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Last Week in Event SPACE: Wirecard, Skyworth, Nichii Gakkan, Yixin, Perennial, 58.Com, Keppel

378 Views21 Jun 2020 07:58
SUMMARY

Last Week in Event SPACE ...

(This insight covers specific insights & comments involving Stubs, Pairs, Arbitrage, share Classifications, and Events - or SPACE - in the past week)

EVENTS

Wirecard AG (WDI GR) (Mkt Cap: $5.5bn; Liquidity: $340mn)

There is a large backstory to this whole sorry saga, culminating this week with the IR saying the publication of annual and consolidated financial statements 2019 will be delayed due to indications of presentation of spurious balance confirmations. The shares immediately plummeted, hitting a low of €35.00 seven minutes after the news - down 66.5% from the previous close, and trading decent volume there (658k shares at that one price in one minute). Shares bounced from there, but the notes by auditor EY suggesting €1.9bn of cash balances - literally 25% of total assets, and materially all of equity - are potentially spurious suggests this is not over.

  • The KPMG report in April was pretty damning. That resulted in a second delay to earnings release to 4 June. That got delayed a third time to 18 June. Now it is delayed further, date unknown. The company was out and out confident AFTER the KPMG report that the EY report would provide an "unqualified opinion." Materially, not much has changed in the accusations since prior to the KPMG report, but now a spokesperson says the company may have been the victim of a "gigantic fraud."
  • That suggests the company is willing to admit that €1.9bn of assets claimed does not exist. The company has known about the allegations for years. They have persisted for years calling the accusations an unfounded attack and conspiracy. Now the tune has changed. The ability for anyone to trust the company and its management is gone.
  • That lenders can call their loans tomorrow on non-delivery of accounts is significant. I am told (but have no documentation - though it could easily exist) that the €2bn of loans is secured against those 'cash' and short-term assets. It is not described as short-term loans on the balance sheet, but indeed if they are functionally secured, they could decide to put the company in receivership because they would be secured ahead of all the other unsecured creditors who would pop out of the woodwork.
  • If you can't trust them, will its business counterparties stick with it if management has to resign and the scandal goes everywhere? This is a payments business. Every one of their counterparts is probably looking to back up processes with someone else starting today. Now. There will be a lot of very hard conversations at long-onlies today. They are €7-8bn in the hole vs yesterday. Do you defend it or do you take your losses and sell? If Travis Lundy owned it, he would have sold every intra-day bounce. Patryk Basiewicz still sees no reason to hold the stock at present.
links to:

M&A - ASIA

Skyworth Group Limited (751 HK) (Mkt Cap: $0.9bn; Liquidity: $2mn)

After Skyworth was suspended "pursuant to the Codes on Takeovers and Mergers and Share Buy-backs", the immediate takeaway as the company would be subject to a privatization Offer similar to TPV Technology (903 HK)'s. But in a twist, Skyworth announced a partial buyback - 12.83% of shares out or 392.8mn shares, at HK$2.80/share, a 32.1% premium to last close. Stephen Wong & concert parties hold 40.88% of shares out and will not tender. Additional directors holding 0.9% have given an undertaking not to tender. That leaves 58.22% of the register subject to the buyback, implying a minimum pro-ration of 22.04%.

  • Should the partial buyback complete (i.e. fully exercised) Wong & concert parties will hold 46.90% of shares out, before the exercise of any outstanding share options. That step-up in %-held oversteps Hong Kong's "creeper rule", and therefore Independent Shareholders are required, by way of a special resolution (75% vote), to approve a whitewash waiver such that Wong is not obligated to make a general offer for shares not held.
  • 77% of shares traded in the past five years have been done above the Offer price. It is 41% over the past three years. Perusing the register, the likes of Blackrock and others (with around 16% of shares out) have held their shares prior to August 2018, when shares traded above the Offer price - apart from a handful of days in late Mar-19. They are unlikely to sell.
  • I think the minimum pro-ration will be more like 30% (simply factoring in 16% of the register who are unlikely to tender) - Travis Lundy reckons upward of 50% is feasible in light of the volume traded above terms. At 30%, that takes you to a theoretical breakeven price of ~HK$2.54; 50% to ~HK$2.60. At $2.40/share (where it was at the time of the insight) and below, this is a buy.

