Event-Driven

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

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

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

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.

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

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

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

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

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.

💡 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

Nov 07

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

By Smartkarma Daily Briefs | 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

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

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

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

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Blibli (1437710D IJ) priced at IDR450, Giant Biogene Holding (2367 HK) solid trading debut.
Event-Driven developments – Nitro Software Ltd (NTO AU), Perpetual Ltd (PPT AU), ReadyTech Holdings Ltd (RDY AU), China VAST, Singapore Medical (SMG SP), 21Vianet Group (VNET US).

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

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), 111 Inc (YI US), Pendal Group (PDL AU), Genex Power Ltd (GNX AU), O2Micro International (OIIM US).
Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Tassal (TGR AU), OZ Minerals Ltd (OZL AU), China Vast Industrial Urban Development (6166 HK), PTB.

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

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

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%.

💡 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

Nov 06

Daily Brief Event-Driven: Index Rebalance & ETF Flow Recap: TW Div+ and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Index Rebalance & ETF Flow Recap: TW Div+, CSI500, ChiNext, SSE180, KS200, KQ150, FTSE CH50, AMFI
Last Week in Event SPACE: Toshiba, Perpetual/Pendal, News Corp/Fox Corp
Hong Kong CEO & Director Dealings: 4 Nov: Cross Harbour, C C Land, Zhuguang Holdings Group
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Perpetual, Nitro, Fengxiang, Pushpay, Singapore Medical

Index Rebalance & ETF Flow Recap: TW Div+, CSI500, ChiNext, SSE180, KS200, KQ150, FTSE CH50, AMFI

MSCI announces the changes at the November SAIR pre-market open (Asia time) on 11 November. That day is also the market cap cutoff for the FTSE December QIR.
There are some pretty big changes to the flows for the FTSE TWSE Taiwan Div+ Index following changes to forward dividend estimates and stock prices.
Quiet week for ETF flows with large inflows to Huatai-PB CSI 300 ETF (510300 CH) and Tracker Fund of Hong Kong Ltd (2800 HK).

Last Week in Event SPACE: Toshiba, Perpetual/Pendal, News Corp/Fox Corp

There is potentially a premium of about 20-25% being assessed for the possibility of a deal for Toshiba Corp (6502 JP), but there is also fundamental risk beyond this.
Perpetual Ltd (PPT AU) rejects EQT/BPEA/Regal’s Offer, a proposal that is contingent on PPT ceasing its Scheme with Pendal Group (PDL AU)
News Corp (NWS AU) is trading rich. The net EV/EBITDA for the stub ops trades closely matches to Fox (FOXA US). And Fox is preferable over NWS’ print media business.

Hong Kong CEO & Director Dealings: 4 Nov: Cross Harbour, C C Land, Zhuguang Holdings Group

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 Cross Harbour (32 HK), C C Land (1224 HK), and Zhuguang Holdings Group Co (1176 HK).

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Perpetual, Nitro, Fengxiang, Pushpay, Singapore Medical

There are 44 – 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 this week: EQTBPEA/Regal’s tilt for Perpetual Ltd (PPT AU).
Key updates took place for: Nitro Software Ltd (NTO AU), Pushpay Holdings (PPH NZ), Singapore Medical (SMG SP), and Shandong Fengxiang (9977 HK).

💡 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

Nov 04

Daily Brief Event-Driven: Arbs Take Another Hit as Regal’s Offer for Perpetual Puts Pendal Deal at Risk and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Arbs Take Another Hit as Regal’s Offer for Perpetual Puts Pendal Deal at Risk
EQT/Baring/Regal’s Tilt For Perpetual Muddies Waters on Pendal (PDL AU) Deal
News Corp (NWS AU)’s Proposed Merger With Fox Corp. Again.
FTSE China 50 Index Rebalance Preview: Two Changes Now, Could Be More
Perpetual Turns from Predator to Prey with Regal/BPEA EQT’s Offer
Singapore Medical: TTW Bumps To S$0.40
Launching Single-Stock ETFs in Korea: Market Flow Impact Analysis

Arbs Take Another Hit as Regal’s Offer for Perpetual Puts Pendal Deal at Risk

Regal Partners and BPEA have made a conditional, non-binding indicative proposal to acquire Perpetual Ltd at A$30/share in cash. Perpetual would need to terminate the SID with Pendal Group.
Perpetual Ltd (PPT AU)‘s Board has rejected the offer. Today’s price action is partially driven by arbs selling Pendal shares and buying back their Perpetual shorts.
The Pendal Group / Perpetual Ltd price ratio is trading below the levels from August and could move higher if Perpetual and/or the consortium decide not to move ahead.

