Event-Driven Archives | Page 103 of 187 | Smartkarma

Back on the 7th December, Xingda International (1899 HK) announced a partial Offer from a consortium comprising management (known as the Five parties) at HK$1.88/share, a 24.5% premium to undisturbed.
Pre-Conditions were satisfied on the 15 December and the Composite Document was dispatched last night.
The first close is the 24 February. Payment under the Offer is expected to be the 21 March.

Acotec (6669 HK): Current Proration of 82.7%

With a minimum acceptance hurdle of 50% and irrevocables of 60.14%, Acotec Scientific Holdings (6669 HK)‘s partial offer was always going to turn unconditional.
As per last night’s announcement, valid acceptances were 78.59%. The Offer has automatically been extended to the 9 February – this is the final close. Pro-ration is currently 82.7%.
The minor quirk for partial Offers is that payment occurs within seven business days of the final close, not seven days from the Offer turning unconditional.

Tyro Offers Due Diligence To Potentia

After Potentia bumped indicative terms to A$1.60/share last month, Tyro Payments (TYR AU)‘s board considered the revised terms remained below what is considered fair, and has ceased all discussions.
Following discussions between Tyro and Potentia, the Tyro Board is now providing Potentia with a 4-week period of due diligence to “enable Potentia to develop a significantly improved proposal“.
No indicative price was mentioned. Mike Cannon-Brookes’ Grok Ventures was open to a competing proposal of A$1.85/share.

Siemens/Siemens Gamesa: Running for the Exit

On 25 January, the EGM of Siemens Gamesa approved the delisting of the shares, which the company requested to the CNMV.
The standing purchase order for the shares, at €18.05/share (same as the offer price, sellers will bear the brokerage, trading and settlement fees) will last until 7 February.
Gross spread is nil. Shortly after 7 February, Siemens Gamesa will be an unlisted illiquid share. Recommendation is sell into the sustained purchase order.

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Jan 27

Daily Brief Event-Driven: IDX30/LQ45/IDX80 Index Rebalance: 4 Days to Implementation and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

IDX30/LQ45/IDX80 Index Rebalance: 4 Days to Implementation
SenseTime (20 HK): Index Inclusions Incoming?
Northbound Stock Connect Expansion: Updated Details
JAFCO Tender Offer Results – Low Pro-Ration Surprise, Murakami Overhang
Adani Enterprises FPO Update: Hindenburg, Anchors, and Righteous Indignation
Acotec (6669 HK): Boston Scientific’s HK$20 Partial Offer Unconditional
Where To Go With Warrego?
AAG Energy (2686 HK): Is Xinjiang Xintai Returning for Another Bid?
Xingda (1899 HK): HK$1.88 Partial Offer Now Open
Nitto Denko Q3 Results and Buyback Announced

IDX30/LQ45/IDX80 Index Rebalance: 4 Days to Implementation

There are 3 changes for the IDX30 Index, 6 changes for the LQ45 Index, and 7 changes for the IDX80 Index at the rebalance to be implemented on 31 January.
Largest passive inflows are expected to be on Sumber Alfaria Trijaya Tbk Pt (AMRT IJ) and Surya Esa Perkasa (ESSA IJ).
With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.

SenseTime (20 HK): Index Inclusions Incoming?

SenseTime Group (20 HK) was added to the Non-SDN Chinese Military-Industrial Complex Company (NS-CMIC) list on 10 December 2021. So, the stock is not a part of any global indices.
There is a possibility that the stock is no longer restricted to U.S. investors and that could lead to multiple index inclusions over the next few months.
Inclusion in the MSCI China Index could take place in February or May while inclusion in the FTSE All-World Index could take place in March.

Northbound Stock Connect Expansion: Updated Details

On 19 January, the HKEX clarified the liquidity criteria as well as treatment of Differentiated Voting Rights (DVR) stocks and the criteria for current Northbound stocks to become Sell-only.
We currently see 975 China A-shares becoming eligible for Northbound Stock Connect when the extension is implemented.
With the extension likely to be implemented in June, there will be additions to the MSCI China Index, FTSE All-World Index and FTSE All-Cap Index in August and September.

JAFCO Tender Offer Results – Low Pro-Ration Surprise, Murakami Overhang

Jafco Co Ltd (8595 JP) announced the results of its Tender Offer Buyback today. They wanted to buy 16.8mm shares including 13.9mm from Murakami-san. He sold 9.63mm. Oops.
Pro-Ration was 69.25% which means that Murakami entities are still long about 4.276mm shares or 5.83% of shares out.
There should be some index selling, and some Murakami Overhang. There may be more overhang at recent prices.

Adani Enterprises FPO Update: Hindenburg, Anchors, and Righteous Indignation

The Adani Enterprises (ADE IN) Further Public Offering (“FPO”) expected to raise Rs 200bn has its first leg publicly complete with anchor investors taking Rs 59.849bn.
Noted shortseller Hindenburg Research published a long report suggesting Adani Enterprises and indeed the Adani Group were over-priced according to fundamentals and were the result of a “con.”
Now the book build starts. Deal structure and Adani Group CFO comments continue to suggest that Liquidity is a Bug, not a Feature.