link to my insights:
Inside The Box: First TPV (903 HK), Now Skyworth (751 HK)?
Skyworth (751 HK)'s Partial Buyback

Nichii Gakkan Co (9792 JP) (Mkt Cap: $1bn; Liquidity: $5mn)

The BCJ-44 entity MBO Tender Offer for Nichii Gakkan expires on 22 June 2020. Travis has received a lot of questions about this Tender Offer. He has also received more comments about fairness and process than any other takeover he has been involved in over the past 20 years. To be sure, this is not the most egregiously unfairly-priced takeover proposal I have ever seen approved by a board in Japan.

  • Travis' base case is that Family+Bain do not want to let this get away, and they need to get enough people over the line that they get to 67%. If they do, they may be able to claim in front of those who would try for Appraisal Rights that the fact they got to 67% proves the price was fair. That does nothing of the sort, but it's an angle which could be played.
  • The question out there is Appraisal Rights Risk. If the bidder's lawyers say that because of the lack of use of the METI Fair M&A Guidelines, in spite of being made aware of them, the process could be deemed not fair therefore the price is in question - in line with the JCOM ruling thinking - then the Bidders may want to get to a slightly higher up-front price to avoid having to pay a MUCH higher price on the remainder. If, however, the Bidder's lawyers say that JCOM basically proves that if the board approves it, the process must be fair, then they may try to lowball a bump. But Travis still thinks that it is VERY easy to explain, economically-speaking, a 20% bump. And a 10% bump is a walk in the park, both economically and in terms of face.

  • Based on Travis' own "probability matrix", he expects a Tender Offer Extension and Bump to ¥1690-1750 Tender Offer is his "Median Estimated Near-Term Outcome."

(link to Travis' insight: Thinking Through Nichii Gakkan Tender Strategy)

Yixin Group Ltd (2858 HK) (Mkt Cap: $1.6bn; Liquidity: $2mn)

Bitauto Holdings (BITA US) owns ~43.72% of shares out in Yixin. Tencent holds 20.58%, JD.com 10.73%, and Hammer 1.48%. Should the BITA proposal complete (discussed below under "M&A - US"), there will be a change in statutory control in Yixin, obligating Tencent and concert parties to make an unconditional mandatory general offer. The consideration obligated under Hong Kong's chain principle rule are generally low-balled. The announcement indicates an MGO price of HK$1.9088, roughly at Yixin's closing price (at the time of the announcement), and below my earlier estimate of HK$1.96/share.

  • The Offer, should it unfold, will be unconditional as the Joint Offerors (Tencent Holdings (700 HK)/Hammer Capital) and parties acting in concert will hold 77.11% of shares out (>50%) in Yixin at the completion of the Bitauto merger.
  • You effectively have a hard floor (or put) on the stock through to early November, based on my timetable. Peers are up 14% since the Offer was first floated back in September, and 9% since the beginning of this year. Currently trading at $1.93/share or 1.1% through the indicative terms (this is still not a firm Offer). Not a bad level to pick up shares - or even a spread or two below - in this uncertain environment.

(link to my insight: Yixin (2858 HK)'s Indicative Downstream Offer)

Perennial Real Estate Holdings (PREH SP) (Mkt Cap: $1.1bn; Liquidity: $1mn)

The previous Friday, a deal by the current ownership "Consortium" (which collectively owns 82.43% of Shares) and HOPU Patners was announced, with the intention to take Perennial private. The existing 82.43% owners have made irrevocable undertakings to accept the Offer and use the proceeds to fund purchases of stakes in the new company (though the options which may be exercised can lower that to 79+%). There is a minimum acceptance condition of getting to 90%. The Offer Price of S$0.95/share, which is final, represents a 37.7% premium to last close, and the highest price in four years.

