Financials

• 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: Smart Share Global (EM US), Pressance Corp (3254 JP), Seven & I Holdings (3382 JP), Get Nice Financial Group Ltd (1469 HK), ESR Group (1821 HK). 
• Lowest spreads: Lifestyle China (2136 HK), Makino Milling Machine Co (6135 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Latin Resources (LRS AU).    

• The continuation of large budget deficits under the second Trump administration is causing concerns amongst investors about interest rate implications, but Treasury yields are determined by a multitude of factors.  
• High government borrowing will typically impart greater stress on financial markets if private sector borrowing is also strong. Long-end yield curve steepening may reflect funding issues due to buyer shortages.
• Current expected returns on Treasuries (both nominal and real) are highly elevated compared to recent history and should offer decent protection for investors. 

• Weak price action to start the year for the Nikkei with little direction from USD/JPY which was grinding higher throughout the week.
• Volatility at the start of the week helped push short term historic vol higher with at-the-money implied vol up about 1 point.
• Volumes picked up substantially over year-end levels with Puts making up 53.5% of all contracts traded.

• Our bullish outlook on global equities (MSCI ACWI) remains intact. Actionable Themes today include Financials, Energy, and Consumer Discretionary (European Luxury Retailers)
• We view this pullback as a buying opportunity and we are watching for $116-$117 support to hold on ACWI-US; this is an important resistance-turned-support level dating back to July 2024.
• Europe and Japan are on the cusp of major breakouts above critical resistance levels of 5000-5120 on the EURO STOXX 50 and 2740-2820 on the TOPIX

• Yibin City Commercial Bank Co Ltd (2596 HK) is scheduled to debut on the HKEX on 13 January 2025 at a market capitalization of ~$1.6bn.
• The IPO free float is 100% as the offered shares represent all the listed shares. However, the significant amount of unlisted shares result in a low fcap.
• The security can be added at the June 2025 review if the stock price mimics the IPO debut of Bloks (325 HK) and surges by ~84%.

• Upstart Holdings, Inc., a company at the forefront of fintech innovation using artificial intelligence, has reported its third quarter financial results for 2024.
• The company showcased significant developments while balancing both growth potentials and present challenges.
• Positively, Upstart demonstrated substantial growth momentum, with a reported 43% sequential growth in lending volume and a return to positive adjusted EBITDA, reaching this milestone a quarter ahead of schedule.

• Back on the 20 December, VCredit Holdings (2003 HK), a provider of consumer financial services in China, announced a unconditional MGO from Ma Ting Hung, VCredit’s chairman. and concert parties.
• The catch? The Offer Price of HK$1.80/share was a 9.09% discount to undisturbed. It will not be increased. 
• VCredit’s Composite Doc is now out, with the Offer open for tendering, with a 3rd February first close. The IFA says “not fair and not reasonable“. Trading 45% through terms.

• Back on the 9th October, China’s leading state-backed brokerages Guotai Junan Securities (2611 HK) (GJS) and Haitong Securities (6837 HK) announced a scrip merger, with GJS the surviving entity.
• Barring a China Traditional Chinese Medicine (570 HK)-like obstacle/debacle, this transaction was a wrap. Fortunately, key regulatory approvals (SAMR and SASAC) have been ticked off.
• Approval from the Shanghai Stock Exchange was secured overnight. That was a formality. One approval remains – CSRC. Expect that condition to be satisfied shortly. GJS is no longer shortable.

• Common perception is that Trump = Volatility. We look at average monthly historic volatility and returns across 2017-2020 and compare with prior 19 years.
• Trumps term in office included “Volmageddon”, the Christmas Massacre and Covid but we still find that the returns and historic volatility were not out of line.
• Although a small sample size, we see a pattern to how historic volatility deviated from the average over his last term in office. 

• Lower Acceptance Threshold: BBVA reduced its tender offer threshold to 49.3%, excluding Sabadell’s 1.4% treasury shares to ensure voting rights focus on active shareholders.
• Shareholder and Regulatory Hurdles: Retail shareholder resistance, extended antitrust reviews, and opposition from Spanish and Catalonian governments complicate the takeover.
• Sabadell’s Defensive Moves: A €2.9 billion shareholder return plan, potential treasury share expansion to 10%, and Zurich’s 3% stake further reduce the offer’s likelihood of success.

• On 10 January, it was reported that Hyundai Motor Securities (001500 KS)’s 200 billion won capital increase plan passed the Financial Supervisory Service’s review.
• Based on the recent revised report to the FSS, Hyundai Motor Securities disclosed that there is a risk of loss in domestic real estate PF and overseas real estate investment.
• The company’s decision to proceed with the capital raise is likely to weaken its share price to below its expected rights offering price of 6,640 won in the coming weeks.

