Event-Driven Archives | Page 75 of 187 | Smartkarma

The Appraisal rights exercise period ends on 13 November. If the NPS and other large shareholders exercise their rights in Celltrion Inc (068270 KS), the merger could be in trouble.
Both stocks are trading close to their exercise price and could be supported due to the companies buying back their shares.
There will be passive flows from local and global trackers and there does not appear to be pre-positioning. That is likely due to the risk of potential merger cancellation.

Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down – Opportunity Abounds, Still

40% of Banks outside the Top 7 (none of which offered H1 guidance) in the TOPIX Banks Index have now changed H1 guidance or reported H1. 2 reported both up.
92% of the others have revised up H1 net income guidance a weighted average of 47%. Net Interest Income, Corporate fees/comms are up, expenses and credit costs are down.
Big tables with data, reasons for guidance changes, and buyback history of each presented below.

Symbio Backs ABB’s Reduced Terms

Back on the 22 September, Superloop Ltd (SLC AU) lobbed a best and final cash/scrip NBIO for Symbio Holdings (SYM AU) with an implied price of A$2.85/share.
Aussie Broadband Pty Ltd (ABB AU) then tabled a cash/scrip Offer, with an implied price of A$3.151/share. Symbio was supportive, if terms were firmed. Superloop’s Offer subsequently lapsed.
ABB returned with a reduced cash/scrip Offer of A$2.99-$3.04/share. Symbio has unanimously recommended the Offer (at A$3.011/share) and they entered into a Scheme agreement. A partially/fully franked dividend is permitted.

AMFI Stock Reclassification Preview (Dec 2023): HUGE Outperformance as Active and Passive Meet

We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 13 stocks from SmallCap to MidCap, and 14 stocks from MidCap to SmallCap.
Some stocks are expected to be inclusions to global indices later this month while others are potential NIFTY Index and/or Nifty Next 50 Index changes in March.
On average, the upward migrating stocks have outperformed the downward migrating stocks by close to 100% over the last 8 months. The passive flow can be used as an exit.

Symbio (SYM AU): Aussie Broadband’s Lower Binding Proposal

Symbio Holdings (SYM AU)‘s binding proposal with Aussie Broadband Pty Ltd (ABB AU) is at A$2.26 cash and 0.192 ABB shares per SYM share, 3.2% lower than its earlier proposal.
The key condition is shareholder approval. The scheme booklet will be despatched on 22 December, with a scheme meeting in early February 2024.
While the offer is light compared to long-term historical prices and multiples, there seem to be no signs of dissent from institutional or retail investors.

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Nov 01

Daily Brief Event-Driven: March 2024 Nikkei 225 Rebal – Socionext and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD
S&P/ASX 200 Index Adhoc Rebalance: Emerald Resources (EMR) To Replace Invocare (IVC)
Concerns About A Major Accounting Fraud at Kakao Mobility
Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”
End of Mandatory Lock-Up Periods for 48 Companies in Korea in November 2023
NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover
(Mostly) Asia M&A, Oct 2023: Haitong, Azure, Hollysys, Aeon, Teraoka, Tietto, Lithium Power
Back in Telefonica

March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD

In March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split I suggested Socionext (6526 JP) needed a stock split to get in.
Today after the close, Socionext reported H1, guided up full-year earnings (still too conservative), raised its div, and announced a 5:1 stock split for Jan1 2024.
DISCO Corp (6146 JP) is now likely to be a top 75, which leaves the question of which Consumer Goods stock would likely be added.

S&P/ASX 200 Index Adhoc Rebalance: Emerald Resources (EMR) To Replace Invocare (IVC)

Shareholders have approved Invocare Ltd (IVC AU)‘s acquisition by TPG and IVC is expected to stop trading after the close on 3 November.
Invocare Ltd (IVC AU) will be replaced by Emerald Resources Nl (EMR AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 3 November.
Boss Resources (BOE AU) misses out this time but should be added to the index late November or at the regular rebalance in December.

Concerns About A Major Accounting Fraud at Kakao Mobility

It was reported in numerous local media in Korea that FSS is investigating Kakao Mobility for a potential accounting fraud.
There are suspicions that Kakao Mobility may have artificially inflated its sales from 2020 to 2023 to enhance the value of the company prior to its IPO listing.
Given that the regulators are unlikely to make a final decision on this matter until next year, this is likely to be negative on both Kakao Mobility and Kakao Corp.

Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”

In July the BOJ lifted the YCC range to allow flexibility at 0.5% and a red line at 1.0%. Today it moved the “reference” to 1.0% with no red line.
This allows 10yr yields to move higher, but the Board’s insistence on negative rates and YCC staying in place tells you steeper for longer makes shorting long JGBs tough.
The move today helps encourage the market mechanism to take control of dampening volatility, the same way it did when the BOJ stepped away from ETF buying in 2021.

End of Mandatory Lock-Up Periods for 48 Companies in Korea in November 2023

We discuss the end of the mandatory lock-up periods for 48 stocks in Korea in November 2023, among which 6 are in KOSPI and 42 are in KOSDAQ.
These 48 stocks on average could be subject to further selling pressures in November and could underperform relative to the market.
Among these 48 stocks, top five market cap stocks include Doosan Robotics, Fadu, CanariaBio, Enchem, and Gigavis.

NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover

Halfway through the review period, we see 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
Estimated one-way turnover is 15.26% and that will result in a one-way trade of INR 24bn. There will be more than 2x ADV to sell on nearly all deletes.
There is a possibility of an index methodology change, but no news for the last 4 months could indicate pushback from users or more stocks added to the F&O market.

