Event-Driven

Just post-close, the Nikkei reported Toshiba’s Board had agreed a JIP deal at “around ¥2trln.” Toshiba confirmed HOURS later indicating language was still being hashed out. And the dividend cancelled.
Toshiba “supports” the deal because it aligns a single shareholder with management goals. They cannot recommend to general shareholders because it is too low. But JIP was the only bidder.
It raises the question of whether activists will submit to “Toshiba Fatigue” at what the Board admits is too low a price, or whether there is still fight left.

Toshiba – The End… Hopefully

By Mio Kato

The Nikkei reported today that Toshiba’s board had chosen to accept JIP’s buyout offer.
The purported pricing of ¥2trn is a relatively modest premium but is not a surprise and no surprise is a positive here in our view.
All that remains is shareholder approval and while we doubt there will be too many celebrations on that front, there is likely to be relief.

Toshiba (6502 JP): JIP’s JPY4,620 Tender Offer, Now for the Really Hard Part

Toshiba Corp (6502 JP) announced a pre-conditional tender offer by Japan Industrial Partners (JIP), the preferred bidder at JPY4,620 per share, a 9.7% premium to the last close price.
The special committee opines that the offer is the best price that can be expected today, which sounds like we are recommending the offer as it is the only one.
The offer has several negatives: a 14% price reduction during the process, below the undisturbed price, below the mid-point IFA DCF range and no serious effort on Plan B.

KOSPI 200 Flow Trading: Those Subject to a Significant Float Rate Change

Samsung SDS and Meritz Financial will welcome a 6%p and 30%p increase, respectively, in the upcoming rebalancing in June.
Assuming a K200 tracking fund size of 65 trillion won, they are expected to receive 2.69x and 5.47x ADTVs, respectively. This is enough for us to consider a preemptive position.
However, in the case of Samsung SDS, we need to consider potential price correction by the scheduled block deal (1.95%) and develop a multi-phased approach to minimize timing conflicts.

NIFTY NEXT50 / NIFTY100 Index Rebalance: Flows Change as Index Capping Methodology Changes

On 17 February, NSE Indices announced the results of the March index review for the Nifty Next 50 Index (NIFTYJR INDEX). There are 5 adds and 5 deletes.
Last evening, NSE Indices announced a change in the index methodology where the cumulative weight of non-F&O stocks in the index will be capped at 10% (down from 15% earlier).
This changes the flows at the March rebalance that will be implemented at the close of trading on 29 March.

KOSDAQ150 Ad Hoc Index Rebalance: EM-Tech (091120 KS) To Replace SBW Life (151910 KS)

Following Nanos Co Ltd (151910 KS)‘s designation as an Investment Attention Issue, the stock will be deleted from the KOSDAQ150 Index and replaced with Em Tech Co Ltd (091120 KS).
Passive trackers are estimated to buy 1.3 days of ADV on Em Tech Co (091120 KS) while they will need to sell 1.1 days of ADV on Nanos (151910 KS).
Em Tech Co Ltd (091120 KS) was up yesterday but the stock is still way off its highs. The stock should trade higher over the next few days.

Quiddity Leaderboard TWSE Div+ Jun 23: 3 ADDs/DELs and US$700mn+ of Capping Flows!

In this insight, we take look at Quiddity’s estimations for index changes and capping flows for the Taiwan Div+ index for the June 2023 review.
I currently see 3 ADDs and 3 DELs but there are several names close to the border and expectations could change before the base date as prices move around.
I also currently expect capping flows of US$705mn one-way with multiple names with more than five days to trade.

Chinese Developers’ Overview – Shift in Sentiment but a Few Still Needs Some Equity

By Clarence Chu

Having first introduced the three red line guidance in late 2020, the government has begun shifting its stance, and relaxing some of its regulatory oversight.
In this note, we looked at recent news developments and how some larger developers fared against the three red lines criterion.
Of the large developers we looked at, there are a few names which stand out which could potentially do a capital raising given their financial standing.

Rakuten Bank IPO Points That the Market Could Be Undervaluing Rakuten’s Businesses & Investments

By Oshadhi Kumarasiri

As Rakuten Bank (5838 JP) prepares for an IPO in April 2023, we see the potential for Rakuten’s NAV discount to narrow significantly from its current level of over 52%.
We think the market could be unaware of the hidden value in smaller Rakuten businesses and other investments.
Rakuten-Bank, which seems like a small piece of Rakuten’s ecosystem producing as much as 26-31% of Rakuten’s market-cap could open markets’ eyes to the undervaluation of Rakuten businesses & investments.

