Smartkarma Daily Briefs

111 Inc (YI US), the largest virtual pharmacy network in China, disclosed a privatisation proposal from a co-founder-led consortium at US$3.66 per ADS, a 20.0% premium to the undisturbed price.
For privatisation to succeed, shareholders representing two-thirds of shares present and voting need to approve the deal. The co-founders represent 92.04% of the total voting power.
The offer price is unattractive but this is a done deal. At the last close, the gross and annualised spread for a January 2023 completion is 11.6% and 33.4%, respectively.

Backtesting Implications: Korea Sector ETFs Rebalancing on the 8th

By Sanghyun Park

Compared to the tightly crowded KOSPI 200, the sector ETFs’ rebalancing flow trading appears relatively less crowded, which led to a significantly higher flow/price correlation on the rebalancing day.
The KRX now delivers the rebalancing results of the KRX Sector & K-New Deal Indexes only to paying customers. This can increase the profit effect of acquiring prior information.
So, safe play, which builds up a position from the time this information is acquired, rather than an aggressive preemptive position build-up, can still obtain a sufficient level of juice.

Merger Arb Mondays (12 Sep) – DTAC/True, Link Admin, Ramsay, Genex, Tyro, EVOC, Giordano, 111

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 – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Genex Power Ltd (GNX AU), Infomedia Ltd (IFM AU), 111 Inc (YI US).
Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), MyDeal.com.au Ltd (MYD AU), MACA Ltd (MLD AU).

Repsol: Sale of 25% of E&P Division

By Jesus Rodriguez Aguilar

The $19bn EV operation (vs. Repsol’s market cap of €19bn) allows Repsol to maintain the majority in a strategic area, crystallizes value (market assigns a higher valuation to the E&P division separately).
The implied valuation by the market is on average $3 billion lower. As usual with a minority stake sale, the market rarely values it at 100%.
I estimate a moderate positive impact (the deal is similar to what was announced in July), value unlocking could theoretically reach €2.5-€3 per share, but I’d take a neutral stance.

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Sep 12

Daily Brief Macro: Assessing “Big Short” Michael Burry’s Crash Warning and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Assessing “Big Short” Michael Burry’s Crash Warning
How I Learned to Stop Worrying and Love the Bond Market

Assessing “Big Short” Michael Burry’s Crash Warning

By Cam Hui

A number of readers asked us to comment on Michael Burry’s forecast of a crash. We find Burry’s wildly bearish projection of S&P 1900 to be implausible.
Nevertheless, the S&P 500 faces strong valuation and macro headwinds in the near future.
On the other hand, conventional technical analysis view calls for market weakness and a bottom during the September–October time frame.

How I Learned to Stop Worrying and Love the Bond Market

By Cam Hui

Cross-Asset signals from the commodity market indicate that bond prices are poised to rise, which should provide tailwinds for large-cap NASDAQ stocks.
A key risk is continued market fears of rising rates from hawkish Fed rhetoric.
Another risk is a possible sudden policy reversal in response to crisis conditions, which changes the narrative from recessionary conditions to renewed growth.

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Sep 12

Daily Brief Equity Bottom-Up: Nikon (7731) | Snapping up a 3D Printing World Leader and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Nikon (7731) | Snapping up a 3D Printing World Leader
Incannex Healthcare (IHL AU): Attractive Idea Backed by Niche Focus on Cannabinoid Pharmaceuticals
Breakthrough Battery Innovation
China Internet Weekly (12Aug2022): Tencent, JD.com, Meituan, NetEase, Inkeverse

Nikon (7731) | Snapping up a 3D Printing World Leader

By Mark Chadwick

We believe the market may have missed the important acquisition of 3D printing firm, SLM Solutions
The 3D printing market is expected to grow rapidly driven by industrial applications that require accurate products and rapid time to market
We believe the acquisition is a good fit for Nikon and that the realization of synergies could see SLM making a meaningful profit contribution

Incannex Healthcare (IHL AU): Attractive Idea Backed by Niche Focus on Cannabinoid Pharmaceuticals

By Tina Banerjee

Incannex Healthcare (IHL AU) has a differentiated product portfolio, addressing unmet global medical needs. With cash balance of A$37.5 million, Incannex is well-resourced to fund its activities for ~2.5 years.
Recently completed acquisition of APIRx Pharmaceuticals has strategically expanded intellectual property portfolio to 28 clinical programs, the world’s largest portfolio of patented medicinal cannabinoid drug formulations and psychedelic treatment protocols.
The combined annual global market size of the targeted indications is over $420 billion. The company’s strategy of combining cannabinoids with FDA-approved generic drugs calls for shorter regulatory pathway.

