In today’s briefing:
- FTSE TWSE Taiwan Div+ Index: Recent Performance & Potential Trades
- A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical
- Disaster As VTOs Cancelled Under DTAC/True Merger
- Keppel (KEP SP) Vote on Keppel O&M and Sembcorp Marine Transaction on 8 Dec
- Mori Trust Sogo – Mori Trust Hotel REIT Merger
- Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade
- Link Admin (LNK AU) Sets in Motion a Strategy to Realise Underlying Value
- Pendal/Perpetual: 23 Dec Scheme Meeting
- NIFTY Quiddity Leaderboard Mar 23: Tata Motor DVR Could Be Included in NIFTY 100
- SM Investments (SM PM): Retail Income Now Exceeds Pre-Covid Levels
FTSE TWSE Taiwan Div+ Index: Recent Performance & Potential Trades
- The review period for the FTSE TWSE Taiwan Dividend+ index ended Monday, 21 November. We forecast 26 adds/ 5 deletes in December – the flows are huge.
- Stocks with potential inflows have outperformed stocks with potential outflows over multiple time periods going back a month. Yesterday was an especially good day for the strategy.
- We expect continued pre-positioning ahead of the passive flows will help the stocks with inflows outperform stocks with outflows. A reversal of performance could come post implementation.
A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical
- This post will specifically examine arb trade opportunities during the subscription rights trading period, with the recent HLB and Lotte Chemical cases.
- HLB gave an arb yield of 8%. As for Lotte Chemical, the size (₩1.1T) is much bigger, and it carries single-stock futures, a powerful incentive for arb traders.
- Another thing for Lotte Chemical is that it is unclear whether the major shareholders will participate in the subscription, which can lead to a widening of our arb spread.
Disaster As VTOs Cancelled Under DTAC/True Merger
- “The conditions precedent to the VTO have not been satisfied within one year from 22 November 2021 … the parties have declined to carry out the VTO.“
- This statement was lifted from Telenor’s (the major shareholder of Total Access Communication (DTAC TB)) brief announcement. Telenor/CP Group aim to complete the transaction within the first quarter of 2023
- This appears a cop-out on behalf of both Tender Offerors (Telenor & CP Group), who probably could have pushed for an extension. And why weren’t the scrip terms addressed?
Keppel (KEP SP) Vote on Keppel O&M and Sembcorp Marine Transaction on 8 Dec
- Keppel Corp (KEP SP)’s EGM on 8 December requires majority shareholder approval of two ordinary resolutions. The IFA notes that the transaction terms are “not prejudicial” to minorities.
- Keppel shareholders will be supportive due to attractive terms. The other key conditions precedent is Sembcorp Marine (SMM SP) shareholders and regulatory approvals (SGX-ST and Maritime Port Authority of Singapore).
- The deal is expected to close by the end of the year. Our Keppel SoTP valuation is S$8.30 per share, which is 12% above the last close.
Mori Trust Sogo – Mori Trust Hotel REIT Merger
- Yesterday, Mori Trust Sogo Reit (8961 JP) (MTR) and Mori Trust Hotel Reit (3478 JP) (MTH) announced a merger to be effective 1 March 2023. MTR will be the survivor.
- The ratio is 1.00 : 0.92 MTR:MTH but MTR will conduct a 2:1 stock split on effective date to make it 1.00 : 1.84 to allow retail to continue holding.
- This will effectively increase the size of MTR by 35%, and re-distributes earnings structure. There will be index consequences.
Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade
- With just over two months left in the review period, we expect three changes to the Nikkei 225 (NKY INDEX) at the March rebalance.
- Lasertec Corp (6920 JP), Oriental Land (4661 JP) and Renesas Electronics (6723 JP) could replace Toyobo Co Ltd (3101 JP), Nippon Light Metal (5703 JP) and Toho Zinc (5707 JP).
- As with the last rebalance, there will be a large funding trade estimated at JPY 417bn. There are many stocks with over 0.5x ADV to sell.
Link Admin (LNK AU) Sets in Motion a Strategy to Realise Underlying Value
- The EGM to approve the PEXA Group (PXA AU) distribution of Link Administration (LNK AU)’s remaining 38.49% stake is on 23 December. Shareholders get one PEXA share per 7.52 Link shares.
- This marks the latest move to unlock the underlying value by pursuing a breakup strategy. Discussions continue on DND’s acquisition of the CM and the BCM business for A$1.27 billion.
- Our base-case SoTP value is A$4.42 per share, which is 28% above the last close. If you haven’t been turned off by the Link saga, it is worth a look.
Pendal/Perpetual: 23 Dec Scheme Meeting
- After the Supreme Court of NSW ruled that Perpetual Ltd (PPT AU) cannot stall the Scheme for Pendal Group (PDL AU), the Scheme Booklet is now out.
- Under the revised terms, Pendal shareholders will receive 1 Perpetual (share for every 7 Pendal shares plus $1.65/share cash. The IE concluded the terms are fair and reasonable.
- The Scheme Meeting will be held on the 23 December, with an expected implementation date on the 23 January.
NIFTY Quiddity Leaderboard Mar 23: Tata Motor DVR Could Be Included in NIFTY 100
- In this insight, we take a look at the potential ADDs/DELs for the NIFTY 50, 100, and 500 Indices in the run up to the March 2023 Rebalance.
- In October 2022, NIFTY Indices Ltd initiated a market consultation recently on the “treatment of merger/demerger in Nifty equity indices” and its outcome has been confirmed now.
- Separately, Tata Motors DVR (TTMT/A IN) – previously ineligible for NIFTY 100 Inclusion for liquidity reasons – could become eligible for the March 2023 Rebalance event.
SM Investments (SM PM): Retail Income Now Exceeds Pre-Covid Levels
- SM Investments (SM PM), the leading Filipino conglomerate, recently announced strong 9M22 earnings, buoyed by increased economic activity and strong consumer sentiment.
- The standout was the unlisted SM Retail segment which recorded net income of PHP 11.5bn, exceeding 2019 pre-pandemic levels.
- The implied stub/share – net of all listcos – of PHP 208/share compares to the five-year average of PHP 273/share, and the two-year average of PHP 252 preceding Covid.
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