Event-Driven

We see 28 potential inclusions to the HSCI in September, plus another 9 stocks that are close to the inclusion cutoff. Some stocks are already a part of Stock Connect.
There could be 22 deletions from the index on market cap, liquidity and prolonged suspension. Most of the deletions would be moved to the ‘sell-only’ Southbound Stock Connect list.
Some of the stocks that remain in the HSCI could move to the ‘sell-only’ Southbound Stock Connect list since their average market cap drops below HKD 5bn.

Toshiba (6502) Strong Vs Peers on No News Means Susceptible to Risk On Underperformance

Toshiba Corp (6502 JP) sees its AGM next week with new directors and a possible privatisation process ongoing. But the AGM is a done deal and privatisation is not.
The event-i-ness of Toshiba keeps it “supported” while its better-valued and higher-growth peers fall harder in the face of recent overall market weakness.
Toshiba promised transparency on its privatisation process, and so far, it has delivered everything it promised. The next “transparency” likely comes in November.

ResApp (RAP AU): Low-End Pfizer Offer As Cough Trial Fails

Disappointingly, the sensitivity and specificity of ResApp Health (RAP AU)‘s cough trial were significantly lower than its March pilot study.
As such, the Scheme Consideration from Pfizer Inc (PFE US) will be A$0.146/share, which is still a 62.2% premium to the undisturbed price.
Trading super wide to terms after short-term punters kicked out.

Shinko Shoji (8141) Buyback – Possibly An Interesting Development

Smallcap semiconductor/component/design/assembly service trading house Shinko Shoji (8141 JP) has been buying back stock. It cancelled 20% of shares out last year. Today it buys back nearly 7%.
The question is, who sells. What one might want to do may depend on who sells. And we will know that in 1-5 days.
The stock itself trades at less than net current assets. The entire market cap and indeed equity is its funding of inventory and net receivables. It’s cheap.

Meritz Securities: Another Major Treasury Shares Cancellation

In this insight, we discuss another 100 billion won worth of treasury shares cancellation just announced by Meritz Securities (008560 KS).
This share cancellation could potentially offset the recent controversies surrounding the FSS investigating the Meritz Asset Management CEO John Lee.
After the market close today, Meritz Securities announced that it plans to cancel 20.08 million treasury shares worth 100 billion won, representing 3% of outstanding shares.

S&P/ASX Quiddity Leaderboard Sep 2022: Uniti Deletion & Many Other Changes for ASX 200 & 300

In this insight, we take a look at the potential index changes for S&P ASX 300, 200, 100, 50, and 20 in the September 2022 Rebalance.
In addition to the Regular Rebalance changes, M&A events involving Uniti Group Ltd (UWL AU) and Link Administration (LNK AU)could also cause index changes during this quarter.
The historical price and volume performance of high conviction ADDs/DELs and potential LONG-SHORT trade ideas involving these names are also discussed in this insight.

Block Deal Sale of KEPCO Engineering & Construction Likely in 2H 2022

There has been increased speculation about a potential block deal sale of Kepco Engineering & Construction (052690 KS), driving its share price lower in the past several days.
KEPCO owns a 65.77% stake in Kepco Engineering & Construction (052690 KS).
We believe that there could be a further 10-20% downside risk for KEPCO E&C in the coming weeks.

SenseTime Lock-Up -Investment Blacklist Will Further Pressurize the Upcoming US$18bn Lock-Up Release

By Sumeet Singh

SenseTime Group (STG) raised US$741m in its Hong Kong IPO in Dec 21. The IPO barely made it through and was priced at the bottom of its IPO price range.
STG is a leading AI software company. STG was the largest AI software company in Asia in terms of 2020 revenue, as per Frost & Sullivan (F&S).
In this note, we will talk about the lock-up dynamics and updates since our last note.

DTAC/True Merger: Administrative Court Ruling a Positive

Press reports (here and here) suggest that Administrative Court has ruled out the request to suspend the DTAC/True merger and that the regulation which repeals NBTC’s veto rights is lawful.
This development suggests that the NBTC will apply remedial conditions rather than block the merger. The timeline for the satisfaction of VTO conditions is from late June to early August.
With the Court ruling increasing the probability of a successful merger, it is attractive to buy the current share price ratio of 9.698x vs the implied swap ratio of 10.221x.

ResApp’s Confirmatory Study Fails, Resulting in Pfizer’s Lower A$0.146 Offer

Disappointingly, Resapp Health (RAP AU)‘s confirmatory data readout condition was not satisfied, resulting in Pfizer Inc (PFE US)’s lower unconfirmed data offer price of A$0.146 per share.
The revised SID provides no obvious way for Pfizer to pull its offer. The still material premium to undisturbed price and open shareholder register suggests that the scheme will pass.
The scheme meeting will be held in early to mid-August. At the last close of A$0.125, the gross spread to the unconfirmed data offer price of A$0.146 is 16.8%.

Before it’s here, it’s on Smartkarma

Jun 21

Event-Driven: SK Telecom, WH Group, Com7 PCL, Policybazaar, Infomedia Ltd, Asiana Airlines and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

A Detailed Guide About Korea’s FOL Stocks & MSCI Treatments
WH Group (288 HK) – Stronger, But Still WAY Cheap to Peers
SET50 Index Rebalance: BLA, JMT, JMART Added; COM7, RATCH, STGT Out
India: AMFI Stock Reclassification Preview
Infomedia Draws in Vista Equity Partners to Start a Three-Way Auction
HMM-Like Dilution Event: Korean Air Is Nearly Done, But Asiana Airlines Gearing Up

A Detailed Guide About Korea’s FOL Stocks & MSCI Treatments

Korea has a total of 33 FOL stocks. The Korean government restricts foreign ownership in major national infrastructure operators such as broadcasting companies, airlines, and telecommunication companies.
They each have a different FOL % in the range of 0-49.99%, and five are currently included in the MSCI Standard: SKT, LG Uplus, CJ ENM, KEPCO, & KAL.
Those located on the borderline that will trigger a meaningful event in the MSCI Standard Index are the three telecom companies: SKT, KT, & LG Uplus.

