Category

Event-Driven

May 18
0

Daily Brief Event-Driven: Naspers X Prosus (NPN and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Naspers X Prosus (NPN, PRX): Market Reacts Negatively to Appointment of CEO
  • EQD | The Nikkei Can Go Higher From Here

Naspers X Prosus (NPN, PRX): Market Reacts Negatively to Appointment of CEO

By Charlotte van Tiddens, CFA

  • Naspers and Prosus have announced the appointment of Fabrício Bloisi as Group CEO, effective from 1 July 2024. Unlike his predecessor, Bloisi has an entrepreneurial background.
  • Prosus and Naspers have sold off on the news. Prosus is down 1.7%, widening the discount by 80bps. Naspers is down 1.3%, widening the discount by 50bps.
  • Since Bob van Dijk stepped down in September last year, both discounts have narrowed.

EQD | The Nikkei Can Go Higher From Here

By Nico Rosti

  • The Nikkei 225 INDEX has been rallying a bit last week and closed the week up. A rebound from the previous downtrend is underway.
  • A temporary bottom may have been established in May, it is not clear if the index is about to go lower or higher, but our pattern model readings suggests higher.
  • If the index continues to rally, the first major resistance area will be around 40k.

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May 17
0

Daily Brief Event-Driven: Sep24 Nikkei 225 Rebal – Still 1 ADD (Ryohin Keikaku) and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Sep24 Nikkei 225 Rebal – Still 1 ADD (Ryohin Keikaku), 1 DELETE, and 1 Very Large Very Dark Horse
  • L’Occitane (973 HK): Dilemma as the Share Alternative Pre-Condition Met
  • L’Occitane (973 HK): On Activism And The Scrip Alternative
  • Kansai Food Market (9919) Minorities Get Squeezed into H2O Retailing (8242)
  • Business On The Fly: Malaysia Airports (MAHB MK)’s RM11.00/Share Offer
  • Quiddity Leaderboard ASX Jun 24: Intra-Review Replacement Surprise Possible
  • Block Deal Sale of 3% Stake in HD Hyundai Heavy Industries
  • Huafa Property (982 HK)’s Potential Offer
  • Potential Samsung Life Insurance Block Deals, Likely to Be Triggered by E Mart

Sep24 Nikkei 225 Rebal – Still 1 ADD (Ryohin Keikaku), 1 DELETE, and 1 Very Large Very Dark Horse

By Travis Lundy

  • The Sep 2024 Nikkei 225 Review data set is mostly done, and one can interpolate results relatively accurately. It still leaves us with one ADD, one DELETE, and capping fun.
  • Recently, Yanai-san sold more Fast Retailing (9983 JP). There is more Real World Float- more active holders own more stock (which may mean less interest to buy later).
  • There is a dark horse candidate which is on investor radar for other reasons. It would not be out of the question, but the precedent is old, and different.

L’Occitane (973 HK): Dilemma as the Share Alternative Pre-Condition Met

By Arun George

  • L’Occitane (973 HK) announced that the share alternative pre-condition was satisfied. However, The share alternative offer is at the offeror’s discretion and with the consent of the financing parties. 
  • The share alternative offer poses a dilemma due to the requirement to satisfy the minimum acceptance condition while not breaching the upper limit of the share alternative offer.
  • The share alternative offer is a play on higher multiples by relisting the business. At HK$50.00, L’Occitane would trade in line with its median global beauty peers’ multiples.

L’Occitane (973 HK): On Activism And The Scrip Alternative

By David Blennerhassett

  • In the 29th April HK$34/share VGO announcement, a share scrip alternative may be afforded if 10% of L’Occitane (973 HK)‘s disinterested shareholders expressed interest by the 15th May
  • That pre-condition has been satisfied. However, we are none the wiser whether you receive shares of the levered-up Bidco, at some undetermined scrip ratio; or keep shares of L’Occitane as-is.
  • Some shareholders, like Butler Hall, considered terms low-balled. They now have the option to rollover. But there are still other large activists on the register, whose intentions are not known. 

Kansai Food Market (9919) Minorities Get Squeezed into H2O Retailing (8242)

By Travis Lundy

  • Two and a half years ago, H2O Retailing (8242 JP) the 10.9% owner, arranged to merge its own units into Kansai Super Market (9919 JP) to get control. OK Corp complained.
  • OK Corp offered to double the price in a Tender Offer but wouldn’t go hostile. KSM/KFM said no go. Shares popped to ¥2,000+ then when the deal failed, they fell. 
  • H₂O ended up with 58% (64.9% of votes now). The ultimate goal was to swallow it paying zero premium. On 15 May, it announced the merger to do just that. 

Business On The Fly: Malaysia Airports (MAHB MK)’s RM11.00/Share Offer

By David Blennerhassett

  • Khazanah Nasional, the EPF,  the Abu Dhabi Investment Authority, and Global Infrastructure Partners, are offering to buy all shares not already owned in Malaysia Airports Holdings (MAHB MK) at RM11.00/share.
  • The pre-conditional voluntary Offer price is a 5.77% premium to last close; but a life-time high. The Offeror consortium collectively holds 41.22% of shares out.
  • The pre-cons include regulatory approvals (in Malaysia, Turkey, Saudi Arabia, and Egypt). The Offer is subject to a 90% acceptance condition; which may be reduced. 

Quiddity Leaderboard ASX Jun 24: Intra-Review Replacement Surprise Possible

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run-up to the June 2024 index rebal event.
  • We expect one ASX 20 change and two ASX 100 changes during the regular rebalance event.
  • For the ASX 200 index, there could be two intra-review changes in the month of June 2024 and one of those names could be a surprise.

