Category

Event-Driven

Apr 16
0

Daily Brief Event-Driven: Imminent Block Deals Involving Hanmi Science Shares Due to Inheritance Tax Payments and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Imminent Block Deals Involving Hanmi Science Shares Due to Inheritance Tax Payments
  • Tietto Minerals (TIE AU): Zhaojin’s Revised and Final Takeover Offer Remains Light
  • Quiddity Leaderboard NIFTY Sep 24: Multiple Names Eligible for NIFTY 50 Addition
  • Kokusai Electric IPO Lock-Up – KKR Will Be Tempted by the US$2.7bn Release but Might Have to Wait

Imminent Block Deals Involving Hanmi Science Shares Due to Inheritance Tax Payments

By Sanghyun Park

  • The local market anxiously awaits the family’s ability to pay by early May. Failure could prompt the Tax Service to sell their pledged stocks, including Hanmi Science shares.
  • Preventing Tax Service from selling Hanmi Science shares requires additional collateral, unlikely due to existing pledges. Rumor suggests mother and daughter may sell shares before May, followed by Tax Service.
  • Given negotiation uncertainty with KKR, it’s crucial to prepare for potential failure rather than solely relying on success, necessitating a pragmatic approach.

Tietto Minerals (TIE AU): Zhaojin’s Revised and Final Takeover Offer Remains Light

By Arun George

  • Tietto Minerals Ltd (TIE AU) has disclosed a revised conditional proposal from Zhaojin Mining Industry H (1818 HK) at A$0.68 per share, a 17.2% premium to the previous offer of A$0.58.
  • The offer is conditional on a 50.1% minimum acceptance condition (which can be waived). The offer is declared best and final. 
  • Despite the bump, the offer is below the IE’s valuation range of A$0.79 to A$0.93 per share. The IE’s valuation range would be around 25% higher at current gold prices. 

Quiddity Leaderboard NIFTY Sep 24: Multiple Names Eligible for NIFTY 50 Addition

By Janaghan Jeyakumar, CFA

  • NIFTY 50 represents the 50 largest stocks listed in the National Stock Exchange (NSE) of India and the NIFTY Next 50 index tracks the next 50 largest names.
  • In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50 and NIFTY Next 50 indices in the September 2024 rebalance.
  • There could be at least one change for NIFTY 50 and separately, there could be up to five changes for NIFTY Next 50.

Kokusai Electric IPO Lock-Up – KKR Will Be Tempted by the US$2.7bn Release but Might Have to Wait

By Sumeet Singh

  • KKR raised around US$730m via selling some stake in Kokusai Electric (6525 JP) Japan IPO in Sep 2023. Its remaining stake will be released from its IPO linked lockup soon.
  • KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
  • In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

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Apr 15
0

Daily Brief Event-Driven: Pasona (2168 JP) Special Div – Too Small to Matter and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Pasona (2168 JP) Special Div – Too Small to Matter
  • Merger Arb Mondays (15 Apr) – Azure, Silver Lake, Genex, Boral, China TCM, C&F Logistics, Roland DG
  • HK Connect SOUTHBOUND Flows (To 12 Apr 2024); Strong Net Buying. New State Council and CSRC Plans
  • A/H Premium Tracker (To 12 Apr 2024):  Liquid AH Premia Still Very Wide, The Right Spreads Behaving
  • Tietto Minerals (TIE AU): Zhaojin Mining Secures Reg Approvals. Then Bumps
  • Mainland Connect NORTHBOUND Flows (To 12 Apr 2024): NB A Net Seller; Flows See Semi/Tech Buys
  • EQD / NSE Volatility Update / 08-Apr-24 to 12-Apr-24

Pasona (2168 JP) Special Div – Too Small to Matter

By Travis Lundy

  • On Friday, Pasona Group (2168 JP) announced its expected use of funds into the May 2024 results, including a special dividend plan, investment for growth, and “strengthening the operating platform.”
  • The plan will disappoint. The stock may get hit hard. The truth is somewhere in the middle. This is where active stewardship matters. So get stewarding.
  • A special div paid over 5yrs should be paid one-shot, now. If the company has plans worth supporting, set KPIs now, ask for money later. Good plans get good money.

Merger Arb Mondays (15 Apr) – Azure, Silver Lake, Genex, Boral, China TCM, C&F Logistics, Roland DG

By Arun George

HK Connect SOUTHBOUND Flows (To 12 Apr 2024); Strong Net Buying. New State Council and CSRC Plans

By Travis Lundy

  • A shares were down on the week, not maintaining the month-end bounce after the long weekend. H-shares were mixed. HSCEI was slightly up. 
  • Net SOUTHBOUND buying was +HK23bn. SOUTHBOUND ended its consecutive post-CNY daily net buy streak on 25 March, then started a new one. No net sell days since.
  • This week saw a LOT of news. State Council Nine Points. CSRC draft regs and legislative work plan. Ratings agency action. Lots of movement. None of it hugely positive.