Acotec (6669 HK): Boston Scientific’s HK$20 Partial Offer Unconditional

As expected, Acotec Scientific Holdings (6669 HK)’s partial offer from Boston Scientific (BSX US) at HK$20 per share is now unconditional. The final closing date is 9 February.
The current acceptances representing 78.59% of outstanding shares imply current proration is 82.71%. Current pro-ration suggests CA Medtech post-offer shares will be counted towards the public float.
Based on the current proration of 82.71% and at the last close price of HK$19.78 per share, the breakeven price is HK$19.00 per share.

Where To Go With Warrego?

It’s a fair bet Hancock Prospecting and Mineral Resources (MIN AU) are actively discussing the final stages for Warrego Energy (WGO AU) behind the scenes.
It is unlikely MinRes aggressively builds a ~19% stake in a company subject to a two-way takeover battle, and declares its position “strategic” with no intention of making an Offer.
This stake may be a bargaining chip from MinRes to keep Hancock on the sidelines in its tilt for Norwest Energy NL (NWE AU).

AAG Energy (2686 HK): Is Xinjiang Xintai Returning for Another Bid?

Aag Energy Holdings (2686 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers on 26 January.
It is likely that Xinjiang Xintai Natural Gas (603393 CH), the largest shareholder representing 56.95% of outstanding shares is seeking to privatise AAG.
The potential bid is likely privatisation through a scheme. Multiples from Xinjiang Xintai’s previous voluntary cash offer in 2018 suggest an offer north of HK$2.00.

Xingda (1899 HK): HK$1.88 Partial Offer Now Open

Xingda International (1899 HK)’s partial offer from a management-controlled offeror at HK$1.88 per share is now open. The IFA opines it to be fair and reasonable.
The partial offer is conditional on the offeror/concert parties, which have a 45.60% stake, hitting 50.01% voting rights and approval by the requisite majority of shareholders on the acceptance form.
The 4.41% minimum acceptance is not onerous. Based on a proration of 8.88% and at the last close price of HK$1.59 per share, the breakeven price is HK$1.56 per share.

Nitto Denko Q3 Results and Buyback Announced

Nitto Denko (6988 JP) today announced Q3 results, lower full-year guidance with one-quarter left to go, sharply undercutting implied Q4 results vs the Street.
The company also announced a buyback of 4.1-4.7% of shares out over the next 6mos. Assuming the share price falls in reaction, this could be closer to the top end.
The buyback is non-negligible as a portion of Likely Real World Float and as such the situation is worth a look – for those with a position and those without.

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Jan 26

Daily Brief Event-Driven: Solactive Global Uranium & Nuclear Components Index Rebalance: 6 Adds and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Solactive Global Uranium & Nuclear Components Index Rebalance: 6 Adds, 5 Deletes
The Olympus Peer-Relative Crash – Due to ADR Cancellation Overhang?
MBK/Unison Capital Korea Do a Deal for Osstem Implant (048260 KS) Thwarting Activist KCGI
Norwest Backs MinRes’ Bumped Offer
Toshiba – Preparing for 2QFY23
Samsung Electronics 1P Pushed to a Substantial Diversion (Below -2σ) Today
Origin Energy (ORG AU): Risk/Reward Profile
Quiddity Leaderboard for Thailand SET50 Jun 23:Ramkhamhaeng Hospital Is an Interesting Case
Adani Enterprises US$2.4bn FPO – Updates, Pricing, Structure, Anchor and Some More

Solactive Global Uranium & Nuclear Components Index Rebalance: 6 Adds, 5 Deletes

Solactive has announced the constituent changes for the Global Uranium & Nuclear Components Index. There are 6 adds and 5 deletes with implementation at the close on 31 January.
Estimated one-way turnover is in excess of 12% and will result in a one-way trade of US$207m. There are 11 stocks with estimated passive flows greater than 5x ADV.
Some of the inclusions have had BIG rallies over the last couple of months and there could be profit taking on those names in the next few days.

The Olympus Peer-Relative Crash – Due to ADR Cancellation Overhang?

Olympus has been sold down relatively hard in the last couple of months. At the same time, we are at crunch time for the cancellation of the US ADR.
This may create short-term overhang, but the medium-term overhang from substantial foreign net buying in H1 when USDJPY was going up may be larger.
This insight looks at the relative performance vs Peers, vs forward earnings expectations, USDJPY, etc.

MBK/Unison Capital Korea Do a Deal for Osstem Implant (048260 KS) Thwarting Activist KCGI

Just over a year ago, leading Korean dental implant and dentistry supply company Osstem Implant (048260 KS) announced the largest-ever embezzlement case in Korea. The stock was suspended.
There were fears about forced selling by the founder, and PE funds circled. Activist KCGI probably bought in Q3 but built a 5+% stake by end-December 2022.
Korean PE Firms MBK and Unison Capital have now launched an MBO-style Tender Offer to buy 2.4-11.2mm shares in the company at a sharp premium to the pre-activism undisturbed price.

