Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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On the 5 July 2021, <a href="https://www.smartkarma.com/entities/major-cineplex-group-pcl" target="_blank" data-smartkarma-citation="entities:16662:1" rel="noopener">Major Cineplex Group (MAJOR TB)</a>'s board <a href="https://major.listedcompany.com/newsroom/050720211745440725E.pdf" target="_blank" rel="noopener">approved</a> the entering of a MOU with <a href="https://www.smartkarma.com/entities/central-pattana-pcl-0b7fb113-16e1-4535-be8b-02dce5bbcd92" target="_blank" data-smartkarma-citation="entities:17188:1" rel="noopener">Central Pattana Pub (CPN TB)</a> in relation to its shares in shopping mall operator <a href="https://www.smartkarma.com/entities/siam-future-development-pcl" target="_blank" data-smartkarma-citation="entities:4373:1" rel="noopener">Siam Future Development (SF TB)</a>, at a price of Bt12/share. An IFA was appointed to assess the sale and its opinion on the <a href="https://major.listedcompany.com/newsroom/060820211832280109E.pdf" target="_blank" rel="noopener">19 July</a>, concluded the "Transaction is reasonable with price and conditions that are fair". A SPA was <a href="https://major.listedcompany.com/newsroom/250820211847500685E.pdf" target="_blank" rel="noopener">entered into</a> on the 25 August with an expected completion on the 30 August. 
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CPN <a href="https://www.set.or.th/set/newsdetails.do?newsId=16302807319920&amp;language=en&amp;country=US" target="_blank" rel="noopener">completed</a> the purchase of shares in Siam Future on 30 August 2021. After the completion of shares purchase, the number of shares held by CPN was 56.26%. In Thailand, the obligation to make a mandatory offer is triggered when an acquirer obtains shares of the target company of more than 25%, 50%, or 75% of the total voting rights of the target company.  Therefore, CPN was required to make a Tender Offer for the remaining shares in Siam Future, also at Bt12/share. A mandatory Tender Offer is always unconditional. 
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The Tender Offer doc (247-4) for Siam Future was <a href="https://www.set.or.th/set/pdfnews.do?newsId=16311444618740&amp;sequence=2021100646" target="_blank" rel="noopener">tabled</a> on the 9 September. The Offer period was for 25 business days - and closed on the 18 October. The payment date was the 20 October. The IFA reckoned the Offer was <a href="https://www.set.or.th/set/pdfnews.do?newsId=16326998697600&amp;sequence=2021104947" target="_blank" rel="noopener">fair</a>. At the close of the Offer, CPN held <a href="https://www.set.or.th/set/pdfnews.do?newsId=16346869712030&amp;sequence=2021112797" target="_blank" rel="noopener">96.24%</a>. 
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There are no provisions regarding minority squeeze-out mechanisms under Thai law. However, if the board of directors approves a proposed de-listing,  an independent financial adviser provides its opinion to shareholders on the merits of the proposal, and the company gains approval (≥ 75% for, ≤10% against) from its shareholders to voluntarily delist, then a company can be delisted. The company is permitted to purchase shares tendered in accordance with SEC and Capital Market Supervisory Board rules. 
On page 57 (of Siam Future's Tender Offer doc's <a href="https://www.set.or.th/set/pdfnews.do?newsId=16311444618740&amp;sequence=2021100646" target="_blank" rel="noopener">PDF</a>), it states:
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After the Tender Offer, the Offeror has an intention to delist the Business from being a listed company on the SET during the period of 12 months after the end of the Offer Period. Currently, the Offeror is under the possibility study of proceeding such transaction under relevant rules and regulations, including but not limited to, assessment of possibility of obtaining the approval from the shareholders meeting of the Business, of which has not reached a conclusion on delisting of the Business from being a listed company on the SET.
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With 96.24% held, a Delisting Offer from CPN is likely imminent. Such an Offer at the prior Tender Offer price provides 20% upside to the current price.


On the 5 July 2021, Major Cineplex Group (MAJOR TB)'s board approved the entering of a MOU with Central Pattana Pub (CPN TB) in relation to its shares in shopping mall operator Siam Future Development (SF TB), at a price of Bt12/share. An IFA was appointed to assess the sale and its opinion on the 19 July, concluded the "Transaction is reasonable with price and conditions that are fair". A SPA was entered into on the 25 August with an expected completion on the 30 August. 


