Event-Driven

Shareholders have approved OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU) and OZL is expected to stop trading after the close on 18 April.
OZ Minerals Ltd (OZL AU) will be replaced by Bellevue Gold (BGL AU) in the S&P/ASX 200 (AS51 INDEX) and by Seven Group Holdings (SVW AU) in the S&P/ASX 100.
There has been huge short covering on Seven Group Holdings (SVW AU) and Bellevue Gold (BGL AU) over the last few months.

MSCI Taiwan May QCIR: Potential Inclusions to Drive Deletions

Based on closing prices from 12 April, we forecast 2 adds and 2 deletes for the MSCI Taiwan Index at the May QCIR.
Global Unichip (3443 TT) is a high probability index inclusion and that will drive the deletion of Giant Manufacturing (9921 TT) from the index.
Wistron Corp (3231 TT) is a potential inclusion and that could result in the deletion of Win Semiconductors (3105 TT) from the index.

KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)

Following SK Oceanplant (100090 KS) moving from the KOSDAQ to KOSPI Market, the stock will be deleted from the KOSDAQ 150 Index and replaced with Sun Kwang (003100 KS).
The change will be implemented at the close on 18 April and passive trackers will need to trade over 1x ADV on both stocks.
Sun Kwang (003100 KS) was a high probability index inclusion in June, so this brings forward the inclusion by a couple of months.

Analysis of Adani Group Shareholder Structure Changes in Q1 – Stock Moved

Every quarter, Indian companies report their “Shareholding Pattern” for all to see. They show holdings by category type, and holders over 1%.
The big news in Q1 in AdaniLand was the failed FPO, thwarted by the Hindenburg Research report, and the Adani Promoter sale of stakes in 4 companies to GQG Partners.
The details in the change of the shareholder structure are, however, interesting.

Hong Kong CEO & Director Dealings (13 Apr): Melco, CMGE, Differ, Sino Biopharmaceutical

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.
Stocks mentioned in this insight include: Melco International Development (200 HK), CMGE Tech (302 HK), Differ Group Auto (6878 HK), and Sino Biopharmaceutical (1177 HK)

Jardine Strategic’s Dissentient Shareholders: The Sensible And Workable Approach

Back on the 8 March 2021, Jardine Matheson (JM SP) made a cash acquisition for the 15% of Jardine Strategic (JS SP)‘s share capital it did not already own.
The US$33/share Offer price was arguably light. But with the amalgamation requiring 75% approval and Matheson providing an irrevocable to vote its 84.89% stake for the transaction, it was done.
On the 20 April 2022, the Bermuda Court dismissed Jardine’s application to strike out dissenting shareholders who acquired shares after the Offer was announced. Last month, Jardine lost its appeal.

Temenos (TEMN SW; TMSNY US): M&A Looks Imminent

By Vijay Lohia, CFA

Temenos is an attractive takeover candidate with multiple M&A speculation in the media in the last 12-18 months.
The probability of Temenos being taken over continues to increase especially after the fresh round of banking industry turmoil witnessed in the last few weeks.
At a buy-out multiple of 10x EV/sales, Temenos would be worth CHF110 per share which is roughly 72% upside from here.

Quiddity Leaderboard NIFTY Sep 23: LTIMINDTREE Could Be an Intra-Review NIFTY 50 ADD

In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50 and NIFTY 100 indices in the September 2023 rebalance.
A couple of these names could become intra-review additions if the HDFC Limited (HDFC IN) – HDFC Bank (HDFCB IN) Merger closes prior to the September 2023 Rebalance.
Apart from that, there could be five ADDs/DELs for the NIFTY 100 index which by definition will also be added/deleted from the NIFTY Next 50 index.