KOSDAQ 150: Special Changes (SBW Life Science: Deletion & EM-Tech: Addition)

The Korea Exchange announced special changes in KOSDAQ 150 after the market close today.
Effective 28 March, SBW Life Science (151910 KS) will be excluded from KOSDAQ 150 index and Em Tech Co Ltd (091120 KS) will replace it.
We expect 20-30% additional upside for EM-Tech from the KOSDAQ 150 inclusion and further downside risk for SBW Life Science from the index exclusion.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 23

Daily Brief Event-Driven: Rakuten Bank (5838 JP) IPO: Listing in April and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Rakuten Bank (5838 JP) IPO: Listing in April, TPX Inclusion in May, MSCI SC in August
Rakuten Bank (5838 JP) – Another Net-Bank IPO, This One With TOPIX and Other Index Inclusions
MBK/Unison Launch ANOTHER Tender on Osstem Implant (048260 KS) To Squeeze Out Minorities
MBK/Unison Capital Announces a Second Tender Offer for Osstem Implant to Take It Private
StubWorld: Impairments Weigh Down Kingsoft Solid Results
Quiddity Leaderboard-DAX Jun 23: Fresenius, Lufthansa, Covestro, Continental & Others
Korea Small Cap Gem #20: BYC
Jiangnan Group (1366 HK): Irrevocable from the Shareholder with a Blocking Stake
Liberty/Telenet: Intended Offer for Minorities
Hindustan Aeronautics (HNAL IN) Offer for Sale: Buy Ahead of Potential MSCI Inclusion

Rakuten Bank (5838 JP) IPO: Listing in April, TPX Inclusion in May, MSCI SC in August

Rakuten Bank (EBANKZ JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 21 April.
News reports indicate a raise of US$800mn (JPY 106.8bn) at the mid-point of the IPO range, valuing the company at JPY 305bn (US$2.3bn).
The stock should be added to the TPX INDEX at the close on 30 May where trackers will need to buy over 14% of the stock issued in the IPO.

Rakuten Bank (5838 JP) – Another Net-Bank IPO, This One With TOPIX and Other Index Inclusions

Today, Rakuten (4755 JP) and Rakuten Bank (5838 JP) announced that Rakuten Bank had received TSE approval to list (English) on TSE Prime, with expected listing date 21 April 2023.
This had been in the works since July 2022, and they selected advisors in September 2022. The low end of the offer price range seems attractive. More diligence needed.
There will be index inclusions. Unlike SBI Sumishin Net Bank (7163 JP) which is going to TSE Standard, Rakuten Bank is going to Prime.

MBK/Unison Launch ANOTHER Tender on Osstem Implant (048260 KS) To Squeeze Out Minorities

As discussed in MBK/Unison Capital Korea Do a Deal for Osstem Implant (048260 KS) Thwarting Activist KCGI, at end-Jan, they launched a deal to get a minimum of 15.4%.
They ended up getting 61.16%. That left 10.6% of shares out in unaffiliated hands.
Now they have launched another tender offer to buy the remaining at the same KRW 190k price. There is no minimum. Straight simple risk arb.

MBK/Unison Capital Announces a Second Tender Offer for Osstem Implant to Take It Private

MBK/Unison Capital consortium announced a second tender offer for Osstem Implant (048260 KS) today in order to take the company private.
The tender offer price is 190,000 won per share, which is the same price as the first tender offer price.
The number of shares for the tender offer is 1,654,916, accounting for 10.62% of the outstanding shares.

StubWorld: Impairments Weigh Down Kingsoft Solid Results

Despite the topline growth of 20%, Kingsoft Corp (3888 HK) recorded a loss in FY22 after a large impairment for its holding in Kingsoft Cloud (KC US).
Preceding my comments on Kingsoft 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%.

Quiddity Leaderboard-DAX Jun 23: Fresenius, Lufthansa, Covestro, Continental & Others

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.
Two changes could happen between DAX and MDAX while there could be one change between MDAX and SDAX.
There could be more changes for the MDAX and SDAX indices as a couple name are lurking close to the border.

Korea Small Cap Gem #20: BYC

Byc Co Ltd (001460 KS) is the 20th company in our Korea Small Cap Gems series.
Estimated value of BYC’s real estate is more than 2 trillion won, which is much higher than its current market cap of 302 billion won.
A large local fund called Truston has been going activist on BYC for more than a year. Plus, BYC’s Chairman Han is being sued by his mum for inheritance recovery.

Jiangnan Group (1366 HK): Irrevocable from the Shareholder with a Blocking Stake

The shareholder with a blocking stake has provided an irrevocable to accept Mr Chu Hui (Chairman and CEO)’s offer to privatise Jiangnan (1366 HK) at HK$0.40 per share
Key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). There are no other shareholders with a blocking stake.
The price is final and attractive in the context of historical prices and multiples. At the last close, the gross spread is 8.1%. Scheme document likely despatched in mid-April.

Liberty/Telenet: Intended Offer for Minorities

Liberty intends to launch an offer to acquire the minorities in its subsidiary Telenet, taking advantage of the drop in the share price over the last two years.
Liberty offers €22/share in cash, cum dividend, 5.9x EV/Fwd EBITDA, a minimum 95% threshold and no MAC with respect to BEL-20 index and shares of Telenet peers prior results announcement.
My fair value estimate (DCF based) is €16.2, i.e. 26% downside to the intended offer price. Spread is 5.2%/15.6% (gross/annualised). Cautious long.