Block Deal Sale of 3% Stake in HD Hyundai Heavy Industries

By Douglas Kim

  • HD Korea Shipbuilding & Offshore Engineering (009540 KS) plans to sell 2.66 million shares (3% of outstanding shares) of HD Hyundai Heavy Industries (329180 KS) in a block deal sale.
  • We would avoid participating in this block deal sale and we have a Negative view of HD Hyundai Heavy Industries (329180 KS) over the next one year.
  • After this block deal sale, we believe there could be concerns about HD Korea Shipbuilding & Offshore Engineering potentially selling additional shares of HD HHI in the next 2-3 years.

Huafa Property (982 HK)’s Potential Offer

By David Blennerhassett

  • Huafa Property Services Group (982 HK) is currently suspended pursuant to the Takeovers Code. 
  • This SOE-backed property management play recently announced its highest-ever earnings.
  • Shares have gained ~32% in the past fortnight, touching a three-year high. IF an Offer were to unfold, expect an Offer Price ~10% above the last close. 

Potential Samsung Life Insurance Block Deals, Likely to Be Triggered by E Mart

By Sanghyun Park

  • Talks circulate that E-Mart may sell its 5% stake in Samsung Life Insurance, valued around ₩1T, due to fundraising needs linked to SSG.com investors’ put options.
  • Initially, Starbucks Korea was a potential sale, but U.S. HQ approval makes it unfeasible. Shinsegae L&B and Food weren’t enough to raise funds, leading E-Mart to focus on Samsung Life.
  • E-Mart’s block deal timing is uncertain due to potential legal disputes over unmet put option conditions, yet recent local market discussions suggest E-Mart may avoid legal battles.

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May 16
0

Daily Brief Event-Driven: Japan Post Holdings (6178) – Bigger Better Bullish Buyback With Caveats and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Japan Post Holdings (6178) – Bigger Better Bullish Buyback With Caveats
  • Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June
  • Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
  • Malaysia Airports (MAHB MK): Pre-Conditional Voluntary Offer at RM11.00
  • S Line (9078 JP) TOB/MBO at 0.57x Book – Wrong Price by Far but Only AGGRESSIVE Activism Blocks It
  • Lock & Lock: Second Tender Offer by Affinity Equity Partners
  • SK Group’s Restructuring Plans for SK IET and an Earnings Shock for SK IET in 1Q 2024
  • Quiddity Leaderboard SET50 Jun 24: BANPU Vs SAWAD Has to Be Monitored Closely
  • Liquid Universe of European Ordinary and Preferred Shares: May‘24 Report
  • Ecopro Materials Lockup Expiry – US$1.5bn Lock-Up Expiry, Can Expect Selling Pressure

Japan Post Holdings (6178) – Bigger Better Bullish Buyback With Caveats

By Travis Lundy

  • Today, Japan Post Holdings (6178 JP) announced results (and Mar25 guidance) as did its subsidiaries Japan Post Insurance (7181 JP) and Japan Post Bank (7182 JP). 
  • There are a number of interesting things in all the announcements/presentations but the most interesting one for JPH holders is a big buyback. Another one.
  • The company has announced a ¥350bn buyback. It is larger than last year’s (¥300bn) buyback and has another important difference.

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June

By Brian Freitas

  • Post market close tomorrow, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 7 June.
  • There were no constituent changes to the index in March. We highlight ten profitable and eligible stocks that could be added to the index in June.
  • Changes to the Hang Seng Industry Classification System (HSICS) could lead to inclusions for the Information Technology industry while there could also be inclusions for the underweighted Healthcare industry.

Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows

By Brian Freitas

  • Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
  • If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
  • We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.

Malaysia Airports (MAHB MK): Pre-Conditional Voluntary Offer at RM11.00

By Arun George

  • Malaysia Airports Holdings (MAHB MK)’s pre-conditional voluntary conditional offer from a four-member consortium is RM11.00, a 5.8% premium to the last close. 
  • Despite the offer representing an all-time high, the 90% minimum acceptance condition could be challenging due to the low takeover premium and discount to historical and peer multiples. 
  • The consortium can overcome issues satisfying the minimum acceptance condition by bumping the offer or lowering the acceptance condition. 

S Line (9078 JP) TOB/MBO at 0.57x Book – Wrong Price by Far but Only AGGRESSIVE Activism Blocks It

By Travis Lundy

  • Today, S Line Co Ltd (9078 JP) announced its CEO would conduct a Tender Offer MBO to buy out the ¥50bn-target revenue logistics company, at 0.6x book. 
  • The company announced results with revenues up. But withdrew its existing MTMP which said revenues would be up 10% from here to March 2025 and ROE would be higher.
  • This is the wrong price. It should engender some upset, but active investors own almost nothing it seems. 

Lock & Lock: Second Tender Offer by Affinity Equity Partners

By Douglas Kim

  • On 15 May, it was reported in the local media that Affinity Equity Partners (AEP) is expected to launch a second tender offer for Lock & Lock (115390 KS).
  • The tender offer price in this second tender offer is 8,750 won (same as the first tender offer). The second tender offer will last from 16 May to 5 June.
  • In the first tender offer, only about half of the target was reached. There was a strong backlash from investors due to low tender offer price.

