Category

Event-Driven

Apr 25
0

Daily Brief Event-Driven: AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote
  • KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks
  • CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete
  • Quiddity Leaderboard SE600 Jun 23: Three ADDs/DELs Likely
  • Silver Lake/Software AG: Agreed Offer
  • Shockwave Medical Inc (SWAV US): Initial Thought on Takeover Talk and Probable Pricing

AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote

By Arun George

  • Ahead of Aag Energy Holdings (2686 HK)’s vote on 27 April, the gross spread to Xinjiang Xintai Natural Gas (603393 CH)’s HK$1.85 offer sits uncomfortably high at 13.5%. 
  • The key risk remains that minorities vote down the scheme. Retail forums are active with mixed views on the offer. Peers have also modestly re-rated, which helps the NO camp. 
  • At the last close, the risk-reward profile is unfavourable as the downside to a scheme fail (-16.0%) is greater than the upside to a scheme pass (+13.5%).  

KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks

By Brian Freitas

CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete

By Brian Freitas

  • With 4 trading days to go the review period, we see 13 potential index changes at the June rebalance that will be implemented at the close on 9 June.
  • We estimate a one-way turnover of 1.94% at the June rebalance leading to a one-way trade of CNY 5.05bn.
  • With the review period nearly complete, the gap between the potential adds and deletes could narrow ahead of the announcement of the changes as pre-positions are built.

Quiddity Leaderboard SE600 Jun 23: Three ADDs/DELs Likely

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the names leading the race to become ADDs/DELs for the STX Europe 600 and EUROSTX Indices for the March 2023 Rebalance.
  • There is roughly one more month left to the base date. At present, I see around 3 ADDs/DELs in the June 2023 review.
  • Separately, STX Europe 600 members Credit Suisse (CSGN SW) and Vantage Towers (VTWR GR) could possibly get deleted in the next few months triggering intra-review index changes.

Silver Lake/Software AG: Agreed Offer

By Jesus Rodriguez Aguilar

  • Silver Lake has announced its intention to launch a cash offer to delist Software AG at €30/share (53% premium, 12.7x EV/NTM EBITDA, 20.5x Fwd P/E), targeting 37% of the float.
  • The Board is suportive and Silver Lake does not seek a domination agreement. The offer price will not be adjusted by the next dividend (€0.05, ex-date 19 May).
  • My fair value estimate (EV/EBITDA based) is €26.54/share, the offer price seems adequate. The offer targets 37.6% of the float, feasible. Gross spread (incl. divi) is 0.97%, not terribly exciting.

Shockwave Medical Inc (SWAV US): Initial Thought on Takeover Talk and Probable Pricing

By Tina Banerjee

  • Shockwave Medical Inc (SWAV US) is reportedly drawing takeover interest from Boston Scientific. Shockwave can potentially be one of Boston Scientific’s largest ever acquisitions. Probable pricing still offers upside potential.
  • Shockwave has an addressable market opportunity of $8.5 billion. The company has guided for 2023 revenue of $660–680 million, which represents 35–39% YoY growth.
  • Addition of Shockwave will bolster Boston Scientific’s cardiovascular portfolio. No official announcement has been made by any of the companies. There is no certainty they will lead to a deal.

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Apr 24
0

Daily Brief Event-Driven: Another Reason To Like China Mobile (941 HK) and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Another Reason To Like China Mobile (941 HK)
  • Yuexiu Property (123 HK) Rights Offering
  • Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch
  • Merger Arb Mondays (24 Apr) – AAG Energy, Jiangnan, HKBN, Healius, Lian Beng, Toyo
  • Weekly Deals Digest (23 Apr) – HKBN, Jiangnan, Lian Beng, Yuexiu Property, ZJLD, Mankind, Adicon
  • Jiangnan (1366 HK): 15th May Court Meeting. IFA Says Fair

Another Reason To Like China Mobile (941 HK)

By Travis Lundy

  • In March, the HK Secretary for Financial Services announced a waiver of stamp duty on dual counter trading market making. In November, the Govt of HK gazetted a bill.
  • HKEX launched plans in December. 9 large HK names announced in March they’d apply (Tencent, Kuaishou, Geely, BOC, Anta, AIA, China Resources Beer, Bidu, HKEX). Six more in April.
  • All the announcements are similar. But one on 21 April caught my eye because it is a big H/A with strong southbound support. That’s China Mobile (941 HK). 