Norwest Backs MinRes’ Bumped Offer

Back on the 10 January, Norwest Energy NL (NWE AU) rejected Mineral Resources (MIN AU)‘s off-market scrip Offer.
It was apparent what MinRes needed to bump. This was an easy win if they do. On cue, they have now increased the scrip terms and NWE’s directors are supportive.
Scrip terms are now 1 MinRes for every 1,300 NWE shares – from 1,367. I think NWE could have held out for more, but it is what it is.

Toshiba – Preparing for 2QFY23

By Mio Kato

We have turned slightly more bearish on Toshiba’s near term fundamental prospects as we now have concerns about the industrial side of its semiconductor business.
The re-emergence of a WDC-Kioxia deal and the likelihood of a change in BOJ policy make us wonder whether bankers might want to wait a little on financing.
As such, while recent weakness makes an aggressively negative view difficult we do not feel that upside risks are particularly threatening either.

Samsung Electronics 1P Pushed to a Substantial Diversion (Below -2σ) Today

SamE PREF’s relative underperformance compared to ORD has been getting a bit worse lately. And finally, today, it went down below -2.0σ on a 20-day moving average.
This much diversion is the first in recent months, and the pref discount is close to last year’s peak. The dividend yield difference is also the widest in recent years.
The current diversion appears to be a byproduct of the SamE overbuying amid the recent market rally, and we should expect a quick reversion.

Origin Energy (ORG AU): Risk/Reward Profile

Origin Energy (ORG AU)’s exclusivity agreement with Brookfield/EIG expired on 24 January. Brookfield/EIG is reportedly continuing its due diligence on its A$9.00 per share offer.
Time often kills deals. There is speculation that recent price caps would result in Brookfield/EIG walking away or trying to recut the deal terms. ACCC approval is also an overhang.
Peers’ share prices have risen despite the price cap which weakens the case for a recut to the deal terms. Brookfield/EIG clearly want Origin as it twice bid against itself.

Quiddity Leaderboard for Thailand SET50 Jun 23:Ramkhamhaeng Hospital Is an Interesting Case

In this insight, we take a look at the potential ADDs/DELs for the SET50 index rebalance in June 2023.
Based on the latest available data, I expect 3 ADDs/DELs but there are multiple names lurking close to the border.
Srisawad (SAWAD TB) and Sansiri Public (SIRI TB) are leading the SET50 and SET100 Reserve Lists respectively and could become intra-review ADDs if the DTAC-TRUE merger closes in 1H 2023.

Adani Enterprises US$2.4bn FPO – Updates, Pricing, Structure, Anchor and Some More

By Sumeet Singh

Adani Enterprises is looking to raise INR200bn (US$2.4bn) via a further public offering (FPO). Bookbuild will begin tomorrow (27th Jan 23) and last till the end of the month.
Adani Enterprises is the flagship company of the Adani Group. The group’s entities’ stock performance over the past few years has made the founder one of the richest persons globally.
We have covered most aspects of the deal in our earlier note published. In this note, we talk about the recent updates and the deal pricing and structure.

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Jan 25

Daily Brief Event-Driven: KLINE (9107) – Chances for an Additional Buyback At Q3 Earnings? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

KLINE (9107) – Chances for an Additional Buyback At Q3 Earnings?
YFO To Take the Fight To Toyo Construction’s Board
KRX New Deal Index Rebalance Preview: Some Big Impact Names
Norwest Energy (NWE AU): The Board Perplexing Succumbs to MinRes’ Revised Offer
China Internet Investment (810 HK): 98% Downside
Coway Is a Prime Candidate for Corporate Activism in Korea
Quiddity Leaderboard STOXX Europe Mar 23: 5 ADDs/DELs and Potential Downweights for EDF and VTWR
A Tender Offer of Osstem Implant by MBK & Unison Capital?
Detailing Maekyung Report on MBK’s Tender Offer to Osstem Implant Shareholders at a 20% Premium

KLINE (9107) – Chances for an Additional Buyback At Q3 Earnings?

KLine is the cheapest of the three Japan majors in terms of forward consensus PER. And forward EPS ratios are improving as the company buys back shares.
The CEO mentioned in December the possibility of additional shareholder return this fiscal year based on cashflow.
In this insight, we look at what he knew then, and what he might know now, and the chances for an additional buyback (and how it might work).

YFO To Take the Fight To Toyo Construction’s Board

YFO offered another Press Release yesterday. This one outlines what they see as Corporate Governance failures and offers a NEW POLICY.
The Corporate Governance failures are indeed, failures. Toyo’s Board has failed to be transparent with shareholders, and in not at least addressing the takeover proposal, has failed its duties.
NEW POLICY? Elect new independent directors “capable of improving the long-term corporate value and maximizing the interests of the general shareholders.” Soft war starts now.

KRX New Deal Index Rebalance Preview: Some Big Impact Names

The review period for the March rebalance ends on 31 January, the changes will be announced towards end February and implemented at the close of trading on 9 March.
We forecast one add/delete for the Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).

