Category

Event-Driven

Event-Driven: Gcl Poly Energy Holdings Limited, Seven & I Holdings, Link Administration, SK IE Technology, Australian Unity Office Fund, Tassal and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • FTSE All-World/​​All-Cap Index Rebalance Preview: Some Big Changes in China
  • Seven & I Sale of Sogo Seibu Moves Closer
  • Merger Arb Mondays (04 Jul) – Link Admin, Ramsay, DTAC/True, Australian Unity Office Fund, Yashili
  • WISE Theme Indexes (TIGER ETFs): Rebalancing Flow Estimations
  • AOF Trading at the Dividend-Adjusted Unaffected Price
  • Tassal: Cooke Remains a Determined Suitor

FTSE All-World/​​All-Cap Index Rebalance Preview: Some Big Changes in China

By Brian Freitas

  • The price review period for the FTSE All-World/All-Cap September 2022 SAIR ended on 30 June. The changes are expected to be announced on 19 August and implemented on 19 September.
  • There are a lot of potential inclusions to the indices for China -some changes are a result of stocks being included in Northbound Stock Connect.
  • Gcl Poly Energy Holdings Limited (3800 HK) is the largest potential inclusion (in terms of passive flow) in the index following resumption of trading in November 2021.

Seven & I Sale of Sogo Seibu Moves Closer

By Michael Causton

  • Initial reports suggest that Fortress Investment, part of the Softbank group of funds, is now the frontrunner in negotiations to acquire Sogo Seibu department stores from Seven & I.
  • Reports suggest Fortress is already in discussions with privately owned retailer Yodobashi Camera to take over management of the chain’s better stores, beginning with Seibu Ikebukuro.
  • The loss of ¥500 billion or so in turnover won’t be missed not will the ¥8.8 billion losses but activist investors won’t stop there.

Merger Arb Mondays (04 Jul) – Link Admin, Ramsay, DTAC/True, Australian Unity Office Fund, Yashili

By Arun George


WISE Theme Indexes (TIGER ETFs): Rebalancing Flow Estimations

By Sanghyun Park

  • Among the local theme indexes in Korea, we have three noteworthy ones for July. They are the WISE theme indexes. They will all rebalance on July 15.
  • Due to some constituents’ recent significant price movements, we can now expect some notable passive flows.
  • These names are worthy of our attention: SKIET, Solus Advanced, Kangwon Land, Hanatour, T’way Air, Yong Pyong Resort, HYBE, CJ ENM, and Studio Dragon.

AOF Trading at the Dividend-Adjusted Unaffected Price

By Arun George

  • Australian Unity Office Fund (AOF AU) has extended Aliro’s exclusive due diligence to 15 July. Shares slid 1.8% on concerns of Aliro lowering the offer or walking away. 
  • Encouragingly, Aliro confirmed its intention to pursue the proposal at a price not lower than the offer price and will return with an updated proposal within two weeks.
  • The offer price (including Sep distribution) of A$2.465 is 14.7% above the last close. The downside is low as the shares are trading in line with the dividend-adjusted unaffected price. 

Tassal: Cooke Remains a Determined Suitor

By Arun George

  • On 1 July, Cooke, the spurned suitor, disclosed that it further increased its stake from 5.40% to 7.60% at an average price of A$4.59 per share. 
  • The Tassal (TGR AU) Board decided not to engage with Cooke as its third offer of A$4.85 per share did not reflect the fundamental value of the business. 
  • Cooke’s recent actions suggest that it will not be easily deterred. We think that it is likely that Cooke returns with another offer which will force the Board to engage.

Before it’s here, it’s on Smartkarma

Event-Driven: Gcl Poly Energy Holdings Limited, Tencent, Toshiba Corp and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Index Rebalance & ETF Flow Recap: FTSE JP, HSTECH, HSCEI, PCOMP, GCL Tech, Tencent, Tianqi Lithium
  • Last Week in Event SPACE: Prosus/Naspers, Link Admin, Bank of Kyoto, Tassel, Toshiba
  • Asia-Pac Weekly Risk Arb Wrap: Tassal, Toshiba, Link Admin, Link Net

Index Rebalance & ETF Flow Recap: FTSE JP, HSTECH, HSCEI, PCOMP, GCL Tech, Tencent, Tianqi Lithium

By Brian Freitas


Last Week in Event SPACE: Prosus/Naspers, Link Admin, Bank of Kyoto, Tassel, Toshiba

By David Blennerhassett

  • Prosus (PRX NA) selling its JD.com (9618 HK) shares was expected. The beginning of an open-ended share repurchase programme of Prosus and Naspers (NPN SJ) shares was a welcome surprise.
  • Dye & Durham has reduced its Offer price for Link Administration (LNK AU) to $4.30/share, down from $5.50/share. It still may get board support.
  • A 40-45% discount is about the narrowest Bank of Kyoto (8369 JP) should get to. For that, there is probably 15-20% upside. But like all holdco trades, trade the range.