Yuexiu Property (123 HK) Rights Offering

By Travis Lundy

  • On Thursday morning, Yuexiu Property (123 HK) halted trading in its shares and then later in the day announced a rights offering. Shares fell hard but gained back a little.
  • The rights offering lowers BVPS by about 11.3% so the current price is “about right” for the fundamentals if the price the day before the news was right.
  • There are, however, flow dynamics which are of interest. There almost always are.

Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch

By Sanghyun Park

  • Two pairs of constituent changes marked in squares in INTERNET and GAME may offer meaningful trading opportunities: Seojin System IN / Ahnlab OUT and Com2us IN / Doubleugames OUT.
  • Along with TIGER ETF, stealth index funds follow these indices. So, constituent changes in INTERNET and GAME create a flow impact of 0.3~0.6x DTV, even not in the Top 3.
  • Also, INTERNET and GAME have less passive flow impact degradation risk due to momentum trading flows compared to BATTERY and BIO.

Merger Arb Mondays (24 Apr) – AAG Energy, Jiangnan, HKBN, Healius, Lian Beng, Toyo

By Arun George

Weekly Deals Digest (23 Apr) – HKBN, Jiangnan, Lian Beng, Yuexiu Property, ZJLD, Mankind, Adicon

By Arun George

Jiangnan (1366 HK): 15th May Court Meeting. IFA Says Fair

By David Blennerhassett

  • On the 21st Feb, Chu Hui, Jiangnan (1366 HK)‘s chairman and major shareholder, offered HK$0.40/share by of a Scheme, a 12.68% premium to last close.
  • However, shares gained 63% in the morning session of the 16 Feb, before being suspended, therefore the premium was an impressive 83.49% over the last full trading day’s closing price.  
  • A shareholder with a blocking stake gave his irrevocable on the 22 March. The IFA reckons terms are fair and reasonable. This is done.  The Court Meeting is May 15th.

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Apr 23
0

Daily Brief Event-Driven: Index Rebalance & ETF Flow Recap: MSCI STD and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Index Rebalance & ETF Flow Recap: MSCI STD, Yuanta Div+, ZJLD, Anta
  • EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Grinding to a Halt
  • Last Week in Event SPACE: Yamada Denki, Genting, HKBN, Toyo Construction
  • Jiangnan Group (1366 HK): Scheme Vote on 15 May
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Silk Laser, Arcland, Essential Metals, AAG, Lian Beng, Oishi

Index Rebalance & ETF Flow Recap: MSCI STD, Yuanta Div+, ZJLD, Anta

By Brian Freitas

  • The review period for the MSCI May QCIR started last week and there were ad hoc changes to the S&P/ASX family and the KOSDAQ 150 Index (KOSDQ150 INDEX).
  • The end of the coming week will mark the end of the review period for the upcoming rebalances for a bunch of indices with implementation scheduled in May and June.
  • There was inflow to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF for another week.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Grinding to a Halt

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

Last Week in Event SPACE: Yamada Denki, Genting, HKBN, Toyo Construction

By David Blennerhassett

  • Yamada Denki (9831 JP) lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.
  • Genting Bhd (GENT MK)‘s implied stub and simple ratio (GENT/ Genting Singapore (GENS SP)) are currently at muti-year trough levels. 
  • Buy Toyo Construction (1890 JP) <¥970. The proposed dividend could be in danger should YFO spill the board; but spilling the board to get better governance is a good thing. 