(Mostly) Asia M&A, Oct 2023: Haitong, Azure, Hollysys, Aeon, Teraoka, Tietto, Lithium Power

For the month of October 2023, 7 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$4bn.
The average premium for the new deals announced (or first discussed) in October was 65%. The average YTD is 37% (85 deals).
This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

Back in Telefonica

By Jesus Rodriguez Aguilar

The public holding company SEPI, controlled by the Spanish Treasury, has confirmed to the CNMV that it is studying the possibility of acquiring a stake in Telefonica SA (TEF SM).
Market speculates with a 5% stake to counterbalance the current 4.9% stake of STC (which could execute an option to acquire another 5% pending Government authorisation).
At current market prices, it is equivalent to 22.04 trading sessions. Q3 results and Capital Markets Day, the first major strategic update in years, will take place on 8 November.

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Oct 31

Daily Brief Event-Driven: StubWorld’s: Amorepacific’s Multi-Year Lows and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

StubWorld’s: Amorepacific’s Multi-Year Lows
BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling
Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster
SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
Quiddity JPX-Nikkei 400 Rebal 2024: End-Oct 2023
Tietto (TIE AU): Zhaojin Makes An Offer
Quiddity A/H Premium Tracker (To Oct27): Volatility Off, Spreads Still Volatile. GreatWall Q3!
Kum Yang – Submits An Agenda to Expand Issuance Limit of CB and BW to 10 Trillion Won
Tietto Minerals (TIE AU): Zhaojin’s Conditional Off-Market Takeover Offer
Mankind Pharma Lock-Up – A US$1.1bn+ Lockup Release

StubWorld’s: Amorepacific’s Multi-Year Lows

Both the implied stub for Amorepacific Group (002790 KS) and the simple ratio (Group/Amorepacific Corp (090430 KS)) are around lifetime low levels.
Preceding my comments on Amorepacific 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%.

BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling

Nippon Electric Glass (5214 JP) is going through a rebuilding year. Lots of restructuring expenses and I expect there will be more.
The company today announced the outline of its next Mid-Term Management Plan for the 5 years to 2028. It will announce details in early Feb 2024 with results.
In that, there is ¥50bn of buybacks through Dec2026, of which ¥20bn will be made in the next 4mos. That is about 11-14% of ADV assuming the price jumps.

Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster

A small specialty adhesives maker – Teraoka Seisakusho (4987 JP) has had an MBO proposed and approved. At 0.54x book. NetCash+securities+2.5mos of net A/R+inventory = 99% of Takeover Market Cap.
Borrow 2x EBITDA, pay out the cash and securities, and this is being done at <0.3x remaining book. The takeover is 100+% bank funded. It’s ridiculous.
For this to get stopped, however, someone has to go activist on a smallcap where retail owns the entire float and friends and family own 55% to start.

SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close

Two thirds of the way through the review period, we see one change for the SET 50 Index in December with KCE Electronics (KCE TB) replacing Ngern Tid Lor (TIDLOR TB).
There is one close change where I-TAIL (ITC TB) could replace Srisawad Power 1979 (SAWAD TB) in the index.
Delta Electronics Thailand (DELTA TB) is unlikely to be deleted while Berli Jucker (BJC TB) fails liquidity and is unlikely to be added.

Quiddity JPX-Nikkei 400 Rebal 2024: End-Oct 2023

JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2024 based on trading data as of end-October 2023.

Tietto (TIE AU): Zhaojin Makes An Offer

SOE-Backed Zhaojin Mining Industry H (1818 HK), China’s fourth largest integrated gold producer, has tabled a non-binding Offer for Aussie-listed West African gold miner Tietto Minerals Ltd (TIE AU).
The A$0.58/share cash Offer is a 36% premium to undisturbed. Zhaojin is seeking 50.1% of shares out, with 7.02% already held.
Conditions include a raft of PRC and Côte d’Ivoire regulatory approvals. None of these should face opposition.

Quiddity A/H Premium Tracker (To Oct27): Volatility Off, Spreads Still Volatile. GreatWall Q3!

The New and Better (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
Last week the portfolio bounced back, erasing the previous week’s losses. Southbound continues to see net inflows and this week all H/A Pair sectors saw Hs outperform except Energy.
High-Div SOEs continue to be weak. Banks, Pharma, Industrials, and Utilities spreads continue to be Very Volatile. Quiddity Favourite Great Wall Motor (2333 HK) up 7% after Q3 results Friday.

Kum Yang – Submits An Agenda to Expand Issuance Limit of CB and BW to 10 Trillion Won

On 30 October, Kum Yang announced that it has submitted an agenda to expand the issuance limit of CB and BW to 10 trillion won.
This increase in the limit of CB and BW issuance to 10 trillion won would mean potential capital raise through these methods that are nearly 2x its entire market cap.
Kum Yang may be trying to raise large amount of capital (several trillion won) which could result in significant dilution risk for the existing shareholders.

Tietto Minerals (TIE AU): Zhaojin’s Conditional Off-Market Takeover Offer

Tietto Minerals Ltd (TIE AU) has disclosed a conditional proposal from Zhaojin Mining Industry H (1818 HK) at A$0.58 per share, a 36.5% premium to the undisturbed price of A$0.425.
The offer is conditional on China and Cote d’Ivoire regulatory approvals (should be forthcoming) and a 50.1% minimum acceptance condition (which can be waived).
The offer is light compared to peer resource multiples and recent share prices. The presence of large Chinese shareholders is a stumbling block for a rival offer.