WH Group (288 HK) – Stronger, But Still WAY Cheap to Peers

WH Group has sharply outperformed both global peers and HK/China-listed peers since the last bullish insight pounded the table in mid-March 2022.
Since then, the Pork/Feed ratio has been climbing in China and flat to down in the US, and pork prices in China are particularly robust recently.
WH Group (288 HK) remains cheap as chips. And despite gains, still Cheapest in Yonks relatively speaking.

SET50 Index Rebalance: BLA, JMT, JMART Added; COM7, RATCH, STGT Out

Bangkok Life Assurance (BLA), JMT Network Services (JMT) and Jaymart (JMART) will replace Com7 (COM7), Ratch Group (RATCH) and Sri Trang Gloves (STGT) in the SET50 INDEX.
Estimated one-way turnover is 2.1% and will result in a one-way trade of THB 1,914m. There is little funding flow on the other index stocks.
The inclusion of Bangkok Life Assurance (BLA TB) is a minor surprise. The deletion of Com7 PCL (COM7 TB) is a much bigger surprise.

India: AMFI Stock Reclassification Preview

Nearing the end of the review period, we see 5 stocks moving from MidCap to LargeCap, 2 new listings added to LargeCap and 7 stocks moving from LargeCap to MidCap.
We see 7 stocks moving from SmallCap to MidCap, 3 new listings added to MidCap, and 12 stocks moving from MidCap to SmallCap.
Stock migrating upward have, on average, outperformed stocks that are downward migrations. Stocks moving from MidCap to LargeCap have performed the best.

Infomedia Draws in Vista Equity Partners to Start a Three-Way Auction

Infomedia Ltd (IFM AU) disclosed an indicative non-binding proposal from Vista Equity Partners at A$1.70 a share. The Board has provided due diligence to all three bidders
Curiously, Vista’s offer is in line with TA/Viburnum but below the Battery Ventures’ offer of A$1.75. This suggests that Vista requires due diligence to firm up a higher bid.
With the market downturn starting to blow up M&A deals, the three-way auction for Infomedia lowers its risk profile. At last close, the gross spread to the offers is 6.3-9.4%.

HMM-Like Dilution Event: Korean Air Is Nearly Done, But Asiana Airlines Gearing Up

The KAL event is almost over. But we still have Asiana Airlines. The KDB’s Asiana CB conversion should also be considered a foregone conclusion.
Applying the case of KAL, the KDB will likely file conversion when 30 days have elapsed since receiving the repayment notice. For this, the prevailing local consensus is June 10.
Conversion filing on July 8 and listing on July 29 with the 15-day delay rule applied is a likely scenario. Hence, our entry point should be from July 4.

Before it’s here, it’s on Smartkarma

Jun 20

Event-Driven: SK Telecom, Infomedia Ltd, Frasers Hospitality Trust, Ping An Insurance (H), Hana Tour Service, Ecopro BM Co Ltd, Feng Tay Enterprise, HYBE, SinoPac Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

SK Telecom / KT Corp: Foreign Room, Passive Flow & Trade Update
Merger Arb Mondays (20 Jun) – Link Admin, Infomedia, ResApp, Ramsay Health, Frasers Hospitality
Weekly Deals Digest (19 Jun): Frasers Hospitality, Link Admin, Link Net, Thai Life, GOGOX, ResApp
Ping An A/H: Position for Premium Contraction
TIGER Theme ETF “Tour Leisure” Rebalancing Projections: Hanatour, Asiana, Kangwon Land, & T’way Air
TIGER Theme ETF “Secondary Cell” Rebalancing Projections: SKIET, Ecopro BM, SKI, SKC, & Ecopro
FTSE TWSE Taiwan Indices: Quiddity Primer
WISE Theme Index “Media Contents” Rebalancing Projections: HYBE, CJ ENM, & Studio Dragon
FTSE TWSE Quiddity Leaderboard Sep 2022: Sinopac Financial and Pegatron Leading the Race
Infomedia (IFM AU): Now A Three-Way Hunt

SK Telecom / KT Corp: Foreign Room, Passive Flow & Trade Update

On 20 May, we recommended selling SK Telecom (017670 KS) and buying KT Corp (030200 KS). That trade is up 12% over the last month.
Foreign investors have sold 2.5m shares of SK Telecom (017670 KS) in the last month while buying 2.8m shares of KT Corp (030200 KS).
With the price ratio trading at a 4 year low, we feel is is time to start unwinding the trade and waiting for a little bit before reversing it.

Merger Arb Mondays (20 Jun) – Link Admin, Infomedia, ResApp, Ramsay Health, Frasers Hospitality

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.
The highest spreads are Sezzle Inc (SZL AU), Link Administration (LNK AU), 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Resapp Health (RAP AU).
The lowest gross spreads are Irongate Group (IAP AU), AKM Industrial (1639 HK), Beijing Enterprises Urban Resources (3718 HK), Hwa Hong Corp (HWAH SP), Uniti Group Ltd (UWL AU).

Weekly Deals Digest (19 Jun): Frasers Hospitality, Link Admin, Link Net, Thai Life, GOGOX, ResApp

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 and Chinese ADRs.
On the ECM front, Thai Life Insurance (124744Z TB) and aCommerce Group (ACOM TB) are premarketing US$1bn and US$200m IPOs. Tianqi Lithium has passed the HKEx listing hearing for US$1-1.5bn raise.
On the Event-Driven front, developments at Link Administration (LNK AU), Frasers Hospitality Trust (FHT SP), Link Net (LINK IJ), Resapp Health (RAP AU), Beijing Enterprises Urban Resources (3718 HK).

