Event-Driven

Starting May 27th, KRX-listed firms can voluntarily disclose value-up details, publicly available on the website. Additionally, view five investment indicators for all KRX-listed companies below.
Finalized version similar to draft, with added content requested by listed companies, like R&D investment growth rate. Tax incentives excluded, awaiting alignment with Ministry’s plan in July.
KRX keeps a screening framework for the index akin to March’s criteria, with ROE likely having the highest weight. Recent signals hint at increasing dividend weighting.

Chilled & Frozen Logistics (9099 JP): Irrational Exuberance Takes Hold

Chilled & Frozen Logistics Holdings (9099 JP) shares are trading 85.7% above AZ-Com Maruwa Holdings (9090 JP) JPY3,000 offer due to the disclosure of four counterbidders.
The white knight “winning” bidder can secure the Board’s recommendation if it is the highest offer (likely well below the last close) and does not result in AZ-COM Maruwa-type dis-synergies.
AZ-COM Maruwa would face the dilemma of bumping, particularly if the white knight bidder secures irrevocables and the Board presents a compelling case to support the white knight bidder.

HK Connect SOUTHBOUND Flows (To 24 May 2024); Strong Bank Buying and Tech Selling Continues

SOUTHBOUND was again a net buyer for HK$18.6bn on strong two-way volumes. The top three net buys of the week were SOE banks. Some may be Central Huijin.
Some of this may be driven by the dividend w/h tax cancellation on H divs and by significant H-share discounts, but high-div CNOOC was the biggest net sell.
No end to the inflows, and HK valuations are not at a place where they would hamper continued flows. Alibaba making HK a Primary will spur more inflows over time.

KOSDAQ150 Index Rebalance: Short Sell Ban Definitely Helping

There are 13 inclusions and 13 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance to be implemented at the close on 13 June.
For the second consecutive review, Fadu (440110 KS) and Shinsung DeltaTech (065350 KS) have been kept out of the index. Not sure what the index committee’s beef with them is.
The adds have outperformed the deletes and the KOSDAQ150 since the start of the review period. This has been helped, in no small, part by the ban on short selling.

A/H Premium Tracker (To 24 May 2024): HK Stocks Have a BAD Week and AH Premium Rebounds In

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s buy streak continued this past week; every day was net positive. NORTHBOUND was net positive too. It is not clear how much is National Team buying. Much may be.
AH Premia rebounded off multi-year lows, on average, this past week as Hang Seng and other HK indices fell sharply and A-shares did not fall as much.

What’s Still Concerning in the HLB Situation & HLB Life Science’s Stock Rights Trading Next Week

HLB expects Jiangsu Hengrui to receive another CRL from the FDA, but specifics on CMC issues remain unclear. Due to the lack of clarity, it’s advisable to avoid trading HLB.
HLB IR stated they’ll apply for KOSPI transfer listing after FDA approval when asked by local media, suggesting it’s currently not under consideration.
We should instead consider short-term trading opportunities in HLB Life Science. Anticipate a surge in forfeited shares from Day 1, reminiscent of last year’s CJ CGV rights offer event.

Merger Arb Mondays (27 May) – L’Occitane, SciClone, GA Pack, KFC Japan, CF Logistics, Best World

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: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK), China Traditional Chinese Medicine (570 HK).
Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Mimasu Semiconductor Industry (8155 JP), Boral Ltd (BLD AU).

Offshore China ETFs Rebalance Preview: Three Changes in June; Cutoff Today

Based on the close of 24 May, there could be three changes for the iShares A50 China (2823 HK)/ CSOP China A50 (HKD) (2822 HK) in June.
COSCO SHIPPING (601919 CH), CRRC (601766 CH) and China National NuclearPower (601985 CH) could replace LONGi GreenEnergy (601012 CH), CSC Financial (601066 CH) and China Tourism Group DutyFree (601888 CH).
There are a couple of stocks that are close adds and could become adds if they outperform higher ranked stocks in trading today.

KOSPI200 Index Rebalance: Index Committee Knows Best; Cosmo AM&T the Winner

There will be 6 additions and 6 deletions for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance that will be implemented on 13 June.
The index committee has used a boatload of discretion in the inclusion of CosmoAM&T (005070 KS) and the deletion of some of the stocks.
The adds and deletes from the Information Technology sector will also have passive flow from the sector ETF and will increase the impact of the changes.

FXI Rebalance Preview: Cutoff Today; Two Changes Likely in June

With a day to go in the review period, there could be 2 changes for the iShares China Large-Cap (FXI) (FXI US) in June.
There should be more than 1x ADV to buy on one of the adds while there will be nearly 5x ADV to sell on one of the deletes.
There will be positioning in all the potential changes but there appears to be higher interest in one of the potential adds and one of the potential deletes.