EQT/Baring/Regal’s Tilt For Perpetual Muddies Waters on Pendal (PDL AU) Deal

Perpetual (PPT AU) has received an indicative proposal in which EQT/Baring Private Equity Asia takes Perpetual’s private clients and corporate trustee businesses, and Regal (RPL AU) the asset management arm.
The A$1.75bn buyout proposal, by way of a $30/share cash Offer – and an undefined Regal scrip alternative – was rejected by Perpetual as it “materially undervalues” the company.
The twist in the proposal is that it is contingent on the termination of the earlier-announced Scheme between Perpetual and Pendal Group (PDL AU)

News Corp (NWS AU)’s Proposed Merger With Fox Corp. Again.

Back on the 17 October, News Corp (NWS AU) announced it had begun exploring a potential combination with Fox Corporation (FOXA US).
A merger of two parts of Rupert Murdoch’s media empire would combine Fox News and TMZ assets with NWS’ newspaper and online news operations.
Murdoch split his empire in 2013, placing the print business in a newly created NWS, and the TV and entertainment under Fox,

FTSE China 50 Index Rebalance Preview: Two Changes Now, Could Be More

Tianqi Lithium (9696 HK) and JD Health (6618 HK) could be inclusions while XPeng (9868 HK) and Longfor Properties (960 HK) are near certain deletions.
There are a few stocks that are close to the deletion threshold and could be deleted from the index if they continue to sell off over the next few weeks.
Tianqi Lithium (9696 HK) is also a high probability inclusion to the FTSE All-World Index at the December rebalance. That will bring in additional inflows to the stock.

Perpetual Turns from Predator to Prey with Regal/BPEA EQT’s Offer

Perpetual Ltd (PPT AU) rejected a conditional, non-binding indicative proposal from Regal Partners (RPL AU)/BPEA EQT at A$30.00 per share, an 11.5% premium to the undisturbed price.
Regal/BPEA EQT’s aim is to present shareholders with a choice – pay a premium to merge with Pendal Group (PDL AU) or receive a lower risk premium from Regal/BPEA EQT.
The Perpetual/Pendal deal is increasingly on shaky grounds. The skinny premium suggests that Regal/BPEA EQT have headroom to bump the offer to get the Board to engage.

Singapore Medical: TTW Bumps To S$0.40

I should have stuck to my guns. Singapore Medical (SMG SP)‘s original Exit Offer was low-balled. The IFA all but conceded this. I mused that TTW probably needed to bump.
And now TTW has, bumping the Offer by 8.1% to S$0.40/share, and declaring the terms final.
The Offer remains subject to TTW holding 90% (with 77.42% in the bag already). The Offer has been extended to the 5 December.

Launching Single-Stock ETFs in Korea: Market Flow Impact Analysis

The target market size that will be affected by the Default Option is estimated to be ₩92T. Up to 30% of them (₩30T) can flow into single-stock ETFs.
Competing against TDFs, half of this ₩30T is a conservative estimate for single-stock ETFs. Then, up to 40% of the ₩15T becomes the flow size entering the local stock market.
KODEX’s Samsung Electronics single-stock ETF may dominate the market. In this case, at least ₩3-4T can flow into Samsung Electronics Ord.

💡 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

Nov 03

Daily Brief Event-Driven: FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Good Start and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Good Start, Some Surprises, More to Come!
Singapore Medical’s VGO: Revised Offer of S$0.40 Is Good to Go
KOSPI200 Index Rebalance Preview: Potential Changes, Excess Volumes & Pre-Positioning
Sweden’s EQT Partners to Invest Big in SK Shieldus: Impact on SK Square

FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Good Start, Some Surprises, More to Come!

