In today’s briefing:
- Sun Art Retail (6808 HK): BABA Takes Massive Hit After Inking SPA @ HK$1.38
- Canvest (1381 HK): Attractive Spread with Steady Progress in Precondition Satisfaction
- NZ: Contact Energy (CEN NZ) Hotter Than Mercury (MCY NZ) As Catalyst Looms
- EQD | KOSPI 200 Index – Buy January Straddle
Sun Art Retail (6808 HK): BABA Takes Massive Hit After Inking SPA @ HK$1.38
- HK$1.38/Share. That’s the takeaway as Alibaba Group (9988 HK) enters an SPA to offload its 78.7% stake in Sun Art (6808 HK) at HK$1.38/share, a 44.4% discount to last close.
- The buyer, Paragon Shine, an entity under Chinese PE outfit DCP Capital, is paying ~HK$12.3bn compared to BABA’s HK$28.1bn purchase of a 51% stake in October 2020.
- Should the SPA complete, an unconditional MGO is triggered. Minorities tendering can receive up to HK$1.58/share. But the question is: why would BABA be cashing out at this price?
Canvest (1381 HK): Attractive Spread with Steady Progress in Precondition Satisfaction
- Grandblue Environment Co A (600323 CH) continues to make steady progress in satisfying the precondition for its HK$4.90 privatisation offer for Canvest Environmental Protection Group (1381 HK).
- Two of the five preconditions are satisfied, and another will be satisfied by 20 January. The long stop date of 17 July provides ample time to satisfy the remaining two.
- Although the peers have materially re-rated, the offer implies a premium compared to peer multiples. Vote risk remains low, aided by selling by a shareholder with a blocking stake.
NZ: Contact Energy (CEN NZ) Hotter Than Mercury (MCY NZ) As Catalyst Looms
- Contact Energy (CEN NZ) has outperformed Mercury NZ Ltd (MCY NZ) over the last month off the back of expected passive flows in February.
- Despite the outperformance, Contact Energy (CEN NZ) trades at a lower forward PE compared to Mercury NZ Ltd (MCY NZ), though it does trade at a higher Price to Book.
- There could be large passive inflows to Contact Energy (CEN NZ) and large passive outflows from Mercury NZ Ltd (MCY NZ) in February.
EQD | KOSPI 200 Index – Buy January Straddle
- The implied move for January is less than what has been historically experienced. Sixteen of the last 26 years have had price movement > current implied move.
- January punches above its weight in terms of both historic volatility (most volatile month) and the amount of price movement relative to that historic volatility.
- Trades at the current implied move historically would have been winners 61.5% of the time with the average winner being more than double the average loser.
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