Event-Driven Archives | Page 101 of 187 | Smartkarma

Ito En Ltd (2593 JP) is a slightly strange stock in the grand scheme of things.
It is expensive for its growth, and the shareholder register is such that it is subject to the whims and vagaries of forces over which investors may have no control.
This time, it is MSCI. Stock prices go up, stocks go in the indices. Stock prices fall, they come out. It’s coming out this month. So who buys?

Samsung C&T Shareholder Return: Directly Related to Lee Family’s Inheritax Tax Issue

The target volume is 24,718,099 ordinary shares (13.2%) and 159,835 preferred shares (9.8%). That is, C&T will cancel all of its treasury shares in the next five years.
C&T’s decision to cancel treasury shares clearly indicates that the family’s fundraising strategy is focused on stake sales rather than dividend increases.
The number of shares inherited will be the volume Lee Seo-hyun will sell in the short term as this is within the range that minimizes the tax liability through LIFO.

O2Micro Wraps Up. GSMG Capitulates

At the EGM held on January 31, O2Micro International (OIIM US)’s shareholders approved the Merger Agreement. Completion was subject to satisfying certain conditions, which appeared rudimentary.
An equity corporate action notice released yesterday (15 February) indicates the last day of trading will be the 24 February, with an effective date of 27 Feb.
O2Micro is currently at a 2.7% gross spread. At the other end of the spectrum, Glory Star New Media (GSMG US) is at a staggering 79% spread, despite shareholder approval.

Adways (2489 JP) – Really, Really Big News for a SmallCap

Adways Inc (2489 JP) is an ad agency, ad platform, marketing platform, and a variety of sub-platforms serving certain mobile, PC, marketing, and app development niches.
They released earnings last Friday, but today released other – follow-on information.
Included was a buyback – up to 5.7mm shares (13.57% of shares out) for up to ¥2bn (9% of mktcap) – over the next 5.5 months. Seems big. Look closer.

SciClone Pharma (6600 HK): Inexpensive Ahead Of New Therapies Rolling Out

Shareholders have given SciClone Pharmaceuticals (6600 HK)‘s buyback the go-ahead which will result in the major shareholder holding (upward of) 31.63%, and the freedom to creep.
As such, a concentrated shareholder register, primarily comprising entities that privatised SciClone in 2017, gets even more concentrated.
Trading inexpensively ahead of the launch of a new (and approved) drug, SciClone is worth a second look.

Trend Micro (4704 JP) – Value Act’s Activism Starts To Show, But It’s Still Small Potatoes

Trend Micro Inc (4704 JP) is an interesting, but odd little company in an interesting odd little niche. They make cybersecurity products and are good at it.
Last summer, well-known activist Value Act Capital showed up on the tape in August with an 8.7% position.
What had been good dividend payout ratios are now cemented. Now there is a big buyback to return cash. Look for more. And as always, details matter.

Keppel (KEP SP): Keppel O&M/Sembcorp Marine Transaction Moves Towards Completion

Sembcorp Marine (SMM SP) shareholders voted overwhelmingly for the merger between Keppel O&M and Sembcorp Marine. The transaction is expected to close by 28 February.
The divestment of Keppel O&M will further move Keppel Corp (KEP SP) towards a more asset-light and recurring earnings model, providing a helpful tailwind to hit its 15% ROE target.
Pre-Dividend in specie distribution, our Keppel SoTP valuation based on Sembcorp Marine’s reference issue price (S$0.122) and last close (S$0.136) is S$8.49 and S$8.72 per share, respectively.

Toyo Construction (1890 JP): The Board Uses the Smokescreen of a Special Committee

Toyo Construction (1890 JP) will set up a special committee to evaluate YFO’s JPY1,100 offer. The Board will decide “after respecting the content of the decision of the special committee.”
YFO rightly points out the special committee is a ruse and is an attempt by the Board to demonstrate ‘a fair process’ for the predictable decision to reject its proposal.
The Board’s anxious move shows that protracted conflict is shifting in favour of YFO. At the last close, the gross spread to the tender offer is 10.3%.

EQD | TSMC (TSM US): Revisiting the Call Ratio and Vol Pair Trade with AAPL US

We published last November about buying upside via selling call ratios and also about a vol pair trade idea versus AAPL US.
Buffet has surprisingly exited the bulk of his stake in the chip maker causing concern that the value investor no longer sees value
We update on the position and consider what to do next

EQT/Va-Q-Tec: Deal Will Complete

By Jesus Rodriguez Aguilar

The offer price is attractive for shareholders, even more so following an enthusiastic recommendation from the Board and a profit warning during the acceptance period.
The main hurdle was always the acceptance rate, but at 62.46% on the last count, it is just shy of the minimum threshold condition of 62.5%.
Some shareholders may feel tempted to explore the benefits of a domination agreement (as in participating in future synergies, with liquidity risk). Spread (gross/annualised) is 1.73%/6.11%. Long and tender.

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Feb 16

Daily Brief Event-Driven: The MatsuKiyoCocokara (3088) February Flow Show and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

The MatsuKiyoCocokara (3088) February Flow Show
Adaro Energy (ADRO IJ) Buyback – A Decent Chunk of 1 Year ADV
HK Electric Investments (2638 HK): MSCI Deletion Could Mark a Bottom
S&P/ASX Index Rebalance Preview: Review Period (Nearly) Complete
Who Wants SM Entertainment More? Kim Bum-Soo (Kakao) Or Bang Si-Hyuk (Hybe)?
Japan Tobacco: An Activist Targeting Torii Pharmaceutical, Turns to JT to Fulfil Their Wishes
Star Entertainment (SGR AU): Entertaining Known Unknowns
EQD | KOSPI2 Index: Reloading on Upside Calls

The MatsuKiyoCocokara (3088) February Flow Show

MatsukiyoCocokara (3088 JP) has run up quite well in the past year, rising strongly and outperforming Peers significantly. It has been the avatar of Inbound Rebound hopes and dreams.
Over that time, forward EPS expectations have also improved, but not as much as price. MatsukiyoCocokara used to be cheap to peers on forward PER. Now it is not.
28 Feb sees an MSCI inclusion trade to swing 7% of shares from active to passive. Understanding where those come from is key.

