Category

Event-Driven

May 06
0

Daily Brief Event-Driven: Penguin International (PBS SP): Chairman & Dymon Return To the Well and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Penguin International (PBS SP): Chairman & Dymon Return To the Well
  • Insiders Sell at Ecopro BM

Penguin International (PBS SP): Chairman & Dymon Return To the Well

By David Blennerhassett

Insiders Sell at Ecopro BM

By Douglas Kim

  • It was recently reported that Choi Mun-Ho (CEO of Ecopro BM) sold 2,000 shares of Ecopro BM Co Ltd (247540 KS) at 254,000 won per share.
  • It was also recently announced that Eroom T&C, the family company of Lee Dong-Chae, the chairman of Ecopro Group, also sold shares of Ecopro BM.
  • Recent selling of Ecopro BM shares by CEO Choi Mun-Ho and Ecopro affiliate Eroom T&C are negative signs on the Ecopro BM. Lofty valuations are also negative on Ecopro BM. 

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May 05
0

Daily Brief Event-Driven: Toshiba (6502) – Thinking About the Arb and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Toshiba (6502) – Thinking About the Arb
  • Penguin International (PBS SP): Dymon Asia & Co Return with an S$0.82 Unconditional Offer
  • Ventia (VNT AU) – Placement Could Lead to ASX200 Inclusion in June
  • Oishi Group: Shareholders Back ThaiBev’s Offer
  • Chairman Kim Ik-Rae of Daou Kiwoom Group Resigns & Says Sorry – But Is This Enough?
  • Providence/Hyve: Scheme Approval

Toshiba (6502) – Thinking About the Arb

By Travis Lundy

  • Toshiba is trading at a 12-13% annualised return on the arb when using the expected Tender Offer Start Date proposed in the Takeover Announcement on 23 March 2023.
  • On Day 1-2 post-announcement, Toshiba traded at an 11-13% annualised spread. Since the announcement, a 12-name Peer Basket is up 11+% meaning Toshiba back end risk has shrunk.
  • Forward consensus EPS ratios have fallen, in part due to the shift forward one fiscal year by comps. We’ll see where those lie in a week when earnings come.

Penguin International (PBS SP): Dymon Asia & Co Return with an S$0.82 Unconditional Offer

By Arun George

  • Penguin International (PBS SP) has disclosed a voluntary unconditional offer from Dymon Asia, Executive Chairman and Managing Director at S$0.82 per share, a 15.5% premium to the undisturbed price. 
  • The offer price is attractive, represents an 8-year share price high, and is shy of the 10-year high of S$0.825. It is also 26.2% higher than the 2021 offer.
  • The offeror aims to privatise Penguin. Hitting the 90% compulsory acquisition threshold implies a minority acceptance rate of around 44%, which is eminently achievable due to an attractive offer.

Ventia (VNT AU) – Placement Could Lead to ASX200 Inclusion in June

By Brian Freitas

Oishi Group: Shareholders Back ThaiBev’s Offer

By David Blennerhassett

  • Back on the 10th March, Thai Beverage (THBEV SP) launched a Delisting Offer for 79.66%-held Oishi Group (OISHI TB), at THB 59/share, a 26.9% premium to last close. 
  • This two-step Offer required a shareholder vote followed by a tendering process. Yesterday (the 3rd May), Oishi shareholders approved the Delisting Offer. 
  • The tendering period may kick off around this time next month, with an expected payment late August. 

Chairman Kim Ik-Rae of Daou Kiwoom Group Resigns & Says Sorry – But Is This Enough?

By Douglas Kim

  • After the market close today, Kim Ik-Rae (Chairman of the Daou Kiwoom Group) announced his resignation of the Chairman position.
  • Chairman Kim mentioned he has not done anything legally wrong. He will donate the entire amount (60.5 billion won) which was gained from selling 1.4 million shares of Daou Data. 
  • We believe that Kiwoom Securities’ share price could fall additional 10-30% in the next several weeks/months. This could be offset by a large share buyback & cancellation by the company. 

Providence/Hyve: Scheme Approval

By Jesus Rodriguez Aguilar

  • Another British company taken over by private equity. On 25 April, Providence sweetened its offer to 121p/share, a 12% increase (22.1x trailing EBITDA; 13.1 EV/Fwd NTM EBITDA).
  • On 3 May, all of the resolutions were passed at both Court Meeting and General Meeting. The Scheme Court Hearing is scheduled for 18 May. Settlement should happen on/before 2 June.
  • Although there isn’t enough liquidity for large tickets, at 120.4p the spread is 0.5%/6.6% (gross/annualised).

