Event-Driven

On no news, China Traditional Chinese Medicine (570 HK) shares declined 12% today. We spoke to several readers to gauge the likely reasons for the fall.
The speculation is that the fall could be due to forced liquidation, Sinopharm’s new Chairman pulling the offer, the consortium unravelling, SAMR issues and Ping An blocking the deal.
There is clearly news behind today’s fall, but none of the above rumours seem credible. The risk/reward is attractive as the upside (25% spread) outweighs the downside (18% to undisturbed).

Malaysia Airports (MAHB MK)’s Offer: Buckle Up!

Back on the 15th May, Khazanah Nasional, the EPF, the Abu Dhabi Investment Authority, and GIP, offered to buy shares not already owned in Malaysia Airports (MAHB MK) at RM11.00/share.
The premium to undisturbed appears reasonable. The price is a life-time high. The 90% acceptance hurdle was not insurmountable, and the consortium had the flexibility to lower the %.
But the Offer is now facing unexpected political pushback, amid protests against the Israel-linked bid.

Tax-Loss Selling In Australia 2024 – Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)

The original trade was discussed at end-April in Tax-Loss Selling in Australia 2024 – Historical Analysis and A Trade Basket then updated here and here.
That has done OK. The LIQUID basket has delta neutral performance of +8.4% over 2mos; LIQUID+LESSLIQUID +7.2%; If one did a mixed basket (3x L+LL + 1x Illiquids) it’s +8.6%.
Now it is time to reverse the trade, buying the basket you were short, and running it against index for the next 6-8 weeks.

Sawai Group (4887) – BIGLY Buyback To “Drastically” Change Capital Structure

Two years ago, generic pharmaceuticals co Sawai Group Holdings (4887 JP) traded at 10x PER, 6% ROE, and far below book. 10mos ago the price got back to 1x PBR.
By then, their US sub had partly been put into “Current Assets AFS” as it was for sale. By Dec23, it was completely there. In Jan, a “business review” announcement.
The US business sale led to a loss, but growth this year, and a new MTMP in early June. Monday, we got a HUGE buyback announcement. Today, an 8+% pop.

Quiddity Leaderboard MV J-Gold Miners Sep 24: Mergers Mean Possible Up-And-Out DELETEs

The MV J-Gold Miners index represents the performance small-cap gold and silver mining companies listed around the world.
This index is reviewed semi-annually in March and September. During these reviews, names can be added or deleted from the index.
In this insight, we take a look at the potential ADDs and DELs and our flow expectations for the index rebal event in September 2024.

Redox IPO Lock-Up Expiry – Limited Liquidity Might Provide a Good Excuse to Sell

By Sumeet Singh

Redox (RDX AU), a chemical and ingredients distributor, raised US$270m in its IPO in Jun 2023. Some of its founding family shareholders will be released from their IPO lockup soon.
Redox primarily serves the ANZ market, and it has a presence in Malaysia and the US. It is one of the largest chemicals and ingredients distributors in Australia.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

Midea Real Estate (3990 HK): Ex-In-Specie, The Rump Is Rich

In an unusual move, property developer Midea Real Estate Holding (3990 HK) announced the In-Specie distribution of its core ops, either in unlisted scrip, or HK$5.90/share in cash.
As this is considered a “very substantial disposal“, a Scheme-like vote from independent shareholders is required at an EGM. And controlling shareholders – with 81.13% – are required to abstain.
The EGM will be held on the 2 September, with the cash payment expected on (or before) the 18 October. The question is: what is the Rump worth?

Merger Between Classys and Ilooda Likely to Reduce Local Competition

On 25 June, Classys (214150 KS) announced a merger with Ilooda (164060 KS). The merger ratio is set at 0.1405237 to 1 for Classys and Ilooda.
This merger aims to combine Classys’ expertise in high-intensity focused ultrasound (HIFU) with Ilooda’s in micro-needle radio frequency (RF) and laser technologies.
We have a positive view of this merger between Classys and Ilooda. This merger is likely to reduce the overall competition in the aesthetics devices market in Korea.

Adnoc/Covestro: Fresh Takeover Negotiations and Valuation Scenarios

By Jesus Rodriguez Aguilar

On 24 June, Covestro AG (1COV GR) confirmed it has decided to enter into concrete negotiations with ADNOC regarding a potential transaction at an indicative €62/share (9.6x EV/fwd NTM EBITDA).
Covestro is trading at 8x (vs. 6.5x median of peers). To justify €70/share (sought last December), Covestro should overdeliver, but analysts and market are somehow skeptical about that.
Considering a takeout price of €62, gross spread is 12.1% and the shares are pricing a 32.5% probability of deal completion.

