Category

Event-Driven

Nov 17
0

Daily Brief Event-Driven: Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend
  • Tencent Distribution of Meituan Shares Official – Impact and Index Implications
  • 2023 High Conviction: Haw Par Is Cheap
  • Tencent Meituan Dividend – The US$20bn Overhang – Impact, Placement, Index, Other Investees
  • Halcyon Agri Suspended Ahead Of Possible Offer
  • KOSPI200 Index Rebalance: Just One Change
  • KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises
  • KOSPI 200 & KOSDAQ 150 Rebalance Changes + KOSPI 200 & KOSDAQ 150 Exclusion Candidates in 2023
  • Swire B Vs A – It Bounced Before, It Can Bounce Again – A 19 Year Low On the Ratio In Sight
  • KOSPI 200 & KOSDAQ 150 Constituent Changes: Several Surprises

Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend

By Brian Freitas

Tencent Distribution of Meituan Shares Official – Impact and Index Implications

By Travis Lundy

  • In mid-August at mid-day, a Reuters article suggested Tencent (700 HK) would seek to divest its $24bn stake in Meituan (3690 HK) this year. The stock fell 9% that afternoon.
  • The general underlying suggestion was that regulators wanted them to sell. Other articles suggested later both aspects were “untrue” 
  • With Q3 earnings, Tencent today announced a Jan23 distribution (Mar23 settlement) of 958,121,562 Meituan shares (1 for every 10 Tencent shares held). There are significant flow and index implications.

2023 High Conviction: Haw Par Is Cheap

By David Blennerhassett

  • Haw Par Corp (HPAR SP) is trading around multi-year trough levels on an implied stub valuation, and on an HPAR/UOL Group (UOL SP) ratio.
  • Preceding my comments on HPAR 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%.

Tencent Meituan Dividend – The US$20bn Overhang – Impact, Placement, Index, Other Investees

By Sumeet Singh

  • On 16th Nov 22, post-market close, along with its 3Q22 results Tencent also declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
  • The share distribution follows the template of the US$16bn worth of JD.com shares that Tencent paid out after its dividend announcement at the end of 2021.
  • In this note, we talk about the implications of the deal.

Halcyon Agri Suspended Ahead Of Possible Offer

By David Blennerhassett

  • Natural rubber play Halcyon Agri (HACL SP) was suspended ahead of trading on the 14 November.
  • Word on the street is that a privatisation will be announced shortly. 
  • The benefit of hindsight … Halcyon’s largest shareholder, SOE-backed Sinochem, recently increased its stake, paying ~S$0.45/share. 

KOSPI200 Index Rebalance: Just One Change

By Brian Freitas

KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises

By Brian Freitas

  • There are 11 inclusions and 11 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 8 December.
  • We had forecast most of the changes (10 adds and 9 deletes), so there are a few surprises. The inclusion of SillaJen Inc (215600 KS) is the biggest one.
  • The adds to the index become short sell eligible from the open of trading on 9 December while the deletions will not be short sell eligible from the same time.

KOSPI 200 & KOSDAQ 150 Rebalance Changes + KOSPI 200 & KOSDAQ 150 Exclusion Candidates in 2023

By Douglas Kim

  • Korea Exchange announced the KOSPI 200, KOSDAQ 150, and KRX 300 rebalance changes today. Lotte Confectionery will be added and Samyang Holdings will be deleted from the KOSPI 200 index.
  • The rebalances of these Korean indices are regularly updated twice a year. The changes to these indices will be effective starting 9 December. 
  • The potential exclusion candidates for KOSPI 200 in 2023 include K Car, Handsome, HS Enterprise, Zinus, and Hyundai Home Shopping. 

Swire B Vs A – It Bounced Before, It Can Bounce Again – A 19 Year Low On the Ratio In Sight

By Travis Lundy

  • Swire Pacific has been buying back Swire Pacific (B) (87 HK) and Swire Pacific (A) (19 HK) shares since August. They are now 58+% done with their HK$4bn buyback program. 
  • The buyback so far has been 50% B shares and 50% A shares. This still seems odd to me but they are doing what they are doing.
  • B/A ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks. Now 5% cheap to average.

KOSPI 200 & KOSDAQ 150 Constituent Changes: Several Surprises

By Sanghyun Park

  • For KOSDAQ 150, SillaJen and WCP made it to the index. As for deletions, Intron Biotechnology, Ebest I&S, and Devsisters are additional names to leave the index through regular review.
  • Lotte Confectionery and Samyang Holdings do not have sizeable DTV. And they were fully expected. Nevertheless, the passive impact is so significant that the LONG/SHORT approach still seems valid.
  • We should focus on KOSDAQ 150 inclusions whose return has been high due to the inflow to secure a borrow pool for short-selling on top of the preemptive rebalancing flow.