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May 26

Daily Brief Event-Driven: Best World (BEST SP): Best and Final S$2.56 Offer and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Best World (BEST SP): Best and Final S$2.56 Offer
(Mostly) Asia-Pac M&A: KFC Holdings Japan, Shanghai Henlius, Alumina, BHP/ Anglo American, SciClone
Last Week in Event SPACE: Mitsui Matsushima, L’Occitane, Prosus/Tencent, EOFlow

Best World (BEST SP): Best and Final S$2.56 Offer

Best World International (BEST SP) has disclosed a revised exit offer which has been declared final. The S$2.56 offer is a modest 2.4% premium to the previous S$2.50 offer.
The key conditions are approval for the selective capital reduction (at least 75% of eligible shareholders) and delisting resolution (a majority holding not less than 75% in value).
The revised offer remains underwhelming. However, the headcount test risk is lowering as retail seems resigned to accepting it. At the last close, the gross spread was 2.4%.

(Mostly) Asia-Pac M&A: KFC Holdings Japan, Shanghai Henlius, Alumina, BHP/ Anglo American, SciClone

I tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma this week: Carlyle’s tiult for KFC Holdings Japan (9873 JP). Shanghai Henlius Biotech (2696 HK) suspended pursuant to the Takeovers Code.
Key updates took place on: Alumina Ltd (AWC AU), L’Occitane (973 HK), BHP Group Ltd (BHP AU)/ Anglo American (AAL LN), and SciClone Pharmaceuticals (6600 HK).

Last Week in Event SPACE: Mitsui Matsushima, L’Occitane, Prosus/Tencent, EOFlow

Murakami-San now owns far more in Mitsui Matsushima (1518 JP) than he can easily get out of other than by corporate action. Murakami-san is not a dumb guy. He knows this.
The unique investigative shareholder register confirms what has been long rumoured about a certain shareholder activist in L’Occitane (973 HK). It is also informative for what isn’t present.
Prosus (PRX NA)‘s discount to NAV and implied stub widened after Fabricio Bloisi’s CEO appointment the previous week. But the sell-down of Tencent (700 HK) to buy-back Prosus will continue.

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May 25

Daily Brief Event-Driven: SciClone Pharma (6600 HK): Scheme Vote on 19 June and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

SciClone Pharma (6600 HK): Scheme Vote on 19 June
KOSPI200 June ’24 Rebalance: Index Changes Released, 6 Additions & 6 Deletions
Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT
EQD | Hang Seng Down: How Low Can the Pullback Go?
Iberdrola/Avangrid: Spread

SciClone Pharma (6600 HK): Scheme Vote on 19 June

Sciclone Pharmaceuticals (6600 HK)‘s scheme document is out, and the court meeting is scheduled for 19 June. The IFA considers the HK$18.80 per share offer fair and reasonable.
The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake.
This is a done deal. At the last close and for the 12 July payment, the gross and annualised spread is 2.2% and 17.3%, respectively.

KOSPI200 June ’24 Rebalance: Index Changes Released, 6 Additions & 6 Deletions

By Charlotte van Tiddens, CFA

The KRX have announced the index changes for the KOSPI200 June review.
The index will be rebalanced in the closing auction on Thursday the 13th of June.
There will be 6 additions to the index and 6 deletions.

Unexpected Inclusion of Cosmo AM&T in KOSPI 200 Sparks Notable One-Day Flow Via KOSPI 200 IT

Unexpectedly, KRX included Cosmo AM&T (005070 KS) despite not meeting the market cap cutoff and excluded DB Hitek (000990 KS) and Lotte Energy Materials (020150 KS).
Cosmo AM&T’s unexpected inclusion triggers a significant one-day passive flow event through the KOSPI 200 IT, the sector index with the largest AUM.
Sector index rebalancing, a single-day event managed by one ETF operator, more significantly correlates flow direction with price impact. We should consider a long-short setup for these on June 13th.

EQD | Hang Seng Down: How Low Can the Pullback Go?

By Nico Rosti

The Hang Seng Index has been rallying for 3 weeks but then last week the rise was halted and the index gave up a good chunk of the gains.
It seems the index has become quite volatile but this week it could go up again, or otherwise next week, the reversal is imminent given its oversold condition.
It’s hard to predict if the rally can continue after the bounce, the index seems a bit long-term overbought, albeit short-term oversold. A contradiction, but that is the situation now.

Iberdrola/Avangrid: Spread

Post-March announcement, investors bought shares of Avangrid (AGR US) in the hope of an offer sweetening, which was flagged here, as Iberdrola got $6 billion from its Mexico exit.
The improved $35.75/shareoffer was made in response to potential resistance from prospective minority shareholders, as the deal needs the approval of a majority of these non-Iberdrola stakeholders.
Spread is 3.2%/5.55% (gross/annualised) assuming $1.4667 in dividend payments (three dividends of $0.44 and a prorated dividend of $0.1467) and settlement on 30 December. Long.