Hindustan Aeronautics (HNAL IN) Offer for Sale: Buy Ahead of Potential MSCI Inclusion

The Government of India is looking to sell up to 3.5% of Hindustan Aeronautics Ltd (HNAL) to meet the minimum public shareholding and will raise US$350m at the floor price.
Hindustan Aeronautics Ltd (HNAL IN) is a potential inclusion to the MSCI India Index at the May QCIR and there will be buyers at the placement.
Hindustan Aeronautics Ltd (HNAL IN) trades cheaper than its peers and there could be a move higher over the next few weeks.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 22

Daily Brief Event-Driven: The BIG March 2023 “Wednesday Thursday Trade” and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

The BIG March 2023 “Wednesday Thursday Trade”
S.M. Entertainment: Proration Musings
S&P/ASX Index Rebalance Preview: Changes from Now to June
Mincor Resources (MCR AU): Wyloo’s A$1.40 Unconditional Takeover Offer
Quiddity Leaderboard-ASX Jun 23: OZ Minerals Replacements and Other Changes
Mincor: Twiggy’s On-Market Takeover
India: AMFI Stock Reclassification Preview (June 2023)
Oak Holdings/Vantage Towers: Delisting Agreement
Onewo Space-Tech IPO Lock-Up – Company, Parent and Cornerstones Could Eventually Sell

The BIG March 2023 “Wednesday Thursday Trade”

Every year it’s the same trade. But it isn’t really. But it kinda is. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
But, ceteris paribus, it is still possibly a ¥1,580,876,450,407 buying spree to take place on one day into the close later this month. Or something close to it.
And for a two-day period, over the last ten years, the average return is 1.60% on these two days with a 9:1 win ratio. Lots of angles here.

S.M. Entertainment: Proration Musings

After HYBE (352820 KS) conceded to Kakao Corp (035720 KS) earlier this month, S.M.Entertainment Co (041510 KS)‘s shares have declined 23%.
Kakao’s Partial Offer of ₩150,000/share closes on the 26 March.
Unadjusted proration is 36.8%, conservatively rising to 48.5%. It may settle at 61% if HYBE maintains its position – but that is probably a tad optimistic.

S&P/ASX Index Rebalance Preview: Changes from Now to June

There could be an addition to the S&P/ASX 100 Index and S&P/ASX 200 (AS51 INDEX) in April following OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU).
Then there could be another change for the S&P/ASX 200 (AS51 INDEX) at the regular rebalance in June.
Passive trackers will need to trade between 4.5-18 days of ADV on the potential adds/ deletes. Short interest has started to increase on a couple of stocks.

Mincor Resources (MCR AU): Wyloo’s A$1.40 Unconditional Takeover Offer

Wyloo has launched an unconditional off-market takeover bid for Mincor Resources NL (MCR AU) at A$1.40 per share, a 34.6% premium to the undisturbed price. The offer opens 5 April.
In certain aspects the offer is attractive. The offer values Mincor at a premium to peer and precedent transaction EV/Resource and EV/Reserve multiples.
However, the offer is at a discount to recent share prices and price targets. Rival bidders (BHP Group Ltd (BHP AU) or IGO Ltd (IGO AU)) could also emerge.

Quiddity Leaderboard-ASX Jun 23: OZ Minerals Replacements and Other Changes

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.
OZ Minerals Ltd (OZL AU) upcoming deletion in April 2023 could cause a couple of intra-review replacements.
Separately, there could be one more change in the ASX 200 index in the June 2023 review.

Mincor: Twiggy’s On-Market Takeover

Nickel explorer Mincor Resources NL (MCR AU)‘s board urges shareholders to take no action in response to the on-market takeover from Andrew Forrest’s backed Wyloo Metals.
Wyloo is offering A$1.40/share. The offer period commences on the 5 April and runs until the 8 May – unless extended. However, Wyloo’s broker is already standing in the market.
Wyloo, together with associates, control 19.87% of the voting power in Mincor. Currently trading 5.7% through terms

India: AMFI Stock Reclassification Preview (June 2023)

Nearly halfway through the review period, we see 10 stocks moving from MidCap to LargeCap and vice versa, and 9 stocks moving from SmallCap to MidCap and vice versa.
Financials are poised to be the biggest gainers in the reshuffle with 6 stocks moving from MidCap to LargeCap and 5 stocks moving from SmallCap to MidCap.
Over the last 6 months, stocks expected to migrate upward have outperformed stocks that are expected to migrate downward., though there has been a downward drift this year.

Oak Holdings/Vantage Towers: Delisting Agreement

Vantage Towers and Oak Holdings have concluded a delisting agreement after all takeover conditions were met. Oak Holdings intends to offer a cash consideration of €32/share to holdouts.
The stock is trading 4.25% above the delisting offer price, thus it seems difficult that a lot more shares will be tendered.
Elliot has a 5.61% stake in Vantage Towers, enough to prevent a squeeze-out and can exert pressure to obtain the DPLTA to include favorable terms (higher interest).

Onewo Space-Tech IPO Lock-Up – Company, Parent and Cornerstones Could Eventually Sell

By Sumeet Singh

Onewo (2602 HK) (OST) had raised around US$730m in its Hong Kong IPO in Sep 2022. Its six-month lockup is set to expire soon.
OST is a property management service provider in China, primarily owned by China Vanke (H) (2202 HK).
In this note, we will talk about the lock-up dynamics and updates since our last note.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 21

