Event-Driven

Today, part-way through the day, the Nikkei ran an article saying that Alimentation Couche-Tard (ATD CN) had made a confidential non-binding proposal to buy Seven & I Holdings (3382 JP).
7&i shares obviously went up (limit up in a hurry, staying there, large size traded limit up at close).
Now things get complicated. 7&i has said they received a non-binding proposal for all the shares. There will be a Special Committee of all Independent Directors. All stakeholders will matter.

Seven & I Holdings (3382 JP): Couche-Tard “friendly” Proposal Likely to Go Nowhere

Seven & I Holdings (3382 JP) shares rose 22.7% as it confirmed media reports that it had received a confidential, non-binding preliminary proposal from Alimentation Couche-Tard (ATD CN).
The interest is unsurprising due to the weak share price performance. Since ValueAct’s open letter on 25 January 2022, the shares are up 5.2% vs. the Nikkei 225 up 38.0%.
Couche-Tard aims for a friendly offer, which is challenging as it requires support from the founder’s family and the Japanese government. Therefore, the probability of a binding proposal is low.

FXI Rebalance Preview: China Tower (788 HK) Could Replace CICC (3908 HK)

With the review cutoff done, we expect just one change for the iShares China Large-Cap (FXI) (FXI US) ETF in September.
China Tower (788 HK) is a high probability inclusion while China International Capital Corporation (3908 HK) is a high probability deletion.
There has been an increase in cumulative excess volume for both stocks in the last few months, but the pace has slowed noticeably in the recent past.

HK CEO & Director Dealings (19th Aug 2024): Merlin Selling Swire Pac/Props; Chans Buying Hang Lung

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
The key stocks mentioned in this regular insight include: Swire Pacific (19/87 HK)/Swire Properties (1972 HK) and Hang Lung (10 HK)/Hang Lung Properties (101 HK).

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

By Jesus Rodriguez Aguilar

Since mid-July, share-price spreads have generally widened across our European liquid universe of ordinary and preferred shares (9 have tightened, 8 widened, 2 remained at same level).
Recommended trades long preferred / short ordinary shares: Atlas Copco, Grifols SA (GRF SM) (see section on the company), Media-for-Europe, Sixt.
Recommended trades long ordinary / short preferred shares: Henkel, SSAB Svenska Stal.

China A50 ETFs Rebalance Preview: Two High Probability Changes in Sep

With the review cutoff done, there should be two changes for the CSOP FTSE China A50 (HKD) (2822 HK) / iShares FTSE/Xinhua A50 China (2823 HK) ETFs in September.
Huaneng Lancang River Hydropow (600025 CH) and China National Nuclear Power (601985 CH) should replace China Tourism Group Duty Free Corp (601888 CH) and Yihai Kerry Arawana (300999 CH).
China Tourism Group Duty Free (1880 HK) will be deleted from a global index later this month and there could be some opportunities to trade the A/H arb.

Archimed Group Seeks Delisting of Jeisys Medical Through Stock Exchange

Jeisys Medical announced that it has decided to exchange shares with Syracus Subco, its largest shareholder. The stock exchange ratio between Syracus Subco and Jeisys Medical is 1 to 1.3575606.
The exchange date is 23 October. Through this stock exchange, Archimed Group (owner of Syracus Subco) seeks to delist Jeisys Medical (287410 KS).
Jeisys Medical also announced that it plans to cancel 1,075,838 common shares, representing 1.4% of its outstanding shares.

KOSDAQ150 Index Adhoc Rebalance Preview: Replacements for Jeisys Medical

Archimed, via its Korean entity Syracuse Subco, now holds 91.35% of Jeisys Medical (287410 KS) following the second tender offer. Jeisys shares will be delisted in the next couple months.
Jeisys Medical (287410 KS) is a KOSDAQ 150 Index (KOSDQ150 INDEX) constituent and there will be a replacement for the stock in the index.
Recent ad hoc replacements to the KOSDAQ 150 Index (KOSDQ150 INDEX) have traded well and that warrants positioning for this event.

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Aug 19

Daily Brief Event-Driven: Hang Seng Internet & IT Index Rebalance: Three Changes & A Few Surprises and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hang Seng Internet & IT Index Rebalance: Three Changes & A Few Surprises
HSTECH Index Rebalance: ASMPT (522 HK) Replaces Ping An Healthcare (1833 HK)
HSCEI Sep24 Rebal – Two ADDs, Two DELETEs, Two Surprises, Middling Flows
Hang Seng Index Sep24 Rebal – No Name Changes, Some Capping, 1% One-Way Flow – Total 0️⃣🍔
Hang Seng Index (HSI) Rebalance: Meh (Or Will We Ever Get to 100 Stocks?)
Apple Inc (AAPL US): $43bn Passive Buying Driven by Berkshire Selling & Market Consultation
Sep24 HSTECH Index Rebal – ASMPT (522 HK) ADDed as Expected, After Post-Earnings Fall
Merger Arb Mondays (19 Aug) – China TCM, Henlius, Canvest, CPMC, JTower, Fuji Soft PropertyGuru
Apple (AAPL): Berkshire’s Sell-Off Triggers $37bn Demand from S&P 500
Quiddity Leaderboard ChiNext & ChiNext 50 Dec 24: US$417mn One-Way; Some Changes to Expectations

Hang Seng Internet & IT Index Rebalance: Three Changes & A Few Surprises

There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the September rebalance. There are some surprises.
Estimated one-way turnover at the rebalance is 3.4% resulting in a round-trip trade of HK$2.04bn (US$262m). 7 stocks will have over 1x ADV to trade.
Weimob Inc. (2013 HK) is a surprise add. There is 6x ADV to buy from passive trackers and shorts are 12% of shares out and 24x ADV to cover.