Ping An A/H: Position for Premium Contraction

The Ping An AH premium has traded around 10% over the last few days – this is near its historical highs and close to where reversals take place from.
The AH premium of the broader market is below its highs, while the AH premium on large cap financials has been trending lower over the last few months.
Northbound Stock Connect holdings on the A-shares have been decreasing, while Southbound Stock Connect holdings on the H-shares have been increasing over the last few months.

TIGER Theme ETF “Tour Leisure” Rebalancing Projections: Hanatour, Asiana, Kangwon Land, & T’way Air

This ETF’s AUM has decreased by 17% over the past three months to ₩200B. It has 18 constituents, and it is unlikely that there will be any addition/deletion.
The first thing to note is Hana Tour because the increase in the number of shares through an offering will be reflected its the market cap right before the rebalancing.
Among the top stocks by market cap, Asiana Airlines (020560 KS) (+0,.20x ADTV) and Kangwon Land (035250 KS) (-0.21x ADTV) will likely have a significant passive impact.

TIGER Theme ETF “Secondary Cell” Rebalancing Projections: SKIET, Ecopro BM, SKI, SKC, & Ecopro

This ETF’s AUM has stayed flat over the past three months, sitting at ₩1.3T. It has 28 constituents, and it is unlikely that there will be any addition/deletion.
SKIET is expected to have the most inflow relative to ADTV. Then, we have Ecopro BM, which will increase the number of shares through a rights offering.
On the other hand, among the top-tier stocks, SK Innovation, SKC, and Ecopro Co Ltd deserve our attention for shorting.

FTSE TWSE Taiwan Indices: Quiddity Primer

The FTSE TWSE Index family covers the 150 largest stocks listed in the Taiwan Stock Exchange Corporation (TWSE).
In this index family, Quiddity will primarily focus on the FTSE TWSE Taiwan 50 Index and FTSE TWSE Taiwan Mid-Cap 100 index.
In this insight, we will have a look at the selection criteria and the historical price performance of past Rebalance Events.

WISE Theme Index “Media Contents” Rebalancing Projections: HYBE, CJ ENM, & Studio Dragon

This ETF’s AUM has decreased by 20% over the past three months, remaining at ₩120B. It has 22 constituents, and there won’t be any addition/deletion at the upcoming rebalancing.
As HYBE’s recent share price plunged, we can expect a fairly interesting passive impact from this rebalancing, because its 10% cap reversion is certain to occur despite the price plunge.
CJ ENM (-0.19x ADTV) and Studio Dragon (+0.25x ADTV) are also expected to have a significant passive impact.

FTSE TWSE Quiddity Leaderboard Sep 2022: Sinopac Financial and Pegatron Leading the Race

In this insight, we take a look at the names leading the race to become ADDs/DELs for the Taiwan 50 and Taiwan Mid-Cap 100 Indices for the September 2022 Rebalance.
Currently, there are no names satisfying the requirement to be ADDs/DELs for the Taiwan 50 Index. SinoPac Holdings (2890 TT) and Pegatron Corp (4938 TT) are the highest ranked non-constituents.
For the Taiwan Mid-Cap 100 Index, there could be one ADD and one DEL in September 2022 based on current standings.

Infomedia (IFM AU): Now A Three-Way Hunt

Online auto parts and service provider Infomedia Ltd (IFM AU) has received a third non-binding proposal; this time from U.S.-based software company Solera Holdings.
The Offer price is A$1.70/share, in line with TA Associates-led consortium’s bid, but below Battery Ventures’ A$1.75/share offer.
As with TA and Battery, Solera has been granted limited due diligence. TA holds a 19.4% stake.

Before it’s here, it’s on Smartkarma

Jun 19

Event-Driven: Sk Chemicals Co Ltd/New, Frasers Hospitality Trust, Link Administration, SenseTime Group and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI Korea August QIR Preview
Last Week in Event SPACE: Frasers Hospitality, Toyo Construction, Link Admin, Kito Corporation
Asia-Pac Weekly Risk Arb Wrap: ResApp Health, Kto Corp, Link Admin, Toyo, Fraser Hospitality
Index Rebalance & ETF Flow Recap: HSCEI, LQ45, Kakao Pay, Thai Life

MSCI Korea August QIR Preview

Small Caps → Standard migrations do not seem to happen at all in this QIR. Similarly, there will likely be no deletion of the existing constituents.
Among the Outside IMIs, Kakao Pay is the only one that has the possibility of inclusion. However, it also has uncertainty about the float rate in this QIR.
For FOL stocks, the telcos are on the event-triggering borderline. In particular, SKT deserves attention. But its foreign room is now above 3%, so its deletion possibility is getting slimmer.

Last Week in Event SPACE: Frasers Hospitality, Toyo Construction, Link Admin, Kito Corporation

Frasers Hospitality (FHT SP)‘s Offer comes at an all-time high price, exceeding the end-2019 price on a dividend-adjusted basis. This should be done, but it is worth thinking about how.
There is clearly an intentional miscommunication and bad faith posturing by Toyo Construction (1890 JP).
Link Admin (LNK AU) has to exit PEXA to appease ACCC. But how badly do D&D want PEXA? Will they walk? Time to look at Link fundamentally.

Asia-Pac Weekly Risk Arb Wrap: ResApp Health, Kto Corp, Link Admin, Toyo, Fraser Hospitality

There are 49 – mostly firm – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals this week: Frasers Hospitality Trust (FHT SP)‘s Scheme, and Pfizer Inc (PFE US)‘s Offer for Resapp Health (RAP AU).
Key updates took place for: Link Administration (LNK AU), Virtus Health (VRT AU), Toyo Construction (1890 JP), Kito Corporation (6409 JP), and Hwa Hong Corp (HWAH SP).

