Event-Driven Archives | Page 78 of 171 | Smartkarma

Foreign shareholding has dropped in HDFC Limited and increased in HDFC Bank – the net effect is an increase in foreign room to just north of 18%.
The merger is expected to complete in Q2/Q3 when there will be buying from MSCI trackers. There will be adhoc inclusions to the NIFTY, Nifty Next 50 and SENSEX indices.
HDFC Limited (HDFC IN) trades 1.39% below the merger ratio with HDFC Bank (HDFCB IN) and also at a lower price to book.

Tokyo Gas (9531 JP) Mega Buyback Announced

Five days ago, Tokyo Gas (9531 JP) announced a revision to earnings for the year to 31 March 2023. Today they reported results, and announced March 2024 guidance.
The company also announced a buyback programme to spend up to ¥113 billion to repurchase up to 53mm shares (12.2% of TSO). ¥113 billion is a very specific number.
With the price where it is, ¥113bn is “only” 9.6% of shares out but this is very interesting indeed.

HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies

Hang Seng Indexes has started a consultation on the eligibility of Foreign Companies in the Hang Seng Index, a review of the seven Industry Groups and number of HK constituents.
We agree that foreign companies should be added to the index, no change needed to the Industry Groups, and the cap on the number of HK constituents should be removed.
There are a few potential adds due to the removal of the cap on HK companies, while there are potential foreign company additions later this year or in 2024.

STAR50 Index Rebalance Preview: Changes Depend on Minimum Listing History

The review period for the June rebalance ends 28 April. We expect the changes to be announced 26 May with the implementation taking place after the close on 9 June.
Using a 12-month minimum listing history results in no index changes. Using a 6-month minimum listing history results in two changes – we think this is what will be used.
The potential adds have outperformed the potential deletes but both sets of stocks have underperformed the SSE STAR50 (STAR50 INDEX) and the CSI Smallcap 500 Index – Shanghai (SH000905 INDEX).

Blackmores (BKL AU) Signs SID with Kirin Holdings (2503 JP)

Blackmores Ltd (BKL AU) has signed a Scheme Implementation Deed with Kirin Holdings (2503 JP) for the acquisition of 100% of Blackmores by way of a scheme of arrangement.
The A$95/share offer is a 23.7% premium to the last close and is at least a 20% premium to most other VWAPs.
Blackmores Ltd (BKL AU) intends to pay a fully-franked special dividend of A$3.34/share. This will enable eligible shareholders to benefit from franking credits of A$1.43/share.

Activision Blizzard – An Unsightly Mess

By Mio Kato

Last night the CMA chose to block the merger between Microsoft and Activision Blizzard in the UK on the grounds that it would harm competition in cloud gaming.
The merits of that position are highly debatable in our view but that does not mean that the decision is bad for consumers.
It also does not mean that the decision is bad for Microsoft in our view.

SSE50 Index Rebalance Preview: Five Changes Coming Up in June

With 2 trading days left in the review period, we see 7 potential adds/5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
We estimate one-way turnover of 5.58% at the June rebalance leading to a one-way trade of CNY 4.22bn. Index arb balances could increase the impact on the stocks.
The potential adds have outperformed the potential deletes over the last couple of months and have underperformed over the last week.

Codan (CDA AU): Balancing Defence And Accelerated Preparedness

The highly-anticipated Defence Strategic Review, released on the 24 April, clarifies the five key missions for the Australian Defence Force: maritime, land, air, space, and cyber.
One takeaway recommended Defence balance the need for local content against its timely acquisition, suggesting increased off-the-shelf acquisitions. This may favour overseas contractors in place of the domestic industry.
Codan (CDA AU), whose metal detectors and communications technology are used by the military, is one SME whose procurement speed may be scrutinised.

Quiddity Leaderboard ES50 Sep 23: Vonovia Deletion Seems Likely; US$1.2bn Flow for Wolters Kluwer

The EURO STX 50 Index is one of the most highly-tracked indices in mainland Europe and the annual index review takes place in September.
Historically, these Rebalance events have had significant volume and ADV impact and they generally involve large cap names.
In this insight, we take a look the names leading the race to become ADDs/DELs for the upcoming index review in September 2023.

