Event-Driven

Carlyle’s renewed interest in acquiring Hanon Systems is evident from recent local market news, indicating outreach to bankers for a potential buyout, as confirmed by a local brokerage.
Carlyle eyes majority control of Hanon Systems, targeting 50.5% from Hahn & Co and 19.5% from Hankook Tire. Carlyle may extend a tender offer for the remaining 30%.
Still early stages; no solid info on deal certainty or specifics. Limited immediate trading opportunities, but worth monitoring as it progresses.

Eureka Group (EGH AU): Aspen’s Offer Is A Non-Starter

On the 23 January, Aspen (APZ AU) improved its scrip terms to 0.26 Aspen shares per Eureka (EGH AU) share, up from 0.225 Aspen shares on the 2 March 2023.
Two weeks later, Eureka said they still had not received a formal Offer. Aspen has now released its Bidder’s Statement. Its Offer has a 50.1% acceptance condition.
Complicating the Offer was the recent disclosures from FDC Group that it held a 12.89% stake, preventing Aspen compulsory acquiring shares.

Iberdrola/Avangrid: Logical Move

Iberdrola SA (IBE SM) launches a $34.25/share cash offer to acquire the minorities (18.4%) in its US subsidiary Avangrid (AGR US). Premium is 6.8%, and the cost c. $2.5 billion.
The market was awaiting this move since the cancellation of the PNM deal, which explains the recent rise in the share price of Avangrid.
Gross spread is 4.5%. It seems investors are buying in the hope of an offer sweetening, knowing that Iberdrola has some cash available to spend from the profitable Mexico exit.

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Mar 08

Daily Brief Event-Driven: Oriental Land (4661) Placement by Keisei Rail (9009) Says “That’s the Door” and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Oriental Land (4661) Placement by Keisei Rail (9009) Says “That’s the Door”
JSR (4185) – Reporters Reportedly Report Conditions Such That JIC Deal Could Come Soon
Shinko Electric (6967) – Break/Gap Risk Is Considerably Changed Now
JSR Corporation (4185 JP): Response to SUNY RF Lawsuit and Rumours of SAMR Approval
Karuna Therapeutics Inc (KRTX.US) – This Company Is Worth Bristol Myers Squibb Paying a High Premium
Quiddity HSTECH Jun 24 Leaderboard: Capping Flows Li Auto, Meituan, and XPeng
Azure Min (AZS AU): Trading Wide Ahead Of 8th April Vote
Quiddity HSCEI Jun 24 Flow Expectations: Many Reasons to Follow the Developments Closely
Paradise Announces A Switch in Listing from KOSDAQ to KOSPI
Telefonica/Telefonica Deutschland Holding AG: Delisting Offer

Oriental Land (4661) Placement by Keisei Rail (9009) Says “That’s the Door”

Over two decades, Keisei Electric Railway Co (9009 JP) has been the subject of softer and harder activist efforts to have Keisei monetise its stake in affiliate Oriental Land (4661).
The most recent efforts were by Palliser last fall, briefly discussed here two weeks ago when Keisei announced a buyback.
Today, Keisei announced (Japanese only) an Accelerated Block Offering of 1% of Oriental Land shares. The accompanying announcement is worth reading. It’s pretty clear.

JSR (4185) – Reporters Reportedly Report Conditions Such That JIC Deal Could Come Soon

JSR Corp (4185 JP) saw its stock pop Monday when an article in a Japanese paper said the Tender Offer would start “within the month.”
Investors went from “concerned about delay or worse” to “anticipating resolution.” Then Wednesday just before the close the stock popped as media outlets reportedly reported no SAMR approval was required.
There has been no comment from either JIC or JSR but the discount to terms has gone from 6.9% last Friday to a 1.7% discount now.

Shinko Electric (6967) – Break/Gap Risk Is Considerably Changed Now

Seven weeks ago I wrote about Shinko Electric Industries (6967 JP)‘s changing Break/Gap Risk as comps had gained. Shinko was cheap to its main comp and peers vs Announcement Date.
Since then, Shinko is +4.1% and direct peer Ibiden Co Ltd (4062 JP) is -14.5%. This has erased Shinko’s underperformance since announcement, and shrunk a 9% spread to 3.3% yesterday.
With the spread tighter and tech showing some weakness, I’d be happy unwinding at yesterday’s closing spread (3.3%).

JSR Corporation (4185 JP): Response to SUNY RF Lawsuit and Rumours of SAMR Approval

JSR Corp (4185 JP) has filed a solid response to SUNY RF’s lawsuit. SUNY RF will counter with a response by 13 March.
The response suggests that SUNY RF’s lawsuit will not be harmed if JIC proceeds with TOB, which is the strongest indication that JIC is comfortable taking on the litigation risk.
A media article stating that SAMR has allowed JIC to withdraw its merger control filing helps explain the current tight spread. However, the article needs to be treated with caution.

Karuna Therapeutics Inc (KRTX.US) – This Company Is Worth Bristol Myers Squibb Paying a High Premium

By Xinyao (Criss) Wang

Due to large patient population and strong clinical demand for new therapies, the future commercialization prospects of effective drugs in the field of schizophrenia would be relatively certain and promising.
Our forecast on the peak sales of KarXT is about US$10 billion. In other words, at this peak sales level, BMS is able to recover the US$14 billion in cost.
Karuna’s P/B is much higher than peers. If investors already have Karuna in portfolio, they may consider taking profits in time.But another rally is possible when KarXT is officially approved.

Quiddity HSTECH Jun 24 Leaderboard: Capping Flows Li Auto, Meituan, and XPeng

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 June 2024 index rebal event.
While there are no expected ADDs/DELs for HSTECH in June 2024, some index members like Li Auto (2015 HK), Meituan (3690 HK), and XPeng (9868 HK) could experience capping flows.

