In today’s briefing:
- Wuxi XDC Placement – A Repeat of Biologics Placement Saga, Last Deal Did Well
- BUY/SELL/HOLD: Hong Kong Stock Update (January 10)
- Merger Arb Mondays (13 Jan) – ESR, Henlius, Goldlion, Canvest, 7&I, Fujitsu General, Pressance
- Open House Finally Takes Out Pressance (3254) – Done Deal Done Cheap
- Henlius (2696 HK): LVC Won’t Block. Buy Here & On Weakness
- STAR50/STAR100 Index Rebalance Preview: Migrations & Outright Changes Lead to Outperformance
- FnGuide Semiconductor Top10 Index Rebalance Preview: Three Changes as Adds Rally Bigly
- Bloks Group (325 HK): Bumper Listing; Index Inclusion Timeline
- Seven & I Holdings (3382 JP): The MBO Is Still Alive and Kicking
- A/H Premium Tracker (To 10 Jan 2025): Super Wide Tech Spreads Best Over Holidays and into NY.
Wuxi XDC Placement – A Repeat of Biologics Placement Saga, Last Deal Did Well
- WuXi AppTec (2359 HK) aims to raise around US$150m via selling around 3% stake in WuXi XDC Cayman (2268 HK).
- WuXi XDC Cayman (WXDC) is a contract research, development, and manufacturing organization (CRDMO) focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
- In this note, we will talk about the placement and run the deal through our ECM framework.
BUY/SELL/HOLD: Hong Kong Stock Update (January 10)
- Hong Kong and China shares have outperformed most Asian markets over the last year. In HK the consumer discretionary sector has lost strength and momentum over the last 4 weeks.
- CSSC (Hong Kong) Shipping Co Ltd (3877 HK) was rated BUY after reporting strong results. Analysts have a target price of $2.50 on the stock.
- Bosideng International Holdings (3998 HK) has shown earnings growth exceeding revenue growth for the last seven years. Technically, the stock looks weak near term, but analysts project 60% upside.
Merger Arb Mondays (13 Jan) – ESR, Henlius, Goldlion, Canvest, 7&I, Fujitsu General, Pressance
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Smart Share Global (EM US), Pressance Corp (3254 JP), Seven & I Holdings (3382 JP), Get Nice Financial Group Ltd (1469 HK), ESR Group (1821 HK).
- Lowest spreads: Lifestyle China (2136 HK), Makino Milling Machine Co (6135 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Latin Resources (LRS AU).
Open House Finally Takes Out Pressance (3254) – Done Deal Done Cheap
- Four-Plus years ago, Open House (3288 JP) bought the stake in Pressance Corp (3254 JP) owned by its embattled CEO (who had been arrested for a scandal).
- Four years ago, Open House launched a partial tender and capital injection to go to ~65%. A takeout was a matter of time.
- That time has come. Today Open House announced a Tender Offer to take Pressance fully-private. This is an easy deal. A done deal. Done too cheap.
Henlius (2696 HK): LVC Won’t Block. Buy Here & On Weakness
- Ahead of Shanghai Henlius Biotech (2696 HK)‘s EGM and Court Meeting on the 22 January, the focus has shifted to Loyal Valley Capital (LVC)’s continued buying in the market.
- After the close of market last Friday, LVC held 7.8295%, above the 7.826% blocking stake. That % was as at 9th January. I assume LVC are still buying.
- Yet if you analyse how LVC has traded in and out of Henlius, they are not in it to block. They’re in for the back-end scrip option.
STAR50/STAR100 Index Rebalance Preview: Migrations & Outright Changes Lead to Outperformance
- 95% of the way through the review period, there could be 3 changes for the SSE STAR50 (STAR50 INDEX) and 8 changes for the STAR100 Index.
- We estimate turnover of 4.1% for the STAR50 INDEX and 9.3% for the STAR100 Index. The net round-trip trade is CNY 14.1bn (US$1.9bn).
- The forecast adds to the STAR50 INDEX have outperformed the forecast deletes with steady outperformance over the last 3 months; the performance for the STAR100 Index is a lot better.
FnGuide Semiconductor Top10 Index Rebalance Preview: Three Changes as Adds Rally Bigly
- Early in the review period, we forecast 3 changes for the FnGuide Semiconductor Top10 Index at the April rebalance.
- Based on the passive assets tracking the index, there will be between 0.6-1.6x ADV to buy in the adds and between 2-4.7x ADV to sell in the deletes.
- The forecast adds have outperformed the forecast deletes by a wide margin over the short-term and the medium-term. There could be more prior to the end of the review period.
Bloks Group (325 HK): Bumper Listing; Index Inclusion Timeline
- Bloks Group (1850960D CH) was massively oversubscribed, traded 82% higher on Friday and closed its listing day 40% higher than the IPO price.
- Bloks Group (1850960D CH) now has a full market cap of US$2.7bn. However, lock-ups and cornerstone allocations result in a much lower free float.
- Index inclusions could take place in August and September, but the passive buying is a fraction of the number of shares that will come off lock-up expiry in early July.
Seven & I Holdings (3382 JP): The MBO Is Still Alive and Kicking
- On 10 January, Bloomberg reported that Apollo is considering an equity commitment of JPY1.5 trillion in the Seven & I Holdings (3382 JP) MBO.
- Securing financing is a key challenge for the MBO. Apollo’s involvement suggests a shift to a higher mix of equity vs debt, which should ease concerns about securing debt financing.
- The article suggests that the MBO valuation could be lower than previously reported. However, 7&i’s underlying value supports a JPY8 trillion MBO valuation (market cap).
A/H Premium Tracker (To 10 Jan 2025): Super Wide Tech Spreads Best Over Holidays and into NY.
- AH Premia are lower over the last few weeks of holiday and this past week of heavy SOUTHBOUND buying on Tencent, telcos, and banks.
- Finance and Tech are seeing large buying, but the really big moves over the past few weeks have been on Industrial Names (CRRC), and Materials, and Tech
- The VERY WIDE Tech spreads such as SMIC (981), Shanghai Fudan Microelectric (1385), CHina Rail Signal (3969), and Flat Glass (6865) have been HUGE performers.
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