SK Group’s Restructuring Plans for SK IET and an Earnings Shock for SK IET in 1Q 2024

By Douglas Kim

  • According to Maekyung Business Daily, SK Innovation maybe planning to sell its controlling interest in SK IE Technology (SK IET) which produces separators for rechargeable batteries.
  • SK On is experiencing financial difficulties due to the sluggish demand for EVs. SK Innovation’s 61.2% stake in SK IET is worth 2.5 trillion won. 
  • SK IE Technology had an earnings shock in 1Q 2024. It had sales of 46.2 billion won (67.8% lower than consensus) and operating loss of 67.4 billion won 1Q 2024.

Quiddity Leaderboard SET50 Jun 24: BANPU Vs SAWAD Has to Be Monitored Closely

By Janaghan Jeyakumar, CFA

  • The SET50 index tracks the performance of the top 50 largest and most liquid names listed on the Stock Exchange of Thailand (SET).
  • In this insight, we take a look at the potential ADDs/DELs for SET during the index rebal event in June 2024.
  • Although 80% of the 3-month reference period is now complete, it is still possible for the rankings to change.

Liquid Universe of European Ordinary and Preferred Shares: May‘24 Report

By Jesus Rodriguez Aguilar

  • Since mid-April, spreads have generally tightened across our European liquid universe of ordinary and preferred shares (12 have tightened, 7 widened). Views are unchanged. 
  • Recommended trades long preferred / short ordinary shares: Atlas Copco, Danieli, Grifols (see section on the company), Media-for-Europe, Sixt, Volkswagen.
  • Recommended trades long ordinary / short preferred shares: Henkel, SSAB Svenska Stal, Roche.

Ecopro Materials Lockup Expiry – US$1.5bn Lock-Up Expiry, Can Expect Selling Pressure

By Ethan Aw

  • EcoPro Materials (450080 KS) raised around US$320m in its Korean IPO, after pricing the deal at KRW36,200/share. Its six-month IPO lockup will expire on 17th May 2024.
  • Ecopro Materials (EPM) manufactures and sells high-nickel precursors, one of the key materials for high-nickel cathode materials for secondary (rechargeable) batteries.
  • In this note, we will talk about the lock-up dynamics and updates since our last note.

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May 15
0

Daily Brief Event-Driven: Tencent Q1 FY24 Results Due and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Tencent Q1 FY24 Results Due, a Look into What Is Priced
  • Key Timing Window for a Surge in Block Deals Before Pre-Disclosure Takes Effect in July
  • Tencent (700 HK): Q1 FY24 Results Quick Take, Margin Expansion Drives Decent Set of Results
  • Another HUGE Ushio (6925) Buyback After A HUGE Buyback Last Year
  • Japan – Another Big Round of Passive Selling
  • Great Eastern (GE SP): Getting Technical
  • Quiddity HSTECH Jun 24 Final Expectations: US$1.6bn One-Way; Li Auto, JD, Xiaomi, Meituan, & Tencent
  • Quiddity HSCEI Jun 24 Final Expectations: 2 Changes Likely; US$496mn One-Way Flow

Tencent Q1 FY24 Results Due, a Look into What Is Priced

By Charlotte van Tiddens, CFA

  • Tencent is due to release Q1 FY24 results today. The earnings call is scheduled for 14:00 SAST
  • In this note, we unpack what is priced and how Tencent has performed relative to constituents in the HSTECH index since our last update (29 April).
  • We also provide an update on how the discounts of Naspers and Prosus have traded.

Key Timing Window for a Surge in Block Deals Before Pre-Disclosure Takes Effect in July

By Sanghyun Park

  • Anticipation grows for increased block deals before July 24th’s pre-announcement rule takes effect, emerging as a key investment focus in the local market.
  • The local market expects heightened activity in the three weeks post-May 15th, following first-quarter earnings announcements, a strategic move to mitigate insider trading controversies.
  • Local traders eagerly await which companies will capitalize on the post-first-quarter earnings window, with a highly anticipated block deal involving SK Innovation selling a portion of its stake in SKIET.

Tencent (700 HK): Q1 FY24 Results Quick Take, Margin Expansion Drives Decent Set of Results

By Charlotte van Tiddens, CFA

  • Tencent reported a decent set of results for Q1 FY24. Revenue for the quarter was up 2.8% QoQ and 6.3% YoY, ahead of consensus estimates (2.3% & 5.9%).
  • The gross margin came in at 53%, 3 percentage points ahead of consensus, and an increase of 7 percentage points on Q1 FY23.
  • The gross margin for the Fintech and Business Services segment, which accounts for 33% of revenue, increased by 12 percentage points to 46% (consensus 42.6%).

Another HUGE Ushio (6925) Buyback After A HUGE Buyback Last Year

By Travis Lundy

  • Last year with earnings, Ushio Inc (6925 JP) announced a HUUUGE buyback discussed in  HUUUGE Ushio (6925) Buyback. The headline was 17% of shares out. They ended up buying 13.2%. 
  • Last year the stock popped on the news. Then shares went sideways for months. Then they went up on stable (bad) earnings guidance in H2. Today they beat Q3-updated guidance.
  • But today they announced a “new growth strategy” to 2030, and guided to a SHARP (-60%) drop in OP and NP to March 2025, and announced a HUUUGE Buyback. Again.

Japan – Another Big Round of Passive Selling

By Brian Freitas

  • There are 15 stocks in Japan that will be sold by passive trackers at the close on 31 May.
  • Short interest has been increasing in these stocks over the last few months and there will be covering on implementation date.
  • Cumulative excess volume on all stocks has risen in the last couple of months though the pace of the increase has varied.