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May 24

Daily Brief Event-Driven: EOFlow (294090 KS): Suitably Pumped and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

EOFlow (294090 KS): Suitably Pumped
FSS Head Lee Made an Urgent TV Appearance Today to Discuss the Resumption of Short Selling
Henlius Biotech (2696 HK): Fosun Offer?
Henlius (2696 HK): Privatisation by Fosun Pharma?
Tata Technologies IPO Lockup Expiry – US$1.5bn Lockup Release, Some Funds Are Sitting on 40x Gains
Anglo American Rejects BHP’s Increased and Final Offer
SciClone Pharmaceuticals (6600 HK): 19th June Shareholder Vote

EOFlow (294090 KS): Suitably Pumped

For a company that strives to improve people’s lives, investors in EOFlow (294090 KS) shares have mostly faced a world of pain over the past year.
After Insulet Corp (PODD US) filed a lawsuit on the 8th August 2023, accusing EOFlow of misappropriating trade secrets, patent infringement, and trademark dilution, shares declined ~88% by year-end.
Earlier this month, the courts quashed Insulet’s preliminary injunction. EOFlow is up 200%. Insulet is up 3% (?). And Medtronic (MDT US), EOFlow’s prior suitor, is no doubt weighing options.

FSS Head Lee Made an Urgent TV Appearance Today to Discuss the Resumption of Short Selling

Lee urgently appeard on TV today and said, “In June, we will explain whether and when short selling will be resumed, and what criteria we might use for the resumption.”
He noted considering flexible partial short selling resumption even if only some conditions are met, contrasting the Presidential Office’s stance from two days ago.
Presidential Office led short selling ban, now likely under FSC/FSS jurisdiction for resumption.

Henlius Biotech (2696 HK): Fosun Offer?

Biopharmaceutical outfit Shanghai Henlius Biotech (2696 HK) is currently suspended pursuant to the Takeovers Code.
Shanghai Fosun Pharmaceutical (Group) (2196 HK) holds ~60% in Henlius, mostly via domestic shares. Co-founders and Qatar Authority hold ~28% and 8% the H shares respectively.
IF an Offer were to unfold, it would be the third in this space in the past two months, after Offers for Sciclone (6600 HK) and Yichang HEC (1558 HK),

Henlius (2696 HK): Privatisation by Fosun Pharma?

Shanghai Henlius Biotech (2696 HK) entered a trading halt “pending the release of an announcement pursuant to the Code on Takeovers and Mergers.” The likely bidder is Fosun Pharma.
A merger by absorption would require approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection). There could also be a 90% minimum acceptance condition.
The shares are 62% below the IPO price. However, shareholders with blocking stakes would welcome an offer suggesting a 30-40% takeover premium would be sufficient.

Tata Technologies IPO Lockup Expiry – US$1.5bn Lockup Release, Some Funds Are Sitting on 40x Gains

By Sumeet Singh

Tata Technologies (TT) raised around US$370m in its India IPO in Dec 2023.
Tata Technologies is a global engineering services company offering product development and digital solutions, including turnkey solutions, to global original equipment manufacturers (OEMs) and their tier 1 suppliers.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

Anglo American Rejects BHP’s Increased and Final Offer

On 22 May, Anglo American rejected the last offer (0.8860) from BHP on execution risks, potential negative value impacts and additional approvals needed in South Africa. PUSU extended 29 May.
I update my SOTP to 2938p. Copper Fair Value, in my opinion, is £17.70 per share. This contrasts with BHP’s current offer of £21.32/share for the entirety of Anglo’s rump.
There is now a ~20.1% difference between the implied value of BHP’s offer and the share price of Anglo. The market assumes a lower likelihood of an agreed deal

SciClone Pharmaceuticals (6600 HK): 19th June Shareholder Vote

On the 28th March, Li Zhenfu (SciClone (6600 HK)‘s NED), Assicurazioni Generali (G IM), and concert parties (collectively controlling 36.61%), made an Offer at $18.80/share, a 33.9% premium to undisturbed.
The Offer price is bang in line with SciClone’s March 2021 IPO price. Terms were declared final. This is a clean deal.
The Scheme Document is now out. The Court Meeting will be held on the 19th June. Expected payment on or before the 12 July. FWIW: IFA says fair & reasonable.

