Category

Event-Driven

Feb 24
0

Daily Brief Event-Driven: EQD | Where to BUY the KOSPI On The Upcoming Pullback and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • EQD | Where to BUY the KOSPI On The Upcoming Pullback

EQD | Where to BUY the KOSPI On The Upcoming Pullback

By Nico Rosti

  • The KOSPI 200 INDEX has been rallying since January 2022, roughly up +22.5%, the rally can continue, but soon there could be a pullback, possibly this coming week.
  • If the index falls from its current highs, where are the best support levels to go LONG again?
  • The price area between 355 and 345 is where the index could find support and resume the uptrend.

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Feb 23
0

Daily Brief Event-Driven: The Launch of 1st Corporate Value Up ETF on 27 February – Focus on Low PBR and Cash Flow and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • The Launch of 1st Corporate Value Up ETF on 27 February – Focus on Low PBR and Cash Flow
  • CSR (CSR AU): Saint Gobain’s $9/Share NBIO
  • Quiddity Leaderboard S&P 500 Mar 24: Big Index Flows Possible for Workday and KKR
  • FnGuide Semiconductor Top10 Index Rebalance Preview: One Change Likely; Close Among Potential Adds
  • FnGuide Top10 Equal Weight Index Rebalance Preview: Celltrion Could Replace Samsung SDI
  • HK CEO & Director Dealings (23 Feb 2024): Fast Retailing, Far East Consortium, Pharmaron Beijing
  • Start of Acceptance Period with Guaranteed Success

The Launch of 1st Corporate Value Up ETF on 27 February – Focus on Low PBR and Cash Flow

By Douglas Kim

  • Samsung Asset Management announced today that it will be launching the first Corporate Value Up ETF on 27 February. It will focus on low PBR and positive cash flow generators.
  • This ETF which will be called KoAct Dividend Growth Active ETF. There are about 45 stocks that are expected to be included in this ETF. 
  • Among the 92 companies in KOSPI 200 that are trading at less than 1x PBR, those that generate positive free cash flow are outperforming significantly. 

CSR (CSR AU): Saint Gobain’s $9/Share NBIO

By David Blennerhassett

  • Cie De Saint-Gobain (SGO FP) is offering CSR (CSR AU) shareholders A$9/share by way of a Scheme, a 34% premium to last close. That’s a knockout price.
  • The Offer is indicative. Confirmatory due diligence is ongoing. CSR board has, not surprisingly “unanimously resolved to pursue the offer at an agreed price of A$9.00“. 
  • A firm offer would be subject to FIRB and shareholder approval. Neither should pose an issue. Assuming a firm Offer is shortly forthcoming, this could be wrapped up late-July

Quiddity Leaderboard S&P 500 Mar 24: Big Index Flows Possible for Workday and KKR

By Travis Lundy

  • 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.
  • The index is reviewed quarterly. The next review will be in March 2024 and the evaluation date for the rankings for the constituent selection process is 29th February 2024.
  • In this insight, we take a look at Potential ADDs and Potential DELs for the rebalance. We estimate US$13.1bn one-way flow on 3 ADDs and 3 DELs.

FnGuide Semiconductor Top10 Index Rebalance Preview: One Change Likely; Close Among Potential Adds

By Brian Freitas

FnGuide Top10 Equal Weight Index Rebalance Preview: Celltrion Could Replace Samsung SDI

By Brian Freitas

HK CEO & Director Dealings (23 Feb 2024): Fast Retailing, Far East Consortium, Pharmaron Beijing

By David Blennerhassett

Start of Acceptance Period with Guaranteed Success

By Jesus Rodriguez Aguilar

  • Spanish renewables group Opdenergy Holdings (OPDE SM) will exit the stock market upon closing of Antin Infrastructure Partners (ANTIN FP)‘s takeover bid. The company is scheduled to delist on 23 April.
  • Minimum acceptance condition is 75%. Antin had 71.2% irrevocables, which together with a letter of intention for 6.09%, should mean the threshold is crossed.
  • Spread is 0.68%/7.54% (gross/annualised, assuming settlement on 26 March). Long and tender.

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Feb 22
0

Daily Brief Event-Driven: Korea NPS Abruptly Joins Corporate Value Up Program: According to Document Obtained from NPS and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Korea NPS Abruptly Joins Corporate Value Up Program: According to Document Obtained from NPS
  • Itoki (7972 JP) – Worth Thinking About Post Mega ToSTNeT-3 Buyback
  • Azure Minerals (AZS AU): MinRes Selling Out Paves the Way for the Scheme
  • Union Bank of India (UNBK IN) Placement: Using Index Inclusion Well
  • Azure (AZS AU): MinRes’ Discounted Exit
  • NPS Plans to Select Three Asset Management Companies For “Corporate Value Up” Program
  • China Traditional Chinese Medicine (570 HK): Sinopharm-Led Pre-Conditional Offer at HK$4.60
  • TCM (570 HK): Sinopharm’s $4.60/Share Offer
  • CSR Ltd (CSR AU): Saint-Gobain’s A$9/Share Offer
  • CSR (CSR AU): Saint-Gobain’s Non-Binding Proposal at A$9.00

