Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>We have completed roughly half of the 20-day Reference Period for the DAX Equity Indices family for the September 2022 Rebalance.</li>
<li>In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.</li>
<li>Three names could move from SDAX to MDAX while the SDAX index could see another 4 ADDs/DELETEs.</li>
</ul>


We have completed roughly half of the 20-day Reference Period for the DAX Equity Indices family for the September 2022 Rebalance.
In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
Three names could move from SDAX to MDAX while the SDAX index could see another 4 ADDs/DELETEs.


DAX/​​MDAX/​​SDAX Quiddity Leaderboard Sep 2022: Final Expectations

European Event-Driven Analyst

Jesus Rodriguez Aguilar

ADVA Optical Networking SE / Event-Driven

<ul>
<li>Adtran lowered the minimum acceptance threshold from 70% to 60%; the condition was thus fulfilled by the end of the initial acceptance period. Additional acceptance period runs until 14 February. </li>
<li>The consummation of the offer continues to be subject to closing conditions not yet fulfilled, especially foreign direct investment approval in Germany.</li>
<li>A 15% increase in the ADVA share price since the threshold condition was fulfilled has caused the spread to become negative (-3.4%). If you were already long, recommendation is tender.</li>
</ul>


Adtran lowered the minimum acceptance threshold from 70% to 60%; the condition was thus fulfilled by the end of the initial acceptance period. Additional acceptance period runs until 14 February. 
The consummation of the offer continues to be subject to closing conditions not yet fulfilled, especially foreign direct investment approval in Germany.
A 15% increase in the ADVA share price since the threshold condition was fulfilled has caused the spread to become negative (-3.4%). If you were already long, recommendation is tender.


ADTRAN/​ADVA Optical Networking: Additional Acceptance Period

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

iShares Russell 2000 ETF / Technical Analysis

<ul>
<li>The market continues to send mixed signals - some neutral or healthy signals but some risk-off signals as well.</li>
<li>As long as the Russell 2000 index (IWM) is above $208, Russell Micro Cap index (IWC) is above $134-$135, and the S&amp;P 500 is above 4495, we cannot be bearish.</li>
<li>Treasury yields are not breaking down below 1.40%-1.45% support on the 10-year Treasury yield and 1.76% support on the 30-year Treasury yield.</li>
</ul>


The market continues to send mixed signals - some neutral or healthy signals but some risk-off signals as well.
As long as the Russell 2000 index (IWM) is above $208, Russell Micro Cap index (IWC) is above $134-$135, and the S&amp;P 500 is above 4495, we cannot be bearish.
Treasury yields are not breaking down below 1.40%-1.45% support on the 10-year Treasury yield and 1.76% support on the 30-year Treasury yield.


Continued Absence Of Breakdowns Is A Positive Sign; Many Bottoms-Up Stock Recommendations

<a href="https://www.smartkarma.com/entities/adtran-inc" target="_blank" data-smartkarma-citation="entities:14322:1" rel="noopener">Adtran Inc (ADTN US)</a> seeks to gain scale and strengthen its position in the fibre market, by acquiring vendor <a href="https://www.smartkarma.com/entities/adva-optical-networking-se" target="_blank" data-smartkarma-citation="entities:21579:1" rel="noopener">Adva Optical Networking Se (ADV GR)</a> in an all-stock deal. The transaction aims to create a global end-to-end fibre networking solutions leader that combines ADTRAN's global leadership in fibre access, fibre extension and subscriber connectivity solutions with ADVA's global leadership in metro Wavelength Division Multiplexing (WDM), data center interconnect, business Ethernet and network synchronization solutions.
ADTRAN and ADVA have complementary customers and product lines. Access and aggregation account for 61% of ADTRAN's turnover, while cloud interconnect/metro WDM accounts for 70% of ADVA’s turnover.
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<div>
<div>
There is a market opportunity created by the stimulus to roll out fibre networks and the displacement of eastern vendors. 
</div>
</div>
</div>
ADTRAN offers 0.8244 ADTN US x 1 ADV GR. This is equivalent to €14.98 per ADVA share based on ADTRAN’s 3-month VWAP as of 27 August, thus representing a premium of 22% to the 3-month VWAP. For an equity value of €789 million, and an EV of €759 million, an implied multiple of 1.3x LTM Revenue. It also represents 1.4x EV/Fwd Revenue, 7.5x EV/Fwd EBITDA and 18.9x Fwd P/E (source: Capital IQ consensus).
ADTRAN has received irrevocable undertakings from Egora (13.7% stake and ADVA’s largest shareholder). The transaction is subject to customary closing conditions, including, ADTRAN shareholders’ approval and minimum acceptance condition of at least 70% of all outstanding ADVA shares.
My fair value estimate for ADVA is €17.79/share, DCF based (see calculations in the insight).
Median ADTRAN's TP on Capital IQ consensus is $27.5/share ( €23.23/share in euro).
As for the deal, this is a genuine merger rather than a lowball bid, with high probabilities to close, in my view. Gross spread is 4.6%. I recommend setting up the spread.