Azure Min (AZS AU): Trading Wide Ahead Of 8th April Vote

Back on the 19th Dec, Sociedad Quimica y Minera (SQM/B CI)/Hancock offered Azure Minerals (AZS AU) shareholders A$3.70/share by way of a Scheme, a ~52% premium to the undisturbed price.
Creasy Group (12.64%) and Delphi Group (10.15%) gave irrevocables. Mineral Resources (MIN AU)‘s 14.5% stake was unclear; but they exited on the 21 Feb. “Arbitrageurs should arb. Corporations should Corp“.
The Transaction Booklet is now out with a Scheme Meeting on the 8th April. The IE says fair. Expected implementation on the 18 April.

Quiddity HSCEI Jun 24 Flow Expectations: Many Reasons to Follow the Developments Closely

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 June 2024.
Based on the current data, I see two low-conviction ADDs and two low-conviction DELs.

Paradise Announces A Switch in Listing from KOSDAQ to KOSPI

On 7 March, Paradise Co Ltd (034230 KS) announced that it plans to switch its listing from KOSDAQ to KOSPI.
Paradise will be excluded from KOSDAQ150 when it makes the switch to KOSPI. However, it is not certain if and when the company will be included in KOSPI200.
All in all, we would argue that the valuations are not especially appealing for Paradise, despite the sharp pick-up in business in 2023.

Telefonica/Telefonica Deutschland Holding AG: Delisting Offer

Telefonica SA (TEF SM) has decided to make a €2.35/share cash takeover offer to acquire the 5.65% stake in its German unit Telefonica Deutschland Holding (O2D GR) that it does not own.
The bidder and parent company, Telefonica, have informed Telefonica Deutschland that, except for FY 2023 dividend, they do not plan to support the distribution of dividends for future financial years.
The Bidder will apply for delisting thus the shares will soon become illiquid. Accept offer.

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Mar 07

Daily Brief Event-Driven: Sep24 Nikkei 225 Rebal – 2 ADDs and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Sep24 Nikkei 225 Rebal – 2 ADDs, 2 DELETEs Maybe, but Rebals Tougher, and Fastie+TEL Are the FUN
StubWorld: Troubling Signs For NWD (17 HK)
Interpreting Kumho Petro Chemical’s Unexpected Move to Cancel Treasury Shares
CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
Kumho Petrochemical – A Significant Shares Cancellation Announcement
Emerging Markets Ex-China: Looking Back… And Forward
Block Deal Sale of About 400 Billion Won of Shinhan Financial by EQT Partners
Azure Minerals (AZS AU): Scheme Vote on 8 April
Wiwynn GDRs Early Look – US$1.3bn Taiwan GDR Would Be Easily Digested

Sep24 Nikkei 225 Rebal – 2 ADDs, 2 DELETEs Maybe, but Rebals Tougher, and Fastie+TEL Are the FUN

Now that the March 2024 Nikkei 225 Rebalance is decided, we have a model for the Sep 2024 Review. As previously discussed on Smartkarma, actual name changes get tough now.
As of now, there should be two ADDs and two DELETEs. They might not occur. But there are two other situations which create interesting dynamics around big names.
The dynamics of Fast Retailing and Tokyo Electron promise more fun than the actual name changes in September 2024. It impacts how you trade Nikkei vs TOPIX and tech internals.

StubWorld: Troubling Signs For NWD (17 HK)

Despite the lifting of the “spicy” property cooling measures last week, New World Development (17 HK) has plumbed fresh P/B lows after a (very) brief respite.
Preceding my comments on NWD 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%.

Interpreting Kumho Petro Chemical’s Unexpected Move to Cancel Treasury Shares

Kumho Petro Chemical (011780 KS) intends to retire 50% of its common shares, totaling 2,624,417 shares, starting from the 2024 fiscal year until the 2026 fiscal year.
With the annual general meeting nearing, NPS hasn’t revealed its support, causing unease for Park Chan-gu. Considering NPS’s obligation to the Value-Up policy, cancellation seems inevitable for Park Chan-gu.
Whether the battle persists hinges on NPS’s stance. If NPS backs Park Chan-gu, their stake surpassing 25% could deter the opposition’s financial strength. Conversely, NPS’s neutrality could escalate the battle.

CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows

With 85% of the review period complete, we see 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in June.
We estimate one-way turnover of 1.2% at the rebalance leading to a one-way trade of CNY 7.3bn (US$1bn). There are a lot of stocks with multiple days ADV to trade.
The potential adds have outperformed the potential deletes despite large flows from the National Team into ETFs tracking the CSI 300 Index. That support for the potential deletes will reverse.

Kumho Petrochemical – A Significant Shares Cancellation Announcement

After the market close on 6 May, Kumho Petrochem announced a significant shares cancellation program which is likely to have a positive impact on its share price.
The company announced that it will cancel 430 billion won worth of its common shares in the next three years, representing nearly 10.5% of its market cap.
Park Chul Wan, nephew of Kumho Petrochem Chairman Park Chan Koo, has been very vocal about the need for Kumho Petrochem to improve its corporate governance in past several years.

Emerging Markets Ex-China: Looking Back… And Forward

We first wrote about the iShares Emerging Markets ex-China (EMXC US) ETF 3 years ago when AUM was less than US$500m. AUM now stands at US$11bn.
IShares Emerging Markets ex-China (EMXC US) has outperformed iShares Emerging Markets (EEM US) and iShares Emerging Markets Asia (EEMA US) with lower volatility and a lower drawdown.
With the Chinese economy misfiring and markets under pressure, we could see a further shift in positioning away from China and that means inflows to other Emerging Markets.