In October 2022, FTSE Russell confirmed that the number of constituents in the FTSE TWSE Taiwan Dividend+ Index will be increased from 30 to 50 during the December 2022 Rebalance.
The estimated one-way flow was ~US$2bn and I discussed my flow expectations for this event in FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: New Methodology! Massive Flow Implications!
With less than three weeks remaining to the base date, below is an updated look at my latest flow expectations for this event.

Singapore Medical’s VGO: Revised Offer of S$0.40 Is Good to Go

Singapore Medical (SMG SP)‘s voluntary conditional offer from management (chairman, CEO, exec director) has been increased from S$0.37 to S$0.40 per share (share option unchanged).
The revised offer is final unless there is a competitive situation. The offeror came to the realisation that a bump was required to meet the 90% minimum acceptance condition.
Acceptances stand at 77.42% of outstanding shares. The revised offer is now reasonable and should be sufficient to nudge holdouts to accept. At last close, the gross spread is 5.3%.

KOSPI200 Index Rebalance Preview: Potential Changes, Excess Volumes & Pre-Positioning

With the review period complete, we see 1 high probability change and 1 lower probability change for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in December.
We estimate passive trackers will need to trade over 10 days of ADV on the high probability names. There are indications that there are pre-positions built on the stocks.
With short-sell eligibility flipping post implementation of the changes, a lot of pre-positions will be unwound prior to implementation and there will be trading opportunities on the reverse side.

Sweden’s EQT Partners to Invest Big in SK Shieldus: Impact on SK Square

On 2 November, it was reported that Sweden’s EQT Partners is to acquire a 36.87% stake in SK Shieldus.
EQT Partners is expected to invest more than 2 trillion won in SK Shieldus which is expected to be valued at about 4.5 trillion won to 5.2 trillion won.
Our base case valuation of SK Square is NAV per share of 59,272, which is 59% higher than current price.

💡 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

Nov 02

Daily Brief Event-Driven: FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Updated Dividends & Flow Shift and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Updated Dividends & Flow Shift
Yashili’s Widening Spread Is an Opportunity
Readytech (RDY AU): Microequities Baulks At PEP’s A$4.50/Share Indicative Offer
AMFI Stock Reclassification Preview (Dec 2022): Long/Short Trade Flattening Out
SK On Valuation at 22 Trillion Won – Impact on SK Innovation
S&P BSE/Sensex Quiddity Leaderboard Dec 22: Potential ADDs Could Outperform the Index
EQD | ARK Innovation (ARKK US): Is It Time to Get Back into Growth?
ReadyTech’s Indicative Offer of A$4.50 from Pacific Equity Partners Good Enough?
China VAST (6166 HK): 23 Nov Court Meeting. IFA Says Fair
Singapore Medical’s VGO: Acceptances at 77.37%, Closing Date Now 15 Nov

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Updated Dividends & Flow Shift

Updated forward dividend estimates and price moves lead to changes in adds/deletes and to estimated flows at the December rebalance. We now see 26 adds and 5 deletes in December.
The estimated one-way turnover due to adds, deletes, funding and capping is 46.6% and will result in a one-way trade of TWD 72.7bn (US$2.26bn).
Passive trackers will need to buy over 5 days of ADV on 15 stocks and sell over 5 days of ADV on 14 stocks. There will be trading opportunities galore.

Yashili’s Widening Spread Is an Opportunity

Yashili International Holdings (1230 HK)‘s spread to China Mengniu Dairy Co (2319 HK)’s offer (HK$1.20) has widened to 10.1% due to doubts about the satisfaction of the remaining pre-condition.
We think the delay in satisfying Dumex Key Condition is due to the glacial bureaucratic process. The pre-conditions long stop date is 31 July 2023, which provides sufficient time.
Both Danone SA (BN FP) and Mengniu can waive conditions to satisfy the pre-condition. Both have the motivation to complete the transaction as it facilitates the unwinding of their partnership.

Readytech (RDY AU): Microequities Baulks At PEP’s A$4.50/Share Indicative Offer

Software outfit ReadyTech (RDY AU) has announced an indicative proposal from Pacific Equity Partners and affiliates, to acquire ReadyTech by way of a Scheme of Arrangement at $4.50/share.
Pemba Capital, with 32.01% of shares out, are in discussion with PEP as to what appears to be the PE firm rolling over shares.
ReadyTech’s independent board has granted PEP non-exclusive due diligence to flesh out a firm Offer. According to media reports, Microequities, with ~13%, is not on board whatsoever.