Korea NPS Abruptly Joins Corporate Value Up Program: According to Document Obtained from NPS

By Sanghyun Park

  • NPS abruptly joins ‘Corporate Value Up Program’, plans to select three asset managers. Deadline: this month’s 29th; results: March 19th, possibly linked to Korea Premium Index ETF launch in mid-May.
  • The document outlines guidelines, allocating 90-100% to value stocks, with KOSDAQ under 20%. While benchmarked to the internally-built index, it will likely focus on Korea Premium Index and KOSDAQ Global.
  • The fund size is crucial. NPS will disclose details later. But still, there is considerable room to this year’s ceiling for local equity; a significant amount could flow into this.

Itoki (7972 JP) – Worth Thinking About Post Mega ToSTNeT-3 Buyback

By Travis Lundy

  • As discussed in Itoki (7972) Mammoth Buyback Coming Imminently After 35% Jump, the company was going to do a mega ToSTNeT-3 buyback between then and end-Feb. That happened this morning.
  • The company bought back 7.966mm shares (13.96%) for ¥15.9bn. That should have cleared out the bulk of the risk of the original warrant holders who bought in 2020. But…
  • The dilution/accretion don’t offset perfectly, and there is a clause suggesting how this might play out from here. But we can infer things from other data we now have.

Azure Minerals (AZS AU): MinRes Selling Out Paves the Way for the Scheme

By Arun George

  • The AFR reports that JPMorgan is selling 14.5% of Azure Minerals (AZS AU) shares at A$3.42. The primary seller is said to be Mineral Resources (MIN AU), seeking to exit.
  • MinRes’ decision to sell out a discount rather than accept the scheme A$3.70 offer reflects the cost of securing a say on Andover and the opportunity cost of capital. 
  • The transaction booklet will be despatched in early March. At the last close and for an early May scheme payment, the gross/annualised spread is 2.5%/13.4%. 

Union Bank of India (UNBK IN) Placement: Using Index Inclusion Well

By Brian Freitas

  • Union Bank Of India (UNBK IN) is looking to raise up to INR 30bn (US$362m) with the floor price set at INR 142.78/share and a maximum discount of 5%.
  • The stock has run up a lot and with index inclusion around the corner, this is as good a time as any to issue stock.
  • Union Bank Of India (UNBK IN) trades cheaper than peers and could continue to outperform over the near-term.

Azure (AZS AU): MinRes’ Discounted Exit

By David Blennerhassett

  • JPMorgan is placing MinRes (MIN AU)‘s 14.5% stake in Azure Minerals (AZS AU) at A$3.42/share, a 5% discount to last close and a 7.6% discount to the A$3.70/share Scheme price. 
  • It was reported last month that MinRes, who paid up to ~A$4.00/share for some of its stake, was looking to exit. But cash now vs. ~8% more in two months?
  • Given the recent rout in lithium and nickel prices, one wonders if a MAC landmine lurks. Or, quite simply, MinRes just needs the cash. Expect Azure to fall tomorrow.

NPS Plans to Select Three Asset Management Companies For “Corporate Value Up” Program

By Douglas Kim

  • On 21 February, NPS announced that it will select three domestic asset management companies to manage funds that will be allocated to the “corporate value up” program. 
  • NPS plans to accept proposals from the local asset management and investment advisory companies from 21 to 29 February. NPS is likely to finalize the selected candidates sometime in March. 
  • We provide a list of 34 companies where the NPS has at least 5% ownership stake, with PBR of 0.5x or less, and included in KOSPI 200.

China Traditional Chinese Medicine (570 HK): Sinopharm-Led Pre-Conditional Offer at HK$4.60

By Arun George

  • China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
  • The pre-condition relates to various Chinese regulatory approvals. As SOE entities own the offeror, regulatory approvals will be a formality. The offer price is final. 
  • Ping An Insurance (H) (2318 HK), which holds a blocking stake, will be supportive. The offer is fair when the previously (higher) rumoured offers are adjusted for the market downturn. 

TCM (570 HK): Sinopharm’s $4.60/Share Offer

By David Blennerhassett

  • $4.60/Share. That’s the number – by way of a Scheme – that only matters. Below the recently rumoured $6/share, and $5.10/share a little over three years ago. Terms are final.
  • As widely expected, the Offeror is SASAC-managed China National Pharmaceutical Group Corporation (CNPGC), indirectly owning 32.46% in China Traditional Chinese Medicine (570 HK) (TCM) via Sinopharm Group Hongkong,
  • Optically, the Offer price appears light. But this should still get up. TCM is trading rich to peers. No other competing bidder will emerge. Expect regulatory pre-cons to be fast-tracked.

