Event-Driven

I tally 39 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals discussed on Smartkarma this week: Xingda International (1899 HK) and NSL Ltd (NSL SP). Sun Art Retail (6808 HK) also susppended due to the Takeovers Code.
Key updates took place on: Dyna Mac Holdings (DMHL SP), Platinum Asset Management (PTM AU), Fuji Soft (9749 JP), JTower (4485 JP), Arvida (ARV NZ), and Korea Zinc (010130 KS).

Sun Art Retail (6808 HK): Alibaba’s Stake Draws PE Interest

Sun Art Retail (6808 HK) entered a trading halt under the Code on Takeovers and Mergers. Bloomberg suggests Alibaba Group Holding (BABA US)’s stake is attracting preliminary interest from PE.
Alibaba built its 78.70% stake through two purchases in 2017 (HK$6.50) and 2021 (HK$8.10). An exit would align with the strategy to focus on the core business segments.
The recent Miniso-Yonghui transaction could have prompted PE to act. An offer at book value would imply HK$2.50, a 40% premium to the last close price.

Last Week in Event SPACE: DFI/JD.com/Yonghui, Alibaba/Sun Art, New World Development, Austal

Hypermarket reshuffles as JD.com (9618 HK) and DFI Retail (DFI SP) exit Yonghui Superstores (601933 CH); and Alibaba Group (9988 HK) potentially exits Sun Art Retail (6808 HK).
Evidently the influence of a younger hip third-generation tycoon-scion wasn’t the panacea for New World Development (17 HK) and its ongoing issues in the HK/China property space.
MBK bumps the Tender Offer prices for Korea Zinc (010130 KS) by 13.6% to ₩750,000 and Young Poong Precision (036560 KS) by 25% to ₩25,000. What with the Choi’s do?

Kum Yang: Rights Offering Capital Raise of 450 Billion Won

Kum Yang announced a rights offering capital raise of 450 billion won which will be used for facility investments and debt repayment.
The estimated rights offering price is 38,950 won, which is 31% lower than current price (56,500 won).
We remain negative on Kum Yang. Despite the sharply lower rights offering price relative to current price, we would avoid the rights offering.

Quiddity Leaderboard TDIV Dec 24: 5 ADDs/4 DELs Likely; US$1.38bn One-Way

In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the December 2024 index rebal event.
I currently see 5 ADDs and 4 DELs but there are several names close to the border and expectations could change before the base date as prices move around.
The current estimate for one-way flow in December 2024 is US$1.38bn.

Quiddity Leaderboard T50/100 Dec 24: An Alternate Possibility for Formosa Sumco TDIV Deletion

The T50 index represents the top 50 largest stocks by market capitalization in the Taiwan Stock Exchange (TWSE). The T100 index represents the next 100 largest names (51-150 ranks).
In this insight, we take a look at the potential ADDs and DELs for the December 2024 index rebal event.
Currently, we see one change for T50 and one change for T100 but there are two more months to the base date and our expectations can change until then.

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Sep 28

Daily Brief Event-Driven: Sun Art Retail (6808 HK): COFCO Offer? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Sun Art Retail (6808 HK): COFCO Offer?
Latest Forecast for Korea Zinc’s Tendering Rate
Commerzbank Enters Talks with Unicredit
Hana Financial (086790 KS); Error of Omission from the Value-Up Index?
EQD | The Nikkei At The Top

Sun Art Retail (6808 HK): COFCO Offer?

Alibaba Group Holding (9988 HK)-backed hypermarket play Sun Art Retail (6808) is currently suspended pursuant to the Takeovers Code.
Reportedly, SASAC-backed COFCO Group may acquire Alibaba’s 78.7% stake. Sun Art’s shares are up 45% since the middle of the month.
Alibaba exiting – if true – follows JD.com (9618 HK) (and DFI Retail Group Holdings (DFI SP)) selling their respective stakes in Yonghui Superstores Co., (601933 CH) earlier this week.

Latest Forecast for Korea Zinc’s Tendering Rate

Overseas institutions might tender around 4%, locals about 6%, giving a realistic max of 10%. MBK may struggle to even reach that minimum of 7%.
Mirae Asset and Samsung Life, holding the largest portion of the targetable stakes, hinted they’ll participate in the tender but won’t tender all their shares.
Allocation risk for the tender is minimal, but cancellation risk remains. MBK may barely exceed the 7% minimum, making predictions tough and reducing chances of a post-tender stock price drop.

Commerzbank Enters Talks with Unicredit

Commerzbank’s incoming CEO Bettina Orlopp announced talks with UniCredit on September 27 regarding a potential merger. Despite opposition from management and Chancellor Scholz, some investors support the discussions.
Since UniCredit’s entry into Commerzbank on September 10, Commerzbank’s stock has surged 30%, outperforming UniCredit’s 9.2% rise and the European banking sector’s 6.3% gain.
Buying Commerzbank is strategically and financially logical. In conclusion, I maintain my recommendation to buy Commerzbank speculatively.

Hana Financial (086790 KS); Error of Omission from the Value-Up Index?

By Victor Galliano

Hana Financial, along with KB Financial did not make the cut for the Korea Value-up index announced on the 24th September; Hana apparently fell short of the PBV ratio threshold
Despite being excluded from the Value-up Index, Hana remains our core South Korean bank pick for its attractive valuations, low PEG, solid core capital ratio and strong credit quality credentials
We believe Hana stands out positively on fundamentals and return trends versus its peers, and there is also potential for its inclusion in a planned rebalancing scheduled in December

EQD | The Nikkei At The Top

By Nico Rosti

The last 2 weeks’ upswing in the Nikkei 225 INDEX does not change our view: it is WEEKLY overbought and October is a coin flip according to our seasonal models.
The index could rise further at this point, herd behavior may force investors to pile up into the rally, but our models say rising well past 40k will be hard.
A pullback is not necessarily a great occasion to buy, as already explained in our previous insight, the N225’s trend does not look good, at the moment.

