Event-Driven

A Nikkei article today suggests FUNDING SECURED for JIP’s deal for Toshiba Corp (6502 JP). Noises 2wks ago suggested this timing for a deal, but there are no terms yet.
The syndicate, led by SMBC and Mizuho, “has agreed to ¥1.2trln in loans.” The two leads take two-thirds but details suggest not all is as smooth as the headline suggests.
The remaining questions are whether the major holders will take the bait at that price, and/or whether JIC would come in over the top. I expect yes to the first.

China ADRs Delisting – Christmas Came a Day Earlier than We Expected – No Delisting Risk for Now

By Sumeet Singh

Today PCAOB announced that they had secured complete access to inspect and investigate Chinese Firms for the first time in history.
This was on back of the Aug 2022 agreement between PCAOB, CSRC and MOF, which was followed up with a Hong Kong visit by PCAOB officials over Sep-Nov 2022.
We wrote about this on 14th Dec 2022 and expected the results to be out on Friday (16th Dec), they have come out a day earlier than we expected.

Yashili/Mengniu: Are We There Yet?

Back on the 6 May, Yashili International Holdings (1230 HK) announced a pre-conditional Offer, by way of a Scheme, from China Mengniu Dairy Co (2319 HK).
Pre-Conditions concern three sales and purchase agreements, all of which Yashili shareholders voted through on the 16 August.
From a regulatory standpoint, various conditions attached to Dumex China remain outstanding. But the wording in the most recent monthly update suggests the process is getting to the pointy end.

China ADRs: PCAOB Resets the Clock on Delistings; Implications

After getting ‘unprecedented access’ to inspect and investigate audit firms in the PRC, the PCAOB is vacating their 2021 determinations; there will be no ADR delistings in the near future.
PCAOB inspectors have identified numerous potential deficiencies that are consistent with what the PCAOB has encountered in other first-time inspections around the world.
The iShares MSCI China ETF (MCHI US), KraneShares CSI China Internet ETF (KWEB US) and NASDAQ Golden Dragon China Index (HXC INDEX) are trading lower in the U.S.

Toshiba (6502 JP): Securing Financing Helps Sentiment but Hurdles Remain

The Nikkei reports that Japan Industrial Partners (JIP), the preferred bidder, has secured bank financing of around JPY1.2 trillion (US$8.8 billion), conditional on Toshiba Corp (6502 JP) selling some businesses.
JIP will table an offer valuing Toshiba at JPY2.2 trillion (US$16 billion). The special committee is assessing the proposal and a final decision will be made at a board meeting.
JIP’s next challenge is getting the committee to recommend the offer. While a potential offer of JPY5,100 is not terrible, it is well below the original bid expectation of JPY6,000.

Discussing Why Meritz Swap Spread Not Being Narrowed & When to Enter

The swap arb spread has been consistently within the 3% to 5% band since November 23, when arb trading should have actually started.
Meritz Financial’s buyback seems to be making it difficult to build positions on expectations that the price gap relative to Fire and Securities will converge quickly with the swap ratio.
As the actual risk of repaying financial borrows is small, we should start building up positions two weeks before the end of January, aiming to exit in early or mid-February.

MinRes’ “Unconditional” Offer For Norwest

Iron ore and lithium play Mineral Resources (MIN AU) is offering one new share for every 1,367 Norwest Energy (NWE AU), an onshore O&G play, in an off-market takeover.
The implied value of A$0.06/share under the Offer represents a 27% premium to NWE’s one-month VWAP.
MinRes currently owns 19.9% in Norwest. There is no minimum acceptance condition. This is done and will trade tight.

Liquid Universe of European Ordinary and Preferred Shares: December ‘22 Report

By Jesus Rodriguez Aguilar

Since mid-November, spreads have shown a mixed performance across our liquid universe with a slight bias towards widening (10 have widened, 9 tightened).
Trade recommendations long ords / short prefs: Fuchs Petrolub, Henkel, Ericsson, Handelsbanken, SSAB Svenska Stal.
Trade recommendations long prefs / short ords: Sixt, VW, MFE-Media for Europe, Grifols, Atlas Copco.