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Apr 13

Daily Brief Event-Driven: Tencent (700 HK) – This Is Not the Selldown You Are Looking For and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Tencent (700 HK) – This Is Not the Selldown You Are Looking For
Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?
An Alternative Flow Trading Angle for K200 Rebalancing in June
Enchem: Block Deal Sale of 14% of Outstanding Shares
Quiddity Leaderboard for BSE/SENSEX Jun 23: Six BSE 100 Changes and Four BSE 200 Changes
Cash Call at 38% Discount

Tencent (700 HK) – This Is Not the Selldown You Are Looking For

On April 11, Prosus (PRX NA) made an Update on Repurchase Programme that it had repurchased shares in the market from the 3-7 April. They do so every week.
This one said they would move 96 million shares of Tencent (700 HK) currently held in non-transferrable shares into CCASS so they could be sold.
The ADRs dropped in New York time. Tencent shares fell hard today. If the share price fell because of a block offering, that would be unwarranted.

Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?

With no changes made at the March rebalance, we are still stuck at 76 index constituents. And it’s been a year later than originally planned to reach 80 index constituents.
We list 10 potential inclusions in June. Adding all 10 stocks will lead to around 5% one-way turnover, so there could be a mix of larger and smaller stocks added.
There will be at least 1x ADV to trade on nearly all inclusions. Short interest is over 4% of float on some stocks and there has been a recent jump.

An Alternative Flow Trading Angle for K200 Rebalancing in June

In KOSPI 200 IT Sector Index rebalancing in June, we should consider using Samsung SDS as a hedge for short positions on KakaoPay from a day trading perspective.
The expected performance of traditional flow trading based on passive impact has become uncertain due to flexible rebalancing trading by local pensions and short selling resumption on K200 new entrants.
As such, flow events on these sector indices that are still pretty much under the radar in the market could be a meaningful alternative for us.

Enchem: Block Deal Sale of 14% of Outstanding Shares

By Douglas Kim

Chosun Business Daily reported today that Enchem is considering on conducting a block deal sale of nearly 14% of its outstanding shares, representing about 160 billion won.
Brahman PS Investment is the likely seller in this block deal sale. If the block deal sale is successful, Brahman will have gained more than 6x on its original investment.
We would not be buyers of the block deal sale mainly due to unattractive valuations, volatile profitability, and not enough block deal sale discount.

Quiddity Leaderboard for BSE/SENSEX Jun 23: Six BSE 100 Changes and Four BSE 200 Changes

In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the June 2023 Rebalance.
There are only few more days left in the reference period used for the constituent selection process for the June 2023 Rebalance.
Currently, I see 6 ADDs/DELs for the BSE 100 index and 4 ADDs/DELs for the BSE 200 index.

Cash Call at 38% Discount

The timing was ripe for a rights issue after the share price had gained 64% since 24 October and addresses the capital structure, a need to win relevant contracts.
The rights issue is priced at a 38.6% discount (with a negative impact on the share price). TERP is €8.8438, theoretical value of the right is €1.1762).
Exclusively considering the cash injection and new number of shares, TP would be €9.07/share, with the caveat of the large dilution and uncertainty about the execution of the restructuring.

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Apr 12

Daily Brief Event-Driven: Japan’s Governance Changes I – The PBR 1.0 Target and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Japan’s Governance Changes I – The PBR 1.0 Target
Newcrest: Newmont Bumps And Granted DD
StubWorld: Ecopro’s Spike Makes No Sense
Lian Beng (LBG SP): Ong Family’s Derisory Unconditional Offer at S$0.62
TOPIX Inclusions: Who Is Ready (Apr 2023)
Temenos (TEMN SW): World’s No.1; Improving Fundamentals; M&A Candidate
Newcrest Mining (NCM AU): Newmont Returns with a Revised Offer
Lian Beng: Family Takeout At <50% of NAV

Japan’s Governance Changes I – The PBR 1.0 Target

The TSE went through a multi-year period of planning a “Market Restructuring” which ended on 4 April 2022 as the TSE split into three Sections, TSE Prime, Standard, and Growth.
After that, the TSE formed a “Council of Experts” (some very senior people) that would follow up on the changes, and recommend new measures. In January, new rule proposals dropped.
There was talk of a hard end to the transition period. Also, the Council harped on Awareness of Capital Cost and Efficiency. Most notably, for companies with PBR < 1.