Daily Brief Event-Driven: Korean Government’s Official Statement on Foreign Ownership Limits & The Names Still to Watch and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Korean Government’s Official Statement on Foreign Ownership Limits & The Names Still to Watch
Australian Clinical Labs (ACL) Lowballs an All-Stock Offer for Healius (HLS)
MSCI Korea May QCIR: Potential Changes, Impact, Positioning & Short Interest
Healius (HLS AU): Australian Clinical Labs (ACL AU)’s Nil-Premium Merger Needs a Rethink
Healius: Australian Clinical Labs’ Opportunistic Merger Proposal
Essential Metals (ESS AU): Tianqi/IGO JV Scheme Meeting on 20 April
Bionote Lock-Up – Uncertainty on the Horizon, Likely to See Some Selling Pressure
Quiddity Leaderboard for UK F100/250 June 2023: Mediclinic Replacement Candidates Have High Impact
Essential Metals (ESS AU)’s Scheme: Shareholders To Vote On 20 April. MinRes In The Wings?
Potential Inclusions & Exclusions in KOSDAQ 150 Rebalance in May 2023

Korean Government’s Official Statement on Foreign Ownership Limits & The Names Still to Watch

Hankyung exclusively reported that the Korean regulators were considering abolishing the foreign ownership limit. This morning, the Ministry of Economy and Finance released a statement that this report is untrue.
Nevertheless, circumstantially, given the current government’s all-out effort to make it to MSCI Developed Market status, there is a high possibility that it will resurface not too far from now.
Four out of the 33 foreign ownership-restricted stocks will likely be immediately affected: SKT, KT, and Korea Gas (MSCI inclusion) and SBS (flow improvement).

Australian Clinical Labs (ACL) Lowballs an All-Stock Offer for Healius (HLS)

Australian Clinical Labs (ACL AU) has announced its intention to make an off-market takeover for Healius (HLS AU) offering 0.74 ACL shares for each Healius share.
The offer represents a nil-premium merger and if successful will result in current Healius (HLS AU) shareholders owning 68% of the merged company.
The offer is a big discount to longer-term VWAPs. We don’t expect shareholders will tender and Australian Clinical Labs (ACL AU) will need to sweeten the offer.

MSCI Korea May QCIR: Potential Changes, Impact, Positioning & Short Interest

We currently forecast 2 potential inclusions and 3 potential deletions for the MSCI Korea Index at the May QCIR. That will change over the next few weeks till cutoff date.
Passive trackers are estimated to buy between 0.6-3.3 days of ADV on the potential inclusions while selling between 6.9-14.2 days of ADV on the potential deletions.
Short interest on the potential deletions has moved significantly higher in the last few weeks and there will be pre-positioning on the stocks.

Healius (HLS AU): Australian Clinical Labs (ACL AU)’s Nil-Premium Merger Needs a Rethink

Australian Clinical Labs (ACL AU) has launched an all-scrip off-market takeover offer for Healius (HLS AU) at 0.74 ACL shares for each HLS share.
The offer is saddled with several onerous conditions which disproportionately shift the risk to HLS shareholders. The offer is long-dated as ACCC approval is expected to take six months.
The lack of premium and unattractive deal metrics suggests a high probability of Board rejection. Nevertheless, ACL’s bid underscores HLS’s beaten-down valuation. Expect improved terms.

Healius: Australian Clinical Labs’ Opportunistic Merger Proposal

Australian Clinical Labs (ACL AU) has announced a merger proposal for Healius (HLS AU), the completion of which would create Australia’s largest pathology provider.
ACL is offering 0.74 new shares for each share in Healius. Healius shareholders will hold 68% of the enlarged entity, with ACL shareholders holding 32%.
The Offer is conditional on a 90% minimum acceptance condition and regulatory approvals (ACCC and FIRB). Healius’ board is evaluating the Offer.

Essential Metals (ESS AU): Tianqi/IGO JV Scheme Meeting on 20 April

The IE considers Tianqi Lithium (9696 HK)/IGO Ltd (IGO AU) JV’s A$0.50 offer for Essential Metals (ESS AU) to be fair and reasonable as it is higher than its A$0.283-0.468 valuation.
Odey, the recent substantial shareholder, hoped for a competing proposal which has not materialised. On 10 March, Odey sold down 21% of its holding at A$0.48 per share.
Barring an unlikely competing proposal, this is done. At the last close price and for the 5 May payment, the gross and annualised spread is 3.1% and 28.4%, respectively.

Bionote Lock-Up – Uncertainty on the Horizon, Likely to See Some Selling Pressure

By Clarence Chu

Bionote (377740 KS) was listed on 22nd Dec 2023, when it raised US$73m in its downsized Korean IPO. Its three-month lockup will expire on 21st Mar 23.
Bionote is an integrated producer of diagnostics test products and biocontent products. Based on its unique recombinant antigen and antibody manufacturing technology, the firm researches and develops diagnostic reagent products.
Coming up for three-month lockup expiry are the firm’s three pre-IPO investors, together with Gunwoo Ha (ex-CEO). The three pre-IPO investors had earlier trimmed their respective stakes in the IPO.

Quiddity Leaderboard for UK F100/250 June 2023: Mediclinic Replacement Candidates Have High Impact

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 are no changes expected for F100 while there could be up to four changes in F250 between now and the June 2023 Rebalance
This includes the potential intra-review replacement of F250 member Mediclinic International (MDC LN) in the F250 index.

Essential Metals (ESS AU)’s Scheme: Shareholders To Vote On 20 April. MinRes In The Wings?

Back on the 9th Jan, small lithium player Essential Metals (ESS AU) entered into a Scheme with Tianqi Lithium JV, comprising Tianqi (9696 HK) (51%) and IGO (IGO AU) (49%).
The Scheme Booklet is now out, with a Scheme Meeting tabled for the 20 April. The Independent Expert reckons the Scheme Consideration is fair. FIRB is no longer required.
This is done and has traded tight from the onset.