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Dec 15

Daily Brief Event-Driven: Acotec/Boston Scientific: Even Higher Proration and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Acotec/Boston Scientific: Even Higher Proration
Toyo Construction (1890 JP): Pot Shots and Warning Shots
Yashili (1230 HK): Monthly Update Suggests that Pre-Condition Satisfaction in the Final Leg
CSI REITs Index: An Investable Benchmark Launches Today
PayTM (One 97 Communications) Announces a BUYBACK – Overhang Vs Feelings Vs Buyback Vs Index
Alpha Generation Through Share Buybacks in Korea: December 2022
Adani Enterprise US$2.4bn Raising Early Look – Lots to Think About: Controversies, Debt, Grand Plans

Acotec/Boston Scientific: Even Higher Proration

Back on the 12 December, Acotec Scientific Holdings (6669 HK) announced a Partial Offer from Boston Scientific (BSX US)
The Offer Price of $20/share is for up to 65% of shares out. Irrevocables total up to 60.14% of shares out, sufficient to clear the minimum tendering condition.
My initial read was that the proration was simply 65%. That was wrong. It is higher. Plus there are some interesting quirks to avoid breaching the public float post-Offer.

Toyo Construction (1890 JP): Pot Shots and Warning Shots

YFO’s press release alleges the Toyo Construction (1890 JP) Board will not recommend the tender as YFO is not a suitable owner rather than the JPY,1000 price being too low.
The Board responded that YFO violated the NDA by disclosing the reasons for the Board’s disapproval. This damages the understanding between the parties, an essential precondition to recommending the offer.
The start of the tender has been pushed back to late January 2023. YFO is committed and will not withdraw the offer for any reason that shareholders may consider unreasonable.

Yashili (1230 HK): Monthly Update Suggests that Pre-Condition Satisfaction in the Final Leg

Yashili International Holdings (1230 HK)‘s latest monthly update suggests that the remaining pre-condition, the 25% Yashili acquisition, is entering the final stages towards being satisfied.
The wording “in the course of processing the relevant application” suggests that the government authorities will grant the new registration certificate, which should be received shortly.
The gross spread is 6.2%. The downside is low as both Danone SA (BN FP) and China Mengniu Dairy Co (2319 HK) can waive conditions to satisfy the pre-condition.

CSI REITs Index: An Investable Benchmark Launches Today

The China Securities Index (CSI) will launch the CSI REITs Index today. The index currently has 14 constituents, and the REITs will be capped at 15% of the index weight.
We expect another 6 REITs to be added to the index at the March rebalance. And then at least another 3 more in June.
The launch of the index should result in ETFs and other passive investment products being floated which should further enhance market liquidity and bring long-term benefits to the market.

PayTM (One 97 Communications) Announces a BUYBACK – Overhang Vs Feelings Vs Buyback Vs Index

PayTM, which IPOed 13 months ago at Rs2150/share and now trades 75% lower “intimated” the possibility of a buyback on the 8th, and shares jumped 7.2% on the 9th.
The Board approved the INR 8.5bn buyback at max price INR 810/share late last night. The shares fell slightly today. Now we move to a postal ballot.
The buy-back rules crate interesting parameters and these buy-back terms provide interesting opportunities.

Alpha Generation Through Share Buybacks in Korea: December 2022

By Douglas Kim

In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in the past two months.
In addition to these share buybacks, there has also been more recent news flow regarding the share purchases of Samsung Electronics by numerous senior directors.
In the past month, some of the larger market cap companies including KT&G, Douzone Bizon, and Hyundai Elevator that have been buying back shares have been outperforming KOSPI.

Adani Enterprise US$2.4bn Raising Early Look – Lots to Think About: Controversies, Debt, Grand Plans

By Sumeet Singh

Adani Enterprises (ADE IN) is looking to raise INR200bn (US$2.4bn) via a further public offering. The company has obtained board approval and is now awaiting shareholder approval.
It is the flagship company of the Adani Group. The group’s listed entities’ stock performance over the past few years has made the founder one of the richest persons globally.
However, the stock is expensive and has had some issues in the past. In this note, we take an early look at the possible placement and its impact.

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Dec 14

Daily Brief Event-Driven: S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
NTT Buying NTT Data Shares – ¥40bn to Go
MVIS Australia A-REITs Index Rebalance: Cromwell Property (CMW) Is a Deletion
Toyo (1890) Says “We Reject”. YFO Says “But We Didn’t Talk”. Medium-🌶🌶🌶 Hostile Activism To Ensue
Haidilao’s Imminent SpinOff of the Super Hi Overseas Business – Index Treatment and Implications
Origin Energy: Gas Price Cap Compromises Brookfield’s Offer
Nidec (6594) To Take Over Nidec OKK (6205), Squeezing Out Minorities
DTAC/True Merger: The Court Dismisses the Consumer Council’s Petition
China ADRs Delisting – Friday Could Be Judgment Day for over US$800bn Mcap of Stocks
EQD | Alibaba (BABA US): Revisiting the December Call Ratios

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)

We currently see one change each for the ASX20 and ASX100 indices, 4 changes for the S&P/ASX 200 and 10 adds/ 6 deletes for the ASX300 Index in March.
There could be an addition to the S&P/ASX 200 (AS51 INDEX) in January following Pendal Group (PDL AU)‘s acquisition by Perpetual Ltd (PPT AU).
PEXA Group (PXA AU) is a potential inclusion to the S&P/ASX 200 (AS51 INDEX) if Link Administration (LNK AU)‘s in-specie distribution of PEXA shares to its shareholders is approved.

