Event-Driven

Mercari Inc (4385 JP) was deleted from the MSCI Japan at the close today. Then the company announced that it would move to the Prime Market on 7 June.
Transfer to Prime Market will require passive TPX INDEX trackers to buy stock end July and FTSE All-World trackers to buy in September – around 19% of free float together.
Short interest is over 13% of free float. Some of the shorts would have covered against the passive MSCI selling today but the remaining shorts could look to cover.

Mercari (4385) TOPIX Inclusion, Finally… And It’s Bigger Than It Looks

4.5 months ago I wrote Mercari (4385) Applying for TSE Prime Means TOPIX Inclusion in 4-5 Months and today it was announced Mercari would move from TSE Growth to Prime.
The move happens on 7 June, which means that the actual TOPIX inclusion will be at the close of 28 July.
This will change things near-term, and going forward. As always, we dig deeper below.

Nikkei 225 Index Rebalance Preview: Market Consultation & Potential Changes

The Nikkei 225 (NKY INDEX) market consultation released last week could lead to some tweaks to the index methodology and the stock selection process. Nothing really material enough though.
Potential index inclusions in September are Renesas Electronics, Oriental Land and Pan Pacific International Holdings, while Toyobo Co Ltd, Nippon Light Metal and Oki Electric Industry are potential index deletions.
Passive Nikkei 225 trackers will need to buy between 4-9% of the real float on the high/ medium probability names, while they need to buy between 2.5-14 days of ADV.

(Mostly) Asia M&A: May 2022 Roundup

For the month of May, 10 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$26bn.
The average premium for the new deals announced (or first discussed) in May was ~53%.
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.

Shimadzu (7701) To Buy Out Nissui Pharma (4550) In Tender Offer

Nissui Pharmaceutical (4550 JP) has been cheap for years. Years and years and years.
It has traded at negative Enterprise Value for almost all of the past year.
Now Shimadzu Corp (7701 JP) is taking it over and heavily indebted parent Nippon Suisan Kaisha (1332 JP) is letting it go.

Dongfeng Auto (600006 CH): Dongfeng Motors’ Partial Offer

Dongfeng Motor (489 HK) (DFMG) has entered into an agreement to buy back the controlling stake in Dongfeng Automobile (600006 CH) (DFAC) from Nissan Motor (7201 JP).
DFMG and Nissan’s JV (split 50:50) holds a 60.1% stake in DFAC. Under the agreement, 29.9% of the JV’s stake in DFAC will be transferred to DFMG.
Subsequent to the completion of the transfer, DFMG will launch a partial offer for 25.1% of DFAC, with a view to holding 55% of shares out in DFAC.

Ardent Leisure’s EGM Related to Main Event Sale on 29 June; Unlock Value

The EGM to approve Dave & Buster’S Entertainment, Inc (PLAY US)‘s acquisition of Main Event is on 29 June. Ardent Leisure Group Ltd (ALG AU) will receive A$670.3 million.
If the transaction is approved, shareholders will receive a total return of A$0.95 through capital return and special dividends. The independent expert opines that the transaction is fair and reasonable.
At the last close price, the remaining business is valued at just 2 cents. Our SoTP valuation of A$1.65 per share is a 22% upside to the last close.

MergerTalk: Why We Think The Risk In Apollo’s Tenneco Buy Out Is Overpriced

By Robert Sassoon

The 18% spread suggests there the Apollo Global Management Inc (APO US) / Tenneco Inc (TEN US) transaction is fraught with risks which, we believe, are more imaginary than real
With TEN shareholders expected to approve the merger next week, we assess regulatory obstacles low and the risk of APO reconsidering the transaction unlikely except in the most unexpected circumstances
Overall we believe the risk-reward for arbs skews to the attractive with the opportunity to game IRRs in excess of 30%

End of Mandatory Lock-Up Periods for 40 Companies in Korea in June 2022

By Douglas Kim

We discuss end of the mandatory lock-up periods for 40 stocks in Korea in June 2022, among which 5 are in KOSPI and 35 are in KOSDAQ.
These 40 stocks on average could be subject to further selling pressures in June and could underperform relative to the market.
Among these 40 stocks, HYBE (352820 KS) and Koreacenter.com Co Ltd (290510 KS) could face further selling pressures in the coming weeks.

Itausa (ITSA4 BZ) – Historically Wide, and Potentially Understated, NAV Discount

By Victor Galliano

Itausa is trading at a stated 24.4% discount to the HoldCo’s NAV, with the discount having widened sharply since last month; we turn positive on Itausa
We believe that the discount under-estimates the stated NAV; separate from Itausa’s stake in XP, Itaú Unibanco, in which Itausa holds a 37.2% stake, has a direct 11.36% XP stake
Adding its indirect XP stake share to Itausa’s NAV implies a discount of 26.1%; since December 2008, only on 11% of the month end datapoints has Itausa’s discount exceeded 25%

Before it’s here, it’s on Smartkarma

May 31

Event-Driven: Orient Overseas International, AGL Energy Ltd, Seazen (Formerly Future Land), Australian Unity Office Fund, LG Corp, Softbank Corp, Mediaset España Comunicación, S.A., AKM Industrial, Bancolombia SA and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI May 2022 Index Rebalance: Flows at the Close Today & Performance So Far
AGL Drops Demerger Proposal – Back To Square Two
CCASS: Why Large Moves Continue To Matter
Australian Unity Office: Aliro’s Offer Should Get Up. With A Bump
Short LG Corp on the Unsustainable Price Spike
JPX-Nikkei 400 Rebalance 2022: Leaderboard End-May 2022
AOF’s Efforts to Maximise Value Draws an Offer from Aliro Group
MFE/Mediaset España: Start of Offer Period with Lower Success Expectations
AKM (1639 HK): 22nd June Scheme Meeting. IFA Says Fair
Grupo Gilinski Stays Focused on BanColombia, with Political Risk Potentially Receding in Colombia

MSCI May 2022 Index Rebalance: Flows at the Close Today & Performance So Far

For Asia Pacific, there are 48 adds/76 deletes for the Standard Indices and 166 adds/147 deletes for the Small Cap Index that will be implemented at the close today.
The adds have outperformed the deletes on average over the last few weeks/months. A long adds/short deletes trade performed better for Small Caps as compared to the Standard index.
There are a lot of stocks that will have same-way flow from other index trackers over the next few weeks and there could be a higher impact on these names.