CPN completed the purchase of shares in Siam Future on 30 August 2021. After the completion of shares purchase, the number of shares held by CPN was 56.26%. In Thailand, the obligation to make a mandatory offer is triggered when an acquirer obtains shares of the target company of more than 25%, 50%, or 75% of the total voting rights of the target company.  Therefore, CPN was required to make a Tender Offer for the remaining shares in Siam Future, also at Bt12/share. A mandatory Tender Offer is always unconditional. 


The Tender Offer doc (247-4) for Siam Future was tabled on the 9 September. The Offer period was for 25 business days - and closed on the 18 October. The payment date was the 20 October. The IFA reckoned the Offer was fair. At the close of the Offer, CPN held 96.24%. 

There are no provisions regarding minority squeeze-out mechanisms under Thai law. However, if the board of directors approves a proposed de-listing,  an independent financial adviser provides its opinion to shareholders on the merits of the proposal, and the company gains approval (≥ 75% for, ≤10% against) from its shareholders to voluntarily delist, then a company can be delisted. The company is permitted to purchase shares tendered in accordance with SEC and Capital Market Supervisory Board rules. 
On page 57 (of Siam Future's Tender Offer doc's PDF), it states:

After the Tender Offer, the Offeror has an intention to delist the Business from being a listed company on the SET during the period of 12 months after the end of the Offer Period. Currently, the Offeror is under the possibility study of proceeding such transaction under relevant rules and regulations, including but not limited to, assessment of possibility of obtaining the approval from the shareholders meeting of the Business, of which has not reached a conclusion on delisting of the Business from being a listed company on the SET.

With 96.24% held, a Delisting Offer from CPN is likely imminent. Such an Offer at the prior Tender Offer price provides 20% upside to the current price. 

Buy Siam Future Development (SF TB). Then Buy Some More

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

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In this analysis, we provide a detailed overview of investor positioning among 96 active Asia Ex-Japan funds with combined AUM of $80bn.  Highlights:
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<ul style="list-style-type: disc;">
<li>The big four of China &amp; HK, Taiwan, South Korea and India dominate holdings in Asia Ex-Japan.  The 4 countries combined account for 85.4% of total allocations, though all but India are held underweight versus the MSCI Asia Ex-Japan index.</li>
<li>China &amp; HK's weight in Asia Ex-Japan funds stands at a 4-year low of 42.96% having fallen heavily from the high of 52% back in August 2020.</li>
<li>Allocations in Indian stocks hit a new all-time high last month of 13.54%.  India has been the go-to overweight holding since the election of Narendra Modi in 2014, though managers are much more closely aligned to benchmark today.</li>
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Indonesian allocations are close to their lowest levels on record.  Only 82.8% of the Asia Ex-Japan managers in our analysis have exposure to Indonesia,  with Comgest, Barings and Vontobel closing exposure over the last 6-months.
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<li>Information Technology dominates the holdings picture, being both the largest sector holding and the largest sector overweight by some distance.  Opposing this are net underweights in Health Care (-1.61%), Materials (-1.25%) and Financials (-1.17%). </li>
<li>The key antagonist in China's tech crackdown, Consumer Discretionary weights have fallen from a high of 21.35% in October 2020 to 16.84% today.  In tandem, active managers have moved from an overweight of 2.18% to an underweight of -0.12%.  Confidence has certainly taken a knock.</li>
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Also analyzed in more detail:  Thailand, Health Care, Indian Financials, South Korean Consumer Staples, China Financials, <a href="https://www.smartkarma.com/entities/baidu-inc" target="_blank" data-smartkarma-citation="entities:179:1" rel="noopener">Baidu (BIDU US)</a> , <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> , <a href="https://www.smartkarma.com/entities/midea-group-co-ltd-a" target="_blank" data-smartkarma-citation="entities:16185:1" rel="noopener">Midea Group Co Ltd A (000333 CH)</a> and <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US).</a>
Analysis taken from our Asia Ex-Japan research, covering 96 active Asia Ex-Japan funds with combined AUM of $80bn. 
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In this analysis, we provide a detailed overview of investor positioning among 96 active Asia Ex-Japan funds with combined AUM of $80bn.  Highlights:



The big four of China &amp; HK, Taiwan, South Korea and India dominate holdings in Asia Ex-Japan.  The 4 countries combined account for 85.4% of total allocations, though all but India are held underweight versus the MSCI Asia Ex-Japan index.
China &amp; HK's weight in Asia Ex-Japan funds stands at a 4-year low of 42.96% having fallen heavily from the high of 52% back in August 2020.
Allocations in Indian stocks hit a new all-time high last month of 13.54%.  India has been the go-to overweight holding since the election of Narendra Modi in 2014, though managers are much more closely aligned to benchmark today.

