Event-Driven

Last October, activist Palliser Capital launched a campaign (presentation) on well-known “stub trade” Keisei Electric Railway Co (9009 JP) with a stake of about 1.6%.
The proposal? Monetise a decent stake in Oriental Land (4661 JP), repurchase shares, and invest for growth. Keisei responded 6-8 weeks ago with a buyback and 1% OLC stake sale.
I thought that was time to bail. That was it. But now, Palliser has re-engaged. Today a press release (Japanese/English) and a Letter to the Board.

18yrs Later, Shin-Etsu Chem Takes Out Sub Mimasu Semi (8155) – Cheap But Whatchagonnado?

Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), has announced a Tender Offer to take out minorities in Mimasu.
This is not surprising. They bought in 19 years ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. But it’s too cheap.
Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 52%. Then they need a bit to get them to 67% but it should be straightforward.

Japan – Increase in Shorts & Potential Passive Selling in May

There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in May.
The deletion from passive portfolios will lead to a liquidity event at the end of May where passive trackers will need to sell multiple days of ADV.
Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.

Today, Korean Regulators Unveiled an Electronic System Aimed at Blocking Naked Short-Selling

Today’s reveal includes two main parts: first, setting up internal balance management for investors; second, building the detection system to block naked short-selling.
FSC and FSS haven’t provided a set date for system completion but suggest it may start late this year or early next year. Uncertainty remains on overseas investor participation.
A decision on short selling is due in June, but no confirmation was given today. However, the local market anticipates short selling resuming before this system is fully operational.

An Overlooked Passive Flow Potential for the Korea Index: Foreign Listing Materiality

With the rise in Coupang’s market cap, it’s imperative to evaluate if the Korea Index can attain eligibility to include foreign-listed companies.
Coupang’s 45% YTD surge nears a $41B market cap, with a 65% free-float rate equating to $27B. Yet, to meet Korea Index eligibility, an additional $23B is needed.
Aside from Coupang, more companies are preparing for overseas listings. Also, potential stock price increases for Coupang should be considered. The combined market cap approaches the US$50B threshold.

Quiddity Leaderboard SE600 Mar 24: 7 Changes Likely; Expected ADDs Could Outperform Expected DELs

The SE600 index is one of the most widely followed benchmark indices in Europe. This index is rebalanced on a quarterly basis.
In this insight, we take a look at the potential index changes that could take place between now and the end of the June 2024 index rebal event.
Currently, I see 7 ADDs and 7 DELs for the SE600 index. There are more names just outside the border requiring small price changes to get involved in index changes.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 25

Daily Brief Event-Driven: HK REITs Re-Rate On Southbound Inclusion and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HK REITs Re-Rate On Southbound Inclusion
IDX30/LQ45/IDX80 Index Rebalance: BIG Flows for Some Stocks
Quiddity Leaderboard DAX/MDAX Mar 24: Traton Could Outperform the DAX Index
HSCI Index Rebalance Preview: Robosense (2498 HK) Could Be Added in June
Quiddity Leaderboard F100/250 Jun 24: Potential ADDs Could Outperform the Index
International Paper/DS Smith: Spread

HK REITs Re-Rate On Southbound Inclusion

In RMB Dual Counter Trading Is Coming – This Changes AH Relationships, Travis Lundy discussed the forthcoming inclusion of RMB dual counters in the Hong Kong Southbound Connect programs.
This is but one of the five capital market cooperation measures announced by the CSRC last Friday.
The other four measures include ETFs, improving mutual recognition of funds, increasing China IPOs in Hong Kong, and the inclusion of REITs. This insight discusses the latter.

IDX30/LQ45/IDX80 Index Rebalance: BIG Flows for Some Stocks

There are 2 constituent changes for the LQ45 Index and 6 constituent changes for the IDX80 Index at the rebalance to be implemented at the close on 30 April.
The largest passive inflows are expected in Amman Mineral Internasional (AMMN IJ), Indosat Tbk PT (ISAT IJ), Bank Rakyat Indonesia (BBRI IJ) and Merdeka Copper Gold Tbk PT (MDKA IJ).
With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.