Great Eastern (GE SP): Getting Technical

By David Blennerhassett

  • Great Eastern Holdings (GE SP) has consistently traded through OCBC (OCBC SP)‘s Offer terms from the onset. 
  • OCBC did not declare its S$25.60 cash Offer final. And someone appears to be accumulating a stake to block an Exit/Delisting Offer, presumably towards negotiating a bump in terms.
  • But what happens if GE’s free float falls <10% at the close of the Offer and GE is suspended? And OCBC has no intention of restoring the float?

Quiddity HSTECH Jun 24 Final Expectations: US$1.6bn One-Way; Li Auto, JD, Xiaomi, Meituan, & Tencent

By Janaghan Jeyakumar, CFA

  • 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.
  • The final results for the June 2024 index rebal event will be confirmed after market close on Friday 17th May 2024.
  • In this insight, we take a look at our latest flow expectations.

Quiddity HSCEI Jun 24 Final Expectations: 2 Changes Likely; US$496mn One-Way Flow

By Janaghan Jeyakumar, CFA

  • The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
  • The index changes and indicative weights for the June 2024 index rebal event will be announced after market close on Friday 17th May 2024.
  • In this insight, we take a look at the potential index changes and our latest flow expectations.

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May 14
0

Daily Brief Event-Driven: ESR Group (1821 HK): Offer Musings and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • ESR Group (1821 HK): Offer Musings
  • ESR Group (1821 HK): Starwood Capital and SSW Partners Gauging a Privatisation Bid
  • Blackstone to Take I’rom (2372 JP) Private in MBO at ¥2800/Share (49% Premium)
  • Aozora (8304) – Daiwa Securities Group (8601) Tie-Up – Daiwa To Buy 15+%
  • Toppan Printing (7911) Accelerates Buyback Pace and Amount; But Crossholder Sales Lurk
  • Luxottica Buys Washin Optical, Paris Miki Next?
  • Softbank (9984 JP): Has Group NAV Peaked?
  • CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains
  • I’rom Group (2372 JP): Blackstone-Sponsored Pre-Conditional MBO at JPY2,800
  • A Comparison Between Ecopro Materials & HD Hyundai Marine Solution Post IPO

ESR Group (1821 HK): Offer Musings

By David Blennerhassett

  • Back in February this year, various media sources reported that the key shareholders of warehouse/fund management play ESR Group (1821 HK), were exploring options, including a privatisation.
  • Long-Term holders Warburg Pincus and Canadian pension fund OMERS hold 14% and 10.7% respectively. ESR co-founders/directors Jeffrey Shen, Stuart Gibson, Charles de Portes, and Hwee Chiang collectively hold another ~23%.
  • Shares in ESR were suspended this morning “pursuant to the Hong Kong Code on Takeovers and Mergers“.

ESR Group (1821 HK): Starwood Capital and SSW Partners Gauging a Privatisation Bid

By Arun George

  • ESR Group (1821 HK) is on a trading halt. Press reports suggest a consortium featuring Starwood Capital Group and SSW Partners is considering a buyout.
  • Starwood and SSW are approaching other shareholders to join the consortium. The other members are likely Warburg Pincus, OMERS, Jinchu Shen, and Hwee Chiang Lim.
  • The offer is likely to be structured as a Cayman privatisation scheme. Our best guess is that an offer of at least HK$14.00 per share would be needed. 

Blackstone to Take I’rom (2372 JP) Private in MBO at ¥2800/Share (49% Premium)

By Travis Lundy

  • Today SMO and CRO operator I’Rom Group (2372 JP) announced an MBO where Blackstone would be the sponsor.
  • From outward appearances, it would seem to be an estate management exercise. It’s not particularly rich as a bid, but it isn’t awful. 
  • I expect this gets done as Mori-san and family and friends appear to have 58% going in. Expected to start in June.

Aozora (8304) – Daiwa Securities Group (8601) Tie-Up – Daiwa To Buy 15+%

By Travis Lundy

  • Pre-Open on February 1 2024, Aozora Bank Ltd (8304 JP) announced writedowns and a forecast revision, lowering full-year net profit expectations from +¥24bn to -¥28bn.
  • Shares which had been trading relatively richly (and heavily shorted) fell sharply over the following days, then noted activist Murakami-san started buying in. Then he bought more and went silent.
  • Today, Aozora reported full-year earnings – much worse than expected and Mar25 guidance lower than already low Street estimates. And they are selling 15% stake to Daiwa Securities Group. Oof!

Toppan Printing (7911) Accelerates Buyback Pace and Amount; But Crossholder Sales Lurk

By Travis Lundy

  • Toppan Printing (7911 JP) established a new Medium-Term Management Plan with targets in May 2023. 8% ROE, PBR >1.0x. More DX business. More management modernisation. More ESG. Mooooarrrrr!
  • They also promised capital measures: ¥100bn of buybacks over three years. Total shareholder return of 50%+ over three years. More progress in selling down cross-holdings. 
  • Today the company reported better-than expected full-year revenues, OP, and Net Profit, added more to the buybacks, and shortened the buyback period to two years. Details matter.

Luxottica Buys Washin Optical, Paris Miki Next?

By Michael Causton

  • EssilorLuxottica has always played a long game in Japan but since 2018 the eyewear giant has been investing in local production and a growing store network.
  • As reported by Mark Chadwick,Travis Lundy and myself, Luxottica has a stake in Paris Miki Holdings (7455 JP) and the Japanese firm is a key strategic interest for EssilorLuxottica.
  • That Luxottica is increasing its investments in Japan retail through acquisition is evidenced by its takeover of Washin Optical, a 70-store eyewear chain, last month.

Softbank (9984 JP): Has Group NAV Peaked?