NTT Buying NTT Data Shares – ¥40bn to Go

NTT (Nippon Telegraph & Telephone) (9432 JP) and NTT Data Corp (9613 JP) did a deal earlier this year to sell NTT’s global data business to NTT Data. Discussed here.
NTT sold 55% of its current overseas business in NTT Communications, Dimension Data, and NTT Security Group, in return getting 45% of NTT Data’s current global business, plus ¥112bn.
NTT would then spend ¥100bn of the ¥112bn increasing its stake. So far it has spent ¥58.39bn buying 18% of volume every day since Oct 1.

MVIS Australia A-REITs Index Rebalance: Cromwell Property (CMW) Is a Deletion

Cromwell Property (CMW AU) is a deletion from the MVIS Australia A-REITS Index at the close on 16 December.
Passive trackers will need to sell 13.9m shares (5 days ADV) of Cromwell Property (CMW AU) and there appears to be little to no pre-positioning on the stock.
There are a few other stocks that will have over 0.5 days of ADV to buy from passive trackers.

Toyo (1890) Says “We Reject”. YFO Says “But We Didn’t Talk”. Medium-🌶🌶🌶 Hostile Activism To Ensue

In March, Toyo Construction (1890 JP) agreed to be bought out by INFRONEER Holdings (5076 JP) for ¥770/share. One activist objected, and bought 28%. They then said they’d pay ¥1,000.
The Infroneer deal failure started an acrimonious back and forth. The hostility lessened over the summer, but despite activist Yamauchi Family Office’s protestations of love, no deal as of November.
Today saw another press release, delaying things. The contents are 🌶🌶🌶. NOW things are getting more interesting. Hostility is back. Medium-spicy. Three 🌶 out of five.

Haidilao’s Imminent SpinOff of the Super Hi Overseas Business – Index Treatment and Implications

On 11 July, Haidilao (6862 HK) announced it would propose to spin off its international restaurant business (13-15% of revenue) to shareholders and employees. Shareholders approved in August.
There were interim announcements and indeed interim reports with some information, but not a lot. But Super Hi International Holding was headed for separate listing in HK.
Last week, Haidilao said it was going ahead with a Listing by Introduction pending listing approval by HKEX. Haidilao shares go ex- 16 December. Index providers have announced treatment.

Origin Energy: Gas Price Cap Compromises Brookfield’s Offer

On the 10 November, Brookfield and EIG/MidOcean offered Origin Energy (ORG AU) shareholders $9.00/share, a 54.9% premium to last close, by way of a Scheme. The Offer is non-binding.
On the 9 December, the Aussie government said it would take action to limit the worst impacts of the forecast gas price increases to protect Australian households, industry, and manufacturers.
This includes a temporary price cap on new domestic wholesale gas contracts by east coast producers, such as Origin, for 12 months.

Nidec (6594) To Take Over Nidec OKK (6205), Squeezing Out Minorities

Small machine tool maker OKK used to be good for about ¥2bn in EBITDA, then that dropped to the low ¥1bns on average, then the last two years were negative.
A year ago, Nidec agreed to inject capital and buy 66.6% of OKK – Now Nidec OKK – for peanuts. Yesterday, the two agreed a scrip merger on 1 March.
The process and ratio leave a LOT to be desired but they only need 66.67% and with 66.66% already, it’s a done deal. Nothing you can do about it.

DTAC/True Merger: The Court Dismisses the Consumer Council’s Petition

The Administrative Court has dismissed the Thai Consumers Council petition to impose an injunction on the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger.
Telenor ASA (TEL NO) and CP Group are currently seeking clarification on certain NBTC conditions such as tariff adjustments and MVNOs network capacity.
Completion is targeted for 1Q23. The current share price ratio of 9.072x vs exchange ratio of 10.221x is attractive. Timing and tweaks to the exchange ratio are risks.