CSR Ltd (CSR AU): Saint-Gobain’s A$9/Share Offer

By Brian Freitas

  • Cie De Saint-Gobain (SGO FP) has approached CSR Ltd (CSR AU) with a non-binding indicative offer to acquire all of CSR’s shares at A$9/share via a scheme of arrangement.
  • At the last close of CSR (pre-trading halt) the gross spread to the offer price is 13.21%. That will close significantly once the stock resumes trading.
  • Given the large premium to the last close, at a price higher than the highest high, and support from the CSR Board, the deal should go through.

CSR (CSR AU): Saint-Gobain’s Non-Binding Proposal at A$9.00

By Arun George

  • In response to media speculation, Cie De Saint-Gobain (SGO FP) confirmed a non-binding proposal for CSR Ltd (CSR AU) at A$9.00, a 32.9% premium to the undisturbed price.
  • Saint-Gobain is conducting confirmatory due diligence. CSR is at a trading halt concerning receiving a proposal regarding a potential material transaction involving CSR.
  • Shareholders should be supportive as the offer represents a 15-year high. The timing of a binding agreement is the key risk.  

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Feb 21
0

Daily Brief Event-Driven: Snow Peak (7816) – Bain Deal at ¥1 and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Snow Peak (7816) – Bain Deal at ¥1,250 – 46% Premium Is Nice, Not A Home Run
  • Quiddity Leaderboard MV J-Gold Miners Mar 24: One High-Conviction DEL and More Low-Conviction Cases
  • Monitoring LG Display’s Stock Rights Trading
  • CIMC (1839 HK): Justification For Unjust Offer Price?
  • HSCEI Dividend Futures: Shrinking OI; Fair Value Estimates Show Upside
  • Snow Peak (7816 JP): Bain-Backed MBO at JPY1,250
  • JSE Mar ’24 Rebalance: No T40 or T40 SWIX Changes Expected
  • China Traditional Chinese Medicine (570.HK) – New Information on Privatization
  • Dow Jones Industrials (INDU) Index Rebalance: Amazon (AMZN) Replaces Walgreen Boots (WBA)
  • EQD | NIFTY’s Rally Resistance Targets Approaching: Reversal?

Snow Peak (7816) – Bain Deal at ¥1,250 – 46% Premium Is Nice, Not A Home Run

By Travis Lundy

  • The possibility/likelihood of a “¥50bn MBO” for Snow Peak Inc (7816 JP) was leaked in a Nikkei article last Friday. It went limit up two days in a row. 
  • That TOB price is more than 70% off its three-year high. That will certainly disappoint some. Separately, the price seems a bit low given growth. 
  • The family and friends own ~42% so if someone gets upset, or uppity, there could be a challenge. Just because an MBO exists doesn’t mean people have to tender in.

Quiddity Leaderboard MV J-Gold Miners Mar 24: One High-Conviction DEL and More Low-Conviction Cases

By Travis Lundy

  • The MV J-Gold Miners index represents the performance small-cap gold and silver mining companies listed around the world.
  • This index is reviewed semi-annually in March and September. During these reviews, names can be added or deleted from the index.
  • In this insight, we take a look at the potential ADDs and DELs and our flow expectations for the index rebal event in March 2024. 

Monitoring LG Display’s Stock Rights Trading

By Sanghyun Park

  • LG Display’s tight stock rights trading prompts a need to assess potential trading opportunities. Taihan Electric Wire’s concurrent capital increase warrants close observation.
  • Watch for a potentially wider spread in Taihan Electric Wire’s stock rights trading from the 22nd, given local institutional demand focus on LG Display may create a buying vacuum.
  • Observers speculate on a CJ CGV-like pattern at LG Display. With no current market movements, predicting such a scenario is difficult. Nonetheless, I’ll monitor closely and share any developments.

CIMC (1839 HK): Justification For Unjust Offer Price?

By David Blennerhassett

  • On the 28 November 2023, SOE-backed CIMC Vehicle Group Co Ltd (1839 HK) announced a conditional H-share buyback at a $7.00/H-share, a forgettable 8.6% premium to last close.
  • This Voluntary Offer followed by a Merger by Absorption requires shareholder approval and SAFE signing off. The SAFE condition was satisfied on the 26th Jan.
  • Last night, CIMC announced the CBP investigation into the evasion of  U.S. anti-dumping and countervailing duties was extended. There is no mentioned in interim accounts or HKEx of this investigation.

HSCEI Dividend Futures: Shrinking OI; Fair Value Estimates Show Upside

By Brian Freitas

  • The open interest of the HSCEI 2024 dividend futures is less than half that of the HSCEI 2023 and HSCEI 2022 open interest at the same time of the year.
  • Market volatility and the fallout of the losses faced by Korean investors (and the scrutiny of Korean ELS-issuing banks) are among the primary reasons for the low open interest.
  • Our fair value for the HSCEI 2024 dividend futures is higher than the current market but there is a lot of sensitivity to bank dividends and special dividends.