Jiangnan Group (1366 HK): Scheme Vote on 15 May

By Arun George

  • The Jiangnan (1366 HK) scheme document is out with the court meeting scheduled for 15 May. The IFA considers the HK$0.40 per share offer to be fair and reasonable. 
  • Key conditions include approval by at least 75% independent shareholders (<10% rejection). The shareholder with a blocking stake has provided an irrevocable on 22 March.
  • This is a done deal. At the last close and for the 31 May payment, the gross and annualised spread is 3.9% and 44.0%, respectively.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Silk Laser, Arcland, Essential Metals, AAG, Lian Beng, Oishi

By David Blennerhassett

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Apr 22
0

Daily Brief Event-Driven: Toshiba – HDD Business Risk and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Toshiba – HDD Business Risk
  • Essential Metals In Limbo As MinRes Lurks
  • Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion
  • Dechra Pharmaceuticals (DPH LN): Best Case Scenario Offers 10% Upside Potential
  • Competing Proposals

Toshiba – HDD Business Risk

By Mio Kato

  • We have been tracking Toshiba’s rapidly deteriorating HDD business over the last few quarters. 
  • Recent trends raise further concerns about the long-term viability of the business. 
  • In particular, visibility remains low on a strong recovery in demand and until that occurs the possibility of a YoY deterioration remains high.

Essential Metals In Limbo As MinRes Lurks

By David Blennerhassett

Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion

By Sanghyun Park

  • Dongwon Industries’ float rate is less than 10% (1 – 63.15% – 27.65% = 9.20%), which makes it ineligible for KOSPI 200. KRX will reflect this in the June review.
  • The passive outflow size due to K200 deletion is expected to be about 50 billion won, which will cause an impact of about 28x ADTV.
  • Considering this deletion has not been sufficiently exposed in the market, the actual price impact may be even more significant and preemptive.

Dechra Pharmaceuticals (DPH LN): Best Case Scenario Offers 10% Upside Potential

By Tina Banerjee

  • Dechra Pharmaceuticals (DPH LN) received an offer from the Swedish private equity firm EQT regarding a possible all-cash deal, where Dechra shareholders would receive £40.70 per ordinary share in cash.
  • Right after the announcement, Dechra shares surged 33%. The shares are currently trading at £37.66, implying 10% upside potential.
  • Without EQT offer, based on current financial performance, Dechra has a bleak outlook. Currently, Dechra has average target price of £39.39, implying a spread of just ~5%.

Competing Proposals

By Jesus Rodriguez Aguilar

  • Middle East and Africa leading payments processing firm Network International is in play. On 21 April, Brookfield submitted a 400p competing proposal, vs. CVC/Francisco’s earlier 387p. Network was trading cheaply.
  • Exposure to underserved MEA markets should support sustainable longer-term growth. My fair value estimate is 431p. The shares trade 0.75% below Brookfield’s proposal, the market awaits a counteroffer from CVC/Francisco.
  • The fact that Brookfield has raised just 3.4% above CVC/Francisco seems to signal that Brookfield will be cautious in case of an “auction”. Long.

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Apr 21
0

Daily Brief Event-Driven: Big Yuexiu Property (123 HK) Rights Issue – 3 Capital Actions from Here to Mid-June and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Big Yuexiu Property (123 HK) Rights Issue – 3 Capital Actions from Here to Mid-June
  • Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs
  • Wesfarmer’s Non-Binding Offer For Silk
  • Update on the Trading Opportunities Post OCI Spin-Off
  • Quiddity Leaderboard-DAX Jun 23: SMA Solar, Hochtief, Adtran, Aroundtown
  • Apollo/John Wood Group: Due Diligence Access

Big Yuexiu Property (123 HK) Rights Issue – 3 Capital Actions from Here to Mid-June

By Travis Lundy

  • After being halted this morning before the start of trade, post-close, Yuexiu Property (123 HK) announced a fully-underwritten Rights Offering. 
  • The Rights Offering intends to raise HK$8.36bn issuing 30 Rights for every 100 Shares held, at a subscription price of HK$9.00, a 23.3% discount to TERP. 
  • This will take a moderately-levered property/services/leaseco and add more capital to it. Not terribly bullish. Looks opportunistic. And one has to look through 3 capital actions to see dividends ahead.

Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs

By Sanghyun Park

  • We now have an environment that allows Korea’s battery ETFs to include LG Chem in upcoming reviews. KODEX is in June, and TIGER is in July.
  • If LG Chem is included in each review, the expected one-day inflow is at 0.7-0.8x DTV, which can lead to a price impact similar to that of SKIET in 2021.
  • We should consider setups targeting this, including Long Short, which utilizes LG Energy Solution or LG Corp as a hedge.

Wesfarmer’s Non-Binding Offer For Silk

By David Blennerhassett

  • Wesfarmers Ltd (WES AU) has made a non-binding indicative Offer, by way of a Scheme, for Silk Laser Australia (SLA AU), an operator of specialist clinic networks across Australia. 
  • The Offer Price of $3.15/share is a decent 30.2% premium to last close. Wilson Asset Management, with 9.3% of shares out, is supportive. 
  • Wesfarmers has been granted 30 days to undertake due diligence on an exclusive basis.

Update on the Trading Opportunities Post OCI Spin-Off

By Douglas Kim

  • The Korea Exchange announced today (20 April) the change in index constituents and major dates for the Oci Co Ltd (010060 KS) spin-off. 
  • Oci Co Ltd (010060 KS)’s shares will be suspended from trading from 27 April to 26 May 2023.
  • After the spin-off and relisting of holdco/opco shares, we believe that there is a greater probability of OCI Co (opco) shares outperforming OCI Holdings (holdco). 

Quiddity Leaderboard-DAX Jun 23: SMA Solar, Hochtief, Adtran, Aroundtown

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at Quiddity’s estimates for the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
  • At present, I do not see any movements between the DAX and MDAX indices.
  • However, there could be two changes between the MDAX and SDAX index and there could be one more ADD/DEL for the SDAX index.

Apollo/John Wood Group: Due Diligence Access

By Jesus Rodriguez Aguilar

  • “Feedback” from shareholders overturned numantine resistance from the Board of Wood, which has reluctantly decided to grant due diligence access to Apollo. New PUSU deadline is 17 May.
  • As top shareholder of Vallourec, Apollo knows the sector. At the 240p offer proposal, Wood would be valued at an undemanding 5.7x EV/Fwd EBITDA on consensus numbers. 
  • My fair value estimate is 261.7p (average of SOTP-multiples and DCF). There is value in the sector and Apollo may have turned a corner. Long.

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Apr 20
0

Daily Brief Event-Driven: An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing
  • If HKBN Gets Taken Out, Who’s Next?
  • Yuanta/​P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview
  • Rakuten Bank IPO Trading – Ample Upside

An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing

By Sanghyun Park

  • BH Co Ltd (090460 KS) will likely complete the transfer listing by early May, suggesting an ad-hoc change may occur before the regular rebalancing of the KOSDAQ 150 in June.
  • BH’s GICS sector is INFORMATION TECHNOLOGY. It means the top reserved issue at the previous review gets to replace BH. At this point, it will be HFR Inc (230240 KS).
  • We should build up a Long position on HFR right after KRX approves BH’s transfer and then close it on the next trading day after the KQ150 corporate action announcement.

If HKBN Gets Taken Out, Who’s Next?

By David Blennerhassett

  • HKBN Ltd (1310 HK) spiked 12.3% yesterday in response to media reports (like this one) that China Mobile (941 HK) was running a ruler over the company.
  • This follows Bloomberg reports last month and in May last year, that I Square’s HGC Global Communications and numerous PE outfits were kicking tyres of the Hong Kong broadband play.
  • Over the weekend, Hong Kong’s security chief was quoted as saying “the internet could become a major loophole when maintaining national security“. HKT (6823 HK) is a potential privatisation candidate. 

Yuanta/​P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview

By Brian Freitas

  • Using data from the close on 19 April, there could be 5 changes to the Yuanta/​P-Shares Taiwan Dividend Plus ETF in June.
  • There will also be capping and funding flows that will lead to a one-way turnover of 13.6% and a one-way trade of US$885m.
  • There are 10 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1 day ADV to trade.