Adaro Energy (ADRO IJ) Buyback – A Decent Chunk of 1 Year ADV

Yesterday, Indonesia’s second largest coal mining business Adaro Energy (ADRO IJ) announced a buyback. This follows another buyback which ended in December 2022.
The Sep21-Dec22 buyback bought back 1bn shares, but did not spend all the money allocated to the buyback. This new one might buy back a similar quantity.
Looking at Real World Float is the right frame of reference. And the stock was at a recent low vs a Peer Basket.

HK Electric Investments (2638 HK): MSCI Deletion Could Mark a Bottom

HK Electric Investments (2638 HK) will be deleted from the MSCI Hong Kong Index at the close on 28 February. This was largely expected.
We estimate passive MSCI trackers will need to sell 172.3m shares (US$111m; 19.1 days of ADV to trade). That is a lot. But there are pre-positions on the stock.
HK Electric Investments (2638 HK) has underperformed its peers and now trades at a lower price to book. There could be outperformance post the MSCI deletion.

S&P/ASX Index Rebalance Preview: Review Period (Nearly) Complete

We currently see 1 change for the ASX20 Index, 2 changes for the ASX100 Index, 4 changes for the ASX200 Index, 10 adds/7 deletes for the ASX300 Index in March.
On average, the potential adds to each of the indices have outperformed the potential deletes with the largest outperformance for the ASX300 Index.
Shorts have continued to increase positions on the potential deletes while covering their positions on the potential adds. We expect there are large pre-positions on some of the stocks now.

Who Wants SM Entertainment More? Kim Bum-Soo (Kakao) Or Bang Si-Hyuk (Hybe)?

It has been reported that Kakao has hired local brokerage firms to discuss the details of another tender offer of SM Entertainment shares (at more than 130,000 won).
We believe that this has been the key reason why SM Entertainment’s shares rose an additional 5% on 15 February.
We believe that eventually Kakao Group will win the M&A fight for SM Entertainment and shares of SM could rise further in the coming weeks.

Japan Tobacco: An Activist Targeting Torii Pharmaceutical, Turns to JT to Fulfil Their Wishes

By Oshadhi Kumarasiri

Japan Tobacco (2914 JP)’s 4Q22 results were stronger than anticipated yet again with revenue and OP surpassing consensus by 4.3% and 35.2% respectively through selling price increments.
2023 guidance looks a bit disappointing, with the company guiding adjusted OP at ¥667bn in 2023 compared to ¥729bn in the previous year, expecting an unfavourable foreign exchange movement.
But the highlight these days was the proposal by the activist investor LIM Advisors to dispose JT’s share ownership in Torii Pharmaceutical (4551 JP).

Star Entertainment (SGR AU): Entertaining Known Unknowns

Star Entertainment Group (SGR AU) scored an own goal by failing to provide an update on the balance sheet in the update on 13 February. The results are next week.
There is a whirlwind of uncertainty surrounding potential fines and Star is in desperate need to recapitalise its balance sheet to avoid breaching covenants.
Our leverage scenarios suggest an equity raise of A$250-500 million is required. Despite the share price fall, we would steer clear until the details of its equity raise are disclosed.

EQD | KOSPI2 Index: Reloading on Upside Calls

KOSPI2 Index trading off the highs but supported by the 200-dma
Implied vols are trading cheap offering a good entry point
Options continue to be priced cheaply and we look at simple upside plays

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Feb 15

Daily Brief Event-Driven: Toshiba – As Bad As It Gets? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba – As Bad As It Gets?
KOSPI Size Indices – Potential Changes in March
Link REIT US$2.4bn Rights Issue – Mistimed but Yield at the Rights Price Might Be the Saving Grace
K-Pop Battle: HYBE’s Tender Offer For S.M. Entertainment:
Long Short Idea: Ecopro Co Ltd & Iljin Materials on March 9 with K-New Deal Rebalancing
Kirin’s Holdco Discount Could Keep Unwinding After The Price Hikes Announcement
Both C&T & SDS Are Still on the Table for Block Deals by Lee Seo-Hyun, Here’s Why
Idemitsu (5019) – A Big Miss and A Big Buyback
Potential Inclusions & Exclusions in KOSPI 200 Rebalance in May 2023
Ecopro Co: A Likely Inclusion in MSCI Korea May Rebalance

Toshiba – As Bad As It Gets?

Toshiba results looked rather poor at the headline on account of additional one-off costs leading to a guidance downgrade to ¥95bn in OP.
Despite that, we see some small positive signs across the various industrial segments.
On balance, however, the downgrade and tight lips on the JIP bid leave little to be positive about in the near term.

KOSPI Size Indices – Potential Changes in March

The review period for the March rebalance of the KOSPI Size Indices ends 28 February. The results will be announced early March and implemented at the close on 9 March.
We see 5 migrations between MidCap and LargeCap, 8 migrations from SmallCap to MidCap, 3 new adds to MidCap, and 11 migrations from MidCap to SmallCap.
Stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.

Link REIT US$2.4bn Rights Issue – Mistimed but Yield at the Rights Price Might Be the Saving Grace

By Sumeet Singh

Link REIT (823 HK) (LREIT) aims to undertake a 1 for 5 rights issue at a subscription price of HK$44.20/unit, to raise around US$2.4bn.
After announcing a S$2.2bn acquisition in late Dec 2022, the company explicitly mentioned that it didn’t need to raise any new capital. Thus, the rights issue marks an abrupt turnaround.
In this note, we talk about the right issue, its previous acquisition and the overall implications.