Block Deal Sale of About 400 Billion Won of Shinhan Financial by EQT Partners

EQT Partners announced that it is selling all of its remaining shares in Shinhan Financial for about 400 billion won in a block deal sale.
The block deal sale price range is expected to be 43,776 won to 44,688 won, representing 2% to 4% discount to the closing price on 6 March (45,600 won).
We would take the deal. The block deal discount is reasonable and Shinhan Financial continues to have attractive valuations and dividend yield despite recent share price appreciation.

Azure Minerals (AZS AU): Scheme Vote on 8 April

The Azure Minerals (AZS AU) IE considers Sociedad Quimica y Minera de Chile (SQM US)/Hancock’s scheme and takeover offer fair and reasonable as it is above its A$2.03-2.93 valuation range.
The scheme is conditional on FIRB approval, which should be forthcoming as Azure’s key asset (Andover) will be majority-owned by Australian entities.
The scheme vote will get up due to irrevocables and retail support. At the last close and for the 18 April payment, the gross/annualised spread was 3.1%/29.2%.

Wiwynn GDRs Early Look – US$1.3bn Taiwan GDR Would Be Easily Digested

By Clarence Chu

Wiwynn Corp (6669 TT) is looking to raise up to US1.3bn in its upcoming global depository receipts (GDRs) offering.
Wiwynn recently reported its board’s resolution to issue up to 17m new shares in the form of GDRs for purchasing overseas raw materials, debt repayment, investing overseas and others.
Similar to previous GDR listings, the deal is a long drawn out process with the firm required to jump through a number of board/shareholder/regulatory approval loops.

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Mar 06

Daily Brief Event-Driven: Block Deal Sale of 2.2% of Kakao Pay by Alipay and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Block Deal Sale of 2.2% of Kakao Pay by Alipay
TOPIX Inclusions: Who Is Ready (Mar 2024)
Alumina (AWC AU): Further Thoughts on Alcoa’s Proposal
MVIS Australia A-REITs Index Rebalance Preview: One Deletion & Capping Changes
Locals Driving Corporate Reforms and 10 Korean Companies Recently Announcing Share Cancellations
MVIS Australia Equal Weight Index Rebalance Preview: Three Close Deletions
Feb Rebalance – JSE Auction Analytics (SA Upweighted in ACWI and EM)
Bondalti/Ercros: Fair Offer
Tuhu Car Lock-Up Expiry – Would Need Some Selling to Improve Liquidity when US$1.5bn Comes Unlocked
ARM Holdings IPO Lock-Up Expiry – A US$127bn Lockup Release Might Be Too Tempting to Pass On

Block Deal Sale of 2.2% of Kakao Pay by Alipay

After the market close on 5 March, it was reported that Alipay will sell a 2.2% stake (2.95 million shares) in Kakaopay (377300 KS) in a block deal sale.
A key component of this block deal sale is that there will be a lock up period of 90 days post the sale date.
We would avoid this block deal sale. There is a high probability of Kakao Pay’s share price falling below the block deal price of 38,380 won after 90 days.

TOPIX Inclusions: Who Is Ready (Mar 2024)

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
There were no Section Transfers announced in January or February so currently there are no live TOPIX Inclusion events but there are some pre-event names to be monitored closely.
The upcoming TOPIX flows in end-April 2024 will be more complicated than the other quarterly rebalances as there will be more flows due to the annual liquidity factor review.

Alumina (AWC AU): Further Thoughts on Alcoa’s Proposal

I have received several questions from readers on Alcoa (AA US)’s non-binding proposal for Alumina Ltd (AWC AU) in the context of the current gross spread of 9.2%.
The questions primarily concerned Citic Resources Holdings (1205 HK) voting intentions, the probability of a bump and the likelihood of Aloca shareholders supporting the transaction.
CITIC Resources’ lack of public endorsement of the transaction is due to HKEx listing requirements and not an indication of a NO vote risk.

MVIS Australia A-REITs Index Rebalance Preview: One Deletion & Capping Changes

With the review period for the March rebalance complete, Abacus Storage King (ASK AU) could be deleted from the index and there will be capping changes.
The index changes will lead to a one-way turnover of 3.6% resulting in a one-way trade of A$21m. There are three stocks with over A$4m to trade.
Goodman Group (GMG AU) is an inclusion to a global index in March and that buying will far outweigh the selling from the Vaneck Vectors Australian Property ETF (MVA AU).

Locals Driving Corporate Reforms and 10 Korean Companies Recently Announcing Share Cancellations

In a recent discussion with a client, one of the questions that was raised was regarding the impact the local investors are having on the corporate governance reforms in Korea.
The number of local investors in the Korean stock market has jumped in the past few years from 5.3 million in 2017 to 14.4 million in 2022.
All in all, I think Korea is about 3-5 years behind Japan in various corporate governance reforms. So it has a lot of catching up to do.

MVIS Australia Equal Weight Index Rebalance Preview: Three Close Deletions

With the review period complete, there are 3 stocks that are close to the deletion zone and could be removed from the index at the March rebalance.
Even if there are no constituent changes, capping changes will lead to one-way turnover of 4.4% and a one-way trade of A$97m.
There are 9 stocks with over A$5m to trade from passive trackers but the impact on the stocks is not very high.

Feb Rebalance – JSE Auction Analytics (SA Upweighted in ACWI and EM)

By Charlotte van Tiddens, CFA

Indices were rebalanced in the closing auction last week Thursday.
Turnover on the JSE for the day was R25.6bn, R12.9bn traded in the closing auction (50%).
Turnover at the November rebalance was R40.6bn.