HSTECH Index Rebalance: ASMPT (522 HK) Replaces Ping An Healthcare (1833 HK)

As expected, ASM Pacific Technology (522 HK) will replace Ping An Healthcare and Technol (1833 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 6 September.
Estimated one-way turnover at the rebalance is 3.2% resulting in a round-trip trade of HK$6.5bn. Passives need to buy over 7x ADV in ASM Pacific Technology (522 HK).
Positioning appears light in both stocks. Expect ASM Pacific Technology (522 HK) to move up and Ping An Healthcare and Technol (1833 HK) to move lower near-term.

HSCEI Sep24 Rebal – Two ADDs, Two DELETEs, Two Surprises, Middling Flows

The HSCEI is famous but has less AUM tracking it passively than you’d think. Nevertheless it is well-known and well-watched.
J&T Global Express (1519 HK) and New Oriental Education & Techn (9901 HK) were ADDs. JD Logistics (2618 HK) and SenseTime Group (20 HK) are DELETEs.
PICC Property & Casualty H (2328 HK) was NOT included. This was a surprise. We may see some disappointment this week from pre-positioning getting sold.

Hang Seng Index Sep24 Rebal – No Name Changes, Some Capping, 1% One-Way Flow – Total 0️⃣🍔

The Hang Seng Index Committee its slow move (lack of movement) towards 100 names and sector rebalancing to tech and healthcare. This is really disappointing.
This time? We get nothing. No name changes. Some capping flows. 6 FAF changes.
Minimal flows on the HSI rebalance to be effective on 9 September.

Hang Seng Index (HSI) Rebalance: Meh (Or Will We Ever Get to 100 Stocks?)

In a surprise (maybe should not have been!), there are no constituent changes for the Hang Seng Index (HSI INDEX) in September. However, there are float and capping changes.
Estimated one-way turnover is 1% and estimated round-trip trade is HK$3.73bn (US$478m). There are no stocks with over +/-0.5x ADV to trade but flows could add to/offset other index flows.
We remain at 82 index constituents and the road to 100 constituents appears to be a long drawn out torturous one. At this glacial pace, could be an eternity away.

Apple Inc (AAPL US): $43bn Passive Buying Driven by Berkshire Selling & Market Consultation

Berkshire Hathaway Inc Cl B (BRK/B US) held over 5% of Apple (AAPL US). Nearly half of that was sold in the June quarter to take the holding to 2.63%.
Berkshire’s selling should result in an increase in Apple (AAPL US)‘s free float in the S&P 500 INDEX (SPX INDEX) and other related indices.
There will also be large buying in Apple (AAPL US) from the Technology Select Sector SPDR (XLK US) ETF if the proposals in the market consultation are implemented.

Sep24 HSTECH Index Rebal – ASMPT (522 HK) ADDed as Expected, After Post-Earnings Fall

HSTECH sees one ADD, one DELETE and several capping and re-capping actions. One of the re-caps is already an un-recap (i.e. a new capping), to be updated.
The ADD is ASM Pacific Technology (522 HK), as expected, with significant ADV impact to buy. The DELETE is Ping An Healthcare and Technol (1833 HK), also a big sell.
Across the three major indices, Alibaba Group Holding (9988 HK) is the big dollar sell and HSTECH changes are the biggies in terms of ADV impact.

Merger Arb Mondays (19 Aug) – China TCM, Henlius, Canvest, CPMC, JTower, Fuji Soft PropertyGuru

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: Yichang HEC Changjiang Pharma (1558 HK), JTower (4485 JP), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Capitol Health (CAJ AU).
Lowest spreads: Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), C.I. TAKIRON Corporation (4215 JP), Fancl Corp (4921 JP), Alps Logistics (9055 JP).

Apple (AAPL): Berkshire’s Sell-Off Triggers $37bn Demand from S&P 500

By Dimitris Ioannidis

Free float is forecasted to increase from ~94% to 100% in S&P 500 and other US and Global indices after Berkshire halved its stake in Apple (AAPL US) .
Forecasted demand from S&P 500 and S&P TMI is 164.2m shares, $37.1bn and 3.0 ADV at the close of 20 September 2024.
Materialization of the free float increase is uncertain due to debatable strategic shareholder classification. ETF ratios and current free float improve the confidence of the forecast.

Quiddity Leaderboard ChiNext & ChiNext 50 Dec 24: US$417mn One-Way; Some 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.

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Aug 18

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

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia-Pac M&A: TCM, BusinessOn Comm, Orora, Ramsay Health Care, Namoi Cotton, APM, CPMC
HK Connect SOUTHBOUND Flows (To 16 Aug 2024); Big Net Buying On “Tiny” Overall Volume, ETFs Big
PropertyGuru (PGRU US): EQT’s US$6.70 Offer Is A Done Deal
HSCEI Index Rebalance: Three In-Line Changes, Two Big Surprises
Mainland Connect NORTHBOUND Flows (To 16 Aug 2024): Banks Bought, Industry & Materials Sold
Thoughts on Capturing the 7% Doosan Swap Spread
Weekly Deals Digest (18 Aug) – JTower, Piolax, Fancl, China TCM, CPMC, PropertyGuru, Orora, WeRide
Quiddity Leaderboard SSE50/180 Dec 24: SSE 50 Expected ADDs Vs DELs Trade Looks Interesting
Last Week in Event SPACE: Aussie Tax Loss Basket, CK Infra, JTower, Porsche
Peptron: Rights Offering of 120 Billion Won

(Mostly) Asia-Pac M&A: TCM, BusinessOn Comm, Orora, Ramsay Health Care, Namoi Cotton, APM, CPMC

I tally 46 – 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 were discussed this week: JTower (4485 JP) and BusinessOn Communication (138580 KS)‘s Tender Offers. Orora (ORA AU) approached by Lone Star. Ramsay Health Care (RHC AU) Offer also rumoured.
Key updates took place on China Traditional Chinese Medicine (570 HK), Namoi Cotton Co Operative (NAM AU), APM Human Services (APM AU), and CPMC Holdings (906 HK).