Rakuten Bank IPO Trading – Ample Upside

By Sumeet Singh

  • Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), raised around US$630m in its Japan IPO.
  • RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
  • In our earlier notes, we have looked at various aspects of the deal. In this note, we talk about the deal dynamics and trading updates.

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Apr 19
0

Daily Brief Event-Driven: HKBN (1310 HK): China Mobile Is the Latest to Show Interest and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • HKBN (1310 HK): China Mobile Is the Latest to Show Interest
  • Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion
  • YFO Goes Hard for Board Spill – Independents AND Executives
  • Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma
  • Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?
  • Quiddity Leaderboard ASX Jun 23: DHG Could Underperform Peers
  • ZJLD Group (6979 HK): Index Inclusion Possibility & Timelines
  • Oishi Group: IFA Backs ThaiBev’s Offer
  • Sega Sammy Holdings/Rovio Entertainment: Agreed Offer

HKBN (1310 HK): China Mobile Is the Latest to Show Interest

By Arun George

  • Reuters reported that China Mobile (600941 CH) is exploring a potential buyout of HKBN Ltd (1310 HK). The shares surged 12.3% to HK$6.57, above I Squared’s rumoured HK$6.00 offer. 
  • To get an idea of the appropriate offer price, we examine shareholding dealings from substantial shareholders. Our analysis suggests that a scheme offer of around HK$8.50 would likely be required.
  • PAG is also a rumoured bidder. The flurry of interest around HKBN suggests a good probability that one of the bidders will come through with a formal offer.

Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion

By Sanghyun Park

  • We should expect significant changes in KT’s ADR premium approaching the implementation date as foreign institutions leading the passive flow for MSCI Korea constituents have typically preferred ADRs.
  • Looking at the previous two occasions, the ADR disparity widened from the midpoint of the review period. And this trend continued for a while after the implementation.
  • Although KT’s ADR disparity has not yet significantly expanded, we may witness a similar pattern this time as well, given that it has been continuously moving in the premium recently.

YFO Goes Hard for Board Spill – Independents AND Executives

By Travis Lundy

  • At end-March, Toyo Construction (1890 JP) started playing hardball against YFO. They rejected the EGM call; they sent a letter to METI crying “FEFTA Breach!”, and raised the div BIGLY.
  • The new div at ¥63/share was meant to get the share price over ¥1,000/share so the YFO bid at that price would not be meaningful. So far, no luck. 
  • But YFO, which had threatened to propose a new slate, came out today with a list of nine, including two who would be executive directors. 👀👀

Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma

By Travis Lundy

  • In May 2022, Yamada Denki (9831 JP) announced a very large buyback. GINORMOUS – in fact – at 23.9% of shares out ex-Treasury if maximum shares were bought.
  • So far, YDH is 83.5% through, and at the recent pace, they will end it 8 May having bought 183-184mm shares (21.9% of TSO) spending 86.6% of funds allocated.
  • That’s why the announcement lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.

Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?

By Victor Galliano

  • Softbank Vision Funds 1 and 2 were the biggest combined holdings at December 2022, accounting for 30% of group equity value; SVF private companies accounted for 73% of equity value
  • To December-end 2022, public companies in SVF2 were marked down by 52% versus investment cost, whereas SVF2 private companies were marked down by a more modest 33% versus investment cost
  • We believe that SVF2 private company valuations are at risk of further markdowns in 4QFY22 results, with many of these investments made close to the period of peak pandemic valuations

Quiddity Leaderboard ASX Jun 23: DHG Could Underperform Peers

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run up to the June 2023 Rebalance.
  • Based on the latest data, I do not expect any changes for ASX 20, ASX 50, and ASX 100.
  • I expect Neuren Pharmaceuticals (NEU AU) to be added to ASX 200 and Domain Holdings Australia (DHG AU) to be deleted from ASX 200.

ZJLD Group (6979 HK): Index Inclusion Possibility & Timelines

By Brian Freitas

  • ZJLD Group (ZJLD HK) is looking to raise between US$775m-US$933m (including the oversubscription option) in its IPO by selling 564.3m shares at a price range of HK$10.78-HK$12.98/share.
  • ZJLD Group (ZJLD HK) will not get Fast Entry to any indices but should be added to the HSCI and Stock Connect in September.
  • Peer performance has not been great this year and that could weigh on the ZJLD Group (ZJLD HK) listing.