EQT/Dechra Pharmaceuticals: Generous Possible Offer

Dechra is in discussions with EQT and ADIA about a 4,070 cash possible offer (46.6% premium, 22.6x EV/NTM Fwd EBITDA and 32x Fwd P/E). PUSU deadline is 11 May.
With the deal multiple at a slight premium (on both EV/Fwd EBITDA and Fwd P/E) over Zoetis, the market leader in animal health, the offer appears to be reasonably priced.
My base case fair value estimate is 3,568p/share (DCF-based), 12.3% below the offer price. My TP is thus 4,070p. Gross spread is 9.1%, therefore I feel the risk/reward is balanced.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 26

Daily Brief Event-Driven: Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively
AAG (2686 HK): Pros & Cons Ahead Of Scheme Vote
Mankind Pharma: IPO Details & Index Inclusion
KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)
Quiddity Leaderboard Singapore’s STI Sep 23: KDCREIT Facing Risk of Deletion
CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

The local ghost hedge fund began to excessively invest in credit, which leveraged 2.5 to 3 times when the eight manipulated stocks started to increase rapidly in price.
Then, the Financial Supervisory Service deemed this excessively-leveraged trading behavior as unusual, and news of an investigation into their activities broke out and triggered them to dump the shares.
The key now is identifying in advance the stocks that will experience similar selling patterns. To do so, we need to prioritize selecting stocks with high-margin balances in recent times.

AAG (2686 HK): Pros & Cons Ahead Of Scheme Vote

We’re down to the pointy end of AAG Energy Holdings (2686 HK)‘s Scheme. And at a gross/annualised spread of 15.6%/318%, all is not well.
The uncertainty is not without substance. A derisory Offer, one that is rejected by a proxy advisor; together with a silent, large shareholder no one seems to know.
Shareholders go to the vote this Thursday, the 27th April. Currently trading 5% below the undisturbed price.

Mankind Pharma: IPO Details & Index Inclusion

Mankind Pharma (6596876Z IN) is looking to raise up to US$526m in its IPO by selling 40.06m shares at a price range of INR 1026 to INR 1080 per share.
The company has allocated 12.02m shares to anchor investors at INR 1080/share. That list includes marquee names and the lock-up reduces near-term float.
The IPO opens on 25 April and will close on 27 April. Shares are expected to start trading on 9 May and there are no near-term index inclusions expected.

KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)

With 3 trading days left in the review period for the June rebalance, we see 8 potential changes and 2 close adds for the KOSDAQ 150 Index (KOSDQ150 INDEX).
There are two potential transfers from the KOSDAQ Market to KOSPI Market that could lead to more changes in May and/or June.
Nearly all potential deletions are trading near their lows and short interest has been increasing on some of the stocks. That will be covered closer to implementation of the rebalance.

Quiddity Leaderboard Singapore’s STI Sep 23: KDCREIT Facing Risk of Deletion

In this insight, we take a look at the potential index changes for Singapore’s ST index (“STI”) between now and the September 2023 index review.
With roughly 4 more months left for the base date, Sembcorp Marine (SMM SP) seems to be an ADD but it is close to the border.
Since the ranking system used for this index in based on prices as at a single point in time, the rankings could change significantly and our expectations could change too.

CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion

With three trading days left in the review period for the CSI 500 Index (SH000905 INDEX) June rebalance, we forecast 50 changes at the close on 9 June.
There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.77% at the June rebalance resulting in a one-way trade of CNY 6.28bn.
The potential adds have outperformed the potential deletes but there has been a big selloff in the last couple of weeks as the market has headed lower.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 25

Daily Brief Event-Driven: AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote
KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks
CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete
Quiddity Leaderboard SE600 Jun 23: Three ADDs/DELs Likely
Silver Lake/Software AG: Agreed Offer
Shockwave Medical Inc (SWAV US): Initial Thought on Takeover Talk and Probable Pricing

AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote

Ahead of Aag Energy Holdings (2686 HK)’s vote on 27 April, the gross spread to Xinjiang Xintai Natural Gas (603393 CH)’s HK$1.85 offer sits uncomfortably high at 13.5%.
The key risk remains that minorities vote down the scheme. Retail forums are active with mixed views on the offer. Peers have also modestly re-rated, which helps the NO camp.
At the last close, the risk-reward profile is unfavourable as the downside to a scheme fail (-16.0%) is greater than the upside to a scheme pass (+13.5%).

KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks

With 4 trading days left in the review period, we see three potential changes for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in June.
Kum Yang (001570 KS), Cosmochemical (005420 KS) and Youlchon Chemical (008730 KS) could replace Dongwon Industries (006040 KS), Hwaseung Enterprise (241590 KS) and Hyundai Home Shopping Network (057050 KS).
If approved by shareholders, the Dongkuk Steel Mill (001230 KS) split increases the probability of Youlchon Chemical (008730 KS) inclusion and Hyundai Home Shopping Network (057050 KS) could avoid deletion.

CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete

With 4 trading days to go the review period, we see 13 potential index changes at the June rebalance that will be implemented at the close on 9 June.
We estimate a one-way turnover of 1.94% at the June rebalance leading to a one-way trade of CNY 5.05bn.
With the review period nearly complete, the gap between the potential adds and deletes could narrow ahead of the announcement of the changes as pre-positions are built.

Quiddity Leaderboard SE600 Jun 23: Three ADDs/DELs Likely

In this insight, we take a look at the names leading the race to become ADDs/DELs for the STX Europe 600 and EUROSTX Indices for the March 2023 Rebalance.
There is roughly one more month left to the base date. At present, I see around 3 ADDs/DELs in the June 2023 review.
Separately, STX Europe 600 members Credit Suisse (CSGN SW) and Vantage Towers (VTWR GR) could possibly get deleted in the next few months triggering intra-review index changes.

Silver Lake/Software AG: Agreed Offer

Silver Lake has announced its intention to launch a cash offer to delist Software AG at €30/share (53% premium, 12.7x EV/NTM EBITDA, 20.5x Fwd P/E), targeting 37% of the float.
The Board is suportive and Silver Lake does not seek a domination agreement. The offer price will not be adjusted by the next dividend (€0.05, ex-date 19 May).
My fair value estimate (EV/EBITDA based) is €26.54/share, the offer price seems adequate. The offer targets 37.6% of the float, feasible. Gross spread (incl. divi) is 0.97%, not terribly exciting.

Shockwave Medical Inc (SWAV US): Initial Thought on Takeover Talk and Probable Pricing

By Tina Banerjee

Shockwave Medical Inc (SWAV US) is reportedly drawing takeover interest from Boston Scientific. Shockwave can potentially be one of Boston Scientific’s largest ever acquisitions. Probable pricing still offers upside potential.
Shockwave has an addressable market opportunity of $8.5 billion. The company has guided for 2023 revenue of $660–680 million, which represents 35–39% YoY growth.
Addition of Shockwave will bolster Boston Scientific’s cardiovascular portfolio. No official announcement has been made by any of the companies. There is no certainty they will lead to a deal.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 24

Daily Brief Event-Driven: Another Reason To Like China Mobile (941 HK) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Another Reason To Like China Mobile (941 HK)
Yuexiu Property (123 HK) Rights Offering
Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch
Merger Arb Mondays (24 Apr) – AAG Energy, Jiangnan, HKBN, Healius, Lian Beng, Toyo
Weekly Deals Digest (23 Apr) – HKBN, Jiangnan, Lian Beng, Yuexiu Property, ZJLD, Mankind, Adicon
Jiangnan (1366 HK): 15th May Court Meeting. IFA Says Fair

Another Reason To Like China Mobile (941 HK)

In March, the HK Secretary for Financial Services announced a waiver of stamp duty on dual counter trading market making. In November, the Govt of HK gazetted a bill.
HKEX launched plans in December. 9 large HK names announced in March they’d apply (Tencent, Kuaishou, Geely, BOC, Anta, AIA, China Resources Beer, Bidu, HKEX). Six more in April.
All the announcements are similar. But one on 21 April caught my eye because it is a big H/A with strong southbound support. That’s China Mobile (941 HK).