Bondalti/Ercros: Fair Offer

Ercros (ECR SM), a venerable Spanish chemical company has received a €3.6/share, cum dividend, offer from Bondalti. The premium is 40.6%, implied equity €329.17 million and implied EV €421 million.
The offer represents 6x EV/Fwd NTM EBITDA, typical mid-cycle multiple for commodity chemicals, 12.9x Fwd P/E. The offer price accounts for an improving H2. The shares suffer from low liquidity.
Therefore the top shareholders will be glad to cash in. How long does the Spanish government take to authorise FDI will be the primary concern. Gross spread is 4.7%. Long.

Tuhu Car Lock-Up Expiry – Would Need Some Selling to Improve Liquidity when US$1.5bn Comes Unlocked

By Clarence Chu

Tuhu Car (9690 HK) was listed in Hong Kong on 26th Sept 2023 after raising US$151m. The IPO had been a 100% primary offering.
Tuhu is an integrated online and offline platform for automotive services in China.
Trading with a very small float of 1.8%, in its upcoming six-month lockup expiry, >90% of Tuhu’s pre-IPO investors, cornerstones and management combined stakes will come off six-month lockup expiry.

ARM Holdings IPO Lock-Up Expiry – A US$127bn Lockup Release Might Be Too Tempting to Pass On

By Sumeet Singh

Softbank raised around US$4.9bn via selling some of its stake in ARM Holdings (ARM US)’ US IPO. Its remaining 90% stake will be released from its IPO linked lockup soon.
ARM develops and licenses high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

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Mar 05

Daily Brief Event-Driven: Mar24 Nikkei 225 Rebal – Socionext and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Mar24 Nikkei 225 Rebal – Socionext, Disco, Zozo IN; US$4bn One-Way; More Impactful Than It Looks
Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out
JSR Corporation (4185 JP): Something Is Brewing, but Nobody Knows Quite What
Genex (GNX AU): J-Power’s Indicative Offer
TDCX (TDCX US)’s $7.20/Share Short-Form Merger
May Lockup Release & April SSF Listing May Lead to Weird Trading Dynamics for Ecopro Materials
Ecopro Materials: Potential Selling by Second Largest Shareholder Post End of Lockup Period in May
Genex Power (GNX AU): J-Power’s Dual-Track Non-Binding Proposal
Vinda International (3331 HK): Pre-Condition Satisfied
NIFTY100 Low Volatility 30 Index Rebalance Preview: Titan Could Replace IOCL

Mar24 Nikkei 225 Rebal – Socionext, Disco, Zozo IN; US$4bn One-Way; More Impactful Than It Looks

The changes to the Nikkei 225 Average for the March 2024 Review were announced today after the close. A little earlier than I expected.
Socionext, Disco, Zozo IN; Takara Hldgs, Sumi Osaka Cement, Pacific Metals OUT. Nitori PAF increase. US$4bn+ to trade one way on 29Mar close. One interesting surprise.
Overall more impactful than it looks. And it changes the front-end arithmetic on Fast Retailing (9983 JP). There may be fun on the DELETEs.

Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out

DISCO (6146 JP), Socionext (6526 JP) and ZOZO (3092 JP) will replace Takara Holdings (2531 JP), Sumitomo Osaka Cement (5232 JP) and Pacific Metals (5541 JP) in the Nikkei 225.
Nitori Holdings (9843 JP)‘s PAF will increase from 0.3 to 0.5, and surprisingly there is no PAF adjustment for ZOZO Inc (3092 JP).
Passive trackers need to buy between 1-18 days of ADV on the adds while selling between 2.7-28 days of ADV on the deletes. There is a big funding trade too.

JSR Corporation (4185 JP): Something Is Brewing, but Nobody Knows Quite What

JSR Corp (4185 JP)’s shares rose 4.8% due to a Nikkan Kogyo article that states that JIC will start the tender within the month due to concluding negotiations with SAMR.
Caution is warranted as JSR has not provided a customary timeline update, no confirmatory disclosure from SAMR and JSR’s response to SUNY RF’s claims are yet to be filed.
Based on current information, there are five possible tender scenarios. In the worst case, the downside risk on a deal break should be muted due to the market re-rating.

Genex (GNX AU): J-Power’s Indicative Offer

Back in July 2022, Aussie renewable energy player Genex (GNX AU) announced an A$0.23/share NBIO from Skip Enterprises and Stonepeak, subsequently bumped to A$0.25/share, and confirmatory due diligence provided.
Negotiations ceased in December that year. As of today, Scott Farquhar’s Skip Enterprises continues to hold a 19.9% stake in Genex.
This morning, Genex announced an A$0.275/share NBIO from Electric Power Development (9513 JP) (J-Power), by way of a Scheme. A concurrent off-market A$0.27/share is in place.

TDCX (TDCX US)’s $7.20/Share Short-Form Merger

On the 2 January, TDCX (TDCX US), a Singapore-headquartered digital customer experience (CX) provider, announced it had received a preliminary non-binding proposal from Laurent Junique to be acquired at $6.60/ADS.
On the 1st March, TDCX entered in a definitive agreement by way of a short form merger at US$7.20/ADS, a 48% premium to undisturbed.
As Laurent Junique holds 98.4% of the voting power, there is no shareholder vote on the merger. This is done. The Offer should close in the 2Q24.

May Lockup Release & April SSF Listing May Lead to Weird Trading Dynamics for Ecopro Materials

May 17th, all eyes on EcoPro Materials for a buzzed-about lockup release. BRV Capital holds 24.5% stake, 17M shares. Lockup ends May 16th; they’re free to sell off without constraints.
Apparently, they’re eager to cash out, with a profit margin around 30 times and 7 years invested. Many at Yeouido bet they’ll sell out once the lockup’s over.
We might start building a shorting position with futures targeting this lockup release from April 22nd. This could stir up some weird backwardation, which could give us another trading opportunity.

