In today’s briefing:
- Alibaba (9988 HK): Dual Primary Listing Implications
- FTSE China A50 Index Rebalance: Three Changes, As We Expected
- Alibaba Dual-Primary-Listing: An Opportunity to Raise Money Without A Trouble Alert
- China Education Group (839 HK): Sustaining Growth Trajectory
- Is The US Fed Tightening Into A Big Recession?
- Amber Enterprises India Ltd: Forensic Analysis
- ACS/Thiess/MACA: Generous Premium
- Last Week in Event SPACE: Mapletree, Alibaba, Australian Unity Office
- When Will Kyoto Bank’s Policy Change?
- Index Rebalance & ETF Flow Recap: MSCI, S&P/ASX, Alibaba, SK Tel, Thai Life Insurance
Alibaba (9988 HK): Dual Primary Listing Implications
- Alibaba Group (9988 HK) currently has a Secondary Listing in Hong Kong and is looking to become dual primary listed in Hong Kong and the U.S.
- The main change will be inclusion in the Southbound Stock Connect program where mainland investors will be able to buy the stock.
- Alibaba Group (9988 HK) is capped at 8% in the HSCEI INDEX and is close to 8% of the HSI INDEX, there will be negligible impact on the dividend futures.
FTSE China A50 Index Rebalance: Three Changes, As We Expected
- Anhui Conch Cement, China Citic Bank and Tongwei will replace Chongqing Zhifei Biological, Gree Electric Appliances and PetroChina in the FTSE China A50 Index at the close on 17 June.
- All changes are as we expected, but there are still trades to do off the back of the announced changes.
- Estimated one-way index turnover at the rebalance is 2.83% and will result in a one-way trade of CNY1,436m. There is negligible impact of the funding trade on the other stocks.
Alibaba Dual-Primary-Listing: An Opportunity to Raise Money Without A Trouble Alert
- Alibaba Group (9988 HK) announced yesterday that it is seeking to change its listing status in Hong Kong to a primary listing before the end of 2022.
- With the risk of de-listing from the US, a dual-primary-listing in Hong Kong would allow Alibaba (ADR) (BABA US) to smoothly transition all its trading from the US to Hong Kong.
- In addition, the company could possibly use this opportunity to raise more money from capital markets as it is desperately seeking funding for its loss making ventures.
China Education Group (839 HK): Sustaining Growth Trajectory
- China Education Group (839 HK) has retreated 23% from recent high with no regulatory and company news. Given its secured earnings growth outlook, we see an opportunity.
- We believe drivers are higher enrollment and tuition, further capacity growth, good progress in overseas education and light capex. There are positive developments in these aspects recently.
- CEG may return unused share buyback funds to shareholders via dividend, suggesting a potential resumption of payout. At just 5.7x PER for FY23F, its growth prospect is undervalued.
Is The US Fed Tightening Into A Big Recession?
- Latest FOMC meeting sounded ‘surprising’ dovish, but this is less surprising if we consider the US Fed is only six months away from a probable policy pivot
- Evidence seems to confirm the US and World economies are already in recession. This will get worse because a major Global Liquidity shock has already been delivered
- This looks like a bear market rally. Bears have two down-legs, split by an often vicious spike. Effects of a bigger recession on 2H, 2022 profits needs to be discounted
Amber Enterprises India Ltd: Forensic Analysis
- Amber Enterprises India (AMBER IN) is one of the key ODM players in the RAC and related industry.
- However, there are couple of puzzling forensic takeaways, especially in F22 where company had reported high growth in numbers.
- These primarily include the rationale behind debt increase, puzzling subsidiary numbers, discrepancy in inventory verification, etc.
ACS/Thiess/MACA: Generous Premium
- Thiess is launching an agreed offer to acquire 100% of MACA Ltd (MLD AU) at AUD 1.025/share, in cash, cum dividend, a 28% premium, 2.8x EV/Fwd EBITDA. Minimum acceptance condition is 90%.
- Thiess is gaining scale with the acquisition of MACA. I believe that in the future ACS/Hochtief/CIMIC will seek to acquire the whole of Thiess.
- Gross spread (as of 29 July) is 2.43%, for a deal with high chances to complete. I would be long at this price.
Last Week in Event SPACE: Mapletree, Alibaba, Australian Unity Office
- Given recent corporate events in S-REIT land, there could be some considerable money to be allocated to the sector near-term
- Alibaba (ADR) (BABA US) / Alibaba Group (9988 HK) issued an announcement it would pursue a primary listing on the HKEX. This will make BABA Southbound-eligible
- At 0.81x newly-lowered book value, Australian Unity Office Fund (AOF AU) is trading at a relatively low multiple.
When Will Kyoto Bank’s Policy Change?
- The current shareholder structure of Kyoto Bank, where domestic financial institutions are the top shareholders and still continue to hold cross-shareholdings, will make it difficult to pass the shareholder proposal.
- In environment of continued sluggish bank earnings, the dividend income from policy shareholdings and the huge unrealized gains on stocks are valuable assets for weathering this difficult business environment.
- Kyoto Bank’s policy will change when the interest rate environment changes and earnings are expected to improve, or when the shareholder structure changes due to a significant reduction in cross-shareholdings.
Index Rebalance & ETF Flow Recap: MSCI, S&P/ASX, Alibaba, SK Tel, Thai Life Insurance
- Last Friday saw the end of the review period for the upcoming rebalance of the MSCI, NIFTY, NKY and STAR50 indices, among others.
- The coming week has the implementation of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) and NIFTY100 Index rebalances at the close on 5 August.
- There were big inflows to the Tracker Fund of Hong Kong Ltd (2800 HK) last week with over US$500m flowing in.
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