Snow Peak (7816 JP): Bain-Backed MBO at JPY1,250

By Arun George

  • Snow Peak Inc (7816 JP) has recommended a Bain Capital-sponsored MBO tender offer at JPY1,250 per share, a 58.0% premium to the undisturbed price (15 February). 
  • The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 38.13% ownership ratio.
  • Based on the irrevocables, the minimum acceptance condition requires a 52.8% minority acceptance rate. While not a knockout offer, the acceptance condition is achievable.  

JSE Mar ’24 Rebalance: No T40 or T40 SWIX Changes Expected

By Charlotte van Tiddens, CFA

  • Last night the price snapshot was taken for the March 2024 rebalance.
  • We do not expect there to be any changes to the Top 40, Top 40 SWIX, FINI, FINDI or INDI.
  • EXX is expected to enter the RESI with NPH falling out. 

China Traditional Chinese Medicine (570.HK) – New Information on Privatization

By Xinyao (Criss) Wang

  • Since China TCM doesn’t deny the rumors so far after the trading halt, privatization is becoming likely this time.Rumor said formal negotiations may not begin until after the Lantern Festival.
  • CNPGC may not want to pay high prices on privatization.Weak sentiment/share price may help with the negotiations.But the key is to obtain the consent of other shareholders, especially Ping An.
  • There’s underlying logic for Taiji Group to drive this privatization. A price of higher than HKD5.1 is possible. If the price could reach HKD6 (or higher), it has exceeded expectations.

Dow Jones Industrials (INDU) Index Rebalance: Amazon (AMZN) Replaces Walgreen Boots (WBA)

By Brian Freitas

EQD | NIFTY’s Rally Resistance Targets Approaching: Reversal?

By Nico Rosti

  • The NIFTY Index has been rising for 5 days in a row, this is the second week up (CC=+2), there is a good chance it will pullback soon.
  • The index is going towards the Q3 resistance level at 22354, that would be a good area from where to start to prepare for a pullback.
  • Going SHORT may not be worth it, the right trade is to wait for the pullback and go LONG again at better prices.

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Feb 20
0

Daily Brief Event-Driven: Outsourcing (2427 JP) – Earnings Out and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Outsourcing (2427 JP) – Earnings Out, With a Bigger Impairment, But Not Clearly A MAC
  • Outsourcing (2427 JP): The Weak 4Q Unlikely to Deter Bain
  • Seven Group Reloads On Boral (BLD AU)
  • Yuanta/​P-Shares Taiwan Div+ ETF Rebalance Preview: One Deletion & Capping Changes
  • Offshore China ETFs Rebalance Preview: Big Price Moves Could Lead to Four Changes
  • FXI Rebalance Preview: Three Potential Changes as Big Moves Unfold
  • APM Human Services (APM AU) Rejects CVC’s NBIO
  • Quiddity Leaderboard TDIV Mar 24: 8 Days to Sell in Bizlink
  • Quiddity Leaderboard T50/​​​100 Mar 24: Bizlink TDIV DEL; Foxtron’s Futile Rally; One More Surprise
  • Taiwan Top 50 ETF Rebalance Preview: Alchip (3661) Could Replace Feng Tay (9910)

Outsourcing (2427 JP) – Earnings Out, With a Bigger Impairment, But Not Clearly A MAC

By Travis Lundy

  • Outsourcing Inc (2427 JP) delayed its earnings from 14 February to 19 February on tardiness in calculating impairment losses. That caused a short sharp shock in share price.
  • An article came out suggesting it was a small number, and domestic biz EAS-related. Results today do not suggest EAS-related, and half is overseas. But no suggestion of precondition breach.
  • For that, I think this probably goes through, and the EC FSR review period should end on 20 Feb so a deal announcement by Friday is eminently possible.

Outsourcing (2427 JP): The Weak 4Q Unlikely to Deter Bain

By Arun George

  • Outsourcing Inc (2427 JP) has disclosed a weak 4Q materially below guidance due to cost overruns and JPY6,875 million in impairments. The results did not provide an update on Bain’s tender.
  • The weak 4Q has raised concerns that Bain would reconsider terms. Our take is that the results will not warrant a change in the DCF valuation or breach a pre-condition. 
  • Bain is likely to consider the results a reflection of near-term industry weakness rather than company-specific issues. The annualised spread for a March-end completion is 9.8%.

Seven Group Reloads On Boral (BLD AU)

By David Blennerhassett

  • After Boral (BLD AU) rejected Seven Group (SVW AU)‘s $6.50/share Offer in 9 June 2021, Seven bumped to $7.30 cash if they got to 29.5%, and $7.40 if 34.5%.
  • Seven reached 29.5% by July 1, 34.5% less than a week later, then 52.65% on the 15 July, and at the close of the Offer (29 July 2021), held 69.6%.  
  • Seven, now holding 71.6%, has made a cash/scrip Offer for shares not owned, with certain tendering thresholds triggering more cash. Terms are best & final.