AMFI Stock Reclassification Preview (Dec 2022): Long/Short Trade Flattening Out

Two-Thirds through the review period, we see 6 stocks moving from MidCap to LargeCap and vice versa, 7 stocks moving from SmallCap to MidCap, 8 moving from MidCap to SmallCap.
There have been changes to the list of stocks over the last couple of months and there could be more, especially on stocks that are close to the cutoff ranks.
There is a big gap in the performance of the stocks moving upward versus migrating downward and there could be some mean reversion over the next couple of months.

SK On Valuation at 22 Trillion Won – Impact on SK Innovation

SK On announced that it recently received 1 trillion won in investment, valuing the company at 22 trillion won, 29% higher than SK Innovation’s market cap of 17 trillion won.
The recent investment of nearly 1 trillion won in SK On was in the form of convertible preferred stock (CPS), which guarantees a minimum return of 7.5%.
Our SoTP valuation of SK Innovation suggests a target price of 254,396 won per share, which represents a 39% higher levels than current price.

S&P BSE/Sensex Quiddity Leaderboard Dec 22: Potential ADDs Could Outperform the Index

In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the December 2022 Rebalance.
The reference period for the trading data used for the index selection ended on 31st October 2022.
There have been a couple of key revisions to the index selection methodologies for SENSEX and SENSEX Next 50 which could have important consequences.

EQD | ARK Innovation (ARKK US): Is It Time to Get Back into Growth?

By Simon Harris

Growth Stocks have been hammered in the rising rate environment
Inflation may have peaked and central banks could be reaching the end of the hiking cycle
We look at derivative strategies on ARKK US to gain a broad exposure to the growth and tech

ReadyTech’s Indicative Offer of A$4.50 from Pacific Equity Partners Good Enough?

ReadyTech Holdings Ltd (RDY AU) confirmed that it received a conditional, non-binding indicative proposal from Pacific Equity Partners (PEP) at A$4.50 per share, a 38.9% premium to the undisturbed price.
PEP aims to jointly work with Pemba, the largest shareholder with a 32.01% stake, on the proposal. Microequities, the second-largest shareholder, is said to oppose the offer.
The offer represents an all-time price high but struck at a discount to peer multiples, suggesting room for a bump. At last close, the spread to the offer is 8.4%.

China VAST (6166 HK): 23 Nov Court Meeting. IFA Says Fair

On the 9 June, Urban planner China VAST Industrial Urban Development (6166 HK) received a pre-conditional Offer, by way of a Scheme, from China Jinmao Holdings (817 HK).
On the 17 October, China Jinmao and China VAST announced that all pre-cons for the HK$2.40/share Offer had been fulfilled.
The Scheme Doc is now out. The Court Meeting will be held on the 23 November. The IFA says fair and reasonable. This is done and trading tight to terms

Singapore Medical’s VGO: Acceptances at 77.37%, Closing Date Now 15 Nov

Singapore Medical (SMG SP)‘s voluntary conditional offer from management (chairman, CEO, exec director) has received acceptances of 77.37% of outstanding shares, below the 90% minimum acceptance condition.
The closing date has been extended to 15 November. To hit the 90% minimum acceptance condition, the offeror requires a 55.8% acceptance rate from the remaining holdout minorities.
The IFA previously declared the offer “not fair but reasonable.” The gross spread of 1.4% is not an attractive risk/reward profile. We continue to recommend taking profits.

💡 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

Nov 01

Daily Brief Event-Driven: Toshiba – How Much Risk Is There On A Deal Break? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba – How Much Risk Is There On A Deal Break?
KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks
End of Mandatory Lock-Up Periods for 54 Companies in Korea in November 2022
China VAST’s Vote on 23 November
Nitro Attracts a Competing Offer from KKR’s Alludo
Chiho (976 HK): Possible Restructuring May Trigger Offer
ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion
Iberdrola/PNM Resources: One to Watch

Toshiba – How Much Risk Is There On A Deal Break?