• Gordon Tang increases buyout offer for Suntec REIT in response to investor dissatisfaction with original bid.
• Texas teachers ramp up real estate investments, committing 61% more funds totaling $1.6 billion by 2024.
• The Cheng family of Hong Kong faces challenges as an Australian casino operator experiences a cash shortage, impacting their holdings.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Shui On Land, Country Garden
• In the US, the UST curve bull flattened slightly in a shortened trading session. The yield on the 2Y UST fell 2 bps to 4.27%, while that on the 10Y UST was unchanged at 4.69%.
• The US equity market was closed yesterday, in observance of the national day of mourning for former president Jimmy Carter.

• The exchange ratio for the merger between Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) is 0.62x. 
• The merger closing is subject to several effectiveness and implementation conditions. The latest update suggests that the remaining conditions are CSRC and HKEx approvals.
• The satisfaction of the remaining conditions is a formality. At the last close and for an end February payment, the gross/annualised spread is 3.2%/26.4%. 

• Back on the 5th December, Gordan Tang (& his wife Celine) acquired a 2.14% stake in Suntec REIT (SUN SP), lifting their stake to 31.45% from 29.31%, triggering a MGO.
• This had all the hallmarks of a technical Offer. The Offer price was S$1.16/share compared to the S$1.17/share undisturbed price. The IFA opined the Offer was not fair nor reasonable. 
• The Tangs have now bumped to S$1.19/share. Terms are not final. The IFA viewpoint won’t budge. This is an opportunistic move from the Tangs. But why not roll the dice?

• The SET50 index tracks the performance of the top 50 largest and most liquid names listed on the Stock Exchange of Thailand (SET).
• In this insight, we take a look at the potential ADDs/DELs for SET 50 during the index rebal event in June 2025.
• Currently, we see one expected change, but since the market cap reference period is yet to start, the rankings can fluctuate significantly before the base date.

BlackRock Greater Europe Investment Trust (BRGE) is one of six funds in the AIC Europe sector. Co-managers Stefan Gries and Alexandra Dangoor note that although BRGE delivered a modest below-market performance over the last 12 months, the trust’s NAV total return has retained the top spot over the last decade. Despite a somewhat weak European economic backdrop and the risk of tariffs under returning US President Donald Trump, the managers are positive about the prospects for the trust’s portfolio of high-quality growth companies. They are sticking with their long-term approach, viewing themselves as investors in businesses rather than traders in shares.

• Centurion is considering an REIT IPO amidst a rebound in Singapore property trusts, indicating positive market sentiment.
• Microsoft plans to make a significant investment of $3 billion in India’s digital infrastructure, the largest commitment in Asia.
• Hong Kong is testing the market by announcing a land tender following the successful sale of an MTR plot, signaling confidence in the property sector.

• After an interval of 18 months, Chesnara announced a new acquisition just before Christmas.
• Although relatively small, it is another positive step for the company.
• The deal is a further acquisition from Canada Life UK, this time a portfolio of unit-linked bonds and legacy pension business, consisting of ca.17,000 policies and £1.5bn of AUM.

• Large unlocks (over 1% of circulating supply) significantly impact prices, mainly concentrated in the week before and after the unlock. A 1% token unlock triggers, on average, a 0.3% price drop over the week preceding the unlock and another 0.3% drop over the week following the unlock.
• The strongest price effects occur two days before the unlock and on the third and fourth days after the unlock. Interestingly, the actual unlock day and the day after show little price impact.
• The similar magnitude of price drops before and after the unlock suggests that market anticipation is just as influential as the actual selling pressure.

• The $ZRO token was introduced in June 2024, with planned utilities that include protocol governance, transaction fee payment, and staking for DVN security. All three utilities have strong implications for $ZRO’s value.
• We foresee that the next three years will be marked by a rapid increase in $ZRO’s circulating supply, alongside growing utilization within the protocol and its adoption as a common currency for cross-chain trades.
• We propose a valuation framework for $ZRO that leverages the Market Cap to Transaction Volume (MC-Tx) ratio, combined with projected transaction volume scenarios. This framework aims to provide readers with a perspective on the relationship between protocol growth and token value.

