In today’s briefing:
- Merger Arb Mondays (13 Jan) – ESR, Henlius, Goldlion, Canvest, 7&I, Fujitsu General, Pressance
- Weekly Deals Digest (12 Jan) – Henlius, GA Pack, Fujitsu General, Fuji Soft, Pressance, LG CNS
- HK Connect SOUTHBOUND Flows (To 10 Jan 2025); YUUUUGE Net Buying by SB, $4bn on Tencent
- Henlius (2696 HK): LVC Won’t Block. Buy Here & On Weakness
- STAR50/STAR100 Index Rebalance Preview: Migrations & Outright Changes Lead to Outperformance
- FnGuide Semiconductor Top10 Index Rebalance Preview: Three Changes as Adds Rally Bigly
- Bloks Group (325 HK): Bumper Listing; Index Inclusion Timeline
- Seven & I Holdings (3382 JP): The MBO Is Still Alive and Kicking
- A/H Premium Tracker (To 10 Jan 2025): Super Wide Tech Spreads Best Over Holidays and into NY.
- Coca-Cola Europacific Partners (CCEP LN): Halfway In F100
Merger Arb Mondays (13 Jan) – ESR, Henlius, Goldlion, Canvest, 7&I, Fujitsu General, Pressance
- 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: Smart Share Global (EM US), Pressance Corp (3254 JP), Seven & I Holdings (3382 JP), Get Nice Financial Group Ltd (1469 HK), ESR Group (1821 HK).
- Lowest spreads: Lifestyle China (2136 HK), Makino Milling Machine Co (6135 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Latin Resources (LRS AU).
Weekly Deals Digest (12 Jan) – Henlius, GA Pack, Fujitsu General, Fuji Soft, Pressance, LG CNS
- 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 through a primary/secondary offering.
- Event-Driven developments: Shanghai Henlius Biotech (2696 HK), Greatview Aseptic Packaging (468 HK), Fujitsu General (6755 JP), Fuji Soft Inc (9749 JP), Pressance Corp (3254 JP), Smart Share Global (EM US).
HK Connect SOUTHBOUND Flows (To 10 Jan 2025); YUUUUGE Net Buying by SB, $4bn on Tencent
- SOUTHBOUND gross trading activity was not stronger per day than the previous two weeks. But SB Net Buying was HUGE. The biggest week since global index deletions in January 2021.
- The story was similar. On Tuesday in the US, Tencent was put on a DoD list leading to a possible CMC list appearance (which would lead to index deletions).
- Tencent saw US$4bn of SOUTHBOUND net buying. SMIC, Xiaomi, and China Mobile were another $1bn.
Henlius (2696 HK): LVC Won’t Block. Buy Here & On Weakness
- Ahead of Shanghai Henlius Biotech (2696 HK)‘s EGM and Court Meeting on the 22 January, the focus has shifted to Loyal Valley Capital (LVC)’s continued buying in the market.
- After the close of market last Friday, LVC held 7.8295%, above the 7.826% blocking stake. That % was as at 9th January. I assume LVC are still buying.
- Yet if you analyse how LVC has traded in and out of Henlius, they are not in it to block. They’re in for the back-end scrip option.
STAR50/STAR100 Index Rebalance Preview: Migrations & Outright Changes Lead to Outperformance
- 95% of the way through the review period, there could be 3 changes for the SSE STAR50 (STAR50 INDEX) and 8 changes for the STAR100 Index.
- We estimate turnover of 4.1% for the STAR50 INDEX and 9.3% for the STAR100 Index. The net round-trip trade is CNY 14.1bn (US$1.9bn).
- The forecast adds to the STAR50 INDEX have outperformed the forecast deletes with steady outperformance over the last 3 months; the performance for the STAR100 Index is a lot better.
FnGuide Semiconductor Top10 Index Rebalance Preview: Three Changes as Adds Rally Bigly
- Early in the review period, we forecast 3 changes for the FnGuide Semiconductor Top10 Index at the April rebalance.
- Based on the passive assets tracking the index, there will be between 0.6-1.6x ADV to buy in the adds and between 2-4.7x ADV to sell in the deletes.
- The forecast adds have outperformed the forecast deletes by a wide margin over the short-term and the medium-term. There could be more prior to the end of the review period.
Bloks Group (325 HK): Bumper Listing; Index Inclusion Timeline
- Bloks Group (1850960D CH) was massively oversubscribed, traded 82% higher on Friday and closed its listing day 40% higher than the IPO price.
- Bloks Group (1850960D CH) now has a full market cap of US$2.7bn. However, lock-ups and cornerstone allocations result in a much lower free float.
- Index inclusions could take place in August and September, but the passive buying is a fraction of the number of shares that will come off lock-up expiry in early July.
Seven & I Holdings (3382 JP): The MBO Is Still Alive and Kicking
- On 10 January, Bloomberg reported that Apollo is considering an equity commitment of JPY1.5 trillion in the Seven & I Holdings (3382 JP) MBO.
- Securing financing is a key challenge for the MBO. Apollo’s involvement suggests a shift to a higher mix of equity vs debt, which should ease concerns about securing debt financing.
- The article suggests that the MBO valuation could be lower than previously reported. However, 7&i’s underlying value supports a JPY8 trillion MBO valuation (market cap).
A/H Premium Tracker (To 10 Jan 2025): Super Wide Tech Spreads Best Over Holidays and into NY.
- AH Premia are lower over the last few weeks of holiday and this past week of heavy SOUTHBOUND buying on Tencent, telcos, and banks.
- Finance and Tech are seeing large buying, but the really big moves over the past few weeks have been on Industrial Names (CRRC), and Materials, and Tech
- The VERY WIDE Tech spreads such as SMIC (981), Shanghai Fudan Microelectric (1385), CHina Rail Signal (3969), and Flat Glass (6865) have been HUGE performers.
Coca-Cola Europacific Partners (CCEP LN): Halfway In F100
- Coca-Cola Europacific Partners (CCEP LN) was transferred on 15 November 2024, to the index’s eligible FCA listing category under the new regime.
- The security needs to pass the liquidity test in both January and February 2025 to be assigned a UK nationality and become eligible for the March 2025 review.
- The security has already passed the liquidity threshold by ~20% in November and December thus it has a solid probability of being added to F100 at the March 2025 review.
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