HK Connect SOUTHBOUND Flows (To 16 Aug 2024); Big Net Buying On “Tiny” Overall Volume, ETFs Big

SOUTHBOUND was again a net buyer, for HK$16.6bn this week (now 28wks in a row of net buying), on VERY LOW two-way volumes.
Gross volumes were very low. Net volumes were decent. There were three ETFs in the top 5 SOUTHBOUND net buys this past week suggesting position unwinding.
Top net buys other than the ETFs were China Mobile and Tencent (now 14 out of 15 days seeing net SOUTHBOUND buying)

PropertyGuru (PGRU US): EQT’s US$6.70 Offer Is A Done Deal

PropertyGuru (PGRU US) entered into a definitive merger agreement with EQT (EQT SS) at US$6.70 per share, a 51.9% premium to the undisturbed price of US$4.41 (21 May).
The shareholder vote is done (two-thirds voting threshold) due to TPG Inc (TPG US)/KKR & Co (KKR US)’s support and drag-along rights relating to REA Group Ltd (REA AU)’s shares.
This is a clean deal as there is no dissenting condition or requirement for country antitrust approvals. At the last close and for end-of-year payment, the gross/annualised spread is 2.3%/6.4%.

HSCEI Index Rebalance: Three In-Line Changes, Two Big Surprises

J&T Global Express (1519 HK) and New Oriental Education (9901 HK) will replace JD Logistics (2618 HK) and SenseTime (20 HK) in the HSCEI at the close on 6 September.
The inclusion of J&T Global Express (1519 HK) is a big surprise and the stock could move higher over the next couple of weeks.
The non-inclusion of PICC Property & Casualty H (2328 HK) is another surprise since we had the stock highly ranked in the universe.

Mainland Connect NORTHBOUND Flows (To 16 Aug 2024): Banks Bought, Industry & Materials Sold

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 5.0bn of A-shares. NORTHBOUND volumes were very, very low overall.
HK large caps again outperformed Mainland large caps generally. Tech (HSTECH vs Star50 and ChiNext) saw even better HK outperformance.

Thoughts on Capturing the 7% Doosan Swap Spread

Consider a two-phase strategy: go long on Bobcat spot and short futures until November 1. If Robotics’ price drops significantly, close the setup.
If things go well, close the Bobcat futures short before November 1 and hold an unhedged Bobcat long until the listing date on November 25.
Hold an unhedged long position during this trading suspension period because cancellation risk will be gone and Robotics may get stable inflows from MSCI inclusion.

Weekly Deals Digest (18 Aug) – JTower, Piolax, Fancl, China TCM, CPMC, PropertyGuru, Orora, WeRide

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: WeRide (WRD US) aims to raise up to US$119 million through a Nasdaq IPO and US$321 million through a concurrent private placement.
Event-Driven developments:China Traditional Chinese Medicine (570 HK), CPMC Holdings (906 HK), JTower (4485 JP), Piolax Inc (5988 JP), Fancl Corp (4921 JP), PropertyGuru (PGRU US).

Quiddity Leaderboard SSE50/180 Dec 24: SSE 50 Expected ADDs Vs DELs Trade Looks Interesting

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 the names leading the race to become ADDs and DELs during the December 2024 index rebal event.
Some of our index change expectations have changed since our last insight.

Last Week in Event SPACE: Aussie Tax Loss Basket, CK Infra, JTower, Porsche

The Aussie Tax-Loss Selling Baskets worked very well on the sell side from 30 April through end-June 2024. What now? Unwind.
CK Infrastructure Holdings (1038 HK) has now submitted an application for a secondary listing, not a dual-primary listing, on the London stock exchange. Admission expected on the 19th August.
The right trade is to buy JTower (4485 JP) below terms. The really right trade is to already be an owner. IF you’re an arbitrageur, you know what to do.

Peptron: Rights Offering of 120 Billion Won

On 16 August, Peptron (087010 KS) announced that it decided to increase capital through a rights offering worth about 120 billion won, involving 2.64 million shares (12.8% of outstanding shares).
The expected rights offering price is 45,450 won, which is 22% lower than current price.
We are negative on Peptron’s rights offering mainly due to much lower expected rights offering price, concerns about additional rights offering next 2-3 years, and continued lack of profitability.

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Aug 17

Daily Brief Event-Driven: Sun Corp (6736) – The Future Is Bright and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Sun Corp (6736) – The Future Is Bright
Value-Up Flow Trading Opportunities Arising from NPS’s 10% Ownership Ceiling on Banks
Merger Between Celltrion Inc and Celltrion Pharm Is Cancelled
EQD | The ASX200 Can Rally Higher (If This Is A Rally…)
Ola Electric (OLAELEC): EV Maker Receives Turbo Boost from Lock-Up Expiries for Index Inclusion

Sun Corp (6736) – The Future Is Bright

The reason why Sun Corp (6736 JP) has traditionally traded at a large discount to its potential outcome is the possibility of inefficient or delayed value realisation.
Materially ALL of the value of the company is in its holding in Cellebrite DI (CLBT US). True Wind Capital, the SPAC sponsor of CLBT, just bought 19% of SunCorp.
They bought that for the CLBT, or the value realisation thereof. And now with the slightly surprising Tender Offer result, the chances of a better outcome are now higher.