Indonesian allocations are close to their lowest levels on record.  Only 82.8% of the Asia Ex-Japan managers in our analysis have exposure to Indonesia,  with Comgest, Barings and Vontobel closing exposure over the last 6-months.

Information Technology dominates the holdings picture, being both the largest sector holding and the largest sector overweight by some distance.  Opposing this are net underweights in Health Care (-1.61%), Materials (-1.25%) and Financials (-1.17%). 
The key antagonist in China's tech crackdown, Consumer Discretionary weights have fallen from a high of 21.35% in October 2020 to 16.84% today.  In tandem, active managers have moved from an overweight of 2.18% to an underweight of -0.12%.  Confidence has certainly taken a knock.

Also analyzed in more detail:  Thailand, Health Care, Indian Financials, South Korean Consumer Staples, China Financials, Baidu (BIDU US) , Sea Ltd (SE US) , Midea Group Co Ltd A (000333 CH) and JD.com Inc (ADR) (JD US).
Analysis taken from our Asia Ex-Japan research, covering 96 active Asia Ex-Japan funds with combined AUM of $80bn. 


Asia Ex-Japan Positioning:  India & Tech at Record Highs

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According to the <a href="https://investor.majorcineplex.com/en/business-characteristics/strategic-invesments" target="_blank" rel="noopener">website</a> of Thailand's largest cinema operator <a href="https://www.smartkarma.com/entities/major-cineplex-group-pcl" target="_blank" data-smartkarma-citation="entities:16662:1" rel="noopener">Major Cineplex Group (MAJOR TB)</a>'s<a href="https://investor.majorcineplex.com/en/business-characteristics/strategic-invesments" target="_blank" rel="noopener"></a>, the rationale for its investment in shopping mall operator <a href="https://www.smartkarma.com/entities/siam-future-development-pcl" target="_blank" data-smartkarma-citation="entities:4373:1" rel="noopener">Siam Future Development (SF TB)</a> (SFD) was synergistic. SFD "is an anchor tenant that generates traffic to the lifestyle malls". 
MAJOR initially acquired 77.8mn shares in SFD in 2003 at Bt1.70/share. MAJOR held <a href="https://investor.siamfuture.com/misc/ar/20170308-sf-ar2016-en-01.pdf" target="_blank" rel="noopener">24.89%</a> (422.2mn shares) in 2016 ahead of a Tender Offer (at <a href="http://capital.sec.or.th/webapp/corp_fin/datafile/TO/0676000048247-42016-12-20e01.pdf?ts=1499458214" target="_blank" rel="noopener">Bt6.20/share</a>), <a href="https://investor.siamfuture.com/misc/ar/20190311-sf-ar2018-en.pdf" target="_blank" rel="noopener">26.25%</a> in 2017, 28.09% in 2018 &amp; 2019, and 29.13% as at the 31 Dec <a href="https://investor.siamfuture.com/misc/ar/20210525-sp-ar2020-en.pdf" target="_blank" rel="noopener">2020</a>. It currently holds 647.158mn shares or 30.36%.
On the 5 July, MAJOR's board <a href="https://major.listedcompany.com/newsroom/050720211745440725E.pdf" target="_blank" rel="noopener">approved</a> the entering of a MOU with <a href="https://www.smartkarma.com/entities/central-pattana-pcl-0b7fb113-16e1-4535-be8b-02dce5bbcd92" target="_blank" data-smartkarma-citation="entities:17188:1" rel="noopener">Central Pattana Pub (CPN TB)</a> in relation to its shares in SFD, at a price of Bt12/share.
An IFA was appointed to assess the sale and its opinion on the <a href="https://major.listedcompany.com/newsroom/060820211832280109E.pdf" target="_blank" rel="noopener">19 July</a>, concluded the "Transaction is reasonable with price and conditions that are fair".
A SPA was <a href="https://major.listedcompany.com/newsroom/250820211847500685E.pdf" target="_blank" rel="noopener">entered into</a> yesterday with an expected completion on the 30 August. 
In Thailand, the obligation to make a mandatory offer is triggered when an acquirer obtains shares of the target company of more than 25%, 50%, or 75% of the total voting rights of the target company. 
Therefore CPN is required to make a tender offer for the remaining shares in SFD at the same price of Bt12/each upon the completion of the SPA.  A mandatory tender offer must be unconditional. 
SFD shares gained ~40% in the month prior to the 5 July announcement, on evident news leakage. Bt12/share is also a lifetime high. I would not be surprised if the tender offer leads to a subsequent delisting offer from CPN.
More below the fold.
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According to the website of Thailand's largest cinema operator Major Cineplex Group (MAJOR TB)'s, the rationale for its investment in shopping mall operator Siam Future Development (SF TB) (SFD) was synergistic. SFD "is an anchor tenant that generates traffic to the lifestyle malls". 
MAJOR initially acquired 77.8mn shares in SFD in 2003 at Bt1.70/share. MAJOR held 24.89% (422.2mn shares) in 2016 ahead of a Tender Offer (at Bt6.20/share), 26.25% in 2017, 28.09% in 2018 &amp; 2019, and 29.13% as at the 31 Dec 2020. It currently holds 647.158mn shares or 30.36%.
On the 5 July, MAJOR's board approved the entering of a MOU with Central Pattana Pub (CPN TB) in relation to its shares in SFD, at a price of Bt12/share.
An IFA was appointed to assess the sale and its opinion on the 19 July, concluded the "Transaction is reasonable with price and conditions that are fair".
A SPA was entered into yesterday with an expected completion on the 30 August. 
In Thailand, the obligation to make a mandatory offer is triggered when an acquirer obtains shares of the target company of more than 25%, 50%, or 75% of the total voting rights of the target company. 
Therefore CPN is required to make a tender offer for the remaining shares in SFD at the same price of Bt12/each upon the completion of the SPA.  A mandatory tender offer must be unconditional. 
SFD shares gained ~40% in the month prior to the 5 July announcement, on evident news leakage. Bt12/share is also a lifetime high. I would not be surprised if the tender offer leads to a subsequent delisting offer from CPN.
More below the fold.