AGL Drops Demerger Proposal – Back To Square Two

After 14 months of Strategic Review and preparation for a Demerger of its generation and distribution businesses, the Board has dropped the Demerger Proposal in face of shareholder opposition.
While it isn’t clear exactly how much opposition there was, Michael Cannon-Brookes held 11+% and General Meetings have garnered 50-75% of investors for a vote which needed 75% approval.
CEO and Chair have announced their resignations, two other board members will leave, and now the Board will start another strategic review using preparation at hand.

CCASS: Why Large Moves Continue To Matter

In this latest installment in a series dating back to March 2018, I’ve analysed 5,500 moves over three years inside CCASS, targeting >5% of shares outstanding of individual stocks.
The data continues to bear out the overall underperformance of stocks that exhibit such moves.
Additionally, the movement of large blocks of shares may illustrate that the beneficial owner of those shares has pledged them as collateral for a loan.

Australian Unity Office: Aliro’s Offer Should Get Up. With A Bump

Over the years, Australian Unity Office Fund (AOF AU) has had its fair share of suitors. Starwood Capital made no less than six bids between late 2018 and early 2020.
Abacus Property (ABP AU) and Charter Hall (CHC AU) were also in the mix, but their Scheme failed, ostensibly after Hume, one of the largest shareholders voted down the Offer.
Aliro Group has now made an Offer for AOF, by way of Scheme, at $2.45 + dividends. Hume is supportive. Aliro’s executive chairman is the former head of Charter Hall.

Short LG Corp on the Unsustainable Price Spike

The question now is whether this event can lead to a structural uptrend in LG Corp. I am skeptical about this.
LG Corp took a preemptive action to increase its attractiveness as a dividend stock to prevent a share price decline ahead of the listing of LG CNS.
However, this measure does not address the root cause of LG Corp’s massive NAV discount. So, I would consider a short position setup for LG Corp.

JPX-Nikkei 400 Rebalance 2022: Leaderboard End-May 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 2022 based on trading data as of end-May 2022.

AOF’s Efforts to Maximise Value Draws an Offer from Aliro Group

Australian Unity Office Fund (AOF AU) which has had a “for sale” sign up has disclosed an indicative privatisation proposal from Aliro Group, at A$2.45 per unit + permitted distributions.
Hume Partners, the largest unitholder, will vote in favour of the scheme in the absence of a superior offer. However, a relatively concentrated shareholder register poses a risk.
AOF’s ongoing engagement with various parties suggests the possibility of a counterbid and/or a bump to Aliro Group’s underwhelming offer.

MFE/Mediaset España: Start of Offer Period with Lower Success Expectations

On 26 May, the CNMV authorized the bid. The offer period will end on 28 June. Mediaset España shareholders do not seem very excited about the offer though.
Analysts’ median TP (Refinitiv) of Mediaset España is €6.58/share, vs. the package worth €4.452 as of 30 May, 19.4% below value upon offer announcement. Market sentiment is negative.
As of 30 May, risk arb spread is 4.2% (MFE dividend not included). It seems increasingly unlikely that the offer is successful and Mediaset España delisted, in my view.

AKM (1639 HK): 22nd June Scheme Meeting. IFA Says Fair

The Scheme Document Document for AKM Industrial (1639 HK), a flexible printed board player, has been despatched. The Scheme Meeting will be held on the 22nd June.
The Offer Price is HK$1.82/share. It will not be increased. No further dividends will be added,
Trading tight at a gross/annualised spread of 1.1%/6.4%, assuming payment in early August.

Grupo Gilinski Stays Focused on BanColombia, with Political Risk Potentially Receding in Colombia

By Victor Galliano

Indirect stake-building in Grupo Sura and related companies means Gilinski is closing in on indirect control of BanColombia; Gilinski’s latest move is the offer for Grupo Argos shares
We believe that Gilinski’s strategy of “indirect activism” towards BanColombia has incentivised management to deliver improved performance, as seen in 1Q22, with management’s perhaps conservative 2022E ROE guidance at 15%+
Political risk may be receding, now that the firebrand left-winger Petro confronts Hernandez in mid-June’s Presidential election run-off; Hernandez could win by uniting the right and centre anti-Petro vote

Before it’s here, it’s on Smartkarma

May 30

Event-Driven: NTT (Nippon Telegraph & Telephone), Beijing Tongrentang Co A, Link Net, F&F, Adani Enterprises and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

TOPIX Rebalance: Flows at the Close
SSE180/SSE380 Index Rebalance: Potential MSCI/FTSE Adds & Deletes
Merger Arb Mondays (30 May) – Yancoal, Link Net, Link Admin, Alliance Aviation, True Corp, DTAC
Korea Stub Trades: F&F Holdings Pair in a Substantial Diversion with F&F’s KOSPI 200 Inclusion
NIFTY Indices: Quiddity Leaderboard for September 2022

TOPIX Rebalance: Flows at the Close

The second tranche of the FFW methodology change for the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) will be implemented at the close of trading today.
One way flow is ~JPY 745bn and will be spread across ~2170 stocks. The largest inflow will be on NTT (9432 JP) and the largest outflow on Toyota Motor (7203).
The stocks with the largest inflows have outperformed the stocks with the largest outflows over the last month and the outperformance could continue going into the last tranche in June.

SSE180/SSE380 Index Rebalance: Potential MSCI/FTSE Adds & Deletes

There are 18 changes to the SSE180 Index and 38 changes to the SSE380 Index that will be implemented at the close of trading on 9 June.
There will be 9 deletions from the MSCI Standard Index and 22 deletions from the FTSE All-World/All-Cap indices at the close on 9 June.
Currently, 16 stocks meet the threshold/are close for inclusion in the MSCI China Index while there are 38 stocks that meet the threshold for inclusion in the FTSE All-World/All-Cap indices.

Merger Arb Mondays (30 May) – Yancoal, Link Net, Link Admin, Alliance Aviation, True Corp, DTAC

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Thailand and Chinese ADRs.
This week, the highest gross spreads are Sezzle Inc (SZL AU), 21Vianet Group (VNET US), Link Administration Holdings (LNK AU), Alliance Aviation Services (AQZ AU), True Corp Pcl (TRUE TB).
Lowest gross spreads are Yancoal Australia (3668 HK), Hwa Hong Corp (HWAH SP), AKM Industrial (1639 HK), Virtus Health (VRT AU), Irongate Group (IAP AU), Uniti Group Ltd (UWL AU).

