Event-Driven

Today, cram school operator Riso Kyoiku (4714 JP) and 20% owner real estate developer Hulic Co Ltd (3003 JP) amended their Capital and Business Alliance agreement.
Hulic will buy 25.5% of shares out in a Partial Offer at +43.5% vs last. Then post-tender, they will buy shares at last from the company to go to 51.%
The founder will sell his 10%. The rest is interesting. It’s a high ROE high div stock. Some own it from higher. Pro-ration is tough to estimate. But we try.

Riso Kyoiku (4714 JP): Hulic (3003 JP)’s Partial Tender Offer

Riso Kyoiku (4714 JP) announced a partial tender offer and third-party allotment with Hulic Co Ltd (3003 JP), the largest shareholder. Hulic aims to make Riso Kyoiku a consolidated subsidiary.
The offer is for a maximum of 39.4 million shares (23.15% post-allotment ownership ratio) at JPY320 per share, a 46.8% premium to the undisturbed price (5 April).
Irrevocable (from the founder and Chairman) represents a 9.26% post-allotment ownership ratio. The offer is light, but there is no minimum acceptance condition.

Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is

The March 2024 rebal is done and dusted. When announced, there were 2 prospective DELETEs for Sep 2024. Now there is only one expected DELETE, Nippon Paper Industries (3863 JP).
The one likely inclusion is therefore Ryohin Keikaku (7453 JP). But there is more fun afoot with Fast Retailing (9983 JP) and Tokyo Electron (8035 JP).
The two stocks – of totally different sectors – interact somewhat, both in determining Nikkei 225 direction, and their relative potential selldowns.

Azure Minerals (AZS AU): FIRB Approval Concerns Are Overdone

Azure Minerals (AZS AU) shareholders have overwhelmingly approved the dual-track bid from Sociedad Quimica y Minera de Chile (SQM US) and Hancock. The scheme offer is A$3.70 per share.
The shares fell 7%, seemingly due to concerns about FIRB approval sparked by FIRB’s request for an extension on 3 April and today’s AFR article on China’s Australian lithium holdings.
FIRB approval should be forthcoming due to Tianqi Lithium (9696 HK) small indirect interest in Andover, Lithium Power International (LPI AU) precedent, and SQM and Tianqi’s strained relationship.

Samsung Electronics: Block Deal Sale of 5.2 Million Shares by Lee Boo-Jin

After the market close on 8 April, it was reported that Lee Boo-Jin will sell 5,247,140 shares of Samsung Electronics in a block deal (up to 443 billion won).
The expected block deal sale price is 83,700 to 84,500 won per share, which represents a discount rate of up to 0.95% compared to the closing price on 8 April.
We are positive on this block deal sale and on Samsung Electronics. We would take the deal.

KOSDAQ150 Index Rebalance Preview: Potential Adds Still Outperforming

With nearly 85% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
Prior to the June rebalance, C&C International (352480 KS) will replace CanariaBio (016790 KS) in the index following CanariaBio being listed as an Administrative Issue and an Investment Attention Issue.
The potential adds have outperformed the potential deletes and the KOSDAQ 150 Index since the start of the review period. Lighten positions ahead of the end of the review period.

STAR100 Index Rebalance Preview: 10 Changes as Potential Adds Outperform

The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
We forecast 10 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX).
Excluding the migrations, the potential adds have outperformed the potential deletes over the last few months and that could continue as we head to the end of the review period.

Special Changes in KOSDAQ 150: Deletion (NKMAX) + Addition (GI Innovation)

On 8 April, the Korea Exchange announced special changes to KOSDAQ 150. NKMAX will be excluded from KOSDAQ 150 and it will be replaced by GI Innovation.
NKMAX was designated as “administrative issue” and “investment attention issue” on 8 April 2024, which resulted in the Korea Exchange deciding to remove this stock from KOSDAQ 150.
We believe that this inclusion of GI Innovation in KOSDAQ 150 is likely to further positively impact its share price.

SET50 Index Rebalance Preview: Three Potential Changes in June

Nearing the halfway mark in the review period, we see 3 potential changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the June rebalance.
Passive trackers will need to buy between 1.2-4.5 days of ADV on the inclusions and sell 0.9-1.3 days of ADV on the deletions.
Berli Jucker (BJC TB) continues to be a close add on liquidity while Gulf Energy Development (GULF TB) and Intouch Holdings (INTUCH TB) continue to be close deletes.

Naspers (NPN) X Prosus (PRX): Performance for Q1 2024, Gains Driven by Tencent, NAV Growth

By Charlotte van Tiddens, CFA

Naspers and Prosus outperformed the benchmark by a large margin, ending the quarter up 7.3% and 6.7%, respectively. The Capped SWIX finished the quarter down 2.3%.
Tencent was up 3.5% in HKD and 6.5% in ZAR.
Tencent currently makes up 74% of Prosus’ NAV, down 1 percentage point from 75% at the start of the year.

