Event-Driven

Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
Overall, net outflow over the past week was ~US$0.15bn, split between Shanghai (+US$0.05bn) and Shenzhen (-US$0.20bn).
The largest inflows were into Kweichow Moutai (600519 CH) and Zhejiang Huayou Cobalt (603799 CH). The largest outflows were in LONGi Green Energy Technology (601012 CH) and CATL (300750 CH).

Sumitomo/Myovant: Minorities Takeout

Sumitomo has offered $22.75/share in cash, 27% premium, for the 48% stake it doesn’t hold in Myovant, whose Board has rejected the offer and is open to negotiate.
The sell-side forecasts peak sales of over $2 billion for Orgovyx and Myfembree. Myovant also has a co-marketing deal with Pfizer could be worth $3.8 billion in milestones.
My TP is $22.84 (in line with consensus and the offer price). The market certainly believes that Sumitomo could be preparing a sweetened offer. Will Orgovyx become a blockbuster?

Shanghai/Shenzhen Southbound Connect: Weekly Moves (7 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 ~US$0.75bn, split (+US$0.35bn) for Shanghai and (+US$0.40bn) for Shenzhen.
The largest inflows were into Hang Seng H Share Index (2828 HK) and Wuxi Biologics (2269 HK). The largest outflows were in Geely (175 HK) and AIA Group (1299 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

Oct 06

Daily Brief Event-Driven: Thinking Strategically About a Shinsei Position – Things To Do NOW and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Thinking Strategically About a Shinsei Position – Things To Do NOW
Link’s Ongoing Overtures from DND Underscore Its Value
StubWorld: Link And D&D Continue Negotiations On Unlisted Ops
KOSDAQ 150 Rebalancing: 7 Regular Changes + 2 Special Entries
Samsung Electronics: Lee Jae-Yong Orders the Creation of a New Task Force to Raise Shareholder Value
FTSE China 50 Index Rebalance Preview: One Change Could Increase to Three
Trading Ideas on the Possibility of Samsung Electronics’ Special Shareholder Returns
Shidax Outlook May Change – Better Governance Matters
FEMSA/Valora Holding: Offer Success and Squeeze-Out

Thinking Strategically About a Shinsei Position – Things To Do NOW

SBI Holdings (8473 JP)‘s subsidiary has reportedly filed its application to become a Bank Holding Company, the definition being a company holding a 50% or greater stake in a bank.
The day after I last wrote, Shinsei announced it had received approval to change its name to SBI Shinsei Bank as of 4 January 2023.
My expectation is the move above 50% happens sooner rather than later. And in that case, investors should think about their approach. Get your cowbells ready.

Link’s Ongoing Overtures from DND Underscore Its Value

Dye & Durham/DND is a persistent bidder and returned with a A$1.27 billion bid for Link Administration (LNK AU)’s CM and BCM businesses. The Board will update next week.
The latest offer is attractive but curiously, contradicts DND’s previous comments that the FCA would make it challenging to distribute any part sale proceeds.
Despite the overhang from the FCA fine, DND’s ongoing persistence and the Board’s potential in-specie distribution of the PEXA Group (PXA AU) stake highlight the underlying value.

StubWorld: Link And D&D Continue Negotiations On Unlisted Ops

In a Musk/Twitter-like on/off/on-again situation, Link Administration (LNK AU) announced it received an improved offer for its corporate markets and Banking & Credit Management (BCM) businesses from Dye & Durham.
Separately, Link is working with the Australian Tax Office on the in-specie distribution of a minimum of 80% of Link’s holding into PEXA Group (PXA AU).
Preceding my comments on Link 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%.

KOSDAQ 150 Rebalancing: 7 Regular Changes + 2 Special Entries

KOSDAQ 150’s December rebalancing will feature seven regular changes and two special entries.
Among the additions, we should focus on Dear U and ISC, which have a balanced level of liquidity and flow, rather than those theme stocks with high volatility.
As for Nature Holdings, Eoflow, and Nextin, I suggest a more aggressive entry point due to low trading volume. Then, I’d basket-trade the deletions on equal weight.

Samsung Electronics: Lee Jae-Yong Orders the Creation of a New Task Force to Raise Shareholder Value

On 4 October, it was reported that Samsung Electronics (005930 KS) has set up a task force to raise shareholder value of the company.
This task force was formed at the order of Samsung’s Vice Chairman Lee Jae-Yong.
All in all, a major share buyback and cancellations coupled with higher dividends could result in a share price turnaround for Samsung Electronics.

FTSE China 50 Index Rebalance Preview: One Change Could Increase to Three

PICC Property & Casualty H (2328 HK) is a potential replacement for XPeng (9868 HK) at the December rebalance of the FTSE China 50 Index.
There are a couple of index constituents that are close to the deletion threshold rank and that could drive two more changes. The review cutoff date is 21 November.
Tianqi Lithium (9696 HK) will be eligible for index inclusion if it is added to the FTSE All-World Index in December – we have that as a high probability event.

