In today’s briefing:
- FXI ETF: Potential Changes in the Year of the Snake
- Merger Arb Mondays (03 Feb) – ESR, LifeStyle China, Vesync, Giga Prize, Sanyo, Ascot, Seven & I
- Fosun Tourism (1992 HK): Affirming Our Support for the Buyback
- Fosun Tourism (1992 HK): No Love For The Scrip Alternative
- HONG KONG ALPHA PORTFOLIO (January 2025)
- Bama Tea Pre-IPO Tearsheet
- Pre-IPO PegBio Co., Ltd. (PHIP Updates) – Some Points Worth the Attention
FXI ETF: Potential Changes in the Year of the Snake
- There could be 1/2 changes to the iShares China Large-Cap (FXI) (FXI US) in March. Then there will be more changes as large Chinese companies list H-shares on the HKEX.
- Fast Entries and regular inclusion of newly listed H-shares will change the characteristics of the FXI and there could be further deviations from the Hang Seng China Enterprises Index (HSCEI INDEX).
- That will provide opportunities for index rebalance traders as well as volatility traders that are active on the iShares China Large-Cap (FXI) (FXI US) options.
Merger Arb Mondays (03 Feb) – ESR, LifeStyle China, Vesync, Giga Prize, Sanyo, Ascot, Seven & I
- 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: Chuoh Pack Industry (3952 JP), Giga Prize (3830 JP), Sanyo Special Steel (5481 JP), Ascot Corp (3264 JP), Lifestyle China (2136 HK), Seven & I Holdings (3382 JP).
- Lowest spreads: Makino Milling Machine Co (6135 JP), Avjennings Ltd (AVJ AU), Fuji Soft Inc (9749 JP), Macromill, Inc (3978 JP), Millennium & Copthorne Hotels Nz (MCK NZ).
Fosun Tourism (1992 HK): Affirming Our Support for the Buyback
- Fosun Tourism (1992 HK)‘s profit warning suggested a significant deterioration in profitability in 2H24, fading any near-term recovery hope.
- With losses enlarged 89-126% YoY in 2H24, it is more difficult to return to its peak and IPO share prices. This makes the buyback proposal even more attractive.
- We take the inability to introduce the Potential Share Alternative Option as a lack of confidence by the existing shareholders in Fosun Tourism’s medium-term outlook.
Fosun Tourism (1992 HK): No Love For The Scrip Alternative
- Back on the 10th December 2024, Fosun Tourism (1992 HK) announced a rare Scheme buyback, with a Cancellation Price of $7.80/share (not declared final), a punchy 95% premium to undisturbed.
- A successful Scheme would result in Fosun International (656 HK) and concert parties holding 100% in Fosun Tourism – without having to outlay a cent.
- A scrip alternative was afforded IF expressions of interests from 1% of shares out occurred. That didn’t happen. Still a clean deal. Scheme Doc dispatch is the 14th Feb.
HONG KONG ALPHA PORTFOLIO (January 2025)
- HK Alpha Portfolio returned -1.29% in December and outperformed the benchmark by 0.34%. The portfolio has outperformed Hong Kong indexes by 7.93% to 9.64% since its inception on 10/01/24.
- About 75% of the portfolio’s excess returns have been from alpha generation. The portfolio had no exposure to Real Estate, Energy or Materials.
- At month-end we sold China Cinda Asset Management (1359 HK) , Citic Ltd (267 HK) , China Galaxy Securities (H) (6881 HK) and GDS Holdings (9698 HK) .
Bama Tea Pre-IPO Tearsheet
- Bama Tea (BAMA HK) is looking to raise at least US$100m in its upcoming Hong Kong IPO. The deal will be run by Huatai, ABC and TF International.
- Bama Tea, as per the firm, is the most recognized tea brand in China and the leading provider of premium tea leaves in China.
- It sells through its nationwide offline store network and comprehensive online sales platforms, and sells every major tea leaf category
Pre-IPO PegBio Co., Ltd. (PHIP Updates) – Some Points Worth the Attention
- The market’s expectations for GLP-1 have changed, and the sales growth of GLP-1 may enter a turning point, which would cast a shadow over the prospects of PegBio’s GLP-1 pipelines.
- PB-119 would be the first commercialized product for PegBio. However, this market is highly crowded. It’s highly uncertain whether PB-119 can stand out from fierce market competition after its launch.
- The post investment valuation has reached RMB4 billion, which is already expensive in our view. Due to poor valuation performance of peers, we are not optimistic about PegBio after IPO.
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