Oishi Group: IFA Backs ThaiBev’s Offer

By David Blennerhassett

  • On the 10th March, Thai Beverage (THBEV SP) proposed taking 79.66%-held Oishi Group PCL (OISHI TB) private, at an Offer price of THB 59/share, a 26.9% premium to last close. 
  • This Delisting Offer requires a shareholder vote which will take place on the 3<May. Payment may occur mid-to-late August. 
  • In its report yesterday, the IFA reckons “that the shareholders should approve of the voluntary delisting“.

Sega Sammy Holdings/Rovio Entertainment: Agreed Offer

By Jesus Rodriguez Aguilar

  • Sega with better reputation and deeper pockets than Playtika, announces a €9.25/share recommended cash offer; 63% premium to Playtika’s announcement; it represents 2.1x EV/Fwd Revenue, 12.3x EV/Fwd EBITDA, 21.6x Fwd P/E.
  • Acceptance condition is over 90%, and irrevocables are 49.1%, so 80.4% of the float is needed, which is high. I value Rovio using DCF (9% WACC, 1.5% perpetuity growth rate).
  • My fair value base case estimate is €8.80/share (€9.45/bull case). I thus update my TP to €9.25. Spread is 0.59%/1.22% (gross/annualised), which is not massive. 

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Apr 18
0

Daily Brief Event-Driven: MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences
  • Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch
  • StubWorld: Genting Berhad Is Cheap
  • Genesis To Acquire St Barbara’s Flagship As Merger Cancelled
  • Oishi Group (OISHI TB): IFA Recommends the THB59.00 Delisting Offer
  • Quiddity Leaderboard for UK F100/​​250 June 23: 20+ Days to Buy for Top-Ranked F250 Potential ADDs
  • Blackstone/Industrial REIT: Final Agreed Offer

MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences

By Brian Freitas

  • The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) starts today. MSCI should choose a day from this week to compute market cap.
  • The most changes (especially adds) are expected in mainland China following an expansion of the universe for inclusion of stocks in Northbound Stock Connect.
  • There are stocks in India where there will be FIF changes triggering large flows and there are things to watch on some stocks in Korea and China.

Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch

By Travis Lundy

  • With 3.5 months left in the dataset, the data is pretty close to settled. The interesting bits are elsewhere. There are three auto DELETEs and two auto ADDs. Maybe.
  • One auto-ADD is Toshiba, which may have a deal on it. That leaves two to add for sector balance. That could be Nitori (9843 JP) and Zozo (3092 JP).
  • Friday’s move on Fast Retailing brings in the issue of the new capping function. That would be a different US$2bn selldown. Lots of gory details here. 

StubWorld: Genting Berhad Is Cheap

By David Blennerhassett

  • Genting Bhd (GENT MK)‘s implied stub and the simple ratio (GENT / Genting Singapore (GENS SP)) are at multi-year lows.
  • Preceding my comments on Genting are the weekly setup/unwind tables for Asia-Pacific Holdcos.
  • These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Genesis To Acquire St Barbara’s Flagship As Merger Cancelled

By David Blennerhassett

  • Gold miner St Barbara Ltd (SBM AU)’s reverse merger with Genesis Minerals (GMD AU) always had a whiff of biting off more than they could chew. That’s now validated.
  • St Barbara has confirmed it will sell its flagship Leonora gold project to Genesis for $600mn (in cash and GMD scrip). The reverse merger has been cancelled.
  • Post transaction, St Barbara will hold up to ~19.5%,  and be left with no debt and ~$197m in cash. Genesis will emerge with no debt, and ~$175mn cash (pre-transaction costs). 