  • This needs about 43% of the remaining shareholders to get this over the line. Travis expects it will get there, but it is a close-run thing. This is coming at exactly a 40% discount to December 2019 BVPS. Travis expects the IFA will probably mark down the assets because of China's unprecedented fall in GDP in Q1 this year. That would get it into the range of "fair" without too much trouble. This is kind of garbage.
  • There is a possibility this gets to unconditional within a month. For that a 1% spread seems reasonable though it may trade a half cent wide because shareholders are expected to get the S$0.002 dividend in early July. If you have no cares for the arb, I would get out at S$0.945.

links to:
Travis' insight: Perennial Takeover - Disappointing Precedents Suggest "Fair" Even if Not Really
Brian Freitas' insight: Perennial Real Estate Holdings - Delisting Opportunism

Jinmao Hotel was suspended on the 8 June "pursuant to the Code on Takeovers and Mergers", having gained ~40% in the previous three trading days. Funny that. An Offer by way of a Scheme has now been announced, at an offer price of $4.80/share, a 30.4% premium to last close. The Offer price is Final. Irrevocables total 21.04%. The Offeror (China Jinmao Holdings (817 HK)) and concert parties hold 66.81%, therefore the blocking stake at the Unitholders Meeting will be 3.319% of shares out. Jinmao is Cayman incorporated, so the headcount test applies.

  • $4.80 is roughly a two-year high, and ~90% above where shares were trading at the beginning of the month. Plus a 57.4% premium to NAV (Dec-19). And (what appears to be) a life-time high P/B, this transaction is structured to get up.
  • Independent shareholders comprise 33.19% of shares out. 21.04% of that 33.19% have given an irrevocable to vote for the Scheme resolutions. Therefore, for the deal to be blocked, 3.319% or 27.3% of the remaining independent shareholders need to vote against the Scheme. That looks unlikely.
  • And though the announcement unprofessionally failed to mention this, the final distribution of HK$0.1543/share was also to be added - if you had bought this past Monday, after the Offer announcement.
  • UPDATE: Jinmao Hotel has received an additional irrevocable undertaking of 3.04% from Camden Medical.

(link to my insight: Jinmao Hotel (6139 HK): Priced To Check Out)

Infigen Energy (IFN AU) (Mkt Cap: $0.6bn; Liquidity: $2mn)

Iberdrola SA (IBE SM) announced that it had purchased 20% of Infigen at A$0.86 from TCI. Iberdrola also announced an Offer for Infigen at A$0.86/share vs. UAC Energy's (a JV between AC Energy and Ayala Corporation (AC PM)) A$0.80/share Offer on 2 June. Infigen announced it recommended the Iberdrola Offer and announced there would be no distribution for H2 2020 (half ending 30 June) because both bids' pricing (UAC's and Iberdrola's) were contingent on distribution being declared. That changes the landscape. Iberdrola comes in with a strong deal which resolves any questions of due diligence, funding, regulatory suitability (Iberdrola has already invested in Australia).

  • FIRB is the big question, but should be okay. Travis would expect a 3-6 month wait, by which time we will already have all the other documentation. He might expect this at the earlier end because FIRB has recently covered Iberdrola, and has recently covered or will soon cover the Infigen Energy assets. Both are effectively known quantities to FIRB prior to FIRB consideration of this deal.
  • Will someone else come in over the top, or will UAC come back higher? UAC might come back at A$0.90. Someone else might come in at A$0.90-1.00. For a big firm, this kind of asset enhances green credentials. And it provides more in-house experience and expertise in dealing with customers, regulators, etc. Very big global energy firms need to acquire these smaller firms, or need really big self-run projects. Given the borrowing costs of large firms are so low, this seems like a no-brainer to pay up to get it.
  • Travis thinks this is probably a buy at terms if you are an arbitrageur. If you are not an arbitrageur, it is probably a sell at A$0.88-90. The volatility of other assets in the market is worthwhile as a portfolio characteristic if you are an active manager. This asset will not be volatile and may not have tremendous upside potential at A$0.90.