Yuexiu Property (123 HK) Rights Offering

On Thursday morning, Yuexiu Property (123 HK) halted trading in its shares and then later in the day announced a rights offering. Shares fell hard but gained back a little.
The rights offering lowers BVPS by about 11.3% so the current price is “about right” for the fundamentals if the price the day before the news was right.
There are, however, flow dynamics which are of interest. There almost always are.

Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch

Two pairs of constituent changes marked in squares in INTERNET and GAME may offer meaningful trading opportunities: Seojin System IN / Ahnlab OUT and Com2us IN / Doubleugames OUT.
Along with TIGER ETF, stealth index funds follow these indices. So, constituent changes in INTERNET and GAME create a flow impact of 0.3~0.6x DTV, even not in the Top 3.
Also, INTERNET and GAME have less passive flow impact degradation risk due to momentum trading flows compared to BATTERY and BIO.

Merger Arb Mondays (24 Apr) – AAG Energy, Jiangnan, HKBN, Healius, Lian Beng, Toyo

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 – 111 Inc (YI US), Estia Health (EHE AU), Aag Energy Holdings (2686 HK), United Malt Group Ltd (UMG AU), Origin Energy (ORG AU), Toshiba Corp (6502 JP).
Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Lian Beng (LBG SP), Golden Energy & Resources (GER SP), HKBN Ltd (1310 HK), Mincor Resources NL (MCR AU).

Weekly Deals Digest (23 Apr) – HKBN, Jiangnan, Lian Beng, Yuexiu Property, ZJLD, Mankind, Adicon

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 – Yuexiu Property (123 HK) rights issue and ADICON Holdings Limited (ADI HK), ZJLD Group (ZJLD HK), Mankind Pharma (6596876Z IN) IPOs.
Event-Driven developments – HKBN Ltd (1310 HK), Jiangnan (1366 HK), Essential Metals (ESS AU), Healius (HLS AU), Lian Beng (LBG SP), Oishi Group PCL (OISHI TB).

Jiangnan (1366 HK): 15th May Court Meeting. IFA Says Fair

On the 21st Feb, Chu Hui, Jiangnan (1366 HK)‘s chairman and major shareholder, offered HK$0.40/share by of a Scheme, a 12.68% premium to last close.
However, shares gained 63% in the morning session of the 16 Feb, before being suspended, therefore the premium was an impressive 83.49% over the last full trading day’s closing price.
A shareholder with a blocking stake gave his irrevocable on the 22 March. The IFA reckons terms are fair and reasonable. This is done. The Court Meeting is May 15th.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 23

Daily Brief Event-Driven: Index Rebalance & ETF Flow Recap: MSCI STD and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Index Rebalance & ETF Flow Recap: MSCI STD, Yuanta Div+, ZJLD, Anta
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Grinding to a Halt
Last Week in Event SPACE: Yamada Denki, Genting, HKBN, Toyo Construction
Jiangnan Group (1366 HK): Scheme Vote on 15 May
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Silk Laser, Arcland, Essential Metals, AAG, Lian Beng, Oishi

Index Rebalance & ETF Flow Recap: MSCI STD, Yuanta Div+, ZJLD, Anta

The review period for the MSCI May QCIR started last week and there were ad hoc changes to the S&P/ASX family and the KOSDAQ 150 Index (KOSDQ150 INDEX).
The end of the coming week will mark the end of the review period for the upcoming rebalances for a bunch of indices with implementation scheduled in May and June.
There was inflow to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF for another week.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Grinding to a Halt

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 Event SPACE: Yamada Denki, Genting, HKBN, Toyo Construction

Yamada Denki (9831 JP) lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.
Genting Bhd (GENT MK)‘s implied stub and simple ratio (GENT/ Genting Singapore (GENS SP)) are currently at muti-year trough levels.
Buy Toyo Construction (1890 JP) <¥970. The proposed dividend could be in danger should YFO spill the board; but spilling the board to get better governance is a good thing.