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Nov 16
0

Daily Brief Event-Driven: TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher
  • Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix
  • Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue
  • KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation
  • Chindata: China Merchants Potentially In The Mix
  • Sapphire Foods IPO – Smallish Stock with Big (US$550m) Multiple PE Lockup Expiry
  • Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase
  • S&P/​​​​​​ASX Index Rebalance Preview: Shrinking Number of Changes in Dec
  • Nitro (NTO AU)’s Binding Offer from Alludo to Force Potentia’s Hand?
  • HYBE Shorting Opportunity with a Lockup Release from Dunamu

TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher

By Brian Freitas

Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix

By Douglas Kim

  • This insight will discuss the impact of Buffett’s investment in Taiwan Semiconductor (TSMC) – ADR (TSM US) on Samsung Electronics (005930 KS) and SK Hynix (000660 KS).
  • We believe that Buffett’s sizeable investment in TSMC is likely to have a positive impact on Samsung Electronics and SK Hynix.
  • This would be similar to how Buffett’s investment in the Japanese trading companies which has had a positive impact on the major Korean trading companies. 

Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue

By Travis Lundy

  • In February 2021 Nabtesco Corp (6268 JP) announced it would sell half of its stake in Harmonic Drive Systems (6324 JP) to concentrate on its own products and growth. 
  • It was a not-very-well-held secret Nabtesco had invested wanting to own HDS. HDS didn’t want to be owned. Eventually Nabtesco gave up. So they sold over time into low float.
  • Now they are letting go of the other half. Sale structure means ongoing pressure.

KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation

By Sanghyun Park

  • Given SunEel’s market cap and the level of relevance to the rechargeable battery business, KODEX will likely include it this time around.
  • If you are looking for a short-selling opportunity, I recommend adjusting the timing after this KODEX ETF passive event.
  • If you are long targeting the KOSDAQ 150 inclusion, I recommend taking a slightly longer holding window to additionally target the passive inflow of the KODEX ETF.

Chindata: China Merchants Potentially In The Mix

By David Blennerhassett

  • Bain Capital-backed Chindata Group (CD US) is on the move after Bloomberg flagged – again – interest from industry players.
  • This time, SOE-backed China Merchants Group is understood to be mulling a takeover of Chindata. Shares are up 23% since that article earlier this month.
  • Back in April, Bloomberg mentioned GDS Holdings (ADR) (GDS US), PE outfit PAG, and EQT AB (EQT SS)-backed EdgeConneX were rumoured to be interested in merging with Chindata. 

Sapphire Foods IPO – Smallish Stock with Big (US$550m) Multiple PE Lockup Expiry

By Sumeet Singh

  • In Nov 2021, Sapphire Foods Limited (SFL), one of Yum Brand’s franchisees in the Indian subcontinent, raised around US$280m in its Indian IPO. 
  • The lock-up on its shareholders will expire soon, with a number of PE funds on its register
  • In this note, we will talk about the upcoming lockup expiry.

Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase

By Shifara Samsudeen, ACMA, CGMA

  • Chindata Group (CD US)  is the leading carrier-neutral hyperscale data center solutions provider in Asia Pacific emerging markets.
  • At the beginning of the month, Bloomberg reported a takeover offer for Chindata from China Merchants Group, which is a state-owned company.
  • Several state-owned companies have shown interest towards acquiring data centers and data center companies, which is likely to be in line with China’s strategy of digitization.

S&P/​​​​​​ASX Index Rebalance Preview: Shrinking Number of Changes in Dec

By Brian Freitas

Nitro (NTO AU)’s Binding Offer from Alludo to Force Potentia’s Hand?

By Arun George

  • Nitro Software Ltd (NTO AU) has entered into a binding agreement with Alludo at A$2.00 per share via a scheme or an off-market takeover, with a 50.1% minimum acceptance condition.
  • This is a good move by the Board to force Potentia to improve its off-market takeover bid of A$1.80 per share. Alludo can leverage synergies to support a higher bid.
  • The shares are trading through Alludo’s terms as there is an expectation of Potentia returning with improved terms. The break fee implies that Potentia needs to offer at least A$2.02.

HYBE Shorting Opportunity with a Lockup Release from Dunamu

By Sanghyun Park

  • Dunamu may not be in a financial situation that will allow it to hold HYBE shares. With FTX’s liquidity crisis, Upbit’s liquidity management risk will inevitably rise to the surface.
  • Doubts about whether the size of Upbit’s assets is sufficiently absorbing the shock of a bank run are still strongly raised in the local market.
  • These concerns are likely to affect HYBE’s share price as the December 9 release approaches, and yes, we need to design short position setups aimed at this.

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Nov 15
0

Daily Brief Event-Driven: Wharf Holdings (4 HK): MSCI Deletion and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Wharf Holdings (4 HK): MSCI Deletion, Short Interest & Trade Ideas
  • Paytm (One 97) Lockup – US$4bn+ Lockup Expiry, Some Large Shareholders Are Underwater, a Lot Aren’t
  • Warrego Enters Into A Scheme With Beach
  • HSCI Index Rebalance and Stock Connect: Changes at the Margins
  • Nearmap (NEA AU)’s Update Results in an Unwarranted Increase in the Spread
  • Nitro Software: KKR’s $2.00/Share Firm Offer

Wharf Holdings (4 HK): MSCI Deletion, Short Interest & Trade Ideas

By Brian Freitas

  • In a surprise, MSCI announced the deletion of Wharf Holdings (4 HK) from the MSCI China Index at the November SAIR that will be implemented at the close 30 November.
  • The stock dropped 14.3% on Friday as volume spiked 26x compared to ADV and 14m shares were shorted on the day.
  • Total short interest is estimated to be significantly lower than the estimated selling from passive MSCI trackers and there could be a move lower over the next few days.

