In today’s briefing:
- IDX30/LQ45/IDX80 Index Rebalance: Changes Across the Indices
- [Japan M&A] Nikkei Reports Pacific Industrial (7250) To Go Private Via MBO at ¥110bn
- Swiggy/Eternal: Free Float Increase & Foreign Room Decrease ‘Delivering’ BIG Passive Flows
- GDS Holdings (9698 HK): Global Index Inclusion as Shorts Build Up
- Korean Policy Tailwinds: Preferred Shares Rerating Play
- Hyosung Heavy (298040 KS): Positioning Not Extreme as Index Inclusion Nears
- Merger Arb Mondays (28 Jul) – Shibaura, Abacus Storage, Insignia, Mayne, Santos, ENN, Smart Share
- [Japan M&A] Pacific Industrial (7250) MBO Officially Being Done Dirt Cheap
- LG Energy Solution: Light At the End of the Tunnel?
- China TCM (570.HK) – About the 25H1 Profit Warning and the Outlook
IDX30/LQ45/IDX80 Index Rebalance: Changes Across the Indices
- There are 2 constituent changes each for the IDX30 Index and the LQ45 Index, and 3 constituent changes for IDX80 Index to be implemented at the close on 31 July.
- The largest passive flows are expected in Bank Central Asia, Bank Rakyat Indonesia, PT Adaro Andalan Indonesia, Mitra Adiperkasa, XLSMART Telecom Sejahtera, Indo Tambangraya Megah and Bank Mandiri Persero.
- With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.
[Japan M&A] Nikkei Reports Pacific Industrial (7250) To Go Private Via MBO at ¥110bn
- Overnight, the Nikkei carried an article saying Toyota valve supplier Pacific Industrial (7250 JP) would go private at a 40% premium in an MBO.
- The implied price would match its ATH, but would remain far below book value, which is disappointing for a company with a very strong customer base and market share.
- This is potentially blockable, but it would need to be activism from scratch I think. An activist or collection of them would need about 18-20% to block this deal.
Swiggy/Eternal: Free Float Increase & Foreign Room Decrease ‘Delivering’ BIG Passive Flows
- Increased free float should result in passives buying Swiggy (SWIGGY IN) and lower foreign room should lead to passives selling Eternal (ETERNAL IN) at the end of August.
- The increased free float should also result in passive buying for Swiggy (SWIGGY IN) in September.
- Eternal has outperformed Swiggy last week following strong earnings. Swiggy announces earnings later this week and that could be a short-term catalyst for a narrowing of the spread.
GDS Holdings (9698 HK): Global Index Inclusion as Shorts Build Up
- Following a rally in the stock over the last 3 months, GDS Holdings (9698 HK) / GDS Holdings (ADR) (GDS US) could be added to a global index in August.
- Short interest in GDS Holdings (9698 HK) has been increasing. Add the short interest in GDS Holdings (ADR) (GDS US) and the number is pretty big.
- Despite the recent rally, GDS Holdings (9698 HK) trades cheaper than its closest peer and there could be opportunities to enter market neutral trades.
Korean Policy Tailwinds: Preferred Shares Rerating Play
- Most expect prefs to be in policy crosshairs soon—watch for tighter rules on dividends, discounts, and liquidity, plus likely incentives for redemption or cancellation ahead of commons.
- If Korea rolls out a pref stock overhaul, long-biased rerate plays could pop—focus on liquid, high-yield large-cap prefs trading at 35%+, yield north of 3%, and solid daily turnover.
- Korea Inv, Kumho Petro, CJ Cheil, CJ Corp prefs already screen well; Doosan and Hanwha 3PB could join if dividend hikes materialize on back of strong sub earnings.
Hyosung Heavy (298040 KS): Positioning Not Extreme as Index Inclusion Nears
- In an all too familiar sight across a range of stocks across a range of markets, Hyosung Heavy Industries‘ stock price has doubled over the last 3 months.
- The increased market cap should result in index inclusion and passive trackers are estimated to buy 358k shares (US$291m; 4.5x ADV) at the close on 26 August.
- Hyosung Heavy has outperformed most peers over the last few months but still trades at reasonable relative valuations. Positioning does not appear excessive relative to peers.
Merger Arb Mondays (28 Jul) – Shibaura, Abacus Storage, Insignia, Mayne, Santos, ENN, Smart Share
- I summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Mayne Pharma (MYX AU), Yichang HEC Changjiang Pharma (1558 HK), ENN Energy (2688 HK), Pacific Industrial (7250 JP), Santos Ltd (STO AU), Smart Share Global (EM US).
- Lowest spreads: Bright Smart Securities (1428 HK), Hainan Meilan International Airport (357 HK), Humm Group (HUM AU), New World Resources (NWC AU), Nippon Concept (9386 JP).
[Japan M&A] Pacific Industrial (7250) MBO Officially Being Done Dirt Cheap
- The MBO for Pacific Industrial (7250 JP) starts with the father+son Chairman and CEO, – combined stake 2.92% – putting nothing in to buy this, with help from banks.
- The Takeover Price is priced at 0.7x book, and a Net Debt to EBITDA of 2x (when adjusted for securities+pension assets+DTLs) and 5-6x average 2026-2030 FCF.
- This is being done too cheap: Toyota is the main customer, one third of revenues comes from Japan, and the company is set for a transition to EVs.
LG Energy Solution: Light At the End of the Tunnel?
- LG Energy Solution has been on a dark, long tunnel in the past two and half years. However, there is finally some light showing post its excellent 2Q 2025 results.
- LG Energy Solution reported much better than expected operating profit in 2Q25. It had operating profit of 492.2 billion won (up 152% YoY) and 56.3% higher than consensus in 2Q25.
- The company is showing initial signs of a turnaround, with a significantly better than expected operating profit in 2Q 2025.
China TCM (570.HK) – About the 25H1 Profit Warning and the Outlook
- China TCM’s Profit Warning indicates a weak 25H1 results. Performance downturn is longer-than-expected. But as an industry leader, China TCM will enhance its bargaining power by integrating the industrial chain.
- Investors have reignited interest in betting on privatization of China TCM and potential merger with Taiji, as deadline is approaching.Privatization price may be lower considering China TCM’s weak 25H1 results.
- HK$0.84-2.17/Share is the reasonable share price range at this stage.The catalyst for China TCM’s share price is CNPGC may announce how to address the horizontal competition issue within three months.
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