In today’s briefing:
- Introducing KODEX Top 5 Plus ETF Rebalancing Event
- KOSPI 200 Ad Hoc Rebalance for Meritz Securities: DGB Financial Will Be Added
- Golden Energy (GER SP): Long-Stop Date Extended as the Offer Looks Increasingly Light
- Sun Capital Partners/K3 Capital Group: Agreed Underwhelming Offer
- Sun Pharmaceutical Ind (SUNP IN): Acquisition Adds Late-Stage Biopharma Product in Derma Franchise
- KCGI Formally Goes Activist on Osstem Implant
Introducing KODEX Top 5 Plus ETF Rebalancing Event
- At this point, one constituent change is expected, and LG Chem is expected to replace KT&G.
- The return of the equal-weighted long/short basket trade for the constituent changes in the past two years was recorded from 2.3% to 3.8%.
- Both LG Chem and KT&G are expected to have a significant rebalancing flow impact. It can be an event that brings a juicy day trading return.
KOSPI 200 Ad Hoc Rebalance for Meritz Securities: DGB Financial Will Be Added
- With JB Financial Group gone for Meritz Fire, the next one in line will enter KOSPI 200 in place of Meritz Securities. And the lucky one is DGB Financial.
- DGB can expect an inflow of 8.23x ADTV and will face a 2.8x ADTV in one day on March 31.
- Given the size of the preemptive flow that JB Financial is currently attracting, we should prepare for DBG to start receiving a similar level of price impact earlier than usual.
Golden Energy (GER SP): Long-Stop Date Extended as the Offer Looks Increasingly Light
- The long-stop date for the satisfaction of the offer conditions has been extended from 9 April to 9 August, to help Dian Swastatika Sentosa (DSSA IJ) obtain shareholder approval.
- An alternative explanation is that the Widjaja family’s offer for Golden Energy & Resources (GER SP) is increasingly looking unattractive in light of Stanmore Coal (SMR AU)’s share price rally.
- The offer remains light and we think that there is a good chance that the Widjaja family will raise its offer (likely a bump to the delisting price) to succeed.
Sun Capital Partners/K3 Capital Group: Agreed Underwhelming Offer
- Sun Capital offers 350p/share for K3, 10.7x EV/NTM EBITDA, lower than median of peers at 11.3x and lower than my DCF-based estimate of 404.7p (implied 12.4x EV/NTM EBITDA).
- In spite of the underwhelming figure, the deal is likely to go ahead: top shareholders/managers (30.4%) will contribute to Bidco, and irrevocables total 10%. Court/GM meetings are on 26 January.
- Gross spread is 0.71%. Assuming it all goes smoothly, the estimated annual return assuming settlement by 28 February is 7%. Long.
Sun Pharmaceutical Ind (SUNP IN): Acquisition Adds Late-Stage Biopharma Product in Derma Franchise
- Sun Pharmaceutical Industries (SUNP IN) is acquiring the U.S.-based late-stage biotechnology company, Concert Pharmaceuticals (CNCE US) for $576M in equity value. The transaction is expected to be completed in 1Q23.
- Concert has completed the evaluation of the efficacy and safety of its lead candidate, deuruxolitinib in adult patients with moderate to severe Alopecia Areata in its phase 3 clinical program.
- With the disease affecting up to ~1.5M people in the U.S., Alopecia represents potential blockbuster opportunity. Sun Pharma plans to file NDA for deuruxolitinib to the FDA in 1H23.
KCGI Formally Goes Activist on Osstem Implant
- On 20 January, KCGI private equity fund formally started its corporate governance activist campaign on Osstem Implant (048260 KS).
- KCGI officially going activist on the company, its strong fundamentals and deep discount valuations suggest that Osstem Implant’s price is likely to outperform KOSPI by a wide margin in 2023.
- KCGI has demanded Kyoo-Ok Choi (Chairman of Osstem Implant) to resign.
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