Norwest Energy (NWE AU): The Board Perplexing Succumbs to MinRes’ Revised Offer

Mineral Resources (MIN AU) has revised its offer from 1 MinRes share for every 1,367 NWE shares to 1 MinRes share for every 1,300 NWE shares. The offer is unconditional.
The Norwest Energy NL (NWE AU) Board now recommends the offer. Most of the value uplift is due to the 17.4% increase in MinRes’ share price since 15 December.
MinRes’ revised off-market takeover offer is fair in comparison to Warrego Energy (WGO AU)’s bids and historical ranges. However, this is predicated on the MinRes maintaining its share price run.

China Internet Investment (810 HK): 98% Downside

Bubble-Stock China Internet Investment Finance Holdings (810 HK) (CIIFH) was suspended on the 10 January pursuant to the Hong Kong Code on Takeovers and Mergers.
It has now announced a possible voluntary conditional takeover. No price was mentioned and terms remain indeterminate.
CIIFH, which invests primarily in listed Hong Kong securities, is trading at an eye-watering 59.5x NAV. 98% downside from here is conceivable.

Coway Is a Prime Candidate for Corporate Activism in Korea

In this insight, we discuss the major reasons why Coway Co Ltd (021240 KS) is a prime candidate for corporate activism in Korea.
Netmarble has done a poor job with Coway post its acquisition in 2019.
An action plan for Coway is to return at least half of its net profit through dividends and share buybacks/cancellations.

Quiddity Leaderboard STOXX Europe Mar 23: 5 ADDs/DELs and Potential Downweights for EDF and VTWR

In this insight, we take a look at the names leading the race to become ADDs/DELs for the STOXX Europe 600 and EURO STOXX Indices for the March 2023 Rebalance.
Based on the latest available data, I see five ADDs/DELs for the STOXX Europe 600 Index during the March 2023 review.
Separately, Electricite De France Sa (EDF FP) and Vantage Towers (VTWR GR) could have index outflows triggered by extraordinary float adjustments before or during the March 2023 review.

A Tender Offer of Osstem Implant by MBK & Unison Capital?

On 24 January, it was reported in Maeil Business Daily that MBK and Unison Capital are ready to take over the management rights of Osstem Implant through a tender offer.
For now, Osstem Implant, MBK Partners, and Unison Capital have not confirmed on the validity of this news.
We would attach a 70-90% probability that indeed MBK Partners and Unison Capital Korea are ready to launch a tender offer on Osstem Implant.

Detailing Maekyung Report on MBK’s Tender Offer to Osstem Implant Shareholders at a 20% Premium

Maekyung exclusively reports MBK will do a tender offer to Osstem Implant shareholders at a 20% premium to buy a 15% stake.
As Maekyung is a first-tier news outlet in Korea, we have to see enough credibility in this report. We should expect to see it in an official regulatory filing soon.
We should design a play that actively utilizes the tender offer event very elaborately. Here, we need to consider immediate offerings and potential delisting from a longer-term perspective.

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Jan 24

Daily Brief Event-Driven: Seven & I: Activist ValueAct Seeking a Spin-Off of The US Business and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Seven & I: Activist ValueAct Seeking a Spin-Off of The US Business
Partial Tender for Sabana Industrial REIT – Large Additional Player to the Activist Mix
Toyo Construction (1890 JP): YFO Fires Another Salvo at the Board
Warrego (WGO AU): End-Game Scenarios
Five Most Aggressive Corporate Activists Moving the Korean Market: Align, KCGI, FCP, Truston, & LIFE
République Française/EDF: Squeeze-Out
NIFTY50 Index Rebalance Preview: No Changes Likely in March

Seven & I: Activist ValueAct Seeking a Spin-Off of The US Business

By Oshadhi Kumarasiri

New York-based hedge fund ValueAct has told Seven & I Holdings (3382 JP)’s shareholders to support them in their bid to spin off the 7-Eleven US convenience store business.
Spinning off the only growth driver of the business does not seem like an idea that Seven & I or its shareholders are likely to entertain.
We fear that ValueAct could be looking for reasons to call-off its investor-activism-campaign and perhaps is trying to squeeze out every last bit of gains as it exits its positions.

Partial Tender for Sabana Industrial REIT – Large Additional Player to the Activist Mix

On Friday, after the close, 5.4% owner of Sabana Industrial REIT (SSREIT SP) announced it had offered to buy another 10.0% in a Partial Offer at a recent high price.
The Price of the Tender Offer at S$0.465/share matches a recent (and 7-year) high and a 0.88x multiple against June 2022 NAV of S$0.53/share.
It’s a small deal (US$35mm) for a small REIT (US$350mm) but there’s an activist and an engaged not-quite sponsor, and this would make a third large unitholder in the mix.

Toyo Construction (1890 JP): YFO Fires Another Salvo at the Board

Due to the inability of getting a fair hearing from Toyo Construction (1890 JP)’s Board, YFO’s strategy now is to replace some of the Board at the June AGM.
YFO’s latest press release also catalogues the Board’s shockingly poor corporate governance in relation to its tender offer at JPY1,000. Crucially, a special committee is yet to be formed.
There is no timeline update on the tender which was set to start in late January. YFO continues to maintain that it will not withdraw its proposal.

