In today’s briefing:
- Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings
- Adani Enterprises – A Record Follow-On Public Offering May Be in the Works
- Straits Times Index Quiddity Leaderboard Mar 23: SMM Index Treatment Clearer Under New Terms
- Korea Zinc: Treasury Shares Swap with LG Chem & Hanwha Corp + Treasury Share Sale
- EQD | TSMC (TSM US): Buffet Is Betting on Long Term Upside – We Look at the Options Market for Ideas
- Chip Eng Seng (CHIP SP)’s S$0.72 VGO from the Tangs
- Lygend (2245 HK) IPO: No Index Inclusions Expected
- MergerTalk:Why Broadcom’s Pursuit of VMware Will Fare Better Than Nvidia’s Doomed Bid For ARM
Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings
- Days after the Tencent (700 HK) announcement about its planned distribution of the bulk of the Meituan (3690 HK) shares it owns, the Hang Seng Index team clarified index treatment.
- It will be treated in HS Indices as a “listed non-cash distribution” for Tencent. There is theoretically wiggle room on the Meituan side, but it appears it will follow JD.com.
- That means Meituan selling on 4 January at the close, limbo for two months, then Meituan buying. Full model below.
Adani Enterprises – A Record Follow-On Public Offering May Be in the Works
- Adani Enterprises (ADE IN) (“ADL”) on Tuesday announced a Board Meeting for Friday to consider capital raising options. Multiple media sources suggest a record Indian Follow-on Public Offering of INR200bn.
- The company has bid for/bought multiple assets recently, and proposed investments plan of up to US$150bn in 10yrs in renewables, cement, airports, healthcare to aim at a US$1trln valuation.
- This will get complicated, interesting, and is not necessarily going to come out well.
Straits Times Index Quiddity Leaderboard Mar 23: SMM Index Treatment Clearer Under New Terms
- In this insight, we take a look at the potential index changes for the FTSE Straits Times Index (STI) (STI INDEX) between now and the March 2023 index review.
- The Sembcorp Marine (SMM SP) – Keppel Corp (KEP SP) deal terms were revised recently and our latest expectation is for SMM to become an STI member in March 2023.
- At present, SATS (SATS SP) and Keppel DC REIT (KDCREIT SP) are the lowest-ranked STI members – one of which could get removed due to SMM’s addition in March 2023.
Korea Zinc: Treasury Shares Swap with LG Chem & Hanwha Corp + Treasury Share Sale
- On 23 November, Korea Zinc announced that it will swap its treasury shares with LG Chem and Hanwha Corp and sell part of its treasury shares to other investors.
- Korea Zinc could gain additional dividend payments by exchanging part of its treasury shares with shares of LG Chem and Hanwha Corp.
- Potential separation of Young Poong and Korea Zinc between the Choi and Jang families is likely to be an on-going process, although it is difficult to tell the exact timing.
EQD | TSMC (TSM US): Buffet Is Betting on Long Term Upside – We Look at the Options Market for Ideas
- Stock has suffered this year (-47% YTD) with rising geopolitcal tensions and slowing global economy
- Berkshire Hathaway is betting on a recovery in the stock with their $4.1bn stake
- We look at the options market to identify some trades
Chip Eng Seng (CHIP SP)’s S$0.72 VGO from the Tangs
- Chip Eng Seng Corp (CHIP SP) disclosed a conditional VGO from the Tangs at S$0.720, a 6.7% premium to the undisturbed price (6 September). The price is not declared final.
- Irrevocables and family represent 41.44% of outstanding shares. The VGO has a 50%+ minimum acceptance condition which requires around a 15% minorities acceptance rate.
- While the last close is in line with the offer, it is attractive in the context of historical prices/multiples. Therefore, there is a good chance of hitting the 50% threshold.
Lygend (2245 HK) IPO: No Index Inclusions Expected
- Media reports indicate that Lygend Resources & Technology (2245 HK) has priced its IPO near the low end of the range at HK$15.80/share and will raise HK$3.67bn (US$470m).
- Most of the cornerstone investors will be classified as non-float and the stock will not be included in the MSCI or FTSE indices due to low float market cap.
- Importantly, Lygend Resources & Technology (2245 HK) will not meet the threshold for inclusion in the HSCI which means no inclusion to Southbound Stock Connect and no mainland flows.
MergerTalk:Why Broadcom’s Pursuit of VMware Will Fare Better Than Nvidia’s Doomed Bid For ARM
- While the size of the $61BN Broadcom/VMware deal has naturally attracted the scrutiny of regulators, the transaction’s regulatory obstacles are far less onerous than the failed Nvidia/Arm deal
- Timing risk is a consideration as we can expect a protracted review process
- If the regulatory review timeline does not stretch too far beyond the end 2023, there are still decent IRRs to be earned by arbs
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