Category

Event-Driven

Dec 07
0

Daily Brief Event-Driven: Swire (19 HK / 87 HK) Announces NEW and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback
  • StubWorld: Swire’s Latest Buyback
  • Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock
  • Eoflow Vs Insulet: Round II
  • CPMC Holdings (906 HK): Pre-Conditional Voluntary Offer at HK$6.87
  • Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV.
  • WHSP’s Non-Binding Indicative Offer for Perpetual Turned Down
  • China: Consolidated Flows at the Close Tomorrow
  • Tokyo Rakutenchi (8842 JP): Toho’s Tender Offer at JPY6,720
  • CPMC (906 HK): SASAC Takeover

Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback

By Travis Lundy

  • Yesterday afternoon, Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK) announced a new buyback program. The last one was announced August 2022 and ran until the AGM.
  • That was HK$4bn. In the meantime the company paid an HK$8.12 special div on the Swire As (14%) in September (on top of the HK$1.20 regular div). 
  • Now they have announced a new HK$6bn buyback buying both A Shares and B shares. Details, index impact, historical B/A trading patterns, etc, below.

StubWorld: Swire’s Latest Buyback

By David Blennerhassett

Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock

By Brian Freitas

  • Rakuten Group (4755 JP) is looking to sell 25.5m shares of Rakuten Bank (5838 JP) via a secondary offering at a discount of between 8.7%-12.3%.
  • The offering will raise a maximum of US$433m and Rakuten Group (4755 JP) will use the funds to reduce its interest-bearing debt by the early repayment of its bonds.
  • There will be limited passive buying at the time of settlement of the stock but there is an index inclusion coming up that will result in passives buying.

Eoflow Vs Insulet: Round II

By Douglas Kim

  • This insight provides a detailed analysis of Eoflow’s appellant brief (released on 4 December) on Insulet Corp (PODD US)’s lawsuit. 
  • We provide the following three major reasons why we believe Eoflow will win versus Insulet in this lawsuit.
  • One of the most important arguments on Eoflow’s appellant brief is the DTSA three years statute of limitations.

CPMC Holdings (906 HK): Pre-Conditional Voluntary Offer at HK$6.87

By Arun George

  • CPMC Holdings (906 HK) has announced a pre-conditional voluntary offer from Changping Industrial at HK$6.87 per share, a 32.1% premium to the undisturbed price (16 August). 
  • The pre-condition mainly relates to Chinese approvals. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights.
  • The 50% minimum acceptance condition should be met due to COFCO’s irrevocable and the second-largest shareholders’ past dealings with COFCO. At the last close, the gross spread was 6.0%.

Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV.

By Travis Lundy

  • Yesterday, Tokyo Rakutenchi (8842 JP)‘s #1 shareholder Toho Co Ltd (9602 JP) agreed to buy out the rest of Tokyo Rakutenchi from its #2 and #3 shareholders and minorities.
  • The Takeover Price is a 51% premium. Which is nice. But the asset is a real estate portfolio, and it was sold as a company, not a real estate portfolio.
  • The revaluation surplus to market value for the real estate assets is more than net equity, so Takeover PBR >1.0, but Price/NAV of the takeover is 0.7x, without synergies included. 

WHSP’s Non-Binding Indicative Offer for Perpetual Turned Down

By Brian Freitas

China: Consolidated Flows at the Close Tomorrow

By Brian Freitas

  • Local indices in China including the CSI 300 Index, CSI 500 Index, STAR50 Index and SSE50 Index will rebalance at the close tomorrow.
  • There are many changes for the indices and there are stocks that are adds and/or deletes from multiple indices which results in cumulative or offsetting flows.
  • We estimate turnover at the close tomorrow in China will be around US$7.5bn with big impact on a lot of stocks.

Tokyo Rakutenchi (8842 JP): Toho’s Tender Offer at JPY6,720

By Arun George

  • Tokyo Rakutenchi (8842 JP) has recommended Toho Co Ltd (9602 JP)’s tender offer of JPY6,720 per share, a 51.5% premium to the undisturbed (6 December). 
  • 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 24.29% ownership ratio.
  • Based on the irrevocables, the minimum acceptance condition requires a 30.2% minority acceptance rate. This acceptance rate is doable as the offer represents a ten-year high. 