Korea Stub Trades: F&F Holdings Pair in a Substantial Diversion with F&F’s KOSPI 200 Inclusion

F&F Holdings is a single-subsidiary PURE STUB PLAY with no operating assets. It currently trades at a 54.30% discount to its NAV, and its 20-day MA sigma sits below -2.0.
The pair is currently in a substantial diversion. The passive inflow caused by F&F’s KOSPI 200 inclusion appears to have caused a flow imbalance.
F&F is becoming a primary target for KOSPI 200’s post-rebalancing shorting events. Then, we can consider using F&F Holdings as a long hedge, in addition to outright shorting for F&F.

NIFTY Indices: Quiddity Leaderboard for September 2022

The NIFTY Index Family has a series of broad equity indices that represents large, mid and small market capitalisation segments of the Indian public equity market.
The review of broad market indices will be done on a semi-annual basis and the changes will be implemented at the end of March and September every year.
Below is a look at the names leading the race to become Adds and Deletes for NIFTY 50, NIFTY 100, and NIFTY 500 in September 2022.

Before it’s here, it’s on Smartkarma

May 29

Event-Driven: Jinko Solar, Shanghai Pudong Development Bank Co., TBEA Co Ltd A, Hyundai Mobis, Ichigo Inc, Bank of Kyoto, SPH REIT, Dongzheng Automotive Finance and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

STAR50 Index Rebalance: Dear Index Committee…
SSE50 Index Rebalance: Some Large Impact Changes
CSI300 Index Rebalance: Big Sector Shift with 28 Changes
A Substantial Trade Seems Lurking on Hyundai Mobis with Chung’s Possible Stake Purchase
Index Rebalance & ETF Flow Recap: FTSE AW/AC, KOSPI2, KQ150, EPRA, China 50/A50, ASX, STAR50, SSE50
Last Week in Event SPACE: BHP, Bank of Kyoto, Incitec Pivot, Yancoal, Virtus
Asia-Pac Weekly Risk Arb Wrap: Yancoal, Donzheng, Virtus, Toyo, SPH REIT, Mapletree Merger, BEURG
Dongzheng’s Potential MGO Price from SAIC at HK$1.2430

STAR50 Index Rebalance: Dear Index Committee…

The index committee has continued to use a 6 month minimum listing history leading to five changes to the SSE STAR50 (STAR50 INDEX) in June.
One way turnover is estimated at 8.56% and will result in a one-way trade of CNY 3,496m. Passive trackers will need to trade between 2-6 days ADV on the adds/deletes.
The inclusions have outperformed the deletions and the CSI500 Index since the end of the review period with all inclusions moving higher over the period.

SSE50 Index Rebalance: Some Large Impact Changes

There are 5 changes for the SSE50 Index that will be implemented at the close on 9 June. The impact is pretty chunky on a few deletions.
Apart from the passive assets tracking the index, there are some liquid index futures and the impact on the stocks will be larger than just the headline numbers.
The adds underperformed the deletes in March and April but have come roaring back in May. Playing the trade via long/short pairs could provide better risk adjusted returns.

CSI300 Index Rebalance: Big Sector Shift with 28 Changes

There are 28 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 June.
We had forecast nearly all the changes, though the index committee seems to have used discretion in deciding not to add three Distillers to the index, leading to other changes.
There’s a large sector skew with Industrials, Information Technology and Materials stocks taking 17 more spots in the index, while Health Care and Financials lose 9 and 5 spots respectively.

A Substantial Trade Seems Lurking on Hyundai Mobis with Chung’s Possible Stake Purchase

A trading dynamic that is drawing attention is the possibility of Chung Eui-sun’s purchase of a stake in Mobis, triggering to boost Mobis’ relative share price to Hyundai Motor.
Chung may push ahead with the Glovis → Mobis swap using the substantially increased value of Glovis’ stake. Carlyle, who serves as Chung’s ally, may additionally park Chung’s Glovis stake
Chung uses the proceeds to purchase a stake in Mobis. Unlike in 2020, likely, he will only purchase Mobis shares this time.

Index Rebalance & ETF Flow Recap: FTSE AW/AC, KOSPI2, KQ150, EPRA, China 50/A50, ASX, STAR50, SSE50

Early last week was the review cutoff for the FTSE country indices and the EPRA Nareit, while the changes to the CSI300 and STAR50 indices were announced on Friday.
Monday will see tranche 2 of the TPX INDEX FFW changes implemented, while Tuesday is MSCI implementation day and a bunch of review cutoffs.
There were large inflows to the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) and outflows from the iShares MSCI EM ESG Optimized (ESGE US) ETF.

Last Week in Event SPACE: BHP, Bank of Kyoto, Incitec Pivot, Yancoal, Virtus

Post-Spin, BHP (BHP AU) should look more like RIO. It’s not clear it does, but it does move around in a way that allows one to harvest ratio noise.
Bank of Kyoto (8369 JP) has been the poster child for “deep value” Japan traders and occasional wannabe activists. It has a huge equity portfolio which dwarfs market cap.
Fourteen years after its acquisition, Incitec Pivot (IPL AU) plans to demerge Dyno Nobel from its fertilizer ops. The split has been a long time coming.

Asia-Pac Weekly Risk Arb Wrap: Yancoal, Donzheng, Virtus, Toyo, SPH REIT, Mapletree Merger, BEURG

There are 43 – mostly firm – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two news deals this week: Yankuang Energy Group Company (1171 HK)‘s tilt for Yancoal Australia (YAL AU); SAIC Motor (600104 CH)‘s Offer for Dongzheng Automotive Finance (2718 HK).
Key updates took place for: Virtus Health (VRT AU), Toyo Construction (1890 JP), SPH REIT (SPHREIT SP), Mapletree Commercial Trust (MCT SP)/ Mapletree North Asia Commercial Trust (MAGIC SP)

Dongzheng’s Potential MGO Price from SAIC at HK$1.2430

The potential MGO price is HK$1.2430 per H Share vs Dongzheng Automotive Finance (2718 HK)’s previously noted HK$1.294 per H Share due to the change in RMB/HK$ rates.
The completion procedures for the auction will take place within six months. Approvals have low risk as the SAIC Motor (600104 CH)’s controlling shareholder is owned by the Shanghai SASAC.
At the last close and for a 1 November completion, the gross and annualised spread to the MGO price is 5.3% and 12.7%, respectively.