By Victor Galliano

  • Arm’s valuation has driven the group NAV to a new high at fiscal year-end in March; with Arm accounting for 45% of group equity value, NAV downside risk is high
  • JPY depreciation has been NAV supportive, but this could reverse; SVF2 remains very exposed to financing costs, with 87% of its equity value in private companies
  • Softbank shares trade at a 57% discount to the estimated NAV; yet the downside risks to Arm’s valuation, along with SVF2 valuation headwinds, should keep the discount wide

CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains

By Brian Freitas

  • The review period ended on 30 April, there are just over 2 weeks to announcement of the changes, and implementation will be done at the close on 14 June.
  • We forecast 5 potential changes for the index in June where there could be buying of 1.6-2.6x ADV on the adds and selling of 0.7-2.6x ADV on the deletes.
  • At the December 2023 rebalance, the adds outperformed the deletes in the weeks prior to announcement of the changes and then spiked post-announcement. Repeat this time?

I’rom Group (2372 JP): Blackstone-Sponsored Pre-Conditional MBO at JPY2,800

By Arun George

  • I’Rom Group (2372 JP) recommended a Blackstone (BX US)-sponsored pre-conditional MBO at JPY2,800, a 49.5% premium to the undisturbed price. 
  • Approvals under the competition laws of Japan and Australia are a precondition. The tender offer is expected to start in mid-June.
  • The offer is attractive and requires a 37% minority acceptance rate. While the timing of regulatory approvals is a risk, the transaction is a done deal.

A Comparison Between Ecopro Materials & HD Hyundai Marine Solution Post IPO

By Douglas Kim

  • In this insight, we make comparisons between EcoPro Materials (450080 KS) and HD Hyundai Marine Solution (443060 KS) post their IPOs
  • Ecopro Materials’ share price is likely to face continued weakness, especially with the potential for a major block deal sale by BRV Capital and end of the lock up period.
  • We believe that HD Hyundai Marine Solution’s share price has surged above its intrinsic value. More insiders are likely to start selling HD Hyundai Marine Solution in the coming months.

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May 13
0

Daily Brief Event-Driven: KDDI (9433) – Own Share Tender Offer and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!) Redux (Another Buyback in H2 Possible)
  • HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
  • Great Eastern Holdings (GE SP): OCBC’s Offer Needs a Bump to Achieve Privatisation Ambitions
  • Local Reports in Korea Regarding A Holdings Stake Sale Between Naver & Softbank
  • Merger Arb Mondays (13 May) – GA Pack, HEC Pharma, L’Occitane, Alps Logistics, Great Eastern
  • EQD / NSE Volatility Update / 06-May-24 to 10-May-24

KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!) Redux (Another Buyback in H2 Possible)

By Travis Lundy

  • In May 2023, KDDI Corp (9433 JP) announced a ¥300bn buyback program, did nothing for two months, then announced a Tender Offer Buyback to buy shares from Toyota. 
  • Toyota had increased its stake years before, then KDDI bought back shares from others, so Toyota was backing its ownership down. I discussed the relationships, history, etc, here.
  • This year, KDDI announced Friday with earnings that is buying back another large stake from Toyota. 

HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June

By Brian Freitas

Great Eastern Holdings (GE SP): OCBC’s Offer Needs a Bump to Achieve Privatisation Ambitions

By Arun George

  • OCBC (OCBC SP) has announced a voluntary unconditional general offer for Great Eastern Holdings (GE SP) at S$25.60 per share, a 36.90% premium to the undisturbed price.
  • OCBC aims to privatise Great Eastern by delisting resolutions or exercising compulsory acquisition rights. The offer has not been declared final.
  • While the offer is reasonable, it is not a knockout bid which would comfortably allow OCBC to privatise through either option. A bump is highly likely.   

Local Reports in Korea Regarding A Holdings Stake Sale Between Naver & Softbank

By Sanghyun Park

  • Naver doesn’t view the sale of its A Holdings stake unfavorably; insiders suggest it’s been planning this move since last year.
  • Market speculation suggests Naver was disappointed by Softbank’s rejection of CLOVA X in LINE, prompting plans to sell A Holdings stake for AI development. A sale agreement is expected soon.
  • The method through which Softbank secures funds for this acquisition is worth the attention from a short-term trading perspective.

Merger Arb Mondays (13 May) – GA Pack, HEC Pharma, L’Occitane, Alps Logistics, Great Eastern

By Arun George

EQD / NSE Volatility Update / 06-May-24 to 10-May-24

By Sankalp Singh

  • Election-Related volatility being reflected in options. India VIX has surged 70% over the past two weeks. Quarterly IVs have seen the largest rise as they capture election result date.
  • BankNifty IVs are finally responding as the market plays catch up to the bank regulator’s new-found aggressiveness
  • Elevated Vol-of-vol observed the past few weeks. Vol-regime Switching Model continues to point to “High & Down” state. Odds of switching to a “High & Up” state are increasing.