Potential Inclusions & Exclusions in KOSDAQ 150 Rebalance in May 2023

In this insight, we discuss the potential inclusions and exclusions of the upcoming KOSDAQ 150 rebalance in May 2023.
The next round of KOSDAQ 150 rebalance will be announced in May and it will be effective as of end of May 2023.
Typically, the potential inclusions and exclusions to KOSDAQ 150 make their biggest moves in the one to three months prior to the rebalance announcements.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 20

Daily Brief Event-Driven: Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week
Golden Energy (GER SP): Revised Offer Is Still Not Good Enough
Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8
Merger Arb Mondays (20 Mar) – Toshiba, AAG Energy, Tyro, Newcrest, InvoCare, Pushpay, Golden Energy
Meritz Financial Group: A Large Share Buyback Amid Global Financials Uncertainties
Korean Government Reviews Rules to Ease Foreign Ownership Limits
SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month
Golden Energy: Offer Bumped. Still Insulting
ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Recent Outperformance

Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week

In early 2022, Tencent (700 HK) made clear it was on a divestment path – disposing of investments able to support themselves – possibly “obliged” after 2021’s China internet mess.
In August, Reuters suggested Meituan (3690 HK) was next. Tencent denied it, but in November with Q3 earnings, announced a January 2023 distribution with March 2023 settlement.
US$16bn of Meituan shares get delivered on 24 March 2023 – this Friday. That’s a lot. But this time is different than last time.

Golden Energy (GER SP): Revised Offer Is Still Not Good Enough

Golden Energy & Resources (GER SP)‘s revised proposal from the Widjaja family – distribution proposal (1.3936 GEMS share per share or IDR6,500 per GEMS share) and the delisting proposal (S$0.181).
The revised offer addresses the issue around the previous offer’s unattractive distribution cash alternative and unfavourable FX. However, the revised offer remains light but is not declared final.
The revised offer fails to address the issue concerning the decline in Golden Energy Mines (GEMS IJ) share price and the value of Stanmore Coal (SMR AU) stake.

Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8

Kakao Pay’s GICS sector movement from IT to FINANCIALS creates flow trading opportunities due to the subsequent transfer between KOSPI 200’s sector sub-indices.
An outflow of ₩24.6B or 410K shares will occur. This is 0.6x ADTV. Given that the recent trading volume has further decreased, the actual impact will likely exceed 1.0x DTV.
It will be a concentrated flow in a single trading day by a single ETF, which gives us plenty of reasons for preemptively designing a short position targeting this.

Merger Arb Mondays (20 Mar) – Toshiba, AAG Energy, Tyro, Newcrest, InvoCare, Pushpay, Golden Energy

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 – 21Vianet Group (VNET US), 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Genesis Minerals (GMD AU), Newcrest Mining (NCM AU), Aag Energy Holdings (2686 HK).
Lowest spreads – Nitro Software Ltd (NTO AU),Norwest Energy NL (NWE AU), GK Goh Holdings (GKG SP), Boustead Projects (BOCJ SP), Nippon Steel Trading Corporation (9810 JP), Nissin Electric.

Meritz Financial Group: A Large Share Buyback Amid Global Financials Uncertainties

On 17 March (after market close), Meritz Financial Group (138040 KS) announced a share buyback program worth 400 billion won, which represents 5.4% of its market cap.
Given the relative large size of this deal, it should have a positive impact on its share price, especially on a relative basis against its competitors.
The collapse of SVB Financial and uncertain investors’ reactions on the purchase of Credit Suisse by UBS will likely add to the global investors’ negative sentiment on the financial sector.

Korean Government Reviews Rules to Ease Foreign Ownership Limits

In recent days, the Korean government announced that it is reviewing foreign ownership limit rules.
The main reasons are to align South Korea’s financial policies in line with the global standards and improve the chances of South Korea becoming included in MSCI Developed country status.
Key companies that could benefit from potential raise of foreign ownership limit include SK Telecom, KT Corp, and SBS.

SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month

Nearly 90% through the review period, we see 6 potential adds and 5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
We estimate a one-way turnover of 5.07% at the June rebalance leading to a one-way trade of CNY 3.97bn. Index arb activity could add to the impact on the stocks.
The potential adds have outperformed the potential deletes by 17% over the last month and by 21% over the last two months.

Golden Energy: Offer Bumped. Still Insulting

The Widjaja family has responded to criticism from various quarters over its low-balled Offer for Golden Energy & Resources (GER SP) and revised terms.
The all-cash payout for the 62.5% stake in Golden Energy Mines (GEMS IJ) is now 15.5% higher at S$0.792/share. The exit offer is 13% higher at S$0.18.1.
No matter how you slice it, the bump is petty. GEAR’s “rump” is currently worth at least S$0.63/share.

ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Recent Outperformance

Three quarters of the way through 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 will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. On average, the impact on the potential deletions is higher.
The potential adds have outperformed the potential deletes over the last six months, and there has been a sharp widening of the gap over the last few weeks.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 19

Daily Brief Event-Driven: EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades 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
Halcyon Agri (HACL SP): Hainan Rubber’s Offer Is Declared Unconditional
Index Rebalance & ETF Flow Recap: STAR50, HSCEI, CSI300, KOSDAQ150, Japan Post Bank
Halcyon Agri’s Offer Is Now Unconditional
Last Week in Event SPACE: Japan Post Bank, S.M Entertainment, Toshiba, Link REIT
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Oishi, AAG, Pushpay, GK Goh, Halcyon Agri, S.M.Entertainment

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

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

Halcyon Agri (HACL SP): Hainan Rubber’s Offer Is Declared Unconditional

Halcyon Agri (HACL SP)’s S$0.413 per share MGO from China Hainan Rubber Industry (601118 CH) has met the 50%+ minimum acceptance condition.
The closing date is extended from 24 March to 10 April. The payment settlement is within seven business days of receipt of a valid acceptance.
The offeror currently represents 50.003% of outstanding shares. At the last close, the gross and annualised spread for a 10 April payment is 2.0% and 41.8%, respectively.

Index Rebalance & ETF Flow Recap: STAR50, HSCEI, CSI300, KOSDAQ150, Japan Post Bank

There were a bunch of rebalances on Friday across Asia resulting in big flows across multiple stocks and countries.
The coming week is quieter with no scheduled rebalances – though the KOSDAQ 150 Index rebalance could take place dependent on Kuk Il Paper Mfg (078130 KS)‘s trading resumption.
Inflows to China and Taiwan ETFs while Korean ETFs had outflows. Market volatility resulted in redemptions from iShares MSCI Emerging Markets (EEM) and IShares MSCI Min Vol Emerging Markets (EEMV).

Halcyon Agri’s Offer Is Now Unconditional

China Hainan Rubber Industry (601118 CH)‘s Offer for Halcyon Agri (HACL SP) is now unconditional in all respects.
The closing date has accordingly been extended to the 10 April. It can be further extended.
This transaction is done. And will trade tight to terms.

Last Week in Event SPACE: Japan Post Bank, S.M Entertainment, Toshiba, Link REIT

Medium-Term, Japan Post Bank (7182 JP) is not in great shape fundamentally compared to others We still know nothing about TOPIX. And we may just not hear.
Kakao Corp (035720 KS) to take control of S.M.Entertainment Co (041510 KS) after HYBE (352820 KS) throws in the towel.
The world is quite volatile now, and funding is probably more precious today than yesterday. But a bid for Toshiba Corp (6502 JP) is too.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Oishi, AAG, Pushpay, GK Goh, Halcyon Agri, S.M.Entertainment

There are 42 – 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: Thai Beverage (THBEV SP)‘s delisting Offer for Oishi Group PCL (OISHI TB).
Key updates took place for AAG Energy Holdings (2686 HK), Pushpay Holdings (PPH NZ), GK Goh Holdings (GKG SP), Halcyon Agri (HACL SP), and S.M.Entertainment Co (041510 KS).

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 18

Daily Brief Event-Driven: Flow Trading Targeting Cap Reversion in TIGER Battery ETF Rebalancing on April 13 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Flow Trading Targeting Cap Reversion in TIGER Battery ETF Rebalancing on April 13
Four Companies Likely to Switch Their Listing from KOSDAQ to KOSPI in 2023/2024
MFE/Mediaset España: Merger Approval, Spread and Delisting

Flow Trading Targeting Cap Reversion in TIGER Battery ETF Rebalancing on April 13

There seems to be no constituent change this time. However, opportunities from cap reversion are likely to lead to noteworthy passive flows.
Ecopro BM and Ecopro Co will experience a weight movement of -4.35% and -3.68%p. On the other hand, SK Innovation will enjoy the most pleasant passive impact.
At KODEX Battery’s March rebalancing, the Long SK Innovation Short Ecopro BM position setup provided a return of more than 10% with a similar level of impact x ADTV.

Four Companies Likely to Switch Their Listing from KOSDAQ to KOSPI in 2023/2024

In this insight, we discuss four companies that are likely to switch their listing from KOSDAQ to KOSPI in 2023/2024.
These four companies include Ecopro BM, Ecopro Co, BH Co, and Nice Information Service.
BH Co and Nice Information Service have included the agenda of transfer of the listing from KOSDAQ to KOSPI in their upcoming AGMs this month.

MFE/Mediaset España: Merger Approval, Spread and Delisting

TL5 holdouts have exposed themselves to being trapped by MFE, which has already shown in the past that it has no qualms about running its subsidiary for its own interests.
The implied exchange values the audiovisual business of TL% at 1.2 EV/22eEBITDA TL5/MFEA spread is +3.02%, I would wait for it to turn negative to open a position.
MFE A shares are trading at a 34.7% discount, which seems excessive nevertheless. With more A shares coming in the market (and higher liquidity), I would be long MFEA/short MFEB.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 17

Daily Brief Event-Driven: Pushpay (PPH NZ): Sixth Street/BGH Return with a NZ$1.42 Offer and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Pushpay (PPH NZ): Sixth Street/BGH Return with a NZ$1.42 Offer
Quiddity Flow Expectations HSCEI Jun 23: 2 ADDs/DELs Possible; Capping Flows US$585mn One-Way
Quiddity Flow Expectations HSTECH Jun 23: New Oriental Education IN; AAC Technologies OUT
Cosmo AM&T: Strong Momentum from Likely Inclusion in MSCI Korea Standard in 2023

Pushpay (PPH NZ): Sixth Street/BGH Return with a NZ$1.42 Offer

Sixth Street/BGH have come back for Pushpay Holdings (PPH NZ) with a revised offer of NZ$1.42 per share, a 6.0% premium to the previous failed offer of NZ$1.34 per share.
Sixth Street/BGH have secured total commitments to accept the offer from 28.9% of outstanding shares, including all the shareholders that publicly voted against the previous scheme.
The offer is around the mid-point of the IE’s valuation range. At the last close and for the end-May payment, the gross and annualised spread is 2.2% and 7.4%, respectively.