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May 23

Daily Brief Event-Driven: July Short Selling Resumption in Korea: Local Market Info & Trading Considerations and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

July Short Selling Resumption in Korea: Local Market Info & Trading Considerations
Chilled & Frozen Logistics (9099) Gone Ballistic – Reminder of Structure, Price, and Incentives
Tax-Loss Selling in Australia 2024 – A Trade Basket [Updated]
HKTV (1137 HK): Co-Founders’ Ruse to Increase Their Grip Through a Share Buyback at HK$2.15
PropertyGuru (PGRU US): KKR/TPG Mulling a Buyout
Quiddity Leaderboard F100/250 Jun 24: Names Lurking Close to The Border Should Be Monitored
NIFTY50 Index Rebalance Preview: Two High Probability Changes in September; Adds Are Flying
NIFTY100 Low Volatility 30 Index Rebalance Preview: Bharti Could Replace Power Grid
TAQA & Criteria/Naturgy: Imminent Offer

July Short Selling Resumption in Korea: Local Market Info & Trading Considerations

According to market information confirmed so far, the resumption is set for July 1st, and short selling will be restricted to the constituents of KOSPI 200 and KOSDAQ 150.
The surge in trading volume likely stemmed from the return of long-short positions post-short-selling ban, leading to an overall market volume increase.
Another critical factor is the buying pressure on value-up stocks resuming in early July. We should aim at the price impacts of intersecting long-short flows and value-up stock purchases.

Chilled & Frozen Logistics (9099) Gone Ballistic – Reminder of Structure, Price, and Incentives

In late March, AZ-Com Maruwa Holdings (9090 JP) made an unsolicited (“hostile”) bid for Chilled & Frozen Logistics Holdings (9099 JP) at a near 50% premium at ¥3,000/share.
It traded through, then C&F ran a bid solicitation process, got four bids. Since the day AFTER that announcement, the stock is up 56%. We approach Alps Logistics multiples.
This deal doesn’t get the split price benefit that HTS and Alps Logistics did. And it is a fundamentally different logistics business. And target management dynamics are different.

Tax-Loss Selling in Australia 2024 – A Trade Basket [Updated]

Three weeks after instantiation of Phase 1, the ASX200 vs LiquidBasket is +1.8% if you traded the basket VWAP the next day. vs LessLiquid it is +8.5%.
Equal weight all names in the two is +3.1%. Trade VWAP over two days it is +0.7%, +7.6%, and +2.7%. So far things are OK.
Next week one would add another basket, then in the last week of June, one would cover and reverse the trade and hold on for 30-40 trading days or so.

HKTV (1137 HK): Co-Founders’ Ruse to Increase Their Grip Through a Share Buyback at HK$2.15

Hong Kong Television Network (1137 HK) has launched a share buyback to acquire a maximum of 100.0m shares (11.25% of shares) at HK$2.15, a 20.8% premium to the undisturbed price.
The offer is conditional on approval by the requisite majority of shareholders and the approval of the whitewash waiver. There is no minimum acceptance condition, and the offer price is final.
The offer is unattractive and is an inefficient use of cash to increase the co-founders’ grip on the shares. Nevertheless, the EGM vote is likely to get up.

PropertyGuru (PGRU US): KKR/TPG Mulling a Buyout

Bloomberg reports that KKR and TPG are exploring options, including a buyout of PropertyGuru (PGRU US), and are gauging initial interest from other global investors.
The favoured privatisation option for US ADRs with the Cayman Islands incorporation is a statutory merger requiring a two-thirds voting approval threshold.
The concentrated shareholder register would suggest that TPG/KKR would aim for irrevocable from the other three substantial shareholders, facilitating a modest takeover premium.

Quiddity Leaderboard F100/250 Jun 24: Names Lurking Close to The Border Should Be Monitored

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the June 2024 index rebal event.
Based on the current numbers, we see two F100 expected ADDs/DELs and three other F250 expected ADDs/DELs. The final changes will be decided based 4th June 2024 closing prices.
There are several names just outside the border requiring small price changes to trigger more index changes. An intra-review change is also possible.

NIFTY50 Index Rebalance Preview: Two High Probability Changes in September; Adds Are Flying

Trent Ltd (TRENT IN) and Bharat Electronics (BHE IN) should replace LTIMindtree (LTIM IN) and Divi’s Laboratories (DIVI IN) in the NIFTY Index (NIFTY INDEX) in September.
Jio Financial Services (JIOFIN IN) and Zomato (ZOMATO IN) meet the free float market cap requirements but are not part of the F&O segment.
Passive NIFTY Index (NIFTY INDEX) trackers will need to trade at least 3.8 days of ADV and 9 days of delivery volume on the index changes.

NIFTY100 Low Volatility 30 Index Rebalance Preview: Bharti Could Replace Power Grid

With a week left in the review period, Bharti Airtel (BHARTI IN) could replace Power Grid Corporation Of India (PWGR IN) in the Nifty100 Low Volatility 30 Index in June.
Constituent changes, volatility changes and capping changes will result in one-way turnover of 6.4% resulting in a one-way trade of INR 2.3bn.
The flows on the stocks are not very large but there will be same side and offsetting flows from other index trackers at the same time.