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May 12
0

Daily Brief Event-Driven: Greatview Aseptic (468 HK): Shandong Xinjufeng VGO Could Force Mengniu to Act and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Greatview Aseptic (468 HK): Shandong Xinjufeng VGO Could Force Mengniu to Act
  • HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder
  • Weekly Deals Digest (12 May) – China TCM, GA Pack, HEC CJ Pharma, CPMC, Alps Logistics, Infocom
  • (Mostly) Asia-Pac M&A: Namoi Cotton, Great Eastern, GAPack, Nihon, Chilled & Frozen, Shinko Electric
  • HK Connect SOUTHBOUND Flows (To 10 May 2024); Banks, Coal, and High-Div Energy/Materials Names
  • Cosmecca Korea Plans to Switch Listing from KOSDAQ to KOSPI
  • Last Week in Event SPACE: Alps Logistics, L’Occitane, Hanon Systems, Perpetual Ltd
  • Quiddity Leaderboard NIFTY Sep 24: Strong Flow Rationale for LONG Jio Financial – SHORT SBI Cards
  • Underexposed Flow Trading Opportunity: LONG Banks & SHORT LG Chem/Energy on June 14
  • Mainland Connect NORTHBOUND Flows (To 10 May 2024): So-So Volumes, As Did Not Play Catchup

Greatview Aseptic (468 HK): Shandong Xinjufeng VGO Could Force Mengniu to Act

By Arun George

HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder

By Arun George

  • Yichang HEC Changjiang Pharma (1558 HK)‘s pre-conditional privatisation from Sunshine Lake Pharma comprises scrip (0.263614 new offeror H Share per HEC CJ Pharma share) and cash (special dividend of HK$1.5).
  • The pre-condition is regulatory approvals from NDRC, MOFCOM, and SAFE. The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). 
  • There is valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, with no shareholder close to a blocking stake, the deal should get up.   

Weekly Deals Digest (12 May) – China TCM, GA Pack, HEC CJ Pharma, CPMC, Alps Logistics, Infocom

By Arun George

(Mostly) Asia-Pac M&A: Namoi Cotton, Great Eastern, GAPack, Nihon, Chilled & Frozen, Shinko Electric

By David Blennerhassett

HK Connect SOUTHBOUND Flows (To 10 May 2024); Banks, Coal, and High-Div Energy/Materials Names

By Travis Lundy

  • A-Shares only two days of the week and were up small Monday and Tuesday. H-shares took a breather Wednesday after trailing A-shares, then rallied hard on Thursday and Friday.
  • Net SOUTHBOUND buying was +HK11.3bn. Thursday saw a break of the SOUTHBOUND buying streak. 
  • The big news in China markets this week was the idea that mainland investors through SOUTHBOUND would no longer be hit with a 20% w/h tax on dividends.

Cosmecca Korea Plans to Switch Listing from KOSDAQ to KOSPI

By Douglas Kim

  • On 10 May, Cosmecca Korea (241710 KS) announced that it plans to switch its listing from KOSDAQ to KOSPI. 
  • The company plans to convene an extraordinary general meeting of shareholders on 29 August to finalize on the switching of Cosmecca Korea listing from KOSDAQ to KOSPI. 
  • Cosmecca Korea is one of the leading Korean ODM manufacturers of cosmetic products.

Last Week in Event SPACE: Alps Logistics, L’Occitane, Hanon Systems, Perpetual Ltd

By David Blennerhassett

Quiddity Leaderboard NIFTY Sep 24: Strong Flow Rationale for LONG Jio Financial – SHORT SBI Cards

By Janaghan Jeyakumar, CFA

  • NIFTY 50 represents the 50 largest stocks listed in the National Stock Exchange (NSE) of India and the NIFTY Next 50 index tracks the next 50 largest names.
  • In this insight, we take a look at the names leading the race to become ADDs/DELs during the September 2024 index rebal event.
  • More than 50% of the 6-month reference period is now complete. There are a couple of changes to the expected ADDs/DELs list since my last insight.

Underexposed Flow Trading Opportunity: LONG Banks & SHORT LG Chem/Energy on June 14

By Sanghyun Park

  • Despite time until screening, predictions likely hold due to market cap gaps; all candidates are banks, benefiting from recent momentum.
  • Historical patterns show profit-taking selling affecting price impact, particularly on additions with significant pre-inclusion price rises. Monitor banks’ pre-June 14th price appreciation to anticipate impact distortions.
  • Shorting LG Chem and LG Energy Solution based on high price cointegration, consider basket-trading them before the rebalancing, using the battery sector as a long hedge.

Mainland Connect NORTHBOUND Flows (To 10 May 2024): So-So Volumes, As Did Not Play Catchup

By Travis Lundy

  • 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 4.8bn of A-shares on high gross low net volume in the two days. NORTHBOUND bought Kweichow Moutai, banks, Haier Smarthome, etc.
  • HUGE week in H vs A (since the 30 April close). This may be colouring foreigner activity in As quite a bit. 

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May 11
0

Daily Brief Event-Driven: Nissin (9066) – Super Big Buyback Race-Walks the Governance Walk – Super Cheap Logistics Biz and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Nissin (9066) – Super Big Buyback Race-Walks the Governance Walk – Super Cheap Logistics Biz
  • GAPack (468 HK): Mengniu & Bi Weigh Options On Shandong Xinjufeng’s VGO
  • Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer
  • Eoflow Announced that US Federal Court Has Decided to Suspend the Effect of 1st Injunction Decision
  • Nihon Housing (4781 JP) – A Very Tight Register Sees an MBO At All Time Highs
  • EQD | KOSPI 200 Ready to Pullback

Nissin (9066) – Super Big Buyback Race-Walks the Governance Walk – Super Cheap Logistics Biz

By Travis Lundy

  • Yesterday after the close, Nissin Corp (9066 JP) announced earnings (down vs last year), guidance (back up partway to last year), and a sale of securities to raise ¥6+bn.
  • Nissin also announced an employee share incentive plan (¥900mm) and an adjustment to its MTMP from Apr24 to Mar27. Much lower revenues. Same OP. Higher net. Higher Div Payout ratio.
  • They also announced a really big buyback which should be done by the time people read this. It is really big.