Oishi Group (OISHI TB): IFA Recommends the THB59.00 Delisting Offer

By Arun George

  • The Oishi Group PCL (OISHI TB) IFA opines that shareholders approve Thai Beverage (THBEV SP)’s delisting tender offer of THB59.00 per share at the EGM on 3 May.
  • The offer is conditional on Oishi shareholder approval which requires 75% approval by total outstanding shares and <10% rejection by total outstanding shares.
  • The offer is attractive to the IFA’s fair value of THB53.48-56.42 per share. At last close and the end-July completion, the gross and annualised spread is 2.2% and 8.1%, respectively.

Quiddity Leaderboard for UK F100/​​250 June 23: 20+ Days to Buy for Top-Ranked F250 Potential ADDs

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the potential index changes for F100 and F250 in the run up to the June 2023 Rebalance.
  • Based on latest prices, there could be one change for F100 and four changes in F250 between now and the June 2023 Rebalance including Mediclinic International (MDC LN)‘s intra-review change. 
  • Many of the high-ranked F250 potential additions could have very high impact according to our estimates.

Blackstone/Industrial REIT: Final Agreed Offer

By Jesus Rodriguez Aguilar

  • Blackstone launches a recommended 168p/share cash offer (via a scheme of arrangement) for Industrials REIT, which needs funding to increase its portfolio (and scale) and lower its blended cost ratio. 
  • The asset class seems attractive in an economic upturn. The offers represents a 42% premium, 1.04x to latest reported NTA, 1.2x P/23e BVPS; 22.1x Fwd P/E (source IBES). 
  • The offer should succeed, although irrevocables are just 6.3% (plus 22.4% letters of intent). Spread is 0.89%/4.52% (gross/annualised). While not terribly exciting, I would be long, in case of sweetening.

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Apr 17
0

Daily Brief Event-Driven: Rakuten Bank (5838) IPO – Let’s Go! (Part 2) and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Rakuten Bank (5838) IPO – Let’s Go! (Part 2)
  • Arclands (9842) Overpays for Arclands Service Holdings (3085)
  • Merger Arb Mondays (17 Apr) – Newcrest, Essential, Healius, Lian Beng, Golden Energy, Arcland
  • Aiming for Price Movement Patterns with Low Market Exposure in MSCI Korea May Review
  • Rights Arbitrage
  • Weekly Deals Digest (16 Apr) – Lian Beng, Arcland, Essential, Genesis, Newcrest, Rakuten Bank, ZJLD
  • Liquid Universe of European Ordinary and Preferred Shares: April ‘23 Report

Rakuten Bank (5838) IPO – Let’s Go! (Part 2)

By Travis Lundy

  • SBI Sumishin Net Bank (7163 JP) lowered its listing price vs what were already lowered expectations from a year prior. Then Rakuten Bank (5838 JP) lowered its IPO range. 
  • SBI Sumishin dilly-dallied around IPO price for three days then went nuts, rising 40% as of Friday morning. Rakuten Bank’s IPO looks dirt cheap now. 
  • But it is worthwhile comparing it on a spectrum of OTHER Japanese banks and neobanks. 

Arclands (9842) Overpays for Arclands Service Holdings (3085)

By Travis Lundy

  • On Friday Arcland Sakamoto (9842 JP) and restaurant franchise subsidiary Arcland Service (3085 JP), which it launched in 1993 and IPOed in 2007, announced they had agreed to merge. 
  • Arcland SHD runs 18 restaurant brands, of which Katsuya is most well-known, with a total of 750 or so restaurants managed globally. It has grown consistently.
  • The merger ratio is at an all-time high for Arcland SHD. This should be a done deal but I might expect some complaints. I think Arclands is probably overpaying. 

Merger Arb Mondays (17 Apr) – Newcrest, Essential, Healius, Lian Beng, Golden Energy, Arcland

By Arun George

Aiming for Price Movement Patterns with Low Market Exposure in MSCI Korea May Review

By Sanghyun Park

  • We should aim for price movement patterns with relatively low market exposure. One of them is the post-effective upward price movement of deletions.
  • The relative price performance for one week after the implementation compared to KOSPI 200 was consistently positive, ranging from 2.41% to 6.82%.
  • Given the recent price movement of four deletion candidates, there is again a high possibility that the price distortion caused by MSCI flow will revert after the effective date.