Before it’s here, it’s on Smartkarma

May 28

Event-Driven: Dongzheng Automotive Finance, CanSino Biologics Inc, Iljin Hysolus, Kweichow Moutai, Beijing Enterprises Urban Resources, Infomedia Ltd, Virtus Health, Asiana Airlines and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

SAIC’s Unconditional Offer For Dongzheng
Shanghai/Shenzhen Southbound Connect: Weekly Moves (27 May 2022)
Post KOSPI 200 Rebalancing Shorting Event: Watch Iljin Hysolus, F&F, & K Car
Shanghai/Shenzhen Northbound Connect: Weekly Moves (27 May 2022)
Beijing Enterprises Urban Resources’ MGO Open, First Closing Date 17 June
Infomedia (IFM AU): Battery Ventures Sneaks In Above TA’s Proposal
Infomedia Receives a Competing A$1.75 Offer from Battery Ventures
BGH Capital in Pole Position at Virtus
Korean Air & Asiana Airlines: Current Status of CB Conversion Event
BEURG (3718 HK) Now Open For Acceptances. IFA Says Fair

SAIC’s Unconditional Offer For Dongzheng

It’s now official – SAIC Motor (600104 CH) has made a possible unconditional mandatory cash Offer for Dongzheng Automotive Finance (2718 HK).
To recap: on the 19 May, SAIC acquired China Zhengtong Auto Services Hldg (1728 HK)‘s 71.04% stake in Dongzheng at a judicial auction. This triggers the mandatory Offer.
The new news from today’s announcement is that the Offer price was reduced to HK$1.243/share – presumably on account of moves in HKD vs. RMB. The Offer price is final.

Shanghai/Shenzhen Southbound Connect: Weekly Moves (27 May 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$1.1bn, split evenly (roughly) between Shanghai and Shenzhen.
The largest inflows were into China Mobile (941 HK) and CNOOC Ltd (883 HK). The largest outflows were in Kuaishou Technology (1024 HK) and BYD (1211 HK).

Post KOSPI 200 Rebalancing Shorting Event: Watch Iljin Hysolus, F&F, & K Car

We should pay attention to the following three stocks: F&F, Iljin Hysolus, and K Car. They all have recently seen a drastic increase in the loan balance.
Their passive flow sizes relative to ADTVs are the lowest among the additions. It seems that those with relatively little passive impact are targeted.
Also, their projected earnings are highly volatile, and they all face overvaluation issues, whereas the other four names have more clear projections for earnings.

Shanghai/Shenzhen Northbound Connect: Weekly Moves (27 May 2022)

Inside is a recap of movements in the last week relating to the Hong Kong Stock-Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
Overall, net inflow was ~US$0.7bn, split between Shanghai (+US$1bn) and Shenzhen (-US$0.3bn)
The largest inflows were into China Yangtze Power (600900 CH) and Cosco Shipping Holdings (601919 CH). The largest outflows were in Kweichow Moutai (600519 CH)and CATL (A) (300750 CH).

Beijing Enterprises Urban Resources’ MGO Open, First Closing Date 17 June

Beijing Enterprises Urban Resources (3718 HK) composite document is out with the MGO’s first closing date of 17 June. The IFA considers Beijing Enterprises Water Group (371 HK)‘s offer fair.
The MGO is conditional on the offeror and concert parties holding more than 50% of the voting rights. With the offeror currently at 44.16%, the MGO should become unconditional.
At last close and for a 28 June payment, the gross and annualised spread to the MGO price (including final dividend) of HK$0.81 per share is 2.5% and 31.5%, respectively.

Infomedia (IFM AU): Battery Ventures Sneaks In Above TA’s Proposal

Online auto parts and service provider Infomedia Ltd (IFM AU) has received a second non-binding proposal – by way of a Scheme – this one from PE outfit Battery Ventures.
The Offer price is A$1.75/share, a 36.7% premium to last close, and a A$0.05/share premium to TA/Viburnum’s proposal earlier this month.
As with TA, Battery has been granted limited due diligence. With a 19.4% stake, TA remains very much in the driver’s seat.

Infomedia Receives a Competing A$1.75 Offer from Battery Ventures

Infomedia Ltd (IFM AU) disclosed an indicative non-binding proposal from Battery Ventures at A$1.75 a share, a 2.9% premium to TA/Viburnum’s offer of A$1.70 per share.
Infomedia is in preliminary discussions with several other interested parties. The other interested party is rumoured to be the auto software business OEConnection.
The situation is reminiscent of the ongoing bidding war for Virtus Health (VRT AU) between CapVest and BGH Capital. Expect at least another round of bids.

BGH Capital in Pole Position at Virtus

The Virtus Health (VRT AU) Board changed their recommendation that the BGH takeover offer rather than the CapVest offer is in the best interest of shareholders.
BGH and CapVest represent 22.38% and 1.13% of outstanding shares, respectively. Press reports suggest that it is unlikely that CapVest will increase its offer (scheme: A$8.15, takeover: A$8.10).
The BGH takeover offer of A$8.15 per share remains open until 31 May. At the last close price, the gross spread to the BGH takeover offer is 0.9%.

Korean Air & Asiana Airlines: Current Status of CB Conversion Event

Korean Air might have already notified the creditors of its early repayment decision. Asiana will likely follow suit, immediately triggering the creditors to exercise the conversion rights.
So, both Korean Air and Asiana’s conversion should be a foregone conclusion. There is only uncertainty about how many conversions we will actually see for Asiana from the KDB.
Instead of preemptive position setup at this point, I would consider starting the position build-up within the 2-3 day window from the repayment filing to CB conversion.