Ecopro Materials: Potential Selling by Second Largest Shareholder Post End of Lockup Period in May

We discuss the strong likelihood of potential selling of EcoPro Materials by BRV Capital Management (the second largest shareholder of Ecopro Materials with a 24.7% stake) in May 2024.
BRV Capital Management’s stake in Ecopro Materials is currently worth 3.1 trillion won. In the past seven years, BRV Capital Management has invested about 93 billion won in Ecopro Materials.
On 4 March, Ecopro Materials announced it has entered into a contract to supply precursor to a U.S. auto company. There is some local speculation that this could be Tesla.

Genex Power (GNX AU): J-Power’s Dual-Track Non-Binding Proposal

Genex Power Ltd (GNX AU) has disclosed a non-binding scheme proposal from Electric Power Development C (9513 JP) at A$0.275, a 48.6% premium to the undisturbed price of A$0.185.
If the scheme fails, J-Power will launch an off-market takeover offer with a 50.1% minimum acceptance condition at A$0.270 per share. The dual-track bid is meant to counter Skip’s stake.
The Board has granted exclusive due diligence until 31 March. The offer is attractive, but the scheme’s completion hinges on Skip Capital’s acceptance.

Vinda International (3331 HK): Pre-Condition Satisfied

Vinda International (3331 HK) has announced the pre-condition for Sukanto Tanoto’s HK$23.50 voluntary offer is satisfied. The composite document will be despatched on or before 11 March.
The offeror has received irrevocables from Essity (ESSITYB SS) and Mr Li, representing 72.62% of outstanding shares, which satisfies the 50% minimum acceptance condition.
Including irrevocables, the offeror currently represents 80.31% of outstanding shares. The offeror intends to exercise compulsory acquisition rights. The tight 0.4% gross spread reflects a done deal.

NIFTY100 Low Volatility 30 Index Rebalance Preview: Titan Could Replace IOCL

With the review period complete, Titan Co Ltd (TTAN IN) should replace Indian Oil Corp (IOCL IN) in the Nifty100 Low Volatility 30 Index at the close on 27 March.
Constituent changes, volatility changes and capping changes will result in one-way turnover of 13.2% resulting in a one-way trade of INR 4.2bn.
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.

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Mar 04

Daily Brief Event-Driven: JAPAN FLOW: Foreigners Vs Cross-Holding Unwinds Vs Buybacks Vs Pensions and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JAPAN FLOW: Foreigners Vs Cross-Holding Unwinds Vs Buybacks Vs Pensions
Korea Value-Up Index: Probable Constituents & Impact of NPS’ US$8.2bn Allocation
S&P 500/400/600 Index Rebal – It’s Not The Trade You Think
S&P/ASX Index Rebalance (Mar 2024): Changes, Flows, Impact, Shorts & Positioning
HK Connect SOUTHBOUND Flows (To 1 Mar 2024); Continued Big Buys of SOEs (Getting Boring to Say This)
A/H Premium Tracker (To 1 Mar 2024): Liquid AH Premia Still Wide
Quiddity TDIV/50/100 Mar 24 Rebal: Disappointing Result but Trade Successful So Far; Bail Out Now!
Mainland Connect NORTHBOUND Flows (To 1 Mar 2024): Foreigners Buy a New Set of Names
STTF Index Rebalance: The Widening Emperador Spread
What We Need to Know About Speeding Up Delisting in Korea

JAPAN FLOW: Foreigners Vs Cross-Holding Unwinds Vs Buybacks Vs Pensions

For years I have tracked investor category flows in Japanese stocks because I find them quite informative. I write about them every so often in an insight series JAPAN FLOW.
The series, which I have written about for years, suggests foreign investors invest in Japan pro-cyclically and that correlates well to One (relatively) Simple Indicator.
Foreigners have a lot of ammunition left. But cross-holding unwinds are picking up, and buybacks are too, and dividend reinvestments are smaller than public pension selling. Which way next?

Korea Value-Up Index: Probable Constituents & Impact of NPS’ US$8.2bn Allocation

Media reports indicate that the National Pension Service (NPS) could invest up to KRW 11tn (US$8.2bn) in a new index tracking stocks with low Price to Book ratios.
Filtering stocks with market cap higher than US$500m, ADTV of atleast US$1m, div yield of atleast 1.5% and Price to Book less than 1 throws up 94 potential index candidates.
Choosing an index of 50 stocks will require managers to buy between 1.7-3.4% of the float on the stocks. Increasing the number of constituents will reduce the impact.

S&P 500/400/600 Index Rebal – It’s Not The Trade You Think

On Friday after the close, the S&P DJI Index Committee announced changes to the S&P 100, S&P500, S&P MidCap400, and S&P SmallCap600. Changes happen at the close 15 March 2024.
Super Micro Computer (SMCI US) and Deckers Outdoor (DECK US) replace Zions Bancorporation (ZION US) and Whirlpool Corp (WHR US) in the S&P500. 2 changes to 400, 6 to 600.
The immediate reaction was to send SMCI up 12.5%. That’s shortsighted. It pays to count the pennies involved. There are a LOT of pennies.

S&P/ASX Index Rebalance (Mar 2024): Changes, Flows, Impact, Shorts & Positioning

There is 1 change for the S&P/ASX20 Index, 2 changes for the S&P/ASX100 Index, 4 changes for the S&P/ASX200 INDEX and 14 adds/10 deletes for the S&P/ASX300 Index in March.
The largest impact is expected on the changes to the S&P/ASX 200 (AS51 INDEX) while flows are large among changes to the S&P/ASX 20 Index and S&P/ASX 100 Index too.
There has been a steady increase in cumulative excess volume for most stocks but there are a few where there has been a spike recently.