Warrego (WGO AU): End-Game Scenarios

Warrego Energy (WGO AU)’s offers from Hancock and Strike Energy (STX AU) close on 31 January and 13 February, respectively. As time passes, the chance of a further bump is slim.
Mineral Resources (MIN AU) is the kingmaker. A MinRes/Strike pairing results in a combined min of 49.83% to a max of 73.93% of outstanding shares (if Hancock retains its stake).
A MinRes/Hancock pairing results in a combined min of 45.21% to a max of 69.32% of outstanding shares (if Strike retains its stake). This is the likely scenario.

Five Most Aggressive Corporate Activists Moving the Korean Market: Align, KCGI, FCP, Truston, & LIFE

In this insight, we discuss the five most aggressive corporate activist firms that have been moving the Korean equity market in the past year.
They include Align Partners Capital Management, KCGI, Flashlight Capital Partners, Truston, and LIFE Asset Management.
Share prices of 15 companies that the corporate activist firms have invested in Korea are up on average 9.7% YTD, outperforming KOSPI which is up 7.1% in the same period.

République Française/EDF: Squeeze-Out

On 6 July, the French Prime Minister said that France would have 100% of EDF. I recommended BUY at €8.98 in the wake of a very willing big-pocketed buyer.
The French state now holds 92.71% of voting rights in EDF, and intends to initiate the squeeze-out within three months from closing (up to 22 March).
Although the shares are still liquid, gross spread is 0-2 bps, and therefore there is no trade worth considering, in my view, just selling into the sustained purchase order/await squeeze-out.

NIFTY50 Index Rebalance Preview: No Changes Likely in March

With only 5 trading days to go in the review period, we see no constituent changes to the NIFTY Index (NIFTY INDEX) at the March rebalance.
Pidilite Industries (PIDI IN) is the highest ranked non-index constituent, but its free float market cap does not exceed 1.5x the free-float market cap of Bharat Petroleum Corp (BPCL IN).
We do not expect LTIMindtree (LTIM IN) to be added to the index in March post the merger between Larsen & Toubro (LT IN) and Mindtree Ltd (MTCL IN).

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Jan 23

Daily Brief Event-Driven: Fujitsu General (6755) – Fujitsu’s Stake On The Block and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Fujitsu General (6755) – Fujitsu’s Stake On The Block
Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End
Merger Arb Mondays (23 Jan) – Origin Energy, Warrego, Golden Energy, Yashili, Kingston, O2Micro
Weekly Deals Digest (22 Dec) – Kingston, Fengxiang, Yashili, Golden Energy, Olam, SSREIT, Warrego
LG Energy Solution: Another MSCI Upweight Event Coming in May

Fujitsu General (6755) – Fujitsu’s Stake On The Block

10 days ago I wrote Fujitsu (6702) Subsidiary Selldowns To Come after Bloomberg carried an article with the CEO. Not new news, but I was struck by the implications.
Yesterday saw an article which pushed Fujitsu General (6755 JP) nearly 14% higher yesteday. Fujitsu Ltd (6702 JP) had launched an auction for its 42% stake. First round bids due imminently.
This takes the urgency to a new level. People jumped into an already illiquid stock. How far can this go?

Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.
Lasertec Corp (6920), Oriental Land (4661) and Renesas Electronics (6723) remain our top inclusions, while Toyobo Co Ltd (3101), Nippon Light Metal (5703) and Toho Zinc (5707) could be deleted.
Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.

Merger Arb Mondays (23 Jan) – Origin Energy, Warrego, Golden Energy, Yashili, Kingston, O2Micro

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), Golden Energy & Resources (GER SP), Genesis Minerals (GMD AU), Origin Energy (ORG AU), 111 Inc (YI US).
Lowest spreads – Essential Metals (ESS AU), Nitro Software Ltd (NTO AU), Norwest Energy NL (NWE AU), Chip Eng Seng Corp (CHIP SP), Conexio Corp (9422 JP), Nippon Steel Trading.

Weekly Deals Digest (22 Dec) – Kingston, Fengxiang, Yashili, Golden Energy, Olam, SSREIT, Warrego

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 – iQIYI Inc (IQ US), Bilibili Inc (BILI US) placements, VinFast (1905332D VN) continues to pre-market a US$1bn IPO.
Event-Driven developments – China Internet (810 HK), Shandong Fengxiang (9977 HK), Kingston Financial (1031 HK), Golden Energy & Resources (GER SP), Olam Group (OLG SP), Sabana Industrial REIT (SSREIT SP).

LG Energy Solution: Another MSCI Upweight Event Coming in May

MSCI will likely reflect the ESOP selling in the upcoming rebalancing. Since MSCI’s rounding magnitude is 5%p, a similar passive impact as that of the previous IR may appear.
This means that the remarkable price rally up to last November’s announcement date can be repeated this time closer to the announcement time in May.
Conservatively assuming MSCI Korea’s tracking fund size to be ₩60T, LG Energy’s 5%p up-weight is expected to induce about ₩330B of passive inflow, which is 2.09x ADTV.