Quiddity Flow Expectations HSCEI Jun 23: 2 ADDs/DELs Possible; Capping Flows US$585mn One-Way

In this insight, we take a look at the potential index changes and the resultant capping flows for the HSCEI Index in June 2023.
According to our estimation, there could be two changes for the HSCEI in June 2023 and there could be one-way index flows of US$585mn.
The final index changes along with indicative capping and index weights could be published in Mid/Late-May 2023.

Quiddity Flow Expectations HSTECH Jun 23: New Oriental Education IN; AAC Technologies OUT

In this insight, we take a look at the potential index changes and the resultant capping flows for the HSTECH Index in June 2023.
According to our estimation, there could be one ADD/DEL for the HSTECH in June 2023 triggering total one-way index flows of US$238mn.
The final index changes along with indicative capping and index weights will be published in Mid/Late-May 2023.

Cosmo AM&T: Strong Momentum from Likely Inclusion in MSCI Korea Standard in 2023

We provide a fundamental analysis of Cosmo AM&T (005070 KS) (Cosmo Advanced Materials & Technology), which is increasingly likely to become included in MSCI Korea Standard index in 2023.
Cosmo AM&T is a borderline inclusion candidate for MSCI Korea Standard in May 2023. If it does not get included in May, it could get included in 2H 2023.
All in all, the increasing possibility of MSCI Korea Standard inclusion combined with strong sales and profit momentum could result in a further positive momentum on its share price.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 16

Daily Brief Event-Driven: Link REIT (823) – Anchors Aweigh! Fair Weather Sailing Ahead and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Link REIT (823) – Anchors Aweigh! Fair Weather Sailing Ahead
Toshiba (6502) – Funding Possibly Re-Secured, Deal Possibly In Play,
Anycolor (5032 JP) Shows Its Colours – Great Quarter Guys! and TOPIX-Bound
AAG Energy (2686 HK): Full-Year Results Lay Bare Xinjiang Xintai’s Low-Balled Offer
KOSDAQ150 Ad Hoc Index Rebalance: Lake Materials (281740) To Replace Kuk Il Paper (078130)
Japan Post Bank (7182) – The Flow Calendar
AAG Energy (2686 HK): Solid Results Amplify the Risk of the NO Vote
An Increasing Probability of LG Corp Preferred Shares Cancellation
CSI300 Index Rebalance Preview: Narrowing the Gap
Liquid Universe of European Ordinary and Preferred Shares: March ‘23 Report

Link REIT (823) – Anchors Aweigh! Fair Weather Sailing Ahead

The Link REIT (823 HK) rights offering caused some upset amongst investors. They got dilution where they did not need it, and de-leveraging from a REIT wanting to invest.
The units fell in price, then fell some more. Then the rights started trading.
Last week in Link REIT (823) – Nil Paid Rights Start Trading Tomorrow – The Trades I said strategy was to be long by Tuesday or Wednesday. It’s Wednesday.

Toshiba (6502) – Funding Possibly Re-Secured, Deal Possibly In Play,

Bloomberg has an article today after the close saying Toshiba Corp (6502 JP)‘s board will meet tomorrow to discuss the JIP bid, and the Special Committee will give its recommendations.
The article suggests the Board may proceed with a vote. If they do, an announced bid could come as early as the afternoon.
The world is quite volatile now, and funding is probably more precious today than yesterday. But a bid is too. All in all, I see no reason for a position.

Anycolor (5032 JP) Shows Its Colours – Great Quarter Guys! and TOPIX-Bound

Anycolor (5032 JP) reported Q3 results today. 9mo Revenue is now above the lower end of original forecasts for the full-year. 9mo OP is 25% higher than the original mid-range.
The net profit forecast is now up 51% from the original mid-range, and up 128% on the year. The stock has cratered. Badly.
It is now 19x April 2023 earnings for 90% revenue growth and 150% Net Profit growth and 40% OPM in the last quarter. Go figure.

AAG Energy (2686 HK): Full-Year Results Lay Bare Xinjiang Xintai’s Low-Balled Offer

On the 17 February, AAG Energy Holdings (2686 HK) announced an Offer of HK$1.85/share (declared final) by way of a Scheme from major shareholder Xinjiang Xintai Natural Gas (603393 CH).
At a 10.1% premium to undisturbed and just a 2.2% premium over the highest closing price of HK$1.81/share in the past year, the Consideration price was unreasonable.
FY22 numbers are now out, which further illustrates the Offer price’s inadequacy. AAG’s trailing PER and EV/EBITDA are 3.6x and 1.4x. Net cash accounts for 41% of AAG’s market cap.

