In today’s briefing:
- CATL (300750 CH): Index Inclusion Post H-Share Listing
- Fast Retailing (9983 JP): Double Capping & The Reverse Funding Trade
- Guotai Junan/Haitong Sec Merger: The Many Index Flows Around the Corner
- IDX30/LQ45/IDX80 Index Rebalance: Big Impact in Some Stocks with 4 Days to Implementation
- Sigma Healthcare (SIG AU): Shareholders Approve Merger; Passives Could Start Buying in Two Weeks
- Indian Renewable Energy (IREDA IN) QIP: Index Implications
- PCOMP Index Rebalance: AREIT, CBC to Replace NIKL, WLCON
- Nippon Steal! Again. Parent Takes Out Sanyo Special Steel (5481) At Well Below Book
- Nikkon Pays 273% Premium for Chuoh Pack (3952 JP) In Takeover
- Freebit (3843) Buys Out Minorities in Giga Prize (3830) – Light, But Tough to Block
CATL (300750 CH): Index Inclusion Post H-Share Listing
- Contemporary Amperex Technology (CATL) (300750 CH) has announced plans for an H-share listing with media reports indicating a raise of at least US$5bn. Shareholders have approved the issuance.
- CATL (300750 CH) was designated as a Chinese Military Company earlier this year by the U.S. Department of Defense but is still not on the NS-CMIC list.
- The CATL (300750 CH) H-shares should get Fast Entry to the global indices and iShares China Large-Cap (FXI US) ETF. Inclusion in the HSCEI and HSI will take longer.
Fast Retailing (9983 JP): Double Capping & The Reverse Funding Trade
- With 3 days left in the review period, Fast Retailing (9983 JP) has a 11.29% weight in the Nikkei 225 (NKY INDEX). That means double capping in March.
- If Fast Retailing (9983 JP) underperforms the other index stocks by 1.8% from now to the close on 31 January, there will only be a single level of capping.
- Double capping will result in big selling on Fast Retailing (9983 JP) and big inflows into the other index constituents. Smaller impact for single level capping.
Guotai Junan/Haitong Sec Merger: The Many Index Flows Around the Corner
- Haitong Securities (H) (6837 HK) and Haitong Securities (A) (600837 CH) shares will stop trading after 5 February following the merger with Guotai Junan Securities (2611 HK).
- There will be small buying in Guotai Junan Securities (2611 HK) at the close on 5 February and there should be more buying in the A-shares and H-shares in March.
- There will also be a stock added to the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) to bring the number of index constituents back to 300.
IDX30/LQ45/IDX80 Index Rebalance: Big Impact in Some Stocks with 4 Days to Implementation
- There are 2 constituent changes for the IDX30 Index, and 3 changes each for the LQ45 Index and IDX80 Index to be implemented at the close on 31 January.
- The largest passive flows are expected in Bank Central Asia, Indosat, Japfa Comfeed Indonesia, Indocement Tunggal Prakarsa, Dayamitra Telekomunikasi, MAP Aktif Adiperkasa, Bank Mandiri Persero, Ciputra Development and XL Axiata.
- With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.
Sigma Healthcare (SIG AU): Shareholders Approve Merger; Passives Could Start Buying in Two Weeks
- Sigma Healthcare (SIG AU) and Chemist Warehouse (CWG) shareholders have approved the merger with 99.86% and 100% of the votes cast in favour.
- The Second Court Hearing is on 3 February and the merger will be implemented on 12 February, which is when the passive buying could commence.
- Sigma Healthcare has continued to trade higher on a record margin and sales expansion for CWG and expected passive buying that could top A$3bn over the next few months.
Indian Renewable Energy (IREDA IN) QIP: Index Implications
- IREDA has announced a Qualified Institutional Placement (QIP) of a maximum of INR 50bn as long as the Government of India’s holding does not drop by more than 7%.
- There will be passive buying at the time of settlement of the QIP shares while the increase in float will bring the stock closer to inclusion in another global index.
- With the stock close to index inclusion level and down 37% from its peak, there could be positioning in the stock for passive inflows.
PCOMP Index Rebalance: AREIT, CBC to Replace NIKL, WLCON
- As forecast, Areit (AyalaLand REIT) (AREIT PM) and China Banking (CBC PM) will replace Nickel Asia (NIKL PM) and Wilcon Depot (WLCON PM) in the Philippines Stock Exchange PSEi Index.
- Passive trackers will need to buy between 14-44 days of ADV in the adds while selling between 17-54 days of ADV in the deletes.
- The stocks have already moved a lot over the last few months and positioning has built up over that period. There could still be outperformance ahead of the passives trading.
Nippon Steal! Again. Parent Takes Out Sanyo Special Steel (5481) At Well Below Book
- 6-7 years ago Sanyo Special Steel (5481 JP) bought out a large foreign specialty steel company, and funded it by getting Nippon Steel to inject capital at below book.
- Now Nippon Steel is buying the rest of Sanyo Special Steel in a Tender Offer at 0.66x book, where most of book is Net Receivables, Inventory, WIP, and Materials.
- This is the second time in a decade where the Board has decided to sell control of itself at far below book value. They should be ashamed of themselves.
Nikkon Pays 273% Premium for Chuoh Pack (3952 JP) In Takeover
- Today, Nikkon Holdings (9072 JP) announced it would take over Chuoh Pack Industry (3952 JP) for ¥5,034/share. It closed today at ¥1,349. This is a HUGE win for governance.
- The 273% premium is not the big win here. For holders it is, of course, but for Japan Inc shareholders everywhere, the win was the auction process.
- This could have come out at 100% premium and that might have been OK. As it is, cross-holders and one big holder together get this deal done. Congrats!
Freebit (3843) Buys Out Minorities in Giga Prize (3830) – Light, But Tough to Block
- Today, Freebit Co Ltd (3843 JP) announced it would launch a Tender Offer next Monday to buy out minorities in 60.9%-owned Giga Prize (3830 JP).
- The multiple is not terribly impressive. It could be better. But they only need 5.8% of the 39.1% they do not own to get this over the hump.
- Synergies are clear. They are expected. They are not priced in the valuation. This is disappointing. Again.
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