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Jan 22

Daily Brief Event-Driven: Sabana REIT (SSREIT SP): Partial Offer from Volare and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Sabana REIT (SSREIT SP): Partial Offer from Volare
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Last Week In SPACE: Bank of Kyoto, WM Motors, Japanese Banks, Hong Kong Aerospace, CP ALL/MAKRO
China Internet Investment Finance’s (810 HK): A Vague Offer Leads to a Sinking Feeling
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Relia, Kingston, Fengxiang, Jafco, Esso, Golden Energy

Sabana REIT (SSREIT SP): Partial Offer from Volare

Sabana Industrial REIT (SSREIT SP) disclosed a partial offer from Volare to acquire a maximum of 109.6 million units at $0.465 per unit, a 9.4% premium to the undisturbed price.
The partial offer is conditional on minimum acceptances representing 10.00% of outstanding units. Quarz Capital, the activist fund, says the offer is attractive.
ESR Group (1821 HK), the sponsor, is unlikely to tender. Based on a proration of 13.54% and at the last close price of S$0.425, the breakeven price is S$0.420.

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

By Simon Harris

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

Last Week In SPACE: Bank of Kyoto, WM Motors, Japanese Banks, Hong Kong Aerospace, CP ALL/MAKRO

Japanese banks are the hottest new thing but unless you think Bank of Kyoto is going to change its spots, it’s still best thought of as a range trade.
WM Motors opts for a backdoor listing via merging with WE Solutions Limited (860 HK). There’s probably a good reason for doing so.
You pay for the liquidity of Japanese banks by paying a higher PBR against not as much improvement in ROE. That’s life.

China Internet Investment Finance’s (810 HK): A Vague Offer Leads to a Sinking Feeling

China Internet Investment Finance Holdings (810 HK)/CIIF disclosed that it received a letter from a potential offeror, stating that it is considering making a voluntary conditional cash offer.
The possible offer will have two conditions – a 50% minimum acceptance condition and that the shares remain listed. No price or timeline has been disclosed.
An offer if it materialises, will likely be a take-under due to the presence of a willing seller (Chairman) seeking a liquidity event and CIIF’s unjustified share price run.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Relia, Kingston, Fengxiang, Jafco, Esso, Golden Energy

There are 43 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma in the past week: Mitsui & Co’s tilt for Relia Inc (4708 JP).
Key updates took place for: Kingston Financial (1031 HK), Shandong Fengxiang (9977 HK), Jafco Co Ltd (8595 JP), Golden Energy & Resources (GER SP), and Esso Thailand (ESSO TB).

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Jan 21

Daily Brief Event-Driven: Introducing KODEX Top 5 Plus ETF Rebalancing Event and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Introducing KODEX Top 5 Plus ETF Rebalancing Event
KOSPI 200 Ad Hoc Rebalance for Meritz Securities: DGB Financial Will Be Added
Golden Energy (GER SP): Long-Stop Date Extended as the Offer Looks Increasingly Light
Sun Capital Partners/K3 Capital Group: Agreed Underwhelming Offer
Sun Pharmaceutical Ind (SUNP IN): Acquisition Adds Late-Stage Biopharma Product in Derma Franchise
KCGI Formally Goes Activist on Osstem Implant

Introducing KODEX Top 5 Plus ETF Rebalancing Event

At this point, one constituent change is expected, and LG Chem is expected to replace KT&G.
The return of the equal-weighted long/short basket trade for the constituent changes in the past two years was recorded from 2.3% to 3.8%.
Both LG Chem and KT&G are expected to have a significant rebalancing flow impact. It can be an event that brings a juicy day trading return.

KOSPI 200 Ad Hoc Rebalance for Meritz Securities: DGB Financial Will Be Added

With JB Financial Group gone for Meritz Fire, the next one in line will enter KOSPI 200 in place of Meritz Securities. And the lucky one is DGB Financial.
DGB can expect an inflow of 8.23x ADTV and will face a 2.8x ADTV in one day on March 31.
Given the size of the preemptive flow that JB Financial is currently attracting, we should prepare for DBG to start receiving a similar level of price impact earlier than usual.

Golden Energy (GER SP): Long-Stop Date Extended as the Offer Looks Increasingly Light

The long-stop date for the satisfaction of the offer conditions has been extended from 9 April to 9 August, to help Dian Swastatika Sentosa (DSSA IJ) obtain shareholder approval.
An alternative explanation is that the Widjaja family’s offer for Golden Energy & Resources (GER SP) is increasingly looking unattractive in light of Stanmore Coal (SMR AU)’s share price rally.
The offer remains light and we think that there is a good chance that the Widjaja family will raise its offer (likely a bump to the delisting price) to succeed.

Sun Capital Partners/K3 Capital Group: Agreed Underwhelming Offer

Sun Capital offers 350p/share for K3, 10.7x EV/NTM EBITDA, lower than median of peers at 11.3x and lower than my DCF-based estimate of 404.7p (implied 12.4x EV/NTM EBITDA).
In spite of the underwhelming figure, the deal is likely to go ahead: top shareholders/managers (30.4%) will contribute to Bidco, and irrevocables total 10%. Court/GM meetings are on 26 January.
Gross spread is 0.71%. Assuming it all goes smoothly, the estimated annual return assuming settlement by 28 February is 7%. Long.