Newcrest: Newmont Bumps And Granted DD

Under the revised proposal, Newmont (NEM US) has bumped the all-scrip terms for Newcrest Mining (NCM AU) to 0.400 Newmont shares – from 0.380 – for each Newcrest share held.
Including a permissible franked special dividend of up to US$1.10/share, the revised proposal represents an implied value of A$32.87/share. Newmont indicated the revised bid represents its best and final price.
Newcrest has granted Newmont confirmatory due diligence to put forward a binding proposal.

StubWorld: Ecopro’s Spike Makes No Sense

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.
Preceding my comments on Ecopro 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%.

Lian Beng (LBG SP): Ong Family’s Derisory Unconditional Offer at S$0.62

Lian Beng (LBG SP)/LBG has disclosed a voluntary unconditional offer from the Ong family at S$0.62 per share, an 8.8% premium to the undisturbed price (6 April).
The offer price is unattractive in comparison to peer multiples and precedent transactions. The price is not final. As the family aims to privatise LBG, a bump is likely.
The offer will likely follow the Boustead Projects (BOCJ SP) playbook, where Boustead Singapore Limited (BOCS SP) tabled a take-it-or-leave-it derisory 5.6% bump to its low-balled offer.

TOPIX Inclusions: Who Is Ready (Apr 2023)

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
In the last two months, Amvis Holdings Inc (7071 JP), AXXZIA Inc (4936 JP), and Sosei Group (4565 JP) have confirmed their moves to the Prime Market.
These names appeared in our lists (A or B) of candidates with high “readiness” for TOPIX Inclusions in our recent insights.

Temenos (TEMN SW): World’s No.1; Improving Fundamentals; M&A Candidate

By Vijay Lohia, CFA

Overall, the sentiments are extremely negative with most sell-side analysts having a Sell/Neutral rating on the stock.
We believe either A) Revenue and earnings growth will pick up under the new management team, or B) Temenos will be taken over by some private equity firm.
While revenue growth has remained subdued, the company’s moat remains intact in our view.

Newcrest Mining (NCM AU): Newmont Returns with a Revised Offer

Newcrest Mining (NCM AU) disclosed a revised non-binding indicative privatisation proposal from Newmont Mining (NEM US) at 0.400 Newmont shares per Newcrest share + US$1.10 special dividend.
Since the 6 February announcement, the average implied value of the revised offer is A$29.14 per share, which is 11.6% higher than the average of the previous offer of A$26.12.
The offer is attractive in terms of historical prices and VWAP ratios but carries the volatility risk around Newmont shares and FX rates. Expect a binding proposal.

Lian Beng: Family Takeout At <50% of NAV

Singaporean construction firm Lian Beng (LBG SP) has announced a voluntary unconditional cash Offer from the controlling Ong family, via investment holding company OSC Capital.
The Offer Price of S$0.62/share (not declared final) is a mediocre 8.8% premium to last close and a 59.7% discount to the 30 November 2022 NAV of S$1.538/share.
The announcement fails to mention the NAV/share. The IFA considered the 2021 Mandatory Offer of S$0.50/share not fair and not reasonable. Expect a similar conclusion

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Apr 11

Daily Brief Event-Driven: TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next
Kotak Mahindra Bank (KMB IN): Potential MSCI Upweight in May to Bring Close to US$1bn Passive Buying
Target May 15th for LONG Youlchon Chemical with Dongkuk Steel’s Split Approval
Caverion Switches to Triton’s Offer
New Unconditional Date

TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next

The TOPIX liquidity factor removal names (upweights) for April 2023 were announced after the close on Friday 7th April 2023 as expected.
According to the announcement, 22 names will see their Liquidity Factors removed and experience index inflows later this month.
Today was the first day of trading post-announcement and the 22 names gained +1.1% (+0.47% vs the TOPIX Index). I feel there could be more upside for some names.