Rights Arbitrage

By Jesus Rodriguez Aguilar

  • The rights issue is fully underwritten and should bolster the balance sheet. This is akin to a placing by market volume. There are arbitrage opportunities (although not limitless borrowing available).
  • The arbitrage is a long position on a synthetic put. Rights will trade up to 17:30 on 3 May.
  • The new shares coming is a giant block compared to the existing shares outstanding. There may be a wave of selling from 4 May, and the shares should drop then.

Weekly Deals Digest (16 Apr) – Lian Beng, Arcland, Essential, Genesis, Newcrest, Rakuten Bank, ZJLD

By Arun George

Liquid Universe of European Ordinary and Preferred Shares: April ‘23 Report

By Jesus Rodriguez Aguilar

  • Since mid-March, spreads have generally tightened across our liquid universe (6 have widened, 12 tightened, 1 at same level).
  • Possible trades long ordinary / short preferred shares: Fuchs Petrolub, Henkel, Handelsbanken, SSAB Svenska Stal.
  • Possible trades long preferred / short ordinary shares: Sixt, VW, Danieli, Grifols, Atlas Copco.

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Apr 16
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Daily Brief Event-Driven: Arcland Service (3085 JP): Share Exchange Offer from Arclands Corp and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Arcland Service (3085 JP): Share Exchange Offer from Arclands Corp
  • Last Week in Event SPACE: Tencent, Ecopro, Japan’s Governance, Jardines, Citizen
  • EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Nothing to See Here!
  • Price/Flow Impact on Four Constituent Changes in KODEX Top 5 Plus ETF Rebalancing in June
  • Index Rebalance & ETF Flow Recap: HSI, S&P/ASX, KOSDAQ150, TAMSCI, Kotak Mahindra Bank
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Liann Beng, Newcrest, OZ Minerals, Glory Star New Media

Arcland Service (3085 JP): Share Exchange Offer from Arclands Corp

By Arun George

  • Arcland Service (3085 JP)/Arcland SHD has recommended Arcland Sakamoto (9842 JP)/Arclands’ share exchange offer at 1.87 Arclands shares per Archland SHD share.
  • The implied offer value of JPY3,051.84 per share at Arclands’ last close price is a 35.3% premium to the undisturbed price of JPY2,256.00 per share (14 April).
  • The offer requires Arcland OGM (25 May) and Arcland SHD EGM (22 June) shareholder approval. Arcland SHD shareholders will be supportive as the deal metrics are attractive.  

Last Week in Event SPACE: Tencent, Ecopro, Japan’s Governance, Jardines, Citizen

By David Blennerhassett

  • Prosus (PRX NA) moved 96mn shares of Tencent (700 HK) into CCASS. Tencent shares fell hard. If the share price fell because of a block offering, that would be unwarranted. 
  • Ecopro (086520 KS) is up an eye-watering 590% in the past three months, primarily on Ecopro BM (247540 KS)‘s outperformance, together with sentiment towards soon-to-be-listed 52.8% held Ecopro Materials. 
  • Japan’s Finance Minister said that companies need to improve their PBRs, and that “increasing corporate value of listed companies would allow for Japan to realise sustainable growth.”

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Nothing to See Here!

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

Price/Flow Impact on Four Constituent Changes in KODEX Top 5 Plus ETF Rebalancing in June

By Sanghyun Park

  • Samsung SDI and LG Chem are expected to be newly included in the index, while Hana Financial and KT&G Corporation are predicted to be excluded.
  • The correlation between the price movement and the flow direction on the rebalancing trading day of constituent changes from the past reviews was quite high.
  • We can set the price impact expectation for the upcoming review even more aggressively, given that the size of the flow x DTV is more significant than in previous cases.

Index Rebalance & ETF Flow Recap: HSI, S&P/ASX, KOSDAQ150, TAMSCI, Kotak Mahindra Bank

By Brian Freitas

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Liann Beng, Newcrest, OZ Minerals, Glory Star New Media

By David Blennerhassett

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