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May 04
0

Daily Brief Event-Driven: KRX Plans to List Single-Stock Futures of All KS200 & KQ150 Constituents and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • KRX Plans to List Single-Stock Futures of All KS200 & KQ150 Constituents
  • Asian Defence Contractors: Up In Arms
  • KRX New Deal Index Rebalance Preview: Potential & Close Changes in September
  • Lian Beng (LBG SP): Ong Family’s Final, Unconditional and Derisory S$0.68 Offer
  • Oishi Group (OISHI TB): Shareholders Approve the THB59.00 Delisting Offer
  • Lian Beng: The Family Bumps. Still <50% of NAV

KRX Plans to List Single-Stock Futures of All KS200 & KQ150 Constituents

By Sanghyun Park

  • According to Chosun, KRX plans to list the single-stock futures of all constituents of KOSPI 200 and KOSDAQ 150 within 2-3 years.
  • This information comes from a KRX official, who directly confirmed it. As Chosun is the most well-established news outlet in Korea, the credibility of this article is quite high.
  • We should consider screening those with a high proportion of short-selling positions and devising a positioning strategy in conjunction with the new listing event of single stock futures in July.

Asian Defence Contractors: Up In Arms

By David Blennerhassett

  • According to the Stockholm International Peace Research Institute (SIPRI), total global military expenditure increased by 3.7% in real terms in 2022, to reach a new high of $2,240bn.
  • A number of European states significantly increased their military spending following Russia’s invasion of Ukraine. Elsewhere, Japan’s 2022 military spending accounts for 1.1% of GDP, the highest level since 1960.
  • South Korea had four companies inside the world’s top 100 arms manufacturers in 2021. These conglomerates are expected to move up the ranking in 2022. 

KRX New Deal Index Rebalance Preview: Potential & Close Changes in September

By Brian Freitas

  • The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
  • There are potential changes to some of the indices and then there are close changes that will result in big flows if they eventuate.
  • The March rebalance saw some funky moves on the stocks that had big flows and we could see more of that at the September rebalance.

Lian Beng (LBG SP): Ong Family’s Final, Unconditional and Derisory S$0.68 Offer

By Arun George

  • Lian Beng (LBG SP)/LBG disclosed a revised final voluntary unconditional offer from the Ong family at S$0.68 per share, a 9.7% premium to the previous offer of S$0.62 per share. 
  • The final offer price remains unattractive in comparison to peer multiples and precedent transactions. The offer is open and closes on 26 May.
  • The Ong Family aims to privatise LBG. Hitting the 90% compulsory acquisition threshold implies a minority acceptance rate of around 64%, which could prove to be a challenge.

Oishi Group (OISHI TB): Shareholders Approve the THB59.00 Delisting Offer

By Arun George

  • Oishi Group PCL (OISHI TB)’s shareholders overwhelmingly approved Thai Beverage (THBEV SP)’s delisting tender offer of THB59.00 per share. The approval was expected as ThaiBev was allowed to vote.
  • The offer is attractive compared to historical share prices, multiples and the IFA’s fair value of THB53.48-56.42 per share. 
  • The delisting now requires SET approval. At the last close and for an end of July completion, the gross and annualised spread is 2.2% and 9.4%, respectively.

Lian Beng: The Family Bumps. Still <50% of NAV

By David Blennerhassett

  • On the 11th April, construction firm Lian Beng (LBG SP) announced an Offer from the controlling Ong family of S$0.62/share, a 59.7% discount to the November 2022 NAV of S$1.538/share.
  • After media articles judged the Offer price as being too low – it is – the Ongs have now bumped the Offer Price 9.7% to S$0.68/share and declared terms final.
  • It’s still the wrong price. Yet Lian Beng is illiquid, And the revised price is a lifetime high.

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May 03
0

Daily Brief Event-Driven: Quiddity Jun23 HSTECH Flow Expectations Update: SHORT AAC Vs LONG Lenovo Might Be Interesting and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Quiddity Jun23 HSTECH Flow Expectations Update: SHORT AAC Vs LONG Lenovo Might Be Interesting
  • Quiddity HSCEI Jun 23 Flow Expectations Update: Two Expected Changes, US$608mn One-Way Flow
  • AAG Energy (2686 HK): AGM Results Suggest a Scheme Fail Was Inevitable
  • JAPAN ACTIVISM: Murakami-San Goes Substantial on Arcland SHD (3085) Ahead of Merger Vote Record Date
  • Liontown: Counter-Bid All But Baked In
  • Golden Energy (GER SP): Two Conditions Satisfied, Now for the Hard Part
  • NIFTY100 Index Rebalance Preview: Double/Triple Whammy for Some Stocks
  • SET50 Index Rebalance Preview: Two Changes – One High Probability; One Has Possibilities
  • Sell AAG (2686 HK). A Revised Scheme Will Fail
  • Selected European HoldCos and DLC: April’23 Report

Quiddity Jun23 HSTECH Flow Expectations Update: SHORT AAC Vs LONG Lenovo Might Be Interesting

By Janaghan Jeyakumar, CFA

  • In my previous insight in Mid-March 2023, we had a look at the potential index changes and the resultant capping flows for the HSTECH Index in June 2023.
  • Since then, our flow expectations have changed with changes in prices and/or float and total share counts.
  • Here are our latest flow expectations based on the current prices.