A/H Premium Tracker (To 12 Apr 2024):  Liquid AH Premia Still Very Wide, The Right Spreads Behaving

By Travis Lundy

  • The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
  • SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. NORTHBOUND has started selling (but buying semi tech).
  • Hs rebounded vs As. AH Premia still wide. Fabulous two-week performance by the Quiddity Portfolio (+2.09% over the two weeks) on a delta 3:1 long H/short A

Tietto Minerals (TIE AU): Zhaojin Mining Secures Reg Approvals. Then Bumps

By David Blennerhassett

  • On the 30 October 2023, Chinese gold producer Zhaojin Mining Industry (1818 HK) pitched a non-binding off-market Offer for Aussie-listed West African gold miner Tietto Minerals (TIE AU).
  • Zhaojin held 7.02% of shares out, and sought 50.1%. Tietto subsequently rejected the A$0.58/share cash proposal. The IE backed out a fair value range of A$0.793-A$0.927/share.
  • Zhaojin has now announced it has secured all Chinese regulatory approvals; and that Côte d’Ivoire government approval is not required. Plus Zhaojin bumped terms to A$0.68/share – best and final. 

Mainland Connect NORTHBOUND Flows (To 12 Apr 2024): NB A Net Seller; Flows See Semi/Tech Buys

By Travis Lundy

  • The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
  • Last week saw NORTHBOUND net SELL RMB 11.5bn of A-shares on low-ish volume. A-shares underperformed H-shares quite dramatically, giving back gains from two weeks ago.
  • This week saw considerable net buying of semiconductor technology names. I expect that to continue.

EQD / NSE Volatility Update / 08-Apr-24 to 12-Apr-24

By Sankalp Singh

  • Downtrend in IVs stall as market sentiment deteriorates. Vol Regime Model sticks to “High & Down” state.
  • Consider Equity Tail hedges/ buying OTM puts in current environment. Roll strikes lower if/when equities weaken further.
  • Skew compression seen in BankNifty options as preference for out-of-money puts wane. Skew selling an unsuitable strategy at current levels.

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Apr 14
0

Daily Brief Event-Driven: Genex Power (GNX AU): J-Power’s Binding Proposal as Skip’s Intentions Remain Unknown and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Genex Power (GNX AU): J-Power’s Binding Proposal as Skip’s Intentions Remain Unknown
  • Roland DG (6789) – Brother Still Not Making Friends
  • Ansarada (AND AU): Scheme Vote on 14 June
  • (Mostly) Asia-Pac M&A: APM Human Services, Jastec, Genex, JSR Corp, Chilled & Frozen, Lawson
  • Weekly Deals Digest (14 Apr) – L’Occitane, CGN New Energy, Azure, Genex, C&F Logistics, Riso Kyoiku
  • Genex (GNX AU) & J-Power (Finally) Firm Terms
  • Last Week in Event SPACE: Mitsui Fudosan, Melco, Aozora Bank, CGN New Energy

Genex Power (GNX AU): J-Power’s Binding Proposal as Skip’s Intentions Remain Unknown

By Arun George

  • Genex Power Ltd (GNX AU) has entered a transaction implementation deed with Electric Power Development C (9513 JP) for a scheme (A$0.275) and an off-market takeover offer (A$0.270). 
  • Skip could vote against the scheme due to the low 10% premium to its 2022 offer and Genex’s operational capacity rising by 2.7x by the end of 2024.
  • The likely scenario is that J-POWER succeeds with its takeover offer. At the last close, the gross spread of the scheme and takeover offer was 3.8% and 1.9%, respectively.   

Roland DG (6789) – Brother Still Not Making Friends

By Travis Lundy

  • Taiyo Pacific’s Tender Offer for Roland DG Corp (6789 JP) was to end Friday, but it was extended 10 days. 
  • Roland DG provided an update regarding the status of the Brother overbid. It did not show as much strategic-mindedness as it might have.
  • Shares are now trading at a post-overbid high. Strategic missteps up the risk but Brother can pay more.

Ansarada (AND AU): Scheme Vote on 14 June

By Arun George

  • The Ansarada Group Ltd (AND AU) IE considers Datasite’s A$2.50 scheme offer fair and reasonable. However, the inter-conditional carve-out transaction is NOT fair but reasonable. 
  • ACCC clearance (findings on 6 June) is a prerequisite for FIRB approval (scheme condition). As Datasite has a limited Australian presence, ACCC approval should be forthcoming. 
  • The offer is attractive, with no vocal shareholder opposition. At the last close and for the 1 July payment, the gross/annualised spread was 2.5%/12.2%.