Kotak Mahindra Bank (KMB IN): Potential MSCI Upweight in May to Bring Close to US$1bn Passive Buying

Kotak Mahindra Bank (KMB IN) was added to the MSCI India Index at the November 2020 SAIR. However, a LIF of 0.5 was applied due to the low foreign room.
The latest shareholding pattern as of end-March shows a foreign room higher than 25%. That should result in a removal of the LIF at the May QCIR.
The increase in foreign room is a result of FPIs selling the stock despite the inclusion of Kotak Mahindra Bank (KMB IN) in a global index in March.

Target May 15th for LONG Youlchon Chemical with Dongkuk Steel’s Split Approval

Through the regular rebalancing, Kum Yang and Cosmo Chemical will be included in KOSPI 200, and Youlchon Chemical will be included as an ad-hoc change due to Dongkuk Steel’s deletion.
We should prepare for an aggressive long position on Youlchon Chemical from a day trading perspective, targeting May 15th, the day after Dongkuk Steel’s general meeting.
If the meeting is scheduled for the morning, we should consider entering the position in the afternoon of the 12th.

Caverion Switches to Triton’s Offer

Triton’s consortium reduced the acceptance threshold to 2/3rds of all shares, and, as expected, the board of Caverion changed its recommendation in favour of the Triton consortium’s proposal.
Nearly a third of the shares supporting the offer are held by each party. Bain’s consortium hasn’t improved Triton’s offer and expects the latter will encounter antitrust hurdles.
Triton would make a cumulative IRR of about 20% if it sold the business for 7.5x EBITDA by year 7. Long and tender to Triton’s offer (spread is 2.63%/3.75% gross/annualised).

New Unconditional Date

On 6 April, Bidco and Dignity confirmed that the FCA Change in Control Condition had been satisfied on 5 April. The new Unconditional Date is 4 May 2023.
Bidco has so far irrevocables and letters of intent in respect of 39.12%. The end of the life of Dignity as a listed company is nigh.
Spread to cash offer is 3.6%/42% (gross/annualised, assuming settlement on 18 May). Long/tender to the cash offer. The Alternative Offers are either Valderrama D shares (unlisted) or Castelnau shares (illiquid).

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Apr 10

Daily Brief Event-Driven: Last Week in Event SPACE: ANZ/Suncorp and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Last Week in Event SPACE: ANZ/Suncorp, JCNC, Adani, Khan Bank/HS Holdings, Hong Kong Buybacks
Merger Arb Mondays (10 Apr) – Genesis, Estia, Newcrest, Pushpay, Mincor, Golden Energy, Toyo

Last Week in Event SPACE: ANZ/Suncorp, JCNC, Adani, Khan Bank/HS Holdings, Hong Kong Buybacks

In a dealbreak, ANZ (ANZ AU) will either have enough capital in a downturn or excess capital it could use to buy back stock. If behavioural remedies, SunCorp is cheaper.
Jardine Cycle & Carriage (JCNC SP)‘s implied stub value is around its highest-ever level, dating back to 2004.
There is no good reason to be long Adani names, even if GQG is up 25% on his money so far.

Merger Arb Mondays (10 Apr) – Genesis, Estia, Newcrest, Pushpay, Mincor, Golden Energy, Toyo

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Genesis Minerals (GMD AU), Estia Health (EHE AU), Aag Energy Holdings (2686 HK), Origin Energy (ORG AU).
Lowest spreads – Healius (HLS AU), Golden Energy & Resources (GER SP), Liontown Resources (LTR AU), Norwest Energy NL (NWE AU), Mincor Resources NL (MCR AU), GK Goh.

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Apr 09

Daily Brief Event-Driven: EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Calm Before the Storm? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Calm Before the Storm?
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Mincor, Toyo Construction, Pushpay, Breaker Resources

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Calm Before the Storm?

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-Pac Weekly Risk Arb Wrap: Mincor, Toyo Construction, Pushpay, Breaker Resources

There are 45 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma this past week: Breaker Resources Nl (BRB AU) all-scrip Offer from Ramelius Resources (RMS AU).
Key updates took place for Mincor Resources NL (MCR AU), Toyo Construction (1890 JP), and Pushpay Holdings (PPH NZ).