Quiddity Leaderboard DAX/MDAX Mar 24: Traton Could Outperform the DAX Index

In this insight, we take a look at the potential ADDs/DELs for the DAX index and the MDAX index in the run up to the June 2024 index rebal event.
I currently see no changes for the DAX index but there could be one change for the MDAX index.
M&A candidate MorphoSys AG (MOR GR) could be deleted in the run up to the June 2024 review.

HSCI Index Rebalance Preview: Robosense (2498 HK) Could Be Added in June

There were only 12 new listings on the Main Board of the HKEX (388 HK) in the first quarter of the year. More than half the listings were in March.
Of those stocks, we only see Robosense Technology (2498 HK) having a chance of being added to the HSCI in June and then into Southbound Stock Connect.
There is a big lock-up expiry for Robosense Technology (2498 HK) in July and that should keep the stock under pressure.

Quiddity Leaderboard F100/250 Jun 24: Potential ADDs Could Outperform the Index

In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the June 2024 index rebal event.
I see two regular changes for the F100 index during the June 2024 review. There are more names very close to triggering F100 index changes.
I see eight other changes for F250 in the run up to the June 2024 review including three intra-review changes. One of those intra-review changes will be confirmed later today.

International Paper/DS Smith: Spread

By Jesus Rodriguez Aguilar

Following the withdrawal of Mondi PLC (MNDI LN) from the contest to acquire DS Smith PLC (SMDS LN), the gross spread to the deal turned negative (from >10%).
At the median 7.07x EV/Fwd NTM EBITDA (within the range of former transactions), the implied equity value of DS Smith would be 388.4p. (vs. an IBES consensus TP of 395p).
IP is giving away most of the synergies. Spread is 1.91%/2.86% (gross, annualized assuming settlement by Y/E). I would wait for the spread to widen, before setting it up.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 24

Daily Brief Event-Driven: Find Out When HMM’s Upcoming Early Redemption Requests Might Drop and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Find Out When HMM’s Upcoming Early Redemption Requests Might Drop
Tiantan (600161CH) To Acquire Weiguang (002880CH)- New King Rises in China’s Blood Products Industry

Find Out When HMM’s Upcoming Early Redemption Requests Might Drop

Despite this pattern persisting for years, there has still been a significant price impact each time it surfaces. Therefore, we should pay attention to the upcoming CB conversion schedule.
A consistent observation is that the price impact is most significant at the announcement of early redemption requests.
The anticipated announcement dates for the forthcoming early redemption requests are: around May 20th (195th conversion), around September 20th (196th conversion), and around March 20th of next year (197th conversion).

Tiantan (600161CH) To Acquire Weiguang (002880CH)- New King Rises in China’s Blood Products Industry

By Xinyao (Criss) Wang

Guangming District State-owned Assets Supervision and Administration Bureau reached a cooperation agreement with China National Biotec to establish a joint venture, which will become the new controlling shareholder of Weiguang.
Since Tiantan is already Sinopharm’s subsidiary, there will be horizontal competition issue in the field of blood product business between Tiantan and Weiguang, mainly due to significant business overlap.
Some spin-offs and integrations are expected between Tiantan and Weiguang. As the reform of SOE enters a new stage, the two companies could end up very different.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 23

Daily Brief Event-Driven: RMB Dual Counter Trading Is Coming – This Changes AH Relationships and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