Breakthrough Battery Innovation

By subSPAC

For those unfamiliar, Battery Maker Enovix has developed the next generation of Lithium-ion cells that powers everything from Smartphones to Electric Vehicles.
The company’s 3D silicon Cells use 100% active silicon anodes, compared to graphite anodes that are used by most Li-on batteries manufactured today.
Battery makers have stayed away from Silicon anodes due to several technical challenges, including battery swelling and short usable lifespan.

China Internet Weekly (12Aug2022): Tencent, JD.com, Meituan, NetEase, Inkeverse

By Ming Lu

Tencent invested more in Ubisoft Entertainment, a French game developer.
The monthly active users of local life recovered in China in June and July.
NetEase will close Music Street, the social networking-oriented karaoke app.

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Sep 11

Daily Brief Australia: Gold Road Resources, Sayona Mining, Tyro Payments, BHP Group Ltd and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

MVIS Global Junior Gold Miners Index Rebalance: One Delete & Plenty of Float Changes
MVIS Global Rare Earth/Strategic Metals Index Rebalance: Three Adds, Two Deletes
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Tyro, Shidax, Link Admin, Giordano, Hitachi Transport
Global Backlash Against ESG (Part I)

MVIS Global Junior Gold Miners Index Rebalance: One Delete & Plenty of Float Changes

Great Panther (GPL US) is a deletion from the VanEck Vectors Junior Gold Miners ETF (GDXJ US). There are a lot of float changes that will result in passive flows.
One way turnover is estimated at 3.4% and will result in a one-way trade of US$106m at the September rebalance.
Most index constituents have traded poorly over the last few months and the stocks with passive inflows could outperform their peers in the short-term.

MVIS Global Rare Earth/Strategic Metals Index Rebalance: Three Adds, Two Deletes

Sayona Mining (SYA AU), Sigma Lithium (SGML US) and Tianqi Lithium (9696 HK) will replace Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) in the index.
Sayona Mining (SYA AU) is also an inclusion to the FTSE All-Cap and S&P/ASX 200 on the same day as the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX US) addition.
We had Sayona Mining (SYA AU) and Tianqi Lithium (9696 HK) as potential adds while Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) were high probability deletes.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Tyro, Shidax, Link Admin, Giordano, Hitachi Transport

By David Blennerhassett

There are 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals were discussed this week: Potentia’s rejected proposal forTyro Payments (TYR AU) and Oisix ra daichi (3182 JP)‘s tilt for Shidax Corp (4837 JP).
Key updates took place for Link Administration (LNK AU), Giordano International (709 HK), and Hitachi Transport System (9086 JP).

Global Backlash Against ESG (Part I)

This insight highlights the global backlash against ESG. This is a collaborative project between Douglas Kim and Kyle Rudden.
In particular, my insight will focus on three recent places of major backlash against ESG including United Kingdom, Texas, and Florida.
Despite efforts by ESG investors to increase renewables, a return to more BALANCED energy supplies is more likely, expanding the use of nuclear power and domestic oil & gas sources.

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Sep 11

Daily Brief South Korea: Samsung Kodex Autos ETF and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Korea ETF Market Size Breakdown from a Flow Trading Perspective

Korea ETF Market Size Breakdown from a Flow Trading Perspective

By Sanghyun Park

There are 611 ETFs with a combined AUM of ₩76T. Korea is in the global top 7. ₩32T worth of ETFs belongs to local equity, half of which are index-trackers.
The market began to pay attention to the less crowded areas. The result is the rise of sector ETFs. Sector-type has also grown significantly, now with an AUM of ₩8.4T.
Lower predictability causes their rebalancings to be relatively less crowded. That is, the profit effect of acquiring prior information is much more dramatic on the day of rebalancing trading.