Siam Future Development (SF TB): Central Pattana MGO As MAJOR Cineplex Exits

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

The SET50 Index is one of the very few indices that is still weighted by full market cap. Stocks need to have a minimum free float of 20% to be eligible for index inclusion but the free float is not used to determine the weight of the stock in the index.This had led to stocks with low free floats having an inordinately high weight in the index. The most recent case in point was <a href="https://www.smartkarma.com/entities/delta-electronics-thai-pcl" target="_blank" data-smartkarma-citation="entities:20912:1" rel="noopener">Delta Electronics Thai (DELTA TB)</a> - the stock was an inclusion in the SET50 index at the December review. DELTA is now the third largest stock in the index with a 6.07% weighting, even though the SET free float of the stock is only 22.35%. The stock has jumped 1000% over the last year.Media reports now indicate that there are changes brewing that could result in the SET revising the calculation methodology to more accurately determine the free float of stocks, and a change to the calculation methodology of the SET50 Index that would see it move from a full market cap weighted index to a free float market cap weighted index.In this Insight, we take a look at the stocks that would be affected by the changes and the impact of passive fund trading on the stocks.

The SET50 Index is one of the very few indices that is still weighted by full market cap. Stocks need to have a minimum free float of 20% to be eligible for index inclusion but the free float is not used to determine the weight of the stock in the index.This had led to stocks with low free floats having an inordinately high weight in the index. The most recent case in point was Delta Electronics Thai (DELTA TB) - the stock was an inclusion in the SET50 index at the December review. DELTA is now the third largest stock in the index with a 6.07% weighting, even though the SET free float of the stock is only 22.35%. The stock has jumped 1000% over the last year.Media reports now indicate that there are changes brewing that could result in the SET revising the calculation methodology to more accurately determine the free float of stocks, and a change to the calculation methodology of the SET50 Index that would see it move from a full market cap weighted index to a free float market cap weighted index.In this Insight, we take a look at the stocks that would be affected by the changes and the impact of passive fund trading on the stocks.

SET50 Index: Change to Free Float Weighting In the Works?