Trading Ideas on the Possibility of Samsung Electronics’ Special Shareholder Returns

1P/Ord LONG/SHORT betting on a 1P-skewed buyback does not look very desirable. The Lee family’s financial needs are short-term, so there is no need for a 1P-skewed buyback.
Given that the 1P discount rate has stabilized again, a strategy betting on the mean reversion does not seem very timely either.
We should look at the possibility that false expectations for a special year-end dividend will further deepen futures backwardation. This situation can lead to quite a juicy spot/futures spread opening.

Shidax Outlook May Change – Better Governance Matters

On 8 September, I went over the Oisix ra daichi (3182 JP) bid for the stake in Shidax Corp (4837 JP) held by Unison Capital.
The founding Shida family had a deal whereby when the company raised capital years ago, the family had ROFR to buy or nominate a buyer of the Unison stake.
The problem? Shidax’ independent board said this was unfair to minorities. The back and forth has continued but there may now be hope for a better deal.

FEMSA/Valora Holding: Offer Success and Squeeze-Out

The Additional Acceptance Period ended on 29 September. On 3 October, FEMSA announced the satisfaction of all conditions. On 5 October, FEMSA announced that its participation amounts to 96.87%.
Settlement will occur on 7 October. FEMSA intends to initiate a squeeze-out procedure and delist the Valora shares from trading on SIX Swiss Exchange.
The tender was good news for shareholders. My TP is CHF 252.2/share, therefore I believe the offer is fair and there was no counterbid.

💡 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 04

Daily Brief Event-Driven: Two Bits of Non-Bullish Toshiba News and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Two Bits of Non-Bullish Toshiba News
FTSE All-World/All-Cap Index Rebalance Preview (Dec): Quieter Than Usual as IPOs Dry Up
Saudi Arabia Gaming: Plans to Invest $38 Billion in Global Game Industry
EQD | Tencent (700 HK): Time to Take off Hedges and Leverage up Using Options
O2Micro’s “Reasonable” Homecoming Offer
O2Micro Enters into a Definite Privatisation Agreement at US$5.00 Per ADS
Kakao Pay Placement Lockup Expiry – Alipay Is Soon Going to Be Free to Shed Its US$1.6bn Stake
Noteworthy Lockup Releases for the Next Two Months in Korea

Two Bits of Non-Bullish Toshiba News

On Friday, Toshiba investors got two bits of news which have been taken as non-bullish.
Affiliate and former subsidiary Kioxia (6600 JP) announced it would cut wafer input volume by 30% starting in October, and Toshiba’s announcement on the Privatisation process status implied some delay.
Today the shares are getting hit vs Peers. It’s still a problem of lots of moving parts.

FTSE All-World/All-Cap Index Rebalance Preview (Dec): Quieter Than Usual as IPOs Dry Up

We see 4 potential inclusions to the FTSE All-World and All-Cap indices that will be implemented at the close of trading on 16 December.
There are a couple of other recent listings that are close to the investable market cap threshold and could be added to the All-Cap index.
Given the lack of IPO in the April to August period, the rebalance will be quieter than usual though lock-up expiries will keep things interesting.

Saudi Arabia Gaming: Plans to Invest $38 Billion in Global Game Industry

Saudi Arabia’s Savvy Games Group has a grand ambition to invest in the global gaming industry. It recently announced that it will invest US$37.8 billion in the global gaming industry.
There has been a sharp appreciation of the USD and Riyal versus JPY which could help to accelerate more M&As of Japanese game companies by SGG.
Saudi Arabia’s aggressive push to expand into the global gaming industry could aid this sector in the coming months as it could result in further major M&As in this sector.

EQD | Tencent (700 HK): Time to Take off Hedges and Leverage up Using Options

Stock has fallen 17% since Sep 15th, and implied vols have picked up
The fundamentals remain strong and tech momentum may be shifting
We suggest two directional trades using options to play earnings

O2Micro’s “Reasonable” Homecoming Offer

O2Micro International (OIIM US), an integrated circuits play, has announced a definitive privatisation transaction.
The acquirer, led by the CEO and CFO of O2Micro, are offering US$5.00/ADS, a 68.9% premium to the undisturbed price.
The Offer requires shareholders representing at least two-thirds of O2Micro vote FOR. Roughly 30% of shares out appear to be supportive. This Offer is expected to close in the 1Q23.

O2Micro Enters into a Definite Privatisation Agreement at US$5.00 Per ADS

O2Micro International (OIIM US) entered into a definitive agreement for going private with FNOF Precious Honour Limited at US$5.00 per ADS, a 54.8% to the undisturbed price (17 March).
Shareholders representing two-thirds of shares present and voting need to approve the deal. The rollover shareholders represent 16.90% of voting rights.
The offer is attractive in the context of O2Micro’s weakening performance and grim market conditions. At the last close, the gross spread is 18.2%. Expect a 1Q23 deal close.