China ADRs Delisting – Friday Could Be Judgment Day for over US$800bn Mcap of Stocks

By Sumeet Singh

PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.
The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.
In this note, we’ll talk about the latest developments, possible outcomes and implications.

EQD | Alibaba (BABA US): Revisiting the December Call Ratios

By Simon Harris

In November we published on the upside potential in Alibaba
Stock has rallied and the call ratio we recommended has performed very well
We evaluate the trade and look at potential trade options

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Dec 13

Daily Brief Event-Driven: HSCEI: Index Handling Changes for Secondary & Dual-Primary Listings and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HSCEI: Index Handling Changes for Secondary & Dual-Primary Listings
Acotec Scientific Holdings: Boston Scientific’s Partial Offer
Acotec Scientific (6669 HK)’s Partial Offer of HK$20 from Boston Scientific
HSTECH: Index Handling Changes & Flows in March
Genesis Minerals (GMD AU) And St Barbara (SBM AU) Merger
Home Consortium (HMC AU) FTSE EPRA Index Deletion – Underperforming but STILL Expensive
St Barbara’s Reverse Merger Of Genesis
Dongkuk Steel Mill: Demerger Details & Passive Outflow Trading

HSCEI: Index Handling Changes for Secondary & Dual-Primary Listings

Hang Seng Indexes has changed the index handling treatment for Secondary Listings and Dual Primary Listings from the next rebalance in March.
The changes could lead to an increase in the index weighting for Li Auto (2015 HK) and the inclusion of XPeng (9868 HK) at the March rebalance.
The improved rankings for the Secondary and Dual Primary listings will lead to other changes to the index in March.

Acotec Scientific Holdings: Boston Scientific’s Partial Offer

Acotec Scientific Holdings (6669 HK), a Chinese medical technology company, has announced a Partial Offer from Boston Scientific (BSX US).
The Offer Price for up to 65% of shares out is HK20/share, a 31.6% premium to last close, but below last year’s IPO price of HK$23.80/share.
Irrevocables who intend to tender a total of up to 60.14% of shares out. This includes the CEO and the key pre-IPO investor.

Acotec Scientific (6669 HK)’s Partial Offer of HK$20 from Boston Scientific

Acotec Scientific Holdings (6669 HK) disclosed a partial offer from Boston Scientific (BSX US) to acquire a maximum of 203.7 million shares at HK$20 per share.
The partial offer is conditional on the offeror hitting 50.01% voting rights and approval by the requisite majority of shareholders. Irrevocables represent a minimum of 55.14% of outstanding shares.
Despite the recent share price pop on the back of FDA approval for Vericor, the partial offer represents an all-time share price high. Therefore, the offer will be declared unconditional.

HSTECH: Index Handling Changes & Flows in March

Hang Seng Indexes has changed the index handling treatment for Secondary Listings and Dual Primary Listings from the next rebalance in March.
The change could result in Tencent Music Entertainment Group (1698 HK) replacing Ming Yuan Cloud Group (909 HK) in the index.
There could be passive buying on Li Auto (2015 HK) and XPeng (9868 HK) due to an increase in the index shares with outflows on other index constituents.

Genesis Minerals (GMD AU) And St Barbara (SBM AU) Merger

St Barbara Ltd (SBM AU) and Genesis Minerals (GMD AU) will merge via a scheme at a gross exchange ratio of 2.0338 SBM shares per GMD share.
The deal metrics are favourable for GMD shareholders. The gross exchange ratio is attractive and values GMD at a slight premium to mid-cap ASX peers on an EV/Resource basis.
The likely pushback from SMB shareholders is that the terms were struck from a position of share price weakness. However, the low SMB shareholder voting threshold (50%) will help.

Home Consortium (HMC AU) FTSE EPRA Index Deletion – Underperforming but STILL Expensive

Home Consortium Ltd (HMC AU) is a Super Stapled Security, having developed HomeCo Daily Needs REIT (HDN AU), overseen the Aventus Group (AVN AU) merger, IPOed HealthCo REIT (HCW AU).
The current market cap is 1.6x book and probably closer to 2x tangible book as a large “management and development capability premium” is baked in.
There is a FTSE EPRA Nareit index deletion on Friday. That could prompt further underperformance.

St Barbara’s Reverse Merger Of Genesis

Gold miners St Barbara Ltd (SBM AU) and Genesis Minerals (GMD AU) have agreed to merge via a Scheme. Inter-conditionally, SBM will demerge Atlantic, Simberi, and other assets.
SBM will issue 2.0338 of its own shares for each GMD share. Conditional on the Scheme and asset demerger, Genesis will raise $275m to fund the merged entity.
At completion, SBM shareholders will hold 38% in the combined group, current Genesis shareholders 41%, with the remaining 22% held by participants in the capital raising.

