In today’s briefing:
- Henlius (2696 HK): Test of Nerves Awaiting LVC’s Next Move
- Kokusai Electric (6525) – Upcoming Lockup Expiry And BIG Index Demand
- SHIFT (3697) The Next – Potential Big Index Add
- Nikkei 225 Index Rebalance Preview (Mar 2025): SHIFT Splits; Updated Ranking, Capping & Funding
- BayCurrent Consulting (6532) – High Growth, OK Multiple, Big Index Inclusion Coming Up?
- HMM’s Shaping up to Be a Solid Pick for Classic Dividend Arbitrage Plays
- Insignia Financial (IFL AU): Bain Calls CC Capital’s $4.30/Share NBIO
- CVSG: A Special Sit with 2x Potential
- STAR Chip Index Rebalance Preview: Changes in March
- EQD | Hong Kong Single Stock Options Weekly January 06 – 10
Henlius (2696 HK): Test of Nerves Awaiting LVC’s Next Move
- The vote on Fosun Pharma’s HK$24.60 offer for Shanghai Henlius Biotech (2696 HK) is on 22 January. The gross spread ballooned today due to LVC’s amassing a blocking stake.
- There are valid arguments for LVC to block the vote or to support the offer. LVC’s trading behaviour over the coming days will point to its voting intentions.
- I continue to believe that LVC will support the offer. At the current price and for a 15 February payment, the gross/annualised spread is 9.1%/160%.
Kokusai Electric (6525) – Upcoming Lockup Expiry And BIG Index Demand
- Kokusai Electric (6525 JP) was IPOed in September 2023. The stock was cheap. It rose sharply, tripling in 9 months. At the ATH, the pre-IPO owners launched a HUGE secondary.
- It was like a second IPO. The stock dipped, rallied, plummeted into pricing. Stayed there for two days, and in 6 months, the shares have halved.
- Lockup expiry is next week, and there is a likely large index event in ~10 weeks.
SHIFT (3697) The Next – Potential Big Index Add
- Shift Inc (3697 JP) is a high-growth stock in the software services, testing, consulting, development business. They have a big specialist TAM ahead of them.
- Revenue is up 50-fold in 10 years. OP is up 85-fold in that period. Revenue is guided +17.5% in the year to Aug 2025. OP is guided +28%.
- There is an event coming up shortly which could trigger an imminent index inclusion. It’s worth a look.
Nikkei 225 Index Rebalance Preview (Mar 2025): SHIFT Splits; Updated Ranking, Capping & Funding
- The review period for the Nikkei 225 Index March rebalance ends in 3 weeks. There could be one outright change and one or two others driven by sector balance.
- Shift Inc (3697 JP) will have a 15:1 stock split next week and that puts the stock in the list of potential inclusions over the next couple of rebalances.
- The recent drop in Fast Retailing (9983 JP)‘s stock price will lead to a single step drop in the PAF. That means less passive selling and a smaller funding buy.
BayCurrent Consulting (6532) – High Growth, OK Multiple, Big Index Inclusion Coming Up?
- BayCurrent Consulting (6532 JP) is a high-growth consulting company. This year sees 22% annual revenue growth and 25% OP growth to Feb 2025. Q3 results come out tomorrow.
- The stock has a fairly large and concentrated active institutional holder base, though interestingly, the foreign active insto base is very long-tailed. LOTS of investors hold this.
- The company is likely to see an index inclusion imminently which will over time mean a buy of more than a third of Maximum Real World Float.
HMM’s Shaping up to Be a Solid Pick for Classic Dividend Arbitrage Plays
- To stay in the Value-up index by June, HMM needs to maintain high ROE, but with 2023’s dip and a 2024 estimate around mid-10%, they’ll be borderline in the rankings.
- Local markets expect HMM’s dividend payout to range from 840 KRW to mid-1,000 KRW, with a yield of 4.5% to 8%, while futures show mild backwardation in February and March.
- HMM may finalize the dividend and announce the record date by late January, with the record date likely in mid to late February.
Insignia Financial (IFL AU): Bain Calls CC Capital’s $4.30/Share NBIO
- After wealth manager Insignia Financial (IFL AU) announced – and subsequently rejected Bain’s A$4.00/share Offer, CC Capital waded in on the 6th January with its own A$4.30/share NBIO.
- IFL have yet to reach an opinion on CC Capital bid. And to make things interesting, Bain has sweetened its Offer to $4.30/share, matching CC Capital’s terms.
- What now? Either, IFL opens the data room to both parties. Or rejects both. I think they should engage.
CVSG: A Special Sit with 2x Potential
CVS Group plc (“CVSG”) has seen its share price take a hit recently, but the decline seems to stem from two short-term issues rather than any real damage to the business fundamentals.
The first blow came in March 2024 when the UK’s Competition and Markets Authority (CMA) unexpectedly announced a nationwide review of veterinary services for household pets.
These investigations typically last 12 to 18 months, so we’re looking at a resolution by late 2025 with a mid term resolution being around the corner mid-year.
STAR Chip Index Rebalance Preview: Changes in March
- There could be 1 constituent change for the STAR Chip Index at the March rebalance. There will also be a few capping changes.
- Estimated one-way turnover is 6.5% resulting in a round-trip trade of CNY 3.12bn (US$426m). Passives need to trade between 0.24-0.33x ADV in the potential changes.
- There is one very close add and the final list could change depending on price performance over the next 10 trading days.
EQD | Hong Kong Single Stock Options Weekly January 06 – 10
- Tough week with 82% of optionable stocks we survey declining on the week but no sign of panic as investors still prefer Calls over Puts.
- Tencent was far and away the volume leader, accounting for 37% of all option trading.
- Materials was the only Sector to see price gains and implied vol rose across all Sectors we survey.
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