Mankind Pharma Lock-Up – A US$1.1bn+ Lockup Release

By Sumeet Singh

A group of shareholders raised around US$530m in Mankind Pharma(MP) IPO in May 2023. The pre-IPO shareholders will be released from their lockup soon.
MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
In this note, we will talk about the lock-up dynamics and recent updates.

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Oct 30

Daily Brief Event-Driven: KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade
Weekly Deals Digest (29 Oct) – Eoflow, Haitong Intl, Hollysys, Azure, Symbio, EcoPro, Cainiao
L&F (066970 KS): Index Implications of KOSDAQ to KOSPI Transfer
Onewo (2602 HK) – Full Circulation & HSCI Inclusion
EQD | If the Nikkei Begings to Rally, Where Will It Encounter Resistance?
Merger Arb Mondays (30 Oct) – JSR, Eoflow, Azure Minerals, Symbio, Hollysys, Haitong Intl
TPG/Intervest: Agreed Offer, Spread
Quiddity HK Connect SOUTHBOUND (To 27-Oct-23); Meituan & Tech IN, High Div SOEs OUT, Financials MIA
Mainland Connect NORTHBOUND Flows (To 27Oct23): Net Selling Small, Foxconn & Tianqi Bought

KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade

The merger between Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) is done. Newco starts trading this week as KDX.
The trade was fine until I wrote 9 days ago there was still room to run. It fell the next day, bounced 3%, then got CRUSHED into the index upweight.
NEWREIT is now as cheap relative to its Pro-Forma Peer Group as it was at announcement.

Weekly Deals Digest (29 Oct) – Eoflow, Haitong Intl, Hollysys, Azure, Symbio, EcoPro, Cainiao

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 – EcoPro Materials (ECO123 KS), Cainiao Smart Logistics (1437124D HK), VNG (VinaGame) (VNG US) IPOs
Event-Driven developments – Eoflow (294090 KS), Azure Minerals (AZS AU), Pact Group Holdings (PGH AU), Symbio Holdings (SYM AU), Haitong International Securities Group (665 HK), Hollysys Automation Technologies (HOLI US).

L&F (066970 KS): Index Implications of KOSDAQ to KOSPI Transfer

L&F Co Ltd (066970 KS) has applied to the KRX for a transfer from the KOSDAQ market to the KOSPI market.
Based on history, the approval for the transfer and the listing change could take place some time in December.
L&F (066970 KS) will not be short-sell eligible for 6 months or longer. That means short covering prior to index deletion and a possible overshoot in the stock price.

Onewo (2602 HK) – Full Circulation & HSCI Inclusion

Onewo (2602 HK) has announced the full conversion of 1.05bn Domestic Shares and Unlisted Foreign Shares to H-shares. The increased market cap will help in HSCI inclusion.
Onewo (2602 HK) should be added to the HSCI in March and will be added to Southbound Stock Connect soon after index inclusion.
Onewo (2602 HK) has drastically underperformed its peers since listing and the HSCI inclusion could mark a turning point for the stock.

EQD | If the Nikkei Begings to Rally, Where Will It Encounter Resistance?

By Nico Rosti

Last week, the Nikkei closed down at 30991.69 (CC=-2). The index’s sell-off could end in November, marking a temporary bottom from which a rally could start.
MRM models say that if the Nikkei bounces this week, it could rise for 3 weeks and reach a price area between 31624 (Q3/CC=+1) and 32892 (Q3/Gen.Pattern Boxplot).
The upcoming rally comes as a reaction to quite OVERSOLD conditions, as previously discussed, but could be followed by another pullback. This insight points to where the rally may end.

Merger Arb Mondays (30 Oct) – JSR, Eoflow, Azure Minerals, Symbio, Hollysys, Haitong Intl

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), Symbio Holdings (SYM AU), JSR Corp (4185 JP), Healius (HLS AU), Haitong International.
Lowest spreads – Pact Group Holdings (PGH AU), Origin Energy (ORG AU), Chindata Group (CD US), Allkem Ltd (AKE AU), T&K Toka Co Ltd (4636 JP), Azure Minerals (AZS AU).

TPG/Intervest: Agreed Offer, Spread

By Jesus Rodriguez Aguilar

TPG will launch an agreed offer for turnaround-play Intervest Offices & Warehouses (INTO BB) at €21/share, 52% premium, with minimum acceptance condition of 50%+1 share. It has already secured 10.09% acceptances.
At 6.7% discount to last reported EPRA NTA, 5.5% discount to pro forma EPRA NTA, and 14.3x P/FFO 2023e, the offer price seems good exit value for shareholders.
Listed logistics European compas trade at c.11% premium EPRA NTA 2023e and 17x-18x P/FFO 2023e. Spread is 4.52%/16.04% (gross/annualised assuming settlement on 21 February). Risk/return looks interesting. Long.

Quiddity HK Connect SOUTHBOUND (To 27-Oct-23); Meituan & Tech IN, High Div SOEs OUT, Financials MIA

This is the somewhat brand-spanking-new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
Last week, China Mobile (941), SMIC (981) and CNOOC (883) all saw total SOUTHBOUND turnover top 75% of value traded on a gross basis, indicating huge participation.
Meituan was again the top SOUTHBOUND inflow, now net inflow every day for more than a month. Total Net Inflows at HK$6.9bn now 14 weeks straight in the positive column.

