In today’s briefing:
- FTSE All-World/All-Cap Index Rebalance: Inclusions, Deletions & Other Changes
- SPH Offer Open – Starts to Look Interesting
- LG Chem & LG Energy LONG/SHORT Pair Trading on a Massive NAV Discount
- SK Telecom Multi-Step Trading Scenario for Underlying & ADR Amid Zero Foreign Room
- Merger Arb Mondays (23 May) – True Corp, DTAC, Ramsay, VNET, Link Admin, Alliance Aviation, Yashili
- Siemens Energy Finally Drops the Bomb
FTSE All-World/All-Cap Index Rebalance: Inclusions, Deletions & Other Changes
- For Asia Pacific, there are 8 inclusions each to the All-World Index and the All-Cap Index at the June QIR. Quite a few have over 3 days ADV to buy.
- There are also changes to the NOS and investability weights that will require passive funds to buy/sell a lot of stocks. Some have a reasonably large impact/flow.
- A lot of the IPOs are trading below their offering prices and investors could be looking to sell into any rallies that take the stocks close to their IPO prices.
SPH Offer Open – Starts to Look Interesting
- The SPH REIT (SPHREIT SP) Chain Offer was launched on Thursday 19 May.
- The Chain Offer Price has been revised lower from the original level to be S$0.9372/unit, as discussed a few times in these pages.
- The units have underperformed Peer Baskets for the last few months and have now fallen to the Chain Offer Price. That presents opportunities
LG Chem & LG Energy LONG/SHORT Pair Trading on a Massive NAV Discount
- The LG Chem/LG Energy pair has been getting much attention lately. Its stakeholding value in LG Energy amounts to ₩83.1T, more than twice its own market value.
- Given LG Chem’s solid operating business value, only the likes of SK Square is worse in terms of NAV discount, as LG Chem’s NAV discount is nearing 70%.
- With the LG Chem OUT/LG Energy IN passive play pretty much completed, we should aim at an entry point for LG Chem’s massive discount to its LG Energy shareholding value.
SK Telecom Multi-Step Trading Scenario for Underlying & ADR Amid Zero Foreign Room
- We first consider a currency hedging setup to target an ADR premium surge before SKT reaches zero foreign room. We close this position as the MSCI special deletion is announced.
- We then move onto an outright long position on the SKT underlying shares to capitalize on potential share recall.
- Lastly, I would quickly jump onto a KT LONG/SKT SHORT position to target potential alternative trading flow.
Merger Arb Mondays (23 May) – True Corp, DTAC, Ramsay, VNET, Link Admin, Alliance Aviation, Yashili
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Thailand and Chinese ADRs.
- This week, the highest gross spreads are Sezzle Inc (SZL AU), 21Vianet Group (VNET US), Dongzheng Automotive Finance (2718 HK), Link Administration Holdings (LNK AU), Alliance Aviation Services (AQZ AU).
- The lowest gross spreads are Hwa Hong Corp (HWAH SP), Virtus Health (VRT AU), Uniti Group Ltd (UWL AU), Mapletree North Asia Commercial Trust (MAGIC SP), Excelpoint Technology (EXLP SP).
Siemens Energy Finally Drops the Bomb
- Siemens Energy hasn’t expected to its CMD and instead announced on Saturday late evening an €18.05/share voluntary cash tender offer for the remaining 32.9% of Siemens Gamesa it doesn’t own.
- The consideration represents a 27.7% premium and 23.1x EV/Fwd EBITDA. It seems fair and higher than that initially expected. Siemens Energy is likely to issue a convertible.
- Upon market open on 23 May, expect the shares to close most of the gap with the offer price. Siemens Gamesa will likely exit the Ibex 35 in H2 2022.
Before it’s here, it’s on Smartkarma