Paytm (One 97) Lockup – US$4bn+ Lockup Expiry, Some Large Shareholders Are Underwater, a Lot Aren’t

By Sumeet Singh

Warrego Enters Into A Scheme With Beach

By David Blennerhassett

  • The Stokes’ family-backed Beach Energy (BPT AU) is offering Warrego Energy (WGO AU)‘s shareholders $0.20/share, in cash, by way of a Scheme. That’s a 36% premium to the one-month VWAP.
  • A contingent value payment may be payable to Warrego shareholders from the sale of Warrego’s Spanish assets within 12 months
  • Warrego’s board unanimously recommend the Beach deal. The transaction is expected to complete in early March.  The wild card is whether Strike Energy (STX AU) pitches a revised Offer.

HSCI Index Rebalance and Stock Connect: Changes at the Margins

By Brian Freitas

  • We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
  • Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
  • Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

Nearmap (NEA AU)’s Update Results in an Unwarranted Increase in the Spread

By Arun George

  • Nearmap Ltd (NEA AU)’s litigation and trading update resulted in the spread to Thoma Bravo’s A$2.10 offer widening to 7.7%. The scheme meeting is on 25 November.
  • There is no chance that the MAC clause will be triggered due to the downbeat trading update. However, the update is softening the stance of some of the retail dissenters.
  • There is a small chance of a bump as peers have re-rated. Nevertheless, the low spread prior to the update suggested that the risk of the NO vote was minimal.

Nitro Software: KKR’s $2.00/Share Firm Offer

By David Blennerhassett

  • Adobe rival Nitro Software Ltd (NTO AU)  has announced KKR (via Alludo) has firmed its $2.00/share Offer, by way of a Scheme, in tandem with an off-market takeover.
  • Both the Scheme and takeover are subject to FIRB and MACs/prescribed occurrences. The takeover is subject to a 50.1% acceptance hurdle. The proposals have the unanimous support of Nitro’s board.
  • The Transaction Booklet is expected to be despatched to shareholders in early February 2023, with a Scheme Meeting expected to be held in March 2023.

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Nov 14
0

Daily Brief Event-Driven: FTSE All-World/​​​​​All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • FTSE All-World/​​​​​All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry
  • Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done
  • Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase
  • Warrego (WGO AU) Bidding War Between Strike (STX AU) And Beach (BPT AU)
  • Selling Sogo Seibu Doesn’t Mean Seven & I Will Sell Ito-Yokado
  • North Holdings 3/Caverion: Agreed Takeout

FTSE All-World/​​​​​All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry

By Brian Freitas

  • We see 4 potential adds, 1 close add and 1 potential delete for the FTSE All-World/All-Cap indices at the upcoming QIR that will be implemented at close on 16 December.
  • The largest impact will be the passive selling on Golden Agri Resources (GGR SP) due to a nationality change from Singapore to Ineligible.
  • There is a big lock-up expiry on Delhivery where US$2.89bn of shares will be free for trading on 21 November – that is significantly larger than the potential passive buying.

Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done

By Travis Lundy

  • On Friday, Sumitomo Corp (8053 JP) announced a bid for equity affiliate (they own 27+% but Nippon Steel 15%, top 2 is 40+%) Sumitomo Precision Products (6355 JP). 
  • It’s a one-year high and 4-year high price, and 8x average 10yr EV/EBITDA but 4.6x 2024e EBITDA from the Mid Term Plan. And way below a 10-year high. 
  • This gets done if Retail agrees to the tender. If 50% put in, that should do it. So I expect this gets done.

Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase

By Arun George

Warrego (WGO AU) Bidding War Between Strike (STX AU) And Beach (BPT AU)

By Arun George

  • Beach Energy (BPT AU)’s all-cash proposal is A$0.20 per share and Strike Energy (STX AU)’s all-scrip proposal is 0.775x STX shares per Petrel Energy (WGO AU) share. 
  • BPT’s all-cash offer provides value certainty. On the other hand, STX’s all-scrip offer lets shareholders get exposure to 100% interest in the West Erregulla project.
  • Both offers are reasonable but far from knockout bids, which suggests room for a further bidding round. At the last close, BPT’s offer is 3.2% higher than STX’s offer.

Selling Sogo Seibu Doesn’t Mean Seven & I Will Sell Ito-Yokado

By Michael Causton

  • Seven & I has at last agreed to sell the ailing Sogo Seibu chain – although not for enough to offset years of investment with little to show for it.
  • Some hope that this means the start of a house cleaning exercise to rid the group of its multiple under-performing retail assets, leaving a gleaming exemplar of rational efficiency.
  • This is unlikely, especially for the original Ito-Yokado general merchandise chain and a problem given the lack of growth potential in the group’s domestic business.

North Holdings 3/Caverion: Agreed Takeout

By Jesus Rodriguez Aguilar

  • The main shareholders of Caverion (27.08% in aggregate) are joining Bain Capital in a voluntary recommended public €7/share cash tender offer that seems adequate in the short term.
  • Nevertheless the offer price fails to account for the potential of Caverion, in my view. My fair value estimate (comps-based) is €9.01/share, thus an offer sweetening could be likely.
  • I consider it unlikely that the offer will fail, and although the current spread is not so attractive on a rate of return basis, I would be long the shares.

