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
- Changes to the S&P/ASX indices, VanEck Vectors Rare Earth/Strategic Metals ETF, VanEck Vectors Junior Gold Miners ETF, Vaneck Aus Equal Weight ETF, and other indices will be implemented 17 March.
- There are plenty of stocks with multiple days of ADV to trade. Some pre-positioning would have taken place prior to announcement and positions adjusted in the last couple of weeks.
- There has been a reversal in stock performance over the last few weeks and short interest has moved a lot in some stocks.
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