Value-Up Flow Trading Opportunities Arising from NPS’s 10% Ownership Ceiling on Banks

NPS is concerned that aggressive value-up measures by bank holding companies and ongoing cancellations might quickly use up their room up to the 10% ownership limit.
With their stake already at mid-8%, they may not buy as much as the index suggests, creating new trading opportunities in the four major bank holding companies.
Woori Financial has more room for buying, so as the year ends, NPS’s skewed-buying could give it a better price impact than other bank holding companies.

Merger Between Celltrion Inc and Celltrion Pharm Is Cancelled

Celltrion Inc announced that its proposed merger with Celltrion Pharm has been cancelled due to disapproval of this deal among an overwhelming percentage of Celltrion Inc shareholders.
This cancellation of a merger between Celltrion Inc and Celltrion Pharm is likely to continue to have a positive impact on Celltrion Inc and negative impact on Celltrion Pharm.
The major reason is because Celltrion Pharm trades at high valuation multiples while Celltrion Inc trades at lower valuation multiples. Celltrion Pharm’s P/B valuation is more than 3x Celltrion Inc’s.

EQD | The ASX200 Can Rally Higher (If This Is A Rally…)

By Nico Rosti

The S&P/ASX 200 has been quietly rallying since its (modest) -11% correction in 2023, mostly unaffected by global turmoils, even the latest sell-off in US, Asia and Europe was “non-damaging”.
The index has already recovered a large part of the losses suffered for only 1 week, very brief if we consider that the SPX INDEX had corrected for 4 weeks.
Now that the S&P/ASX 200 has rallied strongly we want to analyze its pattern model, to identify the area where it could pull back again (or slow down).

Ola Electric (OLAELEC): EV Maker Receives Turbo Boost from Lock-Up Expiries for Index Inclusion

By Dimitris Ioannidis

Ola Electric (OLAELEC IN) is likely to get added at the March 2025 review following the lock-up expiry in November 2024 which increases the fcap way above the fcap threshold.
Current fcap for February 2025 review is ~$1.2bn following the lock-up expiry in November 2024. Inclusion is based on whether fcap passes the prevailing fcap threshold.
The lock-up expiry in February 2025, increases the probability of addition in May 2025 review if it fails inclusion in February.

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Aug 16

Daily Brief Event-Driven: China Traditional Chinese Medicine (570 HK): Relief as Update Favours the Bulls and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

China Traditional Chinese Medicine (570 HK): Relief as Update Favours the Bulls
Examining the September Reshuffle of the KOSPI Size Index Series
TCM (570 HK): A Spoonful Of Sugar …
Midea Group (000333 CH): Index Implications at US$3bn Issue Size
Namoi Cotton (NAM AU): Louis Dreyfus Has This Stitched Up
Hankook Tire & Technology: M&A of Hanon System Falling Apart?
Porsche Automobile Holding: H1, Model Update, Discount to NAV

China Traditional Chinese Medicine (570 HK): Relief as Update Favours the Bulls

China Traditional Chinese Medicine (570 HK)’s monthly update reinforces the bull case. The gross spread has remained uncomfortably high since falling on no news on 26 June.
The monthly update will relieve the bulls, as the consortium has finally made the regulatory submissions. The update stresses that the filing delay is due to an unwieldy consortium.
Potential stumbling blocks remain, which should not be an issue. Nevertheless, the risk (17.7% downside to the undisturbed price)/reward (21.4% gross spread) remains attractive.

Examining the September Reshuffle of the KOSPI Size Index Series

The September KOSPI Size Index rebalancing could bring back the typical price impacts seen over the past decade, unlike the March rebalancing.
The previous rebalancing had anomalies due to newly listed stocks in LARGE and a stronger downward trend in LARGE-to-MID transitions, disrupting the expected price impact.
For September’s rebalancing, fewer distortions are expected compared to March. The NPS Mid to Small Cap fund, a key influence, shows no significant changes in benchmark or AUM.

TCM (570 HK): A Spoonful Of Sugar …

A 14.8% gain month-to-date, including this past Monday’s 6.5% pop – you just knew something positive was taking place behind closed doors. And leaking its way into the public.
So it was no real surprise to read in the latest monthly update announcement on the HKEx that various regulatory approvals are almost, but not quite, satisfied.
The wording in the announcement strikes a positive tone. Even remaining conservative on the timeline, this could be wrapped up before year-end.

Midea Group (000333 CH): Index Implications at US$3bn Issue Size

Midea Group Co Ltd A (000333 CH) has got approval to list on the HKEX (388 HK) and reports are that the listing could be up to US$3bn.
That issue size is around half of the maximum that the company can issue. But it would still need cornerstone investors and a nice discount on the H-shares.
The stock will still get included in some indices even with the scaled down size, and inclusion in Southbound Stock Connect is a given.

Namoi Cotton (NAM AU): Louis Dreyfus Has This Stitched Up

Since Louis Dreyfus Company (LDC) first announced a A$0.51/share Offer, by way of a Scheme, on the 28 November 2023, and Olam Agri countered, there have been significant developments.
Both suitors have now tabled off-market Offers (A$0.67/share from LDC, and A$0.70/share from Olam Agri). Both Offers are open for tendering. Both have extended their closing dates numerous times.
And both suitors have also faced ACCC scrutiny. As of today, only LDC, currently holding a 20.2% stake in Namoi, is in the clear.

