In today’s briefing:
- Shanghai Henlius Biotech (2696.HK) Privatization Update – These Are the Potential Risks Behind
- SENSEX Index Rebalance: F&O Inclusion Brings First of Many Index Inclusions for Zomato
- Kioxia IPO Preview
- Meiji Holdings (2269 JP) Offering – May Approach a 9Yr Low
- Merger Arb Mondays (25 Nov) – Seven & I, Fuji Soft, ID&EH, Arcadium, Henlius, Canvest, GAPack
- Henlius (2696 HK): NDRC Approval Should Calm Nerves
- HSTECH Index Rebalance: Midea (300 HK) Replaces Weibo (9898 HK); US$1.5bn Round-Trip Trade
- HSCI Index Rebalance: Midea (300 HK) And Black Sesame (2533 HK) Added
- Hang Seng Index (HSI) Rebalance: Still Baby Steps to Get to 100 Members
- Meiji Holdings Placement – Momentum Leading into This Cross-Shareholding Selldown Isn’t the Greatest
Shanghai Henlius Biotech (2696.HK) Privatization Update – These Are the Potential Risks Behind
- On the surface, the 24Q3 results are not bad, but if take a close look, the real situation of Fosun Pharma is still not optimistic.
- There are rumors that Fosun Pharma may have encountered funding issues, thus casting a shadow over the prospects of this privatization.
- The motivation and underlying logic for Fosun Pharma to privatize Henlius are both solid.Potential risks currently on the table are funding issues and whether Pre-Condition approval process will go smoothly.
SENSEX Index Rebalance: F&O Inclusion Brings First of Many Index Inclusions for Zomato
- Zomato (ZOMATO IN) will replace JSW Steel Ltd (JSTL IN) in the S&P BSE SENSEX Index (SENSEX INDEX) at the close on 20 December.
- This is the first of many potential inclusions for Zomato in local indices over the next few months and is due to inclusion of the stock in the F&O segment.
- Futures and options in Zomato (ZOMATO IN) start trading from the open on 29 November. Expect increased volatility in the short-term and an increase in traded volumes.
Kioxia IPO Preview
- Kioxia plans to complete its IPO on 18 December, valuing Kioxia at 750 billion yen ($4.8 billion), down nearly 50% from the initial market value estimates about 2-3 months ago.
- Kioxia had revenue of 909.4 billion Yen (up 84.6% YoY) and EBITDA of 449.6 billion Yen in 1H FY24, driven by the recovering demand for data center and enterprise SSDs.
- As of 2Q 2024, Samsung Electronics was the largest player in the global NAND Flash market with a 36.9% market, followed by SK Group (22.1%), and Kioxia (13.8%).
Meiji Holdings (2269 JP) Offering – May Approach a 9Yr Low
- Meiji Holdings (2269 JP) on Friday announced 9 different banks would sell 4.7% of float in an equity offering to price in the first few days of December 2024.
- The shares closed Friday within 1.5% of a 52wk low. The shares are less than 9% off a 9-year low. The offering is about US$300mm and 15 days of ADV.
- Given the stock is under-levered, and structurally a low volatility name, a large move should encourage buying.
Merger Arb Mondays (25 Nov) – Seven & I, Fuji Soft, ID&EH, Arcadium, Henlius, Canvest, GAPack
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Shanghai Henlius Biotech (2696 HK), Canvest Environmental Protection Group (1381 HK), Get Nice Financial Group Ltd (1469 HK), Shinko Electric Industries (6967 JP), Arcadium Lithium (LTM AU).
- Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Nec Networks & System Integr (1973 JP), Fuji Soft Inc (9749 JP), Xingda International (1899 HK), Elematec Corp (2715 JP).
Henlius (2696 HK): NDRC Approval Should Calm Nerves
- Due to several factors, the gross spread of Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer for Shanghai Henlius Biotech (2696 HK) has widened to 21.5%.
- The wide gross spread reflects the China TCM deal break hangover, slow progress in satisfying the precondition, Fosun Pharma’s potential funding challenges, and the shareholder vote.
- NDRC approval should calm nerves about precondition satisfaction. Even with lingering deal-break concerns, a 21.5% gross spread is excessive.
HSTECH Index Rebalance: Midea (300 HK) Replaces Weibo (9898 HK); US$1.5bn Round-Trip Trade
- In a surprise, Midea Group (300 HK) will replace Weibo (9898 HK) in the Hang Seng TECH Index (HSTECH INDEX) after the close of trading on 6 December.
- Estimated one-way turnover at the rebalance is 4.5% resulting in a round-trip trade of HK$11.72bn (US$1.51bn). Passives need to buy 9x ADV in Midea Group (300 HK).
- The Midea Group Co Ltd A (000333 CH) / Midea Group (300 HK) premium could drop due to the index inclusion providing an entry point into an AH expansion trade.
HSCI Index Rebalance: Midea (300 HK) And Black Sesame (2533 HK) Added
- Midea Group (300 HK) and Black Sesame International Holding (2533 HK) will be added to the Hang Seng Composite Index (HSCI) after the close on 6 December.
- Midea Group (300 HK) is already in Southbound Stock Connect while Black Sesame International Holding (2533 HK) will be added from the open on 9 December.
- There is a huge lock-up expiry for Black Sesame International Holding (2533 HK) in February while the lock-up for Midea Group (300 HK) cornerstone investors ends in March.
Hang Seng Index (HSI) Rebalance: Still Baby Steps to Get to 100 Members
- Kuaishou Technology (1024 HK) and New Oriental Education (9901 HK) will be added to the Hang Seng Index in December while New World Development (17 HK) will be deleted.
- Estimated one-way turnover is 2.7% and the estimated round-trip trade is HK$10.89bn (US$1.4bn) with over 1 day of ADV to trade in the adds and the delete.
- The index committee has net added 1 stock to the Hang Seng Index this year to go from 82 to 83 constituents. Reaching the 100-member target will drag into 2026.
Meiji Holdings Placement – Momentum Leading into This Cross-Shareholding Selldown Isn’t the Greatest
- A group of investors are looking to raise US$264m from trimming a portion of their stakes in Meiji Holdings (2269 JP).
- While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
- In this note, we will talk about the placement and run the deal through our ECM framework.
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