This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. SK Hynix (000660 KS; SKHY US) ADR Issue: Large Index Flows & Potential Timing
- SK Hynix (000660 KS) is looking to raise around US$30bn via a new share issue to back ADRs listed on the NASDAQ.
- The ADR to local share ratio is 10:1 and the ADRs are expected to start trading in the second half of July.
- There will be passive buying from multiple index trackers and that will mop up a significant amount of the new share offering.
2. Samsung July Buyback: Impact on the Hynix ADR Listing Setup
- Street chatter points to Samsung buyback board approval likely landing in the first half of next month, pre mid month, with management increasingly focused on Hynix market cap flip risk.
- Samsung common outperforms prefs today. Street reads it as management leaning into Hynix relative performance and skewed toward common driven flow impact.
- Lean into Hynix ADR setup with overhang reinforcing long Samsung short Hynix. July buyback flow adds tailwind. Square Hynix outperformance may re lock into listing window despite today’s pullback.
3. Curator’s Cut: Levered ETFs in Asia, Listed and Listing Exchanges & Robotaxis’ Road Ahead
- Welcome to Curator’s Cut – a fortnightly roundup of standout themes from the 1,200+ insights shared on Smartkarma.
- In this cut, we cover the fast growth of levered ETFs including in Asia, weigh two exchange plays in India and Japan, and assess the competing models in robotaxi.
- Want to dig deeper? Comment or message with the themes you’d like to see highlighted next.
4. Samsung Electronics: Expectation of a Massive Share Buyback Announcement in the Next Few Weeks
- There is a growing expectation of a massive share buyback by Samsung Electronics (005930 KS) in the coming weeks.
- In this insight, I discuss the likelihood, reasons for the buyback, potential size amount, and the impact on the ordinary vs preferred shares price differential.
- In my view, the potential buyback size amount could about 90 trillion won to 110 trillion won over the next three years.
5. On the SK Holdings/Square Merger Noise Circulating in the Local Market Since Yesterday
- Korea street is buzzing on SK governance revamp, with merger talk between SK Holdings and SK Square driving extreme price divergence.
- Merger idea is highly radical with no conviction level intel, so likely noise, but outsized Holdings price action suggests the narrative could stick and keep driving flows near term.
- Speculative chatter links early fab expansion news leak to boosting Holdings valuation via SK Ecoplant exposure, shaping relative trades across Holdings, Square, Hynix.
6. Merger Arb Mondays (22 Jun) – Kakaku, Nippon Dry, Shinko Shoji, Accent, Humm, Qoria, Skyworth
- I summarise the latest spreads and newsflow for the merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, the Philippines, Thailand, and Chinese ADRs.
- Highest spreads: Skyworth (751 HK), Qoria (QOR AU), Changhong Jiahua (3991 HK), Humm Group (HUM AU), Cygnus Metals (CY5 AU), Continental Aerospace Technologies (232 HK).
- Lowest spreads: Accent Group (AX1 AU), Taiyo Holdings (4626 JP), Kakaku.com Inc (2371 JP), Nippon Dry Chemical (1909 JP), Shinko Shoji (8141 JP), Atlas Arteria (ALX AU).
7. Makino Milling Machine (6135 JP): NSSK’s Rumoured Revised Offer Around JPY16,000
- The Nikkei reported that NSSK has made a revised proposal for Makino Milling Machine Co (6135 JP) at around JPY16,000, a 36.2% premium to the failed MBK JPY11,751 offer.
- The Nikkei highlights a risk that the NSSK tender offer may be rejected in favour of implementing the updated corporate enhancement plan (announced on 13 May).
- However, the Board is likely to support an NSSK offer of around JPY16,000, as it would represent an all-time high and exceed the peer- and market-adjusted undisturbed price.
8. Shinko Shoji (8141 JP): Intriguing Shareholder Movements Ahead of 26 June Close
- Sand Grove Capital, which started buying on the day of the offer announcement, has increased its Shinko Shoji (8141 JP) shareholding to 6.12% of outstanding shares.
- Sand Grove, primarily an event-driven fund, has bought marginally above terms, suggesting that it is either playing the bumpitrage trade or waging its first Japanese activism campaign.
- While Murakami’s exit and Sand Grove’s emergence increase the chances of a bump, Kaga Electronics (8154 JP) retains options to force completion at current terms.
9. Ajinomoto Malaysia (AJI MK): Ajinomoto’s Fair Offer
- MSG-Manufacturer Ajinomoto Malaysia (AJI MK) has announced Ajinomoto Co (2802 JP), its controlling shareholder, intends to delist the company via a selective capital reduction.
- Ajinomoto is offering RM20/share in cash, a 31.6% premium to last close; but more like 67% due to apparent price leakage. Ajinomoto holds 50.38% of shares out.
- The Offer price is a decade-high. For shareholders in an illiquid stock, here’s your exit.
10. StubWorld: Sino American Silicon (5483 TT)’s Decade-Low Implied Stub
- The implied stub for Sino American Silicon Products (5483 TT) (“SAS”) – and simple ratio (SAS/GlobalWafers (6488 TT) – are both at decade-lows.
- Preceding my comments on SAS 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%.