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Nov 13
0

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

By | Daily Briefs, Event-Driven

In today’s briefing:

  • EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
  • Weekly Deals Digest (13 Nov) – Toshiba, Uzabase, Origin Energy, Perpetual, Golden Energy, I-Tail
  • Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy
  • Last Week in Event SPACE: Tata Motors, Origin Energy, OZ Minerals, Toshiba
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Origin, Totoku Electric, Uzabase, Golden Energy, Perpetual
  • Hong Kong CEO & Director Dealings (11 Nov): C C Land, Impro Precision, SingAsia, Pharmaron

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 (13 Nov) – Toshiba, Uzabase, Origin Energy, Perpetual, Golden Energy, I-Tail

By Arun George

Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy

By Brian Freitas

Last Week in Event SPACE: Tata Motors, Origin Energy, OZ Minerals, Toshiba

By David Blennerhassett

  • Tata Motors Ltd (TTMT IN) will eliminate its ADS program. This is another potentially juicy trade. 
  • Canada’s Brookfield, along with EIG look to take over Origin Energy (ORG AU), one of Australia’s largest energy companies.
  • This OZ Minerals Ltd (OZL AU) trade is fundamentally a bit short gamma on copper. If copper takes another dive, then it may no longer be interesting to be long. 

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Origin, Totoku Electric, Uzabase, Golden Energy, Perpetual

By David Blennerhassett

Hong Kong CEO & Director Dealings (11 Nov): C C Land, Impro Precision, SingAsia, Pharmaron

By David Blennerhassett

  • 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 C C Land Holdings (1224 HK), Impro Precision Industries (1286 HK), and SingAsia Holdings (8293 HK).

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Nov 12
0

Daily Brief Event-Driven: MSCI Korea Standard/Small Cap Rebalancing & Tradable Names and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • MSCI Korea Standard/Small Cap Rebalancing & Tradable Names
  • Origin Energy: Brookfield’s Energy Transition Bet
  • Seven & I Parts with Sogo & Seibu and Pockets ¥200bn
  • Shanghai/​​​​​​​​​​​​​​​​​​​​Shenzhen Northbound Connect: Weekly Moves (11 November 2022)
  • Shanghai/​​​​​​​​​​​​​​​​​​​​Shenzhen Southbound Connect: Weekly Moves (11 November 2022)

MSCI Korea Standard/Small Cap Rebalancing & Tradable Names

By Sanghyun Park

  • In addition to Hyundai Mipo Dockyard and LG Energy Solution, it is worth noting that Krafton will also have a significant passive inflow. 
  • GS E&C can become a more focused flow trading target as it is an unexpected one that the market must have failed to notice.
  • Since most deletions will have a relatively sizeable passive impact on considerable liquidity, building up a short position with a basket from now on wouldn’t be a flawed approach.

Origin Energy: Brookfield’s Energy Transition Bet

By David Blennerhassett

  • Brookfield and EIG/MidOcean are Offering 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 and indicative.
  • Negotiations kicked off at $7.95 for the LNG developer in early August. Exclusive due diligence has been granted. 
  • A firm offer will be contingent on ACCC and FIRB approval. Such a takeover may actually play into the Albanese government’s future energy plans.

Seven & I Parts with Sogo & Seibu and Pockets ¥200bn

By Oshadhi Kumarasiri

  • Earlier today, Seven & I Holdings (3382 JP)’s board decided to sell the underperforming department store business Sogo Seibu to the SoftBank Group controlled Fortress Investment Group for around ¥200bn.
  • The sale of Sogo & Seibu looks like a positive development from all angles, but it could be already priced in as the rumours were there from February 2022 onwards.
  • Meanwhile, there are downside risks to Seven & I shares in the short term from falling gas prices and rising inflation in the US.

Shanghai/​​​​​​​​​​​​​​​​​​​​Shenzhen Northbound Connect: Weekly Moves (11 November 2022)

By David Blennerhassett

Shanghai/​​​​​​​​​​​​​​​​​​​​Shenzhen Southbound Connect: Weekly Moves (11 November 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, the net inflow over the past week was ~HK$4.1bn, split (+HK$1.7bn) for Shanghai and (+HK$2.4bn) for Shenzhen.
  • The largest inflows were in Tencent (700 HK) and Wuxi Biologics (2269 HK). The largest outflows were inKoolearn (1797 HK)and China Mobile (941 HK).

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Nov 11
0

Daily Brief Event-Driven: Tata Motors ADS Delisting – Here We Go Again – Lots of Fun To Be Had! and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Tata Motors ADS Delisting – Here We Go Again – Lots of Fun To Be Had!
  • MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises
  • Tata Motors (TTM) To Delist ADSs: Details & Potential Trades
  • OZ Minerals (OZL) – Copper and Comps Have Caught Up
  • Golden Energy (GER SP): Widjaja Family’s Low-Balled Offer
  • Origin Energy’s (ORG AU) Indicative Offer of A$9.00 from Brookfield/EIG
  • Golden Agri-Resources (GGR SP) – FTSE Selling in December
  • Assessing LG Energy Solution’s Flow Imbalance Situation
  • EQD | Tencent (700 HK): Buy Calendar Spreads into Earnings
  • Perpetual (PPT AU) Rejects a Revised A$33 Offer; Pendal (PDL AU) Deal Looks Toast

Tata Motors ADS Delisting – Here We Go Again – Lots of Fun To Be Had!