(Mostly) Asia-Pac M&A: APM Human Services, Jastec, Genex, JSR Corp, Chilled & Frozen, Lawson

By David Blennerhassett

Weekly Deals Digest (14 Apr) – L’Occitane, CGN New Energy, Azure, Genex, C&F Logistics, Riso Kyoiku

By Arun George

Genex (GNX AU) & J-Power (Finally) Firm Terms

By David Blennerhassett

  • On the 4 March, Genex Power (GNX AU) announced an A$0.275/share NBIO from Electric Power (9513 JP) (J-Power), by way of a Scheme, in tandem with an off-market A$0.27/share Offer.
  • Due diligence was afforded. Exclusivity was extended twice, before a firm offer was inked at the same terms on the 12th April.  The Scheme meeting is expected mid-July; implementation late-July.
  • And Scott Farquhar’s Skip Enterprises, which holds 19.9% in Genex, and who had previously pitched a A$0.25/share NBIO in 2022? No word. And no irrevocable. 

Last Week in Event SPACE: Mitsui Fudosan, Melco, Aozora Bank, CGN New Energy

By David Blennerhassett

  • 9 weeks ago, the FT reported Elliott Management had a stake in Mitsui Fudosan (8801 JP) and had asked them to sell cross-holdings and do a ¥1trln buyback. Mitsui responds.
  • Lawrence Ho is buying Melco(200 HK). While it often pays to follows where the family invests, Melco is trading too tight for what is a simple holding company structure.
  • Avoid being long Aozora Bank Ltd (8304 JP) vs the Banks Index, a portfolio of other cheaper banks, etc. Minimal/negligible upside in following Murakami-san here. And Activism on Banks is difficult.

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Apr 13
0

Daily Brief Event-Driven: CGN New Energy (1811 HK): Takeover Rumours and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • CGN New Energy (1811 HK): Takeover Rumours
  • Updated TOPIX Big April Basket Flows; More Big Flows and ¥270bn a Side
  • EQD | Nikkei 225 What’s Up Next: Up or Down?
  • Bondalti/Ercros: Board Will Seek a Sweetening

CGN New Energy (1811 HK): Takeover Rumours

By David Blennerhassett

  • Another week, another rumoured (from Bloomberg) takeover. This time it’s for clean energy play CGN New Energy Holdings (1811 HK).
  • Back in 2020, CGN was subject to a potential privatisation from its SOE-parent – see CGN New Energy: The Latest SOE Clean Energy Play – but it failed to materialise.
  • A couple of years back, a “valuation system with Chinese characteristics” had the media discussing whether this implied a premium for SOEs and companies aligned with national goals.

Updated TOPIX Big April Basket Flows; More Big Flows and ¥270bn a Side

By Travis Lundy

  • Several days ago I published a piece showing the data for TOPIX flows for April month-end.
  • This is an update reflecting new data companies have reported to regulators, one large correction to a data provider’s data, and one Very Large Flow.
  • I believe that the revised data is more accurate. And there is more flow. With a spreadsheet attached. 

EQD | Nikkei 225 What’s Up Next: Up or Down?

By Nico Rosti

  • The Nikkei 225 Index last week bounced back, after a 2-weeks down pullback.
  • The index is at a fork in our view: it could go higher from here, but we would like to see a sustained, multi-week rally to be convinced.
  • If doubt about this potential rally continuation is strong, target the 40500-40800 price area to place SHORT trades against the index.

Bondalti/Ercros: Board Will Seek a Sweetening

By Jesus Rodriguez Aguilar

  • Ercros (ECR SM) ‘s advisors will seek an improvement in Bondalti’s €3.6/share offer, which comes amidst a sharp decline in EBITDA compared to 2022, and launched at the bottom of the cycle.
  • An improved offer price of €4.4/share, a 22% increase, would represent 6x EV/25e EBITDA, 11.3x 25e P/E, and thus could gain support from the Board.
  • Gross spread is 1.25%. Considering the potential for an improved offer price, I’d be long.