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Sep 27

Daily Brief Event-Driven: Fuji Soft (9749) – Possible Issues with New KKR Amended Terms and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Fuji Soft (9749) – Possible Issues with New KKR Amended Terms
Lowdown from KRX’s Emergency Presser on the Value-Up Index Today
A Special Rebalancing Of Korea Value-Up Index Is Likely in December 2024
Fuji Soft (9749 JP): KKR on the Home Stretch as Bain Dithers
Nasdaq-100 December 2024 Forecasts: Monolithic Power & AppLovin It; Dollar Tree Needs Watering
Quiddity Leaderboard SET50 Dec 24: 3 Changes Likely; Some Changes to Expectations
Quiddity Leaderboard S&P 500 Dec 24: Two ADDs (One Biggie), Two DELs, Possible Big Intrareview Moves
K Bank IPO (279570 KS): Index Inclusion Timeline
Quiddity Leaderboard ASX Dec 24: Three Changes Possible; New Long-Short Ideas
Prosus X Naspers: Discounts Catch Bid on China Stimulus, Trip.com Stake Fully Exited

Fuji Soft (9749) – Possible Issues with New KKR Amended Terms

On 8 August, KKR and Fuji Soft Inc (9749 JP) announced a Tender Offer for the company. It was, at the time, an intention to do so. KKR needed approvals.
Fuji Soft had KKR terms, and timing, and approved them. KKR then changed the terms and timing. Now on the 19th, they changed the terms again.
This puts Fuji Soft in a kind of quandary. It’s important to think about why and what that leads to.

Lowdown from KRX’s Emergency Presser on the Value-Up Index Today

KRX faces challenges balancing the Value-Up Index as a benchmark while ensuring real disclosures, but passive inflows remain steady with local pension funds still interested.
KRX’s potential December mini rebalancing increases uncertainty but may just lead to minor tweaks, adding KB and Hana while removing a few stocks from Communication Services.
The Value-Up Index resembles the KOSPI 200, using 30-40% GICS stocks and KOSDAQ 150, which may spark trading strategies focused on performance gaps within sectors.

A Special Rebalancing Of Korea Value-Up Index Is Likely in December 2024

On 26 September, the Korea Exchange announced that it is considering a “special rebalancing” of the Korea Value-Up Index in December 2024.
In our view, the probability of this special rebalancing occurring by the end of this year is high at about 85%+.
If there is a special rebalancing, KB Financial, Hana Financial, Samsung Life Insurance, SK Telecom, and KT could be considered the top candidates for inclusion.

Fuji Soft (9749 JP): KKR on the Home Stretch as Bain Dithers

The Fuji Soft Inc (9749 JP) Board has recommended KKR’s first tender offer (JPY8,800). The Board will announce its view on the second tender offer on launch.
The Board sounded out Bain’s progress on a binding proposal and 3D and Farallon’s on their irrevocable. The absence of a Bain binding proposal immensely helped the Board’s decision.
Bain has likely left it too late. With a higher offer, Bain could force a recommendation change and hope KKR is shamed into cancelling 3D and Farallon’s irrevocable.

Nasdaq-100 December 2024 Forecasts: Monolithic Power & AppLovin It; Dollar Tree Needs Watering

By Dimitris Ioannidis

Monolithic Power Systems (MPWR US) is a direct addition followed by AppLovin (APP US) which is a conditional addition but close to be direct. Demand is ~$1.8bn and ~3.5 ADV.
Dollar Tree Inc (DLTR US) is a direct deletion with the highest exclusion probability as it is ranked above the exit rank of 125.
Super Micro Computer (SMCI US) , ARM Holdings (ARM US) and Moderna (MRNA US) are amongst the prioritized constituents preventing eligible candidates from entering the index.

Quiddity Leaderboard SET50 Dec 24: 3 Changes Likely; Some Changes to Expectations

The SET50 index tracks the performance of the top 50 largest and most liquid names listed on the Stock Exchange of Thailand (SET).
In this insight, we take a look at the potential ADDs/DELs for SET 50 during the index rebal event in December 2024.
Currently, we see 3 expected ADDs/DELs and given that the 3-month reference period used for average market cap rankings have now started the rankings may be more stable.

Quiddity Leaderboard S&P 500 Dec 24: Two ADDs (One Biggie), Two DELs, Possible Big Intrareview Moves

The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
In this insight, we take a look at the upcoming constituent changes in the run up to the December 2024 index rebal event.
We expect two regular changes in December 2024. There are also several live spin-off and M&A events which could trigger intra-review index changes in the late-2024/early-2025.

K Bank IPO (279570 KS): Index Inclusion Timeline

K Bank (279570 KS) is looking to raise up to KRW 984bn (US$738m), valuing the company at KRW 5tn (US$3.75bn) at the top end of the IPO price range.
Close peer KakaoBank (323410 KS) and regional peer SBI Sumishin Net Bank (7163 JP) have been trading lower recently and the IPO could price lower than the top end.
The change in KOSPI2 INDEX Fast Entry rules will leave the stock out of the index till June 2025. Inclusion in global indices will have to wait a while too.

Quiddity Leaderboard ASX Dec 24: Three Changes Possible; New Long-Short Ideas

In this insight, we take a look at the potential index changes for ASX200, 100, 50, and 20 in the run-up to the December 2024 index rebal event.
We currently do not see any index changes for ASX 20 and ASX 100.
We see one change for ASX 100 and two changes for ASX 200 but the final result could depend on relative share price movements for the next two months.

Prosus X Naspers: Discounts Catch Bid on China Stimulus, Trip.com Stake Fully Exited

By Charlotte van Tiddens, CFA

On Tuesday, China announced fresh stimulus measures targeting the stock market and property sector.
The PBoC reduced the main policy rate and cut the RRR, signaling that further cuts were on the cards for later this year.
Further stimulus measures were announced today ahead of the Golden Week holiday. The discounts of Naspers and Prosus have rallied on the news, we see room for further upside.