Yuanta/​P-Shares Taiwan Div+ ETF Rebalance Preview: One Deletion & Capping Changes

By Brian Freitas

  • Bizlink Holding (3665 TT) should be deleted from the Yuanta/​P-Shares Taiwan Dividend Plus ETF in March and that will trigger selling of over 8 days of ADV.
  • There will be capping and funding flows due to the higher AUM and passive trackers will need to trade over 0.4x ADV in 5 stocks.
  • Shorts have covered positions in Bizlink Holding (3665 TT) but there has been a recent uptick that could be linked to positioning for the rebalance.

Offshore China ETFs Rebalance Preview: Big Price Moves Could Lead to Four Changes

By Brian Freitas

FXI Rebalance Preview: Three Potential Changes as Big Moves Unfold

By Brian Freitas

APM Human Services (APM AU) Rejects CVC’s NBIO

By David Blennerhassett

  • Employment and disability services play APM Human Services (APM AU) has rejected PE-outfit CVC Asia Pacific’s proposal, which valued APM at less than half of its November 2021 IPO price.
  • APM confirmed it had received – on Friday, 16 February – a conditional and non-binding A$1.60/share indicative proposal. That’s a 93% premium to undisturbed. Yet, APM’s IPO Price was A$3.55/share.
  • CVC – and other suitors – need to persuade executive chair and founder Megan Wynne and US private equity group Madison Dearborn, who collectively control ~65% of the company.

Quiddity Leaderboard TDIV Mar 24: 8 Days to Sell in Bizlink

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at Quiddity’s flow expectations for the March 2024 index rebal event.
  • Today is the base date for the March 2024 index rebalance. Based on the closing prices today, I expect one DEL for the TDIV index in March 2024.
  • Separately, I also expect the AUM assumption to be revised in March 2024.

Quiddity Leaderboard T50/​​​100 Mar 24: Bizlink TDIV DEL; Foxtron’s Futile Rally; One More Surprise

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the March 2024 index rebal event.
  • I expect one change for the T50 index and two other changes for the T100 index.
  • The two T100 expected DELs are special because one could be a surprise deletion due to liquidity test failure and the other one is TDIV member with significant flow implications.

Taiwan Top 50 ETF Rebalance Preview: Alchip (3661) Could Replace Feng Tay (9910)

By Brian Freitas

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Feb 19
0

Daily Brief Event-Driven: HSCI Index Rebalance: 25 Adds and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect
  • HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn
  • Snow Peak (7816 JP): Bain Contemplating Backing an MBO at JPY1,200
  • What We’ve Gathered Thus Far Regarding KOREA PREMIUM INDEX: Schedule, Methodology, & NPS
  • Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise
  • Merger Arb Mondays (19 Feb) – Outsourcing, JSR, Shinko, YSK, Vinda, Altium, Azure, Ansarada
  • STTF Index Rebalance Preview: One High Probability Change in March
  • Boral (BLD AU): Seven Group (SVW AU)’s Best & Final Offer
  • Liquid Universe of European Ordinary and Preferred Shares: February‘24 Report

HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect

By Brian Freitas

  • There are 25 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents down to 514.
  • We expect 21 of the 25 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.
  • Since the start of the year, shares held though Southbound Connect have increased on 22 of the 29 HSCI deletions and there could be some unwinding in the weeks ahead.

HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn

By Brian Freitas

Snow Peak (7816 JP): Bain Contemplating Backing an MBO at JPY1,200

By Arun George

  • The Nikkei reports that Snow Peak Inc (7816 JP) is set to disclose a Bain-sponsored MBO this week “in the range of 1,200 yen per share.”
  • Mergermarket first disclosed a potential MBO on Friday. Snow Peak responded that while it is true that we are considering going private, no decision has been made at this time.
  • The rumoured JPY1,200 offer price is light vs historical trading ranges but attractive vs peer and historical multiples. The probability of an offer materialising is high. 

What We’ve Gathered Thus Far Regarding KOREA PREMIUM INDEX: Schedule, Methodology, & NPS

By Sanghyun Park

  • The Feb 26th announcement introduces the Corporate Value Up Program and unveils the Korea Premium Index direction. Methodology finalization expected by mid-March; ETFs launch by mid-May.
  • Similar to JPX Prime 150, KRX aims to target enhancing equity spread and PBR trends (+1.0x) while also integrating dividend growth rate. KOSDAQ stocks may be omitted.
  • NPS’s role is vital for the Korea Premium Index, yet aligning its passive strategy with this index faces challenges. Ongoing discussions aim to adjust regulations for this index investment.

Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise

By Brian Freitas

  • There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the March rebalance. There are some surprises.
  • Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.
  • There is huge short interest on East Buy Holding (1797 HK) and there could be some short covering ahead of the inclusion of the stock in the index.