Asia-Pac Weekly Risk Arb Wrap: Tassal, Toshiba, Link Admin, Link Net

By David Blennerhassett


Before it’s here, it’s on Smartkarma

Event-Driven: Kirin Holdings, Geely Auto, Hongfa Technology Co Ltd A and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Kirin Sells The Myanmar JV to MEHL: Not a Fair Valuation But Getting At Least Some Money Is a Bonus
  • Shanghai/​​​​​​Shenzhen Southbound Connect: Weekly Moves (30 June 2022)
  • Shanghai/​​​​​​Shenzhen Northbound Connect: Weekly Moves (24 June 2022)

Kirin Sells The Myanmar JV to MEHL: Not a Fair Valuation But Getting At Least Some Money Is a Bonus

By Oshadhi Kumarasiri

  • Kirin Holdings (2503 JP) announced yesterday that it will transfer its stake in the Myanmar business (51% of share capital) to its JV partner MEHL, via a share buyback of ¥22.4bn.
  • Having disposed most of the other underperforming assets during 2018-21, the Myanmar business was the main issue holding back Kirin’s share price performance.
  • With the Myanmar issue resolved better than anticipated, it seems like the right time for Kirin to get a move on.

Shanghai/​​​​​​Shenzhen Southbound Connect: Weekly Moves (30 June 2022)

By David Blennerhassett

  • Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
  • Overall, net inflow over the past week was ~US$1.5bn, split US$0.4bn for Shanghai and US$1.2bn for Shenzhen.
  • He largest inflows were into Geely Auto (175 HK), Li Auto (2015 HK), and HKEX (388 HK). The largest outflow was in China Mobile (941 HK) and CCB (939 HK).

Shanghai/​​​​​​Shenzhen Northbound Connect: Weekly Moves (24 June 2022)

By David Blennerhassett


Before it’s here, it’s on Smartkarma

Event-Driven: Tianqi Lithium, Shinko Electric Industries, LG Corp, LG Energy Solution, Hang Seng China Enterprises Index, Meggitt PLC, Grupo Financiero Banorte and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Tianqi Lithium (9696 HK): Big Discount to A-Shares & Index Inclusion Timeline
  • JPX-Nikkei 400 2022 Rebal: Final Predictions
  • StubWorld: LG Corp In Unwind Territory
  • End of Mandatory Lock-Up Periods for 40 Companies in Korea in July 2022
  • HSCEI Index Rebalance: Bilibili Replaces Sunac Next Week
  • Parker-Hannifin/Meggitt: Ready to Fly
  • CitiBanamex – Potential Bidders Get Serious, We Stay Cautious on Banorte

Tianqi Lithium (9696 HK): Big Discount to A-Shares & Index Inclusion Timeline

By Brian Freitas

  • Tianqi Lithium (9696 HK) is looking to sell up to 188.74m shares to raise up to US$1.97bn. Pricing at HK$69-82/share is a 52-43% discount to Tianqi Lithium (002466 CH).
  • Between 32-38% of the total offer size is being taken by 7 cornerstone investors and they are locked in for 6 months from listing date (expected 13 July).
  • Tianqi Lithium (9696 HK) could be added to MSCI China in November, FTSE All-World and FTSE China 50 in December. Southbound Stock Connect could come online soon after listing.

JPX-Nikkei 400 2022 Rebal: Final Predictions

By Janaghan Jeyakumar, CFA

  • JPX-Nikkei 400 is composed of stocks listed on the Tokyo Stock Exchange selected based on multiple metrics relating to size, liquidity, financial performance, and corporate governance.
  • The annual rebalance of the JPX-Nikkei 400 Index takes place in August every year and the cut-off date for the data used for this rebalance is the end of June.
  • In this insight, we take a look at Quiddity’s final predictions for Potential ADDs/DELs for the August 2022 review.

StubWorld: LG Corp In Unwind Territory

By David Blennerhassett

  • A double dose of StubWorld this week, as LG Corp (003550 KS)‘s NAV discount narrowing looks to have run its course.
  • Preceding my comments on LG Copr are the current setup/unwind tables for Asia-Pacific Holdcos. 
  • These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

End of Mandatory Lock-Up Periods for 40 Companies in Korea in July 2022

By Douglas Kim

  • We discuss end of the mandatory lock-up periods for 40 stocks in Korea in July 2022, among which 7 are in KOSPI and 33 are in KOSDAQ.
  • These 40 stocks on average could be subject to further selling pressures in July and could underperform relative to the market. 
  • Among these 40 stocks, LG Energy Solution (373220 KS) and Heung A Shipping (003280 KS) could face further selling pressures in the coming weeks.