KOSDAQ150 Ad Hoc Index Rebalance: Lake Materials (281740) To Replace Kuk Il Paper (078130)

Following Kuk Il Paper Mfg (078130 KS)‘s designation as an Administrative Issue, the stock will be deleted from the KOSDAQ 150 Index and replaced with Lake Materials (281740 KS).
The timing of the index change is currently uncertain but will be implemented latest by the close of trading on 6 April.
Lake Materials (281740 KS) was up today and is nearing its highs. There could be another leg higher on the inclusion but we’d be wary of chasing the stock higher.

Japan Post Bank (7182) – The Flow Calendar

The near-term Supply/Demand Balance is helped or hurt – depending on how well the deal has been placed to retail, by overseas bank turmoil.
Quality of placement to retail is tough to know from outside. We have near-term offsets with both index demand and dividend looming.
The biggest near-term differentiator in possible supply/demand outcomes is, of course, in the hands of the TSE Index team. And we just don’t know.

AAG Energy (2686 HK): Solid Results Amplify the Risk of the NO Vote

Aag Energy Holdings (2686 HK) released solid FY22 results which magnify the scheme risk of Xinjiang Xintai Natural Gas (603393 CH)‘s pre-conditional privatisation offer of HK$1.85 per share.
The FY22 metrics show that the offer values AAG at a lower EV/1P Reserve and EV/Production vs the 2018 offer. It is unattractive in comparison to historical and peer multiples.
The solid FY22 results and lack of dividends amplify the risk that minorities vote NO. The downside is capped as the shares are trading below the undisturbed price.

An Increasing Probability of LG Corp Preferred Shares Cancellation

In this insight, we discuss an increasing probability of the cancellation of LG Corp preferred shares.
We provide five major reasons as to why LG Corp should cancel its entire preferred shares and how this could have a positive impact on LG Corp’s share price.
We believe a 5-10% buyback and cancellation of LG Corp’s preferred shares in the next 1-2 years is a higher probability.

CSI300 Index Rebalance Preview: Narrowing the Gap

Over 85% of the way through the review period, we see 14 potential index changes at the June rebalance that will be implemented at the close on 9 June.
We estimate a one-way turnover of 2.28% at the June rebalance leading to a one-way trade of CNY 5.95bn.
The potential adds have outperformed the CSI 300 Index over the last two months but have underperformed the potential deletes. The gap has been narrowing recently.

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

Since mid-February, spreads have generally tightened across our liquid universe (9 have widened, 10 tightened, 0 at same level).
Trade preferences long ordinary / short preferred shares: Fuchs Petrolub, Henkel, Handelsbanken, SSAB Svenska Stal.
Trade preferences long preferred / short ordinary shares: Sixt, VW, Danieli, MFE-Media for Europe, Grifols, Atlas Copco, Ericsson.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 15

Daily Brief Event-Driven: SM Entertainment: Kakao’s Tender Offer Proration Analysis and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

SM Entertainment: Kakao’s Tender Offer Proration Analysis
HSCEI Index Rebalance Preview: China Shenhua (1088) Could Replace Country Garden (2007); Div Impact
SM Ent Tendering P&L & Allocation Risk for a 30% Spread Opening
TBS (9401) Selling Cross-Holdings But Don’t Hold Your Breath
Australia: S&P/ASX, REMX, GDXJ, MVA, MVW, Other Flows on Friday

SM Entertainment: Kakao’s Tender Offer Proration Analysis

In this insight, we provide a proration analysis of the S.M.Entertainment Co (041510 KS) tender offer by Kakao Corp (035720 KS).
Our base case assumes 71.4% of outstanding shares will participate in the tender offer, including HYBE, NPS, KB Asset Mgmt, Com2Us, and 70% of the remaining local and overseas investors.
There is a very high probability of a successful tender offer of SM Entertainment shares by Kakao. Post end of tender offer, its share price could fall about 5-10%, however.

HSCEI Index Rebalance Preview: China Shenhua (1088) Could Replace Country Garden (2007); Div Impact

China Shenhua Energy Co H (1088 HK) could replace Country Garden Holdings Co (2007 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the June rebalance.
Short interest on China Shenhua Energy Co H (1088 HK) is pretty small while the short interest on Country Garden Holdings Co (2007 HK) is large and possibly getting bigger.
The change could result in a big increase in the fair value for the HSCEI 2023 dividend futures. Currently, we estimate an increase of up to 9 DIPS.

SM Ent Tendering P&L & Allocation Risk for a 30% Spread Opening

The target volume is 47.6% of the nominally estimated tendering pool size. It may go up due to retail investors’ typically low participation in tendering.
Other factors MAY OFFSET this. Most notable is the tendering possibility of HYBE (18.45%) and Lee Soo-man (4.96%). Combining these, the allocation rate will likely be between 50% and 60%.
Using this 50-60% band as a reference point, we should assess the risk of mismatching between the degree of post-tendering price correction and our loss buffer range for non-tendered shares.

TBS (9401) Selling Cross-Holdings But Don’t Hold Your Breath

Three years ago I wrote a piece about the history of activism at Tokyo Broadcasting System (9401 JP), suggesting it was not expensive but activist gains might be hard won.
Yesterday, TBS announced it would sell strategic cross-holdings to raise cash for investment, as per its Medium-Term Management Plan 2023, and its full-year forecast Net Profit would rise 75%.
That tells you what you need to know, and it guides you to the value within.

Australia: S&P/ASX, REMX, GDXJ, MVA, MVW, Other Flows on Friday