TAQA & Criteria/Naturgy: Imminent Offer

Press reports that CriteriaCaixa and TAQA will launch their takeover bid for Naturgy at €27/share imminently, with conversations between CriteriaCaixa and TAQA on the distribution of control practically finished.
The offer will target approximately 54% of the share capital of Naturgy. TAQA must go through an exhaustive permit request process due to the highly regulated businesses of Naturgy.
The shares look fairly priced vs. comparables. At the closing share price of 22 May of €24.92/share, I would be long Naturgy (gross spread to hypothetical offer is 7.7%).

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May 22

Daily Brief Event-Driven: A Plausible Explanation for Korea NPS’s Unusually Large Outflow on Local Stocks in May and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

A Plausible Explanation for Korea NPS’s Unusually Large Outflow on Local Stocks in May
JAPAN ACTIVISM: Murakami Now 29% of Mitsui Matsushima. Activism? Or Effort to Make Murakami Listco
StubWorld: Bloisi’s Appointment Stalls The Prosus Accretion Trade
KOSPI Size Indices: Potential Migrations in September Are Moving
HKTV (1137 HK): $2.15/Share Buy-Back
Quiddity Leaderboard DAX/MDAX Jun 24: Hellofresh MDAX Deletion Hinges on Encavis Tender Offer Result

A Plausible Explanation for Korea NPS’s Unusually Large Outflow on Local Stocks in May

NPS’s May net selling of ₩700B likely stems from retrieving outsourced management funds to allocate to the newly selected three value-up outsider managers.
These value-up managers will start investing in Q3. NPS’s May net selling matches their allocations. We should design a setup targeting the likely inflow into value-up targets starting early July.
In particular, we should watch non-financial value-up stocks like Kia Corp and Hyundai Motor, which had more significant May price impacts likely due to NPS outflow.

JAPAN ACTIVISM: Murakami Now 29% of Mitsui Matsushima. Activism? Or Effort to Make Murakami Listco

Noted Japanese activist MURAKAMI Yoshiaki and his entities and relations went from 4.98% to 19.88% of Mitsui Matsushima (1518 JP) at an average ¥3,500/share from 2 May through 10 May.
Then they bought an additional 5.44% on 13 May, just before earnings, in the midst of a huge run-up, paying 40% more for that 5% than the first 5%.
I thought that might be the end, but in two days, they have bought an additional 9+%. There is something else going on. It is worthy of your attention.

StubWorld: Bloisi’s Appointment Stalls The Prosus Accretion Trade

Prosus (PRX NA)‘s discount to NAV and implied stub widened after Fabricio Bloisi’s CEO appointment late last week. But the sell-down of Tencent (700 HK) to buy-back Prosus will continue.
Preceding my comments on Naspers (NPN SJ)/Prosus/Tencent 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%.

KOSPI Size Indices: Potential Migrations in September Are Moving

The review period for the September rebalance of the KOSPI Size Indices will run from 1 June to 31 August.
We see 6 migrations from MidCap to LargeCap, 1 new addition to LargeCap, 6 stocks moving from SmallCap to MidCap and 3 new additions to MidCap.
Stocks migrating upward have outperformed stocks migrating lower. But there are still stocks trading at a Price to Book of less than 1.

HKTV (1137 HK): $2.15/Share Buy-Back

Online shopping platform play Hong Kong Television Network (1137 HK) (better known as HKTV) has announced a buy-back of 11.25% of shares out, at $2.15/share, a 20.8% premium to undisturbed.
If successful, the Offer elevates co-founder Ricky Wong’s stake, together with concert parties, to 51.55% (before exercising options), up from 45.75% currently.
HKTV has been in the news lately for all the wrong reasons: claims of non-payments to suppliers; and delaying its 2026 target after a 79% decline in FY23’s net profit.

Quiddity Leaderboard DAX/MDAX Jun 24: Hellofresh MDAX Deletion Hinges on Encavis Tender Offer Result

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential ADDs/DELs for the DAX index and the MDAX index in the run up to the June 2024 index rebal event.
There could be two regular MDAX changes in June including the long-anticipated deletion of M&A candidate MorphoSys AG (MOR GR).
We do not see any changes for the DAX index based on the current numbers.