Kakao Pay Placement Lockup Expiry – Alipay Is Soon Going to Be Free to Shed Its US$1.6bn Stake

By Sumeet Singh

In early Jun 2022, Alipay raised around US$386m via selling 3.3% of outstanding shares of Kakao Pay (377300 KS). That was the first selldown by Alipay (Alibaba (ADR) (BABA US)).
Despite pricing the shares at an enticing 11.8% discount to last close, the stock failed to hold the deal price and hasn’t looked back since.
In this note, we will talk about the previous deal and the upcoming lockup expiry.

Noteworthy Lockup Releases for the Next Two Months in Korea

K Car’s major shareholder is Hahn & Company, which has already fully recovered the initial investment. So, there is an actual probability that it will make an aggressive exit.
SingEel’s 3-month IPO institutional and VCs will be released, 6.18% of SO. All of them are in a profit zone, there is a possibility that an aggressive overhang will occur.
Kakao’s 47% holdings in Kakao Pay will be released. The possibility of lowering the stake seems quite low. Nevertheless, we must consider the risk that this will affect market sentiment.

💡 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 02

Daily Brief Event-Driven: EVOC’s H Share Class Meeting on 19 October and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

EVOC’s H Share Class Meeting on 19 October
Tassal Scheme Meeting on 3 November
BREAKING! Dog Loses To Mangalore – Idemitsu Kosan Does Its Deal for Toa Oil (5008)
Last Week in Event SPACE: Swire Pacific, SATS/WFS, Hitachi Metal, Jinke Smart, Porsche
Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases
Hong Kong CEO & Director Dealings: 30th Sept – Swire Pac’s Bs, Joinn Laboratories, Techtronic
Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Jinke Smart, Pine Care, MACA, Hitachi Metals

EVOC’s H Share Class Meeting on 19 October

EVOC Intelligent Technology Company Limited H (2308 HK)‘s H Shareholders’ class meeting is scheduled for 19 October. The IFA considers the offer to be fair and reasonable.
The key conditions are approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders’ rejection). There is no minimum acceptance condition.
The offer is attractive and should gain approval. At last close and for a 7 November payment, the gross and annualised spread to the offer is 2.9% and 26.0%, respectively.

Tassal Scheme Meeting on 3 November

Tassal (TGR AU)‘s scheme meeting is scheduled for 3 November. The IE considers the A$5.23 per share offer fair and reasonable.
The key condition is approval from shareholders – headcount test and approval by at least 75% of the votes cast on the scheme resolution. Cooke has received FIRB approval.
We continue to think that offer is attractive. At the last close price and for the 21 November implementation date, the gross and annualised spread is 1.2% and 8.8%, respectively.

BREAKING! Dog Loses To Mangalore – Idemitsu Kosan Does Its Deal for Toa Oil (5008)

Friday post-close, Idemitsu Kosan (5019 JP) announced a deal to buy out subsidiary Toa Oil Co Ltd (5008 JP). Cornwall has agreed to tender, so it’s a done deal.
This is at ¥3,150/share, which is nearly 30% higher than the bid 21 months ago, where Cornwall bought enough to block, but it is a disappointing outcome for governance.
A clearly problematic tolling agreement with the parent, and what could be ¥100bn of excess land value are ignored. Minority investors get hosed. One of the problems of minority investments.

Last Week in Event SPACE: Swire Pacific, SATS/WFS, Hitachi Metal, Jinke Smart, Porsche

Historically, when Swire (B) (87 HK) / Swire (A) (19 HK) gets more than 6% from 3mo Avg VWAP Ratio, there is statistically significant reversion. We are now at 6.8%.
The SATS (SATS SP) / WFS transaction appears all stitched up with major shareholder Temasek backing the deal. The acquisition is expected to close in 1Q23, subject to regulatory clearance.
We had the heads up days (or a week plus) ago, and now it is official. Bain has now launched its Tender Offer for Hitachi Metals (5486 JP) at ¥2,181/share.

Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases

On Friday, post-close, there was a flurry of excitement as YFO put out a press release amending the start date of the planned Tender Offer to early November.
Not long after, there was another release by Toyo Construction (1890 JP) itself.
You have to read both for what they are. And as they say…. Get your programs here!

Hong Kong CEO & Director Dealings: 30th Sept – Swire Pac’s Bs, Joinn Laboratories, Techtronic

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 also flag those companies where shares have been pledged. Stocks mentioned include Swire Pacific (B) (87 HK), Joinn Laboratories (H) (6127 HK), and Techtronic Industries (669 HK).

Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB

Last week we had the implementation of the first two tranches of the Nikkei 225 (NKY INDEX) rebalance with the third tranche to be implemented at the close on Monday.
Thursday saw the NIFTY indices implementation while Friday marked the end of the review period for the December rebalance of the Hang Seng family of indices.
There were large inflows to China, Taiwan, Korea and Hong Kong ETFs during the week while there were some outflows from Japan.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Jinke Smart, Pine Care, MACA, Hitachi Metals

There are 49 – 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 were discussed this week: Boyu’s Offer for Jinke Smart Services (9666 HK); Chinachems’s Offer for Pine Care (1989 HK), & Accenture Japan bid for ALBERT (3906 JP).
Key updates took place for Hitachi Metals (5486 JP) and MACA Ltd (MLD AU) .

💡 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 01

Daily Brief Event-Driven: (Mostly) Asia M&A: September 2022 Roundup and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia M&A: September 2022 Roundup
Edizione & KKR/Atlantia: All Clearances Obtained

(Mostly) Asia M&A: September 2022 Roundup

For the month of September, 11 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$3bn.
The average premium for the new deals announced (or first discussed) in September was ~40%, and a year-to-date average of 39%.
This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

Edizione & KKR/Atlantia: All Clearances Obtained

Edizione/Blacktone have obtained clearances from Bank of Italy and Bank of Spain regarding their voluntary takeover offer for Atlantia. Once the Consob approves the prospectus the offer can be launched.
The offer period should start in October and should be completed after 40 working days, with settlement by the end of November, and delisting by the end of the year.
Gross spread is 1.13%, 7.06% annualised return assuming settlement by 30 November. Long ATL IM.

💡 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

Sep 29

Daily Brief Event-Driven: SATS to Buy Worldwide Flight Services (WFS) As Private Equity Exits and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

SATS to Buy Worldwide Flight Services (WFS) As Private Equity Exits
Bilibili (9626 HK): Implications of Dual Primary Listing
SATS Agrees to Acquire WFS for an EV of S$3.1 Billion
Soon-To-Be Cashed-Up Jasmine After Broadband Sale
TIGER (FnGuide) Top 10 ETF Rebalancing: Noteworthy Changes Emerging
DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Porsche AG IPO Makes Things Interesting
Biffa Accepts Lowered Bid from Energy Capital Partners
EQD | FTSE100 (UKX Index): GBPUSD Vol Has Exploded Offering Opportunites to Spread Against FTSE100

SATS to Buy Worldwide Flight Services (WFS) As Private Equity Exits

SATS (SATS SP) has announced that it is buying Worldwide Flight Services (WFS) from an affiliate of Cerberus Capital Management at an Enterprise Value of €2.25bn (S$3.107bn).
The cash consideration is €1.187bn (S$1.639bn) and will likely be financed by an equity fund raising. This could be a rights issue and could be combined with a private placement.
Expect the stock to drop once it resumes trading. A significant drop from current levels could provide a buying opportunity as the rights issue could be backstopped.

Bilibili (9626 HK): Implications of Dual Primary Listing

Earlier today, Bilibili (9626 HK) announced the voluntary conversion of its Secondary Listing on the HKEX (388 HK) to a Dual Primary Listing effective 3 October.
Though the timing is tricky, this could result in the stock not being deleted from the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance.
This could also lead to inflows at the December rebalance from Hang Seng China Enterprises Index (HSCEI INDEX) and Hang Seng Tech Index (HSTECH INDEX) trackers.

SATS Agrees to Acquire WFS for an EV of S$3.1 Billion

SATS (SATS SP) agreed to acquire Worldwide Flight Services (WFS), the world’s largest air cargo handling firm, from Cerberus Capital for a cash consideration of S$1,639 million.
The base funding plan is based on a S$1.7 billion equity raise. The uncertain structure and timing of the equity raise will be a short-term overhang.
The acquisition is conditional on shareholder and regulatory approvals. Assuming no synergies, our pro-forma price per share is S$4.97, a 28.5% upside to the last close.

Soon-To-Be Cashed-Up Jasmine After Broadband Sale

Jasmine International (JAS TB) is in the home straight to sell its 99.8% interest in Triple T Broadband (TTTBB), and 19% stake in Jasmine Broadband Internet Infrastructure Fund (JASIF TB).
With Bt 32.4bn in proceeds coming through the door, JAS would have net cash of ~Bt 24.8bn against a current market cap of ~Bt 24bn.
This sounds like a situation worth a second look. So I look.

TIGER (FnGuide) Top 10 ETF Rebalancing: Noteworthy Changes Emerging

There was a substantial increase in the AUM even in the current market condition. More funds must have sought blue chip stocks as relatively safe assets in this volatile market.
Celltrion and LG Energy Solution will likely replace KB Financial and Shinhan Financial. On the other hand, POSCO is out of the race even with a +5%p float rate change.
LG Energy also has an up-weight event of the KOSPI 200. Since these passive flow events have an interval of only one day, we expect a fairly concentrated passive impact.

DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Porsche AG IPO Makes Things Interesting

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
Based on current share prices, there are no changes for the DAX index. However, there could be multiple changes for the MDAX and SDAX indices.
I have also discussed the index implications for the Porsche AG (P911 GR) IPO.

Biffa Accepts Lowered Bid from Energy Capital Partners

ECP lowers its initial offer to 410p/share in cash plus the final dividend of 4.69p/share (28% premium, implied equity value is €1,269 million, implied EV is €1,847 million).
The offer represents 1.2x EV/Fwd revenue, 8.3x EV/Fwd EBITDA and 32.1x Fwd P/E. Suez was taken at similar multiples: 1.5x, 8.1x and 27.4x respectively. My updated fair value estimate (DCF-based) is 410.6p.
The equity value prior to approach was undemanding. The offer price seems fair. Gross spread (including final dividend) is 2.1%. Reiterate Long BIFF LN.

EQD | FTSE100 (UKX Index): GBPUSD Vol Has Exploded Offering Opportunites to Spread Against FTSE100

GBP depreciation and UK mini budget have triggered a spike in volatility to decade highs
Currency vol is trading at extreme levels vs Equity vol offering trade opportunities
FTSE100 is trading cheap and we suggest a smart way to play upside

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

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

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

Sep 28

Daily Brief Event-Driven: The October TOPIX FFW Review and Shinsei Bank (8303)’s Future Float and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

The October TOPIX FFW Review and Shinsei Bank (8303)’s Future Float
Tencent Investee Selldown – The US$120bn Global Overhang
Jinke Smart (9666 HK)’s Low-Balled But Virtually Unconditional Offer
SET50 Index: Market Consultation & DTAC/TRUE Merger Impact
About A Gajillion Yen of Index Flows At the Close
Swire B Vs A – Surprising on Regs, Surprising on Risk; Short-Tm Displacement Now in 99th Percentile
Jinke Smart’s VGO of HK$12.00 from Boyu Capital
MACA’s A$1.075 Offer from Theiss Declared Unconditional
STOXX Europe Quiddity Leaderboard Dec 22: Five Intra-Review Changes, Porsche Leading The Race
Lotte Chemical Close to Acquiring Iljin Materials

The October TOPIX FFW Review and Shinsei Bank (8303)’s Future Float

This is a hybrid insight on the upcoming TOPIX FFW Review to be announced 7 October, and the situation around Shinsei Bank (8303 JP).
Shinsei Bank is in “limbo” post control-acquisition by SBI Holdings (8473 JP) and an attempt to go over 50% should be in the works. When is not known.
The TOPIX FFW Review should see ¥2.0-2.2trln of one-way flow, and amongst that flow, a large sell on Shinsei to increase Real World Float by 60+% and 25d of ADV.

Tencent Investee Selldown – The US$120bn Global Overhang

By Sumeet Singh

Multiple new agencies have been reporting that Tencent (700 HK) plans to trim its investment portfolio over the remainder of the year.
The reports have been coming in since the second half of the year and the company has been duly denying these rumors.
In this note, we look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how.

Jinke Smart (9666 HK)’s Low-Balled But Virtually Unconditional Offer

PRC-Incorporated property management play Jinke Smart Services (9666 HK) has announced a voluntary cash offer at HK$12/share, a 33.04% premium to last close.
The Offeror (Boyu) and concert parties collectively hold more than 50%. The Offer is contingent on regulatory approvals and 7.71% of shares out tendering. The tendering condition can be waived.
The Offer appears geared to bring Boyu’s stake in line with Jinke Property Group (000656 CH)‘s.

SET50 Index: Market Consultation & DTAC/TRUE Merger Impact

The SET has commenced a market consultation on lowering the turnover ratio level from 5% to 2% while selecting stocks to be added to and deleted from the SET50 INDEX.
The change to the turnover ratio level could lead to three changes in December that result in one-way turnover of 7.44% and in a one-way trade of THB 6.79bn.
Separately, the Total Access Communication (DTAC TB) / True Corp Pcl (TRUE TB) merger could result in an ad hoc inclusion prior to the regular rebalance in December.

About A Gajillion Yen of Index Flows At the Close

Today is a day which happens twice a year in Japan.
It is Day Before Divs Go Ex- Day. Which theoretically means a fair bit of buying.
Nikkei 225 is pretty neutral. But there is a Nikkei 225 buy of Nidec Corp (6594 JP). TOPIX and other float market cap indices are a buy on the close.

Swire B Vs A – Surprising on Regs, Surprising on Risk; Short-Tm Displacement Now in 99th Percentile

The Swire buyback has been impressive. In 27 trading days they have bought back 26.8% of teh HK$4bn promised. In that period, participation has been aggressive.
Swire has bought back As at a pace of 52% of pre-buyback one-year ADV. For Bs, it has been 105%. But Bs have dramatically underperformed As on “HK Re-opening” trades.
Historically, when B/A gets more than 6% from 3mo Avg VWAP Ratio, there is statistically significant reversion. We are now at 6.8%. I’d buy B vs A.