By Mio Kato

With Toshiba giving up its deal premium on news that the JIP consortium was struggling to secure financing it is worth assessing how much downside risk there is.
Prospects are deteriorating rapidly and we believe valuations for Kioxia and the HDD business are likely to lead the way down.
We estimate that there is still a premium of about 20-25% being assessed for the possibility of a deal but that there is fundamental risk beyond this.

KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks

With the review period complete, we see 11 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
Most of the potential changes are high probability ones, but there are some stocks that are very close to market cap and liquidity cutoffs.
The impact of passive trading will be much higher on the potential deletes as compared to the potential inclusions, though trade notionals are higher for the potential adds.

End of Mandatory Lock-Up Periods for 54 Companies in Korea in November 2022

We discuss end of the mandatory lock-up periods for 54 stocks in Korea in November 2022, among which 2 are in KOSPI and 52 are in KOSDAQ.
These 54 stocks on average could be subject to further selling pressures in November and could underperform relative to the market.
Among these 54 stocks, the top 5 market cap stocks include Enchem, Sebit Chem, DearU, Sillajen, and Sampyo Cement. They could be exposed to greater selling pressures in November.

China VAST’s Vote on 23 November

China Vast Industrial Urban Development (6166 HK)‘s scheme document is out with the court meeting scheduled for 23 November. The IFA considers the offer to be fair and reasonable.
Key conditions include approval by at least 75% of independent shareholders (<10% rejection). Shareholders with blocking stakes either provided irrecovables or will likely support the offer.
The offer is not great but headcount test is not applicable. At last close and for the 14 December payment, the gross and annualised spread is 0.8% and 6.7%, respectively.

Nitro Attracts a Competing Offer from KKR’s Alludo

Nitro Software Ltd (NTO AU) has received a competing proposal from Alludo. The offer is A$2.00 via a scheme or an off-market takeover at A$2.00, with a 50.1% minimum acceptance condition.
Unsurprisingly, the Board rejected Potentia’s A$1.80 per share off-market takeover offer. Potentia has three options – lift its offer, do nothing or sell into Alludo’s offer.
While Alludo’s offer is 11.1% above Potentia’s offer, it is far from a knockout bid. Therefore, there is a good chance that Potentia returns with improved terms.

Chiho (976 HK): Possible Restructuring May Trigger Offer

Metal recycler Chiho Environmental Group Limited (976 HK) was suspended this morning pursuant to Hong Kong’s Takeovers Code.
For more than a year, the controlling shareholder group has been implementing a potential restructuring. The ultimate controlling shareholder is Tu Jianhua, an executive director of Chiho.
This long drawn-out reorganisation may finally result in an Offer for Chiho.

ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion

At the end of the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. The impact on the potential deletions is higher on average.
The potential adds have outperformed the potential deletes over the last six months, though there has been a sharp narrowing of the gap over the last few weeks.

Iberdrola/PNM Resources: One to Watch

By Jesus Rodriguez Aguilar

Iberdrola SA has not abandoned its strategic plan in the United States, which includes the acquisition of PNM Resources through its American subsidiary Avangrid Inc.
Iberdrola is convinced that the transaction will be unblocked in the coming weeks, either because the appeal prospers or because of changes in the regulator.
I retain my TP of $50.3 cash takeout price (consideration offered by Avangrid/Iberdrola) vs. my $49.8/share median implied valuation. My TP represents 8.5% upside plus a 2.9% dividend yield.

💡 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

Oct 31

Daily Brief Event-Driven: CSI500 Index Rebalance Preview: 50 Adds/Deletes in December and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

CSI500 Index Rebalance Preview: 50 Adds/Deletes in December
Merger Arb Mondays (31 Oct) – Jinke, Fengxiang, Lifestyle, Kingston, Pushpay, Nitro, Elmo, DTAC/True
Fengxiang (9977 HK): PAG’s Unconditional MGO And Proposed Delisting
Moya Holdings: 21 Nov EGM For Salim’s Exit Offer
Ad Hoc S&P500 Change on Twitter Deletion
LX Semicon KOSPI Migration & KOSDAQ 150 Special Change
MSCI Korea IR: Market Cap Cutoff, NOC, & Constituent Changes
Moya Holding’s EGM for S$0.092 Offer on 21 November
Weekly Deals Digest (30 Oct) – Keppel, GoTo, Fengxiang, Lifestyle, Jinke Services, Kingston, Pushpay
EQD | Volatility Update: Bi-Weekly Review of Vol Changes and Best Trades

CSI500 Index Rebalance Preview: 50 Adds/Deletes in December

With a day left in the review period, we forecast 50 changes (the maximum permitted) for the CSI500 Index at the close on 9 December.
We estimate a one-way turnover of 13.53% at the December rebalance leading to a one-way trade of CNY 8.01bn. The Materials, Consumer Discretionary and Information Technology sectors are net gainers.
The potential adds and potential deletes have performed in line over the last few weeks, and we’d look to position for outperformance post the end of the review period.

