In today’s briefing:
- Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet
- LG CNS Pre-IPO – Thoughts on Valuation – Retail Demand Appears Hot, Digestible Val at Bottom End
- S&P/ASX Index Rebalance Preview: Lots of Change; Could Be More with Sigma/CWG Merger
- HSCI Index Rebalance Preview and Stock Connect: Updated Potential Changes in March 2025
- Shinko Electric (6967 JP) – SAMR Approved, Trading Tight, Done Deal
- WH Group (288 HK): Smithfield’s IPO Doc Now Out
- NPS Stake in Korea Zinc Revealed: EGM Vote Locked, Short Play in Focus
- GAPack (468 HK): IFA Says “Reject”. But Mengniu Selling Down
- Sigma Healthcare (SIG AU): Index Inclusions & Upweights Increase Passive Buying to A$2.7bn
- Aequitas 2024 IPOs and Placements Performance Review-India Driving Volumes as HK Shows Signs of Life
Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet
- The U.S. Department of Defense has designated Tencent (700 HK) as a Chinese Military Company. Tencent Holdings (ADR) (TCEHY US) shares were down nearly 8% overnight.
- There is no change to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC) yet. But the overlap between the DoD list and the NS-CMIC list is high.
- If added to the NS-CMIC list, Tencent (700 HK) will be deleted from global indexes and there will be HUGE passive selling from these trackers.
LG CNS Pre-IPO – Thoughts on Valuation – Retail Demand Appears Hot, Digestible Val at Bottom End
- LG CNS (LGCNSZ KS) is looking to raise around US$850m in its upcoming Korea IPO.
- LG CNS is a South Korean information technology company. The firm primarily provides comprehensive digital transformation services and solutions backed AI, big data, and cloud.
- In our previous notes, we looked at the firm’s past performance and undertook a peer comparison. In this note, we discuss our thoughts on valuation.
S&P/ASX Index Rebalance Preview: Lots of Change; Could Be More with Sigma/CWG Merger
- Nearing the end of the review period, there could be 36 adds/deletes across the S&P/ASX family of indices in March.
- Passive trackers will need to trade a lot of stock in the forecast changes, with the impact being especially large for the changes to the S&P/ASX 200 and S&P/ASX 300.
- Completion of the merger with Chemist Warehouse in February will set off huge passive buying in Sigma Healthcare (SIG AU) over the February to June period.
HSCI Index Rebalance Preview and Stock Connect: Updated Potential Changes in March 2025
- We see 38 potential and close adds and 51 potential and close deletes for the Hang Seng Composite Index in March. Some of the stocks are close on market cap/liquidity.
- There have been many new listings in the last weeks of December. Some of them are fairly large and will be added and that increases the number of potential deletions.
- There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.
Shinko Electric (6967 JP) – SAMR Approved, Trading Tight, Done Deal
- Overnight, we got news that the JIC Consortium Deal for Shinko Electric Industries (6967 JP) was approved 27Dec2024. That was the last approval required (other than TSE TOB Launch approval).
- This is “on schedule” or slightly early from the previously-announced expected launch date.
- This morning, the stock is up sharply and is trading <0.75% from terms. Expect an announcement within two weeks. Current arb annualised at high 6% is OK. One could hold.
WH Group (288 HK): Smithfield’s IPO Doc Now Out
- On 17 November 2024, WH Group (288 HK) announced an EGM to approve the spin-off and separately list subsidiary Smithfield Foods on the NYSE or NASDAQ.
- WHG, the world’s largest pork producer, announced on the 6th December the spin-off overwhelmingly gained shareholder approval.
- Yesterday, the Smithfield NASDAQ IPO doc was made public. As per the filing: “the number and dollar amount of Smithfield Shares to be offered and sold have not been determined“.
NPS Stake in Korea Zinc Revealed: EGM Vote Locked, Short Play in Focus
- NPS’s stake has dropped, and most minority shareholders are passive. NPS might oppose cumulative voting, so Choi’s chances of getting 67% support at the EGM on the 23rd are slim.
- The showdown is between MBK’s 14 picks and Choi’s 7. Without cumulative voting, even with NPS’s shares, Choi’s chances of beating MBK are slim.
- If you’re short on Korea Zinc, holding seems fine. Backwardation in Jan-Feb futures isn’t steep, so a new position before the EGM could also be worth a shot.
GAPack (468 HK): IFA Says “Reject”. But Mengniu Selling Down
- Quite a lot of new news to digest – GAPack (468 HK)‘s IFA, not altogether surprisingly, concluded that shareholders should not accept the Offer – in bold, red caps.
- But more surprisingly, is the disclosure announcement that China Mengniu Dairy Co (2319 HK) has reduced its stake below 5%.
- Evidently Mengniu is keeping its options open to tender – or not – and not have to make public disclosures. Keep an eye out on CCASS movements.
Sigma Healthcare (SIG AU): Index Inclusions & Upweights Increase Passive Buying to A$2.7bn
- SigmaHealthcare and ChemistWarehouse shareholders meet on 29 January. If the merger resolutions are approved, Second Court Hearing is on 3 February and the merger will be effective on 4 February.
- Upward migration in one large global index could take place on 13 February while upweights and upward migrations in the S&P/ASX indices should be at the close on 21 March.
- Upward migration in the other global index could take place in March or June. Total passive buying estimate is A$2.76bn. This will be offset by positioning and CWG shareholders selling.
Aequitas 2024 IPOs and Placements Performance Review-India Driving Volumes as HK Shows Signs of Life
- 2024 marked our ninth year covering Equity Capital Markets in Asia-Pacific. In 2024, IPO volumes were mainly driven by India, even as Hong Kong showed signs of turning a corner.
- We ended 2024 with an accuracy rate of 79.4% across 68 IPOs that we covered and 68.8% across 109 placements.
- For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.
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