In today’s briefing:
- Toyota Industries (6201) – SURPRISE! It’s a TOYODA Takeover Proposal (Good Governance May Not Win)
- The End-April TOPIX Rebalance – US$2.1bn a Side
- Shin-Etsu Chemical (4063) – OK Earnings, OK Forecast, But Ground-Breaking Buyback
- Bright Smart Securities (1428 HK): Ant’s Possible Unconditional MGO at HK$3.28
- Alibaba (9988 HK): Top Trades and Strategic Insights from HKEX Options Trading
- Alibaba (9988 HK): Volatility Surface Favoring Diagonal and Calendar Spreads
- Sigma Healthcare (SIG AU): Next Round of Passive Buying Around the Corner
- Laopu Gold (6181 HK): Global Index Inclusion Likely Derailed by Full Circulation
- Merger Arb Mondays (28 Apr) – Seven & I, Shibaura, Makino, Bright Smart, ENN Energy, Tam Jai
- Fujitsu General (6755 JP): Done Deal as Precondition Satisfied
Toyota Industries (6201) – SURPRISE! It’s a TOYODA Takeover Proposal (Good Governance May Not Win)
- On Friday after the close, media reports surfaced that Toyota Motor (7203 JP) Group chairman and founding family member had put forth a take-private proposal to Toyota Industries (6201 JP).
- The number quoted was ¥6trln market cap (most) or EV (FT), financed by personal funds, 3 megabanks, and reportedly some group companies.
- ¥6trln market cap would be +50%. ¥6trln EV +16%. Simultaneously shocking but somehow not surprising. Opportunistic, and surprisingly elegant as a family/group/cultural solution. More below.
The End-April TOPIX Rebalance – US$2.1bn a Side
- This year there are 10 Free Float Weight Changes for April. There are 20 Liquidity Factor Changes, 2 Inclusions, and 3 M&A-related downweights. There are 90+ Share Count Change Downweights.
- This is a bigger Big April Basket than normally comes around. And there are some big flows. All trades are 28 April at the close.
- Total flow is ~US$2.1bn a side. 64 trades of >2 days of ADV, and of those, 27 with >US$10mm to trade (7 of US$50mm+). Top 20 in USD average 5dADV.
Shin-Etsu Chemical (4063) – OK Earnings, OK Forecast, But Ground-Breaking Buyback
- Shin Etsu Chemical (4063 JP) reported FY earnings to beat January guidance for all four major measures, just slightly. They only guide 1 quarter out, and Q1 is up year-on-year…
- …in revenues, but down in OP and NP. Note: OP and NP guidance is nearly identical to what they guided for Q1 last year on ¥585bn revenues (vs ¥610bn now)
- The BIG news here is a Very Large Buyback. The company has long has huge piles of cash. This buyback (~90% of annual profit) starts to make use of it.
Bright Smart Securities (1428 HK): Ant’s Possible Unconditional MGO at HK$3.28
- Bright Smart Securities And (1428 HK)‘s Chairman entered a SPA with Ant Holdco to sell his 50.55% stake at HK$3.28, a 7.5% premium to the last close.
- The SPA completion requires approval from both the NDRC and SFC. Unusually, Ant has the option of extending the long-stop date, reflecting a possibility of extra scrutiny by the regulators.
- Under Rule 26.1 of the Code, upon completion, Ant will be required to make an unconditional mandatory cash offer at HK$3.28. The MGO price is final and a knockout offer.
Alibaba (9988 HK): Top Trades and Strategic Insights from HKEX Options Trading
- Over the past five trading days, Alibaba Group Holding (9988 HK) multi-leg option strategies showcased a variety of approaches. Strategy highlights are provided.
- Diagonal Spreads account for nearly 30% of all strategies. Many of these strategies sell short term risk to finance longer term protection.
- Several structures hedge against low probability tail events. One such strategy traded 100 contracts.
Alibaba (9988 HK): Volatility Surface Favoring Diagonal and Calendar Spreads
- Alibaba Group Holding (9988 HK) one-month implied volatility has decreased from recent peaks but remains above the 70th percentile, while realized volatility exceeds 80% (96th percentile).
- A relatively flat term structure and skew render Calendar and Diagonal Spreads interesting strategies.
- Open interest extends to March 2026, with balanced call and put interest across all expiries.
Sigma Healthcare (SIG AU): Next Round of Passive Buying Around the Corner
- There was big passive buying in Sigma Healthcare (SIG AU) in March from S&P/ASX trackers following the completion of the merger with Chemist Warehouse Group.
- Sigma Healthcare (SIG AU) should be added to a global index in May and those passive trackers will have a lot of stock to buy.
- While there will be positioning in the stock, it appears lighter than the estimated passive buying. Shorts are being covered and that could provide a boost.
Laopu Gold (6181 HK): Global Index Inclusion Likely Derailed by Full Circulation
- Laopu Gold (6181 HK) was on track to be added to a global index given its large H-share market cap and a free float that was close to 20%.
- Completion of the full circulation in April pushed H-share market cap higher while free float market cap remained the same. Crucially, free float dropped below 15%.
- Laopu Gold (6181 HK) could miss index inclusion in May, while inclusion in August will need some selling from non-float investors following lock-up expiry in June.
Merger Arb Mondays (28 Apr) – Seven & I, Shibaura, Makino, Bright Smart, ENN Energy, Tam Jai
- We 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: Oneconnect Financial Technology (6638 HK), Insignia Financial (IFL AU), ENN Energy (2688 HK), Seven & I Holdings (3382 JP), Smart Share Global (EM US).
- Lowest spreads: Shibaura Electronics (6957 JP), Makino Milling Machine Co (6135 JP), Sinarmas Land (SML SP), Millennium & Copthorne Hotels Nz (MCK NZ).
Fujitsu General (6755 JP): Done Deal as Precondition Satisfied
- The precondition for Paloma Rheem Holdings’ tender offer for Fujitsu General (6755 JP) is satisfied. The offer is from 28 April to 28 May.
- Despite an arguably light offer and less than ideal process, this is a done deal due to a lack of opposition and no competing offer.
- At the last close and for a 5 June payment, the gross and annualised spreads are 1.3% and 14.1%, respectively.
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