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Sep 11

Most Read: True Corp Pcl, Evolution Gaming Group Ab, Gold Road Resources, Sayona Mining, Samsung Kodex Autos ETF, CALB, Onewo Space-Tech, Tianqi Lithium and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

DTAC/True Merger: NBTC Likely to Set Measures to Approve Merger
Evolution Gaming: The World’s Largest Casino, Which You Probably Never Heard Of
MVIS Global Junior Gold Miners Index Rebalance: One Delete & Plenty of Float Changes
MVIS Global Rare Earth/Strategic Metals Index Rebalance: Three Adds, Two Deletes
Korea ETF Market Size Breakdown from a Flow Trading Perspective
Japan Weekly | Renova, Mitsubishi Motors, Mercari
HK Short Interest: Short Spike for Tech Stocks
CALB IPO Preview
Onewo IPO: Trade-Offs Vs Peers
Index Rebalance & ETF Flow Recap: NKY, HSCEI, REMX, GDXJ, Link Admin

DTAC/True Merger: NBTC Likely to Set Measures to Approve Merger

The Bangkok Post reports that the Thai regulator (NBTC) will propose ten remedial measures to approve the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger.
The NBTC board is not expected to issue a final decision as it waits for an interpretation by the Council of State if it can approve or reject the merger.
The current share price ratio is 9.511x vs the swap ratio of 10.221x. At last close, DTAC and True’s gross spread to the VTO price is 9.2% and 10.7%, respectively.

Evolution Gaming: The World’s Largest Casino, Which You Probably Never Heard Of

By Steven Chen

Although lesser-known, this Swedish company dominates one of the most lucrative segments of the global casino industry.
In our view, it is probably the only investable casino company, and despite its size, still has a massive growth runway ahead.
Our DCF model implies a 15%-20% total return for the company’s long-term shareholders.

MVIS Global Junior Gold Miners Index Rebalance: One Delete & Plenty of Float Changes

Great Panther (GPL US) is a deletion from the VanEck Vectors Junior Gold Miners ETF (GDXJ US). There are a lot of float changes that will result in passive flows.
One way turnover is estimated at 3.4% and will result in a one-way trade of US$106m at the September rebalance.
Most index constituents have traded poorly over the last few months and the stocks with passive inflows could outperform their peers in the short-term.

MVIS Global Rare Earth/Strategic Metals Index Rebalance: Three Adds, Two Deletes

Sayona Mining (SYA AU), Sigma Lithium (SGML US) and Tianqi Lithium (9696 HK) will replace Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) in the index.
Sayona Mining (SYA AU) is also an inclusion to the FTSE All-Cap and S&P/ASX 200 on the same day as the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX US) addition.
We had Sayona Mining (SYA AU) and Tianqi Lithium (9696 HK) as potential adds while Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) were high probability deletes.

Korea ETF Market Size Breakdown from a Flow Trading Perspective

By Sanghyun Park

There are 611 ETFs with a combined AUM of ₩76T. Korea is in the global top 7. ₩32T worth of ETFs belongs to local equity, half of which are index-trackers.
The market began to pay attention to the less crowded areas. The result is the rise of sector ETFs. Sector-type has also grown significantly, now with an AUM of ₩8.4T.
Lower predictability causes their rebalancings to be relatively less crowded. That is, the profit effect of acquiring prior information is much more dramatic on the day of rebalancing trading.

Japan Weekly | Renova, Mitsubishi Motors, Mercari

By Mark Chadwick

The Nikkei was up +2.15% over the past week (-2% YTD): the yen was 1.2% weaker at ¥142/$
The news was focused on the sharp drop in the yen with even the BoJ Governor Kuroda noting some undesirable effects
The proportion of female directors rose to 9%, a slight increase over 7.4% in the previous year

HK Short Interest: Short Spike for Tech Stocks

By Ke Yan, CFA, FRM

We analyzed the latest HK SFC report for aggregate short position as of Sep 2nd.
Top short increases and decreases were tabulated for one week and four week period.
We highlight short spike for Tencent, Meituan, Jd.com, Baidu, and Cosco Shipping.

CALB IPO Preview

China Aviation Lithium Battery (CALB) is getting ready for an IPO in Hong Kong.
In the past several days, CALB received the approval from the Hong Kong stock exchange for an IPO.
In the next two years, CALB expects its production capacity for lithium batteries to increase to about 55 GWh which is more than 6x the capacity at end of 2021.

Onewo IPO: Trade-Offs Vs Peers

Onewo Space-Tech (ONEWO HK), China Vanke (000002 CH)’s property management unit, has begun pre-marketing a US$2.0 billion HKEx IPO.
We previously discussed the IPO in Onewo IPO: The Bull Case and Onewo IPO: The Bear Case.
A comparison with large-cap peers suggests that Onewo offers large-scale with parentco stability at the cost of low growth runaway from undelivered GFA and gross margin.