Quiddity HSCEI Jun 23 Flow Expectations Update: Two Expected Changes, US$608mn One-Way Flow

By Janaghan Jeyakumar, CFA

  • In my previous insight in Mid-March 2023, we had a look at the potential index changes and the resultant capping flows for the HSCEI Index in June 2023.
  • Since then, our flow expectations have changed with changes in prices and/or float and total share counts.
  • Here are our latest flow expectations based on the current prices.

AAG Energy (2686 HK): AGM Results Suggest a Scheme Fail Was Inevitable

By Arun George

  • Aag Energy Holdings (2686 HK)’s latest AGM results show a strong dissent from minorities. The number of NO votes per resolution varied from 590.9-652.5 million or 17.40%-19.22% of outstanding shares.
  • The AGM voting shows that Xinjiang Xintai Natural Gas (603393 CH) will struggle to pass the scheme even if the record date is changed and some NO votes are invalidated.
  • The risk-reward profile remains unfavourable as the downside to a scheme fail (12.1% to 17.0% downside) is greater than the upside to a scheme pass (+12.1% to HK$1.85 offer).

JAPAN ACTIVISM: Murakami-San Goes Substantial on Arcland SHD (3085) Ahead of Merger Vote Record Date

By Travis Lundy

  • Today, City index Eleventh, the corporate entity often used by noted activist Yoshiaki Murakami, announced (EDINET filing) they owned 1.756mm shares or 5.31% of Arcland Service (3085 JP) 
  • In mid-April, Arclands Corporation (9842 JP) announced it would merge with 55%-owned restaurant subsidiary Arclands SHD. Murakami-owned 5+% of Arclands at the time. Then it sold 9842 and bought 3085.
  • This looks like a confusing set of moves. It is not as confusing when you think about it. He is setting up something for later.

Liontown: Counter-Bid All But Baked In

By David Blennerhassett

  • On the 28 March, lithium play Liontown Resources (LTR AU) rejected Albemarle Corp (ALB US)‘s third proposal of $2.50/share, citing the revised terms as opportunistic.
  • Since, that date, it’s been “crickets.” Preliminary due diligence was not provided to Albemarle. Liontown responded to media speculation today saying it has received no new takeover proposals. 
  • Yet behind the scenes, an interested party has been building a stake, paying up to $2.75/share, 1.5% above the last close.

Golden Energy (GER SP): Two Conditions Satisfied, Now for the Hard Part

By Arun George

  • Dian Swastatika Sentosa (DSSA IJ)/DSS shareholders have approved the sale of DSS’ 77.49% stake in Golden Energy & Resources (GER SP) to the Widjaja family. 
  • No objection has also been received from the OJK and IDX. The make-for-break condition is the GEAR shareholder approval of the distribution resolution, which DSS will abstain from voting on. 
  • Minorities and SIAS rightly claim that the revised offer remains light. A bump to the offer, particularly to the delisting offer price is S$0.181, is required for a done deal. 

NIFTY100 Index Rebalance Preview: Double/Triple Whammy for Some Stocks

By Brian Freitas

  • Halfway through the review period, we see 5 potential changes for the Nifty Next 50 Index (NIFTYJR INDEX)/ Nifty 100 Index (NSE100 INDEX) at the September rebalance.
  • All the potential adds are expected to migrate from MidCap to LargeCap at the AMFI June reclassification, while we expect two of the potential deletes to move the other way.
  • Of the potential deletes, one is a high probability deletion from the MSCI India Index at the May QCIR while there is another that is a lower probability deletion.

SET50 Index Rebalance Preview: Two Changes – One High Probability; One Has Possibilities

By Brian Freitas

Sell AAG (2686 HK). A Revised Scheme Will Fail

By David Blennerhassett

  • In unprecedented fashion, AAG Energy Holdings (2686 HK)‘s board adjourned the Court Meeting on the 27 April due to some voting instructions not being duly processed.
  • That reasoning had a whiff of nonsense. And just under a week later, there has been no update. Perhaps this is moot though.
  • At yesterday’s AGM, disinterested shareholders turned up in record numbers to vote against stock-standard resolutions. If a similar turnout were present at the Court Meeting, the Scheme would have failed. 