Merger Arb Mondays (31 Oct) – Jinke, Fengxiang, Lifestyle, Kingston, Pushpay, Nitro, Elmo, DTAC/True

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), 111 Inc (YI US), Genex Power Ltd (GNX AU), O2Micro International (OIIM US), Shandong Fengxiang (9977 HK).
Lowest spreads – Tyro Payments (TYR AU), Tassal (TGR AU), China Vast Industrial Urban Development (6166 HK), Singapore Medical (SMG SP), PTB Group Ltd (PTB AU), Nearmap Ltd (NEA AU).

Fengxiang (9977 HK): PAG’s Unconditional MGO And Proposed Delisting

PAG Capital has won the judicial auction to acquire 70.92% of Shandong Fengxiang (9977 HK).
The acquisition remains subject to regulatory clearance (including SAMR). Once greenlit, PAG will be required to make an unconditional Offer for the H-shares at HK$1.5132/share.
Separately, it is PAG’s intention to delist Fengxiang which involves Scheme-like delisting resolutions.

Moya Holdings: 21 Nov EGM For Salim’s Exit Offer

On the 14 September, Indonesian water treatment play Moya Holdings Asia (MHAL SP) announced a S$0.092/share Exit Offer from an Anthoni Salim-controlled entity. The Offer price will not be increased.
The Offer requires approval from 75% of disinterested shareholders. Tamaris and its concert parties hold 72.84%.
The Circular is now out. The EGM takes place on the 21 November. The IFA reckons the Offer is fair and reasonable.

Ad Hoc S&P500 Change on Twitter Deletion

S&P DJI announced late 27 October 2022 that Twitter Inc (TWTR US) would be deleted from the S&P500, replaced by Arch Capital (ACGL US).
RXO would be added to the MidCap400 while Bread Financial Holdings (BFH) would move from MidCap400 to SmallCap600 and Unifi Inc (UFI US) would get deleted from the 600.
This insight presents the issues and the flows, which are not to be separated.

LX Semicon KOSPI Migration & KOSDAQ 150 Special Change

LX Semicon (108320 KS) will be traded on KOSPI from November 3rd. This event has no trade suspension. So, it will be traded on KOSDAQ until November 2nd.
Nextin (348210 KS) will replace LX Semicon for KOSDAQ 150. Again, the effective date is November 3rd. So, the index trackers will rebalance-trade at the close on November 2nd.
LX Semicon will see an outflow of -1.91x ADTV, whereas Nextin will enjoy an inflow of 3.93x ADTV. This Special Change will likely save AptaBio Therapeutics (293780 KS) from deletion.

MSCI Korea IR: Market Cap Cutoff, NOC, & Constituent Changes

The NOC of MSCI Korea Standard is 111, and the market cap of the 111th-ranked company is ₩2.44T on Day 1 and ₩2.40T on Day 2.
In addition to Hyundai Mipo, Ecopro passed the screening. On the other hand, only Meritz Securities and CJ ENM managed to stay inside the safe zone among the deletion candidates.
The recently increased price fluctuations likely resulted in delaying the entry timing of flow trading. So, we should set the expected return of our basket trade a bit more aggressively.

Moya Holding’s EGM for S$0.092 Offer on 21 November

Moya Holdings Asia (MHAL SP) released its delisting circular. The EGM to approve the delisting proposal from Tamaris Infrastructure (Anthoni Salim) at S$0.092 per share is on 21 November.
The IFA says the offer is fair and reasonable. Gateway Partners, which holds a blocking stake, will likely use the offer as an opportunity to exit an underperforming investment.
The offer price is attractive and will likely succeed. At the last close price, the gross and annualised spread for a 30 November payment is 3.4% and 45.8%, respectively.