HK Connect SOUTHBOUND Flows (To 1 Mar 2024); Continued Big Buys of SOEs (Getting Boring to Say This)

A share indices were up on the week. HK stock indices were down except for HS Tech. H-shares with A-share pairs were up.
Net SOUTHBOUND buying was HK$9.1bn in the second post-holiday week after being +HK$20bn in the first week. LOTS of SOEs on the net buying side. Still.
SOUTHBOUND continues to buy high-div SOEs. ex-div is still three months away, and given the new KPIs discussed late January by SASAC official, these still seem to be appropriate targets.

A/H Premium Tracker (To 1 Mar 2024): Liquid AH Premia Still Wide

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 and NORTHBOUND flows net positive. NB 5 weeks in a row. AH premia rebounded slightly. AH Premia are still wide on average. Premia curves should still shift flatter.
Two Sessions seems like a good place to make positive public statements but recent speeches from the very top seem more oriented towards “The People Must Endure.”

Quiddity TDIV/50/100 Mar 24 Rebal: Disappointing Result but Trade Successful So Far; Bail Out Now!

The index changes for the March 2024 index rebal event for the T50/100 index family and the TDIV index were confirmed after market close on Friday 1st March 2024.
The confirmed changes for T50 and T100 were captured in our expectations but an additional change we expected did not materialize which adversely affected our flow expectations for March 2024.
In this insight, we take a close look at the breakdown of our final flow expectations for the upcoming Inclusion/Exclusion and Capping events.

Mainland Connect NORTHBOUND Flows (To 1 Mar 2024): Foreigners Buy a New Set of Names

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 23.5bn of A-shares on strong average activity after RMB +49bn the previous four trading weeks. More efforts by authorities to eliminate selling.
No finance names of any kind in the top ten this week after 5/10 the week before. Slight tendencies to trade on reversion.

STTF Index Rebalance: The Widening Emperador Spread

The SPDR Straits Times Index ETF (STTF SP) will need to sell Emperador (EMI SP) at the close of trading on 15 March.
Other global index trackers will need to sell Emperador (EMP PM) at the close on 15 March.
There will be around US$55m to sell across both lines and varying liquidity has opened up a huge spread between the listings.

What We Need to Know About Speeding Up Delisting in Korea

Korea’s authorities aim to streamline delisting and tighten rules for smooth market funds. 71 companies (17 in KOSPI, 54 in KOSDAQ) under review, about 8 trillion won tied up.
It’s unclear if this ties directly to the FSS chief’s mention of kicking non-compliant firms of the Value-up Program. Rumors hint at FSS-FSC differences. Impact on Value-up trading seems minimal.
Nonetheless, we must explore stocks that may gain from expediting delisting for the 71 companies under review.

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Mar 03

Daily Brief Event-Driven: S&P500 Index Rebalance: SPCY Additions & Large Impact and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

S&P500 Index Rebalance: SPCY Additions & Large Impact
(Mostly) Assia-Pac M&A: Alumina, Superloop, Qantm, Samsonite, ESR, APM , Adbri, CSR, Outsourcing
Weekly Deals Digest (03 Mar) – Aozora, Outsourcing, Tsuruha, Toei, Samsonite, Adbri, Alumina, APM
Index Rebalance & ETF Flow Recap: STAR50/100, FXI, NIFTY/NEXT50, S&P500, KOSPI, Goodman, Ecopro BM
Last Week in Event SPACE: Keisei Electric, CSR, Rakuten, HK Property, Aeon/TSURUHA/Welcia
Quiddity ASX Mar 24 Index Rebal: Many High-Impact Names

S&P500 Index Rebalance: SPCY Additions & Large Impact

Super Micro Computer (SMCI US) and Deckers Outdoor (DECK US) replace Whirlpool Corp (WHR US) and Zions Bancorporation (ZION US) in the S&P 500 INDEX at the close on 15 March.
There are a bunch of inclusions, deletions and migrations across the S&P 500 INDEX (SPX INDEX), the S&P Midcap 400 Index, and the S&P SmallCap 600 Index.
The largest flows will be in the S&P 500 INDEX (SPX INDEX) adds and the largest impact in the adds to the S&P SmallCap 600 Index.

(Mostly) Assia-Pac M&A: Alumina, Superloop, Qantm, Samsonite, ESR, APM , Adbri, CSR, Outsourcing

I tally 54 – 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 discussed this week on Smartkarma (possible four): Offers for Alumina (AWC AU), Superloop (SLC AU) & Qantm Intellectual (QIP AU); Samsonite (1910 HK)‘s ESR (1821 HK)‘s rumoured approaches.
Key updates took place on APM Human Services Internation (APM AU), Adbri (ABC AU), CSR Ltd (CSR AU), Weiqiao Textile Co (2698 HK), and Outsourcing Inc (2427 JP).

Weekly Deals Digest (03 Mar) – Aozora, Outsourcing, Tsuruha, Toei, Samsonite, Adbri, Alumina, APM

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: Toei Animation (4816 JP)‘s prices its US$550 million secondary offering and Trial Holdings (5882 JP) IPO.
Event-Driven developments: Aozora Bank Ltd (8304 JP), Outsourcing Inc (2427 JP), Tsuruha Holdings (3391 JP), Samsonite (1910 HK), Alumina Ltd (AWC AU), APM Human Services Internation (APM AU).

Index Rebalance & ETF Flow Recap: STAR50/100, FXI, NIFTY/NEXT50, S&P500, KOSPI, Goodman, Ecopro BM

The last week was a very busy one. The coming week has some announcements and implementations but is a relatively quieter one.
The SSE STAR50 (STAR50 INDEX) and STAR100 Index changes for March will be implemented at the close on Friday, the 8th.
Another week of inflows for the iShares Emerging Markets ex-China (EMXC US) ETF as creations cross US$2bn for 2024. ETF AUM has gone from US$420m in 2021 to US$11bn now!