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Sep 26

Daily Brief Event-Driven: Crunching Passive Impact Numbers for KRX Value-Up Index Names and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Crunching Passive Impact Numbers for KRX Value-Up Index Names, Based on KRX’s Free-Float Rate Data
MBK Raises Tender Prices: ₩750,000 for Korea Zinc & ₩25,000 for Young Poong Precision
MBK Raises Tender Offer Price on Korea Zinc by 13.6% to 750,000 Won
Tohokushinsha (2329 JP) To 3D – “Not Today”; 3D May Go To The Mattresses
DFI Exits Yonghui, MINISO Enters: Who Got The Short End Of The Stick?
Capitol Health (CAJ AU)/Integral Diagnostics (IDX AU): 31st Oct Merger Vote
NIFTY Indices: Flows (Post Capping) At the Close Tomorrow; Round-Trip US$3.3bn
Unicredit Is Moving Fast
MBK Bumps Offers For Both Korea Zinc and Young Poong Precision

Crunching Passive Impact Numbers for KRX Value-Up Index Names, Based on KRX’s Free-Float Rate Data

KRX 300 hit 1 trillion won AUM fast, but with local pensions more aggressive, the value-up’s early AUM could top 1 trillion, hitting up to 3 trillion in six months.
Hanjin KAL, S1 Corp, Hyundai Elevator, Nice Info, and Huchems are set for strong price action. The financial sector also stands out, seeing the biggest impact compared to other sectors.
Small caps under 1 trillion won see little passive impact, but solid plays exist under 3 trillion, so splitting large and small caps won’t limit target options much.

MBK Raises Tender Prices: ₩750,000 for Korea Zinc & ₩25,000 for Young Poong Precision

Hankyung reports MBK will raise Korea Zinc’s tender offer to ₩750,000 (14%) and Young Poong Precision’s to ₩25,000 (25%) before today’s market opens.
Hankyung and Maeil are top sources for market scoops, so it’s almost certain MBK leaked the tender price hike ahead of today’s trading.
MBK leaves Choi just five trading days to respond. Korea Zinc plans to raise ₩400 billion, but it’s still not enough for a counter-bid.

MBK Raises Tender Offer Price on Korea Zinc by 13.6% to 750,000 Won

MBK announced that it will raise the tender offer prices on Korea Zinc by 13.6% to 750,000 won and Young Poong Precision by 25% to 25,000 won.
If 100% of the 3,024,881 shares of Korea Zinc tender offer is completed, at the revised tender offer price of 750,000 won, this would be 2.27 trillion won in amount.
In term of probabilities, we would put a 80-85% probability that MBK/Jang family successfully completes the tender offers and takes over the controlling stakes of these two companies.

Tohokushinsha (2329 JP) To 3D – “Not Today”; 3D May Go To The Mattresses

3D Investment Partners bought 5% of Tohokushinsha Film (2329 JP) by Mar-2023. A year later they had 17+%. 3D proposed changes. In July, 3D proposed a takeover, asking for DD.
Tohokushinsha responded to the proposals, then offered due diligence to 3D based on terms set by a Special Committee. 3D did not want those strict DD terms.
Yesterday, Tohokushinsha said “Fine.” The stock today fell 10% today. This is not a stalemate, but it means 3D may start to play harder.

DFI Exits Yonghui, MINISO Enters: Who Got The Short End Of The Stick?

Low-Cost retailer MINISO (9896 HK) has entered into SPAs to acquire a 29.4% stake in supermarket chain Yonghui (601933 CH) from DFI (DFI SP) and two units of JD.com (9618 HK).
Upon the completion of this US$890mn transaction, which is subject to regulatory and shareholder approvals, MINISO would become Yonghui’s largest shareholder. And DFI would exit its entire stake.
Ye Guofu, MINISO’s founder/chairman, views the transaction “With a brave heart, start a new world!”. Yonghui has been spilling red ink since FY21. Perhaps “brave soul” is more apt.

Capitol Health (CAJ AU)/Integral Diagnostics (IDX AU): 31st Oct Merger Vote

On the 18th July, diagnostic imaging provider Capitol Health (CAJ AU) entered a Scheme with Integral Diagnostics (IDX AU). IDX will issue 0.12849 new IDX shares for each Capitol share
Upon completing the transaction, Integral would hold ~63% in the MergeCo. They key risk is the ACCC signing off. A decision is expected on (or around) the 28th November.
The Scheme Booklet is now out, with a Scheme Meeting to be held on the 31st October. Expected implementation on the 14th November. The IE says fair & reasonable.

NIFTY Indices: Flows (Post Capping) At the Close Tomorrow; Round-Trip US$3.3bn

The NIFTY Index, Nifty Next 50 Index, NSE Nifty Bank Index, CNXIT Index, Nifty Midcap 150 Index, Nifty100 Low Volatility30 Index and the CPSE ETF rebalance at the close tomorrow.
The round-trip trade across the indices is US$3.3bn and there are 13 stocks with over 1 day of ADV to trade from passive trackers.
Stocks with the largest inflows are Trent, Bharat Electronics, Canara Bank, Bharat Heavy Electricals, Oil & Natural Gas Corp, Coal India, Hindustan Aeronautics and InterGlobe Aviation.

Unicredit Is Moving Fast

UniCredit SpA (UCG IM) has raised its Commerzbank AG (CBK GR) stake to 21%; Chancellor Scholz called it “hostile takeover”. UniCredit also filed to increase its stake up to 29.9%.
Commerzbank’s valuation multiples remain attractive, as despite a 21.3% rise in its stock, it still trades at a price-to-book ratio (P/B) of just 0.57x, compared to UniCredit’s 0.98x.
The conditions remain favorable for a potential premium acquisition by UniCredit, as acquiring Commerzbank makes both strategic and financial sense. Thus I recommend to buy Commerzbank speculatively.