Hankook Tire & Technology: M&A of Hanon System Falling Apart?

There are increasing signs that Hankook Tire & Technology’s M&A of Hanon Systems could be falling apart.
The deadline for signing the main M&A contract to purchase a 25% stake in Hanon Systems has been postponed indefinitely.
New contingent liabilities at Hanon Systems have been uncovered during the 10 week due diligence process of Hanon Systems by Hankook T&T.

Porsche Automobile Holding: H1, Model Update, Discount to NAV

By Jesus Rodriguez Aguilar

Porsche SE is trading at a 35.3% discount to NAV, vs. 32.4% long-term average, implying a 68% probability that Porsche SE will be liable for c. €6.5 billion legal claims.
I think this is too harsh. Shares are trading at a Fwd P/E of 2.5x and a dividend yield of 7.8%, which I consider very attractive.
Porsche SE presents an attractive opportunity to gain exposure to Volkswagen and Porsche AG. Porsche SE is focusing on deleveraging which should drive a reduction in the discount.

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Aug 15

Daily Brief Event-Driven: Tax-Loss Selling In Australia 2024: Trade Reversed Is Tale of Two Hedges and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Tax-Loss Selling In Australia 2024: Trade Reversed Is Tale of Two Hedges, Time To Unwind
J Tower (4485) – Once Ambitious, Still High Growth, Sells Itself Low/Cheapish.
JTOWER (4485 JP): DigitalBridge’s 162% Takeover Premium Offer Is Opportunistic
Quiddity Leaderboard MV Jr Gold Miners Sep 24: Mergers Mean Possible Up-And-Out DELETEs
SET50 Index Rebalance Preview: Four Changes & A Few Close Names
Piolax (5988 JP): Murakami Becomes a Substantial Shareholder
BusinessOn Communication (138580 KS): SkyLake’s Delisting Offer
Midea A/H Listing – Getting Closer to the US$3bn+ Raising, Has a Narrow Window

Tax-Loss Selling In Australia 2024: Trade Reversed Is Tale of Two Hedges, Time To Unwind

The theory is that stocks which are down hard FY-to-date by end-April end up being good sells because Australians will harvest their losses into end-June.
The idea is then to buy those oversold names and hold them for 30-40 trading days. That has worked 10 out of the last 12 years hedged vs ASX200.
This year, the “sold-down” list is very heavily weighted to miners. They have continued to fall since end-June so it’s down. But hedged vs a basket of miners? It’s up.

J Tower (4485) – Once Ambitious, Still High Growth, Sells Itself Low/Cheapish.

JTower (4485 JP) IPOed itself Dec-2019 at ¥1,600/share. An 8-bagger in a year, fell by half, doubled, fell 70%, then doubled, fell 35%, up 50%. That’s the first 3yrs.
Since then, the trend has been lower. The stock is down 80+% in 2 years, especially painful after an equity raise at just under ¥5,000 6 months ago.
But the stock today closed at ¥1,430, and the Tender Offer is at ¥3,600. A 150% premium. That’s big, but it may be “too low.” An interesting case.

JTOWER (4485 JP): DigitalBridge’s 162% Takeover Premium Offer Is Opportunistic

JTower (4485 JP) has recommended a tender offer from DigitalBridge Group (DBRG US) at JPY3,600, a 161.8% premium to the undisturbed price of JPY1,375 (13 August).
Despite the hefty takeover premium, the offer is light (compared to historical trading ranges and the recent placement) and opportunistically timed (the share price has fallen 61% since 9 May).
Nevertheless, barring a spurt of activism, the offer should succeed as the required 40.7% minority acceptance rate is not onerous and should be comfortably met by Japanese cross-holders.

Quiddity Leaderboard MV Jr Gold Miners Sep 24: Mergers Mean Possible Up-And-Out DELETEs

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 latest lists of potential ADDs and DELs for the index rebal event in September 2024.

SET50 Index Rebalance Preview: Four Changes & A Few Close Names

Couple of weeks from the start of the review period for the December rebalance of SET 50 Index, we see four potential index changes.
There are a few stocks that are close to the inclusion zone and there could be a reordering among the non-constituents as stock prices move around.
The potential adds have outperformed the potential deletes since the start of the year with most of the outperformance coming over the last 6 weeks.

Piolax (5988 JP): Murakami Becomes a Substantial Shareholder

Murakami’s entities, City Index Eleventh and City Index Third, reported a 5.05% position in Piolax Inc (5988 JP). The purchases were from 11 June to 6 August over 60 days.
Murakami’s average buy-in price over the last 60 days was JPY2,286.61 per share, a 0.7% discount to the last close price.
Murakami’s disclosure suggests two possibilities: the start of an activist campaign or a short-term pump-and-dump play. The former is likely as Piolax is cash-rich with a P/B less than 1x.

BusinessOn Communication (138580 KS): SkyLake’s Delisting Offer

On the 25th July, SkyLake Equity Partners acquired a 46.9% stake from Praxis Capital Partners in BusinessOn Communication (138580 KS), Korea’s leading B2B SaaS company; plus 24.3% from BusinessOn’s management.
SkyLake has now launched a Tender Offer for 28.94% of BusinessOn. The Tender offer price is ₩15,849/share.
Super clean deal. SkyLake will acquire all shares tendered. There is no minimum tendering % condition.