By Travis Lundy

  • Yesterday, with earnings, Tata Motors Ltd (TTMT IN) announced that it would delist its ADS, making an application on or around 13 January.
  • This sounds relatively benign because since 2004 when the ADS was listed, local funding capacity has increased substantially. It may no longer be needed. 
  • But it is MUCH more interesting than that. There is lots of fun to be had here. 

MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises

By Brian Freitas

Tata Motors (TTM) To Delist ADSs: Details & Potential Trades

By Brian Freitas

OZ Minerals (OZL) – Copper and Comps Have Caught Up

By Travis Lundy

  • In August, BHP Group Ltd (BHP AU) launched a $25/share bid – a price it saw as attractive and what target OZ Minerals Ltd (OZL AU) saw as opportunistic. 
  • Copper had fallen, and peer stock prices had fallen too. Since then, copper has rebounded and peers have too so what was a 25-30% premium no longer exists.
  • This means the price of OZL should “enjoy” different dynamics going forward.

Golden Energy (GER SP): Widjaja Family’s Low-Balled Offer

By David Blennerhassett

  • Golden Energy & Resources (GER SP) has proposed in-specie-ing its holding in Golden Energy Mines (GEMS IJ), subsequent to which the Widjaja family will undertake an Exit Offer.
  • Ex-GEMS, the family is Offering S$0.16/share. That’s insulting. And the Offer was announced after GEAR’s share price had fallen 26%.  The Exit Offer has been declared final.
  • GEAR’s jewel is the stake in GEMS, and shareholders are afforded future exposure. However, the stub ops are worth considerably more than S$0.16/share. 

Origin Energy’s (ORG AU) Indicative Offer of A$9.00 from Brookfield/EIG

By Arun George

  • Origin Energy (ORG AU) received a conditional, non-binding indicative proposal from Brookfield and EIG at A$9.00 per share, a 54.9%  premium to the undisturbed price (9 November).
  • The Board will grant eight weeks of due diligence access and intends to unanimously recommend a binding offer at A$9.00 per share. The offer is attractive.
  • Regulatory approvals are an overhang and would likely require price concessions. At the last close, the gross spread to the offer is 14.9%.

Golden Agri-Resources (GGR SP) – FTSE Selling in December

By Brian Freitas

  • FTSE has announced that it will be changing Golden Agri Resources (GGR SP)‘s nationality from Singapore to Ineligible at the close on 16 December. 
  • This means the stock will be deleted from the FTSE All-World Index at the close on 16 December. We estimate passive trackers will need to sell multiple days ADV.
  • Golden Agri Resources (GGR SP) trades cheaper than a lot of its peers but has outperformed them over the last year. There could be a short-term reversal.

Assessing LG Energy Solution’s Flow Imbalance Situation

By Sanghyun Park

  • LG Energy’s virtually locked-up shares rise to nearly 95%. This should at least partially explain why its price has substantially outperformed the KOSPI in recent months, showing strong downward rigidity.
  • Additional long-term money equivalent to 2-3% of SO can come in for 5% float shares. There is no precedent for a float crunch of this magnitude among top-cap local stocks.
  • It seems necessary to reconsider taking a shorting position for LG Energy even after the 9th of next month when the short-term passives inflow situation is completed.

EQD | Tencent (700 HK): Buy Calendar Spreads into Earnings

By Simon Harris

  • Tencent are due to report earnings next week on Nov 16th
  • Implied vols are bid up into the event causing an inverted term structure
  • We see an opportunity to buy long calendar spreads to play a reversion in vol surface

Perpetual (PPT AU) Rejects a Revised A$33 Offer; Pendal (PDL AU) Deal Looks Toast

By Arun George

  • Perpetual Ltd (PPT AU) has rejected a revised non-binding indicative proposal from Regal/BPEA EQT at A$33.00 per share, a 10% premium to the previously rejected offer of A$30.00 per share. 
  • While the Regal Partners (RPL AU)/BPEA EQT revised offer is not quite a knockout bid, it is good enough to warrant the requested short due diligence period.
  • The PPT/Pendal Group (PDL AU) deal is seemingly dead. The A$23 million break fee is more than compensated by the A$172 million value uplift between Regal/BPEA EQT’s two proposals.

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Nov 10
0

Daily Brief Event-Driven: Toshiba – Realistic Valuation Disappoints Markets and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Toshiba – Realistic Valuation Disappoints Markets
  • Golden Energy & Resources (GER SP)’s Lacking Offer from the Widjaja Family
  • Super High Premium Buyout for Totoku Electric (5807) By Carlyle
  • Origin Energy (ORG AU): Indicative Proposal from Brookfield & MidOcean; Index Implications
  • PB Fintech (Policy Bazaar) Lockup Expiry – US$1bn+, Stock Down 60% but Everyone Is in the Money
  • Nexon Q3 In-Line-Ish, Underperformance Achievement Unlocked, Buyback Language Odd
  • Uzabase (3966) Agrees to Carlyle Takeover
  • Axis Bank (AXSB IN): Last of the SUUTI Selldown Removes Overhang
  • Perpetual Rejects EQT/​BPEA/​Regal’s Revised Offer But Seeks Pendal Merger Delay

Toshiba – Realistic Valuation Disappoints Markets

By Mio Kato

  • The Nikkei reported on Monday that JIP’s bid values Toshiba at roughly ¥2.2trn. 
  • The stock has dropped to a level just below this valuation suggesting some anticipation of a Bain/JIC bid above that valuation. 
  • While that is plausible, the cautiousness of JIP’s bid highlights the fundamental downside risk here in our view.