Dongkuk Steel Mill: Demerger Details & Passive Outflow Trading

The size of treasury shares in the Dongkuk Steel demerger event is not too large to expect a value accretion to the combined market cap after the split.
Based on the current market cap, all three companies will likely leave the KOSPI 200. To this end, K200 trackers must dispose of Dongkuk Steel right before the trade suspension.
The size of rebalancing trading before trade suspension should be about ₩40T. We should consider setting our entry into flow trading as early as two weeks towards the trade suspension.

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Dec 12

Daily Brief Event-Driven: Haidilao’s Spin-Off of Super Hi: Index Implications and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Haidilao’s Spin-Off of Super Hi: Index Implications
LG Energy: ESOP Lockup Release (3.5% of SO) & Contrarian Approach Targeting NPS
Tyro Payments (TYR AU): Potentia Returns with a A$1.60 Offer
Merger Arb Mondays (12 Dec) – Nitro, Tyro, Bigtincan, Warrego, Genex, Elmo, Golden Energy
Potentia Bumps But Tyro Shuts Down Talks

Haidilao’s Spin-Off of Super Hi: Index Implications

Haidilao (6862 HK) intends to spin-off its 90% holding in Super Hi International Holding (SHI HK) with an ex-date of 16 December.
Super Hi International Holding (SHI HK) will be deleted from the Hong Kong Hang Seng Index and Hang Seng China Enterprises Index at the close on listing day.
There could be nationality changes and selling from MSCI and FTSE trackers as well, though the timing is uncertain at this point.

LG Energy: ESOP Lockup Release (3.5% of SO) & Contrarian Approach Targeting NPS

The ESOP’s 3.5% stake will be released on January 27. Considering the extremely tight flow situation, this is by no means small. 3.48% is 20 times the recent ADTV.
NPS will likely move toward a minimum stake of 6% again for LG Energy, irrespective of LG Energy’s current valuation, despite its recent selling.
We should consider the possibility that NPS will contrarily utilize this ESOP lockup release, and we should also design a contrarian position for this lockup release.

Tyro Payments (TYR AU): Potentia Returns with a A$1.60 Offer

The AFR reports that Potentia has increased its offer for Tyro Payments (TYR AU) by 26.0% from A$1.27 to A$1.60 per share, a 62.4% premium to the undisturbed price.
The revised offer remains light and likely to be rejected again by the Board. Grok’s get-out clause with Potentia now sets the floor price of a competing bid at A$1.85.
Potentia’s revised bid is the catalyst for the other rumoured suitors (Westpac Banking (WBC AU) and Moneris) to get their act together. A competing offer of around A$2.00 is possible.

Merger Arb Mondays (12 Dec) – Nitro, Tyro, Bigtincan, Warrego, Genex, Elmo, Golden Energy

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), Bigtincan Holdings Ltd (BTH AU), Golden Energy & Resources (GER SP), Origin Energy.
Lowest spreads Nitro Software Ltd (NTO AU), Warrego Energy (WGO AU), Chip Eng Seng Corp (CHIP SP), Uzabase Inc (3966 JP), Elmo Software (ELO AU), OZ Minerals Ltd (OZL AU).

Potentia Bumps But Tyro Shuts Down Talks

Potentia has increased its indicative proposal for Tyro Payments (TYR AU) to A$1.60/share from A$1.27/share. Grok, holding 12.5% of shares out, remains supportive.
However, Tyro’s board believes the revised terms remain below what is considered fair, and has ceased all discussions.
Separately, Westpac has decided not to submit an Offer. After conducting due diligence. Shares are down 19.5% as I type.

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Dec 11

Daily Brief Event-Driven: EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Weekly Deals Digest (11 Dec) – Toshiba, Bigtincan, Nitro, Warrego, Xingda, VinFast, Weilong
Index Rebalance & ETF Flow Recap: ASX, HSTECH, TWDiv+, EPRA Nareit, HSCEI, PCOMP, STAR50, REMX, GDXJ
Last Week in Event SPACE: JAFCO, Jardine Cycle, Softbank, Star Health
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Xingda, Nitro, Chip Eng Seng, Traditional Chinese Medicine
Hong Kong CEO & Director Dealings (9 Dec): Hopefluent, Matrix, Country Garden Services

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

Weekly Deals Digest (11 Dec) – Toshiba, Bigtincan, Nitro, Warrego, Xingda, VinFast, Weilong

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 – VinFast (1905332D VN) pre-markets a US$1bn IPO, I-Tail (ITC TB) and Sunshine Insurance (6963 HK) have tepid debuts, Weilong Delicious Global (WDG HK) launches a US$141m IPO.
Event-Driven developments – Bigtincan Holdings Ltd (BTH AU), Nitro Software Ltd (NTO AU), Warrego Energy (WGO AU), Xingda International (1899 HK), Chip Eng Seng Corp (CHIP SP).