Mainland Connect NORTHBOUND Flows (To 27Oct23): Net Selling Small, Foxconn & Tianqi Bought

This is the somewhat-brand-spanking-new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
The same five names continue at the top of the gross flows list – Kweichow Moutai, Contemporary Amperex, Wuliangye Yibin, Foxconn Industrial, and BYD. Nets are dropping.
Overall net NORTHBOUND selling this week was small at RMB 445mm. Foxconn Industrial Internet (601138 CH) was net bought every day despite the investigation news the previous weekend.

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Oct 29

Daily Brief Event-Driven: (Mostly) Asia-Pac Weekly Risk Arb Wrap: Azure and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Azure, EOFlow, Hollysys, Essential Metals, Celltrion Health
Last Week In Event SPACE: Newcrest/Newmont, Keisei Electric, PCCW, Cosmo Energy, Leapmotor
Lansen Pharma (503 HK): 27th November Scheme Vote
Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Azure, EOFlow, Hollysys, Essential Metals, Celltrion Health

I tally 40 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deal was discussed on Smartkarma this week: Sociedad Quimica y Minera (SQM/B CI) tilt for Azure Minerals (AZS AU); and another MBO for Hollysys Automation Technologies (HOLI US).
Key updates took place for: Energy One Ltd (EOL AU), EOFflow (294090 KS) , and Celltrion Healthcare (091990 KS)

Last Week In Event SPACE: Newcrest/Newmont, Keisei Electric, PCCW, Cosmo Energy, Leapmotor

Recent underperformance of Newmont Mining (NEM US) vs Peers appears to be part of a “perfect storm”.
PCCW Ltd (8 HK) has an attractive yield on its side; and Richard Li has been buying. But a 6% premium to NAV is unsustainable for this holding company structure.
Palliser Capital’s straightforward request is for a 35% reduction in Keisei Electric Railway Co (9009 JP)‘s Oriental Land (4661 JP) holding reflects a strategic urgency.

Lansen Pharma (503 HK): 27th November Scheme Vote

On the 17 September, specialty prescription drug manufacturer Lansen Pharmaceutical Holdings Co, Ltd. (503 HK), a perennial takeover target, finally announced an Offer.
Wu Zhen Tao, NED and Chairman of Lansen, made an Offer for shares not indirectly held, of HK$1.80/share, by way of a Scheme, a 26.76% premium to last close.
Composite Doc is now out. Court Meeting is the 27th November. Expected last day of trading is the 28 Nov. 28 December payment. IFA says fair and reasonable. Looks done.

Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning

The coming week has a lot of review periods ending – KOSPI 200, KOSDAQ 150, CSI 300, CSI 500, SSE50, STAR50, ChiNext and SENSEX, among others.
The TOPIX rebalance will be implemented on Monday while the Global X Lithium & Battery Tech ETF (LIT US) and IDX indices will rebalance at the close on Tuesday.
There were outflows from Emerging Market ETFs including iShares Emerging Markets (EEM), iShares Core Emerging Mar (IEMG), Schwab Emerging Markets Equi (SCHE) and IShares Edge Min Vol Emerging Markets ETF (EEMV).

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Oct 28

Daily Brief Event-Driven: Japan Post Bank (7182) October TOPIX FFW Upweight Upon Us and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Japan Post Bank (7182) October TOPIX FFW Upweight Upon Us
Passive Flow Trading Opportunities Emerge from L&F’s Transition to KOSPI Listing
Leapmotor (9863 HK): Stellantis’ Stake Doesn’t Come Cheap
Hong Kong CEO & Director Dealings (27 Oct): Kwoks Still Buying SHK; Chairman Selling Golden Solar

Japan Post Bank (7182) October TOPIX FFW Upweight Upon Us

Japan Post Bank (7182 JP) gets a dramatic upweight in TOPIX on Monday 30 October. There is a LOT of stock to buy. Call it US$2.2bn.
Shares have to come from someplace. Basically it will all come from retail or from those who pre-positioned themselves in the stock (buying from retail). Some could come from short-sellers.
The stock WAS not cheap vs regional banks (what I see as their best set of comps) and the Q2 Unrealised Loss on Securities has ballooned. But care is needed.

Passive Flow Trading Opportunities Emerge from L&F’s Transition to KOSPI Listing

L&F will likely be listed on the KOSPI in mid-December. The top reserved issue within the KOSDAQ 150 IT Sector will be added to the index via an ad-hoc change.
Selvas AI stands as the foremost candidate for the screened top reserved issue, with a mere two trading days remaining in the six-month screening period.
Given the relatively limited proactive position buildup due to more uncertainty regarding timing, the price impact leading up to the effective date might become even more significant.

Leapmotor (9863 HK): Stellantis’ Stake Doesn’t Come Cheap

Stellantis, a merger between France’s PSA with Fiat Chrysler Automobiles NV (FCAM BQ), is buying a 17% stake (14.53% fully diluted) in Zhejiang Leapmotor Technologie (9863 HK).
Leapmotor will issue 194mn H shares at HK$43.8/share, a 19% premium to last close, in a HK$8.51bn transaction. Stellantis will also hold a 51% stake in newly formed JV.
Stellantis is paying a chunky 3.64x market cap-trailing-revenue; but ~2.25x forward revs, which compares to the average for key peers of 1.9x.