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Apr 08

Daily Brief Event-Driven: NTT Data’s ¥1 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

NTT Data’s ¥1,940/Share Deal For Jastec (9717) – Not Enough But Probably Enough
HSCEI Index Rebalance Preview: One Change or Two in June?
Observations on Post-Election Flows of Value-Up Stocks, Based on Recent Local Institutional Trades
Merger Arb Mondays (08 Apr) – JSR, Jastec, Shinko, Azure, Genex, Best World, Isetan
SENSEX Index Rebalance Preview: Wipro Deletion to Bring Sector Balance into Play
KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High
STAR50 Index Rebalance Preview: APT Medical Moving Higher
EQD / NSE Volatility Update / 01-Apr-24 to 05-Apr-24
APM (APM AU): Madison Dearborn’s “Disappointing” NBIO
Payment Companies – Potential IPOs, Select Companies Being Taken Private and Sector Overview

NTT Data’s ¥1,940/Share Deal For Jastec (9717) – Not Enough But Probably Enough

NTT Data Corp (9613 JP) on Friday announced a Tender Offer to take over small custom software developer and system integrator Jastec Co Ltd (9717 JP).
It’s at a premium. But for a growing company ahead of “The 2025 Problem” where synergies are expected, you’d want to get a premium vs where comps trade. You don’t.
But this gets to near 50% just from friendlies. Someone who wanted to interfere would have to be publicly noisy. I expect this gets done.

HSCEI Index Rebalance Preview: One Change or Two in June?

SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.

Observations on Post-Election Flows of Value-Up Stocks, Based on Recent Local Institutional Trades

Opposition’s probable win in the election sparks concerns about Value-up initiative’s momentum. However, market sentiment doesn’t universally echo these worries.
Value-Up stocks’ recent corrections likely stem from Q4 dividend arbitrage liquidation, rather than election result concerns.
Post-Election, even if the opposition wins, the left-leaning Value-up program might continue, limiting the opposition’s influence, as seen in recent National Pension Service flows.

Merger Arb Mondays (08 Apr) – JSR, Jastec, Shinko, Azure, Genex, Best World, Isetan

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Jastec Co Ltd (9717 JP), Qantm Intellectual Property (QIP AU), Southern Cross Media (SXL AU), Genex Power Ltd (GNX AU), QV Equities Ltd (QVE AU), China TCM.
Lowest spreads: Roland DG Corp (6789 JP), Tietto Minerals Ltd (TIE AU), Newmark Property REIT (NPR AU), Mma Offshore (MRM AU), CPMC Holdings (906 HK), Pact Group Holdings (PGH AU).

SENSEX Index Rebalance Preview: Wipro Deletion to Bring Sector Balance into Play

Nearly 90% of the way through the review period of the June rebalance, we see one potential index change with Wipro Ltd (WPRO IN) in deletion zone.
Oil & Natural Gas Corp (ONGC IN), Coal India Ltd (COAL IN) and Adani Enterprises (ADE IN) are potential replacements with sector balance likely to come into play.
Passive trackers will need to trade over 13 days of delivery volume on the potential index changes.

KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High

Around 85% of the way through the review period, we see four changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance.
The impact on the potential inclusions ranges from 0.4-8 days of ADV while the impact on the potential deletions varies from 1-13 days of ADV.
Hanmi Semiconductor (042700 KS) is up 72% in the last two months following its appearance on the list of potential Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusions in June.

STAR50 Index Rebalance Preview: APT Medical Moving Higher

The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.
With a big jump in tracking AUM over the last few months, passives will need to trade a lot of stock on implementation date.

EQD / NSE Volatility Update / 01-Apr-24 to 05-Apr-24

By Sankalp Singh

Equities shrug off hawkish RBI rhetoric – eye on $3 Billion inflows from MSCI rejig & June Elections results
Short dated IVs trade lower. Quarterly-expiry IVs continue to hold at >13.0% levels as they capture multiple event risks
Short vega positions recommended as “High & Down” vol state persists. Use current scenario to buy tail hedges as protection for long Equity positions.

APM (APM AU): Madison Dearborn’s “Disappointing” NBIO

On the 28th Feb, PE-outfit CVC Asia Pacific bumped its NBIO to A$2.00/share, and was granted exclusive due diligence. On the 27th Mar, CVC said they were “unable to proceed“.
Today, the 8th April, Madison Dearborn Partners, holding ~29%, has pitched an non-indicative, non-binding Offer at A$1.40/share, in cash, by way of a Scheme. An unlisted scrip option is available.
A key condition is APM Human Services (APM AU)‘s executive-chair Megan Wynne, founding related parties, and key management, electing scrip. The Independent Board Committee reckons the Offer Price is disappointing.

