In today’s briefing:
- Tsuruha (3391 JP)/Welcia (3141 JP): Vote Musings
- Weekly Deals Digest (25 May) – Toyota Industries, Shibaura, ESR, Soundwill, Mayne Pharma, GMO
- Zomato/Eternal: The BIG Passive Selling Starts
- Tongcheng Travel (780 HK): Regaining Momentum, Better Choice than Trip.com
- Alibaba (9988 HK): Navigating Post-Earnings Volatility
- Alibaba (9988 HK): Unpacking the Week’s Savvy Top Options Trades
- Pre-IPO Foshan Haitian Flavouring & Food Company (PHIP Updates) – Some Points Worth the Attention
- Jade Group: Magaseek and Locondo Stall
Tsuruha (3391 JP)/Welcia (3141 JP): Vote Musings
- Leading proxies recommend that Tsuruha Holdings (3391 JP) shareholders vote against the Tsuruha/Welcia Holdings (3141 JP) merger on 26 May.
- The share exchange terms favour Welcia over Tsuruha shareholders. The Tsuruha vote will be close but likely to be approved. Long Tsuruha is the trade, irrespective of the vote.
- For a vote pass, you are long synergies and a likely partial offer bump. For a fail, you are long an undemanding multiple and the optionality of a new bid.
Weekly Deals Digest (25 May) – Toyota Industries, Shibaura, ESR, Soundwill, Mayne Pharma, GMO
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: GMO Internet (4784 JP) secondary offering of 91.7 million shares, worth around US$1.9 billion.
- Event-Driven developments: Toyota Industries (6201 JP), Shibaura Electronics (6957 JP), ESR Group (1821 HK), Soundwill Holdings (878 HK), Mayne Pharma (MYX AU), Gold Road Resources (GOR AU).
Zomato/Eternal: The BIG Passive Selling Starts
- Following shareholder approval of the proposal to reduce the Foreign Ownership Limit from 100% to 49.5%, NSDL has updated the FOL. This starts the process of passive selling in Zomato.
- Passives will sell US$350m at the close on Tuesday. There is a low probability of more selling later in the week. There will be bigger selling in August.
- The size of the selling in August and beyond will depend on what foreign investors do in the stock till the end of June. Watch the red flag/ breach list.
Tongcheng Travel (780 HK): Regaining Momentum, Better Choice than Trip.com
- Tongcheng Travel Holdings (780 HK)‘s 1Q25 adjusted net profit surged 41.1%, suggesting an accelerating momentum. It should continue to outperform Trip.com Group (9961 HK).
- Good cost management, even as revenue rose 13.2%, has enhanced adjusted EBITDA margin by 5.3pp YoY – this trend will sustain.
- More visa convenience will boost inbound and outbound travel. At end-1Q25, net cash equals 14% of market capitalisation, and it can still generate ROE of 12-15%.
Alibaba (9988 HK): Navigating Post-Earnings Volatility
- Implied Volatility Trends:Alibaba Group Holding’s (9988 HK) one-month implied volatility has significantly receded to the 37th percentile after its 15 May earnings, reflecting a substantial implied vola crush.
- Skew and Term Structure Dynamics: The implied volatility term structure is now slightly upward-sloping with longer-dated options commanding a small premium. Skew dynamics indicate cheaper puts.
- Open Interest Distribution: Liquidity is greatest in the June and September expiries. Short term strikes are concentrated near or at the money.
Alibaba (9988 HK): Unpacking the Week’s Savvy Top Options Trades
- Over the past five trading days, Alibaba Group Holding (9988 HK) multi-leg option strategies showcased a variety of approaches. Strategy highlights are provided.
- Popular Strategies: Over 35% of all strategies are Calendar or Diagonal Spreads. Bullish and bearish views prevail at equal rates, with very few market-neutral views expressed.
- Top Trades: Some market participants were betting on a short term re-bound after the post-earnings drop. Others take a bearish view with finely calibrated medium-term hedges. Trade-examples are presented.
Pre-IPO Foshan Haitian Flavouring & Food Company (PHIP Updates) – Some Points Worth the Attention
- Despite returning to positive growth, Haitian still failed to achieve its 2024 revenue target, mainly due to underperformance of Soy sauce products, consumption downgrades, slow online layout/distributors recovery.
- Haitian would face dual challenges of “cost increase + structural transformation” in the next three years due to inflation and the negative impact of “new standard”. We shared our performance forecast.
- High valuation is unsustainable if based on current growth rate.Reasonable valuation is about 20-30x P/E. However, due to the strong sentiment for AH listing, share price may still perform well.
Jade Group: Magaseek and Locondo Stall
- Jade Group (3558 JP) made some wild promises about its potential to grow its online fashion mall business last year when it acquired Magaseek.
- But recent results suggest what many feared: building scale without due regard for the quality of the assets acquired does not an empire make.
- With Magaseek contracting and e-commerce overall showing muted growth, Jade Group´s capacity to escape the shadow of the big three looks limited.
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