RMB Dual Counter Trading Is Coming – This Changes AH Relationships
Jardine Cycle & Carriage Is A Short
Roland DG (6789 JP): Taiyo Mulling Three Options or Is It?
Investor Activism Update: Seven & I Sets the Path in Investor Activism Battle
Krafton: Block Deal Sale of About 270 Billion Won
HK Connect SOUTHBOUND Flows (To 19 Apr 2024); Strong Net Buying on Energy/Finance/Telco SOEs. Again.
Quiddity Leaderboard TDIV Jun 24: LONGs up 6% Vs SHORTs in a Month; Time to Update
Mr. Choi Goes to Washington
A/H Premium Tracker (To 19 Apr 2024): Liquid AH Premia Even Higher; Lots Of “Carry” In The Market
Mainland Connect NORTHBOUND Flows (To 19 Apr 2024): NB Net Seller; Semi-Tech Buys, Renewables Sold

RMB Dual Counter Trading Is Coming – This Changes AH Relationships

A week after the State Council issued “Several Opinions” (关于加强监管防范风险推动资本市场高质量发展的若干意见》), the CSRC announced Friday five capital market cooperation measures with HK Connect. The goals are to increase cross-border investor flows.
They include: a broader range of ETFs in Connect, including REITs in both directions, include RMB counters in Southbound, improve mutual recognition of funds, increasing China IPOs in Hong Kong.
RMB Dual Counters Southbound-eligible will take time. They have some homework, but it is on the “To Do” list “as soon as possible and smoothly.” Watch impact on H/A Pairs.

Jardine Cycle & Carriage Is A Short

Jardine Cycle & Carriage (JCNC SP)‘s current implied stub value is around its highest-ever level.
The simple ratio of JCNC/Astra International (ASII IJ) is at its highest level outside the 2008 GFC.
A weak Indonesian rupiah is likely a factor. Still, JCNC is trading rich to its NAV. A takeover from parent Jardine Matheson Holdings (JM SP) is idealistic.

Roland DG (6789 JP): Taiyo Mulling Three Options or Is It?

On 19 April, Taiyo Co-CEO Brian Heywood told Bloomberg and Reuters they were considering three options to Brother Industries (6448 JP)’s tender for Roland DG Corp (6789 JP).
Taiyo’s options are bumping its offer, walking away or tendering into the Brother’s offer if it bumps and alleviates dis-synergies concerns.
All three options are likely a ruse. Taiyo’s primary play is to frustrate and pressure Brother to withdraw its bid if it cannot get the Board’s recommendation.

Investor Activism Update: Seven & I Sets the Path in Investor Activism Battle

By Oshadhi Kumarasiri

Value Act’s recent statement might suggest that they have prevailed and Seven & I Holdings (3382 JP) has yielded to their demands. However, the reality might be less straightforward.
Value Act sought new market expansion, but Seven & I is focused on reinforcing its presence in existing, well-established markets.
Given Value Act’s impatience, their acceptance of Seven & I’s plan for a 2026 Super Stores IPO, contingent on a business transformation, is unexpected.

Krafton: Block Deal Sale of About 270 Billion Won

After the market close on 22 April, it was reported that SK Square plans to sell 2.2% stake in Krafton in a block deal sale worth about 270 billion won.
The estimated block deal sales price range is from 243,000 won to 251,000 won, representing a 3.1% to 6.2% discount to the closing price of 259,000 won on 22 April.
We would take the deal. The company’s valuations remain attractive and it has been successful in expanding its sales and profits.

HK Connect SOUTHBOUND Flows (To 19 Apr 2024); Strong Net Buying on Energy/Finance/Telco SOEs. Again.

A shares were up on the week, while Hs were down. BIG divergence among liquid names.
Net SOUTHBOUND buying was +HK32.1bn. SOUTHBOUND ended its consecutive post-CNY daily net buy streak on 25 March, then started a new one. No net sell days since.
Little market news. More geopolitical news. SOE bank H-shares are seeing relentless net and gross buying, very very little selling.

Quiddity Leaderboard TDIV Jun 24: LONGs up 6% Vs SHORTs in a Month; Time to Update

In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the June 2024 index rebal event.
Since my last insight, my index change expectations and flow expectations have changed significantly.
My latest estimate for one-way flow in June 2024 is US$1.06bn (down from US$1.22bn a month ago).

