In today’s briefing:
- Goodman Group (GMG AU): Much Bigger Index Impact of US$2.5bn Equity Offering
- India: March Rebalance Announcement Tomorrow; Round-Trip Trade Over US$2.5bn
- MV Australia Equal Weight Index Rebalance Preview: Potential Changes in March; Multiple Overlaps
- Canvest (1381 HK): SAFE In The Bag, But Oddly, Still Not Free From Pre-Cons
- Hang Seng Indexes: Announcement Today; Updated Flows (Some Big Ones)
- Proto Corp (4298) – Large Active Holders Going Activish-Y
- CNBM (3323 HK): Whitewash Waiver Secured. Next Is The Proration
- Proto Corp (4298 JP): Kaname Capital Throws a Spanner in the Works
- Sotetsu Holdings (9003) – Crossholders Sell Down – Big ADV Multiple, Low Earnings Multiple, Boring
- Tsumura (4540 JP) Equity Offering – Easy To Swallow, and Not Expensive
Goodman Group (GMG AU): Much Bigger Index Impact of US$2.5bn Equity Offering
- Goodman Group went into a trading halt and then announced results and an underwritten equity placement of A$4bn (US$2.54bn) to pursue growth opportunities across logistics and data center operations.
- The stock has dropped since CIC’s stake sale in December but still continues to handily outperform peers.
- There will be some passive buying in the stock at the time of share settlement and more a few days later to mop up around 37% of the offering.
India: March Rebalance Announcement Tomorrow; Round-Trip Trade Over US$2.5bn
- The Index Maintenance Sub-Committee of NSE Indices will meet on 21 February to conduct a semi-annual and quarterly review of stocks in various Nifty equity indices.
- The changes will be announced after market close tomorrow and will be implemented at the close of trading on 28 March.
- Based on the forecast index changes and capping changes for a few indices, the round-trip trade will be over US$2.5bn and many stocks will have over 0.5x ADV to trade.
MV Australia Equal Weight Index Rebalance Preview: Potential Changes in March; Multiple Overlaps
- With 6 days left to review cutoff, there are 2 potential adds and 3 potential deletions for the MV Australia Equal Weight Index at the March rebalance.
- Even if there are no constituent changes, capping changes will lead to one-way turnover of 3% and a round-trip trade of A$159m.
- The final list of inclusions/exclusions will depend on price movements till next Friday and whether the provider makes any significant changes to the free float of stocks in the universe.
Canvest (1381 HK): SAFE In The Bag, But Oddly, Still Not Free From Pre-Cons
- After Canvest Environmental Protection Group (1381 HK) announced on the 23rd Jan it had secured Mofcom approval, after securing NDRC earlier that month, that left SAFE. Or so I thought.
- SAFE has now been secured, yet two pre-cons concerning certain (internal) guarantees remain outstanding. It’s rare to see SAFE sign off with other pre-cons still hanging.
- The consolation here is that KM Lai (ED, DC) and Loretta Lee (ED, CL) are on the hook for a chunk of change if they cause the proposal to lapse.
Hang Seng Indexes: Announcement Today; Updated Flows (Some Big Ones)
- Hang Seng Indexes announces changes to the Hang Seng Index, Hang Seng China Enterprises Index, Hang Seng TECH Index, HSIII Index and HSCI Index (among others) post market close today.
- The net round-trip trade across the stocks is estimated to be HK$35bn (US$4.5bn) with big impact in a lot of stocks.
- Capping will lead to most inflows to Meituan (3690 HK) while the largest outflows will be from Alibaba Group Holding (9988 HK) and Xiaomi Corp (1810 HK).
Proto Corp (4298) – Large Active Holders Going Activish-Y
- When the deal was announced, I wrote that the MBO for Proto Corp (4298 JP) was opportunistic and was possibly “vulnerable” to activist attentions (original insight here).
- On the 17th, one large active holder Ancient Arts LP filed an amendment to their Large Shareholder Filing showing a change in Reason for Investment.
- On the 18th of Feb, top independent shareholder Kaname Capital reported an increase in stake and sent Open Letters which appear only now to be circulating. It’s worth a look.
CNBM (3323 HK): Whitewash Waiver Secured. Next Is The Proration
- On the 6th December 2024, China National Building Material (3323 HK) (CNBM), China’s leading building materials company, offered to buy back 841,749,304 H-shares at HK$4.03/share, a 15.1% premium to undisturbed.
- This elevated CNBM’s parent’s stake to 50.01% of total shares from 45.02% currently, necessitating a whitewash waiver so the parent would not be obliged to make a full blown offer.
- Independent H-shareholder overwhelmingly approved the waiver yesterday, the 19th February. Tendering closes on the 5th March. Minimum pro-ration is 19.24%. I’m estimating at least 35%. The Offer is now unconditional.
Proto Corp (4298 JP): Kaname Capital Throws a Spanner in the Works
- Kaname Capital, the second-largest shareholder of Proto Corp (4298 JP), has issued an open letter stating that the JPY2,100 MBO tender offer is a bad conclusion at the wrong price.
- Some assertions are valid, while others do not stand up to scrutiny. Kaname claims that Proto is worth JPY3,778, which will make it hard to reach a compromise.
- Maintaining terms is increasingly not viable. The Chairman is likely to respond by lowering the minimum acceptance condition and/or bumping to secure the support of minorities (excluding Kaname).
Sotetsu Holdings (9003) – Crossholders Sell Down – Big ADV Multiple, Low Earnings Multiple, Boring
- Sotetsu Holdings (9003 JP) today announced a large-ish secondary equity offering – 10% of shares out and 20% of Max Real World Float.
- This is crossholders selling down roughly 30% of what they own. Sotetsu announced a buyback for a quarter of the offering over the next six months.
- The shareholder structure and distribution within Max Real World Float tells you all you need to know.
Tsumura (4540 JP) Equity Offering – Easy To Swallow, and Not Expensive
- Tsumura & Co (4540 JP) shocked everyone a year ago when they announced an immediate large price hike across the board for its kampo medicines. The stock was +35% immediately.
- It did not fall back. Now the stock is up 60% from a year ago and earnings are too. It’s still <10x PER. Now we get a ¥10bn secondary offering.
- It’s 12 days of ADV but not super heavy, and there is a buyback on the back end.
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