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Apr 07

Daily Brief Event-Driven: Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period?
JCNC’s Logic-Defying Valuation
Khan Bank IPO Is Here – At IPO Price, the Stake Is Worth More than HS Holdings’ Share Price
Golden Energy (GER SP): Annual Report Data Points Further Underscore a Low-Balled Offer
Industrivärden: Q1 Results and Discount to NAV

Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period?

There is only one factor that could have affected KT’s foreign flow in mid-February, and that is the repurchase of its shares.
If KT continues its buyback at the current pace, which is highly likely, we can bet that the foreign room will not fall below 15% until MSCI’s review period.
This implies an essential premise for us to set up a more aggressive preemptive position on KT.

JCNC’s Logic-Defying Valuation

Jardine Cycle & Carriage (JCNC SP)‘s implied stub value is around its highest-ever level, dating back to 2004.
The simple ratio of JCNC/ Astra International (ASII IJ) is also the highest level outside the brief spikes post-Covid and during the 2008 GFC.
There is no apparent justification for the current valuation. And a takeover from Jardine Matheson Holdings (JM SP) at these levels appears unrealistic.

Khan Bank IPO Is Here – At IPO Price, the Stake Is Worth More than HS Holdings’ Share Price

Today, it was announced that HS Holdings (8699 JP) subsidiary Khan Bank LLC – Mongolia’s largest bank – would IPO this month.
This is a big deal. The IPO is for 10% of the bank (US$521mm equivalent). Priced at 4x Dec 2022 earnings for a bank which has ~ 25% ROE.
There is a reason to expect substantial realisation of this value within 2023 due to a section of Feb 2021 Amended Mongolian Banking Law. Plus there is boatloads of cash.

Golden Energy (GER SP): Annual Report Data Points Further Underscore a Low-Balled Offer

Golden Energy & Resources (GER SP)’s valuation is dependent on three key assets – Golden Energy Mines (GEMS IJ), Stanmore Coal (SMR AU) and Ravenswood. GEMS/SMR have observable values.
The valuation of GEAR’s 50% stake in Ravenswood gets little publicity largely as it is unlisted. However, the annual report provides data points to value this key gold asset.
Based on peer EV/Resource and EV/Reserve multiples, Ravenswood 50% stake is worth S$200-465 million. Using the midpoint valuation, the SoTP valuation is S$1.40 (39% upside to the last close).

Industrivärden: Q1 Results and Discount to NAV

Industrivarden AB (INDUA SS) is resilient: NAV on 31 March was SEK 138.3 billion, or SEK 320/share, an increase q-o-q of SEK 27/share, +9%, with some minor additions to the portfolio.
The balance sheet is strong, with a debt/equities ratio kept at 4%. A+ rating was confirmed on 27 March. 5-year total return was 67.5% vs. 66% for the OMX30.
The discount to NAV of C shares is 8.1% (vs. 10.7% average over the last 8 years). During Q1 the discount has tightened from 13.6% on 31 December.

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Apr 06

Daily Brief Event-Driven: Toyo Construction FY23 Profit Forecast – 105% Payout = 6.5% and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toyo Construction FY23 Profit Forecast – 105% Payout = 6.5%, Lots of Shares Changing Hands
DB Group: Kim Family Feud Leading to a Potential M&A Fight?
GQG Calls Adani Names 5Yr “Multi-Baggers” – It Works at 30% EPS CAGR if You Torture the Numbers
MSCI Japan May QCIR: Couple of Potential Changes
Quiddity Leaderboard for Hang Seng Index Jun 23: Beigene Looks Interesting
Toyo Construction (1890 JP): YFO Loses Ground to the Board’s New Five-Year Plan
Pushpay: Shareholder To Vote (Again) On 27 April

Toyo Construction FY23 Profit Forecast – 105% Payout = 6.5%, Lots of Shares Changing Hands

Two weeks ago, Toyo Construction (1890 JP) released a new Mid-Term Management Plan with a new investment plan, and a new capital plan (100% payout, ¥50/share minimum div til Mar-2026).
Obvious goal: get the stock above ¥1,000/share so YFO’s ¥1,000 bid looks unattractive. Then they attacked on a FEFTA basis, saying YFO’s foreign entities need permission to go over 10%.
Now Toyo has released a March 2024 forecast, with a ¥63/share dividend and 105% guided payout. The stock popped. LOTS of shares trading. Now only up small.