GAPack (468 HK): Mengniu & Bi Weigh Options On Shandong Xinjufeng’s VGO

By David Blennerhassett

Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer

By David Blennerhassett

Eoflow Announced that US Federal Court Has Decided to Suspend the Effect of 1st Injunction Decision

By Douglas Kim

  • On 8 May, Eoflow announced that the U.S. federal court has decided to suspend the effect of the first injunction decision.
  • While the effect of the second preliminary injunction decision remains intact, Eoflow has requested a review of the suspension of the effect of the second revised injunction decision as well.
  • There has been a renewed optimism on Eoflow (294090 KS)’s share price in the past week which increased by 46% from 7 May to 10 May.

Nihon Housing (4781 JP) – A Very Tight Register Sees an MBO At All Time Highs

By Travis Lundy

  • Nihon Housing (4781 JP) is a business which manages real estate for owners (office, apartment management, janitorial, cleaning, facilities management, security, agency, sub-leasing package systems, etc). 
  • The company has operated in Tokyo for 60+yrs, and they are finally just going to take what has always been a tight register private. Foreigners own 0.05%. Index owns nothing.
  • This is basically a completely done deal. It will trade tight, and illiquidly.

EQD | KOSPI 200 Ready to Pullback

By Nico Rosti

  • This is an update to our previous insight published on April 22nd: “EQD | KOSPI 200 WEEKLY Bounce: Rally or Not?“.
  • The KOSPI 200 INDEX  has performed a nearly +6% rally in the last 3 weeks, closing up 3 weeks in a row (CC=+3).
  • We have something to say about this pattern that was identified 3 weeks and ago and so we wanted to post this insight to explicit our view.

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May 10
0

Daily Brief Event-Driven: Infocom (4348 JP): Rumoured Tender Offer as Teijin Seeks to Exit and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Infocom (4348 JP): Rumoured Tender Offer as Teijin Seeks to Exit
  • Logisteed/KKR Bid BIGLY for Alps Logistics (9055). A Gobsmacking Price/Multiple
  • Alps Logistics (9055 JP): KKR’s Knockout Pre-Conditional Offer at JPY5,774
  • TOPIX Inclusions: Who Is Ready (May 2024)
  • HK CEO & Director Dealings (9 May 2024): Lawrence Adds More Melco; Ng Adds More Sino Land
  • Netmarble Plans to Sell 2.6% Stake in HYBE Through PRS (Price Return Swap).

Infocom (4348 JP): Rumoured Tender Offer as Teijin Seeks to Exit

By Arun George

  • Bloomberg reports that Teijin Ltd (3401 JP) wants to sell its 55% stake in Infocom Corp (4348 JP). The rumoured bidders are Sony Corp (6758 JP), Blackstone and KKR. 
  • Based on precedents, the offer structure will likely be structured such that Teijin provides an irrevocable NOT to accept but vote in favour of share consolidation at the EGM.
  • Bloomberg suggests that Infocom could be valued at JPY200 billion. If this refers to market cap, the tender offer is JPY3,472, a 16.5% premium to the last close.

Logisteed/KKR Bid BIGLY for Alps Logistics (9055). A Gobsmacking Price/Multiple

By Travis Lundy

  • In late February, a specialty media outlet noted Alps Logistics (9055 JP) was up for sale. I missed that. Yesterday pre-close, a headline crossed the wires. A deal was imminent.
  • Nikkei overnight said “¥150bn+ market cap”. I thought KKR might slightly overpay the Hitachi Transport System (9086 JP) multiple paid. That meant +13% today was full-ish. I was wrong.
  • KKR is paying ¥5,774 to minorities, and about ¥4,084-ish to the parent, who is reinvesting at ¥5,774. This is a total knock-out price paid. HUGE MINORITY WIN.

Alps Logistics (9055 JP): KKR’s Knockout Pre-Conditional Offer at JPY5,774

By Arun George

  • Alps Logistics (9055 JP) recommended a pre-conditional tender offer from a KKR & Co (KKR US) subsidiary at JPY5,774, 32.7% and 69.8% premium to the last close and undisturbed price, respectively. 
  • The pre-condition is approvals under competition laws of Japan, China, the EU, South Korea and Vietnam. The tender offer is expected to start in mid-August.
  • The offer represents an all-time high and is a knockout bid. While the timing of regulatory approvals is a risk, the transaction is a done deal. 

TOPIX Inclusions: Who Is Ready (May 2024)

By Janaghan Jeyakumar, CFA

  • 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.
  • Dozens of companies have been able to meet the key Section Transfer requirements on paper for several months but there have been no TOPIX Inclusions announcements in 2024 so far. 
  • However, there are some pre-event candidates we believe are worth monitoring as they have previously confirmed their desire to move to the Prime Market.

HK CEO & Director Dealings (9 May 2024): Lawrence Adds More Melco; Ng Adds More Sino Land

By David Blennerhassett

  • The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
  • Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
  • The key stocks mentioned in this regular insight include Melco International Development (200 HK), Sino Land Co (83 HK), and ZJLD Group (6979 HK).

Netmarble Plans to Sell 2.6% Stake in HYBE Through PRS (Price Return Swap).

By Douglas Kim

  • After the market close on 9 May, Netmarble announced that it plans to sell 2.6% stake in HYBE for 219.9 billion won. 
  • The transaction is based on PRS (price return swap) basis. Previous to this deal, Netmarble sold 2.5 million shares (about 6%) of HYBE shares in November 2023. 
  • We continue to remain negative on HYBE including on this deal involving Netmarble’s plan to sell additional 2.6% stake in HYBE.

