In today’s briefing:
- Swire A Vs Swire B – Regulatory Nuances REALLY Matter
- China Tourism Group Duty Free (1880 HK) IPO: Offer Details, Index Inclusion, AH Premium
- Index Rebalance & ETF Flow Recap: MSCI, S&P Global Water, TW Div+, FTSE JP, STI, OZ Minerals
- Jardine Matheson (JM SP): MSCI Blues
- Giordano (709 HK): Offer Doc Out. Terms Declared Final
- China Internet Weekly (15Aug2022): Alibaba, Tencent, Meituan, TikTok, JD, NetEase, Dingdong
- CTG Duty Free (601888 CH) H-Share IPO: 2Q22/Outlook Updates and Valuation Views
- HLB Capital Increase: Offering Terms & Trading Dynamics
- 2022 JPX Nikkei 400 Rebal Update – Going the Right Way
- S&P/ASX Index Rebalance Preview: Adds Outperform Deletes As Review Period End Nears
Swire A Vs Swire B – Regulatory Nuances REALLY Matter
- Yesterday Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced a buyback of shares according to the 2022 AGM mandates approved in May, limited to HK$4bn.
- A reader question prompted me to look more closely at the rules. There are nuances NOT covered in the announcements. So I work through them.
- The conclusions are surprising, and lead to one clear trading idea.
China Tourism Group Duty Free (1880 HK) IPO: Offer Details, Index Inclusion, AH Premium
- CTG Duty Free (1880 HK) is looking to sell up to 118.176m shares to raise up to US$2.5bn. Pricing at HK$143.5-165.5/share is a 38.6%-29.2% discount to CTG Duty Free (601888).
- Between 32-37% of the total offer size is being taken by 9 cornerstone investors and they are locked in for 6 months from listing date (expected 25 August).
- CTG Duty Free (1880 HK) could be added to MSCI China in November, FTSE All-World and FTSE China 50 in March. Southbound Stock Connect could come online on 19 September.
Index Rebalance & ETF Flow Recap: MSCI, S&P Global Water, TW Div+, FTSE JP, STI, OZ Minerals
- MSCI announced the changes to its indices prior to market open on 12 August. Most changes were expected, while the non-inclusion of Gcl Poly Energy (3800 HK) was a surprise.
- There are a bunch of announcement on the coming Friday for the Hang Seng and FTSE indices. Plus the review cutoff for the S&P/ASX family of indices.
- Outflows from KraneShares CSI China Internet ETF (KWEB US) continued for yet another week, while there were inflows to iShares Core MSCI Pacific ETF (IPAC US).
Jardine Matheson (JM SP): MSCI Blues
- Jardine Matheson Holdings (JM SP) (JMH) has shed ~8% since MSCI said it was cutting the conglomerate’s weighing in two indices.
- The reweighting follows the cancellation of the 59% shareholding in JMH held by Jardine Strategic Holdings (JS SP), which was privatised last year.
- I see the discount to NAV at ~40%, right at the 12-month -2 STD level. JMH bought back ~149mn shares in the 1Q22, paying ~US$59/share, 17% above the current price.
Giordano (709 HK): Offer Doc Out. Terms Declared Final
- On the 23 June, the Cheng family made an underwhelming voluntary conditional Offer of $1.88/share for Giordano International (709 HK).
- The Offer is conditional on the family getting to more than 50% via tendering, and the Cheng’s (and concert parties) control 24.57%.
- The Composite Document is now out with a first close on the 5 September. The Offer Price has now been declared final. That’s a surprise.
China Internet Weekly (15Aug2022): Alibaba, Tencent, Meituan, TikTok, JD, NetEase, Dingdong
- Express parcels increased by 8% YoY in China in July.
- TikTok was still the top non-game app in the world in July.
- Meituan raised its prices of bike sharing on August 10.
CTG Duty Free (601888 CH) H-Share IPO: 2Q22/Outlook Updates and Valuation Views
- At the indicated price range, or 24.8-28.6x PER for FY22F and 16.7-19.2x for FY23F, the H-share IPO of China Tourism Group Duty Free Corp (601888 CH) is not attractive enough.
- 2Q22 net profit is worse than it appears. Recent Sanya lockdown has wiped off half of the summer peak season which may even negatively affect demand during Golden Week.
- Consensus forecasts are too optimistic and there may be another 15% downside. Given current macroenvironment, market volatility and earnings uncertainty, risk outweighs return even at the low-end of price range.
HLB Capital Increase: Offering Terms & Trading Dynamics
- This offering is a 100% stockholder allocation with forfeited shares going to the public. There will be 9.56M new shares at a capital increase of nearly 9%.
- We should note that the largest shareholder may again do the same trick. He may block-deal a 1% stake and use the proceeds to participate in this offering.
- A massive release volume and a 25% discount rate may cause a severe pricing distortion, leading to arb trading openings.
2022 JPX Nikkei 400 Rebal Update – Going the Right Way
- As designed, the JPX-Nikkei400 Index is something of a disaster. It aims to be slightly ‘smart’ vs other cap-weighted indices like TOPIX, but tracking error vs TOPIX is de minimus.
- This year, in week 1, the ADD vs DELETE performance is positive. If we sector-hedge the ADDs vs DELETEs, it’s doing even better.
- This is probably due to relatively low pre-positioning, and cares. Momentum suggests one could be long ADDs vs DELETEs. And there is the perennial trade to watch out for.
S&P/ASX Index Rebalance Preview: Adds Outperform Deletes As Review Period End Nears
- There are 4 trading days to go in the review period for the September rebalance of the S&P/ASX indices. Announcement is on 2 September with implementation on 16 September.
- There could be 6 changes to the S&P/ASX 200 (AS51 INDEX), increasing to 8 if AVZ Minerals (AVZ AU) continues to be halted and if Link Administration (LNK) is privatised.
- The potential adds have outperformed the potential deletes over the last month. Short interest has increased on a few potential deletes. There will be pre-positions built up.
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