DB Group: Kim Family Feud Leading to a Potential M&A Fight?

By Douglas Kim

In this insight, we discuss another very interesting situation brewing which is the potential family feud at the DB Group.
One of the scenarios of the Kim family at DB Group is a sibling conflict between Nam-Ho Kim (Chairman) and his sister Ju-Won Kim.
Our base case valuation of DB Inc is target market cap of 488 billion won or 2,428 won per share, which is 36% higher than current price.

GQG Calls Adani Names 5Yr “Multi-Baggers” – It Works at 30% EPS CAGR if You Torture the Numbers

The Adani names are seeing new news and commentary. SEBI is probing offshore deals for rules violations, SEBI filed an interim report Sunday with the Court, Cements are refinancing US$4bn.
GQG’s Jain was interviewed by Bloomberg TV in NY saying he sees his Adani basket being a “multi-bagger in five years.”
Assuming growth and margins equivalent to peer max rates, all profits reinvested, and 100% gain in stock price in 5yrs, NP CAGR=33%, 2028 EV/EBITDA average of four names is 29.4x.

MSCI Japan May QCIR: Couple of Potential Changes

Based on the last close, we expect Kawasaki Kisen Kaisha (9107 JP) to replace Nihon M&A Center (2127 JP) in the MSCI Japan Index at the May QCIR.
Passive trackers will need to buy less than 1x ADV on Kawasaki Kisen Kaisha (9107 JP) while selling over 5x ADV on Nihon M&A Center (2127 JP).
Kawasaki Kisen Kaisha (9107 JP) trades cheaper than its closest peers and there are some interesting market neutral trades there.

Quiddity Leaderboard for Hang Seng Index Jun 23: Beigene Looks Interesting

The June 2023 index review results for the Hang Seng index can be expected after the close on 12th May 2023.
In Quiddity Leaderboard for Hang Seng Index Mar 23: Healthcare Names Could Dominate, we expected some healthcare names to be added but there were no index changes in March 2023.
Although the index methodology is highly subjective and predicting index changes is extremely tricky, the HSI is an important index in the region and here are our thoughts for June.

Toyo Construction (1890 JP): YFO Loses Ground to the Board’s New Five-Year Plan

The Toyo Construction (1890 JP) Board has tried every tactic to delay YFO’s JPY1,000 tender offer. The Board’s new five-year medium-term management plan tilts the fight in its favour.
The Board’s new management plan, particularly the dividend payout, now provides shareholders with a credible alternative to accepting YFOs’ tender offer. The payout ratio for FY23-FY25 is set at 100%.
YFO’s primary tactic is to replace the Board at the June AGM, but shareholders have less reason to support it. Improving sentiment and the offer continue to underpin the shares.

Pushpay: Shareholder To Vote (Again) On 27 April

At the 3rd March Scheme Meeting, just 55.5% of Pushpay Holdings (PPH NZ) shareholders voted for BGH/Sixth Street’s NZ$1.34/share Offer. At first glance, that was that.
But uniquely in the M&A world, BGH/Sixth Street returned on the 16 March with a NZ$1.42/share Offer, a bump of 6%, around the mid-point of the independent expert’s valuation range.
The revised Scheme Booklet is now out with a new vote to take place on the 27 April. Key shareholders and the IE are supportive. Implementation is estimated late-May.