Selected European HoldCos and DLC: April’23 Report

By Jesus Rodriguez Aguilar

  • Discounts to NAV of covered holdcos have generally tightened during April. Discounts to NAV: C.F.Alba, 51.3%; GBL, 32.3%; Heineken Holding, 16.4%; Industrivärden C, 7.7%; Investor B, 9.5%; Porsche Automobile Holding, 49.7%. 
  • The spread of Rio Tinto DLC tightened to 16.8%. Rio Tinto is a candidate for an Australian top hat structure.
  • Recommended trades: Heineken Holding, Investor AB (long Investor B/short main holdings) and Rio DLC.

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May 02
0

Daily Brief Event-Driven: MSCI May 2023 QCIR Preview: Potential Changes as Review Period Ends and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • MSCI May 2023 QCIR Preview: Potential Changes as Review Period Ends
  • Contenders for MSCI Korea Inclusion in 2H 2023
  • LQ45 Index Rebalance Preview (July): Identifying Potential Changes
  • Astellas Pharma (4503 JP): New Acquisition to Add Promising Drug Candidate in New Therapeutic Area
  • Giant Biogene IPO Lock-Up – US$1.7bn Lockup Release Will Increase Free Float by 14x
  • Astellas Pharma Buys Iveric Bio: Help Offset Upcoming Patent Expiry of XTANDI

MSCI May 2023 QCIR Preview: Potential Changes as Review Period Ends

By Brian Freitas

  • The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) ended 28 April. MSCI should select a day from week one.
  • The most changes are expected in China and there are a couple of stocks that could trigger the Extreme Price Increase thresholds.
  • Some stocks appear on the list of potential changes on certain days during the review period and their addition/deletion will depend on the day that MSCI chooses for computation.

Contenders for MSCI Korea Inclusion in 2H 2023

By Douglas Kim

  • We have provided a list of 10 stocks that could be included in the MSCI Korea index in 2H 2023.
  • Among these 10 companies, the top five companies with the highest free float based market cap have greater probabilities of becoming included in the index, in our view.
  • The five companies include Jyp Entertainment (035900 KS), Hyundai Rotem Company (064350 KS), DB Hitek Co., Ltd. (000990 KS), Cs Wind Corp (112610 KS), and LS Corp (006260 KS).

LQ45 Index Rebalance Preview (July): Identifying Potential Changes

By Brian Freitas

Astellas Pharma (4503 JP): New Acquisition to Add Promising Drug Candidate in New Therapeutic Area

By Tina Banerjee

  • Astellas Pharma (4503 JP) is acquiring the U.S.-based clinical stage biopharmaceutical company IVERIC bio (ISEE US) for ~$5.9B. Iveric Bio focuses on the discovery and development of novel ophthalmology treatments.
  • Iveric’s lead drug candidate Avacincaptad Pegol for the potential treatment of Geographic Atrophy is under FDA review with PDUFA action date of August 19, 2023.
  • The acquisition will be funded by a combination of bank loan, issuance of commercial paper totaling ~¥800B, and internal cash. The acquisition is expected to complete by 3Q23 (July–September).

Giant Biogene IPO Lock-Up – US$1.7bn Lockup Release Will Increase Free Float by 14x

By Sumeet Singh

  • Giant Biogene raised around US$70m in its Hong Kong IPO, after having downsized the deal and priced it at the low-end. Its six-month lockup will expire soon.
  • GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
  • In this note, we will talk about the lock-up dynamics and updates since our last note.

Astellas Pharma Buys Iveric Bio: Help Offset Upcoming Patent Expiry of XTANDI

By Shifara Samsudeen, ACMA, CGMA

  • Japanese drug maker Astellas Pharma announced on Monday that it has entered into a definitive agreement to acquire 100% of opthalmalogy player Iveric Bio for a total consideration of U$5.9bn.
  • Astellas Pharma (4503 JP) will pay US$40 per share of IVERIC bio (ISEE US) , 64% premium to the unaffected closing price of US$24.33 per share as of 31st March 2023.
  • As Astellas’ blockbuster drug XTANDI’s exclusivity is nearing expiry, we think Iveric’s key drug asset ACP should offer some protection over loss of XTANDI’s revenues in the future.

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May 01
0

Daily Brief Event-Driven: JAPAN ACTIVISM: Silchester and Bank of Kyoto (8369) Redux and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • JAPAN ACTIVISM: Silchester and Bank of Kyoto (8369) Redux
  • Weekly Deals Digest (30 Apr) – AAG, HKBN, Blackmores, Lian Beng, Horizon Construction, Mankind
  • Merger Arb Mondays (01 May) – HKBN, AAG Energy, United Malt, Blackmores, Origin, Metro Pacific
  • Deutsche Bank/Numis Corporation: Acquiring Deal Flow

JAPAN ACTIVISM: Silchester and Bank of Kyoto (8369) Redux

By Travis Lundy

  • Last year, Silchester International Investors wrote a series of letters to Bank of Kyoto management and then asked to put items on the AGM agenda. It lost. 
  • A Bloomberg article last week suggests Silchester will ask for a ¥62 special div and a ¥5bn buyback this year. The Silchester letter is “due” by 30 April. 
  • The Bank has already delivered most of the ask this year (¥3bn in upped div, and ¥5bn in buybacks). Silchester will lose. Expect no Conversion on the Road to Kasumigaseki.