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Jun 26

Daily Brief Event-Driven: Midea Real Estate (3990 HK): An In-Specie Distribution to Unlock Value and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Midea Real Estate (3990 HK): An In-Specie Distribution to Unlock Value
NPN X PRX FY24 Results: Initial Market Reaction Positive & JSE June Auction Analytics
Best World (BEST SP): The 19th July Vote Will Be Close
Shanghai Henlius Biotech Privatization (2696.HK) – The Offer Price Is Disappointing
Quiddity Leaderboard STAR 50 Sep 24: Two Changes; US$681mn One-Way; New Trade Ideas
NCSoft: Corporate Split-Off of Two Divisions
NIFTY Bank Index Rebalance Preview: Canara Bank Should Replace Bandhan Bank

Midea Real Estate (3990 HK): An In-Specie Distribution to Unlock Value

On 25 June, Midea Real Estate Holding (3990 HK) disclosed an in-specie distribution of its PD&S business through a scrip or cash (HK$5.90 per share, 57.33% premium to undisturbed price).
The key condition will be approval of the distribution by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection).
Midea RE will remain listed with an asset-light retained business, which is estimated to be worth HK$1.93. The Group’s estimated value is HK$7.83, a 17.6% upside to the last close.

NPN X PRX FY24 Results: Initial Market Reaction Positive & JSE June Auction Analytics

By Charlotte van Tiddens, CFA

Naspers and Prosus released results for FY24 yesterday morning. The initial market reaction was positive, both discounts closed narrower for the day.
Since the appointment of Fabricio Bloisi was announced in May, both discounts have widened.
JSE indices were rebalanced in the closing auction on Friday. Turnover for the day on the JSE was R58bn, R38bn traded in the closing auction (66%).

Best World (BEST SP): The 19th July Vote Will Be Close

Two years of suspension, an “okay” Offer (following the bump), family members selling prior to and after the Offer – Best World International (BEST SP) is anything but dull.
The Circular is now out for the $2.56/share Exit Offer from Best World’s founders Dora Hoan and Doreen Tan. The Offer Price will not be increased.
Independent shareholders go to the vote on the 19th July. The IFA says fair & reasonable. Payment is possible late-July. But the vote is by no means a sure thing.

Shanghai Henlius Biotech Privatization (2696.HK) – The Offer Price Is Disappointing

By Xinyao (Criss) Wang

The Cancellation Price of HK$24.60 per share is about 50% lower than the IPO price of HK$49.6 per share in 2019. So, those long-term investors would suffer big losses.
Henlius’ share price has outperformed the index. If it remains listed, it’s able to continue to grow and provide long-term returns for shareholders. Reasonable Cancellation Price should be above HK$30/share.
As usual, Fosun doesn’t consider the interests of long-term investors and shareholders. There would be some investors/shareholders vote against the privatization, but the returns for arbitrageurs is not bad.

Quiddity Leaderboard STAR 50 Sep 24: Two Changes; US$681mn One-Way; New Trade Ideas

STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the September 2024 index rebal event.
We currently see two ADDs and two DELs for the STAR 50 index resulting in one-way flows of US$681mn.

NCSoft: Corporate Split-Off of Two Divisions

On 24 June, NCSoft announced a corporate split-off of two divisions called named NC QA Company and NC IDS Company.
NCSoft plans to hold a shareholders meeting where to vote on the split off decision on 14 August. Effective date of the company split is scheduled for 1 October 2024.
The consensus estimates sales of 2.0 trillion won (up 19.2% YoY) and operating profit of 272 billion won (up 155.2% YoY) in 2025.

NIFTY Bank Index Rebalance Preview: Canara Bank Should Replace Bandhan Bank

Despite the recent rally in Bandhan Bank Ltd (BANDHAN IN), the stock should be deleted from the NSE Nifty Bank Index (NSEBANK INDEX) in September.
Canara Bank (CBK IN) should be added to the NSE Nifty Bank Index (NSEBANK INDEX) and passive trackers will need to buy 1x ADV and over 2x delivery volume.
Bandhan Bank Ltd (BANDHAN IN) is safe for now but could be deleted from a large global index in the next few months on further underperformance.

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Jun 25

Daily Brief Event-Driven: T-Gaia (3738 JP) – Possible Premium Takeout Story and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

T-Gaia (3738 JP) – Possible Premium Takeout Story
Unlocking Value: SEBI’s New Special Call Auction Mechanism Explained
Chronic Insider Trading in the Korean Tender Offer Market & Time Positions for Short-Term Targets
Henlius (2696 HK): Fosun Pharma’s HK$24.60 Offer at Around Half the IPO Price
Best World (BEST SP): EGM Vote on 19 July
Quiddity Leaderboard SSE50/180 Dec 24: Some Expected DELs Could Underperform Peers
Quiddity Leaderboard ChiNext & ChiNext 50 Dec 24: Expected ADDs Could Outperform Expected DELs
Henlius Biotech (2696 HK): Fosun Pharma’s “Fair” Offer
Carlsberg/Britvic: Awaiting a Third Proposal

T-Gaia (3738 JP) – Possible Premium Takeout Story

I kind of hate this, but I also can’t ignore it. Apparently, an expensive media service Reporting on Deals or about the Market for Mergers, had an article today.
Bloomberg carried a small blurb saying there was “speculation on a tender offer…. according to traders”. The stock is untraded, limit up.
The most informative comment comes from Japanese stock market portal ‘kabutan‘ which suggests “overseas media” thinks Sumitomo Corp will sell its shares. I look at the possibilities below.