(link to Travis' insight: Infigen Gets Iberdrola As Overbidder)

Wheelock (20 HK)(Mkt Cap: $16.2bn; Liquidity: $9mn)

At Wheelock's Court Meeting. the Scheme was approved. The timetable previously provided in the Scheme doc remains unchanged: Wharf Real Estate Investment (1997 HK) and Wharf Holdings (4 HK) shares are to be dispatched to Scheme shareholders on (or around) the 22 July, to commence trading on the 23 July. Cheques for the Scheme consideration ($12/share) are to be dispatched on (or before) the 3 August. Wheelock was suspended from trading this past Thursday. So that's that.

(link to my insight: Wheelock’s Scheme Approved)

Augusta Capital (AUG NZ)(Mkt Cap: $0.1bn; Liquidity: <$1mn)

Augusta announced that it had received a takeover notice for a full takeover from Centuria Capital Group to acquire shares that would take Centuria's holding to 100% at an implied offer price of NZ$1 per share comprising NZ$0.2 in cash and 0.392 shares of Centuria Capital (CNI AU).

  • Brian feels the implied offer price of NZ$1 per share is on the lower side. That said, Centuria should get over the 50% shareholding mark, but it is unlikely they will get to the 90% threshold to squeeze out the minorities. It is highly likely that Centuria will waive the 90% requirement and accept the shares that take it over the 50% shareholding mark.
  • A lot will depend on how CNI trades from now till the conclusion of the offer. The shares tendered by existing holders will increase as CNI moves higher.

Golden Meditech Holdings (801 HK) (Mkt Cap: $0.3bn; Liquidity: <$1mn)

GMH has now announced an Offer by way of a Scheme at $0.88/share, a 41.94% premium to last close. The Offer Price will not be increased. Dividends will be netted. No final 1H20 dividend was declared. GMH has no intention to make, declare or pay any future dividend/distribution until after completion of the Proposal and the Scheme. Disinterested Shareholders comprise 482.75mn shares, or 16.55% of shares out. Therefore the blocking stake at the Scheme Meeting is 48.3mn shares or 1.655% of shares out - or HK$39mn using the last close. The 10% blocking stake is attached to ALL of the Scheme Shares held by the Disinterested Shareholders. The headcount test applies as GMH is a Cayman-incorporated company.

  • Net cash (net of leases) as at 30 Sept was HK$1.77bn, or HK$0.61/share. Net assets as at 20 Sept 2019 was HK$1.406, therefore the rump, ex-cash, is $0.80/share. Net of net cash, the Offeror is taking out GMH's (loss-making) business ops at 0.34x P/B. That looks cheap - however, Pw Medtech (1358 HK), one of GMH's peers, and with a similar market cap (and making a profit), is trading at 0.5x.
  • The Offer price is around the level shares have traded since the payment of the special dividend in 1Q18. ~38% of volume since that ex-date has been above the Offer Price. GMH is loss-making, from EBITDA downwards, since 2014. The offer is pitched at a P/B of 0.6x and P/Rev of 8.3x. This compares to 1.17x and 13.2x in the 2017 Offer.
  • On balance, the Offer Consideration is probably enough for the deal to get up. But it's not a particularly liquid arb play. And you can't short it. Trading wide at a gross/annualised spread of 6.0%/23.3% - reflecting the low blocking stake. Only for the brave.

(link to my insight: Golden Meditech (801 HK): Prescription Renewal)

OptiComm Ltd (OPC AU) (Mkt Cap: $0.4bn; Liquidity: <$1mn)

Adelaide-based outfit Uniti Group Ltd (UWL AU) tabled a cash/scrip Offer by way of a Scheme for OptiComm, with a total consideration of A$5.20/share, including a $0.10/share fully franked dividend. This backs out a 13.6x EV/EBITDA and 24.5x PER. Plus a 160% gain for shareholders since listing. Shareholders are afforded five alternatives under the Scheme: an all-cash payment; an all-scrip settlement (3.4228 Uniti shares for every OptiComm share), or three different cash/scrip combos. Cash and scrip are capped at A$407mn and 84mn Uniti shares, respectively, implying a 77%/23% cash/scrip split.