Merger Arb Mondays (19 Feb) – Outsourcing, JSR, Shinko, YSK, Vinda, Altium, Azure, Ansarada

By Arun George

STTF Index Rebalance Preview: One High Probability Change in March

By Brian Freitas

Boral (BLD AU): Seven Group (SVW AU)’s Best & Final Offer

By Brian Freitas

  • Seven Group Holdings (SVW AU) holds 71.59% in Boral Ltd (BLD AU) and is looking to acquire the remaining shares at A$6.05/share via a mix of SVW stock and cash.
  • The offer consideration ratchets higher to A$6.15/share if SVW’s aggregate shareholding reaches 80% and to A$6.25/share if SVW’s aggregate shareholding reaches 90.6%.
  • Seven Group Holdings (SVW AU) is an addition to a global index at the end of the month and a drop in the stock post inclusion will affect Boral Ltd.

Liquid Universe of European Ordinary and Preferred Shares: February‘24 Report

By Jesus Rodriguez Aguilar

  • Since mid-January, spreads have tightened, same as in December, across our European liquid universe of ordinary and preferred shares (13 have tightened, 6 widened).
  • Recommended trades long preferred / short ordinary shares: Danieli, Grifols, Media-for-Europe, Sixt, Volkswagen.
  • Recommended trades long ordinary / short preferred shares: Fuchs, Henkel, SSAB Svenska Stal, Roche.

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Feb 18
0

Daily Brief Event-Driven: Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest
  • Snow Peak (7816) – Nikkei Says Bain to Launch ¥50bn MBO
  • [Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Altium, Ansarada, Roland DG, Welbe, Orecorp, Vinda
  • HSCEI Index Rebalance: Third Time Unlucky for Zhongsheng (881 HK) As China Unicom (762 HK) In
  • Index Rebalance & ETF Flow Recap: HSI, Screen Holdings, GMRI, SEA EM, MVIS, SET50, JP Positioning
  • Last Week in Event SPACE: Outsourcing Ltd, MGM China, JSR Corp, Dissentient Blues

Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest

By Brian Freitas

  • In a surprise, the Hang Seng index committee has decided not to make any constituent changes to the Hang Seng Index (HSI INDEX) at the March rebalance.
  • We now see the index reaching its 100-member target in 2025 at the earliest, though we would not be surprised to see it spill into 2026 as well.
  • Free float and capping changes will result in one-way turnover of 1.2% resulting in a round trip trade of HK$4.54bn. HSBC Holdings (5 HK) is the biggest sell.

Snow Peak (7816) – Nikkei Says Bain to Launch ¥50bn MBO

By Travis Lundy

  • Apparently, MergerMarket had an article out Friday saying once-higher-flying outdoor/sporting goods retailer Snow Peak Inc (7816 JP) was considering going private. The company said(J) late they were considering multiple options.
  • A Nikkei article (J) Saturday said it was Bain would launch an MBO/Tender Offer as early as this week paying ¥50bn. 
  • This will probably go limit up Monday. I’d expect an announcement post-close Monday. Long-suffering long-only investors who have already sold will be disappointed. Those who were late to sell? Happy.

[Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming

By Travis Lundy

  • There has been a recent non-life insurer price-fixing scandal. The JFTC and FSA investigated. Last December, the FSA issued Business Improvement Orders to the four majors. 
  • There was a Bigmotor scandal last summer and Sompo Japan got a Business Improvement Order last month. All four insurers have 
  • 9 Feb post-close, Jiji/Nikkei had articles saying the FSA had urged four major non-lifes subject to the first BIO to accelerate sales of ¥6.5trln+ of 5,900 Cross-Holdings. That’s big.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Altium, Ansarada, Roland DG, Welbe, Orecorp, Vinda

By David Blennerhassett

HSCEI Index Rebalance: Third Time Unlucky for Zhongsheng (881 HK) As China Unicom (762 HK) In

By Brian Freitas

Index Rebalance & ETF Flow Recap: HSI, Screen Holdings, GMRI, SEA EM, MVIS, SET50, JP Positioning

By Brian Freitas

Last Week in Event SPACE: Outsourcing Ltd, MGM China, JSR Corp, Dissentient Blues

By David Blennerhassett

  • Nobody “named” having >5.0% in Outsourcing (2427 JP); no public noise, the stock down; people won’t be fighting for a bump unless the delay and impairment are truly meaningless.
  • Stay long MGM China Holdings (2282 HK) as its FY23 top line surpasses pre-Covid levels.
  • Investors and risk arbitrageurs who are worried about the potential loss of the case to RF SUNY should simply avoid, or sell then avoid JSR Corp (4185 JP) shares.

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Feb 17
0

Daily Brief Event-Driven: Emerging Korean Investment Theme: Potential Corporate Defense Mechanisms for Share Cancellations and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Emerging Korean Investment Theme: Potential Corporate Defense Mechanisms for Share Cancellations
  • StubWorld: Union Stikes Impact MGM; MGM China Tops Pre-Covid Numbers
  • EQD | HSI Rally: Possible Brief Stop This Week

Emerging Korean Investment Theme: Potential Corporate Defense Mechanisms for Share Cancellations

By Sanghyun Park

  • Local sources confirm government’s focus on strengthening stock market for April election. Market expects aggressive policies for share cancellations, including corporate defense mechanisms.
  • Chosun Ilbo, a government-friendly and influential media outlet,  advocates for corporate defense mechanisms to boost share cancellations, shaping a political atmosphere.
  • This theme is likely to emerge in Korea’s market. We must consider political dynamics and screen companies with high treasury shares for potential stock boosts.