MBK Bumps Offers For Both Korea Zinc and Young Poong Precision

MBK Partners has increased the Tender Offer prices for Korea Zinc (010130 KS) by 13.6% to ₩750,000 and Young Poong Precision (036560 KS) by 25% to ₩25,000.
All other terms remain the same. IF MBK secures the maximum 14.61% in KZ, this will be Korea’s largest-ever Tender Offer.
MBK made a public offering correction announcement today. The Choi family now has 5 business days in which to respond with a counteroffer.

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Sep 25

Daily Brief Event-Driven: All the Scoop on the Korea Value-Up Index and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

All the Scoop on the Korea Value-Up Index
Korea Exchange Announces The Korea Value Up Index
China’s [Maybe] Biggish [Quasi?] Bazooka
Tech: Japan’s Biggest IPO in 6 Years, Kioxia, Is Off. Here Is the Likely Reason
Xingda (1899 HK): No Premium Voluntary Conditional Offer to Ward off a Hostile Holder
Silverlake Axis (SILV SP): Circular Now Out. IFA Says Fair
Capitol Health (CAJ AU): ACCC Overhang as Scheme Meeting Set for 31 October
Xingda (1899 HK)’s HK$1.30/Share Offer – Say What?
MINISO Bets Big on Yonghui. Should Investors Be Concerned About the Acquisition?
EQD | A Very Weak KOSPI 200 Is Ready to Pull Back Again

All the Scoop on the Korea Value-Up Index

The index focuses on qualitative factors like capital efficiency and shareholder returns, but efforts to impose sector balance may have overextended its market benchmark role.
Some companies not fitting the ‘value-up’ narrative got included, while market favorites were sidelined by sector rankings, which is puzzling given the index’s original goal.
Still, with rebalancing cut down to once a year, we should expect the flow impact on the index names to hit harder than initially thought compared to their sector peers.

Korea Exchange Announces The Korea Value Up Index

Korea Exchange announced the long awaited Korea Value Up Index (“K Value Up Index”) (composed of 100 stocks) today.
Korea Exchange used a 5-step screening process to select the 100 companies in this index including market cap, profitability, shareholder returns, market evaluation, and capital efficiency.
This Value Up index is part of the bigger “Corporate Value Up ” program in Korea. These efforts to improve Korea’s corporate governance policies is a marathon, not a sprint.

China’s [Maybe] Biggish [Quasi?] Bazooka

Today, in a press conference held jointly by the Governor of the PBOC, the Director of the Financial Regulatory Bureau, and Chairman of the CSRC, China announced market stimulus measures.
The PBOC will cut RRR 50bp, the 7-day repo rate 20bp, guide effective mortgage rate cuts, and lower minimum down payments on second homes. There are other commercial RE measures.
Three major stock market measures were announced. A RMB500bn collateral swap programme, PBOC backing RMB300bn bank loans for corps to buy stocks, and a Plan to increase Central Huijin investments.

Tech: Japan’s Biggest IPO in 6 Years, Kioxia, Is Off. Here Is the Likely Reason

By Neil Campling

Significant peer price performance declines leaves IPO valuation stretched, the desired discount multiple to attract interest has suddenly become a premium
Investor interest in memory semiconductors, AI derivative stocks has cooled
Peer price sell-offs are extreme but could quickly change, reflecting the highly cyclical nature of the sector

Xingda (1899 HK): No Premium Voluntary Conditional Offer to Ward off a Hostile Holder

Xingda International (1899 HK) has disclosed a voluntary conditional offer from Mr Liu Jinlan (Chairman) at HK$1.30 per share, which aligns with the last close price.
The offer is conditional on the offeror and concert parties representing more than 50% of voting rights. The offeror and concert parties represent 37.03% of voting rights.
The offer is a reaction to Mr Zhao Yue’s “hostile” emergence as a substantial shareholder. It is unattractive and will require a bump to satisfy the minimum acceptance condition.

Silverlake Axis (SILV SP): Circular Now Out. IFA Says Fair

On the 26 August, Goh Peng Ooi, founder and executive chair, made a voluntary unconditional general Offer for the 25.9% in Silverlake Axis (SILV SP) not held.
The Offer Doc for this S$0.36/share cash Offer was dispatched on the 26th August. The Circular is also now out, which incorporates the IFA opinion.
Trading through terms. The first close is the 7th October. I don’t expect a bump, and the share price gradually retraces back to cash terms.

Capitol Health (CAJ AU): ACCC Overhang as Scheme Meeting Set for 31 October

The Capitol Health (CAJ AU) IE considers Integral Diagnostics (IDX AU)’s merger proposal (0.12849 Integral shares per Capitol share) fair and reasonable.
While ACCC informal clearance is an overhang, the evidence suggests that clearance should be secured. The shareholder vote risk is low.
The offer terms are attractive. At the last close and for the 14 November payment, the gross/annualised spread is 4.7%/37.3%.

Xingda (1899 HK)’s HK$1.30/Share Offer – Say What?

After tyre component manufacturer Xingda International (1899 HK) was suspended recently pursuant to the Takeovers Code, an Offer seemed more likely, not another Partial Offer.
On cue, Liu Jinlan, chairman and executive director, plus concert parties (collectively holding 37.03%), have tabled a voluntary conditional Offer (50% acceptance hurdle). But the price? A surprising zero-premium HK$1.30/share
However, this Offer is a pre-emptive strike against former employee Yue Zhao, who holds 9.24%; and was recently appointed ED and vice-chairman of Shougang Concord (103 HK), Xingda’s major competitor.

MINISO Bets Big on Yonghui. Should Investors Be Concerned About the Acquisition?

By Devi Subhakesan

MINISO‘s acquisition of a 29.4% stake in the loss-making supermarket chain Yonghui for USD 890 million has been viewed negatively by investors, leading to a sharp decline in Miniso’s stock.
The deal’s size, combined with Yonghui Superstores (601933 CH) unprofitable track record and MINISO(9896 HK) ‘s unexpected move into the low-margin, highly competitive supermarket space, has likely fueled investor concerns.
However, we believe the acquisition provides Miniso with a strategic opportunity for growth and diversification to a sector that remains vital in the offline retail landscape at undemanding valuations.

