In today’s briefing:
- Wharf Holdings (4 HK): Improved Liquidity & Passive Buying
- JSR (4185) – Time To Fight The FUD
- What Should We Do About the Futures Basis Spread Caused by Hanwha Ocean’s Rights Offering?
- Taiwan Top 50 ETF Rebalance: Alchip (3661 TT) Going Back-To-Back?
- Hollysys (HOLI US): In Court Today …
- Geely Stalls As ZEEKR Spins Off
- Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent
- Zeekr Pre-IPO – Thoughts on Valuation
- S&P/ASX Index Rebalance Preview: Big Impact; A Week From Announcement
- Haitong Sec (665 HK) 15th Dec Scheme Vote
Wharf Holdings (4 HK): Improved Liquidity & Passive Buying
- Improved liquidity and a higher stock price could see passive trackers buying Wharf Holdings (4 HK) within the next couple of months.
- Wharf Holdings (4 HK) trades cheaper than the average and median of its peers on EV/Sales, EV/EBITDA and price to book value.
- Wharf Holdings (4 HK) has already started to move higher and there could be a bigger move in the stock over the next month.
JSR (4185) – Time To Fight The FUD
- Many months ago I suggested the JIC Tender Offer JSR Corp (4185 JP) was not overwhelmingly high-priced, but that it would be “heavy” for months to come.
- FUD and Flows would widen the spread. And they did.
- Now the time decay to expected approvals and tender offer start are getting steep. Time to Fight The FUD.
What Should We Do About the Futures Basis Spread Caused by Hanwha Ocean’s Rights Offering?
- The day the basis spread disappears is this Friday, the 24th of November. This mirrors a comparable pattern observed during Korean Air’s rights offering in 2020.
- If the spot price does not fall below the futures price of our entry until this Friday, we could potentially be in a profitable range.
- There has been a notable pattern where the spread continues to exist until just before the moment when new share selling becomes feasible.
Taiwan Top 50 ETF Rebalance: Alchip (3661 TT) Going Back-To-Back?
- Alchip Technologies (3661 TT) could replace Feng Tay Enterprise (9910 TT) in the Yuanta/P-Shares Taiwan Top 50 ETF at the December rebalance.
- This ETF inclusion for Alchip Technologies (3661 TT) could come back-to-back with another index inclusion scheduled for the end of November.
- Shorts in Alchip Technologies (3661 TT) have been building up while shorts in Feng Tay Enterprise (9910 TT) have surged over the last few months.
Hollysys (HOLI US): In Court Today …
- A fortnight after co-COOs pitched a US$25/share indicative Offer for Hollysys (HOLI US), Ascendent Capital, holding 13.7%, tabled a US$26/share Offer. The Recco/Dazheng consortium offered US$26.50 a week later.
- There is currently a dispute over the ownership and control of Ace Lead’s shares in Hollysys, which was subject to an injunction hearing in the Hong Kong High Court.
- That hearing took place today. So I went along to hear first-hand the key arguments from both sides.
Geely Stalls As ZEEKR Spins Off
- Geely Auto (175 HK)‘s share price has largely swatted away the pending US-listing of ZEEKR (ZK US).
- ZEEKR was valued at US$13bn after a US$750mn fund raising in February. At that value, Geely’s 54.7% stake is worth 58% of its market cap.
- Geely is trading around a six and half year low, and below its five average trailing/forward metrics.
Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent
- The fast entry screening spans from November 17th to December 7th. Given its current market cap, we should anticipate the potential success of fast entry.
- The implementation date will coincide with the effective day of the December rebalancing, which is December 15th. There are precedents of successfully achieving fast entry with such a tight schedule.
- The setup will be challenging due to the short selling ban. Nevertheless, with an existing position, there may be value in a market timing approach.
Zeekr Pre-IPO – Thoughts on Valuation
- ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$500m in its US listing.
- Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
- We have looked at the company’s past performance and undertaken a peer comparison in our earlier notes. In this note, we will talk about valuations.
S&P/ASX Index Rebalance Preview: Big Impact; A Week From Announcement
- There could be 3 changes for the S&P/ASX 200 (AS51 INDEX) in December. There are unlikely to be any changes for indices higher up the hierarchy.
- Passive trackers will need to buy between 7-11 days of ADV in the inclusions while the impact on the deletions will be larger at between 11-23 days of ADV.
- Short interest has decreased on the potential inclusions and increased on the potential deletions. There is significant pre-positioning on some of the stocks.
Haitong Sec (665 HK) 15th Dec Scheme Vote
- Once the pre-cons were satisfied on the 15th November, it seemed pessimistic to stick to the delayed 29 December dispatch date for Haitong International Securities Group (665 HK)‘s Scheme Document.
- And right on cue, the Doc was issued last night (21 Nov). The Court Meeting is the 15 December. with an expected cash despatch on or around the 18 January.
- Trading at a gross spread to terms of 2.7%. The headcount test applies. But this should comfortably get up.
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