Index Rebalance & ETF Flow Recap: HSCEI, LQ45, Kakao Pay, Thai Life

It was a busy Friday with multiple implementations of the June rebalance – FTSE All-World/All-Cap, FTSE China 50/A50/TW50, S&P/ASX, REMX and GDXJ among others.
We highlight potential upcoming changes to the HSCEI INDEX and LQ45 Index, when Kakao Pay (377300 KS) could be added in MSCI Korea & the Thai Life IPO index inclusion.
There were large inflows to China and Korea focused ETFs during the week.

Before it’s here, it’s on Smartkarma

Jun 18

Event-Driven: Viva China Holdings, Grupo Financiero Banorte, Koolearn, Pharmaron Beijing Co., Ltd. (A) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Viva China: Perennially Inexpensive Li Ning Exposure
CitiBanamex Legacy Operations – Revisiting Banorte’s Potential M&A Challenge and Opportunity
Shanghai/Shenzhen Southbound Connect: Weekly Moves (17 June 2022)
Shanghai/Shenzhen Northbound Connect: Weekly Moves (17 June 2022)

Viva China: Perennially Inexpensive Li Ning Exposure

Viva China (8032 HK) trades at a large discount to its 10.6% holding in Li Ning (2331 HK).
Apart from its Li Ning exposure, Viva has a controlling stake in Bossini International Holdings (592 HK), a sports experience segment, and net cash.
The current NAV discount of ~46% is unlikely to meaningfully narrow near term given management’s reluctance to pay out a large dividend or undertake a corporate restructuring.

CitiBanamex Legacy Operations – Revisiting Banorte’s Potential M&A Challenge and Opportunity

By Victor Galliano

Citibanamex legacy operations represent a series of challenges for the acquirer, which include its high cost base, bloated branch network and higher credit risk exposure to consumers and SMEs
The opportunity for an acquirer is access to a rich and stable deposit base with a relatively low loan-to-deposit ratio and Banamex’s fee generating AFORE pension administrator
Banamex is attracting much interest, which puts pressure on bidders to pay up, especially Banorte; we revisit our potential capital absorption calculations, but still see risk to Banorte’s dividend prospects

Shanghai/Shenzhen Southbound Connect: Weekly Moves (17 June 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, net inflow was ~US$1.9bn, split US$0.7bn for Shanghai and US$1.2bn for Shenzhen.
The largest inflows were into CNOOC Ltd (883 HK)and Meituan (3690 HK). The largest outflow was in ICBC (H) (1398 HK).

Shanghai/Shenzhen Northbound Connect: Weekly Moves (17 June 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 inflow over the past week was ~US$3.5bn, split between Shanghai (+US$2.3bn) and Shenzhen (+US$1.2bn).
The largest inflows were into Inner Mongolia Yili (600887 CH) and Pharmaron Beijing (300759 CH). The largest outflows were in CATL (300750 CH) (300750 CH) and Qinghai Salt (000792 CH).

Before it’s here, it’s on Smartkarma

Jun 17

Event-Driven: Link Administration, Nexon, Kakao Pay, Viva China Holdings, Go-Ahead, Thai Life Insurance, Iljin Hysolus, Sixt SE and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Link Admin: Dye & Durham’s Deal All But Dead
ACCC’s Concerns Likely to End in a Link-DND Deal Bust
Nexon Buyback May Signal End To Near-Term Relative Outperformance
Finding Alpha with the End of Mandatory Lock-Up Periods Data from Korea Securities Depository
Viva China: M&A of Global Footwear Brands at Discount & Its Stake in Li Ning Is More than Market Cap
Kinetic & Globalvia/Go-Ahead: Recommended Offer
Thai Life Insurance: Offering Details & Index Entry Timeline
KRX Autos (KODEX ETF) Rebalancing: Watch Iljin HySolus, Halla Holdings, & DTR Automotive
Liquid Universe of European Ordinary and Preferred Shares: June ‘22 Report

Link Admin: Dye & Durham’s Deal All But Dead

This transaction is looking increasingly toast. The ACCC has outlined significant preliminary competition concerns with Dye & Durham’s (D&D) proposed acquisition of Link Administration (LNK AU).
Separately, Link’s subsidiary, Link Fund Solutions Limited, has been notified that an application for a “Group Litigation Order” has been filed in the English High Court.
Link has to exit PEXA for this transaction to proceed. But how badly do D&D want PEXA? Will they walk? Time to look at Link fundamentally, separate from D&D’s Offer.

ACCC’s Concerns Likely to End in a Link-DND Deal Bust

The ACCC’s Statement of Issues noted “significant preliminary competition concerns” in relation to Dye & Durham/DND’s acquisition of Link Administration (LNK AU). The findings will be announced on 8 September.
There is no easy fix. We think that satisfying the ACCC requires a PEXA Group (PXA AU) stake disposal which could trigger a material adverse clause.
Link aims to proceed with the 13 July scheme meeting but this is a broken deal. While our SoTP suggests upside, there are no short-term positive catalysts.

Nexon Buyback May Signal End To Near-Term Relative Outperformance

Nexon (3659 JP) founder Kim Jung Ju tried to sell his holdco in 2019, didn’t, now shares are higher, but he passed suddenly in Q1. The stock popped.
Inheritance tax issues for the estate are complicated, but the buyback just executed might signal a “pause” for a while.
In the meantime, recent underperformance in terms of Peer-relative earnings forecasts suggests the stock could drift.

Finding Alpha with the End of Mandatory Lock-Up Periods Data from Korea Securities Depository

We discuss ways of finding alpha with the end of mandatory lock-up periods data from Korea Securities Depository (KSD) which comes out at the end of each month.
Key companies that are highlighted in this monthly data have been typically underperforming the market much more than the market overall this year.
Among these stocks, some of the big underperformers this year include Kakao Pay (377300 KS), HYBE (352820 KS), WYSIWYG Studios (299900 KS), and DearU (376300 KS).