Hong Kong CEO & Director Dealings (27 Oct): Kwoks Still Buying SHK; Chairman Selling Golden Solar

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.
The key stocks mentioned in this regular insight are Sun Hung Kai Properties (16 HK) and Golden Solar New Energy Technology Holdings (1121 HK).

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Oct 27

Daily Brief Event-Driven: Newcrest/Newmont – More Selling on the NCM Means More Buying on NEM and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Newcrest/Newmont – More Selling on the NCM Means More Buying on NEM, And Settlement Logistics Matter
Keisei Electric: Activists Arrive As Expected
Gina Can’t “Liontown” SQM’s Bid For Azure
Key Points to Consider at This Stage Regarding the Year-End Ex-Dividend Play
Ecopro Innovation Is Selling Ecopro BM Shares
Increasing Probability of Kakao Corp Losing Its Controlling Shareholding of Kakao Bank
What To Make Of Hollysys’ Latest Offer
IDX30/LQ45/IDX80 Index Rebalance: Float & Capping Changes on Tuesday
Azure Minerals (AZS AU): SQM’s Rinehart-Proof Offer
Quiddity Leaderboard NIFTY Mar 24: Bharat Electronics Vs L&T Might Be Interesting

Newcrest/Newmont – More Selling on the NCM Means More Buying on NEM, And Settlement Logistics Matter

Today saw 65mm shares of Newcrest Mining (NCM AU) print at the close and 85+mm shares crossed in blocks post-close. There was another 15mm shares traded in additional excess volume.
That suggests a certain lack of “risk taking” by passive managers, increasing today’s trade in NY.
Furthermore, the settlement logistics appear to indicate an interesting trade to do 7 November (worth checking with your custodian/broker).

Keisei Electric: Activists Arrive As Expected

By Oshadhi Kumarasiri

Just as we suspected earlier in the year, there is now talk of an impending investor activism campaign targeting Keisei Electric Railway Co (9009 JP).
The activist is Palliser Capital, a multi-strategy fund based in London and run by former employees of Elliott Management, a company well-known for its activist campaigns in Japan.
Their proposal is simple and straightforward, requesting for a 35% reduction in Keisei Electric’s Oriental Land holding.

Gina Can’t “Liontown” SQM’s Bid For Azure

When lithium mining play Azure Minerals (AZS AU) was halted this week “regarding a potential change of control transaction“, Sociedad Quimica y Minera (SQM/B CI) was the obvious suitor.
This was confirmed this morning with a A$3.52/share Offer, a 44.3% premium to undisturbed, by way of a Scheme. A concurrent conditional off-market takeover at A$3.50/share is also present.
$3.50 is locked in, no matter what. Gina may take her stake up to 19.9%, but it won’t affect the A$3.50 floor. But it may kickstart a competitive bidding situation.

Key Points to Consider at This Stage Regarding the Year-End Ex-Dividend Play

The pivotal question now is the number of these companies that will effectively defer their year-end ex-dividend date to April next year.
The most reliable way to accurately confirm this would be to check how many of them will publicly announce the dividend reference date two weeks before the December year-end deadline.
This will serve as the most critical indicator in determining whether this year’s year-end flow trading event, the most significant in Korea, will recur.

Ecopro Innovation Is Selling Ecopro BM Shares

On 26 October, it was announced that Ecopro Innovation is selling 160k shares of Ecopro BM shares (0.2% of outstanding shares), representing about 32 billion won.
Although the percentage of shares is small relative to its outstanding shares, this additional selling is likely to further negatively impact Ecopro BM’s shares in the near term.
Ecopro BM’s shares have seen a significant drop in price over the past few months, but its current P/E (87.3x in 2023) and EV/EBITDA (46.9x in 2023) multiples remain unattractive.

Increasing Probability of Kakao Corp Losing Its Controlling Shareholding of Kakao Bank

In this insight, we discuss the increasing probability of Kakao Corp (035720 KS) losing its controlling shareholding of KakaoBank (323410 KS).
The FSS Chairman Lee Bok-Hyun emphasized that the FSS may punish Kakao Corp for a potential stock manipulation of S.M.Entertainment amid the M&A tender offer process earlier this year.
At this point, the higher probability event appears to be a combination of fine and Kakao Corp selling at least 10% of its stake in Kakao Bank to another company.

What To Make Of Hollysys’ Latest Offer

Hollysys (HOLI US), a leading automation control system solutions provider in China, has been subject to at least six indicative Offers since December 2020, ranging from US$15.47/share to $US$25/share.
Yue Xu and Lei Fang, the co-chief operating officers of Hollysys, who previously tabled a NBIO of US$23.00/share in August 2021, have now pitched a US$25/share proposal.
What is different this time? >32% of the share registry has banded together to demand changes. That’s dramatically different vs previous Offers.

IDX30/LQ45/IDX80 Index Rebalance: Float & Capping Changes on Tuesday

Float and capping changes will require passive trackers to sell Bank Central Asia (BBCA) and Adaro Energy (ADRO) while buying Bank Rakyat Indonesia (BBRI) and GoTo Gojek Tokopedia (GOTO).
There will be passive trading to other stocks too, though the impact and flow is not material on most of the stocks.
Passive trackers will trade at the close on 31 October, so there are only 3 days to implementation of the changes.