K-Pop Battle: HYBE’s Tender Offer For S.M. Entertainment:

In a move to counter Lee Soo-man’s influence, S.M.Entertainment Co (041510 KS) intends to issue new shares (9.05% on a fully diluted basis) to Kakao Corp (035720 KS).
Lee, with 18.4% in SM, responded by selling 14.8% to SM’s rival HYBE (352820 KS). HYBE concurrently announced a tender offer for an additional 25%, at ₩120,000/share, a 22% premium.
Kakao and SM are less than impressed. But these developments are a power grab for the pioneer of K-pop.

Long Short Idea: Ecopro Co Ltd & Iljin Materials on March 9 with K-New Deal Rebalancing

One constituent change is expected in the BATTERY index rebalancing as Ecopro Co Ltd surpassed Iljin Materials based on the average daily market cap during the review period.
Ecopro Co Ltd is a pure holding company, so it may not be subject to inclusion. However, KRX recognizes related sales from unlisted subsidiaries as sales from the holding company.
The actual passive impact of the rebalancing day will likely be 0.15x or more for both. This level can enable a long-short setup for these from a day trading perspective.

Kirin’s Holdco Discount Could Keep Unwinding After The Price Hikes Announcement

By Oshadhi Kumarasiri

A trade idea involving Kirin Holdings (2503 JP) from a Holdco perspective, which we suggested last year outperformed Topix by more than 30% in the first 9 months of 2022.
Since November 2022, Kirin has underperformed Topix by 18% (driven by input cost inflation) to push the Holdco discount yet again to an attractive level.
The price hike announcement yesterday could change the cost inflation narrative and help Kirin to keep on unwinding the Holdco discount.

Both C&T & SDS Are Still on the Table for Block Deals by Lee Seo-Hyun, Here’s Why

The family devoted all their efforts to maintaining 33.4% of voting shares in Samsung C&T, a level that can block a special resolution at the general shareholders’ meeting.
The most likely scenario being speculated by the market at this point is to touch both Samsung C&T and Samsung SDS. However, the C&T stake sale is to be minimized.
The possibility currently circulating in the local market is that she has 0.40% (Hana Sec) and 0.62% (Hana Bank), which currently have the highest interest burden, on the table.

Idemitsu (5019) – A Big Miss and A Big Buyback

On 14 February 2023, Idemitsu Kosan (5019 JP) reported Q3 results. They were less impressive than one would have hoped.
Lower USDJPY and lower Dubai crude prices mean a JPY 90bn hit to inventory marks, but the rest of the petro business made almost no money in the quarter.
However, the company announced a large buyback. THAT is worth looking at.

Potential Inclusions & Exclusions in KOSPI 200 Rebalance in May 2023

We discuss potential inclusions and exclusions of the upcoming KOSPI 200 rebalance in May 2023. With regards to the upcoming KOSPI 200 rebalance, we like the following long-short trading strategy.
We would short a basket of potential exclusions from KOSPI 200 rebalance which would include the bottom 5% of KOSPI 200 index (10 stocks).
We would go long a basket of potential inclusions in KOSPI 200 rebalance which include four stocks including Dentium, Jeju Air, Samyang Foods, and DGB Financial.

Ecopro Co: A Likely Inclusion in MSCI Korea May Rebalance

Ecopro Co Ltd (086520 KS) is one of the likely inclusions in the MSCI Korea rebalance in May 2023.
Many investors have pushed up share price of Ecopro Co, already factoring in that this stock will be included in the next round of MSCI Korea index rebalancing.
Our NAV analysis of Ecopro Co suggests an implied NAV per share of 207,087 won, representing a 5% upside from the current price.

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Feb 14

Daily Brief Event-Driven: Canon ADR Cancellation – There May Be A Trade To Do and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Canon ADR Cancellation – There May Be A Trade To Do
Absolutely GINORMOUS Citizen Watch (7762 JP) Buyback
Yashili (1230 HK): Pre-Condition Finally to Be Satisfied?
Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up
Fujitec (6406 JP): Oasis’ Activism Comes to a Head of the 24 February EGM
Osstem Implant: Founder Choi Changes CB Sale Terms to MBK-Unison & KCGI Agrees to Sell Its Shares
Hong Kong CEO & Director Dealings (13 Feb): Koolearn, China Gas, MOG, Hua Yin, China Environmental
Concordia/Rothschild & Co: Back to the Origins
Quiddity Leaderboard for DAX Mar 23: Linde DEL Triggers US$2.7bn Reverse Funding Flows
EQD | SPX Index : CPI Data Is Set to Raise Inflation Fears Again.Use Daily Options to Play the Event

Canon ADR Cancellation – There May Be A Trade To Do

Last week (on 10 February), Canon Inc (7751 JP) announced it intended to delist its ADRs from the NYSE.
Canon is the third Japanese company to do so in two months, after Eisai Co Ltd (4523 JP) announced in December and Olympus Corp (7733 JP) in January.
No related investment opportunity but there may be a trade to do.

Absolutely GINORMOUS Citizen Watch (7762 JP) Buyback

Today, Citizen Watch (7762 JP) reported Q3 earnings, and a BIG buyback.
It is a VERY BIG BUYBACK at up to 75mm shares (25.61% of shares out), with an allocation of up to ¥40bn (which is ~22.1% at last price).
The buyback is to be executed over the next year. Buyback structure (undisclosed) matters and shareholder structure matters too. There is a big short. This could get really interesting.

Yashili (1230 HK): Pre-Condition Finally to Be Satisfied?