Viva China: M&A of Global Footwear Brands at Discount & Its Stake in Li Ning Is More than Market Cap

Viva China Holdings is a deep value stock with several key catalysts. Viva China Holdings’10.36% stake in Li Ning (2331 HK) alone is worth 152% of its market cap.
In addition, Viva China Holdings is making solid acquisitions in the global footwear/apparel sector such as Clarks, which is one of the most well known footwear brands in the U.K.
A major ongoing risk factor is the recent major lockdowns in Shanghai and other cities in China, which is intent on pursing a zero COVID policy.

Kinetic & Globalvia/Go-Ahead: Recommended Offer

By Jesus Rodriguez Aguilar

Although Gerrard Bidco offers a 1500p package (likely settlement on 2 September), the shares are trading c. 6% above in the expectation of a counteroffer.
At 7.7x EV/Fwd EBIT, consideration is below the 8.6x EV/Fwd EBIT offered by DWS for struggling rival Stagecoach. FirstGroup is trading at 11.9x EV/Fwd EBIT after rebuffing I Squared Capital Advisors’ approach.
I do not believe shareholders will accept the current offer. Kelsian could counterbid up to 1715p (Stagecoach takeout multiple), 14% above current offer (c. 7.3% spread, 42% estimated annual return).

Thai Life Insurance: Offering Details & Index Entry Timeline

Thai Life Insurance (124744Z TB) is looking to raise US$1bn in its IPO by selling up to 2.207bn shares. This will value the company at around US$5.18bn.
Inclusion in the SET50 INDEX will depend on the float exceeding 20% and a rally that leads to its market cap exceeding 1% of the SET INDEX market cap.
Fast Entry to the MSCI Thailand and FTSE All-World indices is not likely. MSCI inclusion could take place at the November SAIR and FTSE inclusion at the December QIR.

KRX Autos (KODEX ETF) Rebalancing: Watch Iljin HySolus, Halla Holdings, & DTR Automotive

The ETF operator’s room to play around in index weighting is relatively minimal. Rebalancing is completed in one trading day. So, the actual passive impact was more intense and substantial.
The rebalancing result based on the average float-adjusted MC from May 2 to yesterday: Additions Iljin Hysolus, Halla Holdings, & DTR Automotive / Deletions Nexen Tire, Kumho HT, & Seoyon
Their estimated passive impact is more significant than that of the previous rebalancing. It is substantial enough to consider a preemptive position build-up for them.

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

By Jesus Rodriguez Aguilar

Discounts have generally widened across our liquid universe, in line with the recent market losses.
Recommendations long ords / short prefs: BMW, Fuchs Petrolub, Investor AB, SSAB.
Recommendations long prefs / short ords: Sixt, VW, Danieli, MFE, Grifols, Atlas Copco, Ericsson Handelsbanken, Roche, Schroders.

Before it’s here, it’s on Smartkarma

Jun 16

Event-Driven: Kito Corporation, Resapp Health, Coronado Global Resources Inc, Hwa Hong Corp, Baidu, Kakao Pay, HYBE and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Kito (6409) – Now Sitting Pretty
ResApp (RAP AU): Pfizer Coughs Up
Australia: S&P/ASX, FTSE, REMX, GDXJ Flows on Friday
Hwa Hong (HWAH SP): Directors Recommend Offer. But Not Really …
Baidu to Sell Its Stake in IQiyi
Kakao Pay MSCI Inclusion: 2022 August QIR or 2023 May SAIR?
HYBE: Significant Reduction in MSCI Korea Index Weight Likely in 2022

Kito (6409) – Now Sitting Pretty

Kito Corporation (6409 JP) is under offer by KKR unit Crosby, which announced a takeover in mid-May.
Anti-Trust and foreign review will take a few months, and so we wait. In the meantime, the shareholder register has changed significantly. This remains an interesting option.
And now, global market ructions offer arbitrageurs a meaningful opportunity.

ResApp (RAP AU): Pfizer Coughs Up

Pfizer Inc (PFE US) is Offering ResApp Health (RAP AU) shareholders up to A$0.207/share by way of a Scheme. ResApp’s Board unanimously recommends the Offer.
ResApp is currently trialing a cough-based Covid detection tool. If the study proves satisfactory, Pfizer will outlay A$0.207/share. If not, shareholders get A$0.146/share. Pfizer initially pitched A$0.115/share.
The results of the study are due out on the 20 June.

Australia: S&P/ASX, FTSE, REMX, GDXJ Flows on Friday

Changes to the S&P/ASX indices, FTSE All-World/All-Cap, VanEck Vectors Rare Earth/Strategic Metals (REMX US) and VanEck Vectors Junior Gold Miners (GDXJ US) will be implemented at the close tomorrow.
The stocks with passive inflows have outperformed the stocks with passive outflows over the last couple of months and post-announcement. There will be pre-positions on a lot of names.
Short interest has increased on nearly all the deletes from the S&P/ASX indices, while short interest movement on the stocks with passive inflows has been mixed.

Hwa Hong (HWAH SP): Directors Recommend Offer. But Not Really …

By Shifara Samsudeen, ACMA, CGMA

The Circular, containing the IFA opinion and the directors’ recommendation, was despatched after close yesterday. The IFA says fair and the directors recommend shareholders accept the Offer.
However … directors holding 29.26% of shares out do not intend to accept the Offer. The intention of an additional 10.9% held by Ong family members is not known.
No word on Hong Leong Investment as to their 5.1% stake. The IFA notes the revised Offer terms are a 20.8% discount to the revalued NAV of S$0.5052/share

Baidu to Sell Its Stake in IQiyi

Reuters and several other news media outlets reported that Baidu (BIDU US) is planning to sell its stake in iQIYI Inc (IQ US) .
Baidu has supposedly valued iQiyi at US$7bn, implying US$8.2 per ADR which is at a 78% premium to iQiyi’s last close of US$4.6 per ADR.
IQiyi reported first-ever operating profit in 1Q2022 driven by huge cost cutting. However, it is yet to be seen if the company could continue to maintain margins without compromising growth.