Last Week in Event SPACE: Keisei Electric, CSR, Rakuten, HK Property, Aeon/TSURUHA/Welcia

Apart from being mildly EPS accretive, Keisei Electric Railway Co (9009 JP)‘s buyback is a means to get crossholders out, therefore, it may not have much direct market impact.
Cie De Saint-Gobain (SGO FP) firms a decade-high-plus Offer price for CSR Ltd (CSR AU) – this is done.
Rakuten Group (4755 JP) announced it would propose an amendment to its Articles at the AGM (28 March) to issue “Bond-Type Class Shares.” First reaction: You wot, mate?

Quiddity ASX Mar 24 Index Rebal: Many High-Impact Names

The results for the March 2024 index rebal event for ASX indices were announced after the close on Friday 1st March 2024.
There is one change for ASX 20, two changes for ASX 100, and four changes for ASX 200.
There are 14 ADDs and 10 DELs for ASX 300 and while most of these are small-size flow names some of them have more than 15x ADV to trade.

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Mar 02

Daily Brief Event-Driven: Currys Rejects Second Elliot Approach and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Currys Rejects Second Elliot Approach
NPN X PRX Discount Update Discounts Widen to Pare Back Strong YTD Gains

Currys Rejects Second Elliot Approach

Currys has rejected a second proposal from Elliot, at 67p/share, 8% higher. The Board rejected this second proposal, stating it undervalued the company and its potential for future growth.
My fair value estimate is 76p/share (FY24e PE of 10.2x vs 9.1x currently, and FY25e PE of 8.9x vs 7.9x currently). JD.com’s surely negotiating a friendly offer ahead of 18 March.
A major shareholder advises not to engage with Elliot unless a 75p/share proposal is tabled. JD.com, a trade buyer, should be capable of meeting the Board’s expectations. Reiterate long.

NPN X PRX Discount Update Discounts Widen to Pare Back Strong YTD Gains

By Charlotte van Tiddens, CFA

During the last 3 weeks, Naspers and Prosus have come under pressure relative to their underlying portfolios.
Since reaching a new all-time low on the 12th of February, Naspers’ discount has widened by 6 percentage points to 40.7%.
Prosus’ discount has widened 5.7 percentage points to 35.4%. Naspers and Prosus are down 9% and 8% respectively, relative to a decline of 1.9% for Tencent in ZAR.

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Mar 01

Daily Brief Event-Driven: TOPIX “Big April Basket” 2024 Expectations: More High-Conviction Names; Better Trade Ideas and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

TOPIX “Big April Basket” 2024 Expectations: More High-Conviction Names; Better Trade Ideas
Clearing up Confusion About Bringing Back Short Selling in Korea
Sankei Real Estate (2972) Sponsor Buy Now On And It Isn’t Small (Even if the REIT Is)
FXI Rebalance: Three Buys. Three Sells
Block Deal Sale of 1.7% Stake of Woori Financial by IMM Private Equity
End of Mandatory Lock-Up Periods for 51 Companies in Korea in March 2024
(Mostly) Asia M&A, Feb 2024: Lawson, Altium, CSR, TCM, Boral, APM, Roland DG, Ssangyong Cement

TOPIX “Big April Basket” 2024 Expectations: More High-Conviction Names; Better Trade Ideas

The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation.
For companies with “low liquidity” the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation.
Every April, the application of this liquidity factor is reviewed by the TSE. In this insight, we take an early look at what could happen in April 2024.

Clearing up Confusion About Bringing Back Short Selling in Korea

Government sees foreign investors as key for Corporate Value-Up success, considering reinstating short selling.
Planning to expand short selling beyond 350 stocks, but anticipating pushback from retail investors, likely capping additional stocks around 100.
The head of the Financial Supervisory Service will formally disclose these plans during the upcoming short selling conference scheduled for March 13th.

Sankei Real Estate (2972) Sponsor Buy Now On And It Isn’t Small (Even if the REIT Is)

Last October, I wrote about the plan the sponsor of Sankei Real Estate (2972 JP) had to exchange buildings with the REIT to clean it up, then buy more units.
Today they announced the completion of the Portfolio Rebalancing Plan started in March 2023. And the plan to buy more units. The assets transferred out were gone at end Jan-2024.
Now that’s done, and there are units to buy. Maximum 46,652 units over maximum 220 days.

FXI Rebalance: Three Buys. Three Sells

Yankuang Energy, CGN Power and China Coal Energy are buys, China Resources Beer, China Vanke and Wuxi Biologics are sells for the iShares China Large-Cap (FXI) (FXI US) in March.
Shorts have been spiking in China Vanke (2202 HK) while there has been covering in Yankuang Energy (1171 HK), China Resources Beer Holdings (291 HK) and Wuxi Biologics (2269 HK).
There has been an increase in cumulative excess volume on all the adds and deletes over the last few months. There could be more over the next week.

Block Deal Sale of 1.7% Stake of Woori Financial by IMM Private Equity

IMM Private Equity announced that it is selling a 1.7% stake in Woori Financial Group (316140 KS) in a block deal sale.
The number of shares subject to sale is 12.56 million, or 177.7 billion won to 181.5 billion won.
Block deal sale discount range is reasonable, valuation multiples are low, and we expect continued positive capital inflow into stocks related to Corporate Value Up in the next 12 months.

End of Mandatory Lock-Up Periods for 51 Companies in Korea in March 2024

We discuss the end of the mandatory lock-up periods for 51 stocks in Korea in March 2024, among which 5 are in KOSPI and 46 are in KOSDAQ.
These 51 stocks on average could be subject to further selling pressures in March and could underperform relative to the market.
The top five market cap stocks including those of which at least 1% of outstanding shares could be sold include APR, WCP, DS Dansuk, GI Innovation, and Geolit Energy.