Azure Minerals (AZS AU): SQM’s Rinehart-Proof Offer

Azure Minerals (AZS AU) has entered a scheme implementation deed with Sociedad Quimica y Minera de Chile (SQM US) at A$3.52 per share, a 44.3% premium to the undisturbed price.
To avoid a repeat of the Albemarle Corp (ALB US)/Liontown Resources (LTR AU) situation, if the scheme fails or is terminated, SQM will launch an off-market takeover offer at A$3.50.
Gina Rinehart is rumoured to have built a 14.5% stake, suggesting the final offer is an off-market takeover. The offer is conditional on FIRB approval.

Quiddity Leaderboard NIFTY Mar 24: Bharat Electronics Vs L&T Might Be Interesting

NIFTY 50 represents the 50 largest stocks listed in the National Stock Exchange (NSE) of India and the NIFTY Next 50 index tracks the next 50 largest names.
In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50 and NIFTY Next 50 indices in the March 2024 rebalance.
According to my latest estimates, there could be up to three changes or NIFTY 50 and five changes for NIFTY Next 50. The NIFTY 50 changes could have high impact.

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Oct 26

Daily Brief Event-Driven: Cosmo Energy (5021) – Headed to an EGM Showdown for the Poison Pill and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Cosmo Energy (5021) – Headed to an EGM Showdown for the Poison Pill
EOFLOW/Medtronic Tender: Closing Date Extended to 3 January 2024
Medtronic’s M&A of Eoflow Timeline Postponed
HSCI Index Rebalance Preview: Tuhu Car in the Driver’s Seat; Keep Inc in the Running
EOFlow Situation: Latest Disclosure, Market Speculations, & Key Short-Term Focus
Azure (AZS AU): SQM The Likely Suitor
Hollysys (HOLI US): MBO Proposal and Updates
EOFlow/Medtronic: Signs of Life
Yuanta/P-Shares Taiwan Div Plus ETF Rebalance Preview: In-The-Money; Turnover & Trade Remain High
SIA Placement Lockup – Time for Another Trim of Its US$7bn Stake

Cosmo Energy (5021) – Headed to an EGM Showdown for the Poison Pill

Japanese activist Murakami-san and Cosmo Energy Holdings (5021 JP) have been duking it out for 18 months. He now has 20%. Wants more. Management wants to exercise the poison pill.
Cosmo’s efforts are not completely honest, but Murakami-san’s efforts are clearly designed to benefit Murakami-san over general shareholders, and Cosmo has finally explained the reasons publicly. Read the doc (Japanese).
At 1.0x book, lower refining margins vs earlier in the year, and difficulty for Murakami-san to force the issue, one must take more care here than one did 40% ago.

EOFLOW/Medtronic Tender: Closing Date Extended to 3 January 2024

The closing date of the Eoflow (294090 KS)/Medtronic Plc (MDT US) transaction has been extended from 25 October 2023 to 3 January 2024. All other terms are unchanged.
The bull view is that despite the preliminary injunction and share suspension, Medtronic’s move underscores its commitment to the transaction on current terms.
The bear view is that the extension was Medtronic’s best move as it retains option value should Insulet’s lawsuit start floundering in court and KRX reinstate trading in Eoflow shares.

Medtronic’s M&A of Eoflow Timeline Postponed

On 25 October, Eoflow announced that the M&A of Eoflow by Medtronic has been postponed.
The closing date for Eoflow’s stock transfer agreement with Medtronic has now been changed to 3 January 2024.
Although we believe Medtronic will continue to pursue Eoflow, the M&A tender offer price could be lowered to about 26,000 won, which would be nearly 20% higher than current price.

HSCI Index Rebalance Preview: Tuhu Car in the Driver’s Seat; Keep Inc in the Running

There were only 14 new listing on the Main Board of the HKEX (388 HK) in the third quarter. Half of the listings were in the last week of September.
Of those stocks, only Tuhu Car (9690 HK) and Keep (3650 HK) have a chance of being added to the HSCI in December and then into Southbound Stock Connect.
Keep Inc (3650 HK) could be added to Stock Connect in early December while Tuhu Car (9690 HK) will have to wait till April for inclusion to the link.

EOFlow Situation: Latest Disclosure, Market Speculations, & Key Short-Term Focus

We must acknowledge that the acquisition contract has not been withdrawn, signifying that we have averted the worst-case scenario.
During the shareholders’ meeting on November 15th, it is crucial for us to pay attention to whether personnel from Medtronic are included in the list of new board candidates.
If that’s the case, we can infer that Medtronic intends to go through with this deal, regardless of the litigation issues in the United States.

Azure (AZS AU): SQM The Likely Suitor

Lithium mining play Azure Minerals (AZS AU) went into a trading halt Monday (23 October) “regarding a potential change of control transaction“. That halt has been extended to Friday morning.
The obvious suitor is Sociedad Quimica y Minera de C (SQM/B CI) with 19.9%, who approached Azure with a $2.31/share Offer in August but was rejected.
Mark Creasy, a major shareholder in Azure and also a direct stakeholder in Azure’s flagship mine, is the key. Should a firm Offer unfold, expect a chunky premium.

Hollysys (HOLI US): MBO Proposal and Updates

Hollysys Automation Technologies (HOLI US) update notes a new MBO proposal at US$25 per share, a bidders shortlist in several weeks and an update on the special meeting.
The update suggests several potential bidders and enough shareholders with the required record date to convene the special meeting to appoint independent directors.
The MBO proposal, while potentially a delaying tactic, suggests that the Board are under pressure for a solution and is aiming for a friendly takeover.