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Apr 12
0

Daily Brief Event-Driven: JAPAN ACTIVISM:  Mitsui Fudosan (8801) Responds to Elliott with Buyback and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • JAPAN ACTIVISM:  Mitsui Fudosan (8801) Responds to Elliott with Buyback, Amended Long-Term Plan
  • CGN New Energy (1811 HK): Evaluating a Potential Privatisation
  • StubWorld: Melco Gains As Lawrence Ho Buys
  • NIFTY Bank Index Rebalance Preview: Canara Bank Still Cheap; Double Deletion for Bandhan?
  • Boral Backs Seven’s “Enhanced” Offer
  • Novartis/Morphosys: Start of Offer Period

JAPAN ACTIVISM:  Mitsui Fudosan (8801) Responds to Elliott with Buyback, Amended Long-Term Plan

By Travis Lundy

  • 9 weeks ago, the FT reported Elliott Management had a stake in Mitsui Fudosan (8801 JP) and had asked them to sell cross-holdings and do a ¥1trln buyback. 
  • The stock popped 7% the next day to ¥1302, on the highest volume since the covid crash, hesitated a day, then powered almost 20% higher through the end of March. 
  • Today, Mitsui Fudosan responded with an Amendment to their Plan out to 2030. It has a higher dividend, a share buyback, higher EPS target growth, and higher ROE target. But…

CGN New Energy (1811 HK): Evaluating a Potential Privatisation

By Arun George

  • Bloomberg reports that CGN, the parent and largest shareholder, is reconsidering taking CGN New Energy Holdings (1811 HK) private. 
  • CGN New Energy shares have underperformed the median peer’s shares since the announcement of CGN’s previous aborted privatisation attempt (2 March 2020) and on the last twelve-month basis.
  • The probability of an offer is high as CGN, an SOE has access to financing, and CGN New Energy’s valuation is low. We estimate a potential offer range of HK$2.80-4.30.

StubWorld: Melco Gains As Lawrence Ho Buys

By David Blennerhassett

  • Melco International (200 HK) gains as Lawrence Ho increases his position. Melco and 51.1%-held Melco Resorts (MLCO US) are the two worst performing gaming stocks over the past year.
  • Preceding my comments on Melco are the current setup/unwind tables for Asia-Pacific Holdcos.
  • These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

NIFTY Bank Index Rebalance Preview: Canara Bank Still Cheap; Double Deletion for Bandhan?

By Brian Freitas

Boral Backs Seven’s “Enhanced” Offer

By David Blennerhassett

  • After Boral (BLD AU) rejected Seven Group (SVW AU)‘s cash/scrip Offer, Seven slammed the Independent Expert’s report, calling the Target Statement “unbalanced, selective and risks fundamentally misleading Boral minority shareholders“.
  • Seven has now waived certain tendering thresholds, increasing the cash terms to A$1.70/share from A$1.50/share. Boral will also pay a fully-franked dividend of A$0.26/share, providing A$0.11/share of franking credits. 
  • The IE now considers the Offer to be reasonable. Boral’s board recommends shareholders to accept. This is done.

Novartis/Morphosys: Start of Offer Period

By Jesus Rodriguez Aguilar

  • Novartis published its offer document for MorphoSys AG (MOR GR) (US: MorphoSys AG (MOR US)) following approval by BaFin. The acceptance period has commenced on 11 April, and will expire on 13 May.
  • I remain confident NVS’ acquisition of MOR closes on track. I maintain my TP at €68/share, $18.25/ADR offer price, as deal will highly likely close in H1, in my view.
  • As of 11 April, gross spread is 0.82% and the estimated annual return is 7.78%. Long and tender.

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Apr 11
0

Daily Brief Event-Driven: JAPAN ACTIVISM: Murakami’s Aozora Bet Not Going Anywhere and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • JAPAN ACTIVISM: Murakami’s Aozora Bet Not Going Anywhere, But No Sales Yet
  • Quiddity Leaderboard STAR 50 Jun 24: 3 ADDs/DELs Possible but Should Be Monitored Closely
  • Chilled & Frozen Logistics (9099 JP): Pass The🍿as the Board Responds to AZ-COM Maruwa (9090 JP)
  • SSE50 Index Rebalance Preview: 5 Changes and US$2.7bn Round-Trip Trade
  • Bharti Hexacom IPO: Index Inclusion Timeline
  • Sompo Holdings Cross-Shareholding – At Least US$8bn of Cross-Shareholding to Sell
  • Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: Bullish Names Outperform Bearish Names Again

JAPAN ACTIVISM: Murakami’s Aozora Bet Not Going Anywhere, But No Sales Yet

By Travis Lundy

  • Just under 6 weeks ago, Japanese activist Murakami-san’s company and daughter reported a 5+% stake in Aozora Bank Ltd (8304 JP). They bought after a sharp dip caused CRE-related writedowns. 
  • As is normal, they bought more (now 8.92%) post-5%-filing-trigger, but before the actual first filing. And as is normal these days, the stock popped on the first filing.
  • Then it fell, and hasn’t recovered much. So far, on a weighted basis, they are up 1% vs TOPIX Banks Index. 