Index Rebalance & ETF Flow Recap: ASX, HSTECH, TWDiv+, EPRA Nareit, HSCEI, PCOMP, STAR50, REMX, GDXJ

The rebalance implementation of the KOSPI2, KOSDQ150, CSI 300, CSI 500, STAR50 and other indices took place on 8/9 December. Plus MSCI/FTSE deletes due to Northbound Stock Connect changes.
Friday will see the implementation of the FTSE All-World/All-Cap, EPRA Nareit, S&P/ASX, KLCI, FTSE China and Sensex indices. The FTSE Taiwan Dividend+ Index will have the largest flows.
Big weekly redemptions from the Mirae Asset Tiger Top 10 ETF (292150 KS), ChinaAMC China 50 ETF (510050 CH) and IShares Core MSCI Asia Ex Japan ETF (3010 HK).

Last Week in Event SPACE: JAFCO, Jardine Cycle, Softbank, Star Health

In principle, Jafco Co Ltd (8595 JP) still wants to be greenmailed to get Murakami-san out.
Jardine Cycle & Carriage (JCNC SP)i is expensive here – relative to historical values – and from an implied stub perspective. And the MSCI inclusion event has now passed.
If you think this is a “risk”, then you want to be long when the discount is wide and Softbank Group (9984 JP) is monetising assets in some way.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Xingda, Nitro, Chip Eng Seng, Traditional Chinese Medicine

There are 45 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma: Xingda International (1899 HK)‘s partial MBO.
Key updates took place for: Nitro Software Ltd (NTO AU) , Chip Eng Seng Corp (CHIP SP) and China Traditional Chinese Medicine (570 HK).

Hong Kong CEO & Director Dealings (9 Dec): Hopefluent, Matrix, Country Garden Services

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
These insights may flag those companies where shares have been pledged. Stocks mentioned include Hopefluent Group (733 HK), Matrix Holdings (1005 HK), Country Garden Services Holdings (6098 HK).

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Dec 10

Daily Brief Event-Driven: Can Son-San Take Over Softbank Group Through Buybacks? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Can Son-San Take Over Softbank Group Through Buybacks?
JCNC Is Still Overstretched Vs. Astra
MVIS Global Junior Gold Miners Index Rebalance: Two Adds, Four Deletes, Float Changes
MVIS Global Rare Earth/Strategic Metals Index Rebalance: Float & Capping Changes

Can Son-San Take Over Softbank Group Through Buybacks?

On Thursday 8 December, an article showed up in Bloomberg suggesting Son-san had “increased his stake” as the company bought back shares, giving him more rights, “edging towards a buyout.”
That is a stretch. He went from below one-third to above one-third, giving him an explicit veto on shareholder super-majority resolutions, but it’s minor. He now has 34.2%.
The suggestion: if he got two-thirds, he could squeeze out minorities without a Tender Offer. Technically true, but not easy. I dig deeper and propose how it could be done.

JCNC Is Still Overstretched Vs. Astra

Jardine Cycle & Carriage (JCNC SP) is currently trading at a ~12% discount to NAV, just outside its narrowest post-Covid.
A key catalyst for the recent narrowing was JCNC’s inclusion in the SIMSCI Index at the end of last month.
JCNC is expensive here – relative to historical values – and from an implied stub perspective.

MVIS Global Junior Gold Miners Index Rebalance: Two Adds, Four Deletes, Float Changes

Filo Mining (FIL CN) and Tietto Minerals (TIE AU) are adds while Fresnillo (FRES LN), Galiano Gold (GAU US), Jaguar Mining (JAG CN) and Novo Resources (NVO CN) are deletes.
One way turnover is estimated at 4.3% resulting in a one-way trade of US$163m. There is over 1 day of ADV to trade on 24 stocks.
Largest inflows are on Filo Mining (FIL CN) and Tietto Minerals Ltd (TIE AU) while largest outflows are on Fresnillo PLC (FRES LN) and Centerra Gold (CG CN).

