In today’s briefing:
- Tencent (700 HK): Board Meets Next Week; In-Specie Dividend Candidates
- Descente (8114) : Itochu Still Buying and ANTA Gives You Earnings Hints
- Trading Opportunities Targeting Potential ADR Discount Increases from Korea’s Short-Selling Ban
- Will Semiconductor GDR Listing – Well Flagged and Short Interest Has Been on the Rise
- China Vanke (2202 HK): Short Term Trading Opportunity Post Conference Call
- WuXi XDC Cayman IPO – Decent Upside from IPO Range, Bulk of the Deal Taken up by Marquee Investors
- TOPIX Inclusions: Who Is Ready (Nov 2023)
- Sankyo (6417) – Second Go-Round for a BIG Buyback
- Japan H1 Bank Earnings: Last Minute Update; Suruga Bank Reacts Well
- Hollysys (HOLI US): Ascendent Capital Joins the Fray
Tencent (700 HK): Board Meets Next Week; In-Specie Dividend Candidates
- Tencent (700 HK) announced in-specie dividends of JD.com (9618 HK) (US$15bn+) in 2021 and Meituan (3690 HK) (US$20bn) in 2022.
- With the Tencent (700 HK) Board meeting on 15 November to approve Q3 results and considering the payment of a dividend, the pattern could repeat this year.
- Tencent (700 HK) owns stakes of US$1bn+ in 10 listed companies. We take a look at the stocks that could be next in line to be paid as in-specie dividends.
Descente (8114) : Itochu Still Buying and ANTA Gives You Earnings Hints
- Descente Ltd (8114 JP) saw Itochu report it had continued its streak of consecutive days of buying, extending it to 115. Now they own 44.1% of voting rights.
- ANTA gave hints to the progress of Descente China in the Interim Results, and Q3 Operational Update. Descente analysts are 20% ahead of guidance, but they’re probably low still.
- Descente reports Q2 tomorrow. I expect the numbers and presentation to surprise at the Net Profit level. I expect a forecast revision.
Trading Opportunities Targeting Potential ADR Discount Increases from Korea’s Short-Selling Ban
- Given Korea’s blanket ban on short-selling, we should concentrate on the likelihood of these ADRs being significantly discounted compared to their underlying shares.
- It should persist for an extended period, highlighting the importance of continuously monitoring ADR spreads over the next 2-3 months to seize the opportune entry timing.
- Since all these carry single-stock futures, a flexible setup targeting this spread can be designed, ideally incorporating currency hedges.
Will Semiconductor GDR Listing – Well Flagged and Short Interest Has Been on the Rise
- Will Semiconductor Shan (603501 CH) is looking to raise US$450m in its Switzerland GDR listing. The bookrunners on the deal are UBS and JP Morgan.
- In its base deal, the firm is offering 31m GDRs (1 GDR to 1 ordinary A-share) for sale, at a 5.4-17.2% discount to last close on its A-share leg.
- The base deal would be a relatively small one for the firm to digest, representing just 3.8 days of three month ADV on its A-share leg.
China Vanke (2202 HK): Short Term Trading Opportunity Post Conference Call
- China Vanke (H) (2202 HK) saw a major drop in bond and stock prices recently, due to fear of default.
- Yesterday, the company held a conference call, with representatives from Shenzhen SASAC and Shenzhen Metro (major shareholder of Vanke and owned by Shenzhen SASAC) participating in the call.
- The strong support shown by Shenzhen SASAC/Shenzhen Metro represents a good short-term buying opportunity, for both Vanke stock and bonds.
WuXi XDC Cayman IPO – Decent Upside from IPO Range, Bulk of the Deal Taken up by Marquee Investors
- WuXi XDC Cayman (1877628D HK) is looking to raise US$470m in its Hong Kong IPO.
- WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
- In this note, we will look at the deal dynamics and share our final thoughts on valuation.
TOPIX Inclusions: Who Is Ready (Nov 2023)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- Our main pre-event candidate CELSYS (3663 JP) has outperformed TOPIX by ~12.6% since 1 Sep (when it was highlighted) and 6 Nov 2023.
- There are three TOPIX Inclusion events confirmed for the end of November and two other interesting pre-event names we are closely monitoring.
Sankyo (6417) – Second Go-Round for a BIG Buyback
- Back in late September, Sankyo Co Ltd (6417 JP) announced a 10mm share buyback along with a new dividend policy. Only 4.22mm shares showed up to sell.
- The largest holder – Exec Chair Busujima-san – sold 2.22mm shares under his own name and his company’s name. Hikari Tsushin, which had been selling in the market, didn’t participate.
- Now Sankyo has launched another 10mm share ToSTNeT-3 buyback tomorrow (8 Nov) AM at ¥6,099/share. They may not complete. But they may continue buying later. They have oodles of cash.
Japan H1 Bank Earnings: Last Minute Update; Suruga Bank Reacts Well
- I wrote Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down – Opportunity Abounds, Still last week mentioning the trends in guidance revisions.
- Since then, five have reported H1. +20%, +53%, +23% vs guidance; +25.6%, and +28.2% vs Last Year. Eight more have added new guidance, weighted average H1 up 48%.
- Four more report tomorrow, eight on Thurs, 43 on Friday. The Top 5 are all next Mon/Tues. Watch for comments about portfolio restructuring efforts in H2 as market yields rise.
Hollysys (HOLI US): Ascendent Capital Joins the Fray
- Ascendent Capital has made a non-binding proposal for Hollysys Automation Technologies (HOLI US) at US$26.00 per share, a 4.0% premium to the MBO and Recco proposal of US$25.00 per share.
- Ascendent has also become the largest shareholder by securing 13.69% of outstanding shares at an average price of A$20.84 per share. Ascendant is supportive of the special meeting request.
- The Board has tried several delaying tactics, but the emergence of Ascendant ramps up the pressure on the Board to conduct a transparent sale process and address shareholder concerns.
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