Yashili International Holdings (1230 HK) latest monthly update notes that Dumex Key Condition 2 is satisfied paving the way towards completing the Dumex China Disposal.
The completion of the remaining pre-condition, the 25% Yashili acquisition, depends on the completion of the Dumex China Disposal, which now looks imminent.
We think the pre-condition will be satisfied by the end of February and the scheme document will be despatched by early April. At the last close, the spread is 6.2%.

Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up

By Clarence Chu

Huitongda (9878 HK) was listed on 18th Feb 2023, when it raised US$285m in its HK IPO. Its one-year lockup will expire on 17th February 2023.
Huitongda (HTD) is a commerce and service platform serving businesses in the lower-tier retail markets of China.
Coming up for one-year lockup expiry are HTD’s pre-IPO investors. With the exception of Alibaba and SOE backers, the bulk of HTD’s pre-IPO investors are still currently in the money.

Fujitec (6406 JP): Oasis’ Activism Comes to a Head of the 24 February EGM

Oasis proposals to restructure the Fujitec Co Ltd (6406 JP) Board which will be voted on at the 24 February EGM have got independent proxy advisor, ISS, support.
An Oasis win would renew enthusiasm that Fujitec can close the performance gap with peers, resulting in a catalyst for the rerating of the shares.
An Oasis loss is not disastrous as Oasis could come back or Fujitec would likely offer a premium to buyout Oasis. Fujitec is also cheap on a cash-adjusted P/E basis.

Osstem Implant: Founder Choi Changes CB Sale Terms to MBK-Unison & KCGI Agrees to Sell Its Shares

Due to the enormous controversy regarding Chairman Choi Gyu-Ok’s children exchange CB call options for BWs, the Choi family has decided to change and simplify this transaction structure.
Previously, MBK-Unison decided to acquire the call option on CB that Chairman Choi gave to his children. Under revised contract, MBK-Unison agreed to acquire the convertible bond itself.
We believe MBK-Unison consortium is getting a relative bargain in this deal and the valuation of Osstem Implant remain attractive (EV/EBITDA of 6.4x and P/E of 11.7x in 2024).

Hong Kong CEO & Director Dealings (13 Feb): Koolearn, China Gas, MOG, Hua Yin, China Environmental

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
Stocks mentioned include Koolearn (1797 HK), China Gas Holdings (384 HK), MOG Holdings (1942 HK), Hua Yin International Holdings (989 HK), China Environmental Technology (646 HK).

Concordia/Rothschild & Co: Back to the Origins

By Jesus Rodriguez Aguilar

Concordia (38.9% stake) points out that none of Rothschild’s businesses require a high amount of capital thus a listing brings more troubles than advantages (the enlarged family concert owns 54.5%).
Lo and behold, a possible €48/share cash offer, partly financed with Rothschild’s cash holdings (via dividend and extraordinary dividend) is the solution, arguably cheap for a high-quality firm.
My conservative Fwd P/E-based SOTP valuation is €53.9/share. There’s some margin to improve the offer. Spread is 2.3%/5.6% (gross/annualised). I would be long the shares.

Quiddity Leaderboard for DAX Mar 23: Linde DEL Triggers US$2.7bn Reverse Funding Flows

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
In the March 2023 review, I do not see any changes for the DAX index although a couple names are close to the border.
As it stands, I currently expect two more changes between MDAX and SDAX and one more ADD/DEL for the SDAX index based on the latest available data.

EQD | SPX Index : CPI Data Is Set to Raise Inflation Fears Again.Use Daily Options to Play the Event

January CPI is due on Tuesday 14th and the market is expecting the biggest rise since October
The SPX has rallied over 7% since December but the Yield Curve has been moving higher and the equity rhetoric is turning negative
We look at a short-term trading opportunity in the options market to play the print

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Feb 13

Daily Brief Event-Driven: Dai Nippon Printing (7912) – Activism Results Going Forward Are Complicated and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Dai Nippon Printing (7912) – Activism Results Going Forward Are Complicated
Kakao Pay (377300 KS): MSCI Inclusion (Finally!)
HYBE’s Tender Offer of SM Entertainment: Closing the Price Gap
MSCI Korea: Names to Trade for Feb IR & Names to Watch for May IR
Merger Arb Mondays (13 Feb) – Newcrest, Nitro, Norwest, Boustead, Toyo, Ihara, Iwasaki Electric

Dai Nippon Printing (7912) – Activism Results Going Forward Are Complicated

A little over two weeks ago, western media outlets reported “sources familiar with the matter” said Elliott Management had built a “significant” stake in Dai Nippon Printing (7912 JP).
DNP has been a “value name” for years. And years. Lots of cash, lots of real estate, and lots of cross-holdings. DNP had a plan to sell crossholdings, slowly.
DNP had planned a March 9 presentation of its new MTMP. Elliott, reportedly with a little less than 5%, wanted faster. A few weeks later, DNP has responded with faster.

Kakao Pay (377300 KS): MSCI Inclusion (Finally!)

MSCI will add Kakao Pay (377300 KS) to the MSCI Korea Index at the February QCIR. There are 7 trading days to implementation on 28 February.
Local institutions and foreign investors have been sellers in the last couple of weeks and retail investors have been buying to mop up the selling.
Cumulative excess volume indicates a fair amount of pre-positioning and we’d look to sell ahead of the passive MSCI buying.

HYBE’s Tender Offer of SM Entertainment: Closing the Price Gap

We believe that there is a very high probability of a successful tender offer of 25% stake in SM Entertainment by HYBE.
There is a 4.6% gap between the tender offer price and current price. There is a strong probability of this gap being closed in the next several weeks.
There could also be an on-going interest by Kakao to try to take over the controlling interest in SM Entertainment but HYBE is not likely to give up control easily.