Mr. Choi Goes to Washington

The Deputy Prime Minister Choi Sang Mok reaffirmed the Corporate Value Up program, pushing up the major value driven/low PBR stocks in Korea today.
Deputy Prime Minister Choi emphasized that as part of Corporate Value Up program, corporate tax benefits to companies that have made efforts to strengthen shareholder return policy will be provided.
The Korean government also plans to revise the law to separate taxation on the dividend income of shareholders of companies that expand dividends.

A/H Premium Tracker (To 19 Apr 2024): Liquid AH Premia Even Higher; Lots Of “Carry” In The Market

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. NORTHBOUND has been selling recently (this week and last buying semi tech, selling renewables)
Hs fell sharply vs As. AH Premia very wide. Alpha on portfolio vs straight H vs A but a bad week as liquid Hs underperformed liquid As by 2.5+%.

Mainland Connect NORTHBOUND Flows (To 19 Apr 2024): NB Net Seller; Semi-Tech Buys, Renewables Sold

The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
Last week saw NORTHBOUND net SELL RMB 6.7bn of A-shares on decent volume. A-shares out-performed H-shares quite dramatically, taking back H-share gains from the week before, which reversed prior weeks.
This week saw net buying of semiconductor/chip names, and net selling of the EV/Solar/Battery space and buying of the Ping Ans, but most notable was liquid A vs H performance.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 22

Daily Brief Event-Driven: Significant Developments Emerged Today for Korea’s Value-Up and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Significant Developments Emerged Today for Korea’s Value-Up
Merger Arb Mondays (22 Apr) – Shinko, Inageya, C&F Logistics, Hollysys, Azure, Qantm IP, Tietto
EQD / NSE Volatility Update / 15-Apr-24 to 19-Apr-24
Nippon Steel/United States Steel Corp

Significant Developments Emerged Today for Korea’s Value-Up

Deputy PM Choi Sang-mok commits to aggressively pursue separate taxation of dividend income, marking a shift towards concrete action for value-up policies.
Ever since the introduction of the Value-up policy earlier this year, the primary incentive championed by the local capital market has been the separate taxation of dividend income.
Hence, the government’s official commitment to this marks a crucial step in reshaping the Value-up momentum.

Merger Arb Mondays (22 Apr) – Shinko, Inageya, C&F Logistics, Hollysys, Azure, Qantm IP, Tietto

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: Qantm Intellectual Property (QIP AU), Southern Cross Media (SXL AU), Azure Minerals (AZS AU), QV Equities Ltd (QVE AU), Hollysys Automation Technologies (HOLI US), Shinko Electric.
Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Roland DG Corp (6789 JP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU), Newmark Property REIT (NPR AU), Lawson.

EQD / NSE Volatility Update / 15-Apr-24 to 19-Apr-24

By Sankalp Singh

Unprecedented levels of FII option-buying & increasing geo-political risk causing IVs to re-price higher.
Skew/ Smile characteristics of the Vol Surface reflect increased risk aversion but not it panic mode – yet.
BankNifty IVs exhibiting unusual “kink-in-the-curve”. Enter barbell structures to position for reversion in curve shape.

Nippon Steel/United States Steel Corp

By Jesus Rodriguez Aguilar

On 18 April, a White House official said that any review of the deal between Nippon Steel Corporation (5401 JP) and United States Steel (X US) by CFIUS will continue as scheduled.
X shares trade at ~5.2x on NTM IBES-consensus EBITDA given priced-in deal risk vs. implied 7x at the time of the winning NSC’s bid, and look attractive relative to comparables.
There remains a possibility that Nippon could finalize the takeover after the U.S. presidential election, presenting potential upside.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 21

Daily Brief Event-Driven: (Mostly) Asia-Pac M&A: Lynas and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia-Pac M&A: Lynas, Tietto Minerals, JSR, Shinko Electric, TDCX
Weekly Deals Digest (21 Apr) – Hollysys, Shinko, Inageya, Hang Lung, Kokusai, HD Hyundai Marine
Last Week in Event SPACE: Pasona/Benefit One, Hang Lung Properties, Hollysys, Azure Minerals