  • Opticomm looks like a great business - steady growth with unique characteristics, and unfaltering demand, especially in this current environment. Yet a 160% gain since the listing is pretty fantastic. Even the CEO has trimmed his position since the IPO. And the board has unanimously recommended the Offer.
  • This aggressive tilt for OptiComm is the latest in a string of acquisitions from Uniti, which itself was listed in February last year. I would take the Offer with a more cash-heavy component. Or simply sell here.

(link to my insight: Uniti/OptiComm: High-Fibre Diet)

Allied Properties (H.K.) (56 HK)'s Scheme Doc is now out, with the Court Meeting set for the 15 July, an indicative effective date of the 28 August, and payment on the 8 September. The IFA has opined the Offer is fair & reasonable. Currently trading at a gross/annualised spread of 1.6%/7.4%, having narrowed a smidgen in yesterday's trade. That's pretty tight, considering this is a Scheme vote and the Offer price is at a large discount to book. I previously estimated a $2/share Offer price was fair - this was where shares last traded three years ago. And that is what we got, including the interim dividend. APH is heavily discounted, but has historically been so - this is as good as it will get. Allied Props (56 HK)'s Scheme Document Despatched

CVC's offer to acquire a substantial stake in Healthcare Global Enterprises (HCG IN) has been approved by the shareholders, With the shareholder approval, this tender offer has effectively become unconditional now. Ankit Agrawal wrote in Healthcare Global: An Attractive Spread Trade, that the offer was at a punchy gross spread of 7.8% (at the time of the insight) over a period of ~2.25 months (until Aug 21), any price below 127.5 (gross spread of >2%) would be an attractive buy as he thinks that there is a high likelihood that the acceptance rate in the open offer will be 100%.

In Keppel Corp - Stretched Vs Proxy Baskets And Now With New Risk, Travis noted that Keppel Corp Ltd (KEP SP) has gotten expensive vs most of its proxy baskets except an Infra Heavy proxy basket, but one could easily suggest that the Infra Heavy Proxy Basket should, extraordinarily, outperform Keppel because it is not COVID-19-Impacted whereas most of Keppel's other businesses are. The only way that Keppel looks cheap is if you have substantial borrow from passive funds and expect to trade the Tender with a long-and-tender-borrow trade. The impairment risk has also gone up - a large impairment could trigger Material Adverse Change clause. There are also still anti-trust approvals outstanding.

In Healius to Sell Its Primary Care Business to BGH, Shifara Samsudeen discussed the sale of Healius (HLS AU)'s primary care business which includes large scale medical centres and dental practices, to private equity firm BGH Capital for AU$500m.

In Tencent (700 HK): Acquisition of Baidu’s IQiyi, Very Possible, Ming Lu discussed the rumours that Tencent Holdings (700 HK) will acquire Baidu (BIDU US)’s online TV subsidiary, iQiyi.

INDIAN DELISTINGS

A "Delisting Offer" (aka: "Exit Offer") in India is where a promoter (usually holding a 50%~75% stake) voluntarily makes a Delisting Proposal, which if accepted, means an eventual Offer to buy out the minorities.

M&A - US

Bitauto Holdings (BITA US) (Mkt Cap: $1.1bn; Liquidity: $8mn)

On the 13 September 2019, Tencent Holdings (700 HK) and Hammer Capital tabled a preliminary non-binding proposal for BITA at US$16/ADS, a ~20.6% premium to last close and a 36.1% premium to the 30-day VWAP. This was discussed in Tencent's Potential Downstream Offer For Yixin. On Friday (12 June), Bitauto announced it has entered into a definitive Merger Agreement with Tencent and Hammer at the previously-announced Offer price of US$16/ADS. Shareholders holding 55.3% of shares out have agreed to vote in favour of the Merger. The proposal needs two-thirds. This is a done deal.