Midea A/H Listing – Getting Closer to the US$3bn+ Raising, Has a Narrow Window

By Sumeet Singh

Midea Group Co Ltd A (000333 CH) one of the world’s largest home appliance producers, aims to raise up to US$3bn in its H-share listing.
Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
We have covered the company and deal background in our previous notes. In this note, we talk about the updates since then.

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Aug 14

Daily Brief Event-Driven: To Tender Or Not – Gauging The Future of Sun Corp (6736) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

To Tender Or Not – Gauging The Future of Sun Corp (6736)
HSCEI/HSTECH/HSIII Index Rebalance Preview: Potential Changes, Flow & Positioning
CPMC Holdings (906 HK): A Carefully Caveated Board Recommendation of Changping Industrial’s Offer
Greatview Aseptic Packaging (468.HK) – The Story Behind The “Hostile Offer”
Orora Ltd (ORA AU) Rejects A$2.55/Share Offer From Lone Star
Quiddity Leaderboard HSTECH Sep 24: Expected ADD and DEL Have 10+ Days to Trade
Tencent to Report 2Q FY24 Results (What Is Priced?), MSC Index Changes for Aug Rebalance Published
Quiddity Leaderboard HSCEI Sep 24: Announcement Soon; Updated Flow Expectations and Trade Idea
Orora (ORA AU): Lone Star’s Opportunistic A$2.55 Offer
DB Hitek: Buying a Golf Course Overshadows Corporate Value Up Efforts

To Tender Or Not – Gauging The Future of Sun Corp (6736)

The revised/final True Wind Tender Offer for up to 19% of Sun Corp (6736 JP) ends this week. With the “excitement” the last two weeks, the SunCorp/CLBT ratio is higher.
The minimum threshold is relatively low. The Tender will most likely succeed with very high pro-ration.
For those on the edge, I discuss possibilities on the back end. It will be less liquid, but that may not be bad.

HSCEI/HSTECH/HSIII Index Rebalance Preview: Potential Changes, Flow & Positioning

The constituent changes for the Hang Seng China Enterprises Index (HSCEI INDEX), Hang Seng TECH Index (HSTECH INDEX) and HSIII Index will be announced after market close on Friday.
We forecast 2 changes for the Hang Seng China Enterprises Index (HSCEI INDEX), 1 change for the Hang Seng TECH Index (HSTECH INDEX) and 3 changes for the HSIII Index.
With same-way and opposing flow on stocks from different passive trackers, the one-way trade is currently estimated at HK$5.2bn (US$672m). That will change with final capping done on 3 September.

CPMC Holdings (906 HK): A Carefully Caveated Board Recommendation of Changping Industrial’s Offer

The CPMC Holdings (906 HK) Board recommends that shareholders accept Changping Industrial’s HK$6.87 offer, which the IFA opines is fair and reasonable.
The Board’s carefully crafted and suitably caveated recommendation acknowledges that shares continue to trade through terms and ORG Technology Co., Ltd. A (002701 CH)’s HK$7.21 offer is higher but preconditional.
Based on ORG’s shareholding/irrevocable and volume traded above terms, Changping Industrial’s offer has little chance of success. It remains a question of when, not if, Changping Industrial will bump.

Greatview Aseptic Packaging (468.HK) – The Story Behind The “Hostile Offer”

By Xinyao (Criss) Wang

The connection between Newjf and Greatview is deep. Newjf expressed an interest in acquiring Greatview early on, but the two parties didn’t reach an agreement. Greatview is not entirely “innocent”.
Newjf’s decision to forcibly acquire Greatview at this moment should be made after careful consideration. Mengniu may not necessarily oppose this merger. Mengniu is likely to take a neutral stance.
Newjf’s Offer is attractive. In the absence of a more realistic action by Greatview to make a higher Offer, we advise investors not to walk away from Newjf’s Offer easily.

Orora Ltd (ORA AU) Rejects A$2.55/Share Offer From Lone Star

Sustainable packaging play Orora Ltd (ORA AU) has “received and has rejected an opportunistic, conditional and non-binding indicative proposal from Lone Star Fund“.
The A$2.55/share Offer (less any dividends declared or payable), by way of a Scheme, was a 33.9% premium to last close. Orora was down 25% YTD, prior to the proposal.
Orora’s FY24 results will be released tomorrow. Expect more commentary on the rejection of Lone Star’s approach in the Q&A.

Quiddity Leaderboard HSTECH Sep 24: Expected ADD and DEL Have 10+ Days to Trade

The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
There could be one index change during the September 2024 index rebal event. The official results will be announced after market close on 16th August 2024.
In this insight, we take a look at our latest flow expectations based on closing prices on Monday 12th August 2024.

Tencent to Report 2Q FY24 Results (What Is Priced?), MSC Index Changes for Aug Rebalance Published

By Charlotte van Tiddens, CFA

Last night, MSC published index changes due at the August rebalance. There will be no changes to SA constituents.
The rebalance is set to take place at the end of the month on Friday the 30th.
Tomorrow after the HK close, Tencent is expected to report results for 2Q FY24.

Quiddity Leaderboard HSCEI Sep 24: Announcement Soon; Updated Flow Expectations and Trade Idea

The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
The index changes and indicative weights for the September 2024 index rebal event is expected to be announced after market close on Friday 16th August 2024.
In this insight, we take a look at our latest expectations for capping flows based on current prices.

Orora (ORA AU): Lone Star’s Opportunistic A$2.55 Offer

In response to media speculation, Orora Ltd (ORA AU) disclosed that it had rejected Lone Star’s indicative non-binding proposal at A$2.55 per share, a 33.5% premium to the undisturbed price.
The offer is opportunistically timed to take advantage of the share price collapse precipitating from the profit warning on 2 April.
The Lone Star offer is unattractive and could also draw other suitors. If Lone Star walks, the downside is low, as Orora’s valuation is undemanding compared to peer multiples.

