In today’s briefing:
- A Practical Guide to Stub Arb Trade in the Korean Stock Market
- ESR Group (1821 HK): Precondition Satisfied
- Mayne Pharma (MYX AU): The Scheme Booklet Should Calm Nerves
- OneConnect Financial (6638 HK/OCFT US): Ping An’s Preconditional Scheme Offer Is Below Net Cash
- [Japan Activism?] Toyota Group Equity Affiliate and Murakami Target Aichi Steel Does Large ToSTNeT-3
- Hanjin Group Chairman Cho Fights Back Against Hoban Group for Control of Hanjin Kal
- Mayne Pharma (MYX AU): Scheme Booklet Dispatch Lends More Than A Veneer Of Support
- Aedifica/Cofinimmo: Belgian REITs in Stalemate Over Merger
A Practical Guide to Stub Arb Trade in the Korean Stock Market
- Due to NAV accuracy issues, locals favor sigma plays within ±2σ bands over classic stub trades, with aggressive traders rotating longs and shorts around ±1σ.
- Avoid trending divergence periods; these eight targets usually mean-revert well, but H1 this year showed unusually deep divergence—important to consider for current sigma plays.
- As of today, no 20-day MA sigmas trigger trades, but holding company strength drives price ratios—a trend likely lasting post-election—suggesting ±2σ sigma plays with longs in holdcos.
ESR Group (1821 HK): Precondition Satisfied
- The precondition for the consortium scheme offer for ESR Group (1821 HK) has been satisfied. The scheme document will be despatched by 22 May.
- The consortium has disclosed an additional irrevocable. Total irrevocables and letters of support represent 35.01% of outstanding shares (58.24% of disinterested shares).
- This is a done deal, helped by the material derating of peers. At the last close and for an early August payment, the gross/annualised spread is 4.3%/21.3%
Mayne Pharma (MYX AU): The Scheme Booklet Should Calm Nerves
- Mayne Pharma (MYX AU) has released its scheme booklet regarding Cosette’s A$7.40 offer. The IE opines that the offer is fair and reasonable within its A$6.61-A$7.99 valuation range.
- The high spread reflects concerns that recent events would trigger the MAC clause. Thankfully, the scheme booklet does not indicate that Cosette is contesting it.
- Recent events should help quell retail opposition to the offer. At the last close and for a 2 July payment, the gross/annualised spread is 19.4%/262%.
OneConnect Financial (6638 HK/OCFT US): Ping An’s Preconditional Scheme Offer Is Below Net Cash
- Oneconnect Financial Technology (6638 HK) disclosed a preconditional scheme offer from Ping An Insurance (H) (2318 HK) at HK$2.068 per share (US$7.976 per ADS).
- Despite the hefty premium, the offer is opportunistic as it values OneConnect below net cash, and the FCF burn is modest (net cash can fund 8 years of FCF burn).
- Ping An has secured support from M&G to lower vote risk. The key risk remains that an activist stealthily builds a blocking stake (below the 5% HKEx disclosure threshold).
[Japan Activism?] Toyota Group Equity Affiliate and Murakami Target Aichi Steel Does Large ToSTNeT-3
- Aichi Steel (5482 JP) announced earnings on 25-April during market hours. Results were OK. Guidance was OK. The div was WAY up for Mar26. Shares fell. Then rose 26-April.
- Aichi Steel is a Toyota Motors equity affiliate (26-27%), Toyota Industries, Toyota R.E., megabanks, the Kyoeikai, and Nippon Steel all have stakes. Nippon Steel recently reduced its position.
- Activist Murakami has about 10% across two entities. This morning, the Company was to buy back 16%. WHO is selling? We don’t know yet. Likely a mix. Details may matter.
Hanjin Group Chairman Cho Fights Back Against Hoban Group for Control of Hanjin Kal
- On 15 May, Hanjin KAL Corp (180640 KS) announced that it will contribute 440,044 shares of its treasury stock to the company’s welfare fund, representing 0.7% of its common shares.
- This is a clear indication of Hanjin Kal Chairman Cho Won-Tae and his allies launching a management rights defense against Hoban Group which recently increased its stake in Hanjin Kal.
- The higher probability scenario is for Hanjin Kal’s shares to retrace down to below 100,000 won level as a full blown M&A fight is not likely in the near future.
Mayne Pharma (MYX AU): Scheme Booklet Dispatch Lends More Than A Veneer Of Support
- After a rough week – somewhat of an understatement – the Scheme Doc is now out.
- The Court Meeting is the18th June; the last day of trading the 23rd June, and implementation 2nd July. The IE says fair with a valuation range of A$6.61-A$7.99/share.
- This IE’s valuation range doesn’t factor in the pharma EO, given its ambiguity. Nor the FDA level. However, Mayne, ASIC AND Cosette have effectively signed off on the Doc’s veracity.
Aedifica/Cofinimmo: Belgian REITs in Stalemate Over Merger
- Cofinimmo’s Board considers the 1.16x exchange offer significantly undervalued, citing EPS dilution, low control premium, and disproportionate benefit to Aedifica shareholders despite strategic rationale and merger synergies.
- The combined entity would form Europe’s largest healthcare REIT, benefiting from €12.1bn in assets, ~€710m contractual rents, improved diversification, and potential credit rating uplift from BBB to BBB+.
- A revised 1.21 ratio (probability-weighted value of €76.29) remains plausible, supporting a long Cofinimmo/short Aedifica arbitrage trade, though limited current spread suggests cautious sizing given deal uncertainty and downside risk.
Before it’s here, it’s on Smartkarma
Sign Up for Free
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
Unlock all research summaries