In today’s briefing:
- MSCI Japan Index Rebalance: Short Build Up Continues as We Near Implementation Day
- Bank of Kyoto (8369) Surprises With a Cross-Holding Sale Plan (Albeit Small)
- Jinke & Jiayuan: Pledged Shares And Leveraged Property Developers
- Appen (APX AU): Telus’ 48% Premium; 10% Short Interest; Potential ASX200 Deletion
- SAIC Wins the Auction for the 71.04% Stake in Dongzheng, MGO Upcoming
- Iljin Materials: Is the Potential Change in Compulsory Tender Offer Forcing Owner to Speed Up Sale?
- BGH and Sixth Street to Lob an Offer for Pushpay?
MSCI Japan Index Rebalance: Short Build Up Continues as We Near Implementation Day
- There are 22 deletions for the MSCI Japan Index at the May SAIR. The changes were expected and there was large short buildup prior to announcement of the changes.
- Shorts have continued to increase to increase over the last week and there could be a reversal over the next few days as shorts start to cover.
- Buying the deletions in the next few days and hedging with Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) futures could provide superior risk adjusted returns.
Bank of Kyoto (8369) Surprises With a Cross-Holding Sale Plan (Albeit Small)
- Bank of Kyoto (8369 JP) has been the poster child for “deep value” Japan traders and occasional wannabe activists. It has a huge equity portfolio which dwarfs market cap.
- Every year, twice a year (end of May and early December) Bank of Kyoto (8369 JP) releases a document for a meeting with analysts and press called Information Meeting.
- This year’s is a little different in that it proposes sales of 10% of its equity portfolio. It’s “small” but worth thinking about.
Jinke & Jiayuan: Pledged Shares And Leveraged Property Developers
- On the 21 May, Jinke Property (000656 CH) announced the forced sale of shares by its controlling shareholder. One day later, Jiayuan International (2768 HK) announced a similar event.
- Jinke’s 52.3%-owned Jinke Smart (9666 HK) has now announced an agreement to acquire Jiayuan International’s 73.56% stake in property service play Jiayuan Services Holdings (1153 HK). No price was announced.
- In the past month, Jinke Property is down 24%, Jinke Smart 23%, Jiayuan International 54% and Jiayuan Services 80%. Jiayuan International and Jiayuan Services remain suspended.
Appen (APX AU): Telus’ 48% Premium; 10% Short Interest; Potential ASX200 Deletion
- Telus International (TIXT US) has made an unsolicited, conditional and non-binding indicative proposal to acquire 100% of Appen Ltd (APX AU) at A$9.5/share, valuing the company at A$1.17bn.
- The offer is a 48% premium to the last close but a discount to longer-term VWAPs. It should require a bump for the Appen Board to unanimously recommend to shareholders.
- Appen Ltd (APX AU) is a potential deletion from the S&P/ASX 200 (AS51 INDEX) at the June rebalance. Short interest is 10% of shares out. There will be covering.
SAIC Wins the Auction for the 71.04% Stake in Dongzheng, MGO Upcoming
- On 19 May, SAIC Motor (600104 CH) emerged as the successful bidder for China Zhengtong Auto Services Hldg (1728 HK)’s 71.04% stake in Dongzheng Automotive Finance (2718 HK).
- As SAIC will hold 30%+ of the voting rights, it will result in an MGO at a price not less than the auction price of HK$1.294 per H Share.
- Dongzheng shares remain in a trading halt. The equity interest will transfer to SAIC and the MGO launched when the Shanghai Financial Court issues an auction sale judgment.
Iljin Materials: Is the Potential Change in Compulsory Tender Offer Forcing Owner to Speed Up Sale?
- Heo Jae-Myeong, the CEO of Iljin Materials, is planning to sell his 53.3% stake in the company.
- Potential buyers of Iljin Materials include Lotte, SK, LG, and POSCO.
- The CEO Heo Jae-Myung could potentially receive greater amounts of money if he sells the company now, rather than waiting when the compulsory tender offer could be made into law.
BGH and Sixth Street to Lob an Offer for Pushpay?
- Sixth Street and BGH Capital entered into a cooperation agreement with the aim to acquire Pushpay Holdings (PPH NZ) through a scheme of arrangement. They have a combined 20.3% stake.
- In addition to Sixth Street/BGH, Pushpay also noted expressions of interest from multiple parties. The high recurring revenue, profitability and cash generation make it a target.
- As the Australian takeover premium ranges from 20% to 40%, we think that a bid of at least A$1.46 (30% takeover premium) will be necessary for due diligence access.
Before it’s here, it’s on Smartkarma