(Mostly) Asia-Pac M&A: Lynas, Tietto Minerals, JSR, Shinko Electric, TDCX

Tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
No new deals were discussed on Smartkarma this week; although a Lynas Corp Ltd (LYC AU) / MP Materials Corp (MP US)tie-in (again) rumoured.
Key updates took place on: Azure Minerals (AZS AU), Tietto Minerals (TIE AU), JSR Corp (4185 JP), Shinko Electric (6967 JP), TDCX (TDCX US), and Hollysys Automation Technologies (HOLI US).

Weekly Deals Digest (21 Apr) – Hollysys, Shinko, Inageya, Hang Lung, Kokusai, HD Hyundai Marine

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: Kokusai Electric (6525 JP) and J&T Global Express (1519 HK) lock-ups. HD Hyundai Marine Solution (443060 KS), ZEEKR (ZK US) and Sichuan Baicha Baidao Industrial (2555 HK) IPOs.
Event-Driven developments: Hollysys Automation Technologies (HOLI US), Shinko Electric Industries (6967 JP), Inageya Co Ltd (8182 JP), Hang Lung Properties (101 HK), Tietto Minerals Ltd (TIE AU).

Last Week in Event SPACE: Pasona/Benefit One, Hang Lung Properties, Hollysys, Azure Minerals

Pasona (2168 JP)will pay out 10-20% of the extraordinary gain from the Benefit One (2412 JP) sale. It will take its sweet time doing so. For no apparent reason.
Hang Lung Properties (101 HK)‘s first-ever scrip dividend provides the means for the Chan Family to indirectly chip away at minorities.
Hollysys Automation Technologies (HOLI US) accountant resignation announcement is a nothing burger. An update on PRC regulatory approvals would be welcome about now though.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 20

Daily Brief Event-Driven: Quiddity Leaderboard S&P 500 June 2024 – Minimal Changes Expected but Intrareview Changes Possible and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Quiddity Leaderboard S&P 500 June 2024 – Minimal Changes Expected but Intrareview Changes Possible
Quiddity Leaderboard KOSPI 200 Jun 24: Four Changes Likely
EQD | S&P500 Futures (ES) Deeply Oversold WEEKLY, Reversal (Probably) Imminent

Quiddity Leaderboard S&P 500 June 2024 – Minimal Changes Expected but Intrareview Changes Possible

The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
The index is reviewed quarterly. The next review will be in June 2024 and the evaluation date for the rankings for the constituent selection process is 6th June 2024.
In this insight, we take a look at the Potential ADDs and Potential DELs for the June 2024 index rebal event and the intra-review ADDs/DELs.

Quiddity Leaderboard KOSPI 200 Jun 24: Four Changes Likely

KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX).
In this insight, we take a look at the names leading the race to become ADDs and DELs during the upcoming semiannual review in June 2024.
We expect up to four changes in the KOSPI 200 index during the June 2024 index rebal event (down from 5 expected last month) based on the latest available data.

EQD | S&P500 Futures (ES) Deeply Oversold WEEKLY, Reversal (Probably) Imminent

By Nico Rosti

The S&P500 has been falling for 3 weeks and 6 days, it is very oversold.
The current Market Reversal Matrix pattern suggests a high probability LONG trade for this coming week and the next.
The support price area where to enter LONG is the 4950-4900 but also higher prices between 5000 and 4950 could be a good entry point, although a bit riskier.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 19

Daily Brief Event-Driven: Azure Min’s (AZS AU)’s “Boost” As Gina Ups Stake in Lynas and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Azure Min’s (AZS AU)’s “Boost” As Gina Ups Stake in Lynas
Shinko Electric (6967 JP): Widening Spread Is an Opportunity
Inageya (8182 JP): Share Exchange Offer from USMH (3222 JP)
SoftBank (9984 JP): Arm Out-Stretched (On Valuation) And Is JPY Depreciation Largely Done?
NPN X PRX: Discounts Widen as Fed Pivots on Rate Outlook