StubWorld: Union Stikes Impact MGM; MGM China Tops Pre-Covid Numbers

By David Blennerhassett

  • MGM China Holdings (2282 HK)‘s FY23 top line surpasses pre-Covid levels. MGM Resorts International (MGM US) figures hit by union strike at MGM Grand Detroit.
  • Preceding my comments on MGM 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%.

EQD | HSI Rally: Possible Brief Stop This Week

By Nico Rosti

  • The Hang Seng Index is rallying as anticipated in a previous insight, but it could stop this week and pullback a bit. 
  • 3 possible trades available: go SHORT and hold to profit from a re-start of the downtrend, go SHORT and close after 1 week, wait the pullback and go LONG.
  • It’s unclear at the moment if the index will go lower or rebound after the upcoming pullback.

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Feb 16
0

Daily Brief Event-Driven: Renesas’ Transformative Offer For Altium and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Renesas’ Transformative Offer For Altium
  • Outsourcing (2427) MBO Situation – Checking, and Thinking, and Noodling, and Speculating
  • Sector ETF Rebalancing with Remarkable Price Impact History: ISC In, Wonik IPS Out
  • Japan – Shorts & Positioning on Passive Sells
  • Altium (ALU AU): Renesas (6723 JP) Binding A$68.50 Offer
  • Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: US$313mn One-Way, Four Names with Double-Impacts
  • Quiddity Leaderboard SSE50/180 Jun 24: US$1.5bn Index Flows One-Way
  • Ansarada (AND AU): Datasite’s Binding A$2.50 Offer
  • Vitol/Saras: Time to Bid Farewell

Renesas’ Transformative Offer For Altium

By David Blennerhassett

Outsourcing (2427) MBO Situation – Checking, and Thinking, and Noodling, and Speculating

By Travis Lundy

  • I got a bunch of questions about my Outsourcing comments yesterday in Outsourcing (2427) – Earnings Delay Causes Consternation. 
  • This piece is intended to clarify what I know (still limited), put parameters around what it might be, and draw lines in the sand which I might later erase.
  • This may be nothing. But it may not be. I will try to answer the questions I received in a kind of Q&A format, and I hope that helps.

Sector ETF Rebalancing with Remarkable Price Impact History: ISC In, Wonik IPS Out

By Sanghyun Park

  • Will there be changes in April’s rebalancing? With two weeks left, two names are likely. Wonik IPS may be replaced by ISC Co Ltd, given a ₩150B market cap difference.
  • In the previous rebalancing, constituent changes had a notable price impact. Despite a passive flow impact of +1.0x ADTV, HPSP and EO Technics saw about a 15% 3-day return.
  • Wonik IPS is estimated to receive -4.0x ADTV, while ISC is expected to receive +1.0x ADTV. This is also quite similar to the previous rebalancing.

Japan – Shorts & Positioning on Passive Sells

By Brian Freitas

Altium (ALU AU): Renesas (6723 JP) Binding A$68.50 Offer

By Arun George

  • Altium Ltd (ALU AU) has entered a scheme implementation deed with Renesas Electronics (6723 JP) at A$68.50 per share, a 33.6% premium to the undisturbed price (14 February).
  • The offer will close in 2H, requiring several approvals – FIRB, CFIUS, HSR Act clearance, German Ministry FDI, German Federal Cartel Office clearance, and Turkish Competition Authority.
  • The offer price is attractive and 31% above the all-time high, lowering the chance of a competing proposal. At the last close, the gross spread is 3.8%.

Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: US$313mn One-Way, Four Names with Double-Impacts

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.

Quiddity Leaderboard SSE50/180 Jun 24: US$1.5bn Index Flows One-Way

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.
  • Since my last insight, there have been a couple of changes to our expected ADDs basket and a couple of changes to our expected DELs basket for the SSE180 index.

Ansarada (AND AU): Datasite’s Binding A$2.50 Offer

By Arun George

  • On 13 February, Ansarada Group Ltd (AND AU) entered a scheme implementation deed with Datasite. The offer price is A$2.50 per share, a 19.0% premium to the undisturbed price (12 February).
  • The offer requires FIRB approval along with shareholder approval of the inter-conditional scheme and carve-out transaction. 
  • The offer price is reasonable and marginally short of the all-time high. At the last close and for an early June close, the gross/annualised spread is 2.5%/8.3%.