Jinke Smart’s VGO of HK$12.00 from Boyu Capital

Jinke Smart Services (9666 HK) announced a voluntary conditional general offer from Boyu Capital at HK$12.00 per share, a 33.0% premium to the undisturbed price.
The offer is conditional on 7.71% valid acceptances (such that Boyu represents 30.40% of outstanding shares) and anti-trust approval. The conditions can be waived.
The offer is designed to flush out minorities unwilling to wait for the industry headwinds to dissipate. A low threshold suggests that the offer will be declared unconditional.

MACA’s A$1.075 Offer from Theiss Declared Unconditional

Theiss’ offer of A$1.075 per share for MACA Ltd (MLD AU) has been declared unconditional despite acquiring 44.30% of outstanding shares, below the 50% threshold.
The offer has met with resistance from retail shareholders as it remains below NRW’s rejected offer, and there is a lack of clarity on franking credits.
Thiess can restart on-market purchases from 27 September. The offer closes on 7 October. The shares are trading in line with the offer.

STOXX Europe Quiddity Leaderboard Dec 22: Five Intra-Review Changes, Porsche Leading The Race

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the names leading the race to become ADDs/DELs for the STOXX Europe 600 and EuroSTOXX Indices for the December 2022 Rebalance.
There could be five M&A-related intra-review deletions between now and the end of the year.
There could be more index changes in the December 2022 Rebalance too.

Lotte Chemical Close to Acquiring Iljin Materials

On 27 September, it was announced that Lotte Chemical (011170 KS) is close to acquiring a 53.3% stake in Iljin Materials (020150 KS) for about 2.7 trillion won (US$1.9 billion).
Iljin Materials has relatively high valuation multiples. Despite recent share price decline, its shares are trading at 32.4x P/E and 15.7x EV/EBITDA in 2022.
At such a high valuation premium (93% higher than current prices), there are going to be significant concerns that Lotte Chem may have overpaid for this acquisition.

💡 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

Sep 27

Daily Brief Event-Driven: Two Days Left Til Nikkei 225 Juggled Review Starts and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Two Days Left Til Nikkei 225 Juggled Review Starts
Bain Launches Hitachi Metals (5486) Tender Offer
CALB (3931 HK) IPO: Earliest Passive Flows & Stock Connect Inclusion in 2023
StubWorld: Swire/Cathay And Hong Kong’s “Opening”
S&P/ASX Index Rebalance Preview: A Few High Impact Adds
FTSE UK Quiddity Leaderboard Dec 22: Several High-Impact Intra-Review Changes Could Happen in 4Q22
EQD | Volatility Update: A Look at Global Indices – What Trades Make Sense?
Intouch: AIS’ Expanding Broadband And Expected Mobile Duopoly
A Detailed Summary of Hanwha’s DSME Acquisition Deal
Tetra Tech Outbids WSP

Two Days Left Til Nikkei 225 Juggled Review Starts

The Nikkei announced its Annual Nikkei 225 Average Review on 5 September. It was 3 OUT 3 IN as expected. Then they added Shizuoka Bank (8355 JP) to the mix.
ShizuGin will form a holding company, so out it goes on Wednesday. NIDEC (6594) goes in. Then SMC (6273) and (7741) replace Unitika (3103) and Oki Electric (6703) Friday.
Then ShizuGin goes back in Monday, and Maruha Nichiro (1333) is deleted. The “big trade” here? The ¥550bn+ funding trade. But the change in ADDs’ Real World Float is Real.

Bain Launches Hitachi Metals (5486) Tender Offer

We had the heads up days (or a week plus) ago, and now it is official. Bain launches its Tender Offer for Hitachi Metals (5486 JP) tomorrow at ¥2,181/share.
The company’s trade name will be changed to PROTERIALS (i.e. losing “Hitachi”) which should be fine. It was non-core anyway.
This is still a large-ish deal – up to ¥434bn. MktCap is ¥930bn. But minimum is only 56.8mm shares because they get the parent vote anyway. Done deal.

CALB (3931 HK) IPO: Earliest Passive Flows & Stock Connect Inclusion in 2023

CALB (3931 HK) is looking to raise between US$1.29bn-US$1.73bn by selling 265.85m shares at a price range of HK$38-51/share.
CALB (3931 HK) will not get Fast Entry to any indices but should be added to the HSCI and Stock Connect in March and to the FTSE All-World in June.
Peer performance has been fairly mixed in the recent past. Stock trading weak post listing could provide buying opportunities ahead of the passive inflows.

StubWorld: Swire/Cathay And Hong Kong’s “Opening”

After Hong Kong announced abandoning hotel quarantine for inbound travellers, Cathay Pacific (293 HK) gained 2.6% last Friday, but finished up just 1%. That probably sums up the situation.
Preceding my comments on Cathay and Swire Pacific (19 HK) 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%.