BEURG (3718 HK) Now Open For Acceptances. IFA Says Fair

The Composite Doc for Beijing Enterprises Water Group (371 HK)‘s (BEURG) mandatory general cash for Beijing Enterprises Urban Resources (3718 HK) (BEW) has been despatched.
The first close is the 17 June but can be open until the 26 July. BEW has 44.16% in the bag and this requires a 50% hurdle to turn unconditional.
It’s an underwhelming Offer yet the IFA considers the terms to be fair and reasonable. But there’s probably enough here for the Offer to get up.

Before it’s here, it’s on Smartkarma

May 27

Event-Driven: SK Telecom Co Ltd (Adr), Renesas Electronics, Yancoal Australia, Appen Ltd, Reliance Industries, Sony Corp, Siemens Gamesa Renewable Energy, S.A., LG Energy Solution and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

SK Telecom: Clarifications over ADR Creation & Premium with Zero Foreign Room
Nikkei 225 Methodology Change. Again. This Time Better But Still Not Good Enough
Yancoal’s Unusual Low Bid from Yankuang Energy
Yancoal (YAL AU, 3668 HK): Potential Offer From Parent In H-Share CBs
Appen (APX AU): Telus’ Indicative Offer
Telus Revokes It’s A$9.50 Bid for Appen
NIFTY Indices: Quiddity Primer
Sony – IR Day One and Kadokawa
Siemens Energy/Siemens Gamesa: What Now?
LG Energy Solution: Short-Term Flow Crunch & Block Deal Possibility

SK Telecom: Clarifications over ADR Creation & Premium with Zero Foreign Room

The debating point is whether ADRs can be created from local underlying shares once the FOL is hit if the ADR issuance cap isn’t entirely burned.
The answer is Yes. ADRs can still be created. That is one of the exceptions that the Korea FSS allows for exceeding the foreign ownership limit.
This is why we saw a hefty premium on KT ADR when it reached and stayed at zero foreign room since 2015 AND an increase in ADRs through DR creation.

Nikkei 225 Methodology Change. Again. This Time Better But Still Not Good Enough

The Nikkei Index Team has suggested a methodology change to the Nikkei 225 Average.
It involves capping stocks, creating a method for re-weighting once capped then stocks fall, and they recommend changing to a semi-annual Periodic Review – twice a year rather than once.
More interestingly, they also change the “High Liquidity” definition to be related to traded value not volume, which starts to favour higher-market cap stocks with more shares out.

Yancoal’s Unusual Low Bid from Yankuang Energy

Yanzhou Coal Mining Company Limited H (1171 HK)/Yankuang, a 62.26% shareholder, aims to offer H Share convertible bonds for US$3.60 (HK$28.26 or A$5.07) per Yancoal Australia (YAL AU) share.
Yankuang’s implied offer price is -16.6% and -14.5% below the last close price on the ASX and HKEx, respectively. At first glance, the offer seems to be a non-starter.
Yankuang’s end game is likely to provide large shareholders with a liquidity event to hit the 90% compulsory acquisition threshold. This ploy could work subject to FIRB approval.

Yancoal (YAL AU, 3668 HK): Potential Offer From Parent In H-Share CBs

Yankuang Energy Group Company (1171 HK) is considering an Offer for dual-listed coal-miner Yancoal Australia (YAL AU / 3668 HK) via the issuance of H-share convertible bonds.
The potential consideration of US$3.60 (~A$5.07/~HK$28.26) per Yancoal share, in the form of H-Share CBs, compares to the last close A$6.08 and HK$33.05. Perhaps an attractive yield will be dangled.
Yankuang Energy has 62.26%. Cinda, Glencore, and China Shandong collectively hold 27.7%. You need all three to support the Offer terms, and then some, to force compulsory acquisition.

Appen (APX AU): Telus’ Indicative Offer

AI data service provider Appen (APX AU) has announced an unsolicited, conditional, and non-binding indicative proposal from Canada’s Telus International, by way of a Scheme of Arrangement, at A$9.50/share.
That’s around a 48% premium. Appen’s board is seeking an improvement in terms through offering a limited course of due diligence.
The Offer backs out an equity value of A$1.2bn, significantly down from Appen’s 2020 pandemic peak of A$5.4bn.

Telus Revokes It’s A$9.50 Bid for Appen

In response to media reports, Appen Ltd (APX AU) disclosed a non-binding indicative proposal from Telus International (TIXT US) at A$9.50, a 48.4% premium to the undisturbed price of A$6.40.
Appen also announced a weak trading update. The 1HFY22 EBITDA is expected to be materially lower than the comparable period due to the lower revenue and the ongoing investment.
Subsequently, Appen noted that Telus revoked its indicative proposal. No reason was given for the decision. Nevertheless, Appen’s depressed share price will continue to attract suitors.

NIFTY Indices: Quiddity Primer

The NIFTY Index Family has a series of broad equity indices that represents large, mid and small market capitalisation segments of the Indian public equity market.
The review of broad market indices will be done on a semi-annual basis and the changes will be implemented at the end of March and September every year.
In this insight, we take a look at the selection criteria and the historical price performance of past Rebalance Events.

Sony – IR Day One and Kadokawa

By Mio Kato

Sony held the first of their two investor days yesterday presenting on the Game & Network Services, Music and Pictures segments.
While there was nothing especially new for those paying attention to the broad flow of news conditions for the content businesses remain strong.
What was interesting to us was the degree of collaboration with Kadokawa.

Siemens Energy/Siemens Gamesa: What Now?

Siemens Energy seems to have the backing of both BlackRock and Norges, and could then count on 72.55% of the votes vs. 75% approval at EGM needed for delisting.
The shares have seen high purchasing activity since the offer announcement (€158 million average turnover since Monday). Gross spread is 1.5%, 3.7% estimated annual return (assuming settlement on 24 October).
One could sell part of the shares if the share price rises above the offer price and await a possible sweetening, and tender the rest during the acceptance period.

LG Energy Solution: Short-Term Flow Crunch & Block Deal Possibility

LG Energy Solution’s real-world free-float rate should be around 5%, or 12.3M shares. We will see two additional passive inflows with the real-world float this tight.
KOSPI 200 up-weight and FTSE June QIR New Entry’s combined inflow will be 0.6% of SO, enough for us to expect a short-term flow crunch.
Then, there will likely be a share let-go event (block deals) by LG Chem to lessen the tight float situation, just like what KSOE had done for HHI.