Golden Energy & Resources (GER SP)’s Lacking Offer from the Widjaja Family

By Arun George

  • Golden Energy & Resources (GER SP)‘s proposal from the Widjaja family – The distribution proposal (1.3936 GEMS share per share or IDR5,500 per GEMS share) and the delisting proposal (S$0.160).
  • For minorities, the good news is that the distribution share ratio is in line with the control ratio and offers are at a premium to historical share prices/multiples. 
  • The bad news is that the distribution cash alternative is unattractive and the delisting offer values GEAR at a discount to the Stanmore Coal (SMR AU) stake adjusted for debt.

Super High Premium Buyout for Totoku Electric (5807) By Carlyle

By Travis Lundy

  • Yesterday, Carlyle announced a buyout of Totoku Electric (5807 JP) at ¥5,660/share, which was a cool 155% premium to Tuesday’s close of ¥2,215. The stock was limit up today. 
  • It will be limit up tomorrow, and the next day. And probably the next day. 
  • This is a very interesting outcome. But it is actually not as expensive as it “looks.”

Origin Energy (ORG AU): Indicative Proposal from Brookfield & MidOcean; Index Implications

By Brian Freitas

  • A Brookfield/MidOcean consortium has made a conditional, non-binding, indicative proposal to acquire 100% of the shares in Origin Energy (ORG AU) at A$9/share in cash.
  • The offer values Origin Energy (ORG AU)‘s equity at A$15.5bn and is a 54.9% premium to the last close. The premium is over 50% even using longer term VWAPs.
  • There will be changes to the S&P/ASX family of indices to maintain the number of index members. We will know more once an indicative timeline is published.

PB Fintech (Policy Bazaar) Lockup Expiry – US$1bn+, Stock Down 60% but Everyone Is in the Money

By Sumeet Singh

  • In Nov 2021, PB Fintech raised around US$793m in its India IPO, via selling a mix of primary and secondary shares.  The lock-up on its pre-IPO shareholder will expire soon.
  • The company operates two platforms: Policybazaar operates in India’s online insurance product and service industry; and Paisabazaar platform operates in India’s online credit industry. 
  • In this note, we will talk about the upcoming lockup expiry.

Nexon Q3 In-Line-Ish, Underperformance Achievement Unlocked, Buyback Language Odd

By Travis Lundy

  • Nexon (3659 JP) reported Q3 earnings and full-year forecasts today. Revenue came in at the bottom end of August guidance, despite the higher-than-forecast USD/yen rate. 
  • The forecast for full-year is below consensus. This may be seen as disappointing. The stock may fall on this. 
  • But a buyback announcement and relative valuation suggests time to cover the short. 

Uzabase (3966) Agrees to Carlyle Takeover

By Travis Lundy

  • Carlyle has launched a bid for business news and data service owner Uzabase Inc (3966 JP). The bid is far below the price of a couple years ago. 
  • But the price clears the 2022 high by 1 tick. Some will be OK with this, but some may not be. 
  • At a 72% premium, optically it appears attractive, but given circumstances, it is not a total knockout, though I don’t know who would come in.

Axis Bank (AXSB IN): Last of the SUUTI Selldown Removes Overhang

By Brian Freitas

  • The Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI) is offering 46.53m shares of Axis Bank Ltd (AXSB IN) at a floor price of INR 830.63/share.
  • This will take SUUTI’s stake in Axis Bank Ltd (AXSB IN) to zero and remove an overhang on the stock.
  • Coming in close to Bain’s partial stake sale last week, the stock could trade heavy. But Axis Bank Ltd (AXSB IN) still trades cheaper than peers.

Perpetual Rejects EQT/​BPEA/​Regal’s Revised Offer But Seeks Pendal Merger Delay

By David Blennerhassett

  • Perpetual Ltd (PPT AU) has announced – and subsequently rejected – a revised non-binding proposal from EQT/BPEA/ Regal Partners (RPL AU) of A$33/share, up from the initial Offer of $30/share.
  • PPT factored in the value, high conditionality, transaction, and execution risks, and determined the proposal was not in the best interests of shareholders.
  • Against PPT’s request for a delay, Pendal (PDL AU) will proceed to the first court hearing for this week to convene a Scheme Meeting, which may occur in mid-December. 