EQD | A Very Weak KOSPI 200 Is Ready to Pull Back Again

By Nico Rosti

The last 2 weeks have been painful for investors that were LONG the KOSPI 200 INDEX, and this week is not very promising either.
The index has advanced less than 3% since its last WEEKLY negative Close on September 6th.
The index is in its 3rd consecutive week up (to be confirmed this Friday at the Close) but the current pattern usually ends on the third week up and reverses.

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Sep 24

Daily Brief Event-Driven: The Biggish Sep 2024 “Thursday-Friday Trade” and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

The Biggish Sep 2024 “Thursday-Friday Trade”
REA’s Improved Terms For Rightmove
Why MBK’s Move into Local Hostile Takeover Scene Matters: Focus on SK Inc and Lotte Corp
What Are Locals Saying About Potential Allies to Choi Family in Fight for Korea Zinc?
NSL Ltd (NSL SP): YTL’s Unconditional Offer
REA/Rightmove: Third Proposal Seems Close to Fair Value

The Biggish Sep 2024 “Thursday-Friday Trade”

Every year it’s the same trade. This year it is Thursday and Friday. There is some funkiness to Monday too.
There is meaningful directional buying on one day, which then kind of gets stretched a bit. This year, circumstances suggest high confidence buying should be at the top end.
This year, because circumstances, I expect the trade is a lot larger than last year. I’d say ¥1.6trln.

REA’s Improved Terms For Rightmove

Rightmove PLC (RMV LN), UK’s largest real estate portal, has twice rejected REA Group Ltd (REA AU) cash/scrip non-binding Offers this month.
REA has upped terms to 341 pence + 0.0422 new REA shares per Rightmove share, or 770p/share, a 39% premium. If completed, Rightmove’s shareholders would own ~20.1% of the MergeCo.
Thrice rejected? I think Rightmove should engage. REA also has until the 30th September to make a formal Offer. Or walk away.

Why MBK’s Move into Local Hostile Takeover Scene Matters: Focus on SK Inc and Lotte Corp

The new 100% mandatory tender offer rule could push buyers to lower premiums for major shareholders, potentially increasing hostile takeover attempts as costs get shared with minority shareholders.
It looks like MBK is eyeing this situation as a chance to redefine their strategy. This really shows how serious MBK is about the Korea Zinc deal.
Watch for top-tier assets available via hostile takeovers, particularly companies like SK Inc and Lotte Corp, where low shareholder stakes may lead to management conflicts.

What Are Locals Saying About Potential Allies to Choi Family in Fight for Korea Zinc?

In this insight, we discuss three particular allies that could help the Choi family that have been highlighted by the local media including Hanwha, KIS, and Softbank.
The Hanwha Group is one of the largest shareholders of Korea Zinc. In addition, Hanwha Group Vice Chairman Kim Dong-Kwan has a close relationship with Korea Zinc Chairman Choi Yoon-Beom.
Korea Zinc is planning to hold an important press conference on the 24 September to reveal its position on the tender offer of Korea Zinc shares by MBK.

NSL Ltd (NSL SP): YTL’s Unconditional Offer

Back on the 23rd July, YTL Cement entered into a S&P agreement with 98 Holdings to acquire a 81.24% stake in building material manufacturing/supplier NSL Ltd (NSL SP) at S$0.75/share.
Pre-Conditions are now satisfied, and YTL Cement has launched a mandatory unconditional cash Offer. The Offer price is also S$0.75/share.
Super straightforward deal. And will trade tight to – or through terms. YTL’s intention is to maintain NSL’s listing.

REA/Rightmove: Third Proposal Seems Close to Fair Value

The Board of Rightmove PLC (RMV LN) will consider REA Group Ltd (REA AU)‘s third proposal (implied value of 770p/share, 39% premium, 20.4x EV/NTM EBITDA, 28x Fwd P/E).
Using 21.3x NTM EBITDA (comps) would indicate fair value of 805p, 4.5% increase to current offer, implying 29.3x P/E, although proforma leverage would increase to 3.6x.
REA has not stated that the offer is final. Rightmove investors and Board may require further persuasion, as the implied probability of deal success is just 58%.

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Sep 23

Daily Brief Event-Driven: Korea Zinc’s Latest Shareholder Roll & MBK’s Triggers to Sweeten Tender Price and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Korea Zinc’s Latest Shareholder Roll & MBK’s Triggers to Sweeten Tender Price
KOSDAQ150 Index Adhoc Rebalance: HLB Therapeutics Replaces Jeisys Medical
Merger Arb Mondays (23 Sep) – Henlius, GA Pack, China TCM, Canvest, Trancom, Fuji Soft, Platinum
STAR50/STAR100 Index Rebalance Preview: Massive Outperformance in Last Two Months; Time to Unwind?
PKSHA Tech (3993 JP) – TOPIX Inclusion in October 2024
Tech M&A: Qualcomm for Intel? No Chance. Here’s Why.
CELSYS (3663 JP) Finally Makes It to Prime Time (TOPIX Inclusion Next Month)
EQD / NSE Vol Update / IVs Ride the Fed Seesaw
Quiddity Leaderboard CSI Medical Dec 24: 5 Changes Possible; Exp ADDs yet to Outperform Exp DELs
Ain Shifts Focus with FrancFranc Acquisition

Korea Zinc’s Latest Shareholder Roll & MBK’s Triggers to Sweeten Tender Price

MBK is watching for a 1 million share trading volume, as that may prompt neutral institutional investors to sell rather than participate in the tender, triggering a price hike.
MBK may raise the tender price to ₩900,000, a 35% jump, with a local pension fund CIO suggesting it’s the sweet spot for participation.
MBK believes securing the minimum target would give them 44% voting rights, enough to push their proposals, indicating they’ll go all-in for that 7% stake in this first attempt.