Weekly Deals Digest (30 Apr) – AAG, HKBN, Blackmores, Lian Beng, Horizon Construction, Mankind

By Arun George

Merger Arb Mondays (01 May) – HKBN, AAG Energy, United Malt, Blackmores, Origin, Metro Pacific

By Arun George

Deutsche Bank/Numis Corporation: Acquiring Deal Flow

By Jesus Rodriguez Aguilar

  • In a back to the 90’s, Deustche seeks to acquire UK corporate stockbroker Numis for a  350p/share package (72% premium, 2.1x P/BVPS, 15.5x on a smoothed-out P/E) via scheme of arrangement.
  • The deal should bring deal flow to Deutsche Bank’s UK business. Mifid II may spark more consolidation across UK brokers. Readacross: Peel Hunt Ltd/Guernsey (PEEL LN) could become a target.
  • Irrevocables are 27.2%. There’s no arguing with the premium and the deal should close. Spread is 2.63%/c. 4.93% (gross/annualised, assuming for simplicity all payments at settlement, around 15 November). Long.

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Apr 30
0

Daily Brief Event-Driven: A Noteworthy Long Short Setup: Ecopro BM & Posco Future M and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • A Noteworthy Long Short Setup: Ecopro BM & Posco Future M
  • Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC
  • Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash
  • Last Week in Event SPACE: China Mobile, Fast Retailing, Yuexiu Property, Vinda, Tokyo Gas
  • EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Sell in May and Go Away?
  • (Mostly) Asia M&A, April 2023: Arcland Service, Lian Beng, Silk Laser, Breaker Resources, Blackmores
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Blackmores, Metro Pacific, Invocare, AAG Energy, Jiangnan

A Noteworthy Long Short Setup: Ecopro BM & Posco Future M

By Sanghyun Park

  • Currently, the market cap of Ecopro BM surpassed Posco Future M. As a result, Ecopro BM is in a position to replace Posco Future M in the K-New Deal rebalancing.
  • They are direct peers with a high price cointegration. We should consider using the rebalancing event of this index as an inflection point from a Long Short pair trading perspective.
  • The likelihood of Ecopro BM being included in the Solactive Lithium Index in October could potentially increase the expected return of taking this Long Short position more preemptively.

Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC

By Brian Freitas

  • Friday marked the end of the review cutoff for the MSCI, CSI300, CSI500, STAR50, SSE50, ChiNext and a bunch of other indices for the upcoming rebalances in May and June.
  • There are no major index events coming up this week as a lot of markets are shut on different days.
  • There were big inflows to mainland China ETFs during the week, while there was a big redemption from the iShares MSCI ACWI ETF (ACWI US). 

Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash

By Douglas Kim

  • Key insiders at Seoul City Gas (017390 KS) and Daou Data Corp (032190 KS) sold their shares before the recent crash.
  • On 28 April, it was reported that Kim Young-Min (Seoul City Gas Chairman) sold 2% of Seoul City Gas on 20 April, resulting in net sales of 45.7 billion won.
  • These Korean companies are two of the eight stocks related to the CFD derivatives sell-down that have been crashing in the past week. 

Last Week in Event SPACE: China Mobile, Fast Retailing, Yuexiu Property, Vinda, Tokyo Gas

By David Blennerhassett

  • It is relatively low-hanging fruit to “further propel the renmimbi’s internationalisation” and for HKEX, it will “cement HK’s position as the premier offshore renmimbi financing center.”
  • The Conundrum: the more active investors decide they like Fast Retailing (9983 JP), the more there is to sell. That creates interesting opportunities.
  • Short Yuexiu Property (123 HK) now, or soon. The dynamics of this is that there WILL be selling when the rights come out. 

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Sell in May and Go Away?

By Simon Harris

  • Weekly summary of vol changes and moves across Global Markets
  • Analysing ATM volatility and skew changes over the last 5 days
  • We suggest a few trades to take advantage of the implied vol surfaces

(Mostly) Asia M&A, April 2023: Arcland Service, Lian Beng, Silk Laser, Breaker Resources, Blackmores

By David Blennerhassett

  • For the month of April, 6 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$3bn.
  • The average premium for the new deals announced (or first discussed) in April was 23%.
  • This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Blackmores, Metro Pacific, Invocare, AAG Energy, Jiangnan

By David Blennerhassett

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Apr 29
0

Daily Brief Event-Driven: Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come
  • Essity Mulls Holding In Vinda (3331 HK)
  • Hokkoku Financial (7381) Earnings Report Delay But HUGE Buyback. Again.
  • End of Mandatory Lock-Up Periods for 46 Companies in Korea in May 2023
  • Deutsche Börse/Simcorp: Recommended Offer

Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come

By Travis Lundy

Essity Mulls Holding In Vinda (3331 HK)

By David Blennerhassett

  • Tissue-Maker Vinda International (3331 HK) closed down 6.4% yesterday, recovering from a 13.8% fall intra day.
  • Vinda said its 1Q23 operating profit declined 85.4% to HK$65mn. Vinda also announced its controlling shareholder Essity (ESSITYB SS) will commence a strategic review of its 51.59% ownership.
  • A long-term shareholder potentially seeking a possible divestment, shortly after a company announces poor results, is not a great look.