MSCI Korea: Names to Trade for Feb IR & Names to Watch for May IR

POSCO Holdings and Kumho Petro Chemical are expected to experience a level of passive outflow worthy of our attention in Feb QCIR.
Newly emerging ones for May OCIR are Ecopro Co Ltd and Amorepacific Group. Ecopro’s inclusion is almost certain, and AmoreG isn’t too far off the borderline.
Hanwha Aerospace also settled in the inclusion zone, whereas Posco International has moved somewhat away from the borderline. Lastly, there is S.M. Entertainment, which also deserves our attention.

Merger Arb Mondays (13 Feb) – Newcrest, Nitro, Norwest, Boustead, Toyo, Ihara, Iwasaki Electric

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), Origin Energy (ORG AU), 111 Inc (YI US), Golden Energy & Resources (GER SP), Toyo Construction (1890 JP).
Lowest spreads – Tyro Payments (TYR AU), Boustead Projects (BOCJ SP), Essential Metals (ESS AU), Nitro Software Ltd (NTO AU), Ihara Science (5999 JP), Nissin Electric (6641 JP).

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Feb 12

Daily Brief Event-Driven: Sabana Industrial REIT – Offer Goes Live and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Sabana Industrial REIT – Offer Goes Live, Worth A Look
MSCI Korea Index Rebalance: Kakao Pay Included
KOSPI Size Index Migration: Names to Trade as We Are 30D Towards Effective
Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs
JGC (1963 JP) – A ToSTNeT Buyback Is NOT a ToSTNeT Buyback and Adjusted EV Vs Adjusted EBITDA Is OK.
Weekly Deals Digest (12 Feb) – Pertamina Geothermal, Toshiba, Newcrest, Nitro, Boustead, Sabana
Last Week in SPACE: Adani Group, Hongkong Land, Toshiba, Haw Par, Renault/Nissan
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Newmont/Newcrest, StanChart, Boustead Proj., Ihara, Iwasaki
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

Sabana Industrial REIT – Offer Goes Live, Worth A Look

The Sabana Industrial REIT (SSREIT SP) 2022H2 dividend went ex- on 6 February 2023, setting the Offer to be lowered. The Offer by Volare was lowered. Docs out Friday night.
The S$0.465 Offer, adjusted for dividends (to be paid 27 March (cash or DRP units)), is now S$0.4504 per unit. The first close is 10 March 2023.
Sabana has underperformed a basket of slightly higher beta peers by 1+% since the day before the announcement. Watch pro-ration risk.

MSCI Korea Index Rebalance: Kakao Pay Included

MSCI announced its MSCI Korea index rebalance on 10 February. Kakao Pay (377300 KS) was the only company to be included in the MSCI Korea index.
There were also nine Korean companies included in MSCI Small Cap index including Osstem Implant, DearU, and ISC Co.
Hanwha Aerospace (012450 KS) and Ecopro Co Ltd (086520 KS) are higher probability potential candidates for inclusion in MSCI Korea Index rebalance in May.

KOSPI Size Index Migration: Names to Trade as We Are 30D Towards Effective

Amorepacific Group is more likely to remain in LargeCap due to its share price surge earlier this year. Instead, Hyundai Autoever will likely face a large→mid migration.
Of Small→Mid migrants. Sebang and Kum Yang deserve attention, as they will rank high in the Mid due to the rapid market cap growth over the past six months.
YTD performance seems to have a higher correlation with individual sector performance than causality with this event. So, there is still a circumstantial probability that justifies the trade.

Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs

MSCI announced the changes to the GIMI on Friday as part of the February QCIR. MSCI also announced a review of the free float of the Adani Group companies.
FTSE will announce the changes to the All-World and All-Cap indices after the close of trading on Friday, 17 February. The same day is the S&P/ASX review cutoff for March.
Yet another weekly outflow for the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) taking the YTD outflow to over US$2.5bn.

JGC (1963 JP) – A ToSTNeT Buyback Is NOT a ToSTNeT Buyback and Adjusted EV Vs Adjusted EBITDA Is OK.

Engineering & Construction firm Jgc Corp (1963 JP) on Friday announced 9M results. Full-Year forecasts were revised, with revenue lowered, but OP, RP, and NP unchanged.
The company then also announced a ToSTNeT-3 buyback of up to 4.77% of shares out for ¥20bn to be executed Monday 13 February pre-open. But details matter.
Four Important Takeaways: 1) sometimes a ToSTNeT-3 buyback is not a ToSTNeT-3 buyback, 2) that can be a good sign, and 3) sometimes Adjusted EV vs Adjusted EBITDA is OK.

Weekly Deals Digest (12 Feb) – Pertamina Geothermal, Toshiba, Newcrest, Nitro, Boustead, Sabana

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Pertamina Geothermal (0125738D IJ) guides to the low end of the IDR875-880 price range and Hesai Group (HSAI US) has a good debut.
Event-Driven developments – Newcrest Mining (NCM AU), Nitro Software Ltd (NTO AU), Toshiba Corp (6502 JP), Ihara Science (5999 JP), Boustead Projects (BOCJ SP), Sabana Industrial REIT (SSREIT SP).

Last Week in SPACE: Adani Group, Hongkong Land, Toshiba, Haw Par, Renault/Nissan

The MSCI revised the Adani Group weighting after reviewing FF. Adani Enterprises (ADE IN)affected. Adani Green (ADANIGR IN), Adani Power (ADANI IN), and Adani Ports (ADSEZ IN) not affected.
Hongkong Land (HKL SP) is dirt cheap at 0.3x P/B. It is a China re-opening play. Plus the company is buying back shares.
The Nikkei didn’t write an article on Toshiba (6502 JP) when everyone else did. They waited another day, with what appears to be a zinger on price at “about ¥2trln“.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Newmont/Newcrest, StanChart, Boustead Proj., Ihara, Iwasaki

There are 41 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Five new deal was discussed on Smartkarma this past week: Newmont/Newcrest; First Abu Dhabi Bank/Standard Chartered, Boustead Projects (BOCJ SP); Ihara Science (5999 JP), and Iwasaki Electric (6924 JP).
Key updates took place for: Nitro Software Ltd (NTO AU), Toshiba Corp (6502 JP), and Halcyon Agri (HACL SP).