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Nov 09
0

Daily Brief Event-Driven: Toshiba (6502 JP) – Weak Sauce from JIP and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Toshiba (6502 JP) – Weak Sauce from JIP
  • Jardine C&C (JCNC SP): Potential MSCI Inclusion as NAV Discount Shrinks
  • KLine (9107) Buyback Redux-Squared – Post-Buyback Could Get Squeezy
  • TIGER Top 10 Rebalancing: A Big Change Awaits
  • TOPIX Inclusion: Socionext (6526 JP) – Momentum Is Fading, Exit Now.
  • Jinke Smart (9666 HK) VGO Unconditional
  • FSN E-Commerce (Nykaa) Lockup Expiry – US$2.5bn Unlock with a Very Scattered Shareholding
  • Singtel Holds The Key To Gulf Energy’s Takeunder For Thaicom
  • Delhivery: Potential Index Inclusions Overshadowed by US$2.89bn Lock-Up Expiry
  • Eagle Cement: Offer Open. IFA Says Fair

Toshiba (6502 JP) – Weak Sauce from JIP

By Travis Lundy

  • Media reported last night that JIP would bid ¥2.2trln for Toshiba. That’s about ¥5,000-5,100/share. 
  • This morning, there is a bit more clarification. Funnily, that means there is less info here than people think.
  • But it is not a great look for either JIP or Toshiba at this point.

Jardine C&C (JCNC SP): Potential MSCI Inclusion as NAV Discount Shrinks

By Brian Freitas

  • Jardine Cycle & Carriage (JCNC SP) was deleted from the SIMSCI Index in November 2020 and could be added back to the index at the upcoming SAIR.
  • If added to the index, we estimate passive MSCI trackers will need to buy 7.9m shares (US$176m; 11 days of ADV) at the close on 30 November.
  • Jardine Cycle & Carriage (JCNC SP) is trading at a tight discount to its listed holdings and the spread could widen post the MSCI implementation.

KLine (9107) Buyback Redux-Squared – Post-Buyback Could Get Squeezy

By Travis Lundy

  • Kawasaki Kisen Kaisha (9107 JP) had a shareholder return program in place in May. Earnings forecasts on 3 Nov were slightly disappointing so the stock sold off but…
  • The large buyback allowed investors to try to game the situation. Some may have, but this morning on the execution, VERY few Real World Float holders sold. 
  • That leaves the stock squeezy going into a buyback to repurchase 20% of the Max Real World Float (including short-created longs). 

TIGER Top 10 Rebalancing: A Big Change Awaits

By Sanghyun Park

  • The two names in LONG (LG Energy Solution and Celltrion) and the two names in SHORT (Shinhan Financial and KB Financial) are almost a foregone conclusion.
  • POSCO Holdings is now ahead of Kakao Corp due to the recent sharp rise in its share price. But the gap between them is still quite tight.
  • This rebalancing will likely aggravate LG Energy’s flow crunch as it also awaits an MSCI up-weight (2x ADTV) in end-November and a KOSPI 200 up-weight (2x ADTV) on December 8.

TOPIX Inclusion: Socionext (6526 JP) – Momentum Is Fading, Exit Now.

By Janaghan Jeyakumar, CFA

  • Japan-Based System-On-Chip designer and IP purveyor Socionext (6526 JP) was listed in the “Prime” section of the Tokyo Stock Exchange (TSE) on 12th October 2022.
  • When a company gets listed in the Prime section, it subsequently gets included in the TOPIX Index requiring TOPIX-tracking funds to purchase the stock during an Inclusion Event.
  • Usually, this presents interesting trading opportunities to generate sharp market-neutral returns in the space of few trading days. Below is a look at the details for Socionext’s TOPIX Inclusion Event.

Jinke Smart (9666 HK) VGO Unconditional

By Arun George

  • Jinke Smart Services (9666 HK)’s VGO from Boyu Capital at HK$12.00 per share has been declared unconditional. Boyu has waived the 7.71% valid acceptances condition. 
  • Boyu has likely two aims for the unusual VGO – secure anti-trust approval and a re-rating by becoming the largest shareholder. Anti-trust approval was received on 8 November.  
  • Acceptances of 0.0081% of outstanding shares reflect the unattractive offer. The final closing date is 22 November. At the last close price, the spread to the offer is 2.7%. 

FSN E-Commerce (Nykaa) Lockup Expiry – US$2.5bn Unlock with a Very Scattered Shareholding

By Sumeet Singh

  • In Nov 2021, Nykaa raised around US$720m in its India IPO, via mostly selling secondary shares.
  • Nykaa is a lifestyle focussed e-commerce platform and consumer brand offering a portfolio of beauty, personal care and fashion products, including its own branded products.
  • In this note, we will talk about the upcoming lockup expiry.

Singtel Holds The Key To Gulf Energy’s Takeunder For Thaicom

By David Blennerhassett

  • In April 2021, Gulf Energy (GULF TB)‘s surprising VTO for Intouch (INTUCH TB) was conditional, inter alia, on a waiver NOT to make a downstream offer for Thaicom (THCOM TB).
  • Now Gulf has announced an intention to acquire Intouch’s 41.13% stake in Thaicom for Bt 9.92/share, a 19.3% discount last close, the completion of which triggers an MTO.
  • The acquisition of shares from Intouch requires approval from Intouch shareholders. Gulf, with 46.44% of shares out, is required to abstain. 

Delhivery: Potential Index Inclusions Overshadowed by US$2.89bn Lock-Up Expiry

By Brian Freitas

  • Delhivery (DELHIVER IN) raised US$675m in its IPO and started trading on 24 May. The stock dropped below its IPO price a couple of weeks ago.
  • Lock-Ups on pre-IPO investors expire on 20 November with 598m shares (US$2.89bn) becoming available for sale. Sell before then or hold off on buying.
  • Delhivery (DELHIVER IN) is a potential inclusion to the MSCI Small Cap and FTSE All-World indices in the next month. Passive buying will be overshadowed by lock-up expiry.