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Apr 05

Daily Brief Event-Driven: AAG Energy (2686 HK): Scheme Doc Out. IFA Says Fair. It Is Not and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

AAG Energy (2686 HK): Scheme Doc Out. IFA Says Fair. It Is Not
Clarifying Market’s Inaccurate Constituent Change Forecast in K200 Rebalancing with GICS Revision
HSCEI Dividend Futures: Nearing the Pointy End of Results Season
AAG Energy (2686 HK): Rushed Scheme Document Points to a Vote on a Knife Edge
Alibaba: Business Unit Split Receives Positive Response, Overshadowing Lingering Regulatory Pressure
Introducing Another Long Short Basket Trading Event with Semicon ETF Rebalancing in Korea
Quiddity Leaderboard ES50 Sep 23: Eurozone’s Annual Big Impact Rebal Trades; US$1.1bn+ for ADDs
Loh/Kloeckner & Co Se: Voluntary Takeover Offer
Nucleus Clyde/Curtis Banks: Spread

AAG Energy (2686 HK): Scheme Doc Out. IFA Says Fair. It Is Not

That was a quick turnaround. Two days after the pre-conditions were satisfied, the Scheme Document for Xinjiang Xintai (603393 CH)‘s privatisation of AAG Energy (2686 HK) has been dispatched.
The EGM and Court Meeting will take place on the 27 April, with payment, assuming all resolutions get up, on (or before) the 1 June.
The Independent Financial Adviser, Somerley, considers the terms of the Scheme “fair and reasonable.” However, their analysis clearly shows this is not the case.

Clarifying Market’s Inaccurate Constituent Change Forecast in K200 Rebalancing with GICS Revision

DGB Financial Group’s market cap makes it virtually impossible to get deleted even with Kakao Pay’s GICS change in this June rebalancing.
It’s unclear whether this has damaged the price impact of K200 inclusion. Nevertheless, the intensity of the pre-rebalancing flow wasn’t aggressive, possibly due to the combination of factors, including this.
This suggests the possibility of an intense price impact resulting from a more concentrated flow right before the effective date, so we should prepare a setup that considers this.

HSCEI Dividend Futures: Nearing the Pointy End of Results Season

The HSCEI 2023 dividend futures have dropped over the last week as results have trickled in and some of the larger dividend payers have cut their final dividends.
Over 50% of the DIPS are confirmed now and that number will increase significantly over the next couple of days as the remaining companies announce their final dividends.
From our estimates, just over 80% of the DIPS will be confirmed by tomorrow though over 66% of the total DIPS will have CNYHKD risk attached to it.

AAG Energy (2686 HK): Rushed Scheme Document Points to a Vote on a Knife Edge

Aag Energy Holdings (2686 HK) scheme document is out with the court meeting scheduled for 27 April. The IFA considers the HK$1.85 offer to be fair and reasonable.
The IFA’s conclusion is dubious as the contents of the report could easily have come to the opposite conclusion. The quick despatch of the scheme document is worrying.
The weak IFA report will further annoy minorities and push more towards the NO camp. The vote is on a knife edge which is reflected in the current 13.5% spread.

Alibaba: Business Unit Split Receives Positive Response, Overshadowing Lingering Regulatory Pressure

By Oshadhi Kumarasiri

Yesterday, Alibaba (ADR) (BABA US) announced its intention to divide its business into six distinct units, each with its own CEO and independent board of directors.
Tying this with Jack Ma’s rare public appearance in China since the beginning of the tech crackdown, people are speculating that the tech crackdown is over.
However, if you look at this news more objectively, this split indicates nothing but the tightening of the regulatory framework.

Introducing Another Long Short Basket Trading Event with Semicon ETF Rebalancing in Korea

Mirae Asset TIGER Fn Semiconductor TOP 10 ETF saw a rapid increase in AUM in a short period. Currently, AUM has reached 126 billion won.
Compared to the flow size, the price movement magnitude was substantial. What is particularly important is that the correlation between weight change direction and price impact was quite significant.
Considering Long Short basket trading based on the weight change direction on a day trading window seems worthwhile.

Quiddity Leaderboard ES50 Sep 23: Eurozone’s Annual Big Impact Rebal Trades; US$1.1bn+ for ADDs

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 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.