Azure Min’s (AZS AU)’s “Boost” As Gina Ups Stake in Lynas

On the 8th April, Azure Minerals (AZS AU) shareholders overwhelmingly approved the Sociedad Quimica y Minera (SQM US)/Gina Rhinehart’s Hancock transaction. Shares promptly closed down 7% on regulatory approval fears.
Those fears are unwarranted. China’s Tianqi Lithium would indirectly own just ~11% in Azure post-deal. China has recently lifted anti-dumping tariffs on a range of Aussie products. FIRB won’t block.
An expected approval may have spurred Gina to buy more shares in Lynas (LYC AU). Why buy now if FIRB dings Azure; that outcome would push the whole sector lower.

Shinko Electric (6967 JP): Widening Spread Is an Opportunity

Shinko Electric Industries (6967 JP)‘s pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The gross spread widened from a low of 3.1% on 14 March to 7.0%.
The widening spread can be attributed to China SAMR approval timing, earnings risk, Ibiden Co Ltd (4062 JP)’s material underperformance lowering the break price and a large fund liquidating positions.
The deal break risks remain low with the timing remaining the key risk. The current 7.0% spread is an attractive opportunity to add.

Inageya (8182 JP): Share Exchange Offer from USMH (3222 JP)

Inageya Co Ltd (8182 JP) announced a share exchange offer by United Super Markets (3222 JP) at 1.46 USMH shares per Inageya share.
The share exchange aligns with Aeon Co Ltd (8267 JP)’s well-flagged intention of making Inageya a wholly-owned subsidiary of USMH.
Aeon’s 50%+ shareholding in Inageya and USMH facilitates the two EGM votes. The deal metrics are broadly fair for both sets of shareholders.

SoftBank (9984 JP): Arm Out-Stretched (On Valuation) And Is JPY Depreciation Largely Done?

By Victor Galliano

Arm – which we estimate accounts for 45% of SoftBank group’s equity value – is experiencing limits to its “growth at any price” stock status; the shares fell 12% yesterday
The JPY’s depreciation is supportive of the group NAV, but with the Fed’s hawkish stance well known and BoJ expected to raise interest rates, JPY weakness may be largely done
SoftBank shares trade at a wide 53%+ discount to the estimated NAV; yet we see downside risks to Arm’s valuation, along with the potential for JPY weakness to reverse

NPN X PRX: Discounts Widen as Fed Pivots on Rate Outlook

By Charlotte van Tiddens, CFA

The discounts of both Naspers and Prosus have widened during the last 5 trading sessions.
We see current levels as attractive entry points for trading the rump.
In our view, there are a number of fundamental factors that could act as positive catalysts to a further structural narrowing of the discount.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 18

Daily Brief Event-Driven: Shinko Electric (6967) – Break/Gap Risk Update and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Shinko Electric (6967) – Break/Gap Risk Update
JSR (4185) – Deal Done, Now Back End Arbs Need To Be Card Counters
Hang Lung Group: Thoughts On HLP’s Scrip Dividend
Hang Lung Properties (101 HK): Scrip Div Helps the Family to Chip Away at Minorities
Lynas (LYC AU): Gina’s Stake Revives MP Materials Merger
ChiNext/ChiNext50 Index Rebalance Preview: Plenty of Overlap Between the Indices
Hollysys (HOLI US): This Is A Buy
Lock&Lock Tender Offer: Different Trading Angles Compared to Recent Ssangyong C&E Case
Lock & Lock: Affinity Equity Partners Offers a Tender Offer of a 30% Stake at 8,750 Won Per Share
Quiddity Leaderboard ASX Jun 24: A Couple of Intra-Review Changes Likely

Shinko Electric (6967) – Break/Gap Risk Update

When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
12wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 5wks ago, reco’d trimming.
Shinko had outperformed Ibiden, and gross spreads had come in 5+% on JSR’s approval. Spreads are now 3% wider than their narrowest, but gap risk has widened as Shinko outperforms.