HSCEI Index Rebalance: Bilibili Replaces Sunac Next Week

By Brian Freitas


Parker-Hannifin/Meggitt: Ready to Fly

By Jesus Rodriguez Aguilar

  • UK Secretary of State has said Parker-Hannifin has addressed competition and national security concerns over its takeover of Meggitt PLC. Public consultation is pending, after which clearance is almost sure.
  • As in the case of Ultra Electronics, it would be hard to justify the UK blocking a defence deal from a company based in a key ally, in my view.
  • The market believes there will be a deal. As of 29 June, gross spread is 1.25%, estimated annual return (assuming settlement on 26 October) is 3.98%.

CitiBanamex – Potential Bidders Get Serious, We Stay Cautious on Banorte

By Victor Galliano

  • Banorte and Santander have both hired M&A advisors for a potential Citibanamex bid, according to Reuters; Banco Azteca is not participating in the bidding, whilst Inbursa is potentially still interested
  • In the event of a bid, we do not expect Santander to be aggressive on price; Banorte could be more aggressive, which would increase its chances of a winning bid
  • Were Banorte to acquire Citibanamex, we continue to believe that its prospective dividend could be at risk; in essence, the risks of M&A still outweigh the potential opportunities

Before it’s here, it’s on Smartkarma

Event-Driven: Toshiba Corp, Link Net, Ardent Leisure Group Ltd, Semirara Mining And Power Corp, Frasers Hospitality Trust, Boskalis Westminster and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Toshiba (6502) Ownership Structure – “Hostage to Toshiba” Larger Than Real World Float
  • Link Net: Home Straight For Axiata’s MTO
  • Toshiba – Headed For A Showdown
  • Ardent Leisure’s EGM Approves the Main Event Sale
  • PCOMP Index Rebalance Preview: SCC Likely Replaces SECB
  • (Mostly) Asia M&A: June 2022 Roundup
  • HAL Holding/​Royal Boskalis Westminster: Offer Launch & Precedent of Orange/Orange Belgium

Toshiba (6502) Ownership Structure – “Hostage to Toshiba” Larger Than Real World Float

By Travis Lundy

  • Every year, the yukashoken hokokusho shows a breakdown of share ownership by owner category. It only happens once a year for most companies. 
  • It is a crucial input to knowing where the shares are and how people are positioned. It also shows who and how big is Real World Float.
  • This year’s data shows a surprisingly small change year-on-year for Foreign Active Ownership, which is the biggest category. A little musical chairs, but no chairs removed. 

Link Net: Home Straight For Axiata’s MTO

By David Blennerhassett

  • Axiata Group (AXIATA MK) recently completed the acquisition of a 66.03% stake in Link Net (LINK IJ).  
  • Axiata is now obligated to undertake a mandatory tender (MTO) offer to acquire the remaining 33.97% equity interest in Link Net. There are no conditions attached to the MTO.
  • The MTO is expected to be completed in the third quarter of 2022. The spread has narrowed, yet there is still some left.

Toshiba – Headed For A Showdown

By Mio Kato

  • Following the resignation of director Mariko Watahiki yesterday, the results for the shareholder votes are in for Toshiba. 
  • Watahiki unsurprisingly had a low approval ratio of 65.87% but activist-linked directors also saw less than stellar approval ratios as did new CEO Taro Shimada. 
  • Toshiba’s path forward looks increasingly murky and lofty valuations bid up on privatisation hopium look increasingly tenuous.

Ardent Leisure’s EGM Approves the Main Event Sale

By Arun George

  • Ardent Leisure Group Ltd (ALG AU)‘s shareholders have approved Dave & Buster’S Entertainment, Inc (PLAY US) acquisition of Main Event business. Ardent will receive A$670.3 million.
  • Shareholders will receive a total return of A$0.95 through capital return (A$0.46) and unfranked special dividends (A$0.49) on 13 July. 
  • Precedent transactions and peer multiples suggest that the remaining business is worth A$0.23-0.30, implying a 16%-21% upside to the last close. The remaining business would be attractive to private equity. 

PCOMP Index Rebalance Preview: SCC Likely Replaces SECB

By Brian Freitas


(Mostly) Asia M&A: June 2022 Roundup

By David Blennerhassett

  • For the month of June, 12 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$8bn.
  • The average premium for the new deals announced (or first discussed) in June was ~32%.
  • This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

HAL Holding/​Royal Boskalis Westminster: Offer Launch & Precedent of Orange/Orange Belgium

By Jesus Rodriguez Aguilar

  • The acceptance period runs until 2 September. HAL now controls 52.9% of Boskalis (Stichting Hyacinth will presumably keep buying at €32 or less). HAL will consolidate Boskalis from H2 2022.
  • The Boards of Boskalis have concluded that the offer price is not sufficiently convincing to recommend it to Boskalis’ shareholders. Good try, but twisting HAL’s arm seems difficult. Premium is 0.06%.
  • Considering the precedent of Orange/Orange Belgium, I would only open a position below the offer price. HAL will now consolidate Boskalis and does not need to sweeten the offer.