Before it’s here, it’s on Smartkarma

May 26

Event-Driven: Tsuruha Holdings, Bank of Kyoto, Jiayuan Services Holdings Limited, Appen Ltd, Dongzheng Automotive Finance, Iljin Materials, Pushpay Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI Japan Index Rebalance: Short Build Up Continues as We Near Implementation Day
Bank of Kyoto (8369) Surprises With a Cross-Holding Sale Plan (Albeit Small)
Jinke & Jiayuan: Pledged Shares And Leveraged Property Developers
Appen (APX AU): Telus’ 48% Premium; 10% Short Interest; Potential ASX200 Deletion
SAIC Wins the Auction for the 71.04% Stake in Dongzheng, MGO Upcoming
Iljin Materials: Is the Potential Change in Compulsory Tender Offer Forcing Owner to Speed Up Sale?
BGH and Sixth Street to Lob an Offer for Pushpay?

MSCI Japan Index Rebalance: Short Build Up Continues as We Near Implementation Day

There are 22 deletions for the MSCI Japan Index at the May SAIR. The changes were expected and there was large short buildup prior to announcement of the changes.
Shorts have continued to increase to increase over the last week and there could be a reversal over the next few days as shorts start to cover.
Buying the deletions in the next few days and hedging with Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) futures could provide superior risk adjusted returns.

Bank of Kyoto (8369) Surprises With a Cross-Holding Sale Plan (Albeit Small)

Bank of Kyoto (8369 JP) has been the poster child for “deep value” Japan traders and occasional wannabe activists. It has a huge equity portfolio which dwarfs market cap.
Every year, twice a year (end of May and early December) Bank of Kyoto (8369 JP) releases a document for a meeting with analysts and press called Information Meeting.
This year’s is a little different in that it proposes sales of 10% of its equity portfolio. It’s “small” but worth thinking about.

Jinke & Jiayuan: Pledged Shares And Leveraged Property Developers

On the 21 May, Jinke Property (000656 CH) announced the forced sale of shares by its controlling shareholder. One day later, Jiayuan International (2768 HK) announced a similar event.
Jinke’s 52.3%-owned Jinke Smart (9666 HK) has now announced an agreement to acquire Jiayuan International’s 73.56% stake in property service play Jiayuan Services Holdings (1153 HK). No price was announced.
In the past month, Jinke Property is down 24%, Jinke Smart 23%, Jiayuan International 54% and Jiayuan Services 80%. Jiayuan International and Jiayuan Services remain suspended.

Appen (APX AU): Telus’ 48% Premium; 10% Short Interest; Potential ASX200 Deletion

Telus International (TIXT US) has made an unsolicited, conditional and non-binding indicative proposal to acquire 100% of Appen Ltd (APX AU) at A$9.5/share, valuing the company at A$1.17bn.
The offer is a 48% premium to the last close but a discount to longer-term VWAPs. It should require a bump for the Appen Board to unanimously recommend to shareholders.
Appen Ltd (APX AU) is a potential deletion from the S&P/ASX 200 (AS51 INDEX) at the June rebalance. Short interest is 10% of shares out. There will be covering.

SAIC Wins the Auction for the 71.04% Stake in Dongzheng, MGO Upcoming

On 19 May, SAIC Motor (600104 CH) emerged as the successful bidder for China Zhengtong Auto Services Hldg (1728 HK)’s 71.04% stake in Dongzheng Automotive Finance (2718 HK).
As SAIC will hold 30%+ of the voting rights, it will result in an MGO at a price not less than the auction price of HK$1.294 per H Share.
Dongzheng shares remain in a trading halt. The equity interest will transfer to SAIC and the MGO launched when the Shanghai Financial Court issues an auction sale judgment.

Iljin Materials: Is the Potential Change in Compulsory Tender Offer Forcing Owner to Speed Up Sale?

By Douglas Kim

Heo Jae-Myeong, the CEO of Iljin Materials, is planning to sell his 53.3% stake in the company.
Potential buyers of Iljin Materials include Lotte, SK, LG, and POSCO.
The CEO Heo Jae-Myung could potentially receive greater amounts of money if he sells the company now, rather than waiting when the compulsory tender offer could be made into law.

BGH and Sixth Street to Lob an Offer for Pushpay?

Sixth Street and BGH Capital entered into a cooperation agreement with the aim to acquire Pushpay Holdings (PPH NZ) through a scheme of arrangement. They have a combined 20.3% stake.
In addition to Sixth Street/BGH, Pushpay also noted expressions of interest from multiple parties. The high recurring revenue, profitability and cash generation make it a target.
As the Australian takeover premium ranges from 20% to 40%, we think that a bid of at least A$1.46 (30% takeover premium) will be necessary for due diligence access.

Before it’s here, it’s on Smartkarma

May 25

Event-Driven: Ichigo Inc, Core Lithium Ltd, Hana Tour Service, BHP Group Ltd, Dongzheng Automotive Finance, Toyo Construction, Incitec Pivot, Hana Micron Inc, Grab, CJ CGV Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE EPRA Nareit Developed Asia Preview: Adds, Close Adds & Misses for June
Tabcorp Spinoff (TLC/TAH) & S&P/ASX: Where They Stay and Where They Go
KOSPI200 Index Rebalance: Se7en Changes
Marking Post-WPL-Spin BHP to Market and Model
Shh! SAIC’s Unconditional Offer For Dongzheng (2718 HK)
Toyo Construction Comes Out Fighting Against YFO, But Sincerely.
Explosive Demerger For Incitec Pivot
KOSDAQ150 Index Rebalance Preview: A Dozen Changes in June
Grab IPO Lock-Up – Over 60% of the Stock Worth Nearly US$8bn Comes Free
KOSPI 200 Rebalancing: Noteworthy Names for Passive, Shorting, & Short Covering Flows

FTSE EPRA Nareit Developed Asia Preview: Adds, Close Adds & Misses for June

The FTSE EPRA Nareit Index June rebalance will use data from 23 May. The changes will be announced on 1 June and implemented at the close on 17 June.
Potential inclusions at the review include Ichigo Inc (2337 JP) and LOTTE Reit Co Ltd (330590 KS) while there is a possibility of Digital Core REIT (DCREIT SP) being added.
Mapletree North Asia Commercial Trust‘s NPI from Developed Markets is 72% making it ineligible for index inclusion, while Frasers Hospitality Trust‘s drop has taken it out of the inclusion list.