EOFlow/Medtronic: Signs of Life

When EOFlow (294090 KS) was suspended on the 11th October, and ceased global sales, either the Medtronic (MDT US) deal was (largely) toast; or it was a tactical move.
I’m firmly in the latter camp. Insulet‘s lawsuit was expected. And completing the transaction enables the more financially and legally resource-rich MDT to become the party to the litigation.
The SPA between Jesse Kim and MDT was expected to complete on 25 October. That was not a hard date. It has now been pushed out to 3 January 2024.

Yuanta/P-Shares Taiwan Div Plus ETF Rebalance Preview: In-The-Money; Turnover & Trade Remain High

Using data from the close on 25 October, there could be 6 adds and 5 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
There will also be capping and funding flows that will lead to a one-way turnover of 19.5% and a one-way trade of US$1.39bn.
A long adds/ short deletes trade is up double digits over the last three weeks and there are a few trade adjustments based on the new rankings.

SIA Placement Lockup – Time for Another Trim of Its US$7bn Stake

By Sumeet Singh

Temasek raised around US$300m via its secondary selldown in Singapore Airlines (SIA SP) in Jun 2023. The lockup from that placement will expire soon.
Temasek still owns over 50% of SIA and hence, any selldown might not come before SIA reports its 1H23/24 results in mid-Nov 2023.
In this note, we talk about the placement lockup dynamics.

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Oct 25

Daily Brief Event-Driven: Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
KOSPI200/KOSDAQ150 Index Rebalances: KRX Increases Opacity on Stock Selection
StubWorld: YTL Is Coming Up Cheap; Li Buys More PCCW
Frasers Hospitality – Will TCC Renew Its Takeover Offer? Market Prices Bet Yes Ahead of Earnings
Quiddity Leaderboard TDIV Dec 23: Sector-Neutral Trade Ideas for CDFHC and Far Eastern New Century
Quiddity Leaderboard T50/100 Dec 23: U-Ming Potential TDIV Deletion Is the Main Talking Point
In Play and Likely Worth More
EQD | The NIFTY Could Find WEEKLY Support Soon and Bounce

Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade

Solactive has announced the constituent changes for the Global Lithium Index. There are 8 adds and 9 deletes with implementation at the close on 31 October.
Estimated one-way turnover is in excess of 22% and will result in a one-way trade of US$490m. There are 11 stocks with estimated passive flows greater than 1x ADV.
The index is not very widely tracked and there could be big moves in stocks today and over the next few days – especially where there is multiple days ADV.

KOSPI200/KOSDAQ150 Index Rebalances: KRX Increases Opacity on Stock Selection

KRX has amended the stock selection methodology for the KOSPI2 INDEX and KOSDQ150 INDEX and added ‘Expert Judgement’ as a criteria.
The qualitative and quantitative criteria and the detailed filtering standards will be described in the manual but will NOT be publicly disclosed.
There is no change from using full market cap to free float market cap in stock selection, so the stocks that could be added/deleted will be broadly same as forecasts.

StubWorld: YTL Is Coming Up Cheap; Li Buys More PCCW

Malaysian conglomerate YTL Corp Bhd (YTL MK) is coming up “cheap” versus YTL Power International (YTLP MK). And Richard Li chips away at PCCW Ltd (8 HK).
Preceding my comments on YTL and PCCW 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%.

Frasers Hospitality – Will TCC Renew Its Takeover Offer? Market Prices Bet Yes Ahead of Earnings

400+ days ago, the TCC Group bid for Frasers Hospitality Trust (FHT SP) at just over 1.05x NAV failed on a combination of vocal minority opposition and minority apathy.
FHT has dramatically outperformed plummeting peers over the last few months on hope TCC might re-up that bid, but weaker peers and CRE markets suggest financing could be tougher.
Nothing is impossible, but it might make more sense for TCC to up its stake by stealth here rather than brute force. Earnings are 7 November.

Quiddity Leaderboard TDIV Dec 23: Sector-Neutral Trade Ideas for CDFHC and Far Eastern New Century

In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the December 2023 review.
I currently see 6 ADDs and 5 DELs but there are several names close to the border and expectations could change before the base date as prices move around.
The estimate for one-way flow in December 2023 is US$1.37bn.

Quiddity Leaderboard T50/100 Dec 23: U-Ming Potential TDIV Deletion Is the Main Talking Point

In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the December 2023 Rebalance.
While there are no changes expected for the T50 index there could be one change for the T100 index.
U Ming Marine Transport Corp (2606 TT) has moved closer to a potential T100 deletion which could also result in a TDIV deletion which has very significant flow implications.

In Play and Likely Worth More

By Jesus Rodriguez Aguilar

The current offer from Apollo of 65p/share undervalues the company. RTN ex-Leisure can achieve huge upside merely by executing the business plan. The shares have consistently traded above 65p.
Activist investors are piling on the register and there is a strong possibility that shareholders push for an offer sweetening (c.75p). RTN is in play, another PE bidder could interlope.
The bid is below mid-2021 highs of around 140p. Although a 34% premium is optically good, a conservative SOTP valuation provides a fair value estimate of 78.7p/share (8.7x EV/24eEBITDA).

EQD | The NIFTY Could Find WEEKLY Support Soon and Bounce

By Nico Rosti

The NIFTY Index last week closed down (CC=-1) and it’s moving towards the Q2/median support at 19154.
The Index is not as oversold WEEKLY and MONTHLY as some of its other peers in the APAC group and is expected to rebound this week or the next.
Suggested support prices to go LONG are found in the 19154 to 18682 price area, the rebound should unfold in November and could last the entire month.