CPMC (906 HK): SASAC Takeover

By David Blennerhassett

  • Packaging play CPMC Holdings (906 HK) has announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China.
  • The joint offerors have offered $6.87/share, an okay 32.1% premium to last close. Pre-cons involve the standard PRC regulators. The Offer itself is contingent on a 50% acceptance hurdle. 
  • China Foods (506 HK) has given an irrevocable for its 29.7% stake.  This will turn unconditional. The timing of the Offer is interesting as a VP is under graft investigation.

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Dec 06
0

Daily Brief Event-Driven: P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update
  • Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes
  • EOFLOW/Medtronic Tender: Appeals Brief Is All Bark, No Bite
  • Dissenters Mobilise As Chindata (CD US)’s Shareholders Approve Bain’s Offer
  • Navigating the Potential of Hankook & Company’s Revised Tender Offer
  • Medikit (7749 JP) Below Market Tender Offer Buyback
  • JETS US Equity: Takeoff Accomplished, Time to Return to Base
  • EQD | Nikkei 225 MONTHLY Analysis

P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update

By Travis Lundy

  • The Partial Offer launched last month by Taisei Corp (1801 JP) to take a 50.2% stake in Ps Mitsubishi Construction (1871 JP) ends at the beginning of next week.
  • This hasn’t been a very “exciting” trade. Small, boring sector. One big company selling to another. But it has traded cheap. However, volume has been high. 
  • Volume has been so high it causes me to revisit my pro-ration expectations, so I have updated estimates and tables below.

Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes

By Brian Freitas

  • The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
  • Depending on the changes, passives trackers will need to buy 2.4-22.5x ADV (10-24% of real float) on the inclusions and sell between 3.5-42.5x ADV on the deletions.
  • Fast Retailing (9983 JP) capping, Nitori Holdings (9843 JP) increase in PAF, a big funding trade, and potentially new stocks being added in two-steps. 

EOFLOW/Medtronic Tender: Appeals Brief Is All Bark, No Bite

By Arun George

  • Eoflow (294090 KS) filed a 117-page appeal against the amended preliminary injunction (PI), sparking a 16% share price rally. Insulet Corp (PODD US) is required to respond by 14 December.
  • Eoflow argues that the Massachusetts District Court committed legal errors. However, Eoflow’s arguments are rehashed from those that the district court has already dismissed with balanced counterarguments. 
  • The appeal is Eoflow’s last roll of the dice. Eoflow’s appeal brief worryingly notes that the PI profoundly imperils both the Medtronic transaction and its status as a going concern.

Dissenters Mobilise As Chindata (CD US)’s Shareholders Approve Bain’s Offer

By David Blennerhassett

  • Back on the 11 August, Chinese data center provider Chindata Group (CD US) and major shareholder Bain Capital entered into a definitive agreement at US$8.60/ADS.
  • The EGM was held yesterday, the 4 December, and the merger was approved by 97.75% of the total votes cast. No specific PRC regulatory approval is needed for this merger. 
  • All good right? Not quite. There’s still the nagging issue involving 22.79% of shares out objecting to the deal, exceeding the 12% dissenting threshold, a condition to the merger. 

Navigating the Potential of Hankook & Company’s Revised Tender Offer

By Sanghyun Park

  • With the price almost 10% above ₩20,000, it’s practically fair to regard MBK’s tender offer as effectively canceled, raising the question of the proxy battle’s potential continuation.
  • There is a significant likelihood that MBK has prepared a next-phase plan involving an upward adjustment of the offering price, considering the tight situation of successfully securing the target volume.
  • Essentially, there’s a high likelihood that the situation will resemble the earlier battle between HYBE and Kakao Corp over S.M. Entertainment Co at the start of this year.

Medikit (7749 JP) Below Market Tender Offer Buyback

By Travis Lundy

  • Japanese medical products maker Medikit Co Ltd (7749 JP) Tuesday announced a buyback of ~12% of its shares from the founder’s company.
  • The stock is extraordinarily illiquid. 12mo ADV is <US$40k/day. But Medikit runs 40% gross margins, 20% EBIT margins, and trades at an EV/revenue ratio of ~0.8x. It’s cash-rich, and cheap.
  • But it’s an interesting situation. The buyback (and its reason) combined with the shareholder structure allow me to idly speculate this is an MBO candidate.