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May 09
0

Daily Brief Event-Driven: Perpetual (PPT AU): Shareholders Divided Over Carve Out and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Perpetual (PPT AU): Shareholders Divided Over Carve Out
  • KKR Deal for Alps Logistics (9055) Appears Imminent
  • China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks
  • Nippon Yusen (9101) – Another Big Buyback Announced, But Details Matter
  • Naver: Under Pressure from the Japanese Government To Sell Its Stake in LINE
  • HD Hyundai Marine Solution (443060 KS): Nearing KOSPI200 Index Inclusion in June
  • Qantm IP (QIP AU): IPH Enters the Fray with a Competing Offer
  • QANTM (QIP AU): IPH Wades In As Adamantem Tarries
  • Local Institutional Flows Towards Overweighting Samsung SDS in Samsung Group Context

Perpetual (PPT AU): Shareholders Divided Over Carve Out

By David Blennerhassett

  • Back in December last year, Aussie-listed equities manager Perpetual Ltd (PPT AU) rejected Washington H. Soul Pattinson (SOL AU)‘s $3bn all-scrip non-binding indicative proposal. 
  • Yet Soul Patt’s proposal was in sync with Perpetual’s previously flagged intentions to explore a potential separation of its corporate trust and wealth management businesses, from its asset management business.
  • Perpetual has now entered a Scheme, to carve out the corporate trust and wealth management businesses to KKR for A$2.175bn. A lack of clarity on net proceeds saw shares rollover.

KKR Deal for Alps Logistics (9055) Appears Imminent

By Travis Lundy

  • There was a news article I missed in late February saying Alps Alpine (6770 JP), parent of Alps Logistics (9055 JP) was in the process of selling the logistics unit.
  • A deal made sense for a strategic given the upcoming “2024 Problem”. Pre-close, headlines blared, the stock popped 12%, now we’re at double the end-February price.
  • Late in the evening,Alps Logistics said it had received a bid from Logisteed but nothing had been decided. This morning we have a few more details, but nothing concrete

China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks

By Arun George

  • On 21 February, China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
  • The wide gross spread (7.0%) reflects risks around the re-rating of peers, the slow pace of satisfying the pre-condition, the completion timetable and Ping An’s blocking stake. 
  • The key risk is the deal close timing due to the slow pace of regulatory approvals, which increases the chance that the vote will held after the August interim.   

Nippon Yusen (9101) – Another Big Buyback Announced, But Details Matter

By Travis Lundy

  • Last May, Nippon Yusen Kk (9101 JP) announced buybacks of ¥200bn over 2 years. In August, they changed it to say  ¥200bn in the next nine months.
  • That helped support the stock through early March. It was big, and a decent percentage of ADV. Today, they announced earnings and guidance and another ¥100bn buyback through April 2025.
  • Earnings were OK. Guidance is a little low vs the Street. The stock popped 5% from where it was trading. Lower impact vs 2023. More cross-holder overhang consideration. 

Naver: Under Pressure from the Japanese Government To Sell Its Stake in LINE

By Douglas Kim

  • On 8 May, it was mentioned in numerous local media that Naver is under pressure from the Japanese government to sell its stake in LINE.
  • One of the reasons behind Japanese government’s efforts to force Naver to sell its stake in LINE is due a major data breach incident in November 2023.
  • Based on our current understanding of this situation, the most likely scenario is for Naver to sell about 20-30% stake in A Holdings (the controlling shareholder of LINE) to SoftBank.

HD Hyundai Marine Solution (443060 KS): Nearing KOSPI200 Index Inclusion in June

By Brian Freitas

Qantm IP (QIP AU): IPH Enters the Fray with a Competing Offer

By Arun George

  • Qantm Intellectual Property (QIP AU)‘s non-binding proposal from IPH Ltd (IPH AU) is at A$0.11 cash + 0.291 IPH shares per QIP share, a 4.5% premium to Adamantem’s A$1.817 offer.
  • Since announcing the Adamantem non-binding proposal on 14 March, the IPH offer has been 4.3% higher than the Adamantem offer on average. 
  • The IPH proposal also requires approval from the ACCC and NZCC. The presence of two bidders increases the probability of a binding proposal (with a bump). 

QANTM (QIP AU): IPH Wades In As Adamantem Tarries

By David Blennerhassett

  • It always seemed like a question of when, not if, IPH (IPH AU) would make an Offer for QANTM (QIP AU). IPH previously approached QANTM in 2018, but was spurned.
  • Capitalising on ongoing extensions to Adamantem’s exclusivity, as it relates to its all-cash A$1.817/share Offer by way of a Scheme, IPH has now tabled an all-scrip, plus A$0.11/share dividend NBIO.
  • IPH’s implied Scheme value of A$1.90/share is a premium to Adamantem’s proposal. The catch: apart from terms being indicative, IPH’s Offer requires ACCC and NZCC clearance.

Local Institutional Flows Towards Overweighting Samsung SDS in Samsung Group Context

By Sanghyun Park

  • Local institutions, notably pension funds, are increasingly investing in Samsung SDS, coinciding with the company’s more active investor engagement. This has sparked speculation about Samsung’s strategic motives.
  • Timing-Wise, as AI infra demands rise in Samsung Group, conditions for boosting SDS’s performance improve. They monitor Samsung’s moves to drive SDS’s stock upward, considering its reliance on Samsung’s revenue.
  • Local pension funds actively adopting overweight positions in Samsung SDS underscore the importance of crafting strategies tailored to overweighting SDS within the broader Samsung Group context.

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