Unlocking Value: SEBI’s New Special Call Auction Mechanism Explained

By Nimish Maheshwari

SEBI introduced the SPECIAL CALL AUCTION framework for Listed Holding Companies to unlock the value.
The first special call auction is set to take place in October.
Some companies are trading at a discount of more than 50% or even 80%, post this framework, shares will be traded at fair value.

Chronic Insider Trading in the Korean Tender Offer Market & Time Positions for Short-Term Targets

There is a high likelihood of information leaking through the lead securities firm when the tender offer prospectus is provided to branches about three days before the disclosure.
With the FSS’s stricter stance, tender offer candidates may act swiftly before new regulations, prompting attention to potential surges in tender offers.
Our approach is clear: identify short-term tender offer candidates, monitor trading volumes for spikes, and use the three-day pre-disclosure surge to time our positions effectively.

Henlius (2696 HK): Fosun Pharma’s HK$24.60 Offer at Around Half the IPO Price

Shanghai Henlius Biotech (2696 HK) disclosed a pre-conditional privatisation offer by Shanghai Fosun Pharmaceutical (Group) (2196 HK) at HK$24.60, a 36.7% premium to the undisturbed price. The offer price is final.
The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There is no minimum acceptance condition.
Long term investors will be unimpressed as the offer is half the HK$49.60 IPO price. However, shareholders with blocking stakes should be supportive partly because of the share alternative option.

Best World (BEST SP): EGM Vote on 19 July

The Best World International (BEST SP) IFA considers the S$2.56 exit offer fair and reasonable as it is towards the upper end of its S$1.36-2.69 per share valuation range.
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 lack of activists, IFA supporting recommendations, and no competing offer suggest a done deal. At the last close, the gross spread was 2.8%.

Quiddity Leaderboard SSE50/180 Dec 24: Some Expected DELs Could Underperform Peers

SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
In this insight, we take a look at the names leading the race to become ADDs and DELs during the December 2024 index rebal event.
We currently estimate one-way flows to be US$1.4bn and US$235mn for the SSE 50 and 180, respectively.

Quiddity Leaderboard ChiNext & ChiNext 50 Dec 24: Expected ADDs Could Outperform Expected DELs

The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
We see seven change for the ChiNext index and five changes for the ChiNext 50 index.

Henlius Biotech (2696 HK): Fosun Pharma’s “Fair” Offer

Shanghai Fosun Pharmaceutical (2196 HK) has made a HK$24.60/share Offer (best & final), in cash, for H-shares not held in Shanghai Henlius Biotech (2696 HK). A scrip alternative may be afforded.
As Henlius is PRC-incorporated, this Offer is structured as a Merger by Absorption, involving a Scheme-like vote for independent H-shareholders. There is no tendering condition.
Pre-Conditions include NDRC, MoC, and SAFE. The Long Stop date to secure these conditions is 30th April 2025. That’s way too conservative. This should be wrapped up around mid 4Q24.

Carlsberg/Britvic: Awaiting a Third Proposal

By Jesus Rodriguez Aguilar

On June 24, Carlsberg announced that Pepsico had agreed to waive a change of control clause in its bottling deals with Britvic. The current proposal is 1250p (+9.5p interim).
The offer represents an undemanding 12x EV/fwd NTM EBITDA. My standalone base case fair-value estimate is 1,056p/share. An improved offer could come >1,300p, although 1,420p (13.3x wouldn’t be unreasonable).
Gross spread to the revised offer is 6.2% (6.9% including interim). Shares are pricing a 72% probability of deal success. I believe Carlsberg will come with an improved offer. Long.

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Jun 24

Daily Brief Event-Driven: MMG (1208 HK) Rights Trading Dynamics and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MMG (1208 HK) Rights Trading Dynamics
Swire Properties (1972 HK): Potential Passive Selling & Trade Ideas
Merger Arb Mondays (24 Jun) – Malaysia Airports, GA Pack, Infocom, Mimasu, Tatsuta, Capitol, MMA
DMA | JSE June ’24 Rebalance: Estimated Flows (Buys: Banks, Sells: NPN, PRX)
EQD / NSE Vol Update / IVs Stabilize After Falling Dramatically over past 2 Weeks

MMG (1208 HK) Rights Trading Dynamics

The MMG (1208 HK) rights, designed to raise US$1.15bn to pay off loans to the parent for the purchase of a large copper asset, start trading 24 June 2024.
There is some risk up for grabs, and it is likely to trade according to standard Hong Kong Rights Trading Dynamics. Shorts are down somewhat, but covering should be expected.
There is path-dependency to the Rights Trading, and while they trade for 7 trading days through Tuesday next, one should expect the volume to trade this week.

Swire Properties (1972 HK): Potential Passive Selling & Trade Ideas

The steady selloff in Swire Properties (1972 HK) could result in the stock being deleted from global passive portfolios in the next couple of months.
Swire Properties (1972 HK) trades marginally cheaper than its similar sized peers on forward PE and price to book value.
Swire Pacific (A) (19 HK) owns 82% of Swire Properties (1972 HK) and a big drop in the stock price could see them step in.