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

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Feb 11

Daily Brief Event-Driven: Standard Chartered: Has FAB Gone Cold Or Just Cooling Off? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Standard Chartered: Has FAB Gone Cold Or Just Cooling Off?
Dai Nippon Printing – Activism On Easy Street
Big Link REIT (823 HK) Rights Offering
Sabana REIT (SSREIT SP): Volare’s Partial Offer Is Open

Standard Chartered: Has FAB Gone Cold Or Just Cooling Off?

Back on the 5 January, First Abu Dhabi Bank (FAB DH) said it had considered a bid for Standard Chartered (STAN LN/2888 HK), but was no longer evaluating an Offer.
Such a statement kickstarts a six-month cooling-off period whereby FAB is restricted from reloading. This means all deal work must cease. Unless another bidder emerges or STAN’s board approves.
In a curious development, STAN’s shares popped ~11% yesterday, on no apparent news.

Dai Nippon Printing – Activism On Easy Street

Dai Nippon Printing’s announcement that it would double its RoE target in its next MTP was a pleasant surprise.
Together with saucy hints that future buybacks could be the biggest in its history this has propelled the stock to a post-2007 high.
We think Elliott has found an easy win here and consider this likely to end as a standout success for activism in Japan.

Big Link REIT (823 HK) Rights Offering

After being halted this morning before the start of trade, post-close, Link REIT (823 HK) announced a fully-underwritten Rights Offering.
The Rights Offering intends to raise HK$18.8bn issuing 1 Right for every 5 Shares held, at a subscription price of HK$44.20, a 26% discount to TERP.
This will take an already under-levered REIT and add more capital to it. And there is going to be selling pressure at some point.

Sabana REIT (SSREIT SP): Volare’s Partial Offer Is Open

Sabana Industrial REIT (SSREIT SP)’s partial offer from Volare to acquire a maximum of 109.6 million units at S$0.4504 per unit (S$0.465 in cash – S$0.0146 2H2022 distribution) is open.
The offer is conditional on 10% minimum acceptances. Minorities appear willing sellers as both Volare and Quarz increased their unitholding over the last 12 months.
Quarz is supportive but its intentions are unclear. Based on a proration of 16.70% and at the last close of S$0.420 per unit, the breakeven price is S$0.415 per unit.

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Feb 10

Daily Brief Event-Driven: MSCI Feb 2023 QCIR: Mostly In-Line; Couple of Surprises and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI Feb 2023 QCIR: Mostly In-Line; Couple of Surprises
Adani Group – MSCI Will Treat Very Adani Funds as a Very Special Case
Toshiba – The Nikkei Finally Speaks
Toshiba (6502 JP): Formal Offer Lodged, Now for the Hard Part
Haw Par Corp Is Still Trading Cheap
CATL GDR Listing Early Look – Past Deals Have Done Well. Valuations Somewhat Justifiable
Korea Spin-Offs: Details and KOSPI200 Index Impact
Renesas – Good Results, Great Cashflow, Another Buyback, But Drift.
Kingston Financial (1031 HK) Scheme: That Is a Pass
HYBE to Acquire a 39.8% Stake in SM Entertainment

MSCI Feb 2023 QCIR: Mostly In-Line; Couple of Surprises

MSCI has announced the changes for the February QCIR. For Asia Pacific, there are 20 adds and 14 deletes for the MSCI Standard Index with the most changes in China.
There are no surprises on the adds or deletes. However, there are a couple of stocks that are surprises on not being added to or deleted from the index.
The largest impact will be on Ebos Group Ltd (EBO NZ) – though there will be pre-positioning on the stock.

Adani Group – MSCI Will Treat Very Adani Funds as a Very Special Case

Shortly after the Hindenburg Report came out, MSCI said it was seeking feedback from clients. They got it, and last night announced they would conduct a special review.
They concluded some holders heretofore in the float might not be float. They announce results tonight. That can only be bad news for Adani Group companies.
We don’t know numbers yet, but passive inclusion was one reason why stocks skyrocketed. Few of the companies will be unaffected. Some could be heavily affected.

Toshiba – The Nikkei Finally Speaks

The Nikkei was out this morning with its belated take on JIP securing financing.
The article was nevertheless rather negative in its tone causing Toshiba to drop as much as 3.6% before recovering most of those losses.
We aren’t entirely sure it should have but Toshiba Tec does pique our interest.

Toshiba (6502 JP): Formal Offer Lodged, Now for the Hard Part

The Nikkei reports that Japan Industrial Partners (JIP), the preferred bidder, has finally secured financing and submitted a final offer to Toshiba Corp (6502 JP)’s Board.
Nikkei notes that JIP expects to spend about JPY2 trillion on the acquisition suggesting an offer price around JPY4,750 per share, -4% below the undisturbed price of JPY4,957.60 (21 April).
The hard part now is getting the Board to accept the unremarkable offer and the banks’ conditions. If the Board succumbs, the next challenge is to get shareholders to accept.

Haw Par Corp Is Still Trading Cheap

Last November I highlighted Haw Par Corp (HPAR SP)‘s multi-year trough levels on an implied stub valuation, and on an HPAR/UOB (UOB SP) ratio.
That trade has panned out well as the ratio steadily increased. But it remains below the 200 MDA.
A recovery in Tiger Balm sales is expected in Haw Par’s full-year results later this month. UOB’s financials, and UOL (UOL SP)‘s, are also due out this month.