Sun Pharmaceutical Ind (SUNP IN): Acquisition Adds Late-Stage Biopharma Product in Derma Franchise

By Tina Banerjee

Sun Pharmaceutical Industries (SUNP IN) is acquiring the U.S.-based late-stage biotechnology company, Concert Pharmaceuticals (CNCE US) for $576M in equity value. The transaction is expected to be completed in 1Q23.
Concert has completed the evaluation of the efficacy and safety of its lead candidate, deuruxolitinib in adult patients with moderate to severe Alopecia Areata in its phase 3 clinical program.
With the disease affecting up to ~1.5M people in the U.S., Alopecia represents potential blockbuster opportunity. Sun Pharma plans to file NDA for deuruxolitinib to the FDA in 1H23.

KCGI Formally Goes Activist on Osstem Implant

On 20 January, KCGI private equity fund formally started its corporate governance activist campaign on Osstem Implant (048260 KS).
KCGI officially going activist on the company, its strong fundamentals and deep discount valuations suggest that Osstem Implant’s price is likely to outperform KOSPI by a wide margin in 2023.
KCGI has demanded Kyoo-Ok Choi (Chairman of Osstem Implant) to resign.

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Jan 20

Daily Brief Event-Driven: Quiddity Primer for HSTECH Rebalance Events and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Quiddity Primer for HSTECH Rebalance Events
Olam Group (OLG SP): Entering the Final Stages to Unlock Value
Esso Thailand: Ignore Bangchak Corp’s Takeunder
MSCI Korea: Potential Inclusions & Exclusions in February 2023 Highlighted by Locals
KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)
Quiddity Final Expectations for NIFTY Mar 23: Pidilite Could Be an Interesting Pre-Event Bet
EQT/Va-Q-Tec: Generous Agreed Offer
Hong Kong CEO & Director Dealings (20 Jan): Asymchem Labs, Honbridge, Flat Glass, Gushengtang
EQD | KOSPI2 Index: Buy Calls/Call Spreads into CPI Release

Quiddity Primer for HSTECH Rebalance Events

The Hang Seng Tech Index (HSTECH INDEX) represents the 30 largest technology companies listed in Hong Kong which have high business exposure to certain technology themes.
This index was launched in 2020 and has gained significant passive tracking over the last two years.
In this insight, we take a brief look at the selection criteria and the historical price performance of past Rebalance Events.

Olam Group (OLG SP): Entering the Final Stages to Unlock Value

On 10 January, Olam Group (OLG SP) announced the potential IPO of Olam Agri through a dual primary listing in SGX ST and Saudi Arabia as early as 1H2023.
The Olam Agri IPO could raise US$1 billion, according to press reports. Olam will seek shareholder approval at an EGM for the transaction.
The IPO marks the final stages of the strategy to unlock value. Our SoTP valuation is S$1.85 per share, a 19% upside to the last close price of S$1.56.

Esso Thailand: Ignore Bangchak Corp’s Takeunder

Back on the 11 January, refiner/retailer Bangchak Corporation (BCP TB)‘s board approved the purchase of a 65.99% stake in Esso Thailand (ESSO TB) from Exxon Mobil.
The purchase price remains indeterminate (the indicative price is Bt8.84/share), based on a pricing adjustment mechanism as it relates to Esso’s financial accounts at the close of the stake purchase.
Esso is down 17% since the announcement, and 37% from its recent (Oct-22) high. That seems excessive.

MSCI Korea: Potential Inclusions & Exclusions in February 2023 Highlighted by Locals

We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (10 February) that are being highlighted by the locals.
The potential candidates for inclusion in the MSCI Korea Index emphasized by locals in February 2023 include Kakao Pay and Hanwha Aerospace.
The potential exclusion candidates in the MSCI Korea Index emphasized by locals include S-1 Corp, Celltrion Pharm, and Cheil Worldwide.

KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)

Jb Financial Group (175330 KS) will replace Meritz Fire & Marine Insurance (000060 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 27 January.
We estimate passive KOSPI2 INDEX trackers will need to buy 3.494m shares (KRW 36.34bn; 4.04 days of ADV) of Jb Financial Group (175330 KS) at the close on 27 January.
DGB Financial Group (139130 KS) could be added to the KOSPI2 INDEX in April, replacing Meritz Securities (008560 KS) following its merger with Meritz Financial Group (138040 KS).

Quiddity Final Expectations for NIFTY Mar 23: Pidilite Could Be an Interesting Pre-Event Bet

With roughly a week left in the reference period, we take a look at the potential ADDs/DELs for the NIFTY 50, 100, and 500 Indices for the March 2023 Rebalance.
For NIFTY 50, Pidilite Industries (PIDI IN) is the highest-ranked Potential ADD while Bharat Petroleum Corp (BPCL IN) is the highest-ranked Potential DELETE according to our estimates.
In this insight, we take a look at the recent price performance of names that can potentially be involved in index changes and our flow expectations.