Merger Arb Mondays (24 Jun) – Malaysia Airports, GA Pack, Infocom, Mimasu, Tatsuta, Capitol, MMA

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), Asia Cement China (743 HK), A8 New Media (800 HK), Malaysia Airports Holdings (MAHB MK).
Lowest spreads: Fancl Corp (4921 JP), Tatsuta Electric Wire & Cable (5809 JP), Great Eastern Holdings (GE SP), Nagatanien Holdings (2899 JP), Chilled & Frozen Logistics Holdings (9099 JP).

DMA | JSE June ’24 Rebalance: Estimated Flows (Buys: Banks, Sells: NPN, PRX)

By Charlotte van Tiddens, CFA

In this note we show flow estimates based on passive AUM tracking and hedging the Capped Top 40 SWIX (DCAP), Top 40 SWIX (DTOP & TOPI) and Capped ALSI SWIX.
Relative to the March rebalance, we expect turnover in the closing auction to be much lower.
Turnover for the day was R59bn, R44bn traded in the closing auction (harmonisation implemented).

EQD / NSE Vol Update / IVs Stabilize After Falling Dramatically over past 2 Weeks

By Sankalp Singh

Implied Volatilities (IVs) stabilized over the week after falling dramatically since the 04-June-2024 India General Election results.
No tactical changes required while IVs are stable & “High & Down” Vol-state is maintained.
Vol Curve continues to be in Contango. Lack of significant event risk should keep term structure locked in its current orientation.

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Jun 23

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

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia-Pac M&A: Infocom, Capitol Health, MMA Offshore, Mimasu, Tatsuta Elect., Great Eastern
Last Week in Event SPACE: Exedy Corp, EOFlow, L’Occitane, Jardine Cycle & Carriage
Weekly Deals Digest (23 Jun) – L’Occitane, Exedy, Infocom, Mimasu, Tatsuta, MMA Offshore, Webtoon
Mainland Connect NORTHBOUND Flows (To 21 June 2024): BIG Consumer Name Selling Again

(Mostly) Asia-Pac M&A: Infocom, Capitol Health, MMA Offshore, Mimasu, Tatsuta Elect., Great Eastern

I tally 48 – 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 discussed this week: the Capitol Health (CAJ AU) / Integral Diagnostics (IDX AU) merger; and Infocom Corp (4348 JP)‘s Tender Offer.
Key updates took place on: MMA Offshore (MRM AU), L’Occitane (973 HK), Mimasu Semiconductor Industry (8155 JP), Tatsuta Electric Wire & Cable (5809 JP), and Great Eastern Holdings (GE SP).

Last Week in Event SPACE: Exedy Corp, EOFlow, L’Occitane, Jardine Cycle & Carriage

Murakami Group now owns 10.13% of Exedy Corp (7278 JP). Interestingly, NOMURA Aya sold 6.79% off-market to Minami Aoyama Fudosan. Has the Murakami Group made a “mistake” in its planning?
A big win for EOFlow (294090 KS) as the U.S. Federal Appeals Court issued its decision on overturning Insulet Corp (PODD US)‘s provisional injunction
L’Occitane (973 HK) finally announces the share alternative. And Pleasant Lake (3.25% of shares out) will accept the share offer (either cash or scrip). This is a done deal

Weekly Deals Digest (23 Jun) – L’Occitane, Exedy, Infocom, Mimasu, Tatsuta, MMA Offshore, Webtoon

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: MMG (1208 HK) US$1.2 billion rights issue. Shift Up (462870 KS) and Webtoon Entertainment (WBTN US) IPOs.
Event-Driven developments: L’Occitane (973 HK), Exedy Corp (7278 JP), Infocom Corp (4348 JP), Mimasu Semiconductor Industry (8155 JP), Tatsuta Electric Wire & Cable (5809 JP), Mma Offshore (MRM AU).

Mainland Connect NORTHBOUND Flows (To 21 June 2024): BIG Consumer Name Selling Again

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 SELL RMB 16.1bn of A-shares. NORTHBOUND bought tech and sold everything else, especially consumer names. Kweichow Moutai, Midea, appliances and renewables.
Ongoing questions as to whether the NORTHBOUND volumes to the buy side are all foreigners. Some suspect there is national team buying mixed in, as was expected from earlier announcements.

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Jun 22

Daily Brief Event-Driven: CMCDI (133 HK): Kan Re-Elected. But Only Just and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

CMCDI (133 HK): Kan Re-Elected. But Only Just
CrowdStrike Joins S&P 500
EQD | The KOSPI 200 Is Ready to Pullback (Again)

CMCDI (133 HK): Kan Re-Elected. But Only Just

At the AGM yesterday, China Merchants China Direct Investments (133 HK)‘s director Elizabeth Kan was re-appointed, but by a wafer-thin margin: 29.97% of shares out FOR, and 29.44% AGAINST.
Stripping out Victor Chu’s stake (~2%?) and China Merchant’s (27.6%), or collectively ~29.6% of shares out, it’s fair to say the remainder of the shareholder register wants her out.
CMCDI is currently trading at a 55% discount to the latest NAV (as at 31st May 2024) of HK$30.42/share. Argyle continues to add to its position.