DB Hitek: Buying a Golf Course Overshadows Corporate Value Up Efforts

DB Hitek’s investment in a golf course operating company is a poor investment, one that destroys shareholder value.
Most investors would rather have DB Hitek increase shareholder returns through share buybacks/cancellations and dividends as well as invest in its core semiconductor business rather then buy a golf course.
Given DB Inc’s lack of cash, there is a growing possibility that it will use the proceeds from selling its DB World shares to increase its stake in DB Hitek.

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Aug 13

Daily Brief Event-Driven: Select Sector Indices – HUGE Impact of Proposed Constituent Weighting Changes and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Select Sector Indices – HUGE Impact of Proposed Constituent Weighting Changes
Macquarie Korea Infrastructure Fund: Rights Offering of About 500 Billion Won
Private Equity Examining Ramsay Health (RMC AU). Again.
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for September
HK Connect SOUTHBOUND Flows (To 9 Aug 2024); Tencent the Big Buy Again
KOSDAQ150 Adhoc Index Rebalance: Webzen to Replace Connectwave
CPMC (906 HK) Responds To Champion’s Offer
A/H Premium Tracker (To 9 Aug 2024): Global Market Vol. SB Bought. NB Sold. Premia Down.
Tender Offer of BusinessOn Communications by Skylake Equity Partners
Selected European HoldCos and DLC: July-Aug. 9 ’24 Report

Select Sector Indices – HUGE Impact of Proposed Constituent Weighting Changes

S&P DJI have started a market consultation to change the index weighting methodology for the Select Sector Indices to reduce concentration and avoid reverse turnover.
There is US$281bn tracking the Select Sector Indices from the SPDR ETFs. The market consultation will have a larger impact on indices where there is a high degree of concentration.
The largest inflows are expected in Apple, Conocophillips, Amazon.com and Netflix while the largest outflows will be from Microsoft, NVIDIA, Chevron, Procter & Gamble, Exxon Mobil, Costco Wholesale and Meta Platforms.

Macquarie Korea Infrastructure Fund: Rights Offering of About 500 Billion Won

Macquarie Korea Infra Fund (088980 KS) announced that it is proceeding with a rights offering capital increase of 500 billion won, which represents about 9.4% of its current market cap.
MKIF plans to use higher liquidity increase in the following main areas: Seoul East Underground Expressway – 215 billion won Acquisition of Hanam Data Center – 423 billion won
In the next 6-12 months, we believe MKIF has a solid chance of outperforming KOSPI (on combined capital gains/dividends basis).

Private Equity Examining Ramsay Health (RMC AU). Again.

Back in April 2022, Australia’s largest private hospital operator Ramsay Health Care (RHC AU) announced an unsolicited, non-binding Offer from KKR at A$88.00/share. Arguably, KKR dodged a bullet.
RHC’s share price took another leg down last week after RHC announced weaker-than-expected FY24 earnings; plus a write-down of its European/UK ops. RHC is now ~50% adrift of KKR’s NBIO.
Not altogether surprisingly, various media sources are reporting private equity outfits are (again) running a diagnostic check on RHC.

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for September

Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 6 September.
With no constituent changes in March and 1 add/1 delete in June, there could be more changes in September with Health Care stocks among the potential inclusions.
Changes to the Hang Seng Industry Classification System (HSICS) will be implemented from the September rebalance and that will alter industry coverage.

HK Connect SOUTHBOUND Flows (To 9 Aug 2024); Tencent the Big Buy Again

SOUTHBOUND was again a net buyer, for HK$15.2bn this week (now 27wks in a row of net buying), on smallish two-way volumes. Better than the previous month but still low.
Bank net buying, which had spiked the previous week, didn’t follow through.
There were three ETFs in the top 15 SOUTHBOUND net buys this past week, reversing last week, which reversed the week before’s flows.

KOSDAQ150 Adhoc Index Rebalance: Webzen to Replace Connectwave

Webzen Inc (069080 KS) will replace Connectwave (119860 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) effective 16 August.
There is over 2 days of ADV to trade on both stocks though the flows are not very large.
The Connectwave (119860 KS) delisting will also have an impact on the changes to the KRX New Deal Internet Index in September.

CPMC (906 HK) Responds To Champion’s Offer

On the 30th July 2024, packaging play CPMC Holdings (906 HK) dispatched the Composite Document for the HK$6.87/share, in cash, Offer from SASAC/NCSSF-backed Champion.
The Response Document, including the IFA opinion (with a fair & reasonable conclusion) has now been dispatched.
However, the focus remains on ORG Technology Co., Ltd. A (002701 CH)‘s superior HK$7.21/share Offer, which is currently negotiating the necessary regulatory approvals.

A/H Premium Tracker (To 9 Aug 2024): Global Market Vol. SB Bought. NB Sold. Premia Down.

Delayed this week because of the long (Japanese holiday, which I took for myself) weekend, as were the SOUTHBOUND and NORTHBOUND monitors.
SOUTHBOUND inflow strong. Tencent strong inflows. Net buying every day for two weeks. NORTHBOUND outflows large. Record foreign investor outflows from China’s capital markets this year.
As expected (with AH 20d Premia returns at multi-year highs last week), AH Premia fell slightly, with narrow premia falling more than wide premia. I’d expect more H-vs-A gains.