Index Rebalance & ETF Flow Recap: NKY, HSCEI, REMX, GDXJ, Link Admin

The last week had the announcement of the Nikkei 225 (NKY INDEX) September changes and the implementation of the SSE STAR50 (STAR50 INDEX) rebalance.
The coming week will have the implementation of the FTSE AW/AC, FTSE China 50/A50, Taiwan 50/Div+, STI, EPRA Nareit, S&P/ASX, REMX and GDXJ rebalances.
There were large outflows from iShares MSCI ACWI ETF (ACWI US) and iShares MSCI Emerging Markets (EEM US) during the week.

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Sep 11

Daily Brief Japan: Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

It Is Crucial that Corporate Governance Practices that Are Formally in Place Actually Function

It Is Crucial that Corporate Governance Practices that Are Formally in Place Actually Function

By Aki Matsumoto

The reason why TCFD’s progress is the slowest is that prudent companies are still exploring the minimum line that should be taken by other companies to see how they’re responding.
The lack of specific numerical targets for ensuring diversity, which are not explicitly stated in the Corporate Governance Code, is the main reason for the slow progress.
While some formal progress has been made, such as the establishment of nominating/compensation committees, there are many challenges ahead. Scandals have occurred even in companies that have implemented formal standards.

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Sep 11

Daily Brief China: Soho China, Giordano International, CALB, Onewo Space-Tech, Tianqi Lithium and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Last Week in Event SPACE: SOHO China, Nikkei 225 Review, SK Chemicals, SingTel, Porsche, Tyro
Weekly Deals Digest (11 Sep) – Giordano, DTAC/True, Link Admin, Nitro, Tyro, Ramsay, CALB, Onewo
CALB IPO Preview
Onewo IPO: Trade-Offs Vs Peers
Index Rebalance & ETF Flow Recap: NKY, HSCEI, REMX, GDXJ, Link Admin

Last Week in Event SPACE: SOHO China, Nikkei 225 Review, SK Chemicals, SingTel, Porsche, Tyro

By David Blennerhassett

Soho China (410 HK)‘s Pan Shiyi is resigning to focus on “philanthropic pursuits”. That sounds like “donations”, which can be sourced from the Pans selling their stake in SOHO.
In the Nikkei 225 Annual Review, Nidec (6594 JP), SMC (6273 JP), Hoya (7741 JP) are IN. Unitika (3103 JP), Maruha (1333 JP), and Oki Electric (6703 JP) are OUT.
Volkswagen (VOW GR) confirms its intention to float a portion of its Porsche sports-car brand within weeks, in what is expected to be one of Germany’s largest-ever public debuts.

Weekly Deals Digest (11 Sep) – Giordano, DTAC/True, Link Admin, Nitro, Tyro, Ramsay, CALB, Onewo

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Leapmotor (2007699D HK), Onewo Space-Tech (ONEWO HK) and CALB (CALBLZ CH) are pre-marketing a US$1.5 billion, US$2.0 billion and US$2.0 billion HKEx IPOs, respectively.
Event-Driven developments – DTAC/True, Giordano International (709 HK), Link Administration (LNK AU), MyDeal.com.au Ltd (MYD AU), Nitro Software Ltd (NTO AU), Resapp Health (RAP AU), Tyro Payments (TYR AU).

CALB IPO Preview

China Aviation Lithium Battery (CALB) is getting ready for an IPO in Hong Kong.
In the past several days, CALB received the approval from the Hong Kong stock exchange for an IPO.
In the next two years, CALB expects its production capacity for lithium batteries to increase to about 55 GWh which is more than 6x the capacity at end of 2021.

Onewo IPO: Trade-Offs Vs Peers

Onewo Space-Tech (ONEWO HK), China Vanke (000002 CH)’s property management unit, has begun pre-marketing a US$2.0 billion HKEx IPO.
We previously discussed the IPO in Onewo IPO: The Bull Case and Onewo IPO: The Bear Case.
A comparison with large-cap peers suggests that Onewo offers large-scale with parentco stability at the cost of low growth runaway from undelivered GFA and gross margin.

Index Rebalance & ETF Flow Recap: NKY, HSCEI, REMX, GDXJ, Link Admin

The last week had the announcement of the Nikkei 225 (NKY INDEX) September changes and the implementation of the SSE STAR50 (STAR50 INDEX) rebalance.
The coming week will have the implementation of the FTSE AW/AC, FTSE China 50/A50, Taiwan 50/Div+, STI, EPRA Nareit, S&P/ASX, REMX and GDXJ rebalances.
There were large outflows from iShares MSCI ACWI ETF (ACWI US) and iShares MSCI Emerging Markets (EEM US) during the week.

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Sep 11

Daily Brief Industrials: CALB and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

CALB IPO Preview

CALB IPO Preview