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May 21

Daily Brief Event-Driven: Carlyle To Take KFC Japan (9873) Private at ¥6 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Carlyle To Take KFC Japan (9873) Private at ¥6,500/Share – Big Win For All, a Model Transaction
L’Occitane (973 HK): Who Owns What, And When
JAPAN ACTIVISM: Murakami-Related Buyers Go from 5% to 20% of Mitsui Matsushima (1518) In 5 Days. Hmm
Block Deal Sales of 200 Billion Won Worth of Ecopro Materials by BRV Capital
KFC Holdings Japan (9873 JP): Carlyle Finger Lickin’ Tender Offer at JPY6,500
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 13% One-Way Turnover & US$2.27bn Trade
Star Entertainment (SGR AU): Hard Rock Rolls The Dice
FnGuide Top10 Index Rebalance Preview: Two Changes Possible in June
Hansol Holdings Announces a Tender Offer of 18.53% Stake in Hansol Logistics
EP Group/IDS (Royal Mail): Politically Sensitive

Carlyle To Take KFC Japan (9873) Private at ¥6,500/Share – Big Win For All, a Model Transaction

Carlyle has a deal to buy Kfc Holdings Japan (9873 JP). ¥6,500/share is a 78% premium to undisturbed as a professional holder sells in an auction to the highest bidder.
That’s a great format for achieving a great price. And we got one. This should get done easily.
Importantly, the Bidco is named Crispy KK. It is 100% owned by Juicy KK. Juicy KK itself is 100% owned by Crispy Holdings L.P. Someone had some fun.

L’Occitane (973 HK): Who Owns What, And When

A fortnight ago, I sought access to L’Occitane (973 HK)‘s lesser-known shareholder register, a byproduct of investigative disclosure reports under Chapter 571, s329 of the Securities and Futures Ordinance.
This is the same register I discussed in Giordano (709 HK): A Closer Look At The Shareholder Register Ahead Of The SGM; and one also used by proxy solicitors.
The register confirms what has been long rumoured about a certain shareholder activist. It is also informative for what isn’t present.

JAPAN ACTIVISM: Murakami-Related Buyers Go from 5% to 20% of Mitsui Matsushima (1518) In 5 Days. Hmm

Mitsui Matsushima (1518 JP) was a coal company starting over 100yrs ago. A bunch of years ago it started a solar energy business and then started M&A to diversify.
Coal closed last year and since, MMH has become an investment holdco for “basic businesses” (drinking straws, conveyor system chains, document shredders, weighing machines, crystal measuring devices, mask blanks, etc).
Murakami Group accumulated 4.98% in five weeks, then the next 14.9% in five days. Pump & Dump like Pacific Metals? Activism like JAFCO? Or something else more interesting?

Block Deal Sales of 200 Billion Won Worth of Ecopro Materials by BRV Capital

By Douglas Kim

After the market close on 20 May, it was reported that Blue Run Ventures (BRV) sold 204.1 billion won (US$150 million) worth of EcoPro Materials in a block deal sale.
The block deal sale price was 93,000 won, a 9.7% discount to the closing price on 20 May (103,000 won).
This block deal sale at a big discount is likely to raise overhang concerns about further block deal sales by BRV Capital in the coming years.

KFC Holdings Japan (9873 JP): Carlyle Finger Lickin’ Tender Offer at JPY6,500

Kfc Holdings Japan (9873 JP) has recommended a tender offer from Carlyle Group / (CG US) at JPY6,500 per share, a 20.4% premium to the last close.
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 31.54% ownership ratio.
Due to the Mitsubishi Corp (8058 JP) irrevocable, the minimum acceptance condition requires a 48.6% minority acceptance rate. The acceptance condition is achievable as the offer is a knockout bid.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 13% One-Way Turnover & US$2.27bn Trade

Using data from the close on 17 May, 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 12.6% and a one-way trade of US$1.13bn.
Shorts have increased on the potential adds and potential deletes and covering will lead to rally in some stocks while providing support in others at rebalance implementation.

Star Entertainment (SGR AU): Hard Rock Rolls The Dice

Troubled casino operator Star Entertainment (SGR AU) announced it had “received inbound interest” from several parties, including “Hard Rock Hotels & Resorts … a local partner of Hard Rock”.
Star is in the doghouse, again, as the regulator conducts (another) review amid concerns Star did not do enough to remedy the problems identified in the first review.
Facing “serious and systemic non-compliance” with anti-money laundering laws, Star faces the distinct possibility of losing is casino licence in Sydney; and potentially the one in Queensland.

FnGuide Top10 Index Rebalance Preview: Two Changes Possible in June

The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of around US$1.2bn.
We currently forecast two potential changes at the next rebalance in June – one change is high probability while one could change depending on price moves over the next week.
The trade has performed well historically with positive performance till implementation followed by reversion post implementation.

Hansol Holdings Announces a Tender Offer of 18.53% Stake in Hansol Logistics

By Douglas Kim

After the market close on 20 May, Hansol Holdings announced that it is pursuing a tender offer for an additional 18.53% stake in its affiliate Hansol Logistics.
The tender offer price is 3,000 won, which is 22% higher than the close price on 20 May. The tender offer period is from 21 May to 10 June.
We have a positive view of this tender offer. Hansol Logistics trades at EV/EBITDA of 1.8x, P/E of 3.7x, and P/B of 0.6x based on 2023 figures.

