out of five.
Acotec/Boston Scientific: Even Higher Proration
- Back on the 12 December, Acotec Scientific Holdings (6669 HK) announced a Partial Offer from Boston Scientific (BSX US)
- The Offer Price of $20/share is for up to 65% of shares out. Irrevocables total up to 60.14% of shares out, sufficient to clear the minimum tendering condition.
- My initial read was that the proration was simply 65%. That was wrong. It is higher. Plus there are some interesting quirks to avoid breaching the public float post-Offer.
Toyo Construction (1890 JP): Pot Shots and Warning Shots
- YFO’s press release alleges the Toyo Construction (1890 JP) Board will not recommend the tender as YFO is not a suitable owner rather than the JPY,1000 price being too low.
- The Board responded that YFO violated the NDA by disclosing the reasons for the Board’s disapproval. This damages the understanding between the parties, an essential precondition to recommending the offer.
- The start of the tender has been pushed back to late January 2023. YFO is committed and will not withdraw the offer for any reason that shareholders may consider unreasonable.
Yashili (1230 HK): Monthly Update Suggests that Pre-Condition Satisfaction in the Final Leg
- Yashili International Holdings (1230 HK)‘s latest monthly update suggests that the remaining pre-condition, the 25% Yashili acquisition, is entering the final stages towards being satisfied.
- The wording “in the course of processing the relevant application” suggests that the government authorities will grant the new registration certificate, which should be received shortly.
- The gross spread is 6.2%. The downside is low as both Danone SA (BN FP) and China Mengniu Dairy Co (2319 HK) can waive conditions to satisfy the pre-condition.
CSI REITs Index: An Investable Benchmark Launches Today
- The China Securities Index (CSI) will launch the CSI REITs Index today. The index currently has 14 constituents, and the REITs will be capped at 15% of the index weight.
- We expect another 6 REITs to be added to the index at the March rebalance. And then at least another 3 more in June.
- The launch of the index should result in ETFs and other passive investment products being floated which should further enhance market liquidity and bring long-term benefits to the market.
Recent IPOs Carrying Putback Option in Korea: Market’s Attention Is on WCP
- WCP has the largest gap between the exercise and current prices (-16%). And its retail allocation is also the largest (5.44% of SO). In addition, it is subject to short-selling.
- The deadline is January 2nd. A large-scale option exercise will be unavoidable if the share price does not exceed ₩54,000 by that date.
- It is very likely that WCP’s share price will experience strong downward pressure for a week after January 2nd. We need to consider a position setup that actively utilizes this.
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