Payment Companies – Potential IPOs, Select Companies Being Taken Private and Sector Overview

By Victor Galliano

We explore Klarna’s and Stripe’s IPO prospects and valuations based on recent share transactions; Nuvei and Cielo are close to being taken private, with Worldpay now controlled by private equity
Nuvei and Worldpay both grew by acquisition but failed to deliver on the market’s expected returns, in our view, ending up under PE ownership; is Nexi a potential PE target?
We retain Visa as a core holding and also keep PagSeguro and PayPal as buys, replacing Cielo with new peer group addition Shift4; we keep our sell rating on Affirm

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Apr 07

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

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia-Pac M&A: Austal, Best World, Isetan Singapore, Langham Hospitality, Azure, Genex Power
Last Week in Event SPACE: JSR, Austal, Rakuten, Hyundai Home Shopping, Hanmi Science

(Mostly) Asia-Pac M&A: Austal, Best World, Isetan Singapore, Langham Hospitality, Azure, Genex Power

I tally 52 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals discussed on Smartkarma: Austal (ASB AU)‘s spurned Offer; Best World (BEST SP)‘s Exit Offer; Isetan Singapore (ISET SP)‘s parent Offer; and (maybe) Langham Hospitality (1270 HK)‘s privatisation.
Key updates took place on: Azure Minerals (AZS AU), Genex Power Ltd (GNX AU), IntelliCentrics Global Holding (6819 HK) and JSR Corp (4185 JP).

Last Week in Event SPACE: JSR, Austal, Rakuten, Hyundai Home Shopping, Hanmi Science

Murakami to tender stake in JSR Corp (4185 JP)? Maybe the “double arb”: i.e. short on swap, long on cash, will tender the cash, remain short the back end.
Austal Ltd (ASB AU) rejected (for now) Hanwha Ocean (042660 KS)‘s bid based on regulatory concerns. Hanwha reckons these should not be an issue.
If you can tolerate owning the mobile biz, buy Rakuten (4755 JP) on dips. If not, avoid Rakuten Group and Rakuten Bank short-term; buy Rakuten Bank on larger dips.

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Apr 06

Daily Brief Event-Driven: Backstory on the Hanmi Science Showdown & KKR’s Likely Tender Offer and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Backstory on the Hanmi Science Showdown & KKR’s Likely Tender Offer
Best World (BEST SP): Exit Stage Left
Jastec (9717 JP): NTT Data (9613 JP)’s Tender Offer at JPY1,940
Shockwave Medical Inc (SWAV US): Johnson & Johnson (JNJ US)’s Acquisition Offer
Hanmi Science: If Talks With Mum and Sister Break Down, Then KKR May Provide a Partial Tender Offer
Hanwha Aerospace: Spin Off of Semiconductor Equipment and Video Surveillance Units
Ganz-Mavag/Talgo: Request for Offer Authorisation
EQD | HSI Closed the Week Modestly Up: A Pullback Is Possible Next Week

Backstory on the Hanmi Science Showdown & KKR’s Likely Tender Offer

The victorious brothers plan to join forces with KKR to secure over 51% ownership of Hanmi Science. They aim to persuade the mother and daughter to part with their shares.
Should this negotiation fail, KKR is prepared to initiate a tender offer in the open market, intending to acquire an additional 10-15% of Hanmi Science’s shares.
KKR can target a maximum of 16%. With 10-15% aimed for, this tender offer will cause significant price impact.

Best World (BEST SP): Exit Stage Left

After flagging a proposed delisting exercise last month, direct seller Best World International (BEST SP) has announced an Exit Offer lead by Best World founders Dora Hoan and Doreen Tan.
The Offer Price is S$2.50/share, a 42.86% premium to undisturbed. The Offer requires approval from 75% of disinterested shareholders. Hoan, Tan and concert parties holding 65.12%, are required to abstain.
Best World shares resumed trading on November 2022 after 42 months of suspension, subsequent to media reports and a short seller raising regulatory concerns over its Chinese business model.

Jastec (9717 JP): NTT Data (9613 JP)’s Tender Offer at JPY1,940

Jastec Co Ltd (9717 JP) has recommended a tender offer from NTT Data Corp (9613 JP) at JPY1,940 per share, a 37.6% premium to the undisturbed price (5 April).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
Based on the irrevocables, the minimum acceptance condition requires a 56.4% minority acceptance rate. The acceptance condition is achievable as the offer represents a 22-year high.

Shockwave Medical Inc (SWAV US): Johnson & Johnson (JNJ US)’s Acquisition Offer

By Tina Banerjee

Johnson & Johnson (JNJ US) entered into a definitive agreement to acquire Shockwave Medical Inc (SWAV US) for $335/share in cash or an enterprise value of $13.1B.
Offer price represents 4.7% premium over yesterday’s closing price or around 19% premium over the undisturbed price. The deal is expected to close by mid-2024.
With no product overlap and competition concern, the deal is expected to get regulatory approval. With reasonable deal valuation, shareholders approval is also expected.

Hanmi Science: If Talks With Mum and Sister Break Down, Then KKR May Provide a Partial Tender Offer

The 2024 AGM of Hanmi Science is over and the two Lim brothers have control of the company. Nonetheless, the fight for the control of Hanmi Science is not over.
There is an increasingly probable scenario where the KKR private equity firm gets involved, joining hands with the Lim brothers.
If mum and sister do not sell their shares (which seems to be the higher likely scenario), then KKR may issue a tender offer to the remaining minority shareholders.

Hanwha Aerospace: Spin Off of Semiconductor Equipment and Video Surveillance Units

On 5 April, Hanwha Aerospace (012450 KS) formally announced that it will spin off its semiconductor equipment and video surveillance units which contributed to about 16% of its revenue.
We are Negative on Hanwha Aerospace mainly due to valuations. Its share price has risen so much in the past year that its valuations are no longer attractive.
Hanwha Aerospace is trading at premium valuation to Lockheed Martin on an EV/EBITDA basis. Despite its recent strong growth, Hanwha Aerospace is no Lockheed Martin.