Quiddity Leaderboard STAR 50 Jun 24: 3 ADDs/DELs Possible but Should Be Monitored Closely

By Janaghan Jeyakumar, CFA

  • STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
  • In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the June 2024 index rebal event.
  • I currently expect three changes resulting in a one-way flow of around US$531mn but there is still room for the expectations to change.

Chilled & Frozen Logistics (9099 JP): Pass The🍿as the Board Responds to AZ-COM Maruwa (9090 JP)

By Arun George

  • The Chilled & Frozen Logistics Holdings (9099 JP) Board has responded with several questions regarding AZ-Com Maruwa Holdings (9090 JP)’s pre-conditional hostile offer of JPY3,000 per share.
  • The Board questions the transaction’s schedule, terms and potential synergies. The Board has also used the ruse that due diligence access would justify a higher offer price.
  • Expect several rounds of Q&A and a delay to the tender start. If shares continue trading through terms ahead of the tender start, AZ-COM Maruwa will likely have to bump. 

SSE50 Index Rebalance Preview: 5 Changes and US$2.7bn Round-Trip Trade

By Brian Freitas

  • With the review period nearing completion, 6 stocks are in inclusion zone and 8 are in deletion zone. However, there can be a maximum of 5 changes at a review.
  • We estimate a one-way turnover of 7% at the June rebalance leading to a one-way trade of CNY 9.7bn (US$1.34bn). Index arb balances could increase the impact on the stocks.
  • The inflows into mainland China ETFs have further increased the flow and impact on the potential changes. The potential adds have continued to outperform the potential deletes.

Bharti Hexacom IPO: Index Inclusion Timeline

By Brian Freitas

  • Telecommunications Consultants India Limited (TCIL) raised US$513m by selling 15% of the shares outstanding in Bharti Hexacom (6597372Z IN). Post the sale, they still hold 15% of the company.
  • Bharti Hexacom (6597372Z IN) will start trading on 12 April and the grey market indicates the stock will open at INR 664/share, 16.5% higher than the IPO price.
  • Bharti Hexacom should be added to one smallcap index in August and another smallcap index in December. A move above INR 700/share could result in midcap inclusion in December.

Sompo Holdings Cross-Shareholding – At Least US$8bn of Cross-Shareholding to Sell

By Sumeet Singh

  • The Japanese Financial Services Agency has asked the general insurers to reduce/eliminate their cross-shareholdings.
  • Sompo Holdings (8630 JP) had a stake over US$100m in at least 16 listed Japanese stocks, amounting to a total of around US$6bn.
  • In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: Bullish Names Outperform Bearish Names Again

By Janaghan Jeyakumar, CFA

  • The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
  • The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
  • In this insight, we take a look at the names leading the race to become ADDs and DELs in the June 2024 index rebal event.

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Apr 10
0

Daily Brief Event-Driven: The TOPIX Big April Basket Flows:  ¥200bn a Side Including Many Multi-ADV Flows and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • The TOPIX Big April Basket Flows:  ¥200bn a Side Including Many Multi-ADV Flows
  • Quiddity Leaderboard CSI 300/​​500 Jun 24: SHORTs Down 11% Vs Index Since Mid-Feb; Change the Hedge
  • S&P/​​​​​​​​​ASX Index Rebalance Preview: Potential Changes from Now to June
  • KT’s Foreign Room Below 7.5%, Weight Down-Adjustment Expected in May, Resulting in 3x ADTV Outflow
  • Quiddity Leaderboard SSE50/180 Jun 24: Past Trades Successful but Time to Unwind Some
  • China TCM (570.HK) – Latest Updates on Privatization and the Potential Merger with Taiji Group
  • Itochu Targets Fashion E-Commerce Via Jade Takeover of Magaseek
  • Industrivärden Q1 2024, NAV Evolution and Discount
  • EQD | KOSPI 200 WEEKLY Buy-The-Dip Opportunity

The TOPIX Big April Basket Flows:  ¥200bn a Side Including Many Multi-ADV Flows

By Travis Lundy

  • Every year in April there is an interesting phenomenon with TOPIX. It is what Janaghan Jeyakumar, CFA calls “The Big April Basket.” The TSE re-assesses Liquidity Factor Coefficients.
  • It also does a FFW change, and this year it has Phased Weight Reductions for those slowly leaving TOPIX and PWR re-inclusions for those identified last October as going back.
  • Janaghan had 18 “High Conviction” LF removals. All were hits. They are upweights. Then there are 34 changes to FFW coefficients.

Quiddity Leaderboard CSI 300/​​500 Jun 24: SHORTs Down 11% Vs Index Since Mid-Feb; Change the Hedge

By Janaghan Jeyakumar, CFA

  • CSI 300 represents the 300 largest stocks by marketcap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500. There is subjectivity.
  • Here we look at potential ADDs/DELs for the CSI 300/500 rebalance in June 2024. With 93% of time passed, I expect 11 changes for CSI300, 50 for CSI 500. 
  • Some names have changed since my last insight, but the long/short trades recommended eight weeks ago gained 11.26% since. We make small changes this time.