Kakao Pay MSCI Inclusion: 2022 August QIR or 2023 May SAIR?

When discussing Kakao Pay’s MSCI inclusion, the critical debating point SHOULD BE whether the MSCI will change Alipay’s classification from strategic to non-strategic in the wake of this block deal.
Suppose the MSCI judges Alipay’s block sales as an investment recovery and anticipates further block sales. In that case, Alipay’s classification may change from strategic to non-strategic.
The circumstantial probability that the MSCI will make such a decision is relatively high in light of recent examples. In this case, the inclusion will occur at this August QIR.

HYBE: Significant Reduction in MSCI Korea Index Weight Likely in 2022

As a result of a drastic decline in the share price of HYBE, it is increasingly likely that HYBE’s weight in MSCI Korea Index will be reduced significantly in 2022.
According to our valuation sensitivity analysis, our base case valuation is 4.8 trillion won.
As of 1 March 2022, HYBE’s weight in the MSCI Korea Index was 0.430064%, which was the 38th largest stock in this index (out of 111 stocks in total).

Before it’s here, it’s on Smartkarma

Jun 15

Event-Driven: Singtel, LG Energy Solution, Kansai Paint, Ramsay Health Care, Virtus Health, Dongyue Group, Samsung Electronics Pref Shares, Bank Jago Tbk PT, Resapp Health and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Bharti Singtel Possible Selldown/Holdco Trade – Singtel Appears to Be Ready for Cashing in US$1-2bn
FTSE GEIS Korea: Rebalancing Week Trades
Kansai Paint (4613) – Huge Buyback Launched
Ramsay Health’s Offer Spread Risk/Reward
FnGuide Top 10 (TIGER ETF) Rebalancing Review & Preview: LG Energy’s Potential Inclusion
Virtus Health: Offer From BGH Now Ostensibly Unconditional
Dongyue (189 HK): Fast-Growing FCEV Play… With Baggage
Samsung Electronics Yearend Special Dividend Projections
LQ45 Index Rebalance Preview (July 2022): Candidates for Change
ResApp Draws a Revised Binding Offer from Pfizer

Bharti Singtel Possible Selldown/Holdco Trade – Singtel Appears to Be Ready for Cashing in US$1-2bn

By Sumeet Singh

Various recent media reports have indicated that Singtel aims to sell 2-4% of its stake in Bharti Airtel. Singtel has officially dismissed the reports as media speculation.
There have been subsequent reports in the Indian media about the founder, Sunil Mittal, looking to raise around US$2bn in debt, to finance an increase in his stake in Airtel.
In this note, we talk about the possible deal and its implications.

FTSE GEIS Korea: Rebalancing Week Trades

We typically estimate the size of the FTSE All Cap tracking fund to be around $600B. However, empirically, one-third of this was witnessed in Korean stocks during the rebalancing week.
Estimating each passive flow based on this, we should expect LG Energy to receive the most significant flow at 1.16x ADTV from this point until the closing of this Friday.
As for Kakao Pay, the FTSE announced an increase in the investability to 15.8% (due to Alipay’s block deals), offering a passive inflow of 0.36x ADTV.

Kansai Paint (4613) – Huge Buyback Launched

Kansai Paint (4613 JP) today announced a very large buyback.
Given the shareholder structure, the 11.2% buyback may not have the direct market impact that one might think, but there are still ways to play this.
Kansai Paint starts from a near 5-year low against three of four large competitors. And we have accretion and likely cross-holding unwinding. It’s not a bad story.

Ramsay Health’s Offer Spread Risk/Reward

Ramsay Health Care (RHC AU)‘s gross spread to KKR & Co Inc (KKR US)’s offer (less the interim dividend) of A$87.52 has widened touching an all-time high of 17.0% today.
Despite the longer-than-expected due diligence, rising rates and market volatility, the evidence suggests that KKR remains committed. The expectation is for a binding proposal by June end.
At the last close, the risk/reward profile is favourable as the downside due to a deal break (-10% estimated decline) is lower than the upside (+17%) from a binding offer.

FnGuide Top 10 (TIGER ETF) Rebalancing Review & Preview: LG Energy’s Potential Inclusion

Among the local theme ETFs in Korea, the TIGER (FnGuide) Top 10 has the highest win rate on rebalancing flow trade.
LG Energy deserves the most attention at the next rebalancing event. If LG Chem disposes of some of its LG Energy shares, LG Energy can bypass those on the borderline.
In this case, Shinhan, the one on the borderline at this point, will face a passive flow of -0.65x ADTV, while LG Energy will receive +0.25x.

Virtus Health: Offer From BGH Now Ostensibly Unconditional

BGH now has >90% of the voting power in Virtus Health (VRT AU). In a somewhat friendly gesture, BGH has bumped the Offer by A$0.005/share.
The increased Offer Price will apply to all shareholders who accept the Offer, including shareholders who have already accepted the Offer. The Offer has been extended to the 27 June.
A special fully-franked dividend of up to A$0.30/share should now kick in – an announcement is expected shortly. The Offer remains conditional.

Dongyue (189 HK): Fast-Growing FCEV Play… With Baggage

Dongyue Group (189 HK) is a leader in the manufacturing of fluorochemicals and organosilicons, and the largest player in second-generation refrigerants.
FY21 profit was up 69% yoy. The company just announced profit in the first five months of 2022 recorded an increase of 170%+ compared to the corresponding period last year.
The trade pushback centers on corporate governance issues, both in Hong Kong and in the PRC.