Eagle Cement: Offer Open. IFA Says Fair

By David Blennerhassett

  • Back on the 5 October, San Miguel (SMC PM) announced the acquisition of Eagle Cement (EAGLE PM) at P22.02/share. On the 28 October,  Philippine Competition Commission said it had no issue.
  • The Tender Offer is now out, and the Offer is open for acceptance. The IFA considers the Offer price to be fair.
  • The Offer closes on the 5 December with an expected payment on the 14 December. 

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Nov 07
0

Daily Brief Event-Driven: MSCI Korea November SAIR: Potential Changes and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • MSCI Korea November SAIR: Potential Changes, Impact, Short Interest & Pre-Positioning
  • Mitsui & Co (8031) Buyback – Big Profit, Big Div, Big Buyback, Some Index Selling
  • MSCI SEA EM Nov SAIR: High Impact Deletions Expected
  • Weekly Deals Digest (06 Nov) – Perpetual, Pendal, Nitro, ReadyTech, VNET, Singapore Medical, Blibli
  • Merger Arb Mondays (07 Nov) – Yashili, Fengxiang, Kingston, Pendal, Perpetual, ReadyTech, Nitro
  • Toshiba (6502) – Funding Deadline Risk Was Known 6+ Weeks Ago
  • EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
  • MSCI India November SAIR: Potential Changes & Higher Foreign Holding
  • Elliot Tenders Its Stake

MSCI Korea November SAIR: Potential Changes, Impact, Short Interest & Pre-Positioning

By Brian Freitas

  • We see 1 potential inclusion and 12 potential deletions for the MSCI Korea Index at the November SAIR. The final changes will depend on what day MSCI uses.
  • Nearly all the stocks have over 4 days of ADV to trade from passive trackers. There have been big moves on short interest and excess volume on some stocks.
  • The announcement will be made Friday morning pre-market open and there could be some big moves in the stocks this week.

Mitsui & Co (8031) Buyback – Big Profit, Big Div, Big Buyback, Some Index Selling

By Travis Lundy

  • Mitsui & Co Ltd (8031 JP) on 1 November reported its results for H1 2022. H1 Revenue +37.1%yoy, OP+27.2%yoy, NP+33.2%yoy to ¥539bn. Full-year NP forecast +22.5% to ¥980bn.
  • Mitsui raised its dividend forecast (previously scheduled to rise from ¥105/share to ¥120/share) to ¥130/share and announced a ¥140bn buyback, adding to the ¥100bn announced in May completed in September.
  • The first ¥58.6bn was done in a ToSTNeT-3 buyback. Now there is another ¥79.4bn to go. There’s also a fair bit of index selling the next 6mos.

MSCI SEA EM Nov SAIR: High Impact Deletions Expected

By Brian Freitas

  • There should be quite a few deletions for South East Asia Emerging Markets. The number of potential inclusions is smaller and have a smaller probability of being added.
  • While the passive flow on the potential deletions is not massive, the impact in terms of days of ADV to trade is very high in most cases.
  • There has been a steady increase in cumulative excess volume on a few of the potential deletions and there will be unwinding against the passive flow.

Weekly Deals Digest (06 Nov) – Perpetual, Pendal, Nitro, ReadyTech, VNET, Singapore Medical, Blibli

By Arun George

Merger Arb Mondays (07 Nov) – Yashili, Fengxiang, Kingston, Pendal, Perpetual, ReadyTech, Nitro

By Arun George

Toshiba (6502) – Funding Deadline Risk Was Known 6+ Weeks Ago

By Travis Lundy

  • There are several bits of news in the past few weeks indicating financing commitments might not meet the 7 Nov deadline. Principal among them the JIC/JIP split many weeks ago. 
  • That suggested the 30 Sep and subsequent deadlines would be delayed. And it appears we now have the reason for it, and that is another cause of financing commitment delay.
  • This development suggests activists have another quiver in their arrow should privatisation not succeed. Toshiba has cheapened in the meantime.

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

MSCI India November SAIR: Potential Changes & Higher Foreign Holding

By Brian Freitas

  • Post the end of the review period, we see 7 potential adds and 2 potential deletes for the MSCI India Index at the November SAIR.
  • Inclusion in the index will require passive trackers to buy 6-21 days of ADV on the stocks. That increases to 16-45 days of delivery volume.
  • Cumulative excess volume indicates pre-positioning on most potential adds. Foreign Portfolio Investors (FPI) have increased their holding on all potential adds over the July-September quarter.

Elliot Tenders Its Stake

By Jesus Rodriguez Aguilar

  • 4 November was the deadline to tender. PMI threatened to walk away if it didn’t reach 90%. Some funds that opposed the deal trimmed their stakes, likely bought by arbs.
  • The FT has reported that Elliot (10.5% stake) has tendered and that by 4 November over 80% acceptances were recorded. PMI is very likely to reach now over 90% acceptances.
  • Results will be announced on 7 November, with settlement on 11 November. The squeeze-out procedure is likely be initialed as soon as possible after settlement. Gross spread is 0.87%.

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