Before it’s here, it’s on Smartkarma

Event-Driven: Toshiba Corp, SenseTime Group, Bank of Kyoto, Tassal, Kepco Plant Service & Engineering, Prosus , HKEX, KB Financial, Tata Power, EMIS Group PLC and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Toshiba – These Are The Days Of Our Lives
  • HSTECH Index Rebalance Preview (Sep): Free Float & Capping Changes To Drive Flows
  • Bank of Kyoto – Trading the Holdco Range
  • Tassal And Cooke In Salmon Stand-Off
  • Two Nuclear ETFs Listed Today (KINDEX & HANARO): Passive Flow Outlook
  • StubWorld: Prosus & Naspers Gain On Buyback Funded By Tencent Share Sale
  • ETFs in Stock Connect: List Announced; Effective 4 July
  • KRX Banks Index (KODEX ETF): September Rebalancing Preview
  • NIFTY Quiddity Leaderboard Sep 2022: June Trades Successful; More to Come
  • UnitedHealth/EMIS: Agreed Offer, Estimated Calendar, Spread

Toshiba – These Are The Days Of Our Lives

By Mio Kato

  • At last year’s Toshiba AGM we had an elected director resign because the sitting chairman was rejected. 
  • This year we have another director resigning because two other directors weren’t rejected. 
  • Now all we are really waiting for in this drama is for Kurumatani’s hitherto unknown identical twin, separated at birth, to show up with a plot for revenge or something…

HSTECH Index Rebalance Preview (Sep): Free Float & Capping Changes To Drive Flows

By Brian Freitas

  • We do not expect any inclusions or exclusions for the Hang Seng Tech Index (HSTECH INDEX) at the September rebalance.
  • Float and capping changes will lead to a one-way turnover of 6.5% and that will result in a one-way trade of HK$4,913m.
  • SenseTime Group (20 HK) will have the largest buying flow due a potential increase in free float. The stock is also a potential inclusion to the HSCEI INDEX in September.

Bank of Kyoto – Trading the Holdco Range

By Travis Lundy

  • Bank of Kyoto has twice changed/improved its capital governance in the past six months.
  • Silchester International Investors wants it to do more, asking for a small special dividend at tomorrow’s AGM. I don’t think it will get it. 
  • The holdco is now a better holdco trade than it was 6mos ago, and trading the range is the right way to look at it. 

Tassal And Cooke In Salmon Stand-Off

By David Blennerhassett

  • Tasmanian salmon producer Tassal (TGR AU) has rejected Canadian aquaculture play Cooke Inc’s $4.85/share offer – its third proposal and a 42.2% premium to the undisturbed price.
  • Cooke commenced buying shares in Tassal around ten days ago and has built a 5.4% stake. 
  • Tassal considers the Offer does not reflect the fundamental value of the business and has determined not to engage with Cooke.

Two Nuclear ETFs Listed Today (KINDEX & HANARO): Passive Flow Outlook

By Sanghyun Park

  • Nuclear power is a landmark policy that Korea’s current administration heavily pushes. In response, the local market has quickly launched nuclear thematic ETFs: KINDEX & HANARO, which got listed today.
  • Nuclear power is likely to become the next big thing, AUM-wise, similar to the secondary battery-themed ETFs under the former administration.
  • Since most of these nuclear stocks have significantly smaller market caps than those battery ones, the actual flow impact is likely to be more significant.

StubWorld: Prosus & Naspers Gain On Buyback Funded By Tencent Share Sale

By David Blennerhassett

  • It’s been a long-time coming. Prosus (PRX NA) and parent Naspers (NPN SJ) will gradually sell down their stake in Tencent (700 HK) to fund a share purchase program.
  • Preceding my comments on Prosus and Naspers, are the current setup/unwind tables for Asia-Pacific Holdcos. 
  • These relationships trade with a minimum liquidity of US$1mn, and a % of market capitalisation greater than 20%.

ETFs in Stock Connect: List Announced; Effective 4 July

By Brian Freitas

  • CSRC and SFC have approved the inclusion of eligible ETFs in Stock Connect and trading of the ETFs under Stock Connect would begin from 4 July.
  • There are 4 ETFs included in Southbound Stock Connect, while there are 83 ETFs that have been included in Northbound Stock Connect.
  • Under Stock Connect, only secondary trading is allowed in the ETFs with no creations or redemptions permitted. This will have implications for short-term and long-term repo on the HSI/HSCEI/HSTECH indices.