  • Bitauto is currently trading tight at a gross/annualised spread of 0.9%/2.2%, assuming early November completion. This may well close earlier. Optically, the Offer price is light. But with just an additional 11.4% of shares out (~25% of remaining shares, ex-the consortium shares) required to get the votes over the line, I expect the deal to get up.
58.Com Inc Adr (WUBA US) (Mkt Cap: $8.1bn; Liquidity: $57mn)

58.com announced it had entered into a definitive Agreement and Plan of Merger with a consortium comprising Warburg, General Atlantic, Ocean Link and Yao, who collectively hold 44.1% of shares out. The consideration price under this proposal has been (marginally) sweetened to $56/ADS, a19.9% premium to the undisturbed price. And Tencent? Still no word.

  • It is unlikely the consortium hadn't sounded out Tencent's position on the transaction, as its holding (one that has been on the books for six years) effectively makes or breaks the deal. Logically, they are on board, and the market quite rightfully pushed up 58.com's shares 9.6% in response to this latest announcement.
  • This is a binary outcome - either Tencent joins the consortium (I can't see the company exiting here), or it doesn't. On balance, Tencent supports the Offer. It's just a little surprising they have not clarified their position. Currently trading tight at a 2.7%/6.9% gross/annualised spread, assuming mid-November completion. This may well complete earlier.
In Huya and Douyu Merger Quick Take - Molding a Leader in ESports and Game Live Stream, Zhen Zhou, Toh discussed the rumoured merger of Douyu International Holdings (DOYU US) and HUYA Inc (HUYA US), which would create a leader with more than 50% market share in game live streaming industry, and help to consolidate Tencent's downstream foothold in the gaming industry.

TOPIX INCLUSIONS

Mixi Inc (2121 JP) (Mkt Cap: $1.4bn; Liquidity: $13mn)

mixi made an announcement that the company had received approval from the Tokyo Stock Exchange to move from the MOTHERS section, where it IPOed in 2006, to the First Section of the Tokyo Stock Exchange as of 23 June 2020. TSE1 reassignment triggers inclusion into the TOPIX Index and the inclusion event should occur at the close of trading 30th July 2020. It is, at last price, $100mm worth of buying to do, and about 10 days of volume to buy in the next 29 days. There hasn't been new supply in the equity for five years.

  • Assuming investors have no position prior to the announcement, Travis would get long early but try to own below ¥1,800. He would expect strong demand the next several days, and increased day-trading will suggest the buying is being done early when in fact it will just be a lot of shares changing hands back and forth. Assuming one held a position, he would keep it until the few days before and around inclusion. On average, stocks of these parameters fall sharply in the 20 days post-inclusion.
  • For traders, Travis would look to borrow and short an inclusion if it ends up having a strong run in the next month and a half.

(link to Travis' insight: Mixi TOPIX Inclusion - Out of Left Field)

Tsuzuki Denki (8157 JP) (Mkt Cap: $0.3bn; Liquidity: $1mn)

Tsuzuki confirmed (J-only) on 17th June they had received approval to move from the Second Section to the First Section of the Tokyo Stock Exchange as of 24th June 2020. TSE1 reassignment triggers inclusion into the TOPIX Index and we expect the inclusion event will be at the close of trading 30th July 2020. Based on 3-month ADV, Janaghan estimates the impact of the Inclusion to be 21-26 days of volume. This is significantly higher than our estimated median of 10.95 days for historical TOPIX Inclusions. He estimates the Inclusion Size to be ¥1.13-1.39bn - also slightly larger than the estimated mean of ¥1.06bn for historical TOPIX Inclusions.