Jiangnan Group (1366 HK): Scheme Vote on 15 May

The Jiangnan (1366 HK) scheme document is out with the court meeting scheduled for 15 May. The IFA considers the HK$0.40 per share offer to be fair and reasonable.
Key conditions include approval by at least 75% independent shareholders (<10% rejection). The shareholder with a blocking stake has provided an irrevocable on 22 March.
This is a done deal. At the last close and for the 31 May payment, the gross and annualised spread is 3.9% and 44.0%, respectively.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Silk Laser, Arcland, Essential Metals, AAG, Lian Beng, Oishi

There are 41 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals were discussed on Smartkarma this past week: Wesfarmers (WES AU)‘s tilt for Silk Laser (SLA AU); and Arclands Corporation (9842 JP)Offer for Arcland Service (3085 JP).
Key updates took place for Essential Metals (ESS AU), Genesis Minerals (GMD AU), Alliance Aviation (AQZ AU), AAG Energy (2686 HK), Lian Beng (LBG SP), and Oishi Group (OISHI TB).

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 22

Daily Brief Event-Driven: Toshiba – HDD Business Risk and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba – HDD Business Risk
Essential Metals In Limbo As MinRes Lurks
Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion
Dechra Pharmaceuticals (DPH LN): Best Case Scenario Offers 10% Upside Potential
Competing Proposals

Toshiba – HDD Business Risk

By Mio Kato

We have been tracking Toshiba’s rapidly deteriorating HDD business over the last few quarters.
Recent trends raise further concerns about the long-term viability of the business.
In particular, visibility remains low on a strong recovery in demand and until that occurs the possibility of a YoY deterioration remains high.

Essential Metals In Limbo As MinRes Lurks

On the 9th Jan, lithium player Essential Metals (ESS AU) entered into a Scheme with Tianqi Lithium JV, comprising Tianqi Lithium (9696 HK) (51%) and IGO Ltd (IGO AU) (49%).
Shortly before the 20 April Scheme Meeting, Mineral Resources (MIN AU) announced a 19.55% stake.
A Scheme failure was expected. And 68.47% voted against the transaction. The question is – now what?

Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion

Dongwon Industries’ float rate is less than 10% (1 – 63.15% – 27.65% = 9.20%), which makes it ineligible for KOSPI 200. KRX will reflect this in the June review.
The passive outflow size due to K200 deletion is expected to be about 50 billion won, which will cause an impact of about 28x ADTV.
Considering this deletion has not been sufficiently exposed in the market, the actual price impact may be even more significant and preemptive.

Dechra Pharmaceuticals (DPH LN): Best Case Scenario Offers 10% Upside Potential

By Tina Banerjee

Dechra Pharmaceuticals (DPH LN) received an offer from the Swedish private equity firm EQT regarding a possible all-cash deal, where Dechra shareholders would receive £40.70 per ordinary share in cash.
Right after the announcement, Dechra shares surged 33%. The shares are currently trading at £37.66, implying 10% upside potential.
Without EQT offer, based on current financial performance, Dechra has a bleak outlook. Currently, Dechra has average target price of £39.39, implying a spread of just ~5%.

Competing Proposals

Middle East and Africa leading payments processing firm Network International is in play. On 21 April, Brookfield submitted a 400p competing proposal, vs. CVC/Francisco’s earlier 387p. Network was trading cheaply.
Exposure to underserved MEA markets should support sustainable longer-term growth. My fair value estimate is 431p. The shares trade 0.75% below Brookfield’s proposal, the market awaits a counteroffer from CVC/Francisco.
The fact that Brookfield has raised just 3.4% above CVC/Francisco seems to signal that Brookfield will be cautious in case of an “auction”. Long.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 21

Daily Brief Event-Driven: Big Yuexiu Property (123 HK) Rights Issue – 3 Capital Actions from Here to Mid-June and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Big Yuexiu Property (123 HK) Rights Issue – 3 Capital Actions from Here to Mid-June
Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs
Wesfarmer’s Non-Binding Offer For Silk
Update on the Trading Opportunities Post OCI Spin-Off
Quiddity Leaderboard-DAX Jun 23: SMA Solar, Hochtief, Adtran, Aroundtown
Apollo/John Wood Group: Due Diligence Access

Big Yuexiu Property (123 HK) Rights Issue – 3 Capital Actions from Here to Mid-June

After being halted this morning before the start of trade, post-close, Yuexiu Property (123 HK) announced a fully-underwritten Rights Offering.
The Rights Offering intends to raise HK$8.36bn issuing 30 Rights for every 100 Shares held, at a subscription price of HK$9.00, a 23.3% discount to TERP.
This will take a moderately-levered property/services/leaseco and add more capital to it. Not terribly bullish. Looks opportunistic. And one has to look through 3 capital actions to see dividends ahead.

Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs

We now have an environment that allows Korea’s battery ETFs to include LG Chem in upcoming reviews. KODEX is in June, and TIGER is in July.
If LG Chem is included in each review, the expected one-day inflow is at 0.7-0.8x DTV, which can lead to a price impact similar to that of SKIET in 2021.
We should consider setups targeting this, including Long Short, which utilizes LG Energy Solution or LG Corp as a hedge.

Wesfarmer’s Non-Binding Offer For Silk

Wesfarmers Ltd (WES AU) has made a non-binding indicative Offer, by way of a Scheme, for Silk Laser Australia (SLA AU), an operator of specialist clinic networks across Australia.
The Offer Price of $3.15/share is a decent 30.2% premium to last close. Wilson Asset Management, with 9.3% of shares out, is supportive.
Wesfarmers has been granted 30 days to undertake due diligence on an exclusive basis.

Update on the Trading Opportunities Post OCI Spin-Off

By Douglas Kim

The Korea Exchange announced today (20 April) the change in index constituents and major dates for the Oci Co Ltd (010060 KS) spin-off.
Oci Co Ltd (010060 KS)’s shares will be suspended from trading from 27 April to 26 May 2023.
After the spin-off and relisting of holdco/opco shares, we believe that there is a greater probability of OCI Co (opco) shares outperforming OCI Holdings (holdco).

Quiddity Leaderboard-DAX Jun 23: SMA Solar, Hochtief, Adtran, Aroundtown

In this insight, we take a look at Quiddity’s estimates for the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
At present, I do not see any movements between the DAX and MDAX indices.
However, there could be two changes between the MDAX and SDAX index and there could be one more ADD/DEL for the SDAX index.

Apollo/John Wood Group: Due Diligence Access

“Feedback” from shareholders overturned numantine resistance from the Board of Wood, which has reluctantly decided to grant due diligence access to Apollo. New PUSU deadline is 17 May.
As top shareholder of Vallourec, Apollo knows the sector. At the 240p offer proposal, Wood would be valued at an undemanding 5.7x EV/Fwd EBITDA on consensus numbers.
My fair value estimate is 261.7p (average of SOTP-multiples and DCF). There is value in the sector and Apollo may have turned a corner. Long.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 20

Daily Brief Event-Driven: An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing
If HKBN Gets Taken Out, Who’s Next?
Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview
Rakuten Bank IPO Trading – Ample Upside

An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing

BH Co Ltd (090460 KS) will likely complete the transfer listing by early May, suggesting an ad-hoc change may occur before the regular rebalancing of the KOSDAQ 150 in June.
BH’s GICS sector is INFORMATION TECHNOLOGY. It means the top reserved issue at the previous review gets to replace BH. At this point, it will be HFR Inc (230240 KS).
We should build up a Long position on HFR right after KRX approves BH’s transfer and then close it on the next trading day after the KQ150 corporate action announcement.

If HKBN Gets Taken Out, Who’s Next?

HKBN Ltd (1310 HK) spiked 12.3% yesterday in response to media reports (like this one) that China Mobile (941 HK) was running a ruler over the company.
This follows Bloomberg reports last month and in May last year, that I Square’s HGC Global Communications and numerous PE outfits were kicking tyres of the Hong Kong broadband play.
Over the weekend, Hong Kong’s security chief was quoted as saying “the internet could become a major loophole when maintaining national security“. HKT (6823 HK) is a potential privatisation candidate.

Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview

Using data from the close on 19 April, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
There will also be capping and funding flows that will lead to a one-way turnover of 13.6% and a one-way trade of US$885m.
There are 10 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1 day ADV to trade.