S&P/ASX Index Rebalance Preview: A Few High Impact Adds

At the December rebalance, we expect changes to the S&P/ASX 50 Index and S&P/ASX 200 (AS51 INDEX). Announcement is on 2 December with implementation on 16 December.
If added to the S&P/ASX 200 (AS51 INDEX), passive trackers will need to buy over 9 days of ADV on Monadelphous (MND AU) and ioneer Ltd (INR AU).
Shorts have dropped on nearly all potential adds and deletes over the last couple of months. With shorts at low levels, short covering will have limited impact at the rebalance.

FTSE UK Quiddity Leaderboard Dec 22: Several High-Impact Intra-Review Changes Could Happen in 4Q22

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for FTSE 100 and FTSE 250 in the run up to the December 2022 Rebalance.
There are multiple FTSE 100 and FTSE 250 members involved in M&A situations and there could be many intra-review changes during 4Q 2022.
Most interestingly, the names leading the race to become intra-review ADDs seem to have decent volume impact.

EQD | Volatility Update: A Look at Global Indices – What Trades Make Sense?

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

Intouch: AIS’ Expanding Broadband And Expected Mobile Duopoly

Jasmine International PCL (JAS TB)‘s shareholders approved Advanced Info Service (ADVANC TB) acquiring its subsidiary Triple T Broadband, and to buy 19% of Jasmine Broadband (JASIF TB).
The deal, involving a total outlay of Bt32.4bn, remains subject to approval from JASIF unitholders and NBTC. AIS’ current market cap is Bt574bn.
Separately, the DTAC / True merger looks set to become a reality as it, ironically, does not require NBTC approval. A merger would create a duopoly and ultimately benefit AIS.

A Detailed Summary of Hanwha’s DSME Acquisition Deal

The acquisition will be carried out through a third-party allocation rights offering. DSME will issue 104M new shares, solely allocated to Hanwha’s six affiliates, which will own a combined 49.3%
This DSME acquisition will likely raise Hanwha’s holding ratio, potentially to more than 50%. What preemptive measures Hanwha will take will likely become a noteworthy subject from an investment perspective.
Hanwha Aerospace and Hanwha Systems will likely proceed with a capital increase. As their current cash capacity is quite limited, liquidity concerns will likely be raised in the market.

Tetra Tech Outbids WSP

On 24 September, Tetra Tech outbid WSP with a recommended 222p/share cash offer, a 7.8% increase vs. WSP’s and 110% premium to the start of the offer period.
The new offer represents 19.1x EV/Fwd EBIT and 25.7x Fwd P/E, and seems dilutive for Tetra Tech. Irrevocables and letters of intent amount to 27.53%.
Expect the shares to quickly close the spread at the beginning of the 26 September trading session and the market to possibly await a counterbid.

💡 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

Sep 26

Daily Brief Event-Driven: Pine Care Group – Another MGO and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Pine Care Group – Another MGO, Still Wrong Price Making One Wonder…
Merger Arb Mondays (26 Sep) – Fengxiang, Lifestyle, EVOC, DTAC/True, VNET, 111, Ramsay, Genex
New Pricing Rule for Appraisal Rights in ECO: Potential Arb Openings in DB Hitek
Hanwha Solutions: Biggest Restructuring Measures in 50 Years
Onewo (2602 HK): No Passive Flow or Stock Connect Inclusion
EQD | NIFTY Index: Option Selling Strategies for Short-Term Yield (RIL,SBIN,SBILIFE,COAL,INFY,BRIT)

Pine Care Group – Another MGO, Still Wrong Price Making One Wonder…

In early Feb2020, the #1 shareholder of HK-based elderly home care provider Pine Care Group (1989 HK) sold a 52% stake at HK$1.647, keeping 14.99%. That triggered an Unconditional MGO.
In Aug2022, much of the shareholder consortium which bought in 2020 agreed to sell 56.15% at HK$0.89/share to local privately-held developer Chinachem. That will trigger another Unconditional MGO.
The business has suffered under covid, but it is not clear why the business would be better now. Revenues will spike when Causeway Bay opens, but…. Sell.

Merger Arb Mondays (26 Sep) – Fengxiang, Lifestyle, EVOC, DTAC/True, VNET, 111, Ramsay, Genex

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
Highest spreads – Shandong Fengxiang (9977 HK), Alliance Aviation Services (AQZ AU), Infomedia Ltd (IFM AU), Ramsay Health Care (RHC AU), 21Vianet Group (VNET US), 111 Inc (YI US).
Lowest spreads – OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), Tyro Payments (TYR AU), MACA Ltd (MLD AU), Link Net (LINK IJ), Dongzheng Automotive Finance (2718 HK).