Weekly Deals Digest (30 Oct) – Keppel, GoTo, Fengxiang, Lifestyle, Jinke Services, Kingston, Pushpay

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Blibli (1437710D IJ) priced at IDR450, Giant Biogene Holding (2367 HK) priced at the bottom of the range, GoTo (GOTO IJ)‘s upcoming lock-up expiry.
Event-Driven developments – Keppel Corp (KEP SP), Shandong Fengxiang (9977 HK), Jinke Smart Services (9666 HK), Kingston Financial (1031 HK), Lifestyle International Holdings (1212 HK), Pushpay Holdings (PPH NZ), Nitro.

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

By Simon Harris

Two Week summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 10 days
We suggest a few trades to take advantage of the implied vol surfaces

💡 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

Oct 30

Daily Brief Event-Driven: Fengxiang’s Unconditional MGO at HK$ 1.5132 from PAG and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Fengxiang’s Unconditional MGO at HK$ 1.5132 from PAG
Hyundai Elevator: Announces a Major Share Buyback Program
Index Rebalance & ETF Flow Recap: S&P/ASX, STAR50, CSI300, SSE50, IDX, GOTO, SMM/KEP
Last Week In Event SPACE: Keppel/Sembcorp, Socionext, Jinke Smart, Hitachi Transport, Lifestyle Intl
Nitro’s Carrot-And-Stick A$1.80 Takeover Offer from Potentia
Pushpay Enters a SID with Sixth Street/BGH at NZ$1.34
KOSDAQ150 Ad Hoc Index Rebalance: LX Semicon OUT, Nextin IN
(Mostly) Asia-Pac Weekly Risk Arb Wrap: ELMO, Kingston Financial, Hitachi Transport, Nearmap, Aruhi
Hong Kong CEO & Director Dealings: 28th Oct: Haichang Ocean Park, CC Land, GBA
Pushpay: BGH/Sixth Street Keep The Faith With $1.34/Share Tilt

Fengxiang’s Unconditional MGO at HK$ 1.5132 from PAG

PAG is the successful bidder for Shandong Fengxiang (9977 HK)‘s controlling shareholder’s 70.92% stake at HK$1.5132 per H Share (RMB1.3822 per domestic share).
As PAG has no compulsory acquisition rights, it will also seek shareholder delisting approval. The MGO is not conditional on the approval of the delisting resolution.
The share sale transfer requires SAMR approval which will be forthcoming. Our best guess is the MGO completes end-January 2023. At the last close, the gross spread is 14.6%.

Hyundai Elevator: Announces a Major Share Buyback Program

On 28 October, Hyundai Elevator Co (017800 KS) announced a major share buyback program worth 2.1 million shares, representing 5.1% of outstanding shares or about 50 billion won.
Hyundai Elevator Co Ltd makes excellent elevators and it is the number one player in the elevator industry in Korea with a 41% market share as of 2Q 2022.
Despite the company’s valuations trading at lower levels than its recent historical levels, the negative factors impacting the company are much bigger in scale than the share buyback program.

Index Rebalance & ETF Flow Recap: S&P/ASX, STAR50, CSI300, SSE50, IDX, GOTO, SMM/KEP

The review period for the MSCI Nov SAIR, Kospi 200 Index, KOSDAQ 150 Index, S&P BSE SENSEX Index and a bunch of mainland China indices ends on 31 October.
The minor rebalancing of the IDX30, LQ45 and IDX80 indices takes place at the close on 31 October, while the KOSDAQ 150 Index ad hoc rebalance is on 2 November.
There were outflows from IShares Core MSCI Asia Ex Japan ETF (3010 HK) and inflows to Tracker Fund (2800 HK) and Hang Seng H Share Index ETF (2828 HK).