KOSDAQ150 Index Adhoc Rebalance: HLB Therapeutics Replaces Jeisys Medical

HLB Therapeutics (115450 KS) will replace Jeisys Medical (287410 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) next week.
Passive trackers will need to buy 1.8 days of ADV in HLB Therapeutics (115450 KS) and sell over 4 days of ADV in Jeisys Medical (287410 KS).
Recent ad hoc inclusions to the KOSDAQ 150 Index (KOSDQ150 INDEX) have jumped post announcement of index inclusion but have sold off after the inclusion.

Merger Arb Mondays (23 Sep) – Henlius, GA Pack, China TCM, Canvest, Trancom, Fuji Soft, Platinum

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Canvest Environmental Protection Group (1381 HK), Shinko Electric Industries (6967 JP), Greatview Aseptic Packaging (468 HK), Shanghai Henlius Biotech (2696 HK), China Traditional Chinese Medicine (570 HK).
Lowest spreads: Tohokushinsha Film (2329 JP), Dyna Mac Holdings (DMHL SP), Fuji Soft Inc (9749 JP), Trancom Co Ltd (9058 JP), Seven & I Holdings (3382 JP).

STAR50/STAR100 Index Rebalance Preview: Massive Outperformance in Last Two Months; Time to Unwind?

90% of the way through the review period, there could be 1 change for the SSE STAR50 (STAR50 INDEX) and 5 changes for the STAR100 Index.
We estimate turnover of 1% for the STAR50 INDEX and 5.5% for the STAR100 Index. The net round-trip trade is CNY 3.2bn (US$453m).
The forecast add to the SSE STAR50 (STAR50 INDEX) has massively outperformed the forecast deletion from the index over the last two months.

PKSHA Tech (3993 JP) – TOPIX Inclusion in October 2024

PKSHA is an AI company. It was before this year, and got a boost this past spring. The stock price rose 60% in two weeks in February and March 2024.
Then it fell more than 50%. Back to late 2023 levels. High growth, growing into its valuations. Now moving to TSE Prime this week, TOPIX next month.
Impact in days of ADV is lower than impact in Real World Float metrics. There are lots of day-traders. This probably has legs.

Tech M&A: Qualcomm for Intel? No Chance. Here’s Why.

By Neil Campling

SAMR would draw out review process for too long for a deal to be approved
Intel faces an existential crisis and even the new Foundry division has issues
A theoretical deal would have little financial synergy and destroy Qualcomm’s gross margins

CELSYS (3663 JP) Finally Makes It to Prime Time (TOPIX Inclusion Next Month)

12 days ago, Janaghan Jeyakumar, CFA published his September version of TOPIX Inclusions: Who Is Ready (September 2024). His chosen name was CELSYS (3663 JP), a long-time TSE-Prime inclusion bet.
This week on the 18th, they announced they were going to enter TSE Prime on 25 September. This was a somewhat well-known known. They were interested and had been.
The stock popped 15% the next day. It’s a small cap, but there is a lot of float.

EQD / NSE Vol Update / IVs Ride the Fed Seesaw

By Sankalp Singh

IVs seesawed through the week on account of the Fed meeting. Trading up to 12.7% going into the meeting & selling-off to 11.4% thereafter.
Vol-Curve Term-structure in Contango post Fed meeting – Nifty50 vol curve sheds its inversion & BankNifty vol curve loses its kinked-shape
BankNifty Smile & Skew characteristics extend relative to previous weeks – despite falling IVs & strengthening index.

Quiddity Leaderboard CSI Medical Dec 24: 5 Changes Possible; Exp ADDs yet to Outperform Exp DELs

CSI Medical Service represents the top 50 largest and most-liquid stocks involved in medical devices, medical care, medical informatization, and other medical theme from the Shanghai, Shenzhen and Beijing Exchanges.
In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in December 2024.
We expect up to five ADDs and five DELs for the CSI Medical Service index during this index review event based on the latest available data.

Ain Shifts Focus with FrancFranc Acquisition

By Michael Causton

Ain is best known for running prescription pharmacies but also has a lifestyle-oriented cosmetics chain called Ainz & Tulpe.
Without this, the acquisition of FrancFranc would look odd, but the merger of the two will create genuine synergies and a lifestyle business targeting women in their 20s and 30s.
The move makes sense given the pressure on margins in drug dispensing, Ain’s main business.

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Sep 22

Daily Brief Event-Driven: Unique Rebalancing Pattern & Unique Trading Angle of the KODEX Samsung Group ETF and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Unique Rebalancing Pattern & Unique Trading Angle of the KODEX Samsung Group ETF
(Mostly) Asia-Pac M&A: TCM, Auswide, Latin Resources, Platinum Asset, Trancom, Pacific Smiles
Last Week in Event SPACE: Shin Kong Financial, Swire Pac, Seven & I, Korea Zinc
Quiddity Leaderboard ChiNext Dec 24: East Group Intra-Review Deletion Causes Changes to Expectations
Quiddity Leaderboard STAR 50/100 Dec 24: STAR 50 Exp ADD Could Outperform STAR 50 Exp DEL
Weekly Deals Digest (22 Sep) – Fuji Soft, Elan, Trancom, Seven & I, China TCM, Platinum, K Bank

Unique Rebalancing Pattern & Unique Trading Angle of the KODEX Samsung Group ETF

This KODEX Samsung Group ETF sees 30% AUM outflows pre-rebalancing, with the same chunk flowing back in after, especially noticeable during December.
Over three years, local brokers sold stock baskets before rebalancing, causing notable price impacts. During this time, Samsung affiliates in the ETF delivered 3-4% returns.
ChatGPT said:ChatGPTThis isn’t typical NAV arbitrage; it’s likely an unhedged play. Nonetheless, given the consistent price impact and accessible stock futures, it’s worth considering.

(Mostly) Asia-Pac M&A: TCM, Auswide, Latin Resources, Platinum Asset, Trancom, Pacific Smiles

I tally 42 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals: scrip mergers forAuswide Bank (ABA AU), Latin Resources (LRS AU) & Platinum Asset Management (PTM AU); and the Tender Offer for Trancom Co Ltd (9058 JP).
Key updates took place on: Pacific Smiles (PSQ AU), China TCM (570 HK), Greatview Aseptic Packaging (468 HK), Shin Kong Financial Holding (2888 TT), and Seven & I Holdings (3382 JP).