• Curbline is a convenience retail REIT spun-off from Site Centers in 2024, owning 78 shopping centers in attractive markets
• The company is well-capitalized with $800 million in cash and no debt, allowing for over $1.2 billion in acquisition capacity
• Convenience retail has lower capital intensity and higher NOI growth compared to traditional shopping centers, making CURB’s fundamentals attractive for investors and expected to continue growing as it scales out of its G&A load

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• CDSL is a market infrastructure company operating in the Indian equity capital markets with a $2.5 billion enterprise value
• The company has shown consistent revenue growth over the past decade and listed on the NSE in 2017
• With strong shareholder support and expected mid-teens CAGR growth, CDSL is seen as a buy and hold investment with potential for outperformance compared to major Indian indices

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Intercontinental Exchange Inc. (ICE) reported strong financial performance for the third quarter of 2024, highlighting record net revenues driven by both transaction and recurring revenue streams.
• The company’s net revenue for the quarter reached $2.3 billion, reflecting a 7% year-over-year increase when adjusted for the recent Black Knight acquisition.
• Transaction revenues achieved a milestone at $1.1 billion, underpinned by a 12% rise in the Exchange segment, and included growth in both the interest rate and energy sectors.

• Equitable Holdings’ third-quarter results for 2024 reflect a blend of positive growth momentum and calculated financial strategy oversight.
• The company reported non-GAAP operating earnings of $501 million, which equates to $1.53 per share, marking a significant 34% year-over-year increase.
• Adjustments for notable items bring non GAAP operating earnings per share to $1.59, an increase of 22% compared to the previous year.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Greentown China, Sunac China, Fosun International, China Hongqiao
• In the US, the ISM services index expanded to 54.1 (53.5 e / 52.1 p). This was driven by an increase in the prices paid and new orders components, while the employment component was stable.
• Separately, the November JOLTS job openings rose to 8.10 mn (7.74 mn e / 7.84 mn p). The November trade deficit expanded to USD 78.2 bn (USD 78.3 bn e / USD 73.6 bn revised p).

• Aye FInance Ltd (1239156D IN) (AFL) is looking to raise about US$171m in its upcoming India IPO. The bookrunners for the deal are Axis, IIFL, JM Fin, Nuvama.
• AFL is a non-banking financial company – middle layer (NBFC-ML) that focuses on providing loans to micro, small, and medium enterprises (MSMEs) across India.
• According to CRISIL Report, AFL is recognized as the fastest-growing NBFC in India among its peers with YoY AUM growth between FY24 and FY23, achieving a growth rate of 64%.

• CPPIB is set to sell a China mall to Dajia Insurance for $163M, showcasing a significant real estate deal in Asia.
• GDS announces rebranding of its international unit as DayOne, reflecting a strategic shift within the company.
• Henderson Land plans expansion in Mid-Levels, Hong Kong, while Schroders markets Kowloon Complex floor after canceled auction. Singapore private home prices surge in Q4 with 3-5% growth predicted for 2025.

• KRX and FSS confirmed the NSDS is ready and account registration numbers will be issued, confirming short selling will resume on April 1st, despite no official FSC statement yet.
• Today’s buzz is about pre-registration for short selling, with FSS tracking accounts down to individual desks. This could limit short-selling flexibility, despite addressing the overseas lending issue.
• Exposing too much info on short-selling accounts could shrink securities lending participants, causing supply-demand imbalances, spiking borrowing fees, and creating unique trading opportunities early on.

• Insignia Financial (IFL AU) disclosed a non-binding privatisation offer from CC Capital at A$4.30, a 7.5% premium to the rejected Bain non-binding proposal of A$4.00.
• While the offer is attractive compared to historical trading ranges, it is light compared to peer and precedent transaction multiples. 
• The presence of several substantial shareholders necessitates an attractive takeover premium. To facilitate better terms, the board should provide due diligence access. 

• There are few large US banks where quarterly net interest income is more than 1.6x higher now on average than in late FY19 and early FY20
• JPM demonstrates some of the best asset-liability management (ALM) of any major bank in the US
• Other risks and parts of the business appear to be very well managed too, including credit risk and operating costs

• Big increase in single stock volumes particularly Puts which pushed the single stock put call ratio over 1 for the first time since early November.
• Heavy Put trading in the Financial Sector especially with ICBC and CCB.
• Health Care, Energy and Materials are the 3 sectors seeing higher Put trading vs Calls and are also the 3 sectors with the lowest 3M implied vol 1 year percentile.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: China Vanke, Vedanta Resources
• Last Friday in the US, the ISM manufacturing index climbed to 49.3 in December (48.2 e / 48.4 p).
• This was supported by an increase in the prices paid and new orders components, which offset a decrease in the employment component. Separately, the final manufacturing PMI edged up to 49.4 in the month (48.3 e / 48.3 p).