JETS US Equity: Takeoff Accomplished, Time to Return to Base

By Mohshin Aziz

EQD | Nikkei 225 MONTHLY Analysis

By Nico Rosti

  • After a strong rally in November, the Nikkei is currently in a temporary corrective phase, reaching between the Q1 and Q2 support levels of the MRM LONG chart.
  • There are 2 possible paths from here: 1) a modest pullback, followed by a rally into the end of December, 2) a dive to <= 31672, and December closes down.
  • Both these scenarios offer very good seasonal LONG odds for January closing up (based on our SRM model), so we suggest going LONG the Nikkei 225 on the pullback.

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Dec 05
0

Daily Brief Event-Driven: Benefit One (2412) – Pro-Ration Expectations Update and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Benefit One (2412) – Pro-Ration Expectations Update
  • NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum
  • Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion
  • Weiqiao Textile (2698 HK): Pre-Conditional Privatisation Offer at HK$3.50
  • A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold
  • MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone
  • Weiqiao Textile (2698 HK)’s Pre-Conditional Merger By Absorption
  • HK Connect SOUTHBOUND Flows (To 1 Dec 23); Meituan Dip-Buyings Leads Inflows; CNOOC Vs 941 on SOEs
  • Seven & I Ventures Down Under with 7-Eleven Australia Acquisition
  • Elder Brother Cho Hyun-Sik Joins Hands With MBK Partners to Tender Offer Hankook & Co. Shares

Benefit One (2412) – Pro-Ration Expectations Update

By Travis Lundy

  • Since the announcement of the Benefit One Inc (2412 JP) partial offer, the stock has traded 16+mm shares in the market, which is about 40% of Real World Float.
  • Some of that has been traded multiple times. Looking only at that data would suggest a higher pro-ration, but I expect there is other data one must take into account.
  • Benefit One shares are currently trading at a level suggesting either lower participation OR higher back-end despite the earnings guidance downgrade at announcement.

NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum

By Brian Freitas

  • There could be 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December.
  • If all changes are on expected lines, one-way turnover is estimated at 58.2% and that will result in a one-way trade of INR 20bn (US$240m).
  • Since July, the potential adds to the index have outperformed the index and the potential deletes by a big margin. Momentum could keep the outperformance going till implementation date.

Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion

By Douglas Kim

  • On 4 December, the South Korean government announced that it will launch a tender offer to sell a 29.3% stake in NXC Corp for about US$3.6 billion.
  • The two daughters of ex-Chairman Kim Jung-Ju handed over a 29.3% stake in NXC Corp to the Korean government as payment-in-kind in May 2023 to pay for inheritance taxes.
  • The tender offer sale of the Korean government’s 29.3% stake in NXC Corp (worth nearly 4.7 trillion won) is a positive catalyst for Nexon (3659 JP).

Weiqiao Textile (2698 HK): Pre-Conditional Privatisation Offer at HK$3.50

By Arun George

  • Weiqiao Textile Co (2698 HK) announced a pre-conditional privatisation offer from Weiqiao Chuangye at HK$3.50 per H Share, a 104.7% premium to the undisturbed price.
  • The pre-condition of regulatory approvals from the NDRC, MOC and SAFE. The key condition is approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection). 
  • The offer price is final. Despite the premium, the offer is struck materially below net cash. Nevertheless, the irrevocable from the largest H Shareholder should help the offer get up.

A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold

By Travis Lundy

  • The New and Better (17 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
  • Hs with H/A pairs under-perform their As on average by 220+bp. Liquid HK H/A Pairs saw H/As -244bp. H/A Pair intracorrelation is up and A premia continue to trend better.
  • SOUTHBOUND and NORTHBOUND were net buys overall but Hs had a VERY BAD WEEK vs their A-Shares where pairs were concerned.

MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone

By Brian Freitas

  • AMP Ltd (AMP AU) and A2 Milk Co Ltd (A2M AU) could be deleted as the lowest ranked current index constituents.
  • There are three other stocks that are close to the deletion threshold and a change in the free float could result in the stocks being deleted.
  • With the exception of A2 Milk Co Ltd (A2M AU), shorts have been increasing on nearly all the potential and close deletions.