CrowdStrike Joins S&P 500

By Jesus Rodriguez Aguilar

On June 24, Crowdstrike Holdings (CRWD US) will officially join the S&P 500, which follows strong financial results and guidance. Investors anticipated this inclusion, driven by improved profitability and operational efficiency.
The volume traded has so far been on average 2x the 3-month daily average prior to the news. The enduring effect will be on liquidity (hedging basket for index exposure).
CrowdStrike’s inclusion in the S&P 500 index increases the representation of pure cybersecurity stocks. Median IBES consensus PT is $400 (7.5% upside).

EQD | The KOSPI 200 Is Ready to Pullback (Again)

By Nico Rosti

After 3 weeks up in a row the KOSPI 200 is ripe for a pullback.
The reversal is probably going to begin this coming week.
If the index goes higher, look at 391 resistance targets to initiate SHORT trades or to cover your LONGs.

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Jun 21

Daily Brief Event-Driven: TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already
Shin-Etsu Chem TOB for Rest of Mimasu Semi (8155) – Far Too Cheap, But No Squeaky Wheel No Grease
Tatsuta Electric (5809 JP): Eneos Refuses to Bump, Board Capitulates
ENEOS Launches Tatsuta Elec (5809) “Minority” Takeout at Same Price as 18mos Ago
Digging into Chosun Ilbo’s Report on SK Group’s SK Innovation & SK E&S Merger Plans
MMA Offshore (MRM AU): Disappointing Final Offer Poses a Vote Risk
Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close
Mimasu Semiconductor (8155 JP): Shin-Etsu (4063 JP)’s Tender Offer Launches
Barito Renewables Energy (BREN IJ): Back to Normal Trading & Index Implications
PC Partners (1263 HK) Muses SGX Listing & HKEx Withdrawal

TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already

JPX has commenced a market consultation on changes to the TSE Tokyo Price Index TOPIX (TPX INDEX) including expansion of the universe and periodic stock selection.
Based on current market cap/ liquidity, there could be 38 adds and 447 deletions for the TSE Tokyo Price Index TOPIX, though the changes only start in October 2026.
The deletions will be phased out of the index in 8 steps that will end in July 2028 and most of the stocks will move to the TOPIX Next-tier.

Shin-Etsu Chem TOB for Rest of Mimasu Semi (8155) – Far Too Cheap, But No Squeaky Wheel No Grease

Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), will launch the TOB to buy out Mimasu minority holders, as pre-announced 2mos ago.
Not surprising. They bought in 19yrs ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. It’s too cheap but in 18yrs, I recall zero activism here.
Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 53%. Then they need a bit to get them to 67% but it should be straightforward.

Tatsuta Electric (5809 JP): Eneos Refuses to Bump, Board Capitulates

18 months after announcing the offer, ENEOS Holdings (5020 JP) launched the Tatsuta Electric Wire & Cable (5809 JP) tender offer at unchanged JPY720, 4.9% below the last close price.
The Board requested a bump, but Eneos refused due to Tatsuta’s missed targets, no competing offer and the supportive updated IFA valuation
The lack of a bump, no vocal opposition, deal fatigue, the Board’s unexpected recommendation, weak earnings and 73.9% takeover premium will help acceptance.

ENEOS Launches Tatsuta Elec (5809) “Minority” Takeout at Same Price as 18mos Ago

ENEOS announced its deal for Tatsuta Electric Wire & Cable (5809 JP) 18mos ago. China approval took a while. Now they have launched.
The TOPIX Non-Ferrous Metals sector has returned 60%. TOPIX 50%. There is a new TSE Sheriff in town asking for PBR 1.0x. BVPS is up. Presumably, forward CF is up.
But the TOB Price is unchanged. That is disappointing. One reason why a higher price was rejected was that no other buyer approached to take over the company. 🤷🏻‍♂️

Digging into Chosun Ilbo’s Report on SK Group’s SK Innovation & SK E&S Merger Plans

SK Group plans to merge SK Innovation and 90%-owned SK E&S by month-end. Chosun Ilbo’s report solidifies market confidence due to its credibility and likely intentional leak by SK Group.
Initially considered but deemed lower priority than SK IE Technology sale; SK Group opts for this alternative due to challenging market conditions for SKITE sale.
SK Innovation and SKIET rise with hopes of resolving liquidity issues and avoiding sacrifice. SK Inc is negatively impacted by concerns over valuation double counting from this merger.

MMA Offshore (MRM AU): Disappointing Final Offer Poses a Vote Risk

Cyan Renewables has bumped its Mma Offshore (MRM AU) offer to A$2.70 per share, a 3.8% premium to the previous A$2.60 offer.
The bump is derisory in the context of recent earnings upgrades. Since the binding proposal, MMA has upgraded its FY24 EBITDA and EBIT guidance by 9.8% and 15.5%, respectively.
The AFR reported that around 30% of the register opposed the previous offer. A cursory 3.8% bump is unlikely to sway most of these dissenters to change their views.

Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close

The Sep 2024 Nikkei 225 Review base date is six weeks away. One can no extrapolate results quite accurately. It still gives us one ADD, one DELETE, and capping fun.
Recently, Yanai-san sold more Fast Retailing (9983 JP). More active holders own more stock (which may mean less interest to buy later), and only 1% to go to avoid capping.
There should be one DELETE, one ADD. There is a low-probability Dark Horse ADD but I expect Kokusai Electric (6525) to be added in March 2025.