EP Group/IDS (Royal Mail): Politically Sensitive

The UK Chancellor stated that any bid for International Distributions Services (IDS LN) (Royal Mail owner) would be thoroughly evaluated for national security considerations to prevent any risks to essential infrastructure.
The Board is “minded to accept” the improved 370p takeover proposal (4.8x EV/Fwd NTM EBITDA) from Czech billionaire Daniel Kretinsky’s EP Group, should a formal bid is made.
The improved proposal seems fair. GLS is profitable, while Royal Mail aims break-even by March2025e. Concerns about potential developments post-offer pose a potential political issue. Gross spread is 13.5%.

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May 20

Daily Brief Event-Driven: FSS Head’s Aggressive Remarks for Value-Up at NY Event and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FSS Head’s Aggressive Remarks for Value-Up at NY Event, Incl. Short Selling Resumption Late June
HK Connect SOUTHBOUND Flows (To 17 May 2024); Banks, Banks, Banks, Tencent, and Big SOEs
Merger Arb Mondays (20 May) – L’Occitane, China TCM, SciClone, Malaysia Airports, I’rom, Hollysys
Hang Seng Index (HSI) Rebalance: BYD Electronics Added; Country Garden Services Deleted
HSCEI Index Rebalance: Zijin Mining In; Xinyi Solar Out; SenseTime Survives (For Now)
HSTECH Index Rebalance: Float & Capping Changes Result in 8% Turnover & US$2.5bn Round-Trip Trade
A/H Premium Tracker (To 17 May 2024): Hs Rally Huge Vs As, Again. Avg A/H Premium Lowest in 4yrs
Weekly Deals Digest (19 May) – ESR Group, L’Occitane, CPMC, Malaysia Airports, I’Rom, Modec
EQD / NSE Volatility Update / 13-May-24 to 17-May-24
Mainland Connect NORTHBOUND Flows (To 17 May 2024):

FSS Head’s Aggressive Remarks for Value-Up at NY Event, Incl. Short Selling Resumption Late June

Lee Bok-hyun hopes for short selling to resume by late June. Given his influence on the Value-up policy, it’s likely to happen.
Lee expects key tax incentives for the value-up program to be included in the July tax reform bill, showing a market-friendly stance.
Yesterday’s New York event had a very positive atmosphere with more attendees than expected, showing genuine investor interest, likely ensuring sustained interest in Korea’s Value-up program.

HK Connect SOUTHBOUND Flows (To 17 May 2024); Banks, Banks, Banks, Tencent, and Big SOEs

SOUTHBOUND was again a net buyer for HK$18.6bn on strong two-way volumes. The top three net buys of the week were SOE banks. Some may be Central Huijin.
Some of this may be driven by the dividend w/h tax cancellation on H divs and by significant H-share discounts, but high-div CNOOC was the biggest net sell.
No end to the inflows, and HK valuations are not at a place where they would hamper continued flows. Alibaba making HK a Primary will spur more inflows over time.

Merger Arb Mondays (20 May) – L’Occitane, China TCM, SciClone, Malaysia Airports, I’rom, Hollysys

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: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK).
Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Mimasu Semiconductor Industry (8155 JP), Boral Ltd (BLD AU).

Hang Seng Index (HSI) Rebalance: BYD Electronics Added; Country Garden Services Deleted

BYD Electronics (285 HK) will be added to the Hang Seng Index (HSI INDEX) after market close on 7 June while Country Garden Services (6098 HK) will be deleted.
Estimated one-way turnover is 1.9% and the estimated round-trip trade is HK$8.46bn (US$1.08bn) with over 1x ADV to trade in the add and delete.
We remain at 82 index constituents and the road to 100 index members looks to be a long and winding one.

HSCEI Index Rebalance: Zijin Mining In; Xinyi Solar Out; SenseTime Survives (For Now)

Zijin Mining Group Co Ltd H (2899 HK) will replace Xinyi Solar Holdings (968 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) after the close on 7 June.
An increase in the FAF for SenseTime Group (20 HK) results in the stock avoiding deletion at the June rebalance.
Estimated one-way turnover at the rebalance is 2.9% resulting in a round-trip trade of HK$3.8bn with over 1x ADV to trade on the add and delete.

HSTECH Index Rebalance: Float & Capping Changes Result in 8% Turnover & US$2.5bn Round-Trip Trade

As expected, there are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June. However, there are float and capping changes.
Estimated one-way turnover is 8% leading to a round-trip trade of HK$19.2bn (US$2.46bn). There is over 3x ADV to buy in Li Auto (2015 HK).
Short interest is quite elevated on a lot of stocks both in terms of days of ADV and in terms of free float.

