In today’s briefing:
- Guotai Junan/Haitong Sec Merger: The Many Index Flows Around the Corner
- Weekly Deals Digest (26 Jan) – Seven & I, Shinko, Canvest, GAPack, Get Nice, Japfa, LG CNS, Guming
- China National Building Material (3323 HK): H Share Buyback Vote on 19 February
- Merger Arb Mondays (27 Jan) – Fosun Tourism, Get Nice, Lifestyle China, Canvest, Japfa, SLB
- PCOMP Index Rebalance: AREIT, CBC to Replace NIKL, WLCON
- SLB Development (SLB SP): Ong Family’s S$0.23 Scheme Offer
- CNBM (3323 HK): This Is An “Avoid” Ahead Of 19th Feb H-Class Shareholder Vote
- Indian Renewable Energy (IREDA IN) QIP: Index Implications
- It’s AAPL A BUY? Oversold Models Indicate So, Ahead of Quarterly Earnings
- Q&A with CompoSecure About Imminent Spin-Off
Guotai Junan/Haitong Sec Merger: The Many Index Flows Around the Corner
- Haitong Securities (H) (6837 HK) and Haitong Securities (A) (600837 CH) shares will stop trading after 5 February following the merger with Guotai Junan Securities (2611 HK).
- There will be small buying in Guotai Junan Securities (2611 HK) at the close on 5 February and there should be more buying in the A-shares and H-shares in March.
- There will also be a stock added to the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) to bring the number of index constituents back to 300.
Weekly Deals Digest (26 Jan) – Seven & I, Shinko, Canvest, GAPack, Get Nice, Japfa, LG CNS, Guming
- 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: LG CNS (LGCNSZ KS) seeks to raise up to US$837 million, and Guming Holdings (GUM HK) seeks to raise US$300 million.
- Event-Driven developments: Seven & I Holdings (3382 JP), Shinko Electric Industries (6967 JP), Fuji Soft Inc (9749 JP), Japfa Ltd (JAP SP), Get Nice Financial Group Ltd (1469 HK).
China National Building Material (3323 HK): H Share Buyback Vote on 19 February
- The IFA opines that the China National Building Material (3323 HK) share buyback, which will acquire a maximum of 841.7 million H Shares at HK$4.03, is fair and reasonable.
- The share buyback seems designed to enable the CNBM parent company to bypass the creeper rule and squeeze the shorts.
- The fortuitous material derating of peers has helped make the buyback attractive. Therefore, the votes should pass, and the minimum acceptance condition should be met.
Merger Arb Mondays (27 Jan) – Fosun Tourism, Get Nice, Lifestyle China, Canvest, Japfa, SLB
- 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: SLB Development (SLB SP), Japfa Ltd (JAP SP), Seven & I Holdings (3382 JP), Lifestyle China (2136 HK), Get Nice Financial Group Ltd (1469 HK).
- Lowest spreads: Makino Milling Machine Co (6135 JP), Avjennings Ltd (AVJ AU), Fuji Soft Inc (9749 JP), Auswide Bank (ABA AU), Pressance Corp (3254 JP).
PCOMP Index Rebalance: AREIT, CBC to Replace NIKL, WLCON
- As forecast, Areit (AyalaLand REIT) (AREIT PM) and China Banking (CBC PM) will replace Nickel Asia (NIKL PM) and Wilcon Depot (WLCON PM) in the Philippines Stock Exchange PSEi Index.
- Passive trackers will need to buy between 14-44 days of ADV in the adds while selling between 17-54 days of ADV in the deletes.
- The stocks have already moved a lot over the last few months and positioning has built up over that period. There could still be outperformance ahead of the passives trading.
SLB Development (SLB SP): Ong Family’s S$0.23 Scheme Offer
- SLB Development (SLB SP) disclosed a scheme privatisation from Lian Beng (LBG SP) at S$0.23 per share, a 36.1% premium to the undisturbed price of S$0.169 (22 January).
- The Ong family previously privatised Lian Beng, the parent company. The offer price, which is equal to the IPO price, is attractive compared to peer multiples and historical trading ranges.
- The scheme vote is low-risk, as no disinterested shareholder holds a blocking stake, and the offer is attractive. Expect a scheme meeting in April.
CNBM (3323 HK): This Is An “Avoid” Ahead Of 19th Feb H-Class Shareholder Vote
- On the 6th December, China National Building Material (3323 HK) (CNBM), a leading PRC building materials company, offered to buy back 841,749,304 H-shares at HK$4.03/share, a 15.1% premium to undisturbed.
- The thrust of the buyback lifts the stake of CNBM’s parent – the CNBM Parent Concert Group – to 50.01% of total shares from 45.02% currently, necessitating a whitewash waiver.
- Pre-Cons were satisfied on the 24th Jan. The independent H-class shareholders vote for the waiver is on the 19th Feb. Minimum pro-ration is 19.24%. Implied back-end price is well down.
Indian Renewable Energy (IREDA IN) QIP: Index Implications
- IREDA has announced a Qualified Institutional Placement (QIP) of a maximum of INR 50bn as long as the Government of India’s holding does not drop by more than 7%.
- There will be passive buying at the time of settlement of the QIP shares while the increase in float will bring the stock closer to inclusion in another global index.
- With the stock close to index inclusion level and down 37% from its peak, there could be positioning in the stock for passive inflows.
It’s AAPL A BUY? Oversold Models Indicate So, Ahead of Quarterly Earnings
- Apple (AAPL US) has been downtrending for the past 4 weeks, reaching deeply oversold levels on both our TIME and PRICE quantitative models. Our models are flashing a BUY signal.
- On January 30th Apple (AAPL US) will release its quarterly earnings: despite the stock’s current underperformance, most analysts remain optimistic about Apple’s future.
- Recently, US President’s Trump announced that Apple was planning a “massive investment” in the U.S. This was part of Trump’s initiative to accelerate major corporate investments in the country.
Q&A with CompoSecure About Imminent Spin-Off
- I had a chance to speak to CompoSecure investor relations last week about its imminent spin-off (full notes below) of Resolute Holdings.
- The biggest takeaways are: 1) Resolute Holdings’ only M&A consulting client will be CompoSecure (I had initially thought it could/would focus on other clients).
- 2) The ultimate goal for Resolute is to be a high margin alternative asset manager. 3) Resolute is a taxable spin-off and so CMPO will not be “hyping” the spin-off given CMPO will have to pay taxes based on Resolute’s initiation valuation.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
