Daily BriefsEvent-Driven

Daily Brief Event-Driven: FTSE TWSE Taiwan Div+ Index: Recent Performance & Potential Trades and more

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

By Brian Freitas

  • 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

By Sanghyun Park

  • 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

By David Blennerhassett

  • 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

By Arun George

  • 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

By Travis Lundy

  • 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

By Brian Freitas


Link Admin (LNK AU) Sets in Motion a Strategy to Realise Underlying Value

By Arun George

  • 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

By David Blennerhassett

  • 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

By Janaghan Jeyakumar, CFA

  • 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

By David Blennerhassett

  • 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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