Tabcorp Spinoff (TLC/TAH) & S&P/ASX: Where They Stay and Where They Go

The Lottery Corp (TLC AU) and new Tabcorp Ltd (TAH AU) have commenced trading today as standalone entities following their demerger.
We expect Tabcorp Ltd (TAH AU) to be deleted from the S&P/ASX50 and S&P/ASX100 indices at the June rebalance, while it would remain in the S&P/ASX 200 (AS51 INDEX).
Given Crown Resorts (CWN AU) has delayed the second court hearing, there should be an extra deletion from the S&P/ASX 200 (AS51 INDEX) in June.

KOSPI200 Index Rebalance: Se7en Changes

There will be 7 additions and 7 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the June rebalance that will be implemented on 9 June.
We got all 7 inclusions right and 5 of the 7 deletions right. The adds have 3-6 days ADV to buy, while the deletes have 4-12 days ADV to sell.
Short interest on the deletions is a significant portion of the estimated passive selling and there could be short covering in the week leading up to implementation of the changes.

Marking Post-WPL-Spin BHP to Market and Model

BHP goes ex-WPL at the open of 25 May 2022. The ex-WPL price is A$5.24 lower than Tuesday’s close and there is another A$2.20 of franking credits on top.
Historically, the BHP/RIO ratio has traded within a relatively defined range. It moves, then after a while it tends to revert. I present a trading model.
And grids. I present spinoff grids with live tracking of the BHP ex-WPL/RIO Ratio within its last 6- and 12-month (div-adjusted) ratios.

Shh! SAIC’s Unconditional Offer For Dongzheng (2718 HK)

On the 19 May, SAIC Motor (600104 CH) acquired China Zhengtong Auto Services Hldg (1728 HK)‘s 71.04% stake in Dongzheng Automotive Finance (2718 HK) at a judicial auction.
Reportedly SAIC was the only bidder. The price paid appears to be at the minimum bid price of HK$1.294/share.
The acquisition will trigger an unconditional Offer for the H shares. SAIC and ZhengTong have announced the outcome of the auction. But still no word from Dongzheng.

Toyo Construction Comes Out Fighting Against YFO, But Sincerely.

As discussed in the last insight, there was the possibility that YFO was jumping the gun. From the near 100+ pages released by Toyo Construction (1890 JP) today, they did.
TC accused YFO of being “dishonest” in its attitude and actions, from the “reasons” stated in its Large Shareholder Report and market purchases to YFO’s Murakami-san’s previous interactions.
What TC doesn’t yet understand is that when a company is in play, if a “market check” comes in, that’s OK. Investors are not hurt by a higher bid.

Explosive Demerger For Incitec Pivot

Fourteen years after its acquisition, Incitec Pivot (IPL AU) plans to demerge Dyno Nobel from its fertilizer ops.
The split has been a long time coming. A strategic review of its fertilizer segments dates back to at least September 2019.
If the demerger is approved, IPL shareholders will receive shares in Incitec Pivot Fertilisers Limited in proportion to their existing shareholding in IPL, which will be rebranded Dyno Nobel Limited.

KOSDAQ150 Index Rebalance Preview: A Dozen Changes in June

There are 12 inclusions and 12 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance to be implemented at the close on 9 June.
Most of the inclusions were expected, but there are quite a few surprises among the deletions. The impact on the deletions will be higher than that on the inclusions.
The adds have outperformed the deletes and there has been another leg up in the last couple of weeks. Expect the trend to continue till implementation week.

Grab IPO Lock-Up – Over 60% of the Stock Worth Nearly US$8bn Comes Free

By Sumeet Singh

Grab raised around US$4.5bn in its de-SPAC listing in Dec 2021. The shares are now trading around 68% below the listing price.
At the time of listing, all of its top investors were locked up for six months. The lock-up expires on 30th May 2022.
In this note, we will talk about the lock-up dynamics and updates since our last note.

KOSPI 200 Rebalancing: Noteworthy Names for Passive, Shorting, & Short Covering Flows

SD Biosensor leads the addition group with an estimated inflow of 4.59x ADTV. SK Discovery and Yungjin Pharmaceutical have the most substantial outflow at 7.23x and 6.07x ADTVs, respectively.
For short-covering, CJ CGV stands out the most at this point. Its short interest is 4.57% of SO, and the short interest has increased the most of late.
For short resumption, two names stand out: Meritz Fire and Hana Tour.

Before it’s here, it’s on Smartkarma

May 24

Event-Driven: Woodside Petroleum, Tongwei Co Ltd A, Sunny Optical, MFE-Media for Europe NV, Mapletree Commercial Trust, Mindtree Ltd, SK REITs and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

BHP Woodside Distribution – Could Be a Large Block (~US$1bn) In Early June
FTSE China A50 Index Rebalance Preview: Three Potential Adds/Deletes Due to Ground Rule Change
FTSE China 50 Index Rebalance Preview: Adds, Deletes & Capping Changes
Liquid Universe of European Ordinary and Preferred Shares: May ’22 Report
MCT and MNACT Unitholders Approve Merger To Become MPACT
S&P BSE Indices: No Changes for SENSEX; 7 ADDs/DELs for BSE 100 in June 2022
Launch of Two New REIT Indices by KRX and Two New REIT ETFs in Korea

BHP Woodside Distribution – Could Be a Large Block (~US$1bn) In Early June

By Sumeet Singh

BHP shareholders will receive US$18bn worth of Woodside petroleum shares on 1st Jun 2022, post the completion of the merger. Block, worth US$1.5bn, could be sold in early June.
As a part of the distribution, some shares belonging to ineligible and other small shareholders will have to be sold by the sales agent, JPM.
In this note, we will look at the possible deal dynamics and the overall background of the deal.

FTSE China A50 Index Rebalance Preview: Three Potential Adds/Deletes Due to Ground Rule Change

We expect PetroChina (601857 CH) and Gree Electric Appliances (000651) to be deleted following a Ground Rule change. Chongqing Zhifei Biological Products (300122 CH) should be deleted on market cap.
Potential inclusions are Tongwei Co Ltd A (600438 CH), China Citic Bank Corp (601998 CH) and Anhui Conch Cement (600585 CH).
One-Way turnover at the FTSE China A50 Index (XIN9I INDEX) June rebalance is estimated at 2.91% and will result in a one-way trade of CNY 1,420m.