Mimasu Semiconductor (8155 JP): Shin-Etsu (4063 JP)’s Tender Offer Launches

Mimasu Semiconductor Industry (8155 JP) notes that the pre-condition for Shin Etsu Chemical (4063 JP)’s JPY3,700 tender offer has been satisfied. The tender runs from 21 June to 5 August.
The share price has traded at or above the offer on 15 out of 38 trading days, partly due to expectations of a counteroffer.
While the offer is below the midpoint of the IFA DCF valuation range, it represents an all-time high. The lack of activists or competing offers suggests a done deal.

Barito Renewables Energy (BREN IJ): Back to Normal Trading & Index Implications

Barito Renewables Energy (BREN IJ) listed on the IDX in October 2023 and inclusion in global indices was expected in June and August.
The IDX threw a spanner in the works by placing Barito Renewables Energy (BREN IJ) onto its Watchlist under criteria 10. That resulted in cancellation of index inclusion in June.
Barito Renewables Energy (BREN IJ) will come off the Watchlist today and that could see a renewed move higher in the stock over the next few weeks.

PC Partners (1263 HK) Muses SGX Listing & HKEx Withdrawal

On the 18th June, personal computer (PC) parts and accessories play PC Partner (1263 HK) announced a profit alert for 1H24.
That’s positive. What is also interesting is that the board is considering an SGX listing, by way of introduction, and applying for the withdrawal of the HKEx listing.
Precedents are thin on the ground. And for good reason. The process is not straightforward.

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Jun 20

Daily Brief Event-Driven: JPX Proposes BIG Changes To TOPIX Rules and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JPX Proposes BIG Changes To TOPIX Rules, Affects IPOs More Than Market
Guzman Y Gomez IPO: Listing & Index Inclusion Timeline
Hyundai Motor’s Special Shareholder Return Plan Likely Unveiled in August IR Event
Capitol Health (CAJ AU): All-Scrip Non-Binding Merger with Integral Diagnostics
Another Major Win for Eoflow [U.S. Federal Appeals Court Issues a Decision]
Mizuho Cross-Shareholding – US$11bn of Cross-Shareholding, with at Least US$2bn to Sell over FY24-26
MMA Offshore (MRM AU): Cyan Lifts Offer

JPX Proposes BIG Changes To TOPIX Rules, Affects IPOs More Than Market

In 2021 the JPX established new Listing Rules, and in April 2022 introduced new market segments (Prime/Standard/Growth) to much fanfare. Today, the TSE basically said those changes were meaningless.
Today, the TSE announced proposed new rules for TOPIX constituent selection. There is a 2-month consultation period, then rules come out end-Sep 2024. Expect few changes from the Proposal.
NextGen TOPIX will be created October 2026. 3-4 dozen ADDs, 500-600 DELETEs to create an index of 1,100-1,200 names. Some obvious large impacts 2+yrs from now, but this changes IPOs.

Guzman Y Gomez IPO: Listing & Index Inclusion Timeline

Guzman Y Gomez (0817833D AU) has raised A$335.1m in a primary + secondary offering, valuing the company at A$2.23bn. The stock starts trading on the ASX Ltd (ASX AU) today.
Just over 54% of the shares are escrowed which means there is a lot of stock that will be available for sale on listing day.
Guzman Y Gomez (0817833D AU) could be added to the S&P/ASX 300 Index in September and there could be global index inclusions in November and December.

Hyundai Motor’s Special Shareholder Return Plan Likely Unveiled in August IR Event

Hyundai’s IR team appears to have communicated that a new shareholder return policy would be unveiled at the rescheduled CEO Investor Day in August.
Hyundai aims to boost shareholder returns above 30% by canceling ₩800B to ₩1T in shares annually. The new dividend strategy won’t debut in August; last year’s three-year plan stands.
Equal cancellation ratios apply to common and three types of preferred shares. August’s timing, with ISA tax reforms potentially favoring preferred shares, may enhance prefs’ price impact relative to ords.

Capitol Health (CAJ AU): All-Scrip Non-Binding Merger with Integral Diagnostics

On 17 June, Capitol Health (CAJ AU) disclosed a non-binding merger proposal from Integral Diagnostics (IDX AU) at 0.12849 Integral shares per Capitol share.
Integral has been granted a four-week exclusivity period that ends on 15 July. The transaction will require approval from the ACCC and Capitol shareholders.
The offer is attractive compared to historical exchange ratios, trading ranges and peer multiples. At the last close, the gross spread was 11.7%.

Another Major Win for Eoflow [U.S. Federal Appeals Court Issues a Decision]

On 19 June, Eoflow announced that the U.S. Federal Appeals Court issued a decision to overturn the provisional injunction.
In other words, the U.S. federal court ordered the first trial’s preliminary injunction banning overseas sales of Eoflow to be overturned.
A jury trial is set at end of November 2024. Depending on the ruling, either side may appeal and a second trial may follow or there may be a settlement.