S&P/​​​​​​​​​ASX Index Rebalance Preview: Potential Changes from Now to June

By Brian Freitas

  • With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
  • The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
  • There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.

KT’s Foreign Room Below 7.5%, Weight Down-Adjustment Expected in May, Resulting in 3x ADTV Outflow

By Sanghyun Park

  • KT’s foreign ownership declined since January, below 7.5% by last month. If it remains, the adjustment factor halves to 0.25, impacting KT’s Global Index weight.
  • With the May review screening date estimated for April 17th, swift reversal of foreign inflows seems improbable. Thus, KT’s adjustment factor dropping to 0.25 is likely.
  • This could lead to an outflow of 1.6M shares, approximately 3x ADTV. Given the prolonged price impact on telcos, exploring a long-short setup with SKT might be prudent.

Quiddity Leaderboard SSE50/180 Jun 24: Past Trades Successful but Time to Unwind Some

By Janaghan Jeyakumar, CFA

  • SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
  • In this insight, we take a look at our expectations for potential index changes for SSE 50 and SSE 180 during the June 2024 index rebal event.
  • According to my estimates, the SSE 50 expected ADDs and DELs could see US$1.7bn index buying and US$828mn index selling respectively (leaving nearly $900mm of funding sales to do).

China TCM (570.HK) – Latest Updates on Privatization and the Potential Merger with Taiji Group

By Xinyao (Criss) Wang

  • Since “no dividend was proposed for the year ended 31 December 2023”, the privatization is highly likely to succeed. It may not be wise for investors to bet against privatization.
  • The recent high-level personnel changes in Taiji is “thought-provoking”, which seems to be preparing for the next step of integrating with China TCM. Spin-offs and integrations are expected within Taiji.
  • We analyzed possible playbook. In this way, CNPGC is able to solve the problem of horizontal competition. China TCM could also relist in A-share to gain higher valuations/better liquidity.

Itochu Targets Fashion E-Commerce Via Jade Takeover of Magaseek

By Michael Causton

  • Jade Group has acquired Magaseek and will merge the online mall with its own fashion e-commerce platform, Locondo and hopes to create a growing rival to Zozo.
  • Magaseek was founded by Itochu 20 years ago, and the deal underlines Itochu’s growing influence over Jade as a proxy for its ambitions in fashion e-commerce and distribution.
  • However, Jade Group has seen little organic growth for its Locondo platform in recent years, and while its acquisitions have added scale, integration has been haphazard.

Industrivärden Q1 2024, NAV Evolution and Discount

By Jesus Rodriguez Aguilar

  • As of end of Q1, NAV was SEK 166.8 billion (SEK 386/share). NAV increased by 11% due to a sharp decrease in leverage, while the portfolio value rose by 6%.
  • Industrivärden C shares are trading at a 5.5% discount to NAV (vs. 8.8% average for the last 5 years). It seems risky to bet on a further discount reduction.
  • My target NAV is SEK 173,116 million (SEK 400.8/share). My TP for the C shares of Industrivärden, assuming a 5% discount to NAV, is SEK 361.7.

EQD | KOSPI 200 WEEKLY Buy-The-Dip Opportunity

By Nico Rosti

  • The KOSPI 200 INDEX is currently pulling back for a 2nd week in a row.
  • This could be an opportunity to go LONG,  if the pullback is limited to this (or at most the next) week closing down and reaching targets between 365 and 338.
  • If the index goes down for 3 weeks and reached below 343 caution is advised: the pullback may be larger than expected in that case.

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Apr 09
0

Daily Brief Event-Driven: Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51% and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51%
  • Riso Kyoiku (4714 JP): Hulic (3003 JP)’s Partial Tender Offer
  • Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is
  • Azure Minerals (AZS AU): FIRB Approval Concerns Are Overdone
  • Samsung Electronics: Block Deal Sale of 5.2 Million Shares by Lee Boo-Jin
  • KOSDAQ150 Index Rebalance Preview: Potential Adds Still Outperforming
  • STAR100 Index Rebalance Preview: 10 Changes as Potential Adds Outperform
  • Special Changes in KOSDAQ 150: Deletion (NKMAX) + Addition (GI Innovation)
  • SET50 Index Rebalance Preview: Three Potential Changes in June
  • Naspers (NPN) X Prosus (PRX): Performance for Q1 2024, Gains Driven by Tencent, NAV Growth

Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51%

By Travis Lundy

  • Today, cram school operator Riso Kyoiku (4714 JP) and 20% owner real estate developer Hulic Co Ltd (3003 JP) amended their Capital and Business Alliance agreement. 
  • Hulic will buy 25.5% of shares out in a Partial Offer at +43.5% vs last. Then post-tender, they will buy shares at last from the company to go to 51.%
  • The founder will sell his 10%. The rest is interesting. It’s a high ROE high div stock. Some own it from higher. Pro-ration is tough to estimate. But we try.