JSR (4185) – Deal Done, Now Back End Arbs Need To Be Card Counters

Today after the close, the results of the JSR Corp (4185 JP) Tender Offer were announced. Bidco JICC-02 obtained 84.36% of the shares out in the Tender Offer.
That means imminent index downweights, delayed index downweights, and theoretically another selldown on the last day of listed existence.
News which came up since the start of the Tender Offer make this a little more difficult than it might have otherwise been.

Hang Lung Group: Thoughts On HLP’s Scrip Dividend

And eagle-eyed reader spotted Hang Lung Properties (101 HK)‘s scrip dividend option for the FY23 final dividend. That’s the first time I’ve seen HLP provide this alternative.
Over the years, the Chan family and Hang Lung (10 HK) have chipped away at HLG’s and HLP’s minorities. HLP and HLG are currently trading at all-time low P/Bs.
This scrip dividend, which takes a page out of Jardine Matheson (JM SP)‘s playbook, would boost HLG’s stake in HLP to ~63% from 61.24% currently; if opting only for scrip.

Hang Lung Properties (101 HK): Scrip Div Helps the Family to Chip Away at Minorities

In its final results on 30 January, the Hang Lung Properties (101 HK) board declared a final dividend of HK$0.60 per share, which can be paid in cash or by scrip.
The Chan family’s share of outstanding shares has steadily increased from 53.15% in 2013 to 61.89%. The scrip dividend could increase the family to 63.57% of post-dividend outstanding shares.
The Chan family have plenty of headroom to chip away at minorities before breaching the 25% public float requirements. HPL’s valuation is undemanding, but a privatisation offer is unlikely.

Lynas (LYC AU): Gina’s Stake Revives MP Materials Merger

Lynas Corp Ltd (LYC AU) is the proverbial Aussie battler. Post the 2018 general elections, the new Malaysian government put Lynas on notice it may halt it rare-earth operations.
Since then, Lynas’ Malaysian facility, which cuts into China’s near-monopoly on processing elements for defense/aerospace/EV/electronics industries, has (mostly) operated without substantial disruptions. Profit peaked in FY22; but has since rolled-over.
Gina Rhinehart’s Hancock has now disclosed a 5.82% stake in Lynas; having disclosed a 5.3% stake in MP Materials (MP US) earlier this month. Lynas confirmed discussions with MPM in February.

ChiNext/ChiNext50 Index Rebalance Preview: Plenty of Overlap Between the Indices

Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
There are overlapping names for the two indices and some of the stocks will also have flows from the CSI Smallcap 500 Index – Shang (SH000905 INDEX) trackers.
The potential adds have outperformed the potential deletes between 9-10% for both indices over the last month with the deletes dropping a lot more than the adds.

Hollysys (HOLI US): This Is A Buy

On the 8th February 2024, 85% of Hollysys Automation (HOLI US ) shareholders present and via proxy, voted for Ascendent Capital’s Offer. After three-plus years, the end was finally in sight.
Then crickets. The merger was to complete in the 1Q. On the 15th April, HOLI released an accountant resignation notice. No word on dissenters or regulatory approvals. Shares sold off.
The accountant resignation is a nothing burger. HOLI should lift their game and provide more transparency on the outstanding merger conditions. Still, the spread is attractive. This is a buy.

Lock&Lock Tender Offer: Different Trading Angles Compared to Recent Ssangyong C&E Case

The tendering price is ₩8,750, roughly 7% higher than the last close. However, Affinity’s commitment makes this event noteworthy.
Lock&Lock requires Affinity to target 30%. To reach 95%, securing 25% is needed, much higher than SsangYong C&E, indicating potential price volatility.
A second public offering is likely due to the widening gap between the ownership threshold and actual acquisition percentage in Lock&Lock. This could impact prices significantly during the tendering period.

