In today’s briefing:
- TOPIX Rebalance: Flows at the Close on 29 June
- GCL Poly (3800 HK): Double Index Inclusion & HUGE Passive Inflows
- KOSPI Size Index Series: September Rebalancing Preview
- Merger Arb Mondays (27 Jun) – Ramsay Health, Link Admin, Link Net, True/DTAC, ResApp, Giordano
- Link Admin: Speculation Mounts that DND Will Revive the Deal with a Lower Offer
- Cobham/Ultra Electronics: UK Government Approval
- MergerTalk: Over To You, JetBlue!
TOPIX Rebalance: Flows at the Close on 29 June
- The third tranche of the FFW methodology change for the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) will be implemented at the close of trading on 29 June.
- One-Way flow is ~JPY 742bn and will be spread across 2170 stocks. The largest inflow will be on NTT (9432 JP) and the largest outflow on Toyota Motor (7203 JP).
- Stocks with the largest impact of inflows have outperformed stocks with the largest impact of outflows, but there has been underperformance over the last couple of weeks.
GCL Poly (3800 HK): Double Index Inclusion & HUGE Passive Inflows
- After being suspended for 7 months for not publishing its 2020 annual results, Gcl Poly Energy Holdings Limited (3800 HK) resumed trading on 1 November 2021.
- We expect Gcl Poly Energy Holdings Limited (3800 HK) to be added to the MSCI China Index in August and to the FTSE All-World Index in September.
- Passive index trackers will need to buy over US$1.1bn of stock over the next few months. The stock has run-up inline with peers and this demand could keep it supported.
KOSPI Size Index Series: September Rebalancing Preview
- We generally detect an increase in the buying volume of local institutions for stocks moving from Large Cap to Mid Cap ahead of the KOSPI size index rebalancing.
- At the last close, Mid→Large: Pan Ocean, Hyundai Mipo, BGF Retail, & OCI / Large→Mid: Hanmi Science, KCC, DB Hitek, & KEPCO E&C
- The level of price impact/correlation in the last rebalancing was exceptionally high. This is reason enough for us to consider setting up a preemptive position for this rebalancing event.
Merger Arb Mondays (27 Jun) – Ramsay Health, Link Admin, Link Net, True/DTAC, ResApp, Giordano
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- The highest spreads are Sezzle Inc (SZL AU), Link Administration (LNK AU), 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Resapp Health (RAP AU).
- Lowest gross spreads are Hwa Hong Corp (HWAH SP), AKM Industrial (1639 HK), Irongate Group (IAP AU), Giordano International (709 HK), Uniti Group Ltd (UWL AU), Excelpoint Technology (EXLP SP).
Link Admin: Speculation Mounts that DND Will Revive the Deal with a Lower Offer
- The AFR reports that after weeks of talk, Dye & Durham (DND) is expected to lob a revised lower proposal for Link Administration (LNK AU) as soon as this week.
- Presumably, DND’s justification for a lower offer is to facilitate ACCC approval timelines. It remains to be seen if this is enough for the Board to recommend a lower offer.
- Tweaking the IE’s valuation range for the current peer multiples and PEXA Group (PXA AU) share price points to a Link valuation range of A$3.52-4.40 per share.
Cobham/Ultra Electronics: UK Government Approval
- The £2.55 billion takeover of Ultra by Advent looks set to be waved on by the UK government after the Business Secretary said he was minded to accept the deal.
- Cobham was itself taken over and broken up by Advent over the course of 2019 and 2020, amidst some controversy. As in that case, Advent will bag its prey.
- The 3500p offer price represents 15.4x EV/Fwd EBITDA (same as at the time of deal announcement). Gross spread is 1.49%, estimated annual return is 8.8% (assuming settlement by 30 August).
MergerTalk: Over To You, JetBlue!
- Frontier Airlines (ULCC US)’s improved terms for Spirit Airlines (SAVE US) still falls well short of the Jetblue Airways (JBLU US) offer
- ULCC’s enhanced downside protection matching JBLU’s reverse termination fee and bettering its prepayment proposal is the key swing factor where the regulatory path to approval is challenging for either transaction
- Given its vigorous pursuit of SAVE so far, we expect JBLU will quickly respond with another counter offer in order to regain the initiative which should keep arbs interested
Before it’s here, it’s on Smartkarma