Ganz-Mavag/Talgo: Request for Offer Authorisation

By Jesus Rodriguez Aguilar

Ganz Mavag, a public/private consortium, requests authorisation for its €5/share offer for 100% of Talgo SA (TLGO SM). It needs approvals from Spain and seven other EMEA regulators.
Yesterday’s close remains similar to the announcement date (7 March), gross spread of 11.3%, indicating uncertainty regarding timeline and development. The market is pricing a 48% probability of deal completion.
The Spanish Government will delay the authorization process. Vs. comparables and considering uncertainties regarding backlog execution, investing in the company seems somewhat risky. The risk/reward ratio is not particularly attractive.

EQD | HSI Closed the Week Modestly Up: A Pullback Is Possible Next Week

By Nico Rosti

The Hang Seng Index has been rising for 2 weeks but the uptrend seems slow and weak. The rally may have stalled, a pullback may be behind the corner.
Based on our MONTHLY seasonal studies for the HSI, the index has a extremely high chance to close April in negative territory.
You can go SHORT now, or during this coming week if the index keeps rising, target the 17000 to 17300 areas.

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Apr 05

Daily Brief Event-Driven: Hyundai Home Shopping (057050 KS)’s Partial Offer and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hyundai Home Shopping (057050 KS)’s Partial Offer
Best World (BEST SP): Not the Best Exit Offer
Suruga Bank (8358 JP) – New Div, New Buyback, New KPIs, New 6yr High Price
Great Eagle Seeks To Delist Langham Hospitality (1270 HK)
Hanwha Group’s Restructuring to Positively Benefit Hanwha Corp but Negatively Impact Hanwha Ocean
Selected European HoldCos and DLC: March’24 Report

Hyundai Home Shopping (057050 KS)’s Partial Offer

Yesterday, the 3rd April, Hyundai G.F. Holdings (005440 KS) announced it would conduct a Tender Offer for 3mn shares, or 25% of Hyundai Home Shopping Network (057050 KS) (HHSN).
A successful Tender would lift Holdings stake to 50% from 25% currently, satisfying the 30% holding company threshold introduced in 2022.
Minimum proration is 33%. Shares popped 13.8% on the news. That looks a bit too aggressive.

Best World (BEST SP): Not the Best Exit Offer

Best World International (BEST SP) has disclosed an exit offer through selective capital raising and delisting. The offer of S$2.50 is a 42.9% premium to the undisturbed price of S$1.75.
The key conditions are approval for the selective capital reduction (at least 75% of eligible shareholders) and delisting resolution (a majority holding not less than 75% in value).
The headcount test is a risk. The offer is light as only 66.7% of retained earnings will be distributed and the consideration will be covered 1.6x by the net cash.

Suruga Bank (8358 JP) – New Div, New Buyback, New KPIs, New 6yr High Price

10+ Months ago, Suruga Bank Ltd (8358 JP) announced it would sell a large chunk of its treasury shares to Credit Saison and would then buy back ¥22bn of stock.
I liked the odds in Suruga Bank (8358) To Sell, Then Buy Back 17% of the Bank, but HOW Is Key. They spent the ¥22bn. The stock rose a lot.
Today, we get a div hike for H2 (implying a div hike for this year too), another buyback, a huge share cancellation, and new KPIs. As always, details matter.

Great Eagle Seeks To Delist Langham Hospitality (1270 HK)

Hong Kong hotel-play Langham Hospitality (1270 HK) was spun-off from Great Eagle (41 HK) on the 30 May 2013. Now GE intends to take the company back into the fold.
Covid was devastating to the hospitality sector. As were the 2019 demonstrations. Langham’s share price never recovered, and is currently trading at a lifetime low and a P/B of 0.21x.
No price was mentioned in the announcement. Expect a healthy premium to undisturbed, should a firm Offer unfold. But I wouldn’t expect a knockout price.

Hanwha Group’s Restructuring to Positively Benefit Hanwha Corp but Negatively Impact Hanwha Ocean

We believe the new restructuring plan of the Hanwha Group is likely to have a positive impact on Hanwha Corp but could negatively impact Hanwha Ocean.
Our NAV analysis of Hanwha Corp suggests NAV of 3.2 trillion won or NAV per share of 43,168 won, which is 50% higher than current share price.
The biggest component of the valuation is Hanwha Corp’s 34% stake in Hanwha Aerospace which is worth 4.1 trillion won. (187% of Hanwha Corp’s market cap).

Selected European HoldCos and DLC: March’24 Report

By Jesus Rodriguez Aguilar

The Discounts to NAV of covered holdcos mainly widened during March. Discounts to NAV: C.F.Alba, 47.3% (vs. 47.1%); GBL, 38.15 (vs. 37.7%); Heineken Holding, 16.7% (vs. 16.5%);
Industrivärden C, 1.4% (vs. 4.4%); Investor B, 6.1% (vs. 5.6%); Porsche Automobile Holding, 45.4% (vs. 43.7%). Rio DLC spread tightened to 24.9% (vs. 25.6%), and on 26 March reached 27.7%.
What seems interesting: listed assets vs. Industrivärden C and the Rio DLC (long RIO LN/short RIO AU).