KRX Banks Index (KODEX ETF): September Rebalancing Preview

By Sanghyun Park

  • The index targets the GICS Financials/Banks sector stocks: 12 stocks belong to this sector. Then nine of these are currently included in the KRX Banks.
  • Compared to the last rebalancing, where we had Kakao Bank’s inclusion event, the impact size for the upcoming rebalancing will likely be significantly reduced.
  • The last rebalancing showed that the directional correlation between passive flow and price movement was high. So, we can still consider a Long/Short Day Trade even with this impact size.

NIFTY Quiddity Leaderboard Sep 2022: June Trades Successful; More to Come

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50, 100, and 500 Indices for the September 2022 Rebalance.
  • With only one month left in the reference period, most changes for the NIFTY 50 and NIFTY 100 Index seem to be high-conviction index changes.
  • In addition, I have discussed some trading opportunities with interesting potential index flow dynamics.

UnitedHealth/EMIS: Agreed Offer, Estimated Calendar, Spread

By Jesus Rodriguez Aguilar

  • Giant UnitedHealth offers 1,925p, in cash (implied equity value of £1,243 million, implied EV of £1,185 million). This represents: 6.5x EV/Fwd Revenue, 20.4x EV/Fwd EBITDA and 31.7x Fwd PE (source: I/B/E/S).
  • The offer is pitched above peer’s multiples, which coupled with a 49% premium, should be enough to convince any reluctant shareholder to tender.
  • Gross spread is 2.9%, quite good for a highly likely deal in the European space (c. 16% estimated annual return assuming settlement takes place on 8 September).

Before it’s here, it’s on Smartkarma

Event-Driven: Tencent, Prosus , NTT (Nippon Telegraph & Telephone), JMDC Inc, Link Administration, Samsung Kodex Banks ETF, Tassal, Life Insurance Corp of India (LIC) and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Prosus, Tencent, JD.com – Good Intentions but Questionable Timing
  • Prosus/Naspers – Operation Ouroboros Commences, And It’s Big (Discount, Flows, Index Impact)
  • Last Leg of TOPIX and JPNK400 FFW Rebal – ¥780bn One-Way Flow Wednesday
  • FTSE GEIS Sep 2022 Index Rebalance Preview: Japan
  • Link Admin: Dye & Durham’s Cuts Bid Price
  • A Guide to Thematic Equity ETFs in Korea for Uncrowded Flow Trading Opportunities
  • Link’s Lower Offer of A$4.30 from DND Fails to Excite
  • Tassal Is in the Crosshairs of a Suitor
  • Tencent (700 HK): Impact of Prosus Selling & Passive Inflows
  • S&P BSE Quiddity Leaderboard Dec 2022: LIC, Shriram Finance, Tata Motors, Dr Reddy’s, & More

Prosus, Tencent, JD.com – Good Intentions but Questionable Timing

By Sumeet Singh

  • Today Prosus announced that it will begin an open-ended share repurchase programme of Prosus and Naspers shares which will be funded by on-market sale of Tencent shares.
  • Prosus also announced that it has sold its entire shareholding in JD.com, to raise US$3.67bn, on-market in Jun 2022.
  • In this note, we talk about the implication and timing of today’s announcements.

Prosus/Naspers – Operation Ouroboros Commences, And It’s Big (Discount, Flows, Index Impact)

By Travis Lundy

  • I wanted to write this insight over the weekend but could not finish it, but now there is new news to warrant it. 
  • Today, Prosus (PRX NA)  announced it had sold the 131,873,028 JD.com Inc. (9618 HK) shares it received in the Tencent (700 HK) distribution. This is as expected. Proceeds were US$3.67bn.
  • Also announced this morning is “the beginning of an open-ended share repurchase programme of Prosus and Naspers (NPN SJ) shares.” The details are the key to everything

Last Leg of TOPIX and JPNK400 FFW Rebal – ¥780bn One-Way Flow Wednesday

By Travis Lundy

  • The last of the three-leg rebalance for TOPIX and JPNK400 index weights takes place Wednesday 29 June at the close. This one is a bit larger than expected in April.
  • There were a large number of cancellations of shares by TSE Prime members in May which ups the predicted value to be traded. 
  • Interestingly, because lots of names have seen share cancellations and FFW drops, the average passive ownership of TSE Float (not other providers’ float) has gone up significantly through this process. 

FTSE GEIS Sep 2022 Index Rebalance Preview: Japan

By Brian Freitas

  • The FTSE Russell September 2022 SAIR will use closing prices from 30 June to calculate the market cap cut-offs to determine the inclusions and exclusions for the All-World/All-Cap indices.
  • We see 1 add for the All-World Index and 5 for the All-Cap Index. We see 3 stocks moving from All-Cap to All-World and 5 stocks moving the other way.
  • There are other stocks that are close adds, upweights, downweights and deletes and price moves over the next few days will determine their status.