Mizuho Cross-Shareholding – US$11bn of Cross-Shareholding, with at Least US$2bn to Sell over FY24-26

By Sumeet Singh

Following up on our earlier cross-shareholding notes, in this note we look at Mizuho Financial Group (8411 JP)‘s cross-shareholding.
Mizuho had a stake over US$100m in at least 34 listed Japanese stocks, amounting to a total of around US$7bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

MMA Offshore (MRM AU): Cyan Lifts Offer

Back on 25 March, marine and subsea services provider MMA Offshore (MRM AU) entered into a Scheme with Singapore’s Cyan Renewables, a wholly-owned vehicle of Seraya Partners.
The A$2.60/share Offer in cash, a 11% premium to last close, was within the IE’s fair value range of A$2.03 to A$2.83. However, shares have consistently traded through terms.
Cyna has now bumped the Offer to A$2.70/share – best & final. Thorney (7.95% of shares out) is supportive. The Scheme Meeting will still be held on the 1 July.

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Jun 19

Daily Brief Event-Driven: Blackstone Does a BIG Deal for Infocom (4348) – Minorities Get ¥6 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Blackstone Does a BIG Deal for Infocom (4348) – Minorities Get ¥6,060/Share
[JAPAN ACTIVISM] – Murakami Group Goes Activisting on Exedy (7278) – Room To Run
Pref-Centred Dividend Plays with Expanded ISA Tax Benefits in Value-Up Context
L’Occitane (973 HK): No, PLP Is Not Getting A Back-End Bump
KOSDAQ150 Adhoc Index Rebalance: Eco&Dream to Replace Paradise Co
Infocom (4348 JP): Blackstone’s Long-Awaited JPY6,060 Tender Offer
LS Materials: A Sharp Increase in Short Selling Post Block Deal Sale
KDDI and Lawson: Loyalty Points Just the Start
Quiddity SET 50 Jun 24 Rebal: 4 Changes Confirmed; LONGs up 5.2% Vs SHORTs in a Month
JSE June ’24 Rebalance: Top Buys (Banks!) And Sells (NPN, PRX)

Blackstone Does a BIG Deal for Infocom (4348) – Minorities Get ¥6,060/Share

15 weeks ago, a specialised media outlet suggested Teijin Ltd (3401 JP) was in process to sell its stake in Infocom Corp (4348 JP).
I caught up later, after the stock had run up significantly, but writing bullishly here and here. Since then, the stock is up another 33-35%.
Today we finally got the announced deal. Blackstone will buy the stock at a valuation of ¥280bn, paying ¥6,060/share for the minority stake, and buying back Teijin’s stake at ¥4,340/share.

[JAPAN ACTIVISM] – Murakami Group Goes Activisting on Exedy (7278) – Room To Run

Late May, Aisin (7259 JP) announced a sell-down of its 34% stake in Exedy Corp (7278 JP) – a big non-dilutive offering, pricing 11% below undisturbed. Exedy announced a buyback.
Announced on the 27th of May, shares fell sharply the next day, it priced on the 3rd, and offering shares traded on the 10th. Then the price started climbing back.
My first and second pieces argued that buyback accretion, index impact, and change in register shape all meant it was a buy. Activist Murakami agreed, now he has 6.5%.

Pref-Centred Dividend Plays with Expanded ISA Tax Benefits in Value-Up Context

Local stock market focuses on ISA tax benefits expansion; political push for higher tax-exempt limits seen as pivotal event.
Investors expect dividend stocks to outperform due to ISA tax advantages: tax exemptions within limits and lower 9.9% taxation on excess amounts, boosting ISA-based equity investments.
ETF influence declining; ISA tax benefits may boost dividend plays, heightening interest in preferred stocks tied to efforts to redeem them, impacting equity costs.

L’Occitane (973 HK): No, PLP Is Not Getting A Back-End Bump

In a long-awaited development, L’Occitane (973 HK) announced during the lunchbreak yesterday, a scrip alternative. Plus Pleasant Lake Partners (PLP) (3.25%) will accept the Offer (either in cash or scrip).
This was positive news. And the market reacted accordingly, up ~1.0% in the afternoon session.
One quirk in the doc was the perception those electing the scrip alternative may get a higher % in the unlisted Offeror. A back-end bump for PLP? (Hint: No).

KOSDAQ150 Adhoc Index Rebalance: Eco&Dream to Replace Paradise Co

Paradise Co Ltd (034230 KS) will move from the KOSDAQ Market to the KOSPI Market from the open of trading on 24 June.
E&D Co Ltd (101360 KS) will be added to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 21 June to replace Paradise Co Ltd (034230 KS).
Paradise Co Ltd (034230 KS) belongs to the Consumer Discretionary sector and there is a possibility of inclusion to the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) in December.

Infocom (4348 JP): Blackstone’s Long-Awaited JPY6,060 Tender Offer

Following months of press speculation, Infocom Corp (4348 JP) announced a Blackstone (BX US) tender offer at JPY6,060 per share, a 177.3% premium to the undisturbed price.
After the share consolidation, Infocom will repurchase Teijin Ltd (3401 JP)’s stake at a share repurchase price of JPY4,231. The process is expected to be completed in early October.
The offer is a knockout bid helped by auction. This is a done deal with payment commencing from 7 August. At the last close, the gross spread was 0.5%.