Rakuten Bank IPO Trading – Ample Upside

By Sumeet Singh

Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), raised around US$630m in its Japan IPO.
RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
In our earlier notes, we have looked at various aspects of the deal. In this note, we talk about the deal dynamics and trading updates.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 19

Daily Brief Event-Driven: HKBN (1310 HK): China Mobile Is the Latest to Show Interest and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HKBN (1310 HK): China Mobile Is the Latest to Show Interest
Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion
YFO Goes Hard for Board Spill – Independents AND Executives
Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma
Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?
Quiddity Leaderboard ASX Jun 23: DHG Could Underperform Peers
ZJLD Group (6979 HK): Index Inclusion Possibility & Timelines
Oishi Group: IFA Backs ThaiBev’s Offer
Sega Sammy Holdings/Rovio Entertainment: Agreed Offer

HKBN (1310 HK): China Mobile Is the Latest to Show Interest

Reuters reported that China Mobile (600941 CH) is exploring a potential buyout of HKBN Ltd (1310 HK). The shares surged 12.3% to HK$6.57, above I Squared’s rumoured HK$6.00 offer.
To get an idea of the appropriate offer price, we examine shareholding dealings from substantial shareholders. Our analysis suggests that a scheme offer of around HK$8.50 would likely be required.
PAG is also a rumoured bidder. The flurry of interest around HKBN suggests a good probability that one of the bidders will come through with a formal offer.

Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion

We should expect significant changes in KT’s ADR premium approaching the implementation date as foreign institutions leading the passive flow for MSCI Korea constituents have typically preferred ADRs.
Looking at the previous two occasions, the ADR disparity widened from the midpoint of the review period. And this trend continued for a while after the implementation.
Although KT’s ADR disparity has not yet significantly expanded, we may witness a similar pattern this time as well, given that it has been continuously moving in the premium recently.

YFO Goes Hard for Board Spill – Independents AND Executives

At end-March, Toyo Construction (1890 JP) started playing hardball against YFO. They rejected the EGM call; they sent a letter to METI crying “FEFTA Breach!”, and raised the div BIGLY.
The new div at ¥63/share was meant to get the share price over ¥1,000/share so the YFO bid at that price would not be meaningful. So far, no luck.
But YFO, which had threatened to propose a new slate, came out today with a list of nine, including two who would be executive directors.

Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma

In May 2022, Yamada Denki (9831 JP) announced a very large buyback. GINORMOUS – in fact – at 23.9% of shares out ex-Treasury if maximum shares were bought.
So far, YDH is 83.5% through, and at the recent pace, they will end it 8 May having bought 183-184mm shares (21.9% of TSO) spending 86.6% of funds allocated.
That’s why the announcement lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.

Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?

By Victor Galliano

Softbank Vision Funds 1 and 2 were the biggest combined holdings at December 2022, accounting for 30% of group equity value; SVF private companies accounted for 73% of equity value
To December-end 2022, public companies in SVF2 were marked down by 52% versus investment cost, whereas SVF2 private companies were marked down by a more modest 33% versus investment cost
We believe that SVF2 private company valuations are at risk of further markdowns in 4QFY22 results, with many of these investments made close to the period of peak pandemic valuations

Quiddity Leaderboard ASX Jun 23: DHG Could Underperform Peers

In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run up to the June 2023 Rebalance.
Based on the latest data, I do not expect any changes for ASX 20, ASX 50, and ASX 100.
I expect Neuren Pharmaceuticals (NEU AU) to be added to ASX 200 and Domain Holdings Australia (DHG AU) to be deleted from ASX 200.

ZJLD Group (6979 HK): Index Inclusion Possibility & Timelines

ZJLD Group (ZJLD HK) is looking to raise between US$775m-US$933m (including the oversubscription option) in its IPO by selling 564.3m shares at a price range of HK$10.78-HK$12.98/share.
ZJLD Group (ZJLD HK) will not get Fast Entry to any indices but should be added to the HSCI and Stock Connect in September.
Peer performance has not been great this year and that could weigh on the ZJLD Group (ZJLD HK) listing.