Hokkoku Financial (7381) Earnings Report Delay But HUGE Buyback. Again.

By Travis Lundy

  • Yesterday Hokkoku Financial Holdings (7381 JP) came out with an odd decision to delay earnings from 28 April to 8 May. Volume traded. 
  • Today, despite not reporting earnings, the Kanazawa-based regional bank announced a BIG buyback with subsequent share cancellation.  This was not unexpected. They have an aggressive policy which started last year.
  • Hokkoku Bank policy introduced last year is special. It has worked. They are pursuing it. Expect more policy action like this as banks report. 

End of Mandatory Lock-Up Periods for 46 Companies in Korea in May 2023

By Douglas Kim

  • We discuss the end of the mandatory lock-up periods for 46 stocks in Korea in May 2023, among which 4 are in KOSPI and 42 are in KOSDAQ.
  • These 46 stocks on average could be subject to further selling pressures in May and could underperform relative to the market. 
  • Among these 46 stocks, the top 6 market cap stocks include KG Mobility, Dongwon Industries, Hugel, Yunsung F&C, Enchem, and Jeio. 

Deutsche Börse/Simcorp: Recommended Offer

By Jesus Rodriguez Aguilar

  • Deutsche Börse will offer for DKK 735/share for financial software developer SimCorp, 38.9% premium, 6.5x EV/Fwd Sales (in line with other transactions), and 30.3x EV/Fwd EBIT. 
  • DB offers a full price to grow in data&analytics: my EV/EBIT-based standalone fair value is DKK 629/share, plus (all) synergies taxed and capitalised of DKK 87/share results in DKK 716/share.
  • That figure is still below the offer price, and although gross spread is 0.48%, I’d be long in case of a possible bid by private equity.

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Apr 28
0

Daily Brief Event-Driven: The Fast Retailing (9983) Selldown Conundrum – Not Now and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • The Fast Retailing (9983) Selldown Conundrum – Not Now, But Soon… Then For A Long Time
  • Kirin Looks To Take Blackmores Private
  • PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
  • Metro Pac (MPI PM): Delisting Offer from First Pac & Co
  • One Unnoticed Addition to KOSDAQ 150: Yunsung F&C Through Special Inclusion
  • AAG Energy (2686 HK): Adjourned Scheme Meeting Points to a Close Vote
  • ChiNext/​​ChiNext50 Index Rebalance Preview: Outperformance Maintained
  • BIG Fujitsu (6702 JP) Buyback – It’s a Lot, but Not, but Still Big
  • Kirin’s Bid for Blackmores: Leveraging Regulatory Expertise to Enter China’s Supplement Market
  • JVC Kenwood (6632) – After Two Banner Years, Earnings to Fall, but Large Buyback For 6mos

The Fast Retailing (9983) Selldown Conundrum – Not Now, But Soon… Then For A Long Time

By Travis Lundy

  • Fast Retailing (9983 JP) announced Q2 earnings two weeks ago. Revenues were good. OP was good. And the company raised full-year forecasts for Sales, OP, Pre-tax, and Net Profit.
  • The stock popped sharply. It isn’t “cheap” but it is under-owned, actively. And revenues up 20%yoy is a very good look.  
  • The Conundrum: the more active investors decide they like it, the more there is to sell. That creates interesting opportunities.

Kirin Looks To Take Blackmores Private

By David Blennerhassett

  • Japan’s Kirin Holdings (2503 JP) has proposed taking Aussie vitamin play Blackmores Ltd (BKL AU) private by way of a Scheme at A$95/share. 
  • That’s a 23.7% premium to last close, and represents 23.1x LTM December 2022 EBITDA. 
  • Irrevocables are 18% of shares out. This Scheme requires clearance from ACCC, FIRB – and China’s SAMR.

PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot

By Brian Freitas

Metro Pac (MPI PM): Delisting Offer from First Pac & Co

By David Blennerhassett

  • First Pacific Co (142 HK), together with three other entities, are proposing to delist Metro Pacific Investments Co (MPI PM) at PHP 4.63/share, a 22% premium to the 12-month VWAP.
  • The four bidders hold a combined stake in MPIC of 63.4%. The Offer is conditional on First Pac shareholder approval, a tendering threshold, and an MPIC shareholder vote.
  • Elsewhere, First Pac continues to trade cheap to its NAV. Nothing new there.