MVIS Global Rare Earth/Strategic Metals Index Rebalance: Float & Capping Changes

As expected, there are no adds or deletes for the MVIS Global Rare Earth/Strategic Metals Index at the December rebalance.
There are free float and capping changes that will be implemented at the close on 16 December.
One way turnover is estimated at 4.26% and will result in a one-way trade of US$31.5m.

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Dec 09

Daily Brief Event-Driven: JAFCO (8595) Cancels Tender Offer – I Offer a Modest Proposal For Good Governance and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JAFCO (8595) Cancels Tender Offer – I Offer a Modest Proposal For Good Governance
China Rebalances at the Close Today- BIG Flows
Nitro Software (NTO AU): Potentia Raises to A$2.00 as the Battle Heats Up
Infosys (INFY)’s US$1.1bn Buyback
KODEX Battery Rebalancing Results Out: From Today to Next Tuesday
Targetable Names on KOSPI for Dividend Arbitrage: DPS Estimates & Current Basis
EQD | KOSPI2 Index: Short-Term Trading Opportunity Using Derivatives
Nitro Software: Potentia Matches KKR’s $2.00/Offer

JAFCO (8595) Cancels Tender Offer – I Offer a Modest Proposal For Good Governance

Jafco Co Ltd (8595 JP) announced the reference period VWAP for the Tender Offer Buyback was ¥2,362.4136 vs target ¥2,525. Murakami-san refused to play, so the Tender Offer is cancelled.
This is good news and bad news. The announcement wording doesn’t make JAFCO look good, but they will continue discussions with City Index Eleventh. But there is potential.
I shall now therefore humbly propose my own thoughts, which I hope will not be liable to the least objection (Jonathan Swift, 1729)

China Rebalances at the Close Today- BIG Flows

There are multiple local China indices that rebalance at the close of trading today. Plus MSCI China and FTSE All-World/All-Cap flows due to changes to the Northbound StockConnect Buy-and-Sell list.
China Pacific Insurance (Group) Co., (601601 CH) replaces Beijing-Shanghai High Speed Railway-A (601816 CH) in the FTSE China A50 Index (XIN9I INDEX).
The round-trip turnover at the close of trading today should be in excess of US$8bn.

Nitro Software (NTO AU): Potentia Raises to A$2.00 as the Battle Heats Up

Nitro Software Ltd (NTO AU) has received a revised Potentia off-market takeover offer at A$2.00 per share, an 11.1% premium to its previous offer and in line with Alludo’s offer.
By bumping its offer, adding a scrip alternative and signalling a potentially higher price on due diligence access, Potentia has ramped up the pressure on the Board.
Potentia/Alludo offer remains at the low end of the IE’s valuation range. Alludo would have anticipated this move and likely will have factored in the need to raise its offer.

Infosys (INFY)’s US$1.1bn Buyback

Infosys Ltd (INFO IN) (Infosys Ltd Sp Adr (INFY US)) on 5-6 December announced an on-market buyback of more than US$1.1bn.
The company has done buybacks before, and it is worthwhile looking at the details.
The buy-back looks small, and may be impactful near-term in near-space.

KODEX Battery Rebalancing Results Out: From Today to Next Tuesday

As expected, Sungeel Hitech (365340) made it to the index. And C&I System (222080) and Wonik PNE (217820) were added, whereas Ecopro (086520) and Dongwha Enterprise (025900) were deleted.
Among the existing constituents, Samsung SDI (006400), Ecopro BM (247540), SK Innovation (096770), L&F (066970), and SKC (011790) are expected to have a relatively significant impact.
Looking at the last rebalancing, the impact/price correlation was most significant on Day 1. So, we should consider aiming for LONG/SHORT today for those with a high relative impact.

Targetable Names on KOSPI for Dividend Arbitrage: DPS Estimates & Current Basis

Targetable names on KOSPI for dividend arbitrage: SK Telecom (017670), Woori Financial (316140), SK Hynix (000660), KB Financial (105560), Korea Zinc (010130), and HMM (011200)
Samsung Electronics (005930)‘ basis does not reflect special dividends, even though speculations have not disappeared entirely.
As the current basis hasn’t widened to an entirely sufficient level, we need to target arb trade openings focusing on the above stocks a bit more aggressively.