Samsung Electronics Yearend Special Dividend Projections

This year’s consensus OCF is at least ₩75T, and CAPEX is ₩45T, less than last year. As a result, we will likely reach an FCF of ₩30T.
Then the yearend special DPS would be ₩764, which provides dividend yields of 2.97% (Ord) and 3.22% (Pref), respectively, even based on the conservative OCF estimates.
This is a sufficiently attractive dividend yield for Pref. Hence, unless the SEC’s price enters a sharp uptrend, the bullish Pref will likely continue.

LQ45 Index Rebalance Preview (July 2022): Candidates for Change

The review period for the LQ45 Index ends on 30 June. The changes should be announced in the last week of July, becoming effective after the close on 29 July.
Potential adds are Bank Jago Tbk PT (ARTO IJ), Adaro Minerals (ADMR IJ), Bumi Resources Minerals Tbk (BRMS IJ), Transcoal Pacific Tbk PT (TCPI IJ) and Mitratel (MTEL IJ).
Potential deletions are Pembangunan Perumahan (Persero) (PTPP IJ), Pabrik Kertas Tjiwi Kimia (TKIM IJ), Media Nusantara Citra (MNCN IJ), Gudang Garam (GGRM IJ) and Chandra Asri Petrochemical (TPIA IJ).

ResApp Draws a Revised Binding Offer from Pfizer

Pfizer Inc (PFE US)’s revised binding proposal will vary based on the results of the clinical validation study of Resapp Health (RAP AU)’s COVID Algorithm (expected around 20 June).
If the confirmatory data condition is satisfied, the offer is A$0.207 (130.0% premium to undisturbed price). If not satisfied, the offer is A$0.146 (62.2% premium to undisturbed price).
The offers are within the IE’s valuation range. At the last close, the risk/reward is favourable as the potential upside (A$0.207 offer: +25.5%) exceeds the downside (A$0.146 offer: -11.5%).

Before it’s here, it’s on Smartkarma

Jun 14

Event-Driven: Frasers Hospitality Trust, Whitehaven Coal, Microstrategy Inc Cl A, Kakao Pay and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Frasers Hospitality Trust Scheme Announced
Crown Resorts (CWN AU): Passive Sell Flow and Potential ASX100/200 Replacements
MicroStrategy (MSTR US): It’s Cratering Time
Fraser Hospitality Trust’s Privatisation Offer from Frasers Property Limited
S&P/ASX June 2022 Rebal Final Look and Crown Resorts Replacements
Kakao Pay (377300 KS): Alipay Overhang and Potential MSCI Inclusion

Frasers Hospitality Trust Scheme Announced

This morning, Frasers Hospitality Trust (FHT SP) announced a Scheme Implementation Deed was signed for the S-REIT’s privatisation by its current sponsors TCC Group Investments Limited and Frasers Property Limited.
The S$500mm borrowing mooted suggested S$0.69/unit; Scheme Consideration is S$0.70/unit in cash against the latest commissioned Adjusted NAV estimate of S$0.6519 (vs last NAV of S$0.6534/unit).
The deal comes at an all-time high price, slightly exceeding the end-2019 price on a dividend-adjusted basis. This should be done, but it is worth thinking about how.

Crown Resorts (CWN AU): Passive Sell Flow and Potential ASX100/200 Replacements

Crown Resorts (CWN AU)‘s Second Court hearing is scheduled for 15 June and the stock is likely to stop trading at the close on that day.
Estimated passive tracker selling is 62m shares (A$809m; 31.2 days of ADV) of Crown Resorts (CWN AU) and that could open up some arb opportunities.
We expect Whitehaven Coal (WHC AU) will be added to the S&P/ASX 100 Index, while Coronado Global Resources Inc (CRN AU) could be added to the S&P/ASX 200 (AS51 INDEX).

MicroStrategy (MSTR US): It’s Cratering Time

MicroStrategy Inc (MSTR US) is trading at a ~2% discount to NAV as the crypto rout moves into a higher gear.
Bitcoin briefly dipped below US$25k in the last 24 hours, an 18-month low. If it falls another 18%, this will trigger a margin call on one of MicroStrategy’s loans.
All is not well elsewhere in cryptoland. Ethereum touched a 17-month low; the Luna/Terra ecosystem has crashed; and crypto lender Celsus capitulated ~60% this morning after freezing withdrawals.

Fraser Hospitality Trust’s Privatisation Offer from Frasers Property Limited

Frasers Hospitality Trust (FHT SP) announced a privatisation proposal from Frasers Property Limited at S$0.70 cash per share + permitted distributions (estimated 1.2961 cents).
The offer is the culmination of a strategic review announced on 8 April. The offer price is attractive in comparison to historical multiples, precedent transactions and historical unit prices.
At the last close and for the September end effective date, the gross and annualised spread to the total offer price of S$0.713 per unit is 3.3% and 11.1%, respectively.

S&P/ASX June 2022 Rebal Final Look and Crown Resorts Replacements

The S&P ASX June 2022 index changes were announced on 3rd June as I discussed in S&P ASX June 2022 Rebalance: ADDs Are Mostly Mining Companies; DELs Are Mostly Tech/Financials.
With the Inclusion/Exclusion events expected to take place at the end of this week, below is a closer look at the price and volume performance of the candidates so far.
Separately, Crown Resorts (CWN AU) could get deleted from ASX 100 and ASX 200 in the next few trading days and I have picked out the potential replacements.

Kakao Pay (377300 KS): Alipay Overhang and Potential MSCI Inclusion

Alipay’s sale of 5m shares in Kakao Pay (377300 KS) has caused the stock to slide below its IPO price. Foreign investors have sold while retail have bought last week.
Alipay still holds 34.7% of Kakao Pay (377300 KS) and this will be an overhang on the stock for some time.
Kakao Pay (377300 KS) will be added to the FTSE All-World Index at the close on Friday. MSCI inclusion will likely be at the May 2023 SAIR.

