In today’s briefing:
- Tsuruha (3391) – Welcia (3141) Future Merger Ratio – Pounding the Table
- Guotai Junan/Haitong Sec Merger: The Many Index Flows Around the Corner
- Converting Samsung Life’s Samsung Electronics Stake to Long-Term Holdings: Clearing up the Confusion
- A/H Premium Tracker (To 24 Jan 2025): AH Premia Fall Yet Again, Lowest Avg Premium in 5yrs… Again
- Japfa (JAP SP): Santosa Family’s S$0.62 Scheme Offer
- HK Connect SOUTHBOUND Flows (To 24 Jan 2025); Again Big Net Buying by SB, Again on Tech
- Kalyan Jewellers- Grey Areas Surrounding Inventory
- Weekly Deals Digest (26 Jan) – Seven & I, Shinko, Canvest, GAPack, Get Nice, Japfa, LG CNS, Guming
- China National Building Material (3323 HK): H Share Buyback Vote on 19 February
- PCOMP Index Rebalance: AREIT, CBC to Replace NIKL, WLCON
Tsuruha (3391) – Welcia (3141) Future Merger Ratio – Pounding the Table
- In late December, a Jiji article said Tsuruha & Welcia would look to integrate by end-2025, now that they no longer need SEC approval. Odd language, but we’ll take it.
- That means we look to what might happen between here and there. The companies will hire Legal and Financial Advisors, wait until both report FY, then start negotiating.
- What has been the long-term trend and the trend of the last two years is different. It’s worthwhile looking at valuations and expectations to decide how to trade. It’s good.
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.
Converting Samsung Life’s Samsung Electronics Stake to Long-Term Holdings: Clearing up the Confusion
- Samsung Life needs FSC approval for a 10-year holding plan on its Samsung Electronics stake. Without it, the whole plan could fall apart, so it’s all about regulatory green lights.
- If FSC approves Samsung Life’s long-term holding, they can’t sell those shares for at least 5 years—no exit strategy for the next half-decade due to regulatory rules.
- Samsung Life will convert part of its stake into long-term holdings, signaling how future buybacks and special dividends will balance in Samsung Electronics’ next shareholder return program.
A/H Premium Tracker (To 24 Jan 2025): AH Premia Fall Yet Again, Lowest Avg Premium in 5yrs… Again
- AH Premia are lower over the last few weeks of holiday and this past week of heavy SOUTHBOUND buying on telcos, banks, brokers, insurers, tech, and airlines.
- The average AH Premium across all pairs is now the lowest it has been in five years.
- INFO TECH and FINANCIALS saw significant H outperformance vs As this week. Most others (other than perhaps MATERIALS) were limited in their volatility. No bias by premium tranche seen.
Japfa (JAP SP): Santosa Family’s S$0.62 Scheme Offer
- Japfa Ltd (JAP SP) disclosed privatisation through a scheme of arrangement from the Santosa family at S$0.62 per share, a 34.8% premium, to the undisturbed price of S$0.460.
- While the offer is attractive compared to historical share price ranges, it is light compared to peer and historical multiples.
- The offer has not been declared final. However, the irrevocable, the lack of a disinterested shareholder holding a blocking stake and moderate retail ownership minimises the vote risk.
HK Connect SOUTHBOUND Flows (To 24 Jan 2025); Again Big Net Buying by SB, Again on Tech
- SOUTHBOUND gross trading activity was again not stronger per day than the previous several weeks, but SB Net Buying was again BIG. Given the change in Tencent, remarkable even.
- The story was follow-through, but SMIC and Xiaomi were also big buys. This is shaping up to be a “let’s buy what US Persons cannot” moment.
- No sectors saw net selling through CCASS data five days to Weds. Top 10 activity was quite concentrated this week. Very few stray names.
Kalyan Jewellers- Grey Areas Surrounding Inventory
- Kalyan Jewellers (KALYANKJ IN), one of the largest Indian jewellery player, has been under the limelight for various allegations and misconducts, including possibility of inventory overstatement.
- In this insight, we try to look at the inventory from the forensic lens and uncover the disparity in accounting.
- We also note that operating cash flows are boosted by movement in metal loans while company also has several RPT with promoters, especially on the purchases side.
Weekly Deals Digest (26 Jan) – Seven & I, Shinko, Canvest, GAPack, Get Nice, Japfa, LG CNS, Guming
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: LG CNS (LGCNSZ KS) seeks to raise up to US$837 million, and Guming Holdings (GUM HK) seeks to raise US$300 million.
- Event-Driven developments: Seven & I Holdings (3382 JP), Shinko Electric Industries (6967 JP), Fuji Soft Inc (9749 JP), Japfa Ltd (JAP SP), Get Nice Financial Group Ltd (1469 HK).
China National Building Material (3323 HK): H Share Buyback Vote on 19 February
- The IFA opines that the China National Building Material (3323 HK) share buyback, which will acquire a maximum of 841.7 million H Shares at HK$4.03, is fair and reasonable.
- The share buyback seems designed to enable the CNBM parent company to bypass the creeper rule and squeeze the shorts.
- The fortuitous material derating of peers has helped make the buyback attractive. Therefore, the votes should pass, and the minimum acceptance condition should be met.
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.
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