New Pricing Rule for Appraisal Rights in ECO: Potential Arb Openings in DB Hitek

A South Korean lawmaker introduced legislation that would mandate that appraisal right exercise prices in split-off listings (equity carve-out) be based on asset/earnings value rather than market price (stock price).
We may find an arb opening in DB Hitek. The appraisal price based on the asset/earnings value is at an 11.31% premium to the last close.
If DB HiTek postpones the split-off listing to next year, FY22 earnings should be reflected. In this case, the appraisal price will be at a 90% premium.

Hanwha Solutions: Biggest Restructuring Measures in 50 Years

On 23 September, Hanwha Solutions announced a set of restructuring measures which are probably the biggest ever moves by the company in the past 50 years.
The spin-off of the Hanwha Galleria is a good move. Clearly, having both the renewable energy and a luxury department store business under one roof does not make much sense.
We also like the company’s move expand its U.S. solar module production capacity. The total amount of potential benefit could be nearly US$2 billion over the next decade.

Onewo (2602 HK): No Passive Flow or Stock Connect Inclusion

Onewo (2602 HK) is looking to raise between US$700m-US$784m by selling 116.714m shares at a price range of HK$47.1-52.7/share. Indications are that the IPO will be priced close to mid-point.
Given the domestic shares and unlisted foreign shares will not be converted to H-shares, there is no chance of MSCI inclusion and a small chance of FTSE inclusion.
Onewo (2602 HK) is also unlikely to be added to the HSCI and consequently will not be added to Stock Connect.

EQD | NIFTY Index: Option Selling Strategies for Short-Term Yield (RIL,SBIN,SBILIFE,COAL,INFY,BRIT)

We screen the NIFTY Index components for yield enhancing opportunites
We screen for expensive options and combine with stock performances to find the best candidates
We identity 6 stocks where selling short-term premium makes sense

💡 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

Sep 24

Daily Brief Event-Driven: Leapmotor (9863 HK) IPO – Stock Connect & Index Flows Could Provide Some Support and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Leapmotor (9863 HK) IPO – Stock Connect & Index Flows Could Provide Some Support
Softbank – So The Arm IPO Isn’t Looking All That Hot Then?
Shanghai/Shenzhen Northbound Connect: Weekly Moves (22 September 2022)
Shanghai/Shenzhen Southbound Connect: Weekly Moves (23 September 2022)
A Detailed Summary of Hanwha Solutions Demerger & Tender Offer
Porsche AG: IPO Set for Success
Itausa (ITSA4 BZ); Attractive NAV Discount, Dividend Yield & Portfolio Diversification Are Positives

Leapmotor (9863 HK) IPO – Stock Connect & Index Flows Could Provide Some Support

Leapmotor (9863 HK) is looking to raise between US$800m-US$1.03bn by selling 130.82m shares at a price range of HK$48-62/share. Between 30-39% of the shares will be taken by cornerstone investors.
The continued slide in its closest peers could put pressure on the stock post listing, though there could be some passive buying in December.
Leapmotor (9863 HK) could be added to the HSCI and Hang Seng Tech Index (HSTECH INDEX) in December. Stock Connect could come online in December too.

Softbank – So The Arm IPO Isn’t Looking All That Hot Then?

By Mio Kato

Apparently prospects for a high valuation on a potential Arm IPO are so staggeringly, AI-rifically good that Masayoshi Son is now sounding out Samsung on a strategic partnership.
Samsung itself has not been having the greatest time of late with Micron and SK Hynix making serious inroads against its prior technological leadership in memory.
So as desperate and desperate-er ponder an alliance we can only be thoroughly convinced that this move absolutely, positively has nooooothing to do with trying to prop up share prices.

Shanghai/Shenzhen Northbound Connect: Weekly Moves (22 September 2022)

Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
Overall, net outflow over the past week was ~US$1.4bn, split between Shanghai (-US$0.8bn) and Shenzhen (-US$0.6bn).
The largest inflows were into Tianqi Lithium (002466 CH) and Midea Group (000333 CH). The largest outflows were in East Money Information (300059 CH) and Kweichow Moutai (600519 CH).

Shanghai/Shenzhen Southbound Connect: Weekly Moves (23 September 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 ~US$1.1bn, split (+US$0.8bn) for Shanghai and (+US$0.3bn) for Shenzhen.
The largest inflows were into Wuxi Biologics (2269 HK) and Tencent (700 HK). The largest outflows were in Geely Auto (175 HK) and HKEX (388 HK).

A Detailed Summary of Hanwha Solutions Demerger & Tender Offer

There is no unlocking of treasury shares, so a flow betting on dramatic value accretion will not occur. For tendering, the proration risk appears to be relatively high.
Passive trackers will sell at the close on February 24 and repurchase (likely only for Solutions) at the close on March 31. The flow size would be around 5.5x ADTV.
ECO risk wouldn’t be a concern as the new rule will grant appraisal/preemptive rights to the existing shareholders. Also, Hanwha hinted at the possibility of choosing private placement over ECO.

Porsche AG: IPO Set for Success