Tender Offer of BusinessOn Communications by Skylake Equity Partners

On 12 August, Skylake Equity Partners announced a tender offer of 6.58 million shares (28.9% stake) of BusinessOn Communication. The tender offer price is 15,849 won.
BusinessOn is one of the leading digital tax invoice software providers in Korea. It also provides digital contracts, market intelligence, banner advertising, and supply chain management services.
Skylake plans to purchase all of the shares subscribed in this deal, regardless of the subscription rate. If the public offering target quantity is successful, Skylake plans to delist BusinessOn.

Selected European HoldCos and DLC: July-Aug. 9 ’24 Report

By Jesus Rodriguez Aguilar

Discounts to NAV of covered holdcos generally tightened during July and first week of August. Discounts to NAV: C.F.Alba, 45.3% (vs. 44.5% as of end of June);
GBL, 42.2% (vs. 43.6%); Heineken Holding, 16% (vs. 18.4%); Industrivärden C, 2.2% (vs. 2.4%); Investor B, 7.5% (vs. 9.9%); Porsche Automobile Holding, 34.6% (vs. 35.8%), Porsche SE reports 13 August.
Rio DLC spread tightened to 22.1% (vs. 20.7%). What seems interesting: Porsche SE vs. listed assets and the Rio DLC (long RIO LN/short RIO AU).

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Aug 12

Daily Brief Event-Driven: Merger Arb Mondays (12 Aug) – China TCM and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Merger Arb Mondays (12 Aug) – China TCM, Canvest, GA Pack, Fuji Soft, Fancl, Descente, Takiron
Flow Developments to Watch as the Release of the Value-Up Index Approaches
Swire Properties (1972 HK): Buyback to Offset Passive Selling
Lineage (LINE): Year’s Biggest IPO Failed Fast-Entry. Addition Coming Soon.
Taiwan Top 50 ETF Rebalance Preview: One Change Right at the Cusp

Merger Arb Mondays (12 Aug) – China TCM, Canvest, GA Pack, Fuji Soft, Fancl, Descente, Takiron

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: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Malaysia Airports Holdings (MAHB MK), Asia Cement China (743 HK).
Lowest spreads: Fuji Soft Inc (9749 JP), Second Chance Properties (SCE SP), Descente Ltd (8114 JP), C.I. TAKIRON Corporation (4215 JP), Fancl Corp (4921 JP).

Flow Developments to Watch as the Release of the Value-Up Index Approaches

The plan is to select 20 large-cap companies from around 30 with value-up disclosures by late August, then gradually expand the index’s constituents.
Investors seeking both dividends and value-up benefits must buy stocks individually, as ETFs lack tax advantages, potentially triggering fund shifts from dividend ETFs to value-up stocks.
We can target stocks in dividend ETFs not making value-up disclosures, as they may face overhang risk during fund migration to the value-up index.

Swire Properties (1972 HK): Buyback to Offset Passive Selling

Swire Properties (1972 HK) was trending lower on expectations of deletion from a global index in August. Short interest has jumped a lot over the last few months.
The announcement of the buyback last week took the stock higher. The increased real float from the index deletion will be offset by the buyback.
Swire Pacific (A) (19 HK)‘s ownership of Swire Properties (1972 HK) will increase from 82% to 83.5% following the buyback and cancellation of the shares. Privatisation at some point?

Lineage (LINE): Year’s Biggest IPO Failed Fast-Entry. Addition Coming Soon.

By Dimitris Ioannidis

Lineage (LINE US) , with an IPO market cap of ~$18bn failed the fast-entry threshold of both main global indices with the threshold being more than ~$28bn.
Based on the listing date of 25 July 2024, its addition is forecasted for September 2024, December 2024 and February 2025 in US and Global indices.
Lineage (LINE US) is expected to get added to the Top 1000 US companies index with forecasted demand of ~$340m and ~1.3 ADV at close of 20 September 2024.

Taiwan Top 50 ETF Rebalance Preview: One Change Right at the Cusp

Using the last close, there could be one change for the Taiwan Top 50 ETF in September with Pharmaessentia Corp (6446 TT) replacing Nanya Technology (2408 TT).
There is one other constituent that is close to deletion zone while there are a couple of non-constituents that could move into inclusion zone over the next couple of weeks.
Short interest has been dropping in Pharmaessentia Corp (6446 TT) and increasing in Nanya Technology (2408 TT) over the last few weeks.

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Aug 11

Daily Brief Event-Driven: Trend Micro (4704 JP): Evaluating the Privatisation Rumours and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Trend Micro (4704 JP): Evaluating the Privatisation Rumours
Last Week in Event SPACE: Toyota, Swire, Fancl, Barito Complex, Descente
(Mostly) Asia-Pac M&A: Fuji Soft, C.I. TAKIRON, Pacific Smiles, GaPack, Asia Cement, Shinko Electric
Weekly Deals Digest (11 Aug) – GA Pack, Trend Micro, Descente, Fancl, Fuji Soft, C.I. TAKIRON

Trend Micro (4704 JP): Evaluating the Privatisation Rumours

Trend Micro Inc (4704 JP) shares rose 14.8% on Friday after Reuters reported that it is exploring a sale after attracting buyout interest.
The interest is unsurprising due to the weak share price. Since ValueAct disclosed a stake on 8 August 2022, the shares are down 0.7% vs the Nikkei 225’s 23.6% increase.
The lack of a controlling shareholder and increased cybersecurity M&A activity support the buyout interest. A privatisation price is likely to be around JPY9,000. Valuation is undemanding at last close.

Last Week in Event SPACE: Toyota, Swire, Fancl, Barito Complex, Descente