Riso Kyoiku (4714 JP): Hulic (3003 JP)’s Partial Tender Offer

By Arun George

  • Riso Kyoiku (4714 JP) announced a partial tender offer and third-party allotment with Hulic Co Ltd (3003 JP), the largest shareholder. Hulic aims to make Riso Kyoiku a consolidated subsidiary.  
  • The offer is for a maximum of 39.4 million shares (23.15% post-allotment ownership ratio) at JPY320 per share, a 46.8% premium to the undisturbed price (5 April).
  • Irrevocable (from the founder and Chairman) represents a 9.26% post-allotment ownership ratio. The offer is light, but there is no minimum acceptance condition. 

Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is

By Travis Lundy

Azure Minerals (AZS AU): FIRB Approval Concerns Are Overdone

By Arun George

Samsung Electronics: Block Deal Sale of 5.2 Million Shares by Lee Boo-Jin

By Douglas Kim

  • After the market close on 8 April, it was reported that Lee Boo-Jin will sell 5,247,140 shares of Samsung Electronics in a block deal (up to 443 billion won).
  • The expected block deal sale price is 83,700 to 84,500 won per share, which represents a discount rate of up to 0.95% compared to the closing price on 8 April. 
  • We are positive on this block deal sale and on Samsung Electronics. We would take the deal. 

KOSDAQ150 Index Rebalance Preview: Potential Adds Still Outperforming

By Brian Freitas

  • With nearly 85% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
  • Prior to the June rebalance, C&C International (352480 KS) will replace CanariaBio (016790 KS) in the index following CanariaBio being listed as an Administrative Issue and an Investment Attention Issue.
  • The potential adds have outperformed the potential deletes and the KOSDAQ 150 Index since the start of the review period. Lighten positions ahead of the end of the review period.

STAR100 Index Rebalance Preview: 10 Changes as Potential Adds Outperform

By Brian Freitas

  • The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
  • We forecast 10 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX). 
  • Excluding the migrations, the potential adds have outperformed the potential deletes over the last few months and that could continue as we head to the end of the review period.

Special Changes in KOSDAQ 150: Deletion (NKMAX) + Addition (GI Innovation)

By Douglas Kim

  • On 8 April, the Korea Exchange announced special changes to KOSDAQ 150. NKMAX will be excluded from KOSDAQ 150 and it will be replaced by GI Innovation.
  • NKMAX was designated as “administrative issue” and “investment attention issue” on 8 April 2024, which resulted in the Korea Exchange deciding to remove this stock from KOSDAQ 150. 
  • We believe that this inclusion of GI Innovation in KOSDAQ 150 is likely to further positively impact its share price.

SET50 Index Rebalance Preview: Three Potential Changes in June

By Brian Freitas

Naspers (NPN) X Prosus (PRX): Performance for Q1 2024, Gains Driven by Tencent, NAV Growth

By Charlotte van Tiddens, CFA

  • Naspers and Prosus outperformed the benchmark by a large margin, ending the quarter up 7.3% and 6.7%, respectively. The Capped SWIX finished the quarter down 2.3%.
  • Tencent was up 3.5% in HKD and 6.5% in ZAR.
  • Tencent currently makes up 74% of Prosus’ NAV, down 1 percentage point from 75% at the start of the year.

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Apr 08
0

Daily Brief Event-Driven: NTT Data’s ¥1 and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • NTT Data’s ¥1,940/Share Deal For Jastec (9717) – Not Enough But Probably Enough
  • HSCEI Index Rebalance Preview: One Change or Two in June?
  • Observations on Post-Election Flows of Value-Up Stocks, Based on Recent Local Institutional Trades
  • Merger Arb Mondays (08 Apr) – JSR, Jastec, Shinko, Azure, Genex, Best World, Isetan
  • SENSEX Index Rebalance Preview: Wipro Deletion to Bring Sector Balance into Play
  • KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High
  • STAR50 Index Rebalance Preview: APT Medical Moving Higher
  • EQD / NSE Volatility Update / 01-Apr-24 to 05-Apr-24
  • APM (APM AU): Madison Dearborn’s “Disappointing” NBIO
  • Payment Companies – Potential IPOs, Select Companies Being Taken Private and Sector Overview

NTT Data’s ¥1,940/Share Deal For Jastec (9717) – Not Enough But Probably Enough

By Travis Lundy

  • NTT Data Corp (9613 JP) on Friday announced a Tender Offer to take over small custom software developer and system integrator Jastec Co Ltd (9717 JP). 
  • It’s at a premium. But for a growing company ahead of “The 2025 Problem” where synergies are expected, you’d want to get a premium vs where comps trade. You don’t.
  • But this gets to near 50% just from friendlies. Someone who wanted to interfere would have to be publicly noisy. I expect this gets done.