Weiqiao Textile (2698 HK)’s Pre-Conditional Merger By Absorption

By David Blennerhassett

  • After shares were suspended on the 27 November, Weiqiao Textile Co (2698 HK) has now announced a pre-conditional privatisation at HK$3.50 per H-share.
  • This Offer, from its parent, is by way of a Merger by Absorption, which incorporates a Scheme-like vote. There is no tendering condition.
  • The Offer Price is a premium to last close is a hefty 104.68%. and around a six-year high. This is done. 

HK Connect SOUTHBOUND Flows (To 1 Dec 23); Meituan Dip-Buyings Leads Inflows; CNOOC Vs 941 on SOEs

By Travis Lundy

  • SOUTHBOUND flows the last several weeks clearly indicated a momentum move. The top net sells were all down. The top buys were all up. This week saw reversion.
  • SOUTHBOUND saw net buys of HK$3.5bn this week, breaking a nascent sell streak. Meituan dip-buying Wednesday to Friday was worth the entire net buy.
  • High-Div SOEs remain mixed. CNOOC (883) saw decent net buying, and China Mobile saw decent net selling. Again.

Seven & I Ventures Down Under with 7-Eleven Australia Acquisition

By Oshadhi Kumarasiri

  • Seven & I Holdings (3382 JP) announced last week that it had agreed to buy the 7-Eleven convenience store chain in Australia for A$1.71bn ($1.1bn).
  • The acquisition may not immediately impact Seven & I’s stock price like Speedway did, given its smaller scale, lack of synergies, and less favorable macroeconomic conditions.
  • The main positive takeaway from this news is that the acquisition price for 7-Eleven Australia is not as extravagant as the amount Seven & I paid for the Speedway acquisition.

Elder Brother Cho Hyun-Sik Joins Hands With MBK Partners to Tender Offer Hankook & Co. Shares

By Douglas Kim

  • Cho Hyun-Sik has joined hands with MBK Partners to make a tender offer for shares of Hankook & Co for a minimum of 20.35% and maximum of 27.32% stake.
  • The tender offer price is 20,000 won which is 18.9% higher than the closing price of 16,820 won on Monday.
  • Chairman Cho Hyun-Bum may try to find a strategic ally to launch his own tender offer of Hankook & Co shares at even higher tender offer price than 20,000 won.

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Dec 04
0

Daily Brief Event-Driven: March 2024 Nikkei 225 Rebal – Socionext and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade
  • Taisho Pharmaceutical (4581 JP): Japan Catalyst Pushes for a Bump
  • S&P/​​​​ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough
  • Yuanta/​P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover
  • FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M
  • Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
  • Merger Arb Mondays (4 Dec) – Origin, OreCorp, Healius, CIMC Vehicles, T&K Toka, Eoflow, Hollysys
  • S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up
  • Selected European HoldCos and DLC: November’23 Report

March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade

By Travis Lundy

  • Minimal changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
  • The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
  • There is the upweight to Nitori (9843) AND funkiness with Fast Retailing (9983) to consider. We are right on the threshold. The question is whether it gets “help” in January.

Taisho Pharmaceutical (4581 JP): Japan Catalyst Pushes for a Bump

By Arun George

  • Japan Catalyst’s press release supports the idea of a Taisho Pharmaceutical Holdin (4581 JP) MBO but not the proposed offer price as it implies a P/B less than 1.0x.
  • The press release is a discovery exercise encouraging other like-minded shareholders to show their hand. The shares are trading marginally above the JPY8,620 offer.
  • While justifiable, a bump is unlikely due to the lack of a substantial activist shareholder, irrevocables, no competing bid and the offer’s 55.5% premium to the undisturbed price.

S&P/​​​​ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough

By Brian Freitas

  • There are 3 changes for the S&P/ASX 200 (AS51 INDEX) that will be implemented at the close on 15 December. One name is a relative surprise.
  • There will be 8-15 days of ADV to buy on the inclusions and there will be 12-18 days of ADV to sell on the deletions.
  • Cumulative excess volume and changes in short interest indicate there will be positioning in most stocks. But it may not yet be enough to cover the passive trade.

