Daily BriefsEvent-Driven

Event-Driven: NTT Docomo Inc, Alibaba Group, Tesla Motors, Beijing Jingneng Clean Energy, Nexon, Think Childcare and more

In today’s briefing:

  • Surprising NTT Docomo Tender Result Accelerates Squeezeout, Great Re-Allocation, Nikkei 225 Change
  • Alibaba (9988 HK): FTSE and MSCI Switch from BABA Coming
  • The Great Tesla Ascension
  • Beijing Jingneng Clean Energy’s Voluntary Conditional Offer
  • Nexon: Speculation Checking & Valuation Level for Building a Position
  • Think Childcare (TNK AU) : Takeover Proposal From Alceon Group Seems Light

Surprising NTT Docomo Tender Result Accelerates Squeezeout, Great Re-Allocation, Nikkei 225 Change

By Travis Lundy

This morning NTT (Nippon Telegraph & Telephone) (9432 JP) and NTT Docomo Inc (9437 JP) announced the results of NTT’s Tender Offer for NTT Docomo, noting that NTT had purchased 815mm shares and as a result their position would be 91.46% upon settlement. 

This is surprising. 

That clears the way for an acceleration of the Great Docomo Re-Allocation Trade. 

Details below.

Alibaba (9988 HK): FTSE and MSCI Switch from BABA Coming

By Brian Freitas

After the inclusion of Alibaba’s Hong Kong listing Alibaba Group (9988 HK) in the Hong Kong Hang Seng Index (HSI INDEX), Hang Seng China Enterprises Index (HSCEI INDEX) and FTSE China 50 indices, the big listing switch from Alibaba Group (BABA US) to Alibaba Group (9988 HK) in the FTSE and MSCI indices could be less than 6 months away.

We see Alibaba Group (9988 HK) passing all requirements for the FTSE GEIS and the change from Alibaba Group (BABA US) should happen at the March 2021 semi-annual review. We are still in the review period for the MSCI, but based on current numbers there is a very high probability of Alibaba Group (9988 HK) passing the requirements for a switch from Alibaba Group (BABA US) to the HK listing at the May 2021 SAIR.

The gradual switch from the US ADRs to HK shares took a big jump couple of weeks back with 5% of the US shares being converted to HK shares. This process will continue over the next 6 months and result in a liquidity shift towards Hong Kong that could result in Alibaba Group (9988 HK) being classified as dual-primary listed in April 2022.

Alibaba Group (9988 HK) has been trading at a premium to Alibaba Group (BABA US) and the increased number of shares listed in HK along with increased liquidity could result in the premium contracting over the next few months.

The Great Tesla Ascension

By Travis Lundy

On 16 November, it was announced by S&P Global that Tesla Motors (TSLA US) would be added to the S&P500 after five consecutive quarters of profit, in a move which was widely expected. 

In an added announcement which was perhaps less expected was that S&P was conducting a market consultation to see whether it should be included one shot, or if the inclusion should be divided into two events (with three different possibilities suggested – 25/75 added 14 and 21 December, 33/67, or 50/50 added on those two dates. 

Survey results from the online consultation are due 20 November, and S&P will let everyone know on 30 November. 

I expect most investors will want to split, and I expect that the right way to do this is to do 33/67 though I expect people may try 50/50. 

Initial response was that TSLA rocketed higher. +13% in the after hours. 

The way S&P looks at it, they saw a funding trade of US$51bn based on the fact that on a pro-forma basis, TSLA was going to be a 1.01% weight. 

That number is likely going to flex quite a bit. And while it is a Good Number, based as it is, off the 2019 Annual Survey of Index Assets, subsequently marked to market to 13 November 2020. 

In that survey, they found that there were US$816bn of Exchange Traded Products (ETFs and ETNs) and US$3.77trln of non-ETP (mutual funds, institutional funds, separate managed accounts, and insurance products). That was US$4.59trln at the time which on a year-to-date performance basis gets you to $5.05trln as of 13 November.

As I said, it is a Good Number

But taking that number for granted is problematic. In one day TSLA’s pro-forma weight has become 1.14% which means that the funding trade is US$58.75bn. 

More discussion below. 

Beijing Jingneng Clean Energy’s Voluntary Conditional Offer

By Arun George

Beijing Jingneng Clean Energy (579 HK)/BJCE is the largest gas-fired heat and power supplier in Beijing and the leading wind power operator in China. After market close, BJCE announced a conditional voluntary cash general offer from Beijing Energy Holding, the controlling shareholder. Beijing Energy Holding will offer HK$2.70 in cash for each H-share, a premium of 11.57% to the last close price of HK$2.42 per H-share and a premium of 70.89% to the unaffected price of HK$1.58 per H-share (6 July prior to the announcement of a possible privatisation bid). This potential privatisation joins a list of recent SOE privatisations of clean energy companies – Huadian Fuxin Energy Corp (816 HK),  Huaneng Renewables Corp H (958 HK) and CP Clean Energy.

The key condition precedent will be approval by at least 75% disinterested H-shareholders (<10% of all disinterested H-shareholders rejection) and minimum acceptance of at least 90% of H-shares held by disinterested H-shareholders. Due to an attractive offer price, we think that offer will garner enough acceptances to become unconditional.  

Nexon: Speculation Checking & Valuation Level for Building a Position

By Sanghyun Park

Nexon GT hit nearly 10x 30D DTV last Friday. It eventually wrapped up the day with a 9% gain.

It was attributable to the market rumor that Nexon KJJ may give it another try.

Yes, selling the company.

Item Value
Name Nexon GT Co Ltd
Ticker 041140
MC (₩B) 468.7
PE (x) 17.58
RSI (14) 14.02
52WH -38.00%
– Date 8/10/20
52WL 316.93%
– Date 3/19/20
20D SMA 3.68%
20D EMA -0.09%
1M Δ -0.75%
1M SD 4.84%
3M Δ -28.88%
3M SD 15.25%
6M Δ 64.40%
6M SD 24.89%
Source: Google Finance

Think Childcare (TNK AU) : Takeover Proposal From Alceon Group Seems Light

By Janaghan Jeyakumar, CFA

On 16 November, Australia-based Childcare company Think Childcare (TNK AU) announced they had received a Non-binding Indicative Proposal from the PE arm of Australian investments firm Alceon Group.

Alceon Group is an Australian independent multi-strategy alternative investments firm with “four key investment platforms”: Private Equity, Real Estate, Corporate Credit, and Liquid Strategies. They have around A$2bn in capital under management. 

The Offer Price is A$1.35/share and the form of consideration could be either cash or a combination of cash and shares in an unlisted newly-formed entity. This Deal values the Target company at an enterprise value of A$300mn and a market cap of A$82mn. 

The successful completion of this transaction is likely to be conditional on the completion of confirmatory due diligence, obtaining necessary funding, regulatory approvals and Target Shareholder approval. 

More below the fold. 

For more information about M&A rules, regulations, and practices in Australia, please refer to Quiddity Australia M&A Guide 2019 and Quiddity M&A: Australia Foreign Investment Reforms 

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