Adtran Inc (ADTN US) seeks to gain scale and strengthen its position in the fibre market, by acquiring vendor Adva Optical Networking Se (ADV GR) in an all-stock deal. The transaction aims to create a global end-to-end fibre networking solutions leader that combines ADTRAN's global leadership in fibre access, fibre extension and subscriber connectivity solutions with ADVA's global leadership in metro Wavelength Division Multiplexing (WDM), data center interconnect, business Ethernet and network synchronization solutions.
ADTRAN and ADVA have complementary customers and product lines. Access and aggregation account for 61% of ADTRAN's turnover, while cloud interconnect/metro WDM accounts for 70% of ADVA’s turnover.



There is a market opportunity created by the stimulus to roll out fibre networks and the displacement of eastern vendors. 



ADTRAN offers 0.8244 ADTN US x 1 ADV GR. This is equivalent to €14.98 per ADVA share based on ADTRAN’s 3-month VWAP as of 27 August, thus representing a premium of 22% to the 3-month VWAP. For an equity value of €789 million, and an EV of €759 million, an implied multiple of 1.3x LTM Revenue. It also represents 1.4x EV/Fwd Revenue, 7.5x EV/Fwd EBITDA and 18.9x Fwd P/E (source: Capital IQ consensus).
ADTRAN has received irrevocable undertakings from Egora (13.7% stake and ADVA’s largest shareholder). The transaction is subject to customary closing conditions, including, ADTRAN shareholders’ approval and minimum acceptance condition of at least 70% of all outstanding ADVA shares.
My fair value estimate for ADVA is €17.79/share, DCF based (see calculations in the insight).
Median ADTRAN's TP on Capital IQ consensus is $27.5/share ( €23.23/share in euro).
As for the deal, this is a genuine merger rather than a lowball bid, with high probabilities to close, in my view. Gross spread is 4.6%. I recommend setting up the spread.

ADTRAN/ADVA Optical Networking: Friendly Merger, Spread

United States

NETGEAR, Inc. provides networking products designed for small businesses and homes.  The Company's suite of products enables small businesses and homes to share Internet access, peripherals, digital content, and applications among multiple personal computers and other Internet-enabled devices.  NETGEAR markets and sells its products through distributors to a network of resellers.

Clearfield, Inc. designs, manufactures and markets a variety of fiber optic and copper components to the data communication and telecommunication industries. The Company's products include fiber distribution systems, optical components and fiber and copper cable assemblies that serve Fiber-to-the-Home (FTTH), large enterprise, and original equipment manufactures markets.

Applied Optoelectronics Inc. manufactures advanced optical semiconductor devices. The Company designs and produces diode lasers, photodiodes, transceivers, photodetectors, analog lasers, and optical subsystems. Applied Optoelectronics caters to the fiber optic communication, telecommunication, satellite broadcast, and wireless sectors.

CommScope Holding Company, Inc. operates as a holding company. The Company, through its subsidiaries, provides end-to-end solutions connecting technology and wireless and wired networks. CommScope serves customers throughout the world.

Ribbon Communications Inc. develops communication software. The Company provides session border controllers, diameter signaling controllers, policy and routing servers, media and signaling gateways, cloud, and mobility solutions. Ribbon Communications serves customers worldwide.

Bel Fuse Inc. designs, manufactures, and sells products used in networking, telecommunication, data transmission, and automotive and consumer electronics. The Company's products include magnetic components, fuses, delay lines, and thick film hybrids.  Bel Fuse operates facilities around the world.

KVH Industries, Inc. designs and manufactures products that enable mobile communication, navigation, and direction sensing through the use of its proprietary in-motion satellite antenna and fiber optic technologies. KVH serves multiple markets, including military navigation and stabilization and mobile satellite communications for vessels, RV's, and automobiles.

Silicom Ltd. designs, manufactures, markets, and supports multi-port gigabit-ethernet server adapters. The Company sells its multi-port gigabit-ethernet server networking adapters including its bypass adapters mainly to original equipment manufacturers.

Comtech Telecommunications Corp. designs, develops, and manufactures technology electronic products and systems.  The Company's communications products are used worldwide for voice, data, facsimile, and video transmissions at microwave frequencies in satellite, over-the-horizon microwave, terrestrial line-of-sight, and wireless telecommunications.

Digi International Inc. provides communications adapters that enable open systems, server-based applications.  The Company also produces local area networking products.  Digi markets its products through a global network of distributors, systems integrators, value added resellers, and original equipment manufacturers.