Yuanta/​P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover

By Brian Freitas

  • There are 5 adds and 4 deletes to the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December with implementation taking place from 15-21 December.
  • The constituent changes and capping changes result in an estimated one-way turnover of 16.1% resulting in a one-way trade of US$1.26bn.
  • There will be positioning in a lot of the adds/deletes and the real action could be in the other stocks with capping and/or funding flows.

FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M

By Brian Freitas

Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea

By Sanghyun Park

  • Korea’s financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
  • Therefore, it’s time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
  • The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.

Merger Arb Mondays (4 Dec) – Origin, OreCorp, Healius, CIMC Vehicles, T&K Toka, Eoflow, Hollysys

By Arun George

S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up

By Brian Freitas

Selected European HoldCos and DLC: November’23 Report

By Jesus Rodriguez Aguilar

  • The discounts to NAV of covered holdcos have all tightened during November. Discounts to NAV: C.F.Alba, 47.1% (vs. 47.8%); GBL, 34.9% (vs. 35.5%); Heineken Holding, 14.5% (vs. 14.9%);
  • Industrivärden C, 4.9% (vs. 6%); Investor B, 14.6% (vs. 16.5%); Porsche Automobile Holding, 39.9% (vs. 40.9%). The spread of Rio DLC tightened to 17.2% (vs. 21%).
  • What seems interesting: holding trades, Heineken Holding vs. Heineken, Porsche SE/vs. listed assets and the Rio DLC: long RIO LN/short RIO AU.

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Dec 03
0

Daily Brief Event-Driven: S&P500 Index Rebalance: Calling an UBER and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • S&P500 Index Rebalance: Calling an UBER
  • Japan Activism:  Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price
  • Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake
  • Quiddity TDIV/​50/​100 Dec 23 Rebal: Inflow Names Could Outperform Outflow Names
  • Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX
  • Last Week in Event SPACE: Denso, Sapporo, Hollysys, PCCW, Origin Energy
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Glosel, CIMC, Orecorp, Tietto Mineral, Lansen Pharmaceutical
  • Quiddity ASX Dec 23 Index Rebal: Beware of Pre-Positioning

S&P500 Index Rebalance: Calling an UBER

By Brian Freitas

Japan Activism:  Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price

By Travis Lundy

  • Japan Catalyst Fund is a relatively young effort in the Japan “engagement activism” space, having been founded by Monex Group in September 2019. Total assets remain apparently small.
  • Championed by Monex Group founder Oki Matsumoto, despite small AUM, the fund has decent access. As of end-October, Taisho Pharmaceutical Holdings (4581 JP) was #5 and 5.26%. Now it’s #2.
  • Friday, they released a statement about the MBO. It isn’t a barn-burner, but the stock has traded through terms since announcement at a too-low price. And nobody else has commented.

Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake

By Travis Lundy

  • The question of how Murakami-san would get out of his stake in Cosmo Energy Holdings (5021 JP) was always a biggie. He likes to sell stock in tender offer buybacks.
  • Cosmo wasn’t going to do that for him. They promised dividends and a high payout ratio, but that left the question was how he was going to get out. 
  • A semi-obvious solution was to find a corporate partner to buy his stake and today, Iwatani Corp (8088 JP) announced that it had bought 19.86% of Murakami-san’s 20.01% holding.

Quiddity TDIV/​50/​100 Dec 23 Rebal: Inflow Names Could Outperform Outflow Names

By Janaghan Jeyakumar, CFA

  • The index changes for the T50/100 index family and the TDIV index were confirmed after market close on Friday 1st December 2023.
  • The index changes were mostly in line with our final expectations.
  • In this insight, we take a close look at the breakdown of our final flow expectations for the upcoming Inclusion/Exclusion and Capping events.

Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX

By Brian Freitas

  • The announcement of the inclusion of Uber Technologies (UBER US) in the S&P 500 INDEX was a big one last week. There were announcements for some other indices too.
  • There are many indices in China that will be rebalanced at the close on Friday, the biggest being the CSI 300, CSI 500, STAR50, SSE50 and KWEB US.
  • Relatively quiet in ETF world with net inflows to China focused ETFs and net outflows for Japan.