Link Admin: Dye & Durham’s Cuts Bid Price

By David Blennerhassett

  • Dye & Durham (D&D) has reduced its Offer price for Link Administration (LNK AU) to $4.30/share, down from $5.50/share.
  • The revised offer followed the Australian Competition and Consumer Commission’s concerns that D&D’s acquisition of Link would lead to dominance in Australia’s conveyancing market.
  • To facilitate the new Offer, D&D said it is considering providing an undertaking to ACCC – presumably, but not stated, being the sale of its GlobalX business.

A Guide to Thematic Equity ETFs in Korea for Uncrowded Flow Trading Opportunities

By Sanghyun Park

  • Korea’s local ETF market has experienced explosive growth in recent years. Over the past year, total ETF net assets have increased by 42%.
  • As a result, the flow impact they have on the market is growing significantly. So, we are now in great need to thoroughly investigates the local equity ETF market.
  • Hence, this post looks at the thematic ETFs, which are still somewhat overlooked by the market, thus providing uncrowded flow trading opportunities.

Link’s Lower Offer of A$4.30 from DND Fails to Excite

By Arun George

  • Dye & Durham/DND has proposed to lower its offer from A$5.50 to A$4.30 per share. The Link Administration (LNK AU) Board will provide shareholders with an update next week.
  • DND’s justification for a lower offer based on the potential undertaking to the ACCC and the current state of the financial markets smacks of opportunism.    
  • The proposed lower bid offers no premium to our valuation range or the undisturbed price. The Board should reject the lower offer and instead reignite interest from past suitors. 

Tassal Is in the Crosshairs of a Suitor

By Arun George

  • Glenn Bruce Cooke has acquired a 5.40% stake in Tassal (TGR AU) at an average price of A$3.58. The shares rose 3.1% to close at a 1-year high of A$3.97.
  • Mr Cooke has shown previous interest in Tassal and its key competitor, Huon Aquaculture (HUO AU). Huon was ultimately acquired by JBS SA (JBSS3 BZ) in November 2021.
  • Tassal is a better business than Huon due to more stable operations and higher margins. Benchmarking to the Huon transaction multiples implies a floor offer price of A$4.65 per share.  

Tencent (700 HK): Impact of Prosus Selling & Passive Inflows

By Brian Freitas

  • Prosus (PRX NA)/ Naspers (NPN SJ) hold 28.78% of Tencent (700 HK) and will be selling Tencent stock to fund their own buyback due to the large discount to NAV.
  • At 3-5% of Tencent (700 HK)‘s ADV, the selling will last from 9-15 years, though could take much longer (or not complete) if Prosus/Naspers’ discount to NAV shrinks considerably.
  • Passive trackers will buy only around 12-14% of the incremental stock and this will lead to a big overhang on Tencent (700 HK) in the near future.

S&P BSE Quiddity Leaderboard Dec 2022: LIC, Shriram Finance, Tata Motors, Dr Reddy’s, & More

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the names leading the race to become ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices for the December 2022 Rebalance.
  • Life Insurance Corp of India (LICI IN) will be added to BSE 200 and BSE 500 at the end of this week. Below are more details on this.
  • In addition, I have discussed some trading opportunities with interesting potential index flow dynamics.

Before it’s here, it’s on Smartkarma

Event-Driven: NTT (Nippon Telegraph & Telephone), Gcl Poly Energy Holdings Limited, Hanmi Science, Ramsay Health Care, Link Administration, Ultra Electronics Holdings, Spirit Airlines and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • TOPIX Rebalance: Flows at the Close on 29 June
  • GCL Poly (3800 HK): Double Index Inclusion & HUGE Passive Inflows
  • KOSPI Size Index Series: September Rebalancing Preview
  • Merger Arb Mondays (27 Jun) – Ramsay Health, Link Admin, Link Net, True/DTAC, ResApp, Giordano
  • Link Admin: Speculation Mounts that DND Will Revive the Deal with a Lower Offer
  • Cobham/​​Ultra Electronics: UK Government Approval
  • MergerTalk: Over To You, JetBlue!

TOPIX Rebalance: Flows at the Close on 29 June

By Brian Freitas

  • The third tranche of the FFW methodology change for the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) will be implemented at the close of trading on 29 June.
  • One-Way flow is ~JPY 742bn and will be spread across 2170 stocks. The largest inflow will be on NTT (9432 JP) and the largest outflow on Toyota Motor (7203 JP).
  • Stocks with the largest impact of inflows have outperformed stocks with the largest impact of outflows, but there has been underperformance over the last couple of weeks.