Before it’s here, it’s on Smartkarma

Jun 13

Event-Driven: Bumi Resources Minerals Tbk, Toyo Construction, PetroChina, LG Energy Solution, Link Administration, Ramsay Health Care, SK Telecom and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MVIS Global Junior Gold Miners Index Rebalance: Big Flows & Impact
Toyo Construction – YFO Standstill Against TC Hostility
HSCEI Index Rebalance Preview: Four Sets of Changes from July to September
LG Energy Solution: End of 6 Months Lock-Up Period & Valuation Sensitivity Analysis
KOSPI200 Lockup Release Events: LG Energy Solution, HYBE, Lotte Chilsung, & Krafton
Merger Arb Mondays (13 Jun) – China VAST, True/DTAC, Hwa Hong, Link Admin, Ramsay Health, Link Net
Weekly Deals Digest (12 Jun): Thai Life, Link Admin, Ramsay, Link Net, China VAST, Suchuang Gas
SK Telecom & KT LONG/SHORT Swing Trading for Mean Reversion

MVIS Global Junior Gold Miners Index Rebalance: Big Flows & Impact

Kinross Gold Corp (KGC US), Fresnillo PLC (FRES LN), Kingsgate Consolidated (KCN AU), Dakota Gold are adds; Merdeka Copper Gold Tbk PT (MDKA IJ) and PGM Gold Mining are deletes.
One way turnover is US$390m and there is a big impact on a lot of stocks due to addition, deletion and float changes. Implementation at the close on 17 June.
Bumi Resources Minerals Tbk (BRMS IJ) was added to the GDXJ in March and rallied over 30% in 4 days since announcement. Buying this time will be even larger.

Toyo Construction – YFO Standstill Against TC Hostility

Three weeks ago, Yamauchi No 10 Family Office (YFO) announced its intentions to launch a Tender Offer by end-June. Toyo Construction (1890 JP) got upset and called YFO names.
TC announced a Poison Pill, they talked, TC accused YFO in the AGM Convocation of “extreme dishonesty.” They have since met again, and finally signed a long standstill agreement.
But the Poison Pill will be put to shareholders (ISS recommends against), and shareholders have to decide from the public documents whether they believe Toyo Construction.

HSCEI Index Rebalance Preview: Four Sets of Changes from July to September

Sunac China Holdings (1918 HK) is still suspended from trading and could be deleted from the index in July and replaced by SenseTime Group (20 HK) or PetroChina (857 HK).
SenseTime (20 HK) or PetroChina (857 HK), Great Wall (2333 HK) and Zhongsheng (881 HK) could replace Haidilao (6862 HK), CPIC (2601 HK) and Alibaba Health (241 HK) in September.
There will be buying on SenseTime Group (20 HK) from HSCEI INDEX and HSTECH INDEX trackers. But there is also a big lock-up expiry on 29 June.

LG Energy Solution: End of 6 Months Lock-Up Period & Valuation Sensitivity Analysis

Our base case valuation LG Energy Solution is implied market cap of 75 trillion won or target price of 319,089 won, representing 25% below current share price.
Currently, LGES is trading at a premium valuation multiple on a EV/EBITDA (2023E) versus CATL. We believe LGES should trade at a discount to CATL in the next 6-12 months.
LGES’s 6 months lock-up ends on 27 July and there are 4.3% of outstanding shares that can be sold which is likely to put negative pressure on share price.

KOSPI200 Lockup Release Events: LG Energy Solution, HYBE, Lotte Chilsung, & Krafton

HYBE and LG Energy have overhang risks. 2% of SO for HYBE and 3% for LG Energy will potentially hit the market. These are 4.46x and 19.89x ADTVs, respectively.
LG Energy is awaiting FTSE inclusion (June 17) and Solactive ETF inclusion (end-October). Still, from a timing perspective, these passive inflows are unlikely to offset the July 27 lockup release.
Their short interest is 1.63% (HYBE) and 0.46% (LG Energy), respectively. So, we need to consider a position buildup when their short interest shows significant upside movements.

Merger Arb Mondays (13 Jun) – China VAST, True/DTAC, Hwa Hong, Link Admin, Ramsay Health, Link Net

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.
This week, the highest spreads are Sezzle Inc (SZL AU), 21Vianet Group (VNET US), Link Administration Holdings (LNK AU), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU).
The lowest gross spreads are Virtus Health (VRT AU), Crown Resorts (CWN AU), Irongate Group (IAP AU), AKM Industrial (1639 HK), Beijing Enterprises Urban Resources (3718 HK).

Weekly Deals Digest (12 Jun): Thai Life, Link Admin, Ramsay, Link Net, China VAST, Suchuang Gas

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 and Chinese ADRs.
On the ECM front, Thai Life Insurance (124744Z TB) is premarketing a US$1bn SET listing and GoGoX Holdings (GOGO HK) has won approval for a US$100-150m HKEx IPO.
On the Event-Driven front, there were developments at China Vast Industrial Urban Development (6166 HK), Suchuang Gas Corp (1430 HK), Link Net (LINK IJ), Atlas Arteria (ALX AU), Ramsay, Crown.

SK Telecom & KT LONG/SHORT Swing Trading for Mean Reversion

Price decoupling relative to KT started after SKT’s foreign room trend began to reverse on May 23. The monthly price yield difference between these two is over 7%p.
From a short-term perspective, it seems that SKT seems to have entered somewhat oversold territory due to the FTSE outflow event.
Additional selling by the FTSE event this week will likely provide a suitable entry timing for a LONG/SHORT pair setup with KT on a swing-term window for mean reversion.

Before it’s here, it’s on Smartkarma