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Apr 04

Daily Brief Event-Driven: Estimating Participation Rate for Hyundai HS Tender Offer and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Estimating Participation Rate for Hyundai HS Tender Offer, Currently at a 5% Spread
Langham Hospitality Investments (1270 HK): Great Eagle (41 HK)’s Possible Scheme Privatisation
HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June
Tender Offer of 25% of Hyundai Home Shopping Shares by Hyundai GF Holdings
ABFRL’s Demerger: A Game-Changer or a Gamble?
Quiddity Leaderboard for Hang Seng Index Jun 24: Could Country Garden Services Get Deleted?

Estimating Participation Rate for Hyundai HS Tender Offer, Currently at a 5% Spread

It is somewhat unusual that there is still a spread of over 5%. This likely reflects concerns about the relatively high intensity of allocation risk.
Retail: 30%, Institutions: 16% of float shares (46%). Retailers may contribute 20%, institutions 10-15%. Total tender rate: 30-35%.
In that case, it means that roughly 70% of our holdings could be tendered. And at this level, it seems reasonable enough to target the current spread of 5%.

Langham Hospitality Investments (1270 HK): Great Eagle (41 HK)’s Possible Scheme Privatisation

Langham Hospitality Inv Ss (1270 HK) received a notice from Great Eagle Holdings (41 HK), the largest unitholder, that it intends to present a detailed proposal for scheme privatisation.
The privatisation interest is unsurprising, as the unit price has declined by 43% over the last twelve months. A tough 2023 did not help the declining sentiment.
Our methodology for triangulating the potential offer price results in a range of HK$0.63-1.76. Our best guess is an offer of around HK$0.85, a 47% premium to the last close.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June

With no stocks in outright inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June.
Capping changes will result in a one-way turnover of 5.3% leading to a round-trip trade of US$1.51bn.
Li Auto (2015 HK) is expected to be the largest buy in June following the stock being the largest sell at the March rebalance (also due to capping).

Tender Offer of 25% of Hyundai Home Shopping Shares by Hyundai GF Holdings

On 3 April, it was reported that Hyundai G.F. Holdings will be conducting a tender offer of 3 million shares of Hyundai Home Shopping (25% of outstanding shares).
The tender offer price is 64,200 won. The main reason for this tender offer is to meet the regulatory requirement of a holding company by 2025.
We are positive on the tender offer of a 25% stake in Hyundai Home Shopping by Hyundai G.F. Holdings.

ABFRL’s Demerger: A Game-Changer or a Gamble?

By Nimish Maheshwari

Aditya Birla Fashion and Retail Ltd (ABFRL IN) on 1st April announced a vertical demerger and separate listing of its matured and asset-light Madura brand portfolio.
Assessment of demerger: whether it is seriously a value creation opportunity or just a strategic gimmick for merger-demerger in Mega Bull Run.
Valuation of Aditya Birla Fashion and Retail Ltd (ABFRL IN) , whether any juice left in the company?

Quiddity Leaderboard for Hang Seng Index Jun 24: Could Country Garden Services Get Deleted?

By Janaghan Jeyakumar, CFA

In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes for the Hang Seng Index in June 2024.
The index changes for the June 2024 index rebal will be announced on 17th May 2024.
The HSI selection process is highly subjective and does not follow clear-cut rules. This insight is simply an attempt to provide readers with an overall understanding of the possible scenarios.

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Apr 03

Daily Brief Event-Driven: JSR (4185 JP) – Activist Murakami-San Goes to 5+%! Bumpitrage? Appraisal Rights? A Technicality? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JSR (4185 JP) – Activist Murakami-San Goes to 5+%! Bumpitrage? Appraisal Rights? A Technicality?
JSR Corporation (4185 JP): Murakami Becomes a Substantial Shareholder
TOPIX Inclusions: Who Is Ready (Apr 2024)
IntelliCentrics (6819 HK): 18th April “Scheme” Vote
What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene
Sciclone Pharmaceuticals (6600.HK) – The Privatization Offers a Good Exit Opportunity
Hyundai Motor Group Becomes the Largest Shareholder of KT Corp
Austal (ASB AU): Hanwha’s NBIO Is A Non-Starter
Keysight/Spirent: Recommended Competing Offer

JSR (4185 JP) – Activist Murakami-San Goes to 5+%! Bumpitrage? Appraisal Rights? A Technicality?

In what is a surprising move to me, Murakami-san has gone substantial on JSR Corp (4185 JP) with the vast majority of his stake purchased at a spread of <0.05%.
As suggested in JIC Launches a NOT-¥1trln Tender Offer for JSR (4185). Welcome? Yes. Overwhelming? Meh, the deal price was not overwhelming. It got less so as the market rose.
But this is an odd target. High float. No competition. Would take a lot to block or force the bumpitrage, which suggests appraisal rights or a “technicality.”