FTSE China 50 Index Rebalance Preview: Adds, Deletes & Capping Changes

We expect China Railway Group Ltd H (390 HK) and Yanzhou Coal Mining (1171 HK) to replace Smoore International (6969 HK) and Sunny Optical (2382 HK) in the FTSE China50 Index.
There are capping changes that have a reasonable large impact on a couple of stocks. One-way turnover is estimated at 3.97% and will result in a one-way trade of HK$1,912m.
FTSE has increased the investability weight for Li Auto (2015 HK) / Li Auto Inc. (LI US) and this leads to the stock failing the median liquidity test.

Liquid Universe of European Ordinary and Preferred Shares: May ’22 Report

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

MCT and MNACT Unitholders Approve Merger To Become MPACT

The merger between Mapletree Commercial Trust (MCT SP) and Mapletree North Asia Commercial Trust (MAGIC SP) (a.k.a. “MNACT”) was approved by both sets of unitholders today.
MCT unitholders offered 85.7-92.1% approval rates for the four measures. MNACT unitholders offered 98-99% approval rates (but high 80s in terms of unitholder count).
Now we move forward, with the election of terms and

S&P BSE Indices: No Changes for SENSEX; 7 ADDs/DELs for BSE 100 in June 2022

After market close on Friday 20th May 2022, the constituency changes for S&P BSE 100, SENSEX 50, and SENSEX Next 50 Indices were announced.
There will be no changes for S&P BSE SENSEX and S&P BSE BANKEX Indices in the June 2022 Rebalance.
These changes will become effective at the open of Monday 20th June 2022. Below is a closer look at each of the names involved in the June 2022 Rebalance.

Launch of Two New REIT Indices by KRX and Two New REIT ETFs in Korea

By Douglas Kim

On 23 March, Korea Exchange launched two Korean REITs related indices, including KRX REITs TOP 10 Index and KRX REITs TOP 10 Leverage Index.
Korea Exchange will list two more REITs related ETFs in KOSPI on 24 May including Arirang Fn KREIT ETF (429740 KS) and HEROES REITs IGIS Active ETF (429870 KS).
The launch of the two new REIT indices by the Korea Exchange and two new REIT ETFs are likely to accelerate higher demand for high quality REITs in Korea.

Before it’s here, it’s on Smartkarma

May 23

Event-Driven: LG Energy Solution, SPH REIT, LG Chem Ltd, SK Telecom Co Ltd (Adr), Total Access Communication, Siemens Gamesa Renewable Energy, S.A. and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE All-World/All-Cap Index Rebalance: Inclusions, Deletions & Other Changes
SPH Offer Open – Starts to Look Interesting
LG Chem & LG Energy LONG/SHORT Pair Trading on a Massive NAV Discount
SK Telecom Multi-Step Trading Scenario for Underlying & ADR Amid Zero Foreign Room
Merger Arb Mondays (23 May) – True Corp, DTAC, Ramsay, VNET, Link Admin, Alliance Aviation, Yashili
Siemens Energy Finally Drops the Bomb

FTSE All-World/All-Cap Index Rebalance: Inclusions, Deletions & Other Changes

For Asia Pacific, there are 8 inclusions each to the All-World Index and the All-Cap Index at the June QIR. Quite a few have over 3 days ADV to buy.
There are also changes to the NOS and investability weights that will require passive funds to buy/sell a lot of stocks. Some have a reasonably large impact/flow.
A lot of the IPOs are trading below their offering prices and investors could be looking to sell into any rallies that take the stocks close to their IPO prices.

SPH Offer Open – Starts to Look Interesting

The SPH REIT (SPHREIT SP) Chain Offer was launched on Thursday 19 May.
The Chain Offer Price has been revised lower from the original level to be S$0.9372/unit, as discussed a few times in these pages.
The units have underperformed Peer Baskets for the last few months and have now fallen to the Chain Offer Price. That presents opportunities

LG Chem & LG Energy LONG/SHORT Pair Trading on a Massive NAV Discount

The LG Chem/LG Energy pair has been getting much attention lately. Its stakeholding value in LG Energy amounts to ₩83.1T, more than twice its own market value.
Given LG Chem’s solid operating business value, only the likes of SK Square is worse in terms of NAV discount, as LG Chem’s NAV discount is nearing 70%.
With the LG Chem OUT/LG Energy IN passive play pretty much completed, we should aim at an entry point for LG Chem’s massive discount to its LG Energy shareholding value.

SK Telecom Multi-Step Trading Scenario for Underlying & ADR Amid Zero Foreign Room

We first consider a currency hedging setup to target an ADR premium surge before SKT reaches zero foreign room. We close this position as the MSCI special deletion is announced.
We then move onto an outright long position on the SKT underlying shares to capitalize on potential share recall.
Lastly, I would quickly jump onto a KT LONG/SKT SHORT position to target potential alternative trading flow.

Merger Arb Mondays (23 May) – True Corp, DTAC, Ramsay, VNET, Link Admin, Alliance Aviation, Yashili

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Thailand and Chinese ADRs.
This week, the highest gross spreads are Sezzle Inc (SZL AU), 21Vianet Group (VNET US), Dongzheng Automotive Finance (2718 HK), Link Administration Holdings (LNK AU), Alliance Aviation Services (AQZ AU).
The lowest gross spreads are Hwa Hong Corp (HWAH SP), Virtus Health (VRT AU), Uniti Group Ltd (UWL AU), Mapletree North Asia Commercial Trust (MAGIC SP), Excelpoint Technology (EXLP SP).

Siemens Energy Finally Drops the Bomb

Siemens Energy hasn’t expected to its CMD and instead announced on Saturday late evening an €18.05/share voluntary cash tender offer for the remaining 32.9% of Siemens Gamesa it doesn’t own.
The consideration represents a 27.7% premium and 23.1x EV/Fwd EBITDA. It seems fair and higher than that initially expected. Siemens Energy is likely to issue a convertible.
Upon market open on 23 May, expect the shares to close most of the gap with the offer price. Siemens Gamesa will likely exit the Ibex 35 in H2 2022.

Before it’s here, it’s on Smartkarma