Vitol/Saras: Time to Bid Farewell

By Jesus Rodriguez Aguilar

  • The Morattis have agreed to sell their 40% stake in Saras SpA (SRS IM) to Vitol at €1.75/share (implied equity value €1,664 million), which will trigger a mandatory takeover offer.
  • Saras has only an asset, the largest refinery in Italy, based in Sardinia, which should add scale to Vitol. At 12.5x Fwd P/E, the offer represents a premium to peers.
  • Considering the unimpressive stock market performance of Saras since listing, and potential Trafigura overhang, it’s a good time to cash in. Spread is 1.54%/8.58% (gross/annualised, assuming settlement by 23 April). Long.

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Feb 15
0

Daily Brief Event-Driven: Outsourcing (2427) – Earnings Delay Causes Consternation and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Outsourcing (2427) – Earnings Delay Causes Consternation
  • JSR (4185) – Updated Information in SUNY Lawsuit, and Other Developments
  • Outsourcing (2427 JP): Keep Calm or Worry About the Earnings Delay?
  • Carlyle Group Selling More than 320 Billion Won Worth of KB Financial in a Block Deal Sale
  • Renesas (6723 JP) To Acquire Altium (ALU AU) In a A$9.1bn Deal
  • S&P/​​​​​​​​​ASX Index Rebalance Preview: Newmont Still Has Nearly A$1bn to Sell
  • Quiddity Leaderboard CSI 300/​​500 Jun 24: SHORT CSI 300 Direct DELs Vs the Index

Outsourcing (2427) – Earnings Delay Causes Consternation

By Travis Lundy

  • Originally, the MBO for Outsourcing Inc (2427 JP) was expected to get launched end-January 2024. A late-ish filing with regard to the EU’s Foreign Subsidies Regulation regime prompted a delay.
  • Yesterday Outsourcing announced a delay its earnings release by 3 business days, the delay “procedures related to impairment losses are continuing.”
  • Outsourcing shares are down hard on this. -1.5% as I write. I examine.

JSR (4185) – Updated Information in SUNY Lawsuit, and Other Developments

By Travis Lundy

  • 12 days ago, JSR Corp (4185 JP) announced that former research collaboration partner Research Foundation of the State University of New York had sued in an intellectual property ownership dispute.
  • I wrote about it here to the extent I could. Since then, more information has become available, or available to me.  Some details on the case. Some on lawyers. 
  • Since then JSR has reported earnings with unchanged forecast, and major pure play comp Tokyo Ohka Kogyo (4186 JP) today reported earnings; the stock popped 10+% to an all-time high.

Outsourcing (2427 JP): Keep Calm or Worry About the Earnings Delay?

By Arun George

  • Outsourcing Inc (2427 JP) has delayed the announcement of its 4QFY2023 results from 14 to 19 February as the impairment loss accounting is yet to be completed. 
  • Outsourcing has a history of impairments, resulting in missed forecasts, which suggests a weak 4Q. The concern is that a weak 4Q could force Bain to trim its JPY1,755 offer. 
  • Persol Holdings (2181 JP) guidance cut today suggests a weak 4Q reflects near-term industry weakness rather than company-specific issues. The weak 4Q is a valuable cover to justify the less-than-stellar offer.

Carlyle Group Selling More than 320 Billion Won Worth of KB Financial in a Block Deal Sale

By Douglas Kim

  • After the market close on 14 February, KB Financial announced that The Carlyle Group is trying to sell a 1.2% stake in the company through a block deal sale. 
  • The expected block deal price range is 64,608 won to 65,954 won per share, representing a 2 to 4% discount to the closing price of 67,300 won on 14 February. 
  • We would pass on this block deal sale. Despite excellent gains so far YTD, there is looming risk of many investors that may bail out of KB Financial post ex-dividend.

Renesas (6723 JP) To Acquire Altium (ALU AU) In a A$9.1bn Deal

By Brian Freitas

  • Renesas Electronics (6723 JP) has entered a Scheme Implementation Agreement to acquire Altium Ltd (ALU AU) at A$68.5/share implying an equity value of A$9.1bn and an Enterprise Value of A$8.8bn.
  • The offer price is a 33.6% premium to the last close and a larger premium to VWAPs ranging from 30 days to 180 days.
  • There will be ad hoc inclusions to the S&P/ASX 100 Index and the S&P/ASX 200 (AS51 INDEX) on Altium Ltd (ALU AU)‘s last trading day (expected second half of 2024).

S&P/​​​​​​​​​ASX Index Rebalance Preview: Newmont Still Has Nearly A$1bn to Sell

By Brian Freitas

  • With two days left in the review period, there could be 28 adds/deletes across the S&P/ASX family of indices in March.
  • There is nearly A$1bn to sell in Newmont (NEM AU) due to the potential S&P/ASX 20 Index deletion and a large decrease in the number of shares held in Australia.
  • There could be 2-41 days of ADV to buy in the index inclusions while the impact on the deletions will range between 0.7-24 days of ADV.

Quiddity Leaderboard CSI 300/​​500 Jun 24: SHORT CSI 300 Direct DELs Vs the Index

By Janaghan Jeyakumar, CFA

  • CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
  • In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in June 2024.
  • I currently see 11 changes for the CSI 300 index and 50 changes for the CSI 500 index.

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