Last Week In Event SPACE: Keppel/Sembcorp, Socionext, Jinke Smart, Hitachi Transport, Lifestyle Intl

Under revised terms, Sembcorp (SMM SP) will issue fewer shares to Keppel (KEP SP). It’s now a takeover rather than Scheme. Keppel will deliver more shares to shareholders, keeping less.
Stay cautiously positive on Socionext (6526 JP) until the stock starts trading as if those who bought on momentum look like they are getting out.
With investors chucking in the towel and the HSI touching a thirteen-year low, it’s time for some old-school perspective applying Benjamin Graham’s Net Nets

Nitro’s Carrot-And-Stick A$1.80 Takeover Offer from Potentia

Nitro Software Ltd (NTO AU) entered a trading halt in response to Potentia’s off-market takeover offer of A$1.80 per share, a 13.9% premium to its previous rejected offer of A$1.58.
Potentia will block rival schemes and not accept competing takeover offers. This move will make it hard for the Board to convince a rival bidder to table an offer.
Potentia wants a friendly offer and placed majority Board support as a condition. The offer is unattractive but Potentia has hinted at improved terms if provided due diligence access.

Pushpay Enters a SID with Sixth Street/BGH at NZ$1.34

Pushpay Holdings (PPH NZ) entered a scheme implementation deed (SID) with Sixth Street/BGH at NZ$1.34 per share, a 30.1% premium to the undisturbed price (12.6% premium to the last close).
The key conditions are shareholder and regulatory (OIO & US antitrust) approvals. The scheme meeting is in 1Q23.
The offer is light. A concentrated shareholder register and signs of retail opposition are risks. A 75% deal probability, implies buying up to NZ$1.27 per share.

KOSDAQ150 Ad Hoc Index Rebalance: LX Semicon OUT, Nextin IN

Following its planned section transfer, LX Semicon (108320 KS) will be deleted from the KOSDAQ 150 Index at the close on 2 November and replaced by Nextin (348210 KS).
Passive trackers will need to buy over 4.5 days of ADV on Nextin (348210 KS) and sell over 1.5 days of ADV on LX Semicon (108320 KS).
Belonging to the Information Technology sector, there is zero chance of LX Semicon (108320 KS) being added to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX).

(Mostly) Asia-Pac Weekly Risk Arb Wrap: ELMO, Kingston Financial, Hitachi Transport, Nearmap, Aruhi

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.
Three new deals discussed on Smartkarma this week: K1’s Offer for Elmo Software (ELO AU), Chu’s Offer for Kingston Financial (1031 HK), KKR’s tilt for Hitachi Transport System (9086 JP).
Key updates took place for Nearmap Ltd (NEA AU), Jinke Smart Services (9666 HK), Lifestyle International Holdings (1212 HK), and Aruhi Corp (7198 JP).

Hong Kong CEO & Director Dealings: 28th Oct: Haichang Ocean Park, CC Land, GBA

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 Haichang Ocean Park Holdings (2255 HK), C C Land (1224 HK), and GBA Holdings (261 HK).

Pushpay: BGH/Sixth Street Keep The Faith With $1.34/Share Tilt

Church donor management tech play Pushpay (PPH NZ) has been fielding expressions of interest since April. Earlier this month, Pushpay announced it had received another proposal, reportedly from BGH/Sixth Street.
On the 28 October, Puspay announced it had entered into a Scheme Implementation Agreement at NZ$1.34/share with BGH/Sixth Street, which collectively hold 20.34%. This is a 30.1% premium to undisturbed.
The offer is subject to shareholder and regulatory approval, with a possible completion date in early 2Q23.

💡 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

Oct 29

Daily Brief Event-Driven: JPX-Nikkei 400 Rebal 2023: End-Oct 2022 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JPX-Nikkei 400 Rebal 2023: End-Oct 2022
Shanghai/Shenzhen Southbound Connect: Weekly Moves (28 October 2022)
Shanghai/Shenzhen Northbound Connect: Weekly Moves (28 October 2022)
Softbank Group (9984 JP) – Defying Gravity into 4Q 2022

JPX-Nikkei 400 Rebal 2023: End-Oct 2022

JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-October 2022.

Shanghai/Shenzhen Southbound Connect: Weekly Moves (28 October 2022)

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$3.65bn, split (+HK$1.78bn) for Shanghai and (+HK$1.87bn) for Shenzhen.
The largest inflows were in Tencent (700 HK) and Meituan (3690 HK). The largest outflows were in China Shenhua Energy (1088 HK) and China Overseas Land & Investment (688 HK).

Shanghai/Shenzhen Northbound Connect: Weekly Moves (28 October 2022)