Oishi Group: IFA Backs ThaiBev’s Offer

On the 10th March, Thai Beverage (THBEV SP) proposed taking 79.66%-held Oishi Group PCL (OISHI TB) private, at an Offer price of THB 59/share, a 26.9% premium to last close.
This Delisting Offer requires a shareholder vote which will take place on the 3<May. Payment may occur mid-to-late August.
In its report yesterday, the IFA reckons “that the shareholders should approve of the voluntary delisting“.

Sega Sammy Holdings/Rovio Entertainment: Agreed Offer

Sega with better reputation and deeper pockets than Playtika, announces a €9.25/share recommended cash offer; 63% premium to Playtika’s announcement; it represents 2.1x EV/Fwd Revenue, 12.3x EV/Fwd EBITDA, 21.6x Fwd P/E.
Acceptance condition is over 90%, and irrevocables are 49.1%, so 80.4% of the float is needed, which is high. I value Rovio using DCF (9% WACC, 1.5% perpetuity growth rate).
My fair value base case estimate is €8.80/share (€9.45/bull case). I thus update my TP to €9.25. Spread is 0.59%/1.22% (gross/annualised), which is not massive.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Apr 18

Daily Brief Event-Driven: MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences
Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch
StubWorld: Genting Berhad Is Cheap
Genesis To Acquire St Barbara’s Flagship As Merger Cancelled
Oishi Group (OISHI TB): IFA Recommends the THB59.00 Delisting Offer
Quiddity Leaderboard for UK F100/250 June 23: 20+ Days to Buy for Top-Ranked F250 Potential ADDs
Blackstone/Industrial REIT: Final Agreed Offer

MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences

The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) starts today. MSCI should choose a day from this week to compute market cap.
The most changes (especially adds) are expected in mainland China following an expansion of the universe for inclusion of stocks in Northbound Stock Connect.
There are stocks in India where there will be FIF changes triggering large flows and there are things to watch on some stocks in Korea and China.

Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch

With 3.5 months left in the dataset, the data is pretty close to settled. The interesting bits are elsewhere. There are three auto DELETEs and two auto ADDs. Maybe.
One auto-ADD is Toshiba, which may have a deal on it. That leaves two to add for sector balance. That could be Nitori (9843 JP) and Zozo (3092 JP).
Friday’s move on Fast Retailing brings in the issue of the new capping function. That would be a different US$2bn selldown. Lots of gory details here.

StubWorld: Genting Berhad Is Cheap

Genting Bhd (GENT MK)‘s implied stub and the simple ratio (GENT / Genting Singapore (GENS SP)) are at multi-year lows.
Preceding my comments on Genting are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Genesis To Acquire St Barbara’s Flagship As Merger Cancelled

Gold miner St Barbara Ltd (SBM AU)’s reverse merger with Genesis Minerals (GMD AU) always had a whiff of biting off more than they could chew. That’s now validated.
St Barbara has confirmed it will sell its flagship Leonora gold project to Genesis for $600mn (in cash and GMD scrip). The reverse merger has been cancelled.
Post transaction, St Barbara will hold up to ~19.5%, and be left with no debt and ~$197m in cash. Genesis will emerge with no debt, and ~$175mn cash (pre-transaction costs).

Oishi Group (OISHI TB): IFA Recommends the THB59.00 Delisting Offer

The Oishi Group PCL (OISHI TB) IFA opines that shareholders approve Thai Beverage (THBEV SP)’s delisting tender offer of THB59.00 per share at the EGM on 3 May.
The offer is conditional on Oishi shareholder approval which requires 75% approval by total outstanding shares and <10% rejection by total outstanding shares.
The offer is attractive to the IFA’s fair value of THB53.48-56.42 per share. At last close and the end-July completion, the gross and annualised spread is 2.2% and 8.1%, respectively.

Quiddity Leaderboard for UK F100/250 June 23: 20+ Days to Buy for Top-Ranked F250 Potential ADDs

In this insight, we take a look at the potential index changes for F100 and F250 in the run up to the June 2023 Rebalance.
Based on latest prices, there could be one change for F100 and four changes in F250 between now and the June 2023 Rebalance including Mediclinic International (MDC LN)‘s intra-review change.
Many of the high-ranked F250 potential additions could have very high impact according to our estimates.

Blackstone/Industrial REIT: Final Agreed Offer