LS Materials: A Sharp Increase in Short Selling Post Block Deal Sale

On 14 June, KeiStone Partners sold 2.51 million shares (3.7% of outstanding shares) of LS Materials at the block deal sales price of 26,350 won per share.
In the next several weeks/months, there will likely be increased concerns about additional selling of LS Materials by KeiStone Partners.
Due to recent block deal sale, higher short selling volume, and concerns about additional selling by Keistone Partners, LS Materials shares could face further weakness in the next 6-12 months.

KDDI and Lawson: Loyalty Points Just the Start

By Michael Causton

KDDI will complete its acquisition of a 50% share in Lawson this month and the chain will then delist.
KDDI is promising a rapid introduction of services and fresh ideas to leverage its new retail arm.
It will begin by unifying premium loyalty point membership under the Ponta brand and offer new services that it hopes will help boost share. What out LY.

Quiddity SET 50 Jun 24 Rebal: 4 Changes Confirmed; LONGs up 5.2% Vs SHORTs in a Month

The June 2024 index changes for Thailand’s SET 50 index were announced after market close yesterday (17th June 2024).
Initially we expected only three changes but after the index methodology was revised in May 2024, we revised our expectations and we had 4 expected ADDs/DELs.
All 4 expected ADDs/DELs turned out to correct. In this insight, we take a look at our estimation of expected flows and potential trade ideas based on the flow dynamics.

JSE June ’24 Rebalance: Top Buys (Banks!) And Sells (NPN, PRX)

By Charlotte van Tiddens, CFA

On Friday, JSE indices will be rebalanced in the closing auction.
There will be no constituent changes to the Top 40, FINI, FINDI, INDI or RESI indices (ALSI gets reviewed in March and September).
The upcoming rebalance will be the first review since the vanilla and SWIX indices were merged in March

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Jun 18

Daily Brief Event-Driven: L’Occitane (973 HK): Share Alternative a Crucial Step Towards the Offer Being Declared Unconditional and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

L’Occitane (973 HK): Share Alternative a Crucial Step Towards the Offer Being Declared Unconditional
Exedy Corp (7278 JP): Murakami Becomes a Substantial Shareholder
Hengdeli Holdings (3389 HK): Negative EV Play Halted
Quiddity Leaderboard HSTECH Sep 24: No Changes but US$425mn One-Way Flows Due to Capping
Quiddity Leaderboard HSCEI Sep 24: Two Changes Possible; US$256mn One-Way
SET50 Index Rebalance: 4 Changes Next Week; One Could Surprise
L’Occitane (973.HK) – The Privatization Is About to Succeed
India Shelter Finance US$240m Lock-Up Expiry – Multi-Bagger Gains Are Ripe for the Taking

L’Occitane (973 HK): Share Alternative a Crucial Step Towards the Offer Being Declared Unconditional

L’Occitane (973 HK) announced the share alternative at an exchange ratio of 10 rollover shares for each offer share, subject to a cap of 5% of outstanding shares.
The share alternative option will help the offer and was likely required to get Pleasant Lake Partners’ support (3.25% of outstanding shares). There is minimal vocal opposition to the offer.
Irrevocables/Letters of support represent 49.83% of disinterested shares. An attractive offer and the share alternative facilitate meeting the minimum acceptance condition, which requires an 80% disinterested acceptance rate (ex. irrevocables).

Exedy Corp (7278 JP): Murakami Becomes a Substantial Shareholder

Murakami’s entity, City Index Eleventh, and daughter reported a 5.46% position in Exedy Corp (7278 JP). The shares purchases began two days after the Aisin (7259 JP) secondary offering.
Murakami’s average buy-in price is JPY2,607.30 per share, 2.3% higher than the recent secondary offering price of JPY2,549.
Murakami’s disclosure suggests two possibilities: the start of an activist campaign or a short-term pump-and-dump play. Recent precedents suggest the latter.

Hengdeli Holdings (3389 HK): Negative EV Play Halted

Watch accessory play Hengdeli Holdings (3389 HK) is currently suspended pursuant to the Takeovers Code.
Potentially founder Zhang Yuping (holding 17%), CEO Tony Cheung (16%) and/or Swatch Group (UHR SW) (9.94%) may table an Offer. My money is on Zhang.
This is a very illiquid name. What is interesting is that Hengdeli has net cash of HK$1.3bn – as at 31 December 2023 – against a market cap of HK$0.59bn.

Quiddity Leaderboard HSTECH Sep 24: No Changes but US$425mn One-Way Flows Due to Capping

The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
In this insight, we take a look at the rankings of potential ADDs and potential DELs for the September 2024 index rebal event.
We do not see any index changes in September 2024 but there could be one-way flows of US$425mn due to capping.

Quiddity Leaderboard HSCEI Sep 24: Two Changes Possible; US$256mn One-Way

The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI index rebal event in September 2024.
Based on the current data, I see two ADDs and two DELs.

SET50 Index Rebalance: 4 Changes Next Week; One Could Surprise