• Last month, wealth manager Insignia Financial (IFL AU)  announced – and subsequently rejected – a A$4.00/share non-binding and indicative proposal from PE outfit Bain Capital.
• The question was whether Bain returned to the well, in a space where Regal (RPL AU) recently binned its Platinum (PTM AU) tie-in; and Perpetual (PPT AU)‘s carve-out has hit a snag. 
• Roughly two weeks after that Bain rejection, US-based asset investment manager CC Capital Partners has now tabled a A$4.30/share, in cash, non-binding Offer. That’s probably enough for Insignia to engage. 

• Zomato (ZOMATO IN) and Jio Financial Services (JIOFIN IN) should replace Bharat Petroleum Corp (BPCL IN) and Britannia Industries (BRIT IN) in the NIFTY Index (NIFTY INDEX) in March.
• Passive NIFTY Index trackers will need to trade at least 4.5x ADV and 8.8x delivery volume on the stocks. There is some opposite flow from Nifty Next 50 Index trackers.
• There does not appear to be a lot of positioning in Jio Financial Services (JIOFIN IN) and the stock could outperform its peers over the next few months.

• This Insight analyzes Hang Seng Index (HSI INDEX) tailor-made option strategies over the last five trading days, providing strategy analysis, trends, highlights, and volatility context.
• Despite the holidays and generally low volume, last week saw some interesting strategies traded.
• The highest premium earned was for a January ’25 Butterfly. The largest trade was a January ’25 Bull Call Spread, reflecting the popularity of long volatility strategies and spreads.

• IVs higher alongside the underlying index. Weekly expiry (02.01.2025) served as the inflection point sending IVs back down. Monthly IVs: 12.7% (Open) -> 14.4% (02.01.2025) -> 13.3% (Close).
• Vol Term-structure swung between Contango & Backwardation around expiry date. Skew in Monthly contracts compressed as IVs moved higher. Smile unchanged. 
• Trading Strategy Implications: Reengage Smile/ Vega harvesting structures. Abandon wait-and-watch stance – “High & Down” vol state confirmed. 

• OTC Markets Group, Inc has a strong moat and capital light business model with high returns on equity and minimal capital expenditure
• The company has a long growth runway with mid-high single digit revenue growth forecasted over the next five years and low-40% EBITDA margins
• CEO owns 27% of the company, leading to aligned interests, and operates as marketplaces rather than exchanges, resulting in favorable regulatory implications and lower capital requirements.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• The Get Nice Financial Group Ltd (1469 HK)/GNF offer is conditional on the approval by GNH/GNF shareholders. Get Nice Holdings (64 HK)/GNH’s shareholder vote is on 22 January. 
• The GNH vote will comfortably pass as Mr Hung, the controlling shareholder, represents 66.11% of outstanding shares, just shy of the 66.67% required voting threshold.   
• The implied offer value has declined by 10%, broadly in line with the median decline in peer share prices. Therefore, the scheme vote remains low-risk. 

• Timing expiration, assessing volatility, and managing event risk are crucial for effective option trades.
• Exchange holidays, expiries, central bank rate decisions, and index changes can significantly impact volatility and market direction.
• The attached document provides key dates to help navigate the complexities of option trading in Australia, Hong Kong, India, Japan, South Korea, and the USA.

• On the 5th November, Get Nice Holdings (64 HK) (GNH) announced a scrip Offer, by way of a Scheme, for 72.99%-held Get Nice Financial Group Ltd (1469 HK) (GNF).
• With an implied scrip price & divvy of HK$1.116/share, against a book value of HK1.736/share – and net cash of ~HK$1.00/share – this is probably being down too cheaply.
• GNH’s Circular is now out, with an EGM to be held on the 22nd Jan. GNF’s Scheme Doc is expected to be dispatched one or before the 10th Feb. 

• Admiral shares have shown strong performance with a 13% CAGR since May 2018 and reaching all-time-highs after 1H24 results
• Despite recent pullbacks, Admiral’s market cap of £8.6bn is considered very cheap
• The market underestimates Admiral’s potential, with the business transitioning from a “sell” to a “buy” consensus in recent years and earnings upgrades through 2024

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Great portfolio of assets, most notably 10 hotels under the Peninsula brand name
• Capex has been excessive over the past 10 years, especially in London, but the company is now focused on execution and paying back debt. Both London and Istanbul ramping up.
• NAV per share of HK$24 per share, putting at the HK$6.2 price at a 74% discount to NAV. Key is whether Philip Kadoorie will unlock value once he takes over.