Loh/Kloeckner & Co Se: Voluntary Takeover Offer

Loh (29.97% stake) launches a voluntary offer at €9.75/share, 2.5% premium, but doesn’t really intend to increase much its shareholding, rather have the flexibility to do it in the future.
With a favourable market environment, the EU steel sector has re-rated since Autumn. The shares trade 5.2% above the offer price (effectively a floor), so don’t expect many acceptances.
Kloeckner currently trades on 6.3x EV/23e EBITDA (vs. a 6.5x 10-year average), and 0.52x P/BV. The median consensus price target (€9.73) is in line with the offer price.

Nucleus Clyde/Curtis Banks: Spread

Founders (34.9% stake) of Curtis Banks are cashing in a recommended 350p offer (32% premium) launched when the stock had not yet fully recovered from the Covid crisis lows.
The Scheme has been approved at both the Court Meeting and General Meeting. Pending green light from FCA, PRA, SRA, CMA (none of those should pose any problem) and Court sanction.
Spread is 2.6%/10.9% (gross/annualised) assuming closing by 30 June (though it should happen earlier). Although the stock is not massively liquid, many usual arb investors are long. BUY.

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Apr 05

Daily Brief Event-Driven: ACCC Sour on ANZ/Suncorp Bank Deal Makes for A Good Trade and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

ACCC Sour on ANZ/Suncorp Bank Deal Makes for A Good Trade
Pre-Positioning Targeting Solactive Global Lithium Index’s October Rebalancing
Ramelius Bolts On Breaker
MSCI India May QCIR: Potential Changes & Special Treatment of Adani Group Stocks
Pushpay (PPH NZ): Revised Scheme Meeting on 27 April
Mincor Resources (MCR AU): Production Issues Result in the Board Succumbing to Wyloo’s Offer

ACCC Sour on ANZ/Suncorp Bank Deal Makes for A Good Trade

This morning, ACCC announced that it had released a “Statement of Preliminary Views” on the ANZ/Suncorp deal and sought further views.
For now, the ACCC questions “the nature, likelihood, and extend of claimed public benefits” including synergies or claims regarding investment in Queensland.
Based on my reading of the document, this view is likely to carry over through the final decision due mid-June 2023. That means there’s likely a trade here.

Pre-Positioning Targeting Solactive Global Lithium Index’s October Rebalancing

LG Energy Solution and Samsung SDI will remain in the index as top stocks of pack makers, respectively. Ecopro BM will almost certainly replace L&F in the category of Cathode.
SK IE Technology will newly join the index with Separator’s top stock. On the other hand, Lotte Energy Materials and SKC are unlikely to be included.
This event can be a critical inflection point in predicting the counter-flow for short positions against Ecopro BM and L&F in advance.

Ramelius Bolts On Breaker

On the 20 March, gold play Breaker Resources Nl (BRB AU) announced a Offer from Ramelius Resources (RMS AU) of 1 RMS for every 2.82 BRB shares.
The all-scrip takeover Offer backs out an implied Offer price of A$0.403/share or a 38.9% premium to last close.
The Offer is conditional on 50.1% tendering with 19.92% of shares out supportive. The first close is the 1 May.

MSCI India May QCIR: Potential Changes & Special Treatment of Adani Group Stocks

Currently, we see 1 high probability inclusion and 2 high probability deletions from the MSCI India Index at the May QCIR. Plus there are stocks close to the cutoffs.
There will be selling on two Adani Group stocks following a lowering of the Foreign Inclusion Factor (FIF). That could increase if one of them is deleted from the index.
As expected, Hindustan Aeronautics Ltd (HNAL IN) has continued to move higher post the placement and there could be more buying in the weeks ahead.

Pushpay (PPH NZ): Revised Scheme Meeting on 27 April

Pushpay Holdings (PPH NZ)’s NZ$1.42 revised offer from Sixth Street/BGH is around the midpoint of the IE’s unchanged valuation range of NZ$1.33 to NZ$1.53 per share.
Class 3 shareholders are the key vote. On the assumption of a similar voter turnout to the last scheme, 81.3% of Class 3 shares will vote for the scheme.
This is a done deal. At the last close and for the 17 May payment, the gross and annualised spread is 2.2% and 21.4%, respectively.

Mincor Resources (MCR AU): Production Issues Result in the Board Succumbing to Wyloo’s Offer