CATL GDR Listing Early Look – Past Deals Have Done Well. Valuations Somewhat Justifiable

By Clarence Chu

CATL (A) (300750 CH) is looking to raise up to US$6bn in its upcoming Swiss GDR listing. Bookrunners on the deal are CICC, China Securities, Goldman Sachs, and UBS.
The relatively large listing comes after the firm has been undertaking a series of capital raisings, since it’s A-share debut back in Jun 2018, to fund its expansion.
In this note, we discuss GDR timelines, and the firm’s recent financial performance/valuations.

Korea Spin-Offs: Details and KOSPI200 Index Impact

Hyundai Dept Store Co (069960 KS), Hyundai Greenfood (005440 KS) and Oci Co Ltd (010060 KS) will spin-off divisions and list them prior to the next rebalance in June.
The equity spin-offs will result in passive flows prior to the trading suspension as well as on relisting of the stocks post the spin-off.
We expect one change to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in April as one stock will be deleted due to low market cap following the spin-off.

Renesas – Good Results, Great Cashflow, Another Buyback, But Drift.

Renesas Electronics (6723 JP) today reported full-year 2022 earnings with revenues 0.032% higher than the high end of guidance, which was better than consensus. OP was not as good.
They have guided Q1 only, with revenues up 0.2-4.6%, and non-GAAP GPM -3.9% to 54.5%, and OPM -6.6% to 32.5%. But they also announced a Tender Offer Buyback.
The buyback is smaller than I’d like, but the company has added cash despite last year’s tender offer and repaying bank borrowings. Lots to like here.

Kingston Financial (1031 HK) Scheme: That Is a Pass

Kingston Financial (1031 HK)’s scheme resolution was approved at today’s scheme meeting – 99.89% of independent share votes cast FOR (0.09% of all independent shareholders AGAINST).
The scheme comfortably passed the headcount test with 44 FOR and 13 AGAINST the scheme (56 FOR and 20 AGAINST on a look-through basis).
The last trading is on 10 February. At the last close and for the 3 March payment, the gross and annualised spread to the offer is 3.4% and 69.3%, respectively.

HYBE to Acquire a 39.8% Stake in SM Entertainment

On 10 February (prior to market open), Seoul Economic Daily reported that HYBE will conduct a tender offer of SM Entertainment shares taking over the controlling ownership of the company.
HYBE agreed to acquire a 14.8% stake from SM Entertainment’s founder Lee Soo-Man at 120,000 won per share, which represents a 21.8% premium to the closing price on 9 February.
HYBE is also conducting a tender offer to minority shareholders and it plans to acquire up to 25% additional shares at 120,000 won per share, representing 717 billion won.

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Feb 09

Daily Brief Event-Driven: MSCI Acts Quickly: Unmitigated Bad News for Adani Group Companies and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI Acts Quickly: Unmitigated Bad News for Adani Group Companies
Toshiba (6502) – Whoop! There It Is!
TOPIX Inclusions: Who Is Ready (Feb 2023)
KOSPI 200 Ad-Hoc Change: Hyundai Greenfood Out & Samyang Foods Fresh Buy-In on April 10
AGC (5201 JP) – A Big Buyback
Ihara Science (5999 JP) Sees the Chairman Launch an MBO. I Might Expect Excitement.
Nitro Software (NTO AU): Potentia Finally Secures Due Diligence
Ihara Science (5999 JP): JPY2,980 MBO Tender Offer
Nitro Software: Potentia Still In The Mix As DD Granted

MSCI Acts Quickly: Unmitigated Bad News for Adani Group Companies

In an unprecedent step, MSCI will reassess the float and likely lower the FIF of the Adani Group companies at the February QCIR. There will be BIG passive selling.
The affected securities will be further reviewed as part of the scheduled Full Country Float Review during the May QCIR. There could be some index deletions and BIGGER passive selling.
Expect active selling before the passive selling and the rally in the Adani Group stocks over the last couple of days should come to a grinding halt today.

Toshiba (6502) – Whoop! There It Is!

As mentioned yesterday here and more clearly by Mio Kato in Toshiba – Good News?, the Nikkei was strangely silent over the fact that loan details were agreed.
The Nikkei comes out with a surprise article this morning saying they hear the Commitment Letter has been handed over. It also says the “Final Bid” is “about ¥2trln.”
Toshiba shares quickly reacted badly quickly. The article deserves parsing and I try to clarify the arguments.

TOPIX Inclusions: Who Is Ready (Feb 2023)

By Janaghan Jeyakumar, CFA

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
This insight is a follow-up to TOPIX Inclusions: Who Is Ready (Jan 2023)
Our top pick from the last insight CELSYS (3663 JP) (previously known as Artspark) has gained ~14% in roughly a month.

KOSPI 200 Ad-Hoc Change: Hyundai Greenfood Out & Samyang Foods Fresh Buy-In on April 10

From a trading perspective, we should pay attention to the KOSPI 200 corporate actions in Hyundai Department Group’s demerger events, as both companies are KOSPI 200 constituents.
Hyundai Green Food’s surviving company won’t beat the cutoff, resulting in a KOSPI 200 constituent change on April 10. Samyang Foods will be a new addition.
Even the size of KOSPI 200 ETFs that will likely go into mechanical trading on April 10 will cause a significant price impact from a day trading perspective.

AGC (5201 JP) – A Big Buyback

AGC Inc (5201 JP) today announced Q4 earnings where revenues were great, OP was slightly disappointing, and Net Profits were awful because of significant impairments.
The company, however, announced a large buyback – its first in 5 years and equivalent to all the buybacks in the previous five years.
The buyback should have impact on what is an interesting name with broad institutional ownership and not overwhelming liquidity.

Ihara Science (5999 JP) Sees the Chairman Launch an MBO. I Might Expect Excitement.