Index Rebalance

Delta Electronics Thailand  / Index Rebalance

Last evening post market close, the Stock Exchange of Thailand (SET) announced the results of the semi-annual review of the SET50 index with the changes taking effect after the close of trading on 30 December.<a href="https://www.smartkarma.com/entities/bangkok-commercial-asset-management-public-company-limited" target="_blank" data-smartkarma-citation="entities:28442:1" rel="noopener">Bangkok Commercial Asset Management (BAM TB)</a>, <a href="https://www.smartkarma.com/entities/com7-pcl" target="_blank" data-smartkarma-citation="entities:27411:1" rel="noopener">Com7 PCL (COM7 TB)</a> and <a href="https://www.smartkarma.com/entities/delta-electronics-thai-pcl" target="_blank" data-smartkarma-citation="entities:20912:1" rel="noopener">Delta Electronics Thai (DELTA TB)</a> have been included in the index, replacing <a href="https://www.smartkarma.com/entities/banpu-power-pcl" target="_blank" data-smartkarma-citation="entities:23631:1" rel="noopener">Banpu Power PCL (BPP TB)</a>, <a href="https://www.smartkarma.com/entities/irpc-pcl" target="_blank" data-smartkarma-citation="entities:19051:1" rel="noopener">IRPC PCL (IRPC TB)</a> and <a href="https://www.smartkarma.com/entities/wha-corp-pcl" target="_blank" data-smartkarma-citation="entities:104:1" rel="noopener">WHA Corp Pcl (WHA TB)</a>. This was our base case scenario, though DELTA had the lowest probability of index inclusion.Terrible timing! <a href="https://www.smartkarma.com/entities/delta-electronics-thai-pcl" target="_blank" data-smartkarma-citation="entities:20912:1" rel="noopener">Delta Electronics Thai (DELTA TB)</a> has gained 543.72% since it was deleted from the SET50 index at the June review, while <a href="https://www.smartkarma.com/entities/banpu-power-pcl" target="_blank" data-smartkarma-citation="entities:23631:1" rel="noopener">Banpu Power PCL (BPP TB)</a> has gained just 2.99% since it was included in the index at the June review. Not implementing this change in June would have led to the SET50 index return being over 3.5% higher than its actual return.One-way turnover for the rebalance is 4.92%. The impact of the changes does not appear like a lot, but the active funds trading ahead of implementation date could cause the stocks to move around a lot compared to their peers.This Insight is labelled Bullish as we expect DELTA to outperform its peers post the inclusion in the SET50 index. The stock could move lower post implementation date due to its higher valuations.

Last evening post market close, the Stock Exchange of Thailand (SET) announced the results of the semi-annual review of the SET50 index with the changes taking effect after the close of trading on 30 December.Bangkok Commercial Asset Management (BAM TB), Com7 PCL (COM7 TB) and Delta Electronics Thai (DELTA TB) have been included in the index, replacing Banpu Power PCL (BPP TB), IRPC PCL (IRPC TB) and WHA Corp Pcl (WHA TB). This was our base case scenario, though DELTA had the lowest probability of index inclusion.Terrible timing! Delta Electronics Thai (DELTA TB) has gained 543.72% since it was deleted from the SET50 index at the June review, while Banpu Power PCL (BPP TB) has gained just 2.99% since it was included in the index at the June review. Not implementing this change in June would have led to the SET50 index return being over 3.5% higher than its actual return.One-way turnover for the rebalance is 4.92%. The impact of the changes does not appear like a lot, but the active funds trading ahead of implementation date could cause the stocks to move around a lot compared to their peers.This Insight is labelled Bullish as we expect DELTA to outperform its peers post the inclusion in the SET50 index. The stock could move lower post implementation date due to its higher valuations.

Thailand

Central Pattana Public Company Limited and its subsidiaries develop properties including shopping centers, condominiums, and office, for sale and rental.  The Company's projects include Central Plaza Lardprao, Central Plaza Ram-indra,  Central Plaza Pinklao, Central Festival Center Pattaya, and Central Plaza Ratchada.

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Central Pattana Pub (CPN TB)

Buy Siam Future Development (SF TB). Then Buy Some More

Buy Siam Future. Then buy some more. I think you're looking at a minimum 10% upside from here - if using Big C Supercenter's delisting example -...

David Blennerhassett

Asia Ex-Japan Positioning: India & Tech at Record Highs

In this analysis, we provide a detailed overview of investor positioning among 96 active Asia Ex-Japan funds with combined AUM of $80bn.

Steven Holden

Siam Future Development (SF TB): Central Pattana MGO As MAJOR Cineplex Exits

This is a done deal. Just a question of timing. At Bt11.70/share, you're looking at a gross/annualised spread of 20.6%/10.9%, assuming late...

David Blennerhassett

SET50 Index: Change to Free Float Weighting In the Works?

There is a strong possibility that the SET revises the calculation methodology to more accurately determine the free float of stocks, and changes...

Brian Freitas

SET50 Index Rebalance: DELTA to Buy

BAM, COM7 and DELTA have been added to the SET50 index replacing BPP, IRPC and WHA with the changes effective after the close on 30 Dec. With 11...

Brian Freitas

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