In today’s briefing:
- Toshiba Bidders Switching Partners May Be Bullish
- FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Market Consultation Could Cause Massive Flows
- Pine Care Group – Another MGO, Still Wrong Price Making One Wonder…
- Icarus Is Falling! The Markets Are Breaking: More Volatility Is Coming
- ECM Weekly (25th Sep 2022) – Onewo, Leapmotor, CALB, Socionext, WCP, Sula, Jenscare, EbixCash, Atlas
- FTSE TWSE 50 & 100 Quiddity Leaderboard Dec 22: Greatek in a Pickle
- Merger Arb Mondays (26 Sep) – Fengxiang, Lifestyle, EVOC, DTAC/True, VNET, 111, Ramsay, Genex
- New Pricing Rule for Appraisal Rights in ECO: Potential Arb Openings in DB Hitek
- Hanwha Solutions: Biggest Restructuring Measures in 50 Years
- Onewo (2602 HK): No Passive Flow or Stock Connect Inclusion
Toshiba Bidders Switching Partners May Be Bullish
- When the Bidding started, at least 10 parties were in the data room. It ended up with 4 parties moving from Round1 to Round2 where binding bids come.
- The Final Four: Brookfield, Bain, JIC+JIP, and CVC. Bidders advancing to Round2 weren’t allowed to join together. But JIC+JIP are apparently splitting, and now JIC wants to partner with Bain.
- They’d need an exception but this keeps four in the same format. It also likely makes more bids competitive.
FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Market Consultation Could Cause Massive Flows
- The FTSE Taiwan Dividend+ Index is a fascinating index. The rebalance works the opposite way from most float market cap-weighted indices, but maintains a grounding in positive fundamentals.
- It has issues, shown in the recent non-constituent review which nonetheless saw ~10% one-way flow. And more flows has meant more impact to changes.
- FTSE Russell has commenced a consultation closing shortly, with the goal of increasing members from 30 to 50. This provides for some interesting potential changes.
Pine Care Group – Another MGO, Still Wrong Price Making One Wonder…
- In early Feb2020, the #1 shareholder of HK-based elderly home care provider Pine Care Group (1989 HK) sold a 52% stake at HK$1.647, keeping 14.99%. That triggered an Unconditional MGO.
- In Aug2022, much of the shareholder consortium which bought in 2020 agreed to sell 56.15% at HK$0.89/share to local privately-held developer Chinachem. That will trigger another Unconditional MGO.
- The business has suffered under covid, but it is not clear why the business would be better now. Revenues will spike when Causeway Bay opens, but…. Sell.
Icarus Is Falling! The Markets Are Breaking: More Volatility Is Coming
- Daily Liquidity has tanked lower, causing bond term premia to worryingly collapse to near all-time lows
- S&P500 (SPX) likely to test 3200 because of skidding Liquidity, but may even drop below 3000 as earnings get crushed.
- Lower term premia are already set-in-stone and have always led to much weaker reported corporate earnings some 15 months later. US S&P500 earnings could skid by over 20% in 2023
ECM Weekly (25th Sep 2022) – Onewo, Leapmotor, CALB, Socionext, WCP, Sula, Jenscare, EbixCash, Atlas
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, a few large Hong Kong IPOs managed to launch their bookbuild over the past week.
- There were no large placements launched this week, although Atlas Arteria (ALX AU) kept many occupied.
FTSE TWSE 50 & 100 Quiddity Leaderboard Dec 22: Greatek in a Pickle
- In this insight, we take a look at the names leading the race to become ADDITIONs/DELETIONs for the Taiwan 50 and Taiwan Mid-Cap 100 Indices for the December 2022 Rebalance.
- Based on current prices, Via Technologies (2388 TT) is an ADD and AP Memory Technology (6531 TT) is a DEL to the Taiwan Mid-Cap 100 index.
- While there are currently no ADDs/DELs expected for the Taiwan 50 index, there are a couple of names that are close to triggering index changes in the December 2022 review.
Merger Arb Mondays (26 Sep) – Fengxiang, Lifestyle, EVOC, DTAC/True, VNET, 111, Ramsay, Genex
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- Highest spreads – Shandong Fengxiang (9977 HK), Alliance Aviation Services (AQZ AU), Infomedia Ltd (IFM AU), Ramsay Health Care (RHC AU), 21Vianet Group (VNET US), 111 Inc (YI US).
- Lowest spreads – OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), Tyro Payments (TYR AU), MACA Ltd (MLD AU), Link Net (LINK IJ), Dongzheng Automotive Finance (2718 HK).
New Pricing Rule for Appraisal Rights in ECO: Potential Arb Openings in DB Hitek
- A South Korean lawmaker introduced legislation that would mandate that appraisal right exercise prices in split-off listings (equity carve-out) be based on asset/earnings value rather than market price (stock price).
- We may find an arb opening in DB Hitek. The appraisal price based on the asset/earnings value is at an 11.31% premium to the last close.
- If DB HiTek postpones the split-off listing to next year, FY22 earnings should be reflected. In this case, the appraisal price will be at a 90% premium.
Hanwha Solutions: Biggest Restructuring Measures in 50 Years
- On 23 September, Hanwha Solutions announced a set of restructuring measures which are probably the biggest ever moves by the company in the past 50 years.
- The spin-off of the Hanwha Galleria is a good move. Clearly, having both the renewable energy and a luxury department store business under one roof does not make much sense.
- We also like the company’s move expand its U.S. solar module production capacity. The total amount of potential benefit could be nearly US$2 billion over the next decade.
Onewo (2602 HK): No Passive Flow or Stock Connect Inclusion
- Onewo (2602 HK) is looking to raise between US$700m-US$784m by selling 116.714m shares at a price range of HK$47.1-52.7/share. Indications are that the IPO will be priced close to mid-point.
- Given the domestic shares and unlisted foreign shares will not be converted to H-shares, there is no chance of MSCI inclusion and a small chance of FTSE inclusion.
- Onewo (2602 HK) is also unlikely to be added to the HSCI and consequently will not be added to Stock Connect.
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