JSR Corporation (4185 JP): Murakami Becomes a Substantial Shareholder

Murakami’s City Index Eleventh entity reported a 5.11% position in JSR Corp (4185 JP). The share purchases started on 19 March, the day of the tender start.
Murakami’s average buy-in price of JPY4,346.22 per share is broadly in line with the JPY4,350 tender offer.
Murakami’s disclosure suggests two possibilities: starting an activist campaign for a bump or pursuing the appraisal process to determine a fair value. We think the latter is likely.

TOPIX Inclusions: Who Is Ready (Apr 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.
There were no Section Transfers announced in the last 3 months so currently there are no live TOPIX Inclusion events at present.
There are currently 79 names capable of satisfying all the key section transfer requirements. Our long-term pre-event candidate CELSYS (3663 JP) is one of them.

IntelliCentrics (6819 HK): 18th April “Scheme” Vote

Soon-To-Be ex-healthcare technology platform play IntelliCentrics Global Holding (6819 HK) is a pseudo risk arb.
IntelliCentrics is selling its key ops, declaring a special dividend from the sale proceeds, subsequently being wound up, then delisted.
Shareholders have the option of voting on a raft of resolutions on the 18th April. Irrevocables total 72.1%. This is done. Just the final dividend amount needs to be confirmed.

What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene

Hanwha received counsel indicating foreign regulators won’t oppose Austal’s acquisition. They admit it’s restricted to AUKUS countries but argue Korea’s ties ease opposition.
Hence, Hanwha Ocean is dropping some heavy hints that even though Austal has turned down the acquisition offer for now, there’s still a chance the deal could go through.
The pivotal factor lies in whether Hanwha Ocean can secure approval from the AUKUS countries. Should they succeed, it is anticipated that Austal would be inclined to accept the deal.

Sciclone Pharmaceuticals (6600.HK) – The Privatization Offers a Good Exit Opportunity

By Xinyao (Criss) Wang

Zadaxin is the biggest performance driver of SciClone. However, due to the challenge of generic drugs/VBP, sales of Zadaxin wouldn’t maintain strong growth momentum. SciClone’s revenue/profit would face a significant decline.
The capital participating the IPO had reduced their holdings or exit entirely. Considering the low valuation/poor liquidity in HKEX, we think this privatization provides investors with a great exit opportunity.
For arbitrage investors, the annualized return depends on the time it takes to complete the privatization (e.g. about 5%-10%). If the privatization fails, share price could fall back to HK$14.

Hyundai Motor Group Becomes the Largest Shareholder of KT Corp

Hyundai Motor Group has become the largest shareholder of KT Corp, as the National Pension Service has recently reduced its stake in KT from 8.53% previously to 7.51%.
Despite this recent change in the largest shareholder status of KT Corp, this requires the approval from the Korean Ministry of Science and ICT.
Although the Hyundai Motor Group (HMG) has become the largest owner in KT Corp, the most likely scenario is for HMG to remain a passive investor in KT.

Austal (ASB AU): Hanwha’s NBIO Is A Non-Starter

Perth-Based shipbuilder Austal Ltd (ASB AU) has confirmed a A$2.825/share non-binding indicative proposal, by way of a Scheme, from Hanwha Ocean (042660 KS). That’s a 28.4% premium to last close.
Austal designs and builds defence vessels for the Australian and US navies. Austal believes Hanwha is unlikely to secure necessary approvals from the Australian and US governments.
Hanwha considers this view to be baseless, that it is a credible buyer, and its capabilities and investment are aligned with government objectives in Australia, the US and South Korea.

Keysight/Spirent: Recommended Competing Offer

By Jesus Rodriguez Aguilar

Keysight Technologies In (KEYS US) and Spirent Communications (SPT LN) have agreed a recommended 201.5p/share cash acquisition via Scheme of Arrangement, an increase of 26.5p (15.1%) relative to Viavi Solutions (VIAV US)‘s Offer.
Spirent, with some scarcity value, should be able to improve its cyclicality as part of Keysight. A counteroffer from Viavi looks unlikely unless Silver Lake significantly increases its stake.
Gross spread is 1.99%. Using Keysight’s forecast s about completion, at best, estimated annual return would be 3.51% while at worst, 1.88%. This suggests there may be better opportunities elsewhere.

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Apr 02

Daily Brief Event-Driven: If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated
Isetan Singapore (ISET SP): Isetan Mitsukoshi (3099 JP)’s 154% Premium Scheme Offer
KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents
IntelliCentrics (6819 HK): Special Dividend Vote on 18 April
Isetan Singapore (ISET SP): Mitsukoshi’s BIGLY Premium Offer
(Mostly) Asia M&A, Mar 2024: Chilled & Frozen, TDCX, MMA Offshore, JSR, Roland DG, SciClone

If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated

A couple of years ago, Rakuten (4755 JP) – burning through cash to start its mobile business – announced it would its Bank and Securities units. Bank listed. Securities didn’t.
Mizuho ended up buying 49% of Securities. Today, it was announced there would be discussions to put Bank, Securities, Card, and Insurance in a new listed Holdco.
How this works will end up being complicated. More complicated than it should be. But the complexity would make this more of a win-win for everyone.