Lock & Lock: Affinity Equity Partners Offers a Tender Offer of a 30% Stake at 8,750 Won Per Share

On 17 April, Affinity Equity Partners offered a tender offer of a 30% stake in Lock & Lock at 8,750 won per share.
The tender offer period is from 18 April to 14 May. The number of shares that are included in this tender offer is 13.14 million shares (30.33% of outstanding shares).
Lock & Lock’s share price could trade higher close to the tender offer price of 8,750 won as the date as the end of the tender offer period approaches.

Quiddity Leaderboard ASX Jun 24: A Couple of Intra-Review Changes Likely

In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run-up to the June 2024 index rebal event.
There are up to two intra-review changes possible between now and the June 2024 review which could triggered by the Silver Lake (SLR AU) and Boral (BLD AU) deals.
Separately, I see one ASX 20 change and two ASX 100 changes for the regular rebalance in June 2024.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 17

Daily Brief Event-Driven: Idemitsu (5019): First SumiChem’s and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Idemitsu (5019): First SumiChem’s, Now JERA’s Stake in Fuji Oil (5017) To Go to 22%. It’s Coming…
Market Chats About What Really Went Down with HPSP This Morning
Hollysys (HOLI US): Keep Calm as Closing Date Slips
Quiddity Leaderboard BSE/SENSEX Jun 24: Jio Financial Addition Creates New Possibilities
Megastudy Education: A Major Shareholder Return Policy in 2024-2026
J&T Global Express IPO Lock-Up Expiry – Tiny Float with 87%+ Stake Lockup Release Worth >US$8.8bn
Prysmian/Encore Wire: Agreed Offer
EQD | Hang Seng Down: Upcoming Bounce May Not Mean Rally Continuation

Idemitsu (5019): First SumiChem’s, Now JERA’s Stake in Fuji Oil (5017) To Go to 22%. It’s Coming…

In the mid-late teens, four refinery groups merged to create two refinery groups – JX and Tonen General became JXTG under ENEOS Holdings (5020 JP) and Idemitsu took over ShowaShell.
When Idemitsu got ShowaShell, it got 50+% in Toa Oil Co Ltd (5008 JP), 6.58% of Fuji Oil Co Ltd (5017 JP). In 2020, they tried to buy in Toa.
That was delayed by an activist. Today, Idemitsu announced they had gone to 23% in Fuji Oil. That stake will go up before it goes down.

Market Chats About What Really Went Down with HPSP This Morning

This morning’s HPSP (403870 KS) situation began with Maekyung’s report, indicating Crescendo PE contacted local bankers for the controlling stake sale.
The surge in HPSP’s stock price after Maekyung’s report suggests Crescendo PE’s tacit approval, implying their involvement in the news’s emergence.
Despite the likely confirmed sale of Crescendo PE’s stake, timing remains uncertain due to disclosure rules. Continued monitoring is vital, considering potential market reactions later.

Hollysys (HOLI US): Keep Calm as Closing Date Slips

On 15 April, Hollysys Automation Technologies (HOLI US) issued a 6-K filing stating that Ascendent remains in the process of obtaining regulatory approvals.
The gross spread has widened to 8% as the closing date has slipped from the end of March guidance, and an updated timeline is lacking.
A delay in securing regulatory approvals is not uncommon. However, regulatory approvals should be forthcoming as the transaction involves Chinese entities (including a SASAC entity) acquiring a Chinese-focused company.

Quiddity Leaderboard BSE/SENSEX Jun 24: Jio Financial Addition Creates New Possibilities

In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, and 200 Indices in the June 2024 index rebal event.
Wipro Ltd (WPRO IN)‘s deletion from Sensex is imminent but there are question marks over the top replacement names as this involves some subjectivity.
For BSE 100, Jio Financial Services (JIOFIN IN) is a new potential ADD and that has caused major changes to the index change expectations I had previously.

Megastudy Education: A Major Shareholder Return Policy in 2024-2026