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Oct 24

Daily Brief Event-Driven: Newcrest/Newmont Conclusion Nearing – Flowfront & Gold Price and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Newcrest/Newmont Conclusion Nearing – Flowfront & Gold Price
Celltrion Merger Swap Event: Trading Dynamics Post-Merger Approval
Quiddity A/H Premium Tracker (To Oct20): Volatility Up Further, Wide Spreads Even Wider. Messy²
Merger Arb Mondays (23 Oct) – Eoflow, Celltrion Healthcare, JSR, Origin, Lithium Power, Poly Culture
KOSDAQ150 Index Rebalance Preview: Big Sell Off Among Potential Inclusions as Momentum Fades
KOSPI200 Index Rebalance Preview: The Tail End
Understanding Kakao Bank’s Overhang Risk from Legal Consequences for Kakao Corp
EQD | Nikkei 225 MONTHLY Rally May Be Finally Coming
Quiddity HK Connect SOUTHBOUND Flows (To 20 Oct 23): Meituan, SMIC, Great Wall!
Quiddity Mainland Connect NORTHBOUND Flows (To 20 Oct 2023): BYD/Changan IN But BIGLY Net Selling

Newcrest/Newmont Conclusion Nearing – Flowfront & Gold Price

Newcrest Mining (NCM AU) saw its shareholder meeting vote through the Scheme, then on teh 18th, the Special Div went ex-.
Since then, as gold has rebounded sharply, Newmont Mining (NEM US) has underperformed peers and juniors (VanEck Gold Miners ETF/USA (GDX US)) since gold has spiked.
Thursday is the last day of trading and there is a LOT of NEM to trade.

Celltrion Merger Swap Event: Trading Dynamics Post-Merger Approval

Celltrion Chairman Seo made a public statement, affirming that they are prepared to bear the entire cost, even if it exceeds the ₩1T ceiling, and proceed with the merger.
The relatively substantial cost risk associated with Celltrion Inc. due to the involvement of NPS is causing the merger swap spread to widen once more in comparison to Celltrion Healthcare.
If the prices persist above the appraisal rights exercise prices, the relative cost risk for Celltrion Inc. could escalate, leading to a significant widening of the swap spread.

Quiddity A/H Premium Tracker (To Oct20): Volatility Up Further, Wide Spreads Even Wider. Messy²

The Somewhat-Brand-Spanking New (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
We used to do it. We brought it back better, with lots of cool interactive tables, and charts, heat maps, and comparative data. And 50 Trade Recommendations.
The last 10wks (since the start of the new Tracker and Portfolio 11 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%, -0.29%, -0.71%, -68%.

Merger Arb Mondays (23 Oct) – Eoflow, Celltrion Healthcare, JSR, Origin, Lithium Power, Poly Culture

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Haitong International Securities Group (665 HK), Lithium Power International (LPI AU).
Lowest spreads – Healius (HLS AU), Pact Group Holdings (PGH AU), Origin Energy (ORG AU), T&K Toka Co Ltd (4636 JP), Kenedix Retail REIT (3453 JP), Chindata Group (CD US).

KOSDAQ150 Index Rebalance Preview: Big Sell Off Among Potential Inclusions as Momentum Fades

With the review period nearly complete, we see 15 potential changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
There could be index changes even before the December rebalance if there are prolonged trading suspensions and stocks migrate from the KOSDAQ Market to the KOSPI Market.
The potential adds have sold off hard over the last six weeks, similar to the performance at the June rebalance.

KOSPI200 Index Rebalance Preview: The Tail End

With the review period nearly complete, we expect 7 changes to the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) in December. Couple of changes are low probability though.
The Materials sector could be the biggest gainer at the rebalance while nearly all deletions could come from the Consumer Discretionary sector.
The impact on the potential inclusion ranges from 0.15-15 days of ADV while the impact on the potential deletions varies from 1.7-8.1 days of ADV.

Understanding Kakao Bank’s Overhang Risk from Legal Consequences for Kakao Corp

Financial regulators will likely mandate Kakao Corp to divest all but 10% of its stake in Kakao Bank. The deadline is six months from the date of the order.
If this issue is resolved through the forced sale of the stake, it is anticipated that this stake volume will eventually be released into the market through block deals.
Kakao may proactively divest its Kakao Bank stake to transfer the majority shareholder position to KIS, regardless of the judicial outcome.

EQD | Nikkei 225 MONTHLY Rally May Be Finally Coming

By Nico Rosti

The Nikkei 225 (NKY) INDEX closed last week down at 31259.36. It’s currently trading between the Q2 and Q3 WEEKLY support levels and down for 4 months, so it’s OVERSOLD.
The index could reverse this week, or fall more into the end of October, but if this week closes down, the odds are very good for a rally in November.
Consider going LONG between here and supports in the 30600-30400 price area, a MONTHLY reversal could last at least 2-4 weeks (a month).

Quiddity HK Connect SOUTHBOUND Flows (To 20 Oct 23): Meituan, SMIC, Great Wall!

This is the somewhat brand-spanking-new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
We like the nifty interactive tables+charts (please play with them!) and we welcome feedback. This 5-day week saw HKD 3.9bn+ of net buying. That makes 13 weeks of net inflows.

Quiddity Mainland Connect NORTHBOUND Flows (To 20 Oct 2023): BYD/Changan IN But BIGLY Net Selling