HSCEI Index Rebalance Preview: One Change or Two in June?

By Brian Freitas

  • SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
  • For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
  • Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.

Observations on Post-Election Flows of Value-Up Stocks, Based on Recent Local Institutional Trades

By Sanghyun Park

  • Opposition’s probable win in the election sparks concerns about Value-up initiative’s momentum. However, market sentiment doesn’t universally echo these worries.
  • Value-Up stocks’ recent corrections likely stem from Q4 dividend arbitrage liquidation, rather than election result concerns.
  • Post-Election, even if the opposition wins, the left-leaning Value-up program might continue, limiting the opposition’s influence, as seen in recent National Pension Service flows.

Merger Arb Mondays (08 Apr) – JSR, Jastec, Shinko, Azure, Genex, Best World, Isetan

By Arun George

SENSEX Index Rebalance Preview: Wipro Deletion to Bring Sector Balance into Play

By Brian Freitas

KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High

By Brian Freitas

STAR50 Index Rebalance Preview: APT Medical Moving Higher

By Brian Freitas

  • The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
  • We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.
  • With a big jump in tracking AUM over the last few months, passives will need to trade a lot of stock on implementation date.

EQD / NSE Volatility Update / 01-Apr-24 to 05-Apr-24

By Sankalp Singh

  • Equities shrug off hawkish RBI rhetoric – eye on $3 Billion inflows from MSCI rejig & June Elections results
  • Short dated IVs trade lower. Quarterly-expiry IVs continue to hold at >13.0% levels as they capture multiple event risks
  • Short vega positions recommended as “High & Down” vol state persists. Use current scenario to buy tail hedges as protection for long Equity positions. 

APM (APM AU): Madison Dearborn’s “Disappointing” NBIO

By David Blennerhassett

  • On the 28th Feb, PE-outfit CVC Asia Pacific bumped its NBIO to A$2.00/share, and was granted exclusive due diligence. On the 27th Mar, CVC said they were “unable to proceed“. 
  • Today, the 8th April, Madison Dearborn Partners, holding ~29%, has pitched an non-indicative, non-binding Offer at A$1.40/share, in cash, by way of a Scheme. An unlisted scrip option is available.
  • A key condition is APM Human Services (APM AU)‘s executive-chair Megan Wynne, founding related parties, and key management, electing scrip. The Independent Board Committee reckons the Offer Price is disappointing.

Payment Companies – Potential IPOs, Select Companies Being Taken Private and Sector Overview

By Victor Galliano

  • We explore Klarna’s and Stripe’s IPO prospects and valuations based on recent share transactions; Nuvei and Cielo are close to being taken private, with Worldpay now controlled by private equity
  • Nuvei and Worldpay both grew by acquisition but failed to deliver on the market’s expected returns, in our view, ending up under PE ownership; is Nexi a potential PE target?
  • We retain Visa as a core holding and also keep PagSeguro and PayPal as buys, replacing Cielo with new peer group addition Shift4; we keep our sell rating on Affirm

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Apr 07
0

Daily Brief Event-Driven: (Mostly) Asia-Pac M&A: Austal and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • (Mostly) Asia-Pac M&A: Austal, Best World, Isetan Singapore, Langham Hospitality, Azure, Genex Power
  • Last Week in Event SPACE: JSR, Austal, Rakuten, Hyundai Home Shopping, Hanmi Science

(Mostly) Asia-Pac M&A: Austal, Best World, Isetan Singapore, Langham Hospitality, Azure, Genex Power

By David Blennerhassett

Last Week in Event SPACE: JSR, Austal, Rakuten, Hyundai Home Shopping, Hanmi Science

By David Blennerhassett

  • Murakami to tender stake in JSR Corp (4185 JP)? Maybe the “double arb”: i.e. short on swap, long on cash, will tender the cash, remain short the back end.
  • Austal Ltd (ASB AU) rejected (for now) Hanwha Ocean (042660 KS)‘s bid based on regulatory concerns.  Hanwha reckons these should not be an issue.
  • If you can tolerate owning the mobile biz, buy Rakuten (4755 JP) on dips. If not, avoid Rakuten Group and Rakuten Bank short-term; buy Rakuten Bank on larger dips.

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