Isetan Singapore (ISET SP): Isetan Mitsukoshi (3099 JP)’s 154% Premium Scheme Offer

Isetan Singapore (ISET SP) disclosed privatisation through a scheme of arrangement from Isetan Mitsukoshi Holdings Ltd (3099 JP) at S$7.20 per share, a 153.5% premium to the last close.
The high takeover premium reflects the fair value of investment properties of S$300.4 million, i.e., S$7.28 per share, marginally above the offer price.
The offer is attractive and 2.1% higher than the all-time high. The vote should comfortably get up. The scheme meeting is from early to mid-July.

KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents

KRX limits individual stock weight to 20% in ETFs with few constituents. KRX confirms working on it, with an official announcement expected soon.
Excludes index ETFs like KOSPI 200. KRX hasn’t finalized criteria for constituent number but expected to involve fewer than 30 stocks.
This could open new passive trading opportunities. Sector ETF cap at 30%, large AUM ones offer noteworthy trading potential.

IntelliCentrics (6819 HK): Special Dividend Vote on 18 April

The IntelliCentrics Global Holding (6819 HK) IFA considers the terms for the disposal of assets to symplr software as fair and reasonable. The EGM vote is on 18 April.
The consideration will be distributed to shareholders as a special dividend with a minimum and maximum of US$0.52 (HK$4.07) and US$0.55 (HK$4.30), respectively.
Irrevocables ensure that the EGM vote will pass. At the last close and for a 7 May payment, the gross and annualised spread of the minimum dividend is 2.8%/33.6%.

Isetan Singapore (ISET SP): Mitsukoshi’s BIGLY Premium Offer

Isetan Mitsukoshi Holdings Ltd (3099 JP), the controlling shareholder of department store operator Isetan Singapore (ISET SP), is offering $7.20/share, by way of a Scheme.
That’s a whopping 153.5% premium to last close. And a 178.9% premium to ISET’s NAV (as at 31 Dec 2023).
Apart from Mitsukoshi’s 52.73% stake, no other shareholder has >5%. This is a done deal. But why the large premium?

(Mostly) Asia M&A, Mar 2024: Chilled & Frozen, TDCX, MMA Offshore, JSR, Roland DG, SciClone

For the month of March 2024, 8 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$4bn.
The average premium for the new transactions announced (or first discussed) in March was ~55%. The average premium YTD is ~39%.
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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Apr 01

Daily Brief Event-Driven: A/H Premium Tracker (To 28 Mar 2024): Liquid AH Premia Still Very Wide and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

A/H Premium Tracker (To 28 Mar 2024): Liquid AH Premia Still Very Wide
Updated Tool (31Mar24) & “Diff File Generator” For TSE “Mgmt Conscious of Capital Cost/Stock Price”
Merger Arb Mondays (01 Apr) – SciClone, IntelliCentrics, CIMC Vehicles, Lawson, Roland DG, MMA
SciClone Pharma (6600 HK): Privatisation At IPO Price
EQD / NSE Volatility Update / 25-Mar-24 to 29-Mar-24

A/H Premium Tracker (To 28 Mar 2024): Liquid AH Premia Still Very 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’s consecutive buying streak ended on Monday, and a new buying streak started Tuesday. NORTHBOUND net bought the dip. Last week’s (double long) choice Longyuan Power was up 5.24%.
Narrow AH premia narrowed some. Wider AH premia saw Hs outperform. There is a LOT of spread left in this market. 7 recommendations this week.

Updated Tool (31Mar24) & “Diff File Generator” For TSE “Mgmt Conscious of Capital Cost/Stock Price”

In mid-January, the TSE announced a “name-and-shame” list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】. But they did not actually shame.
The list shows which companies have disclosed a policy/consideration. But no data/links. We have the links, and we are weeks ahead of the TSE. Working to get months ahead.
We created a tool to name everyone, show their reports, provide links, and now a new tool. Put in a name, see the difference between the Old/New Reports.

Merger Arb Mondays (01 Apr) – SciClone, IntelliCentrics, CIMC Vehicles, Lawson, Roland DG, MMA

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Sciclone Pharmaceuticals (6600 HK), Qantm Intellectual Property (QIP AU), Genex Power Ltd (GNX AU), Southern Cross Media (SXL AU), China Traditional Chinese Medicine (570 HK), QV Equities.
Lowest spreads: Tietto Minerals Ltd (TIE AU), Roland DG Corp (6789 JP), Chilled & Frozen Logistics Holdings (9099 JP), Pact Group Holdings (PGH AU), Mma Offshore (MRM AU).

SciClone Pharma (6600 HK): Privatisation At IPO Price

After Sciclone Pharmaceuticals (6600 HK) was suspended on the 19th March pursuant to the Takeovers Code, I speculated a Scheme at the March 2021 IPO Price. And that’s what unfolded.
Li Zhenfu (SciClone’s NED), Assicurazioni Generali (G IM) and concert parties (collectively controlling 36.61%) have made an Offer at $18.80/share, a 33.9% premium to last close. Terms are final.
The long stop date is the 31 October. That’s too conservative. This could be wrapped up late July.