GCL Poly (3800 HK): Double Index Inclusion & HUGE Passive Inflows

By Brian Freitas

  • After being suspended for 7 months for not publishing its 2020 annual results, Gcl Poly Energy Holdings Limited (3800 HK) resumed trading on 1 November 2021.
  • We expect Gcl Poly Energy Holdings Limited (3800 HK) to be added to the MSCI China Index in August and to the FTSE All-World Index in September.
  • Passive index trackers will need to buy over US$1.1bn of stock over the next few months. The stock has run-up inline with peers and this demand could keep it supported.

KOSPI Size Index Series: September Rebalancing Preview

By Sanghyun Park

  • We generally detect an increase in the buying volume of local institutions for stocks moving from Large Cap to Mid Cap ahead of the KOSPI size index rebalancing.
  • At the last close, Mid→Large: Pan Ocean, Hyundai Mipo, BGF Retail, & OCI / Large→Mid: Hanmi Science, KCC, DB Hitek, & KEPCO E&C
  • The level of price impact/correlation in the last rebalancing was exceptionally high. This is reason enough for us to consider setting up a preemptive position for this rebalancing event.


Link Admin: Speculation Mounts that DND Will Revive the Deal with a Lower Offer

By Arun George

  • The AFR reports that after weeks of talk, Dye & Durham (DND) is expected to lob a revised lower proposal for Link Administration (LNK AU) as soon as this week.
  • Presumably, DND’s justification for a lower offer is to facilitate ACCC approval timelines. It remains to be seen if this is enough for the Board to recommend a lower offer. 
  • Tweaking the IE’s valuation range for the current peer multiples and PEXA Group (PXA AU) share price points to a Link valuation range of A$3.52-4.40 per share. 

Cobham/​​Ultra Electronics: UK Government Approval

By Jesus Rodriguez Aguilar

  • The £2.55 billion takeover of Ultra by Advent looks set to be waved on by the UK government after the Business Secretary said he was minded to accept the deal.
  • Cobham was itself taken over and broken up by Advent over the course of 2019 and 2020, amidst some controversy. As in that case, Advent will bag its prey. 
  • The 3500p offer price represents 15.4x EV/Fwd EBITDA (same as at the time of deal announcement). Gross spread is 1.49%, estimated annual return is 8.8% (assuming settlement by 30 August).

MergerTalk: Over To You, JetBlue!

By Robert Sassoon

  • Frontier Airlines (ULCC US)’s improved terms for Spirit Airlines (SAVE US)  still falls well short of the Jetblue Airways (JBLU US) offer
  • ULCC’s enhanced downside protection matching JBLU’s reverse termination fee and bettering its prepayment proposal is the key swing factor where the regulatory path to approval is challenging for either transaction
  • Given its vigorous pursuit of SAVE so far, we expect JBLU will quickly respond with another counter offer in order to regain the initiative which should keep arbs interested 

Before it’s here, it’s on Smartkarma

Event-Driven: Playtech Plc, Toshiba Corp, SenseTime Group, Kakao Pay, West African Resources and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • TTB/Playtech: PUSU Deadline Looming
  • Asia-Pac Weekly Risk Arb Wrap: Toshiba, Uniden, Giordano, ResApp, Infomedia, SPH REIT, Toyo
  • Last Week in Event SPACE: Toshiba, Hutch Tel, SenseTime, Giordano, DTAC/True, Toyo Const., ResApp
  • Kakao Pay: MSCI Will Likely to Continue to Treat Alipay as a Strategic Investor
  • Index Rebalance & ETF Flow Recap: HSCI, SET50, S&P/ASX, MSCI, EMP PM, AMRT IJ, AMFI, SKT/KT

TTB/Playtech: PUSU Deadline Looming

By Jesus Rodriguez Aguilar

  • PUSU deadline for TTB (Gopher) has been extended until 15 July. Playtech states that this time will allow progress in additional negotiations. Talks are credible, but progress is at snail’s pace.
  • Taking comparables’ median 9x EV/Fwd EBITDA, fair value for Playtech would be 772p. TTB should offer close to 800p to entice the Honk Kong based shareholders who derailed Aristocrat’s offer.
  • I see the current valuation of Playtech as an attractive entry point, with the upside of a likely bid. Long PTEC LN.