Last Week in Event SPACE: Shin Kong Financial, Swire Pac, Seven & I, Korea Zinc

Stay long Shin Kong Financial Holding (2888 TT) and buy more, or get long. CTBC Financial Holding (2891 TT) may make a better run at it, and may even bump.
It’s a hard to be bearish Swire Pacific (A) (19 HK) at 0.34x P/B. Yet the Hong Kong property market remains a challenging space. To put it mildly.
Seven & I Holdings (3382 JP) saw breathless news articles suggesting a foreign takeover became more difficult. Not really.

Quiddity Leaderboard ChiNext Dec 24: East Group Intra-Review Deletion Causes Changes to Expectations

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 have presented our updated rankings for Potential ADDs and DELs for the upcoming index rebal event in December 2024.

Quiddity Leaderboard STAR 50/100 Dec 24: STAR 50 Exp ADD Could Outperform STAR 50 Exp DEL

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.
STAR 100 index tracks the next 100 names (51st-150th ranks) and it represents the mid-cap segment of the STAR market.
In this insight, we take a look at the potential ADDs/DELs for the STAR 50 and STAR 100 indices for the December 2024 index rebal event.

Weekly Deals Digest (22 Sep) – Fuji Soft, Elan, Trancom, Seven & I, China TCM, Platinum, K Bank

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: K Bank (279570 KS) has launched an IPO to raise up to US$734 million.
Event-Driven developments: Fuji Soft Inc (9749 JP), Elan Corp (6099 JP), Trancom Co Ltd (9058 JP), Seven & I Holdings (3382 JP), China Traditional Chinese Medicine (570 HK).

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Sep 21

Daily Brief Event-Driven: Fuji Soft (9749) – As Bain Prepares to Go Higher and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Fuji Soft (9749) – As Bain Prepares to Go Higher, KKR Goes Lower
Young Poong Precision (036560 KS) Also Now Trading Through Terms
Details of MBK’s Four Major Concerns on Management of Korea Zinc
Tokyo Metro (9023 JP): IPO Listing & Fast-Entry Approved
Will New KOSDAQ 150 Member HLB Therapeutics Show Webzen-Like Price Moves?
Brookfield/Grifols: Recap and Analysis of Latest Developments
EQD | HSI September Rally: What’s Next?

Fuji Soft (9749) – As Bain Prepares to Go Higher, KKR Goes Lower

Yesterday, KKR amended its plans to take over Fuji Soft Inc (9749 JP) by creating a Two-Tender Scheme, effectively lowering the threshold for eventual success through clearly coercive tactics.
3D (23.46%) and Farallon (9.22%) had already tendered. Contractual terms make it difficult (not impossible) to withdraw. Assuming it goes through, KKR has 32.68%, quasi-negative control.
This revised structure is clearly abusive of minorities and NOT the deal Fuji Soft signed. This should cause Fuji Soft to Change their Opinion. Shareholder (and Bain) Pressure would help.

Young Poong Precision (036560 KS) Also Now Trading Through Terms

On the 13th September, MBK joined Young Poong (000670 KS) in seeking control of Korea Zinc (010130 KS) via Partial Tender Offers for KZ and Young Poong Precision (036560 KS).
This situation has been canvassed by analysts here at Smartkarma; with increasing expectation the Choi family makes a counterbid.
This insight analyses the fair value of YPP. No matter how you slice it, the Offer Price is punchy. Perhaps not punchier enough.

Details of MBK’s Four Major Concerns on Management of Korea Zinc

In this insight, we discuss in detail MBK’s four major concerns on the management of Korea Zinc.
We believe that MBK has legitimate concerns on especially the three factors including poor investments, deteriorating profitability, and increase in equity capital/disposal of treasury shares.
If and when the 2 trillion won+ is raised, then it could lead to another tender offer and the four concerns highlighted in this insight become much more important.

Tokyo Metro (9023 JP): IPO Listing & Fast-Entry Approved

By Dimitris Ioannidis

Tokyo Metro (TKYMETRO JP) is scheduled to go public on 23 October 2024 with an IPO valuation of ~$4.4bn and a float market cap of ~$2.2bn.
Fast-Entry for the one Global Index is expected at the close of 29 October 2024 with forecasted demand of ~17.4m shares and ~$133m.
Quarterly inclusion at the May 2025 review has a higher probability with a slight price rally or an elevated IPO offering price. Forecasted demand is ~23.2m shares and ~$177m.

Will New KOSDAQ 150 Member HLB Therapeutics Show Webzen-Like Price Moves?

Jeisys Medical’s getting booted from the KOSDAQ 150, and HLB Therapeutics is stepping in as the new addition. This change will officially hit the book on Wednesday, September 25.
HLB Therapeutics, with a ₩0.70T market cap and 87% float, is set for a 0.51% weight in KOSDAQ 150, triggering over 2 million shares in passive buying: 3.26x 30-day ADTV.
With today’s after-hours volume spike in HLB Therapeutics, we’re likely to see some price action from early movers spilling into Monday’s open, similar to what we saw with Webzen.

Brookfield/Grifols: Recap and Analysis of Latest Developments

Since Brookfield’s July 8 takeover interest for Grifols was announced, the situation has become complicated, with unclear pricing, funding challenges, and uncertainty about whether an offer will materialize or when.
Grifols operates in a consolidated plasma-derived therapies market with high entry barriers, and its current valuation of 8.6x NTM EBITDAe significantly undervalues it compared to CSL’s 19.2x.
B shares closed on September 20 in Madrid at a 17.3% discount to A shares. Paying this spread would be my favored approach to gain exposure to a potential offer.

EQD | HSI September Rally: What’s Next?