(Mostly) Asia M&A, Feb 2024: Lawson, Altium, CSR, TCM, Boral, APM, Roland DG, Ssangyong Cement

For the month of February 2024, 15 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$20bn.
The average premium for the new transactions announced (or first discussed) in February was ~33%.
This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

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Feb 29

Daily Brief Event-Driven: Hong Kong To Scrap All “Spicy Measures” (Property Cooling Measures) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hong Kong To Scrap All “Spicy Measures” (Property Cooling Measures)
Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger! [Redux]
Confirmed: Conditions & Schedule of Block Deals Pre-Disclosure Rules in Korea
Hong Kong: Stamp Duties Axed; Mortgage Rules Relaxed
JAPAN ACTIVISM: Is Murakami-San Going To Do A PacMetals Rug Pull on Aozora? Or Is This For Real?
Aozora Bank (8304 JP): Murakami Becomes a Substantial Shareholder
APM Human Services (APM AU): CVC’s 141% Offer Premium
BAT’s Possible US$2.5bn ITC Selldown – Will Be Well Flagged but Still Won’t Be an Easy One to Digest
Aeon (8267 JP), Tsuruha (3391 JP) And Welcia (3141 JP)’s Long-Dated Plan
Goodman Group (GMG AU): Positioned for Outperformance

Hong Kong To Scrap All “Spicy Measures” (Property Cooling Measures)

RTHK just reporting that HK Finance Secretary Paul Chan has said in his budget speech that HK will remove all property cooling measures in place, with immediate effect.
That would be That is Special Stamp Duty, Buyer’s Stamp Duty, New Residential Stamp Duty. “Measures no longer necessary given the current economic and market conditions.”
This should cause people to get excited short-term about property developers.

Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger! [Redux]

The first piece had a question mark in the title. This one has an exclamation point. The exclamation point has value for one investor. Other people? Not so much.
Today post-close we got the deal. I was a little surprised it came this fast, but it’s now mostly done it appears – largely as predicted in the last piece.
There are things one can probably read into the details. It is probably worth thinking about those, and how those details affect the industry.

Confirmed: Conditions & Schedule of Block Deals Pre-Disclosure Rules in Korea

Insiders must disclose transaction details, complete deals within 30 days, limit deviations to 30%, and submit disclosures 30 days before transactions.
Financial investors, including institutional ones, are exempt. This encompasses local pension funds (including NPS) and foreign financial investors. Deals under 1% of total shares and less than ₩5B are exempt.
Confirmation of the timeline indicates many block deals before July. We should hunt potential deals for proactive setups. Also, we should monitor basis widening in futures due to short-selling ban.

Hong Kong: Stamp Duties Axed; Mortgage Rules Relaxed

Hong Kong residential property prices declined 7% in 2023 and are down >20% from the 2021 peak in 2021. The average price of offices also declined ~7% in 2023.
Scrapping property cooling measures, such as the special stamp duty applied to homes resold within 24 months, have been rumoured, to push up housing prices.
In today’s annual budget, we got those. And then some.

JAPAN ACTIVISM: Is Murakami-San Going To Do A PacMetals Rug Pull on Aozora? Or Is This For Real?

Yesterday after the close, well-known Japanese activist Murakami-san’s preferred entity City Index Eleventh filed a Large Shareholder Report.
The blast across Bloomberg was “*AOZORA 5.4% STAKE REPORTED BY CITY INDEX ELEVENTH.” Sounds exciting after the shares dropped 34% in two days earlier this month after reporting big writedowns.
But there has to be a question here. Why? And Why this way? And what kind of activism would be possible?

Aozora Bank (8304 JP): Murakami Becomes a Substantial Shareholder

Murakami’s entity, City Index Eleventh, reported a 5.42% shareholding in Aozora Bank Ltd (8304 JP). Murakami started buying a day after the disastrous 3QFY23 results.
Murakami’s average buy-in price is JPY2,137.88 per share, a 34% discount to the pre-3QFY23 results share price.
Murakami’s disclosure suggests two possibilities: the start of an activist campaign or a short-term trading play replicating the Pacific Metals (5541 JP) playbook.

APM Human Services (APM AU): CVC’s 141% Offer Premium

Back on the 19th Feb, employment and disability services play APM Human Services Internation (APM AU) rejected PE-outfit CVC Asia Pacific’s A$1.60 proposal, a 93% premium to undisturbed.
Undeterred, CVC has returned with A$2.00/share indicative Offer, by way of a Scheme, a 141% premium to undisturbed; yet a 44% discount to APM’s November 2021 IPO price of A$3.55/share.
APM has determined it will engage and provide CVC with a four-week period of exclusivity.

BAT’s Possible US$2.5bn ITC Selldown – Will Be Well Flagged but Still Won’t Be an Easy One to Digest

By Sumeet Singh

Earlier this month, British American Tobacco (BATS LN)’s management stated that they were reviewing their stake in ITC Ltd (ITC IN) to enhance its balance sheet flexibility.
BAT has owned its stake in ITC for over a century and remains its largest shareholder.
In this note, we talk about the possible deal structure and dynamics.

Aeon (8267 JP), Tsuruha (3391 JP) And Welcia (3141 JP)’s Long-Dated Plan

Aeon Co Ltd (8267 JP), Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) have announced an alliance to establish the largest drugstore alliance in Japan by December 2027.
Aeon will carry out several Tsuruha transactions – buy Oasis 13.58% stake at JPY15,500 per share and, on receiving regulatory approval, reach 27.17% of the voting rights.
The agreements involve merging Tsuruha and Welcia through a share exchange offer and Aeon subsequently increasing its Tsuruha voting rights from 27.17% to less than 51%.

Goodman Group (GMG AU): Positioned for Outperformance