Asia-Pac Weekly Risk Arb Wrap: Toshiba, Uniden, Giordano, ResApp, Infomedia, SPH REIT, Toyo

By David Blennerhassett


Last Week in Event SPACE: Toshiba, Hutch Tel, SenseTime, Giordano, DTAC/True, Toyo Const., ResApp

By David Blennerhassett

  • There is a risk that the ¥7,000/share bid for Toshiba Corp (6502 JP) gets pulled/lowered in Round 2 because of due diligence, conditionality, market environment, etc.
  • Hutchison Telecommunications Hong Kong Holdings (215 HK)‘s share price was up 33% month to date, on triple the average daily volume. Then promptly sheds 23% on an even larger volume. 
  • Even if one assumes that Softbank, Baba, and Cornerstones won’t sell, there is still 45% of SenseTime Group (20 HK) of shares out, worth US$11bn, unlocking next week.

Kakao Pay: MSCI Will Likely to Continue to Treat Alipay as a Strategic Investor

By Douglas Kim

  • In our view, MSCI will likely to continue to treat Alipay as a strategic investor in Kakao Pay (377300 KS). 
  • This will likely result in a failed inclusion of Kakao Pay in the next round of MSCI Korea Index rebalance.
  • We also make a comparison to Kakao Pay-Alipay with another block sale involving Kakao Games Corp (293490 KS) and Netmarble Corporation (251270 KS).

Index Rebalance & ETF Flow Recap: HSCI, SET50, S&P/ASX, MSCI, EMP PM, AMRT IJ, AMFI, SKT/KT

By Brian Freitas

  • No changes for Asia Pacific at the MSCI Annual Market Classification Review. Lots of improvements needed for Korea to move from EM to DM in June 2025 at the earliest.
  • Lots of changes expected for the HSCI and S&P/ASX family in September. Emperador Inc (EMP PM) and Sumber Alfaria Trijaya Tbk Pt (AMRT IJ) are potential FTSE inclusions in September.
  • Shimao Services Holdings Limited (873 HK) started trading on Thursday and MSCI has announced the deletion of the stock from the MSCI China Index at the close on 27 June.

Before it’s here, it’s on Smartkarma

Event-Driven: iShares MSCI South Korea Index Fund (ETF), Baozun, Korea Stock Exchange Kospi 200 Index, XPeng, NARI Technology Co Ltd A and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • MSCI Annual Market Classification Review: Korea Doesn’t Make It to the Watchlist
  • China E-Commerce Pair Trade: Long Bozun Short Huitongda
  • Korea May Continue to Fail MSCI DM Inclusion Unless Allowing for K200 Options Listing on SGX
  • Shanghai/​​​​​Shenzhen Southbound Connect: Weekly Moves (24 June 2022)
  • Shanghai/​​​​​Shenzhen Northbound Connect: Weekly Moves (24 June 2022)

MSCI Annual Market Classification Review: Korea Doesn’t Make It to the Watchlist

By Brian Freitas

  • MSCI had announced the results of the 2022 Global Market Accessibility Review earlier this month. Based on that, no changes were expected at the Market Classification Review.
  • Earlier this morning, MSCI announced the results of the Market Classification Review and there are no changes for Asia.
  • Korea has not been placed on the watchlist for an upgrade from Emerging to Developed Market. The earliest that Korea could be reclassified from EM to DM is now 2025.

China E-Commerce Pair Trade: Long Bozun Short Huitongda

By Oshadhi Kumarasiri

  • Chinese e-commerce is having a solid month with most names up 30% in June. Yet this seems more a dead-cat-bounce than a change in direction of the share price momentum.
  • While there’s plenty of additional downside to big e-commerce players in e-commerce, smaller ones such as Baozun Inc. (BZUN US) has limited down side with shares trading near 1.0x P/B multiple.   
  • Meanwhile Huitongda (9878 HK) is yet to experience the post IPO sell-off and trading at expensive multiples. This raises an opportunity for a Long Bozun Short Huitongda trade.

Korea May Continue to Fail MSCI DM Inclusion Unless Allowing for K200 Options Listing on SGX

By Sanghyun Park

  • The KRX and the MSCI have not agreed on the full right to use the KRX indexes’ price information. This should be the essential cause of Korea’s failed DM inclusion.
  • The MSCI wants to list the KOSPI 200 Options on the SGX, which the MSCI sees as a prerequisite for taking the lead in the Korean passive market.
  • Suppose the government takes a forward-looking approach to this issue. In that case, we may see the K200 Options SGX listing that has a bigger market impact before DM inclusion.

Shanghai/​​​​​Shenzhen Southbound Connect: Weekly Moves (24 June 2022)

By David Blennerhassett

  • Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
  • Overall, net inflow over the past week was ~US$1.3bn, split US$0.4bn for Shanghai and US$0.9bn for Shenzhen.
  • The largest inflows were into XPeng (9868 HK) and HKEX (388 HK). The largest outflow was in Meituan (3690 HK) and Koolearn (1797 HK).

Shanghai/​​​​​Shenzhen Northbound Connect: Weekly Moves (24 June 2022)

By David Blennerhassett


Before it’s here, it’s on Smartkarma