Ihara Science (5999 JP) announced an MBO by the chairman.
It’s at an all-time high, but it is not especially attractive. The register is also really interesting.
This is a smallcap but i would not be surprised to see a bumpitrage effort. In fact, I’d be surprised if we didn’t.

Nitro Software (NTO AU): Potentia Finally Secures Due Diligence

Nitro Software Ltd (NTO AU) has finally granted Potentia due diligence access until 22 February. Subject to satisfactory due diligence, Potentia could increase its offer from A$2.00 to A$2.20-2.30 per share.
Alludo’s A$2.15 off-market takeover offer is its best and final offer. Alludo’s offer is subject to a 50.1% minimum acceptance condition (currently at 12.53%) and closes on 3 March.
Potentia’s dogged pursuit despite the Board’s stonewalling suggests a desire to get a deal done. At the last close, the gross spread to Potentia’s potential offer is 2.3% to 7.0%.

Ihara Science (5999 JP): JPY2,980 MBO Tender Offer

Ihara Science (5999 JP) has recommended an MBO tender offer (Chairman and Toku Corporation) of JPY2,980 per share, a 31.3% premium to the undisturbed price (7 February).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.25% ownership ratio.
While the tender price represents an all-time share price, it is light in comparison to peer and historical multiples. This suggests deal risk. The offer runs from 9 Feb-24 Mar.

Nitro Software: Potentia Still In The Mix As DD Granted

Adobe rival Nitro Software Ltd (NTO AU) has granted Potentia Capital due diligence through to the 22 February on the possibility it sweetens its Offer to A$2.20-A$2.30/share.
Alludo’s hands are tied to its A$2.15/share Offer price, which it has declared ‘best and final’ and will not be increased – even if a superior proposal emerges.
But Potentia pitching an Offer A$0.01/share above Alludo’s Offer won’t be sufficient for Alludo and other shareholders to tender.

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Feb 08

Daily Brief Event-Driven: Toshiba (6502) – Funding Definitely Probably Now Secured – Next Steps and Risks and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba (6502) – Funding Definitely Probably Now Secured – Next Steps and Risks
DTAC/TRUE Merger: Index Flows & Potential SET50 Replacement
Carlyle 86% Premium ¥4460 TOB on Iwasaki Elec – Probably Light, and Interesting Shareholder Register
Nissan’s Renault Led Selldown Very Early Look – US$4.3bn Prolonged Overhang or Lack Thereof
Toshiba – Good News?
Toyo Construction (1890 JP): YFO and the Board Trading Half-Truths
SM Entertainment: A Rights Offering & CB Issue to Kakao Corp
EQD | HSI Index: Buying the Dip Using Options

Toshiba (6502) – Funding Definitely Probably Now Secured – Next Steps and Risks

On 31 January, the expected “deadline” for a bank loan agreement with the JIP Consortium bidding for Toshiba, we got news that commitment confirmation would be extended to 3 February.
Every other time we got a deadline extension, we got an article. On 3-6 Feb, we got no article, suggesting we were close. Today, a Bloomberg article says terms agreed.
That gets us over the biggest hump. Now we have to look at possible next steps and timing.

DTAC/TRUE Merger: Index Flows & Potential SET50 Replacement

The Total Access Communication (DTAC TB) / True Corp Pcl (TRUE TB) joint shareholder meeting is in two weeks and amalgamation could be completed in the next month or two.
We forecast inflows to the NewCo from MSCI trackers while there will be no flows from FTSE All-World/All-Cap and Stock Exchange of Thailand SET 50 Index (SET50 INDEX) trackers.
Srisawad Power 1979 (SAWAD TB) is currently comfortably in the lead to be added to the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) in an ad hoc rebalance.

Carlyle 86% Premium ¥4460 TOB on Iwasaki Elec – Probably Light, and Interesting Shareholder Register

Carlyle has agreed to do an MBO on Iwasaki Electric (6924 JP) where the existing CEO who is 65yrs old will take a 0.5% stake.
As a purveyor of specialist industrial lighting, including transition to LED lighting for public space use, the company’s place in the ecosystem is not undesirable. But it isn’t hugely profitable.
This smallcap takeout at an 86% premium is probably still too light. And the Shareholder Structure is interesting.

Nissan’s Renault Led Selldown Very Early Look – US$4.3bn Prolonged Overhang or Lack Thereof

By Sumeet Singh

With Nissan (7201 JP) and Renault coming to a new arrangement regarding their working relationship, Renault will be left with a US$4.3bn Nissan stake that it will look to sell eventually.
The selldown will probably take a long while to materialize.
In this note, we talk about the announcement and take a very early look at the possible selldown.

Toshiba – Good News?

So JIP appears to have finally secured funding for its tortured Toshiba bid.
The market is reacting positively and we think this is reasonable but the real question is whether Toshiba management will be amenable to the new terms of JIP’s deal.
In our view, there are certain quirks regarding recent news flow which point to a potential answer to that question.

Toyo Construction (1890 JP): YFO and the Board Trading Half-Truths

YFO’s latest press release outlines the key objectives of a revamped Toyo Construction (1890 JP) Board, should its recommended directors get elected at the June AGM.
YFO’s strategy is to revamp the Board, which should pave the way for its tender offer. YFO’s standstill agreement expires on 24 May and the tender offer starts in late-September.
The Board could allege that YFO has breached its NDA agreement and re-introduce a poison pill. The Board could look to garner enough support to block YFO’s nominations.

SM Entertainment: A Rights Offering & CB Issue to Kakao Corp

On 7 February, it was announced that SM Entertainment will conduct a third party rights offering and CB issue to Kakao Corp.
Post these deals, Kakao Corp will own a 9.05% stake in SM Entertainment.
The rights offering and the CB issue have all the hallmarks of an intermediate deal prior to an eventual takeover of SM Entertainment by the Kakao Group.

EQD | HSI Index: Buying the Dip Using Options