One Unnoticed Addition to KOSDAQ 150: Yunsung F&C Through Special Inclusion

By Sanghyun Park

  • Due to the matched order fraud incident in recent days, there has been a significant change in the KOSDAQ top 50 rankings, presenting a great opportunity for Yunsung F&C.
  • The estimated size of the passive inflow that it is likely to receive is approximately 0.5-0.8x ADTV for ETFs alone, and 1.2-1.5x when expanded to all passive funds.
  • We should note that the level of market exposure to inclusion possibility has been significantly low. Therefore, we can expect a significant price impact at the time of the announcement.

AAG Energy (2686 HK): Adjourned Scheme Meeting Points to a Close Vote

By Arun George

  • The 27 April vote was adjourned as Aag Energy Holdings (2686 HK) Board was notified by “certain beneficial owners indicating that their latest voting instructions were not duly processed.”
  • The meeting would not be adjourned if the YES vote was going to sail through. A delay helps the offeror as these owners will vote YES and deal fatigue sets in. 
  • Risk-Reward is still unfavourable at the last close. The deal break fair value range is HK$1.37-1.45 per share, with 16.0%-11.0% downside. This compares to the 13.5% upside from the offer. 

ChiNext/​​ChiNext50 Index Rebalance Preview: Outperformance Maintained

By Brian Freitas

  • With 1 trading day left in the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
  • Passive trackers are estimated to trade around +/-0.5 days ADV on most of the potential adds/deletes, though there are some deletes that will have over 1 day ADV to sell.
  • The potential inclusion to one or both indices have outperformed the potential deletes by a huge margin in the last month. We’d be inclined to trim positions.

BIG Fujitsu (6702 JP) Buyback – It’s a Lot, but Not, but Still Big

By Travis Lundy

  • Fujitsu earnings are out. Forecasts are in, lighter than consensus. 
  • But there is a buyback. Looking at the way last year’s was executed is not that informative but it may be useful. 
  • This one is big enough to matter but not big enough to get excited about until we get confirmation. 

Kirin’s Bid for Blackmores: Leveraging Regulatory Expertise to Enter China’s Supplement Market

By Oshadhi Kumarasiri

  • Kirin Holdings (2503 JP) is eyeing the vitamin game with a proposal to buy Blackmores at AU$95 per share, representing a 23.7% premium over the stock’s most recent closing price.
  • Blackmores Ltd (BKL AU)‘s expertise in navigating China’s stringent regulations could be the missing piece for Kirin to gain access to the lucrative supplement market in China.
  • Our main concern is Kirin’s history of unsuccessful overseas business acquisitions, particularly outside of its core beer business.

JVC Kenwood (6632) – After Two Banner Years, Earnings to Fall, but Large Buyback For 6mos

By Travis Lundy

  • Today, JVC KENWOOD (6632 JP) announced earnings, its forecast for this next year, and the outlines of its new Mid-Term Management Plan.
  • That plan has the run to 2025 seeing sales rise slightly, Operating margins rising slightly. EBITDA margins at last year’s level or better, and Operating CF like last year. 
  • They also announced a buyback which they hoped would help them boost ROE and PBR to 1.0x as quickly as possible. The TSE pressure is working. 

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Apr 27
0

Daily Brief Event-Driven: HDFC/​​​​HDFC Bank Mega Merger: Index Implications as We Near Completion and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • HDFC/​​​​HDFC Bank Mega Merger: Index Implications as We Near Completion
  • Tokyo Gas (9531 JP) Mega Buyback Announced
  • HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
  • STAR50 Index Rebalance Preview: Changes Depend on Minimum Listing History
  • Blackmores (BKL AU) Signs SID with Kirin Holdings (2503 JP)
  • Activision Blizzard – An Unsightly Mess
  • SSE50 Index Rebalance Preview: Five Changes Coming Up in June
  • Codan (CDA AU): Balancing Defence And Accelerated Preparedness
  • Quiddity Leaderboard ES50 Sep 23: Vonovia Deletion Seems Likely; US$1.2bn Flow for Wolters Kluwer
  • EQT/Dechra Pharmaceuticals: Generous Possible Offer

HDFC/​​​​HDFC Bank Mega Merger: Index Implications as We Near Completion

By Brian Freitas

  • Foreign shareholding has dropped in HDFC Limited and increased in HDFC Bank – the net effect is an increase in foreign room to just north of 18%.
  • The merger is expected to complete in Q2/Q3 when there will be buying from MSCI trackers. There will be adhoc inclusions to the NIFTY, Nifty Next 50 and SENSEX indices.
  • HDFC Limited (HDFC IN) trades 1.39% below the merger ratio with HDFC Bank (HDFCB IN) and also at a lower price to book.