EQT/Va-Q-Tec: Generous Agreed Offer

The acceptance period for EQT’s €26/share offer (46% premium, 16.1x EV/23eEBITDA) runs until 16 February. Minimum acceptance is 62.5% (49.4% of the float). EQT intends to implement a domination agreement.
The deal makes sense from a strategic standpoint, although there are potential antitrust issues. The price offered seems generous considering my fair-value estimate of €18.67 (DCF-based).
Gross spread is 3.7% (8.6% estimated annual return assuming settlement by 30 June), which is okayish for a not so liquid stock in the European space. Long.

Hong Kong CEO & Director Dealings (20 Jan): Asymchem Labs, Honbridge, Flat Glass, Gushengtang

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 Asymchem Laboratories (6821 HK), Honbridge Holdings (8137 HK), Flat Glass (6865 HK), and Gushengtang (2273 HK).

EQD | KOSPI2 Index: Buy Calls/Call Spreads into CPI Release

By Simon Harris

Korean equities have recovered from the December sell-off but are still playing catch up versus other Asian indices over the last year
We see the upcoming CPI release as an underpriced event in the vol space
We consider some cheap derivative strategies on the upside to play the disinflation theme

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Jan 19

Daily Brief Event-Driven: LG Energy IPO Lock-Up – Last of the Lockups at US$3bn and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

LG Energy IPO Lock-Up – Last of the Lockups at US$3bn
HDFC/HDFC Bank Mega Merger: Foreign Holdings Move Lower; Foreign Room Higher
StubWorld: CPALL Trading “Cheap” To MAKRO
Hanwha Aerospace: A Surprise in MSCI’s February QCIR?
Fengxiang (9977 HK): Delisting Resolution Fails, MGO Closes 1 February
JAFCO (8595) Tender Offer Close Imminent – Decent Conviction to Not Be Long
S&P BSE/Sensex Quiddity Leaderboard Jun 23: Adani Enterprises, Wipro, & The Usual F&O Questions
KOSPI 200 Rebalance: JB Financial In & Meritz F&M Insurance Out

LG Energy IPO Lock-Up – Last of the Lockups at US$3bn

By Sumeet Singh

LG Energy Solution (373220 KS) (LGES) raised US$10.8bn in its South Korea IPO, after pricing at the top-end of the IPO price range.
The stock was listed on 27th Jan 22. Its one-year lockup is set to expire soon.
In this note, we will talk about the lock-up dynamics and updates since our last note

HDFC/HDFC Bank Mega Merger: Foreign Holdings Move Lower; Foreign Room Higher

Foreign shareholding in HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) has dropped over the December quarter resulting in higher foreign room.
The merger is expected to complete in Q2/Q3 when we expect there will be large buying from MSCI trackers.
The merger (and the timing of implementation) will have implications for changes to the NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) at the forthcoming rebalances.

StubWorld: CPALL Trading “Cheap” To MAKRO

7-11 play CP ALL PCL (CPALL TB) is coming up “cheap” on my monitor versus cash & carry subsidiary Siam Makro Public (MAKRO TB).
Preceding my comments on CPALL/MAKRO are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Hanwha Aerospace: A Surprise in MSCI’s February QCIR?

Hanwha Aerospace is still narrowly across the borderline. It is especially painful that the share price was corrected by more than 4% today.
But suppose the cutoff MC is set at less than ₩2.7T, and Aerospace succeeds in recovering slightly. In that case, it will likely manage to come within the borderline.
Given that the preemptive flow must not have been significant and the profit forecast has been upwards until recently, a price shooting may appear at the time of the announcement.

Fengxiang (9977 HK): Delisting Resolution Fails, MGO Closes 1 February

Shandong Fengxiang (9977 HK)‘s delisting resolution was overwhelmingly voted against by independent H Shareholders. The results were not helped by the poor turnout.
PAG’s MGO at HK$1.5132 per H Share is not conditional on the approval of the delisting resolution. The MGO remains open with a final closing date of 1 February.
PAG currently holds 85.44% of the outstanding shares. At the last close and for a 10 February payment, the gross and annualised spread is 1.6% and 28.9%, respectively.

JAFCO (8595) Tender Offer Close Imminent – Decent Conviction to Not Be Long

The Jafco Co Ltd (8595 JP) Greenmail Tender Offer to take Murakami-san out of his position is nearing its close.
Investors should make a decision imminently about where they believe the stock should trade in Price/NAV terms after the buyback is complete, once management is “stabilised.”
My earlier piece written on the day of the announcement needs a few corrections. Those are below.

S&P BSE/Sensex Quiddity Leaderboard Jun 23: Adani Enterprises, Wipro, & The Usual F&O Questions

In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the June 2023 Rebalance.
Adani Enterprises (ADE IN) could be added and Wipro Ltd (WPRO IN) could be deleted from the SENSEX Index. There could be multiple changes for BSE 100, 200, and 500.
Below is a look at our estimated rankings for potential ADDs/DELs, their recent price performance vs peers, and potential trading opportunities.

KOSPI 200 Rebalance: JB Financial In & Meritz F&M Insurance Out