  • Despite the medium-term negative impact of COVID-19, the Fundamentals look good too. The company's FY2021E forecasts for Revenue, Operating Income, Net Income translate to YoY changes of -10.7%, -39.4%, and -42.9% respectively. The main reason for this negative outlook is the potential disruption to operations and order-flow caused by the COVID-19 pandemic. We feel this could be an industry-wide impact and not company-specific.
  • Janaghan would be LONG at or below the current price ¥1,242 with a view to exit during or just before the Inclusion event. If it goes up significantly tomorrow, he would still buy. He would also avoid shorting the stock until the Inclusion event is complete.

(link to Janaghan's insight: TOPIX Inclusion (8157 JP): Tsuzuki Denki)

SHARE CLASS

In Korea Preferred Shares - An Eventful Week & Trade Ideas, Brian noted the discount on some Korean preferred shares has been narrowing over the last few months and could continue to narrow. He recommends buying preferred shares that are trading at discounts of greater than 40% and near the wider end of their 2-year range, while switching out of preferred shares that are trading at discounts of less than 20% and are nearer to their tightest discounts over the last 2 years. Preferred shares will become more attractive as Korean corporates increase dividends and conduct buybacks
In Liquid Universe of European Ordinary and Preferred Shares: June Report, Jesus Rodriguez Aguilar looks at ten share classes (pref vs. ords) throughout Europe, with trade recommendations thereon.

PAIRS

INDEX REBALS

The Stock Exchange of Thailand announced the results of the semi-annual review of the SET50 index. The changes will be effective from 1 July 2020 and passive funds and index arb desks will need to trade at (or by) the close on 30 June 2020. There are 2 additions Banpu Power PCL (BPP TB) and TTW Pcl (TTW TB), and 2 deletions Banpu Public (BANPU TB) and Delta Electronics Thai (DELTA TB). In SET50 Index Review - Delta to Sell, Brian estimates more than 4 days of ADV to buy on TTW and more than 4 days of ADV to sell on Delta. Banpu Power was deleted from the SET50 index in February to make way for Central Retail (CRC TB).

The Hang Seng Indexes Company Limited will announce the results of the 2020 Q2 review of the Hang Seng Family of Indexes in mid-August. The constituent changes will be effective from 7 September 2020 and the rebalancing trades will need to be done at the closing auction on 4 September 2020. In HSCEI Rebalance Preview - September 2020, Brian sees a very high probability of Meituan Dianping (3690 HK) and Alibaba Group (9988 HK) being included in the HSCEI and of Sinopharm Group Co Ltd H (1099 HK), Citic Securities (H) (6030 HK) and BYD (1211 HK)being deleted from the HSCEI. The third inclusion will either be China Overseas Land & Investment Ltd (688 HK) or Xiaomi Corp (1810 HK). Currently, China Overseas Land & Investment Ltd (688 HK) ranks higher than Xiaomi Corp (1810 HK) and has a higher probability of being included in the index.

OTHER M&A & EVENT UPDATES

CCASS

My ongoing series flags large moves (~10%) in CCASS holdings over the past week or so, moves which are often outside normal market transactions. These may be indicative of share pledges. Or potential takeovers. Or simply help understand volume swings.

Often these moves can easily be explained - the placement of new shares, rights issue, movements subsequent to a takeover, lock-up expiry, amongst others. For those mentioned below, I could not find an obvious reason for the CCASS move.

Name

%chg

Into

Out of

Man Sang International (938 HK) 14.43%RooferGuoyuan
Panda Green (686 HK) 32.00%HSBCOutside CCASS
Shenzhen Mingwah Aohan H (8301 HK) 13.67%YuantaChuenman
Shandong Gold Mining Co., Ltd. (1787 HK) 15.86%MSSt Chart
Nanjing Sample Technology H (1708 HK) 16.91%CCBCinda
Source: HKEx

The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.

Name

% chg

Into

Out of

Renrui Human Resources (6919 HK) 19.04%BNPOutside CCASS
Central China New Life (9983 HK) 68.07%CMBBNP
Accel (1283 HK)75.00%MSOutside CCASS
Newborn (9911 HK)15.69%SBIOutside CCASS
Source: HKEx
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