In today’s briefing:
- JD.com (9618 HK): Index Implications of Walmart Placement
- Hang Seng Index (HSI) Rebalance: Meh (Or Will We Ever Get to 100 Stocks?)
- China Traditional Chinese Medicine (570 HK): Never a Dull Moment as Profit Warning Lands
- Guzman Y Gomez (GYG AU): Free Float to Determine Index Inclusion
- Thoughts On Webjet (WEB AU)’s Demerger
- FnGuide Semiconductor Top10 Index Rebalance Preview: Two Changes Likely in October
- Eoflow: Rights Offering of 82 Billion Won and [Medtronic & Eoflow – Don’t You Forget About Me]
- Logisteed/KKR Bigly Bid for Alps Logistics (9055) Goes Live Tomorrow. Still A Shocking Multiple
- LG Electronics’ Value-Up Disclosure Today: Impact on Initial Flow Sizing for the Value-Up Index
- Trading Situation Arising from Local Pensions’ Unusual Buying of DB HiTek
JD.com (9618 HK): Index Implications of Walmart Placement
- Media reports indicate that Walmart (WMT US) is looking to sell 144.5m shares of JD.com (JD US) to raise up to US$3.74bn. That would be substantially all of its stake.
- There will be passive buying from global index trackers at the time of settlement of the placement shares and could absorb around 12% of the placement shares.
- There will be no passive buying from HSI, HSCEI, HSTECH and HSIII trackers in the short-term. An increase in CCASS holdings should result in passive buying in December.
Hang Seng Index (HSI) Rebalance: Meh (Or Will We Ever Get to 100 Stocks?)
- In a surprise (maybe should not have been!), there are no constituent changes for the Hang Seng Index (HSI INDEX) in September. However, there are float and capping changes.
- Estimated one-way turnover is 1% and estimated round-trip trade is HK$3.73bn (US$478m). There are no stocks with over +/-0.5x ADV to trade but flows could add to/offset other index flows.
- We remain at 82 index constituents and the road to 100 constituents appears to be a long drawn out torturous one. At this glacial pace, could be an eternity away.
China Traditional Chinese Medicine (570 HK): Never a Dull Moment as Profit Warning Lands
- China Traditional Chinese Medicine (570 HK) profit warning notes that the 1H24 net profit would decrease by 60%-70% YoY due to pricing pressure, higher impairment losses and remedial taxes.
- The profit warning could pose a risk to the scheme, as the consortium can withdraw if there is an adverse material change in China TCM’s profits or prospects.
- If there were a danger of triggering the MAC clause, the consortium would not have made the regulatory submissions. The flip side is that the warning helps the shareholders vote.
Guzman Y Gomez (GYG AU): Free Float to Determine Index Inclusion
- Guzman Y Gomez (GYG AU) listed on 20 June and is eligible for inclusion in the S&P/ASX family of indices at the September rebalance.
- Whether the stock is included in indices depends on the index providers estimate of free float. We expect index providers to assign floats of between 25-35% for the stock.
- Inclusion in one global index could come in November and another in December. Inclusion in the S&P/ASX indices will depend on whether float is higher than 30% or lower.
Thoughts On Webjet (WEB AU)’s Demerger
- Back on the 22 May, global travel outfit Webjet (WEB AU) announced it was exploring the separation of its two divisions – Webjet and Webjet B2C – via a demerger.
- If the demerger is implemented, shareholders will receive one Webjet B2C share for every Webjet share; plus retain their existing shares in Webjet (to be renamed WEB Travel Group).
- A demerger booklet has been dispatched, with a 17th September vote on the in-specie distribution. If approved, WEB Travel (ex-entitlement) and Webjet B2C commence trading on the 23rd September.
FnGuide Semiconductor Top10 Index Rebalance Preview: Two Changes Likely in October
- With the start of the review period around the corner, there could be two changes for the FnGuide Semiconductor Top10 Index at the October rebalance.
- Wonik Ips (240810 KS) and Techwing Inc (089030 KS) are potential adds while ISC Co Ltd (095340 KS) and Dongjin Semichem (005290 KS) are potential deletes.
- Passives will need to trade more than 2x ADV on two potential changes and more than 1x ADV on another potential change.
Eoflow: Rights Offering of 82 Billion Won and [Medtronic & Eoflow – Don’t You Forget About Me]
- After the market close on 21 August, Eoflow (294090 KS) announced a rights offering capital raise of 9.1 million new shares, representing share dilution of 23%.
- Based on the expected rights offering issue price of 9,040 won, the company is expected to raise 82.2 billion won in this capital raise.
- Eoflow has monthly cash burn rate of about 3.3 billion won. If the rights offering is successful, it would have adequate capital resources for about a couple of years.
Logisteed/KKR Bigly Bid for Alps Logistics (9055) Goes Live Tomorrow. Still A Shocking Multiple
- The Logisteed/KKR entity received its approvals between the last week of July and this past week, and told Alps Logistics (9055 JP) it wanted to launch its tender 22 August.
- It will do so. Approvals were reasonably quick (as expected) and the Special Committee and Board decided nothing material had changed. No reason to change their opinion.
- This is still a HUGE price. And everyone will be out by mid-October if they want. This is an easy deal. And a GIGANTIC win for minorities.
LG Electronics’ Value-Up Disclosure Today: Impact on Initial Flow Sizing for the Value-Up Index
- LG Electronics aims for 7% growth, a 7x EV/EBITDA multiple, and a ₩1,000 DPS with a 25% payout ratio, likely disclosing details by late October or early November.
- LG Electronics’ value-up disclosure highlights major non-financial companies’ participation before the value-up index launch, driven by regulatory pressure and concerns about index inclusion.
- Samsung and Hyundai are likely to disclose value-up plans by early September, prompting an upward revision of flow size predictions for the value-up index launch.
Trading Situation Arising from Local Pensions’ Unusual Buying of DB HiTek
- From early June until yesterday, local pension funds have purchased nearly 4% of DB HiTek’s SO. This places DB HiTek in a dominant first position in their net buying list.
- The timing of local pension funds beginning to buy DB HiTek coincidentally aligns with May 22, when DB Inc was requested by the KFTC to transition into a holding company.
- Focus on potential price impact from DB Inc.’s buying and value-up index inflows. Considering a relative overweight in DB HiTek may be strategic despite some risk.
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