Shenzhen SDG Information Co., Ltd. manufactures and markets optical cables, optical fibers, communication equipment, electrolytic condensers, and electronic components.  The Company also provides paging services sells beepers, provides cable television services.

Gemtek Technology Corp. manufactures and markets wireless local area network (WLAN) personal computer memory card interface adapter (PCMCIA) cards, wireless gateways, wireless routers, access points, and other related wireless products. The Company also  provides wireless solutions.

Tongding Interconnection Information Co., Ltd. produces and sell local telecommunication cables, optical cables and railway signal cables.

Tongding Interconnection Informtn (002491 CH)

Huizhou Speed Wireless Technology Company Limited develops, manufactures and sells wireless communication terminal antennas. The Company's main products include mobile phone antennas, notebook computer antennas, AP antennas, and satellite positioning terminal antennas.

Huizhou Speed Wireless Technology (300322 CH)

Unizyx Holding Corp develops, manufactures, and markets communication products. The Company's main products are broadband products, modems, integrated services digital network (ISDN) modems, ISDN terminal adapters, routers, and network equipment.

Kingsignal Technology Company Limited develops, manufactures and sells coaxial high end radio frequency cables. The Company's main products include semi-flexible cable, low-loss cable, stable phase cable, military series cable, semi-rigid cable, and corrugated cables.

Henan Splendor Science & Technology Company Limited mainly designs, develops, manufactures and sells computer monitoring equipment and other electronic products.  The Company also sells telecommunications equipment, electronic devices, and instrumentation.

Henan Splendor Science&Technology (002296 CH)

Zero One Technology Co., Ltd. operates as a distributor to market network software and hardware.  The Company sells products of Microsoft, Cisco, Novell, Lotus, Oracle, Seednet, Computer Associates, Symantec, Trend, Xircom, and IBM in Taiwan.

Beijing Jiaxun Feihong Electrical Company Limited provides communication equipment and solution.  The Company also provides its customers with technical support, product sales, after-sale services as well as technical assurance amongst other services.

Beijing Jiaxun Feihong Electrical (300213 CH)

Lanner Electronics Inc. manufactures and markets industrial personal computers. The Company's products include full size single board computers, half size single board computers, rack mount chassis, industrial backplane, embedded single board computers, and network security platforms.

Adtran Holdings, Inc. operates as a holding company. The Company, through its subsidiaries, focuses provides networking and communications equipment that enables voice, data, video and Internet communications across any network infrastructure. Adtran Holdings serves customers worldwide.

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ADTRAN Holdings (ADTN US)

DAX/MDAX/SDAX Quiddity Leaderboard Sep 2022: Final Expectations

Delivery Hero has to climb one rank to get into DAX. MDAX and SDAX could see multiple index changes. Takkt's recent negative momentum could have...

Janaghan Jeyakumar, CFA

ADTRAN/ADVA Optical Networking: Additional Acceptance Period

By the end of the acceptance period, the offer had been accepted by more than 60% of all ADVA shares. The minimum acceptance threshold has...

Jesus Rodriguez Aguilar

Continued Absence Of Breakdowns Is A Positive Sign; Many Bottoms-Up Stock Recommendations

As long as the Russell 2000 index (IWM) is above $208, the Russell Micro Caps index (IWC) is above $134-$135, and the S&P 500 is above 4495, we...

Vermilion Research

ADTRAN/ADVA Optical Networking: Friendly Merger, Spread

This is a genuine merger rather than a lowball bid, with high probabilities to close, in my view. Gross spread is 4.6%. I recommend setting up the...

Jesus Rodriguez Aguilar

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

DAX/​​MDAX/​​SDAX Quiddity Leaderboard Sep 2022: Final Expectations

Delivery Hero has to climb one rank to get into DAX. MDAX and SDAX could see multiple index changes. Takkt's recent negative momentum could have...

Janaghan Jeyakumar, CFA

ADTRAN/​ADVA Optical Networking: Additional Acceptance Period

By the end of the acceptance period, the offer had been accepted by more than 60% of all ADVA shares. The minimum acceptance threshold has...

Jesus Rodriguez Aguilar

Continued Absence Of Breakdowns Is A Positive Sign; Many Bottoms-Up Stock Recommendations

As long as the Russell 2000 index (IWM) is above $208, the Russell Micro Caps index (IWC) is above $134-$135, and the S&P 500 is above 4495, we...

Vermilion Research

ADTRAN/ADVA Optical Networking: Friendly Merger, Spread

This is a genuine merger rather than a lowball bid, with high probabilities to close, in my view. Gross spread is 4.6%. I recommend setting up the...

Jesus Rodriguez Aguilar

DAX/MDAX/SDAX Quiddity Leaderboard Sep 2022: Final Expectations

ADTRAN/ADVA Optical Networking: Additional Acceptance Period