EQD | KOSPI2 Index: Short-Term Trading Opportunity Using Derivatives

By Simon Harris

KOSPI2 Index failed to break above the 200dma and has retreated
The index has now fallen back towards the 50dma and we see an short-term opportunity to play the upside
Use weekly options to play a short-term bounce and get the best risk-reward

Nitro Software: Potentia Matches KKR’s $2.00/Offer

Potentia Capital has bumped its Offer for Nitro Software Ltd (NTO AU) to A$2.00/share, matching KKR’s earlier Offer.
Potential’s proposal – which also boasts a scrip alternative for those investors wishing to remain invested – is open for tendering, and has no minimum acceptance threshold.
Nitro’s board has yet to provide a view on Potentia’s revised terms.

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Dec 08

Daily Brief Event-Driven: HDFC AMC: Abrdn’s Potential Placement & Index Implications and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HDFC AMC: Abrdn’s Potential Placement & Index Implications
Xingda Int’l (1899 HK): Kicking The Tyres
HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace Ming Yuan Cloud (909 HK)
TOPIX Inclusions: Who Is Ready (Dec 2022)
Yearend Dividend Play on Korean Stocks with High Yield/Borrow Rate
Xingda (1899 HK)’s Partial Offer from Management to Seize Statutory Control
Xingda International (1899 HK)’s to Draw a Privatisation Bid from Management?
Xingda Int’l (1899 HK): Partial MBO

HDFC AMC: Abrdn’s Potential Placement & Index Implications

Abrdn PLC (ABDN LN) is looking to sell its entire 10.21% stake in HDFC Asset Management (HDFCAMC IN) following which it will no longer be a sponsor of HDFC MF.
Depending on who the stake is sold to, there could be an immediate increase in the investability weight in the FTSE All-World Index.
More importantly, the increased free float will result in an increase in the FIF for the MSCI Standard Index and index inclusion could take place in February.

Xingda Int’l (1899 HK): Kicking The Tyres

Xingda International (1899 HK) is currently suspended “pursuant to The Hong Kong Code on Takeovers and Mergers“.
The controlling shareholders – more commonly known as the Five Parties – hold 45.6% of shares out.
Two years ago, Xingda sought to spin-off its key operating vehicle. Perhaps the Five Parties are privatising Xingda, then IPOing Xingda Steel Tyre Cord. Or, cashing out their positions.

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace Ming Yuan Cloud (909 HK)

Tongcheng-Elong Holdings Ltd (780 HK) could replace Ming Yuan Cloud Group (909 HK) in the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
One way turnover is estimated at 2.1% resulting in a one-way trade of HK$1.7bn. Passive trackers will need to buy nearly 10x ADV on Tongcheng-Elong Holdings Ltd (780 HK).
After being deleted from the MSCI China Index at the November SAIR, this could be the next major index deletion for Ming Yuan Cloud Group (909 HK).

TOPIX Inclusions: Who Is Ready (Dec 2022)

By Janaghan Jeyakumar, CFA

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
This insight is a follow-up to TOPIX Inclusions: Who Is Ready (Oct 2022)
At present, there are 60 names that satisfy all of these conditions and there are more names that are close to being in that group.

Yearend Dividend Play on Korean Stocks with High Yield/Borrow Rate

We’d better pay attention to trading for price gain by building a position 2-3 weeks towards ex-dividend and getting out of it before ex-dividend, which often provides higher returns.
For this, we should focus on high dividend yield stocks, which also feature a high borrow rate, but on a decreasing trend.
They are Hyosung TNC (298020), HD Hyundai (267250), BNK Financial (138930), Woori Financial (316140), DL E&C (375500), LX Semicon (108320), KB Financial (105560 KS), and HDC Hyundai Development (294870).

Xingda (1899 HK)’s Partial Offer from Management to Seize Statutory Control

Xingda International (1899 HK) disclosed a partial offer from management to acquire a maximum of 80.0 million shares at HK$1.88 per share, a 24.50% premium to the undisturbed price.
The pre-condition is Executive approval. The partial offer is conditional on the offeror hitting 50.01% voting rights and approval by the requisite majority of shareholders on the acceptance form.
The partial offer is an opportunistic foray to seize statutory control as it would not be sufficiently enticing to overcome FIL’s 9.99% blocking stake in a privatisation scheme.

Xingda International (1899 HK)’s to Draw a Privatisation Bid from Management?

Xingda International (1899 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers.
It is likely that the management, representing 45.60% of ordinary shares (through a five parties agreement), is seeking to privatise Xingda.
The bid is likely privatisation through a scheme. Due to FIL’s blocking stake, a decent premium is required, such as an offer approaching HK$2.00 (33% premium to the last close).

Xingda Int’l (1899 HK): Partial MBO