A/H Premium Tracker (To 17 May 2024): Hs Rally Huge Vs As, Again. Avg A/H Premium Lowest in 4yrs

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s buy streak was interrupted again this past week, but they still net bought, as did NORTHBOUND. HK stocks continued their rise with liquid Hs outperforming their As by 3.8%.
There were some BIG moves the past two weeks and Average AH Premia are now the lowest in nearly four years vs near 5yr wides less than 12 weeks ago.

Weekly Deals Digest (19 May) – ESR Group, L’Occitane, CPMC, Malaysia Airports, I’Rom, Modec

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: Modec Inc (6269 JP)‘s US$535 million secondary offering.
Event-Driven developments: ESR Group (1821 HK), L’Occitane (973 HK), CPMC Holdings (906 HK), Malaysia Airports Holdings (MAHB MK), I’Rom Group (2372 JP), Great Eastern Holdings (GE SP).

EQD / NSE Volatility Update / 13-May-24 to 17-May-24

By Sankalp Singh

Curtail Short Gamma & Short Vega exposure as Vol-regime has switched to “High & Up” state.
Short-Dated IVs traded markedly lower, driven by recovering equities & the 20-May market holiday
Nifty50 vol curve is exhibiting unusual kinked shape. Monthly IVs are commanding a large vol markup relative to rest of the curve.

Mainland Connect NORTHBOUND Flows (To 17 May 2024):

The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
Last week saw NORTHBOUND net BUY RMB 8.8bn of A-shares on lower gross volumes. NORTHBOUND bought Luxshare, CMB, and CATL. AH Premia now lowest in 4yrs.
Foreign attitudes to HK stocks different than to mainland stocks. This may continue.

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May 19

Daily Brief Event-Driven: (Mostly) Asia-Pac M&A: ESR Group and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market
HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way
Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid
HSI June 2024 Rebal – BYD Electronics (285) ADDed, Cogard Svcs (6098) DELETEd, and Capping Flows
HSCEI June 2024 Rebal – Zijin Mining (2899) ADDed, Xinyi Solar (968) DELETEd
Last Week in Event SPACE: Japan Post, Great Eastern, Malaysia Airports, L’Occitane

(Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market

Tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals was discussed on Smartkarma this week: Malaysia Airports (MAHB MK), I’Rom Group (2372 JP) and S Line (9078 JP). ESR Group (1821 HK) also in the crosshairs.
Key updates took place on: Huafa Property Services Group (982 HK), Kansai Super Market (9919 JP) , Great Eastern Holdings (GE SP) and L’Occitane (973 HK).

HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way

The Hang Seng Tech Index is more widely-followed than many think, and it is reasonably concentrated, so outperformance and underperformance by big names means capping and re-capping.
This time, those flows are worth about 8% of the index in terms of one-way flows. Meituan, Xiaomi, JD.com, Tencent and Kuaishou Tech DOWN. Li Auto back up.
Those who have pre-positioned on the big buy have recently gotten hurt. There are some FAF changes which are less predictable and may be interesting.

Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid

A “Privatisation via a Merger by Absorption” is nothing new in Hong Kong. But the Offer consideration for Yichang HEC (1558 HK)‘s minorities is in unlisted scrip – that’s new.
The Offeror holds 51.41% in Yichang HEC. Founder Guo Meilan and her son Zhang Yushuai control 62.12% of the Offeror. Yichang HEC shareholders are being offered 0.263614 “Offeror H shares”.
These consideration shares are unlisted. An independent valuer backs out an implied scrip value of HK$18.12-HK$20.60/share. This is a super complicated, overwrought deal. With numerous unknowns. I’d vote this down.

HSI June 2024 Rebal – BYD Electronics (285) ADDed, Cogard Svcs (6098) DELETEd, and Capping Flows

The Hang Seng Index benchmark has been expected to see an increase in names and flows to Healthcare. We have only one ADD (IT/tech) and one DELETE.
But the headlined DELETE candidate in the most recent Quiddity Leaderboard was chosen to be deleted. And the ADD one of our top two.
Flows are somewhat restrained at capping flows, small name change flows, and then a few FFW/FAF changes to be about 1.9% one-way flows in total.

HSCEI June 2024 Rebal – Zijin Mining (2899) ADDed, Xinyi Solar (968) DELETEd

The HSCEI is well-known and well-followed but sees less passive tracking than you might expect. Quiddity teammember Janaghan had expected up to two ADDs and two DELETEs.
We got one ADD and one DELETE instead as SenseTime Group (20 HK) was “saved” from deletion by a FFW/FAF increase.
Relatively smaller flows here at 3% one-way with the big flows on the name changes.

Last Week in Event SPACE: Japan Post, Great Eastern, Malaysia Airports, L’Occitane