EQD / NSE Volatility Update / 25-Mar-24 to 29-Mar-24

By Sankalp Singh

On-The-Run Quarterly Options now capture India General Elections. Position buildup can be seen in the 21,000 put and 24,000 call strikes
Weekly and Monthly contract risk premia being squeezed lower due to holiday shortened trading but Quarterly contracts exhibit vol richness
Scale back short gamma exposure as reward-risk unappealing at current IV levels

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Mar 31

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

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia-Pac M&A:MMA, Boral, Orecorp, Probiotec, CPMC, CIMC Vehicle, Roland DG, Welbe, SciClone
Weekly Deals Digest (31 Mar) – Roland DG, Lawson, SciClone, Probiotec, MMA Offshore, Bharti Hexacom
HK Connect SOUTHBOUND Flows (To 28 Mar 2024); Strong Net Buying on Tencent, Telcos, and Energy
Denso’s Big Multi-Year Toyota Industries (6201) Selldown
Koito Mfg – Stock Over-Pops on New MTMP/Buyback; There Will Be Overhang
Samsung C&T: Why Is Lee Seo-Hyun Returning as the President?
Last Week in Event SPACE: Lawson, Samsonite, Socionext, ZOZO
Mainland Connect NORTHBOUND Flows (To 28 Mar 2024): NB Turns Net Buyer Again, Flows Go Idiosyncratic

(Mostly) Asia-Pac M&A:MMA, Boral, Orecorp, Probiotec, CPMC, CIMC Vehicle, Roland DG, Welbe, SciClone

I tally 53 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals were discussed this week on Smartkarma: MMA Offshore (MRM AU)‘s Scheme with Singapore’s Cyan Renewables; and Sciclone Pharmaceuticals (6600 HK)‘s Scheme.
Key updates took place on: Boral (BLD AU), Orecorp (ORR AU), Lawson Inc (2651 JP), CPMC (906 HK), CIMC Vehicle (1839 HK), Roland DG (6789 JP), and Welbe (6556 JP).

Weekly Deals Digest (31 Mar) – Roland DG, Lawson, SciClone, Probiotec, MMA Offshore, Bharti Hexacom

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: Bharti Hexacom (6597372Z IN) and Lianlian DigiTech (2104619D CH) IPOs.
Event-Driven developments: Lawson Inc (2651 JP), Roland DG Corp (6789 JP), Sciclone Pharmaceuticals (6600 HK), CIMC Vehicle Group Co Ltd (1839 HK), HKBN Ltd (1310 HK), Probiotec Ltd (PBP AU).

HK Connect SOUTHBOUND Flows (To 28 Mar 2024); Strong Net Buying on Tencent, Telcos, and Energy

A shares were down on the week, but rallied Thursday and Friday.
Net SOUTHBOUND buying was +HK8.5bn after $57bn the two weeks before. SOUTHBOUND ended its consecutive net daily buy streak Monday, then started buying again.
The flavour of SOUTHBOUND buying has been high-div SOEs for months and months. That is starting to change slightly. Tencent was the top net buy this week. Again.

Denso’s Big Multi-Year Toyota Industries (6201) Selldown

We knew this was coming. We did not know HOW it was coming. The news today has to be seen as a bit of a disappointment.
Why is it a disappointment? Toyota Industries (6201 JP) is not buying back a big chunk, and there is no offering to oblige new investors to take a look.
This is long, slow, leakage on a company which is not overwhelmingly cheap, where it requires good governance to get out well, and even then…

Koito Mfg – Stock Over-Pops on New MTMP/Buyback; There Will Be Overhang

With a new Medium-Term Management Plan and a buyback, the stock was cheap as of Thursday’s close. It was less cheap after it went limit up +25% on Friday.
That put it in the camp of “it may go up more but probably not a lot”. It has told you about big divs and buybacks.
But model it up and they need to do more buybacks. Both to meet share price gains and the needs of legions of potential cross-holders looking to sell.

Samsung C&T: Why Is Lee Seo-Hyun Returning as the President?

On 29 March, it was reported that Lee Seo-Hyun has been appointed as the President of Samsung C&T (028260 KS), returning to the company after more than five years.
Lee Seo-Hyun is the third child of the late Samsung Chairman Lee Kun-Hee. She will be in charge of the overall strategic planning of Samsung C&T.
Many investors will likely to question this move, since they may question her ability to make strategic decisions that are in the best interests of all the minority investors.

Last Week in Event SPACE: Lawson, Samsonite, Socionext, ZOZO

Lawson Inc (2651 JP)‘s Tender Offer is still too cheap. It is also a somewhat non-transparent and unfair process. And it does not adhere to the METI Fair M&A Guidelines.
Samsonite (1910 HK)‘s pursuit of a dual listing (primary or secondary?) appears to be put the buyout on the backburner. For now.
Socionext (6526 JP) and ZOZO Inc (3092 JP) have a large part of the Max Real World Float to displace. Neither of those two names are outlandishly expensive.

Mainland Connect NORTHBOUND Flows (To 28 Mar 2024): NB Turns Net Buyer Again, Flows Go Idiosyncratic