By Nico Rosti

We continue our coverage of the Hang Seng Index : in our previous insight we theorized a continuation of the rally in September.
So far the index is following the path outlined (pullback, then rally). What is going to happen in the next few weeks, if September closes up?
Broadly speaking we see a potential continuation of the rally in October, but there may be some resistance in the short-term.

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Sep 20

Daily Brief Event-Driven: Fuji Soft (9749 JP): Checkmate as KKR Switches to a Two-Stage Tender and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Fuji Soft (9749 JP): Checkmate as KKR Switches to a Two-Stage Tender
Why Samsung Fire Is Shaping Up to Be the Hottest Dividend Play Ahead of the Value-Up Disclosure
M3 (2413 JP) Launches Partial Offer To Take Control of Elan (6099 JP)
StubWorld: Swire Trading “Cheap” As Cathay Squares Government Debt
Elan Corporation (6099 JP): M3 (2413 JP)’s Partial Tender Offer
GAPack (468 HK): SAMR Rests On XJF’s Filing
Korea Investment Securities to Step up as the White Knight for Choi Family at Korea Zinc
Digging into the News Flow on KIS Jumping in as the White Knight for Choi in the Korea Zinc Deal
Main Takeaways from Today’s MBK Press Briefing About the Korea Zinc Tender
Quiddity Leaderboard CSI 300/500 Dec 24: Massive Increase in AUMs Causes Flow Expectations to Soar

Fuji Soft (9749 JP): Checkmate as KKR Switches to a Two-Stage Tender

KKR has rejigged its Fuji Soft Inc (9749 JP) tender offer into a two-stage offer at an unchanged JPY8,800 price. The first stage has no minimum acceptance condition.
The first stage is designed to facilitate KKR’s acquisition of 3D and Farallon shares, which have tendered and will not withdraw their tenders without KKR’s consent.
By securing 3D/Farallon’s shares, KKR has effectively blocked a Bain tender offer. Bain could launch a partial offer but it would be constrained by the tradeable share ratio criteria.

Why Samsung Fire Is Shaping Up to Be the Hottest Dividend Play Ahead of the Value-Up Disclosure

With the 15% ownership cap complicating buybacks, Samsung Fire’s more likely to roll out a dividend-focused value-up play instead.
They’ve flagged a mix of shareholder returns and investments, but the big question is how much will be funneled into returns this year.
If Samsung Fire hits a 50% shareholder return this year, DPS could jump to ₩23,000–₩25,000 with a 6.5% yield, potentially boosting the stock price by 20–30%.

M3 (2413 JP) Launches Partial Offer To Take Control of Elan (6099 JP)

M3 Inc (2413 JP) will buy 50.1-55.0% of Elan Corp (6099 JP). Three principals+family have agreed to tender 50.1%. The premium is not huge. This is not an ATH.
There will be synergies. I am a little surprised by the deal+price (CEO is young, why sell so cheaply so early?) but it should be good for the TargetCo.
There are possible post-tender complications on a high participation rate. I expect those can be cured relatively easily.

StubWorld: Swire Trading “Cheap” As Cathay Squares Government Debt

Swire Pacific (19 HK) is coming up “cheap” on my monitor vs. Swire Properties (1972 HK) and Cathay Pacific (293 HK), after Cathay settles its Hong Kong government tab.
Preceding my comments on Swire and Cathay 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%.

Elan Corporation (6099 JP): M3 (2413 JP)’s Partial Tender Offer

Elan Corp (6099 JP) announced a partial tender offer and capital and business agreement with M3 Inc (2413 JP). M3 aims to make Elan a consolidated subsidiary.
The offer is for a minimum of 30.4 million (50.10% ownership ratio) and a maximum of 33.3 million shares (55.00% ownership ratio) at JPY1,040, 24.0% premium to the undisturbed price.
Irrevocable from tendering shareholders will satisfy the minimum acceptance condition. The offer is unremarkable, suggesting a final proration materially above the minimum of 56.07%.

GAPack (468 HK): SAMR Rests On XJF’s Filing

China’s State Administration for Market Regulation has formally accepted Shandong Xinjufeng Technology (301296 CH) (XJF)’s filing. That’s positive. SAMR previously okayed XJF’s initial 28.22% stake from Jardine Matheson (JM SP).
No new update on co-founders Jeff Bi and Gang Hong’s non-binding Offer.
Separately, the EGM requisitioned by XJF to appoint two XJF-friendly directors progresses.

Korea Investment Securities to Step up as the White Knight for Choi Family at Korea Zinc

Hankyung Business Daily reported that Korea Investment Securities (KIS) is in a serious discussion with the Choi family of Korea Zinc to step up as a white knight.
KIS/Choi family are considering a plan to launch a counterbid against Jang family and MBK by investing around 2 trillion won+ along with other private equity funds.
It is probable that tender offer price of Korea Zinc could be raised by 15-25% due to a likely counterbid and current price trading 7% higher than tender offer price.

Digging into the News Flow on KIS Jumping in as the White Knight for Choi in the Korea Zinc Deal

The key issue is if KIS can form a consortium. PEFs are saying the timeline is too tight and are concerned about the unclear exit strategy.
To make this work, PEFs need Choi’s 15.65% Korea Zinc stake as collateral, but much of it is already tied up, limiting cash-raising potential.
They’ll likely continue to leak news to boost the price and buy time. But this will also push MBK to sweeten their offer sooner.

Main Takeaways from Today’s MBK Press Briefing About the Korea Zinc Tender

MBK’s funding plan for Korea Zinc involves using ₩1T from their 6th Buyout Fund and the rest via debt. This setup leaves room to potentially increase the tender price.
The key question is if there’s enough upside at this price. MBK’s silence on abandoning Youngpoong suggests they’re unlikely to fully bail on Korea Zinc even if the tender fails.
With MBK’s strategy leaked, institutions may hesitate, fearing less price drop risk, suggesting a proxy battle could heat up. We should consider spread trading and post-tender price moves.

Quiddity Leaderboard CSI 300/500 Dec 24: Massive Increase in AUMs Causes Flow Expectations to Soar