Daily BriefsEvent-Driven

Event-Driven: Sea Ltd, Shimachu Co Ltd, SK Telecom, Anta Sports Products and more

In today’s briefing:

  • MSCI Singapore Index: Impact of SEA Inclusion
  • Nitori’s Bid for Shimachu Goes Friendly as Shimachu Dumps DCM
  • Amazon and SK Telecom’s 11st Close to Forming a Strategic Partnership
  • Hang Seng Index Rebalance: Three Adds, One Delete, High Turnover, and More Changes to Come

MSCI Singapore Index: Impact of SEA Inclusion

By Brian Freitas

On 11 November (Asia time), MSCI announced the changes to the index constituents of the MSCI Global Investable Market Indexes (GIMI).

MSCI also announced the eligibility of foreign listings in the MSCI Singapore Index following the market meeting the Foreign Listing Materiality Requirements at the November 2020 Semi-Annual Index Review (SAIR).

We expect Sea Ltd (SE US) will be included in the MSCI World Index (MXWO INDEX) and the MSCI Singapore Free Index (SIMSCI INDEX) at the May 2021 SAIR. We estimate passive buying of US$2.81bn at the close of trading on 27 May 2021.

In this Insight, we take a look at the impact the inclusion will have on the MSCI Singapore index.


Nitori’s Bid for Shimachu Goes Friendly as Shimachu Dumps DCM

By Travis Lundy

Overnight it became clear in a Nikkei article that Shimachu Co Ltd (8184 JP) was going to succumb to the charms of bidder Nitori Holdings (9843 JP) and accept its proposal of a takeover at ¥5500. Shimachu had heretofore officially supported a bid by DCM Holdings (3050 JP) at ¥4200/share, but acceptance of Nitori means that its bid will not be officially “hostile.”

After the close, Shimachu and Nitori defined that support in a set of documents and the comment in the media from Shimachu was that DCM had not responded. 

DCM’s Tender Offer (discussed in DCM Does a Full Takeover of Shimachu – Looks Like a Strong Price. Look Again.) ends on 16 November, the same day Nitori’s starts. 

DCM can still respond by a) extending the time period at the same price, b) raising the price and creating an automatic extension, or c) doing nothing. At the very least, I expect DCM to extend by 10 business days because doing so would extend their own Tender Offer past the JFTC Phase 1 response deadline to the Nitori application (Nitori will launch without having received official approval). 

More below.

The list of insights in this series (on this particular event) are as below:

Previous Insights on the DCM (3050) and Nitori (9843) Approaches to Shimachu (8184)

Date Insight Title
21 Sep 2020 DCM Partial Offer for Shimachu Coming? 
4 Oct 2020 DCM Does a Full Takeover of Shimachu – Looks Like a Strong Price. Look Again. 
21 Oct 2020 Nitori To Make a Rival Bid for Shimachu? More Fun To Go 
28 Oct 2020 Gaming Out a Nitori Bid for Shimachu 
29 Oct 2020 Nitori Bids UP For Shimachu – Now Things Slow Down 

Amazon and SK Telecom’s 11st Close to Forming a Strategic Partnership

By Douglas Kim

It was announced after the market close today that Amazon.com Inc (AMZN US) is close to completing a strategic partnership with SK Telecom (017670 KS)‘s 11st e-commerce business (SK Telecom has an 80.3% stake in 11st). This strategic partnership is likely to include both Amazon taking an investment stake in 11st (potentially) as well as other business partnerships.

However, the exact investment amount has not yet been announced. However, the local media have mentioned that the investment amount could total about 50 billion won to 300 billion won. One of the key benefits of a strategic partnership between SK Telecom’s 11st and Amazon is that it could accelerate the IPO of 11st. 

We believe a potential strategic partnership between SK Telecom and Amazon would be positive for SK Telecom. On a relative basis, SK Telecom probably has a lot more to gain from this partnership rather than Amazon.


Hang Seng Index Rebalance: Three Adds, One Delete, High Turnover, and More Changes to Come

By Brian Freitas

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 13 November. The constituent changes will be effective after the close of trading on 4 December.

For the Hong Kong Hang Seng Index (HSI INDEX), there are 3 inclusions and 1 deletion, taking the number of index constituents up to 52.

The inclusions are Budweiser Brewing Company APAC (1876 HK), Anta Sports Products (2020 HK) and Meituan (3690 HK), while the sole deletion is Swire Pacific (A) (19 HK)

One-way turnover is estimated at 7.38%. That is very high and will result in big turnover at the closing auction on 4 December. We estimate 5 days of ADV to sell on Swire Pacific (A) (19 HK) from passive funds, while Budweiser Brewing Company APAC (1876 HK) and Anta Sports Products (2020 HK) have over 4 days and 3 days of ADV to buy respectively. The impact of passive buying on Meituan (3690 HK) is lower at 1.6 days of ADV.

Following HSIL’s announcement at the previous index review, we had expected there would be more additions than deletions in this review. All the 3 stocks added to the index were our highest probability inclusion candidates – the ‘surprise’ for the market would have to be Anta Sports Products (2020 HK) followed by Budweiser Brewing Company APAC (1876 HK). Meituan (3690 HK) was probably on everyone’s list for inclusion.

We had picked Swire Pacific (A) (19 HK) as the most likely deletion candidate, though we did not think that HSIL would actually delete the stock since it derives most of its revenue from Hong Kong and helps reduce the overlap with the Hang Seng China Enterprises Index (HSCEI INDEX).

HSIL announced that they had submitted a study on the composition of the Hong Kong Hang Seng Index (HSI INDEX) to the Advisory Committee and plan to conduct a market consultation this year with the conclusions announced in February 2021. The implementation of the changes will most likely commence at the March 2021/ June 2021 index review. 


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