Daily BriefsEvent-Driven

Event-Driven: Big Hit Entertainment, SBI Cards , OptiComm Ltd, Wipro Ltd, Hyundai Glovis and more

In today’s briefing:

  • The KOSPI200 Could Have a ‘Big Hit’ in December
  • MSCI Nov20 Index Rebalance Preview – India
  • OptiComm: Uniti Sees Aware And Raises
  • How Indian Buyback Offers Work – The Wipro Example
  • Glovis/Mobis Diversion Is Reaching an Extreme for Three Reasons: Time to Trade on Reversion

The KOSPI200 Could Have a ‘Big Hit’ in December

By Brian Freitas

Big Hit Entertainment (1255064D KS) listed on the KRX yesterday and closed the day at KRW 258,00/share versus an IPO price of KRW 135,000/share for a day 1 gain of 91%. After hitting a high of KRW 351,000/share in early trade, the stock sold off through the day to close near its lows.

Currently ranked 33 among the eligible KOSPI universe, Big Hit could be included in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the December rebalance depending on the price movements over the next 2 weeks.

If Big Hit’s inclusion is the announced ahead of the regular index review announcement, then Unid Co Ltd (014830 KS) should be deleted. If the inclusion is announced as part of the regular index review, then Unid is a medium probability exclusion as part of the overall change. All changes will happen at the close of trading on 10 December.

Following the selloff in Kakao Games (293490 KS) earlier this week on lock up expiries, investors should be aware of the shares unlocking in 15 days and 1 month that could cause a slump in the stock.

With a very low free float, Big Hit will not be eligible for Fast Entry in the MSCI and FTSE indices and could only be included in those indices in the first half of 2021.

MSCI Nov20 Index Rebalance Preview – India

By Brian Freitas

MSCI is scheduled to announce the results of the November 2020 Semi Annual Index Review (SAIR) on 10 November. For India, the changes will be effective after the close of trading on 27 November due to a holiday on 30 November.

The November review could use price data from any of the last 10 business days of October to determine the list of inclusions to and exclusions from the index.

At the current time, we expect Apollo Hospitals Enterprise (APHS IN), SBI Cards (SBICARD IN) and Larsen & Toubro Infotech (LTI IN) to be included in the Standard Index, while we see Rural Electrification (RECL IN) and Bosch Ltd (BOS IN) as potential deletions.

We estimate over 5 days of ADV to trade on four of the five names, and some of the stocks have already started to move in anticipation of the passive flows that are expected. The inclusions in particular have outperformed their peers significantly over the last couple of weeks.

OptiComm: Uniti Sees Aware And Raises

By David Blennerhassett

Back on the 15 June, Adelaide-based outfit Uniti Group Ltd (UWL AU) proposed a cash/scrip Offer by way of a Scheme for fiber network operator OptiComm Ltd (OPC AU).  The consideration price under the Scheme was A$5.20/share, including a fully-franked $0.10/share dividend. OPC shareholders were afforded various forms of Scheme consideration options. 

On the 8 September OPC announced it had received a non-binding and conditional competing proposal, by way of a Scheme, from Aware Super (formerly First State Super), with a cash consideration of A$5.85/share. A week later, Uniti announced a simplified matching offer of $5.85/share, comprising $4.835/share in cash (including a fully-franked $0.10/share dividend), and 0.80537 Uniti shares per OPC share.

On the 12 October, Aware Super made an off-market takeover offer at $6.50/share, including a fully-franked $0.10/share dividend. The Offer was subject to a minimum acceptance condition of 50.1%  – flipping from a Scheme previously – and no MACs. Uniti subsequently sent a letter to OPC stating OPC was in breach of the SID entered into on the 15 September, in commencing the marching rights process. OPC refuted those allegations.

The New News

Uniti’s has now tabled a $6.67/share Offer, comprising $5.20/cash (including a fully-franked $0.10/share dividend) and 1.07 new Uniti shares. OPC considers Uniti’s revised Offer a superior proposal to Aware’s. No mention whatsoever on the alleged SID breach.

Currently trading marginally through terms.

As always, more below the fold.

For a history of the Offers for OPC, please refer to past insights below:

How Indian Buyback Offers Work – The Wipro Example

By Travis Lundy

On October 7th after the close, Wipro Ltd (WPRO IN) released an announcement to the Stock Exchanges saying that the Board would shortly consider a buyback proposal. The stock popped 7% the next day to nearly INR 360 from INR 335, then rose to near INR 380 on the 13th when the Board announced its decision to go ahead with the buyback. This would be the fourth buyback in five years. 

The stock has fallen back more than 10% from the recent high (which was, admittedly, up 50%ytd), on some disappointment on size and price of the buyback and the shares trade less than 2% higher than before the original announcement and on slight disappointment with Q2 earnings which were announced at the same time.  

The buyback announced is to buy up to 237.5mm shares at INR 400/share, spending up to INR 95 billion or ~US$1.3bn. That is 4.16% of shares out. This is a bit smaller than last year’s record US$1.7bn buyback and as always, promoter Mr. Azim Premji and almost all of this related shares are expected to participate. 

The somewhat limited size and Mr Premji’s participation means this event must be treated with some delicacy but there are certainly some interesting angles to think about, and understanding the process and how it works in all buyback offers gives you a leg up for other buyback offers.

Much more below the fold.

Glovis/Mobis Diversion Is Reaching an Extreme for Three Reasons: Time to Trade on Reversion

By Sanghyun Park

It seems that the Glovis/Mobis pair’s ongoing diversion wouldn’t stop here. This morning, Glovis is again up 5%, whereas Mobis isn’t moving anywhere.

On a 20D MA, the duo is pretty much at +3σ favoring Glovis.

% of sigma
Today 279.72%
T-1 290.41%
T-2 304.08%
T-3 218.15%
T-4 285.87%
T-5 123.48%
Source: KRX

Price ratio-wise, Glovis is practically sitting at the 2-yr peak over Mobis, up 23% from the median.

Price ratio
Today 0.76078
20D MA 0.64043
σ 0.04302
+1 σ 0.68346
-1 σ 0.59741
120D mean 0.57561 32.17%
120D median 0.56410 34.86%
120D high 0.76078 0.00%
120D low 0.51276 48.37%
1Y mean 0.58371 30.34%
1Y median 0.58333 30.42%
1Y high 0.76078 0.00%
1Y low 0.51276 48.37%
2Y mean 0.62054 22.60%
2Y median 0.61874 22.96%
2Y high 0.77778 -2.19%
2Y low 0.51276 48.37%
Source: KRX

Glovis and Mobis are the most correlated stocks among the HMG subsidiaries despite the recent diversion (30D correlation coefficient at 0.36).

Correlation Component 1 Component 2
Name Hyundai Glovis Co Ltd HYUNDAI MOBIS CO., LTD.
Ticker 086280 012330
Market cap (₩B) 6,318.8 22,005.2
2Y 0.83192
1Y 0.93186
180D 0.91995
120D 0.86929
90D 0.86376
30D 0.35699
Source: KRX
Liquidity (₩B) Hyundai Glovis Co Ltd HYUNDAI MOBIS CO., LTD.
MC 6,318.8 22,005.2
Avg. DTV 211,359 428,067
– Value 35.6 99.1
– % of SO 0.56% 0.45%
Source: KRX

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