Tokyo Gas (9531 JP) Mega Buyback Announced

By Travis Lundy

  • Five days ago, Tokyo Gas (9531 JP) announced a revision to earnings for the year to 31 March 2023. Today they reported results, and announced March 2024 guidance.
  • The company also announced a buyback programme to spend up to ¥113 billion to repurchase up to 53mm shares (12.2% of TSO). ¥113 billion is a very specific number. 
  • With the price where it is, ¥113bn is “only” 9.6% of shares out but this is very interesting indeed.

HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies

By Brian Freitas

  • Hang Seng Indexes has started a consultation on the eligibility of Foreign Companies in the Hang Seng Index, a review of the seven Industry Groups and number of HK constituents.
  • We agree that foreign companies should be added to the index, no change needed to the Industry Groups, and the cap on the number of HK constituents should be removed.
  • There are a few potential adds due to the removal of the cap on HK companies, while there are potential foreign company additions later this year or in 2024.

STAR50 Index Rebalance Preview: Changes Depend on Minimum Listing History

By Brian Freitas

  • The review period for the June rebalance ends 28 April. We expect the changes to be announced 26 May with the implementation taking place after the close on 9 June.
  • Using a 12-month minimum listing history results in no index changes. Using a 6-month minimum listing history results in two changes – we think this is what will be used.
  • The potential adds have outperformed the potential deletes but both sets of stocks have underperformed the SSE STAR50 (STAR50 INDEX) and the CSI Smallcap 500 Index – Shanghai (SH000905 INDEX). 

Blackmores (BKL AU) Signs SID with Kirin Holdings (2503 JP)

By Brian Freitas

  • Blackmores Ltd (BKL AU) has signed a Scheme Implementation Deed with Kirin Holdings (2503 JP) for the acquisition of 100% of Blackmores by way of a scheme of arrangement.
  • The A$95/share offer is a 23.7% premium to the last close and is at least a 20% premium to most other VWAPs.
  • Blackmores Ltd (BKL AU) intends to pay a fully-franked special dividend of A$3.34/share. This will enable eligible shareholders to benefit from franking credits of A$1.43/share.

Activision Blizzard – An Unsightly Mess

By Mio Kato

  • Last night the CMA chose to block the merger between Microsoft and Activision Blizzard in the UK on the grounds that it would harm competition in cloud gaming. 
  • The merits of that position are highly debatable in our view but that does not mean that the decision is bad for consumers. 
  • It also does not mean that the decision is bad for Microsoft in our view.

SSE50 Index Rebalance Preview: Five Changes Coming Up in June

By Brian Freitas

  • With 2 trading days left in the review period, we see 7 potential adds/5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
  • We estimate one-way turnover of 5.58% at the June rebalance leading to a one-way trade of CNY 4.22bn. Index arb balances could increase the impact on the stocks.
  • The potential adds have outperformed the potential deletes over the last couple of months and have underperformed over the last week.

Codan (CDA AU): Balancing Defence And Accelerated Preparedness

By David Blennerhassett

  • The highly-anticipated Defence Strategic Review, released on the 24 April, clarifies the five key missions for the Australian Defence Force: maritime, land, air, space, and cyber.
  • One takeaway recommended Defence balance the need for local content against its timely acquisition, suggesting increased off-the-shelf acquisitions. This may favour overseas contractors in place of the domestic industry.
  • Codan (CDA AU), whose metal detectors and communications technology are used by the military, is one SME whose procurement speed may be scrutinised. 

Quiddity Leaderboard ES50 Sep 23: Vonovia Deletion Seems Likely; US$1.2bn Flow for Wolters Kluwer

By Janaghan Jeyakumar, CFA

  • The EURO STX 50 Index is one of the most highly-tracked indices in mainland Europe and the annual index review takes place in September.
  • Historically, these Rebalance events have had significant volume and ADV impact and they generally involve large cap names. 
  • In this insight, we take a look the names leading the race to become ADDs/DELs for the upcoming index review in September 2023.

EQT/Dechra Pharmaceuticals: Generous Possible Offer

By Jesus Rodriguez Aguilar

  • Dechra is in discussions with EQT and ADIA about a 4,070 cash possible offer (46.6% premium, 22.6x EV/NTM Fwd EBITDA and 32x Fwd P/E). PUSU deadline is 11 May. 
  • With the deal multiple at a slight premium (on both EV/Fwd EBITDA and Fwd P/E) over Zoetis, the market leader in animal health, the offer appears to be reasonably priced.
  • My base case fair value estimate is 3,568p/share (DCF-based), 12.3% below the offer price. My TP is thus 4,070p. Gross spread is 9.1%, therefore I feel the risk/reward is balanced.

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