Last Week in Event SPACE: Denso, Sapporo, Hollysys, PCCW, Origin Energy

By David Blennerhassett

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Glosel, CIMC, Orecorp, Tietto Mineral, Lansen Pharmaceutical

By David Blennerhassett

Quiddity ASX Dec 23 Index Rebal: Beware of Pre-Positioning

By Janaghan Jeyakumar, CFA

  • The December 2023 review results for ASX indices were announced after the close on Friday 1st December 2023.
  • There will be three ADDs and thee DELs for the ASX 200 index. There are no changes for ASX 20, 50, and 100.
  • In this insight, we take a look at our index flow expectations, trends in short interest, and the recent trading performance of the names involved in the ASX 200 changes.

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Dec 02
0

Daily Brief Event-Driven: HK CEO & Director Dealings (1 Dec 2023): Kwoks Still Buying SHK; Co-Founder Selling Akeso and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • HK CEO & Director Dealings (1 Dec 2023): Kwoks Still Buying SHK; Co-Founder Selling Akeso
  • EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Rate Cuts?

HK CEO & Director Dealings (1 Dec 2023): Kwoks Still Buying SHK; Co-Founder Selling Akeso

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 are Sun Hung Kai Properties (16 HK) and Akeso Biopharma Inc (9926 HK).

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Rate Cuts?

By Simon Harris

  • Weekly summary of vol changes and moves across Global Markets
  • Analysing ATM volatility and skew changes over the last 5 days
  • We suggest a few trades to take advantage of the implied vol surfaces

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Dec 01
0

Daily Brief Event-Driven: Itoen Pref (25935 JP) – Big Discount and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Itoen Pref (25935 JP) – Big Discount, Big Buyback, No Big Governance Change
  • Sapporo Holdings: Activist Investor 3D Investment Partners Assumes Majority Ownership
  • GAPack (468 HK): Unpacking XJF’s Move To Send The Board Packing
  • SET50 Index Rebalance Preview: KCE Could Replace TIDLOR
  • (Mostly) Asia M&A, Nov 2023: Taisho Pharma, CIMC Vehicle, CMIC, Japan Best Rescue, Shidax

Itoen Pref (25935 JP) – Big Discount, Big Buyback, No Big Governance Change

By Travis Lundy

  • This is always a tough subject, but every now and then I throw myself on the mercy of the ho-humming crowd and write about the Ito En Prefs (25935 JP).
  • No strong catalyst. Limited capacity for strongly better governance. Even less apparent corporate interest in good governance. 
  • But we have a mini-catalyst, and it has been a while, and I think there IS a good way to think about this stock, so here’s another crack at it.

Sapporo Holdings: Activist Investor 3D Investment Partners Assumes Majority Ownership

By Oshadhi Kumarasiri

  • Last week, activist investor 3D Investment Partners raised its stake in Sapporo Holdings (2501 JP) by an additional 13%, cementing its position as the majority shareholder in the business.
  • This suggests the activist investor is optimistic about successfully advancing their proposals.
  • If investment properties are sold or spun off, and Alcoholic Beverages and Food & Soft Drinks undergo the suggested turnaround, we anticipate an additional 80-100% upside in the near term.

GAPack (468 HK): Unpacking XJF’s Move To Send The Board Packing

By David Blennerhassett

  • Back on the 27 January 2023, Jardine Matheson (JM SP) entered an agreement with Shandong Xinjufeng (301296 CH) (XJF) to sell its 28.22% stake in GAPack (468 HK). 
  • That sale completed in September.  Last week, XJF requisitioned an EGM to consider appointing five new (& friendly) directors, all-but taking control of the board. 
  • CEO and founder Jeff Bi holds 9.65%. The question is: what are his options?

SET50 Index Rebalance Preview: KCE Could Replace TIDLOR

By Brian Freitas

(Mostly) Asia M&A, Nov 2023: Taisho Pharma, CIMC Vehicle, CMIC, Japan Best Rescue, Shidax

By David Blennerhassett

  • For the month of November 2023, 16 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$13bn.
  • The average premium for the new deals announced (or first discussed) in November was 41%. The average YTD is 38% (97 deals).
  • This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

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Nov 30
0

Daily Brief Event-Driven: StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS
  • Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger
  • SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve
  • Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning
  • Quiddity JPX-Nikkei 400 Rebal 2024: End-Nov 2023
  • Naspers (NPN SJ), Prosus (PRX NA) H1 FY24 Results, Key Takeaways
  • Tata Consultancy Services Buyback: Tender Offer Period Opens on 1st Dec
  • Taking off from Heathrow

StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS

By David Blennerhassett

Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger

By Sanghyun Park

  • KOSDAQ 150’s passive outflow occurs on December 14th for Celltrion Healthcare, whereas it would be January 11th for Celltrion with KOSPI 200.
  • The estimated passive flow size (x ADTV) on their respective rebalancing trading days is anticipated to be approximately -2.79x (Celltrion Healthcare) and +1.76x (Celltrion).
  • We should monitor the potential expansion of the swap spread on December 14th. Additionally, contemplating an outright approach for Celltrion, akin to the Hanwha Ocean scenario, could be worth considering.

SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve

By Douglas Kim

  • SK Square announced it will not exercise the call option to repurchase minority stake in 11 Street. This is likely to have a positive impact on the company. 
  • SK Square does not need to pay 500 billion won plus 3.5% annualized interest to the financial investors of 11 Street. This will also accelerate sale of 11 Street.
  • In addition, SK Square announced the merger of TVing and Wavve OTT services. 

Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning

By Brian Freitas

Quiddity JPX-Nikkei 400 Rebal 2024: End-Nov 2023

By Janaghan Jeyakumar, CFA

  • JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
  • A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the rankings of the potential ADDs/DELs every month.
  • Below is a look at potential ADDs/DELs for the JPX-Nikkei 400 Index Rebal to come in August 2024 based on trading data as of end-November 2023.

Naspers (NPN SJ), Prosus (PRX NA) H1 FY24 Results, Key Takeaways

By Charlotte van Tiddens, CFA

  • Improved transparency from management is an important positive. Additional disclosures were included on entity IRR in the results presentation (attached, not previously disclosed). 
  • Profitability target for the consolidated ecommerce businesses moved forward to H2 FY24 from H1 FY25. Significant narrowing of trading losses in H1 FY24 to $36m from $256m in H1 FY23.
  • As management ‘commit to highlight value where and when possible’, we think an IPO could very well be on the horizon.

Tata Consultancy Services Buyback: Tender Offer Period Opens on 1st Dec

By Janaghan Jeyakumar, CFA

  • Tata Consultancy Svcs (TCS IN) launched an INR170bn (US$2bn) Buyback in mid-November 2023 which is one of the largest Buybacks in India in recent years.
  • The company has published the Letter of Offer confirming the final details and the expected timeline for this Buyback.
  • Below is a closer look at these details and their implications for shareholders.

Taking off from Heathrow

By Jesus Rodriguez Aguilar

  • Ferrovial Sa (FER SM) announces the sale of its 25% stake in Heathrow Airport Holdings for £2,368 million (valued at zero in its books), far exceeding my valuation of €1,617 million.
  • With the operation, Ferrovial will be able to invest in more lucrative new infrastructure projects than Heathrow (a mature asset). Ferrovial is focused on growth in North American greenfield projects.
  • The divestment should have a positive impact of 4.7% on Ferrovial’s consensus target price, which increases to €34.55/share vs. €33/share previously, which implies a revaluation potential of 9.5%.

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Nov 29
0

Daily Brief Event-Driven: Denso Corp Placement – Possible Placement by Toyota to Raise US$4.7bn and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Denso Corp Placement – Possible Placement by Toyota to Raise US$4.7bn
  • Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying
  • Kotak Mahindra Bank – US$1.2 Billion Lockup Release
  • CIMC Vehicles (1839 HK): Possible H Share Buyback Offer
  • Hang Seng Indices (HSI, HSCEI, HS Tech) Recapping the Recaps – A Bit More To Trade
  • HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2023)
  • CIMC Vehicles (1839 HK): Parent Privatisation?
  • CIMC Vehicles (1839 HK): $7.00/Share Indicative Offer From Parent – Really?!
  • Asahi Offering: Discount Presents a Good Entry Point As Price Hikes & Tax Reforms Strengthen Asahi
  • Quiddity Leaderboard F100/​​​250 Dec 23: Final Expectations; Two Trading Days for Announcement

Denso Corp Placement – Possible Placement by Toyota to Raise US$4.7bn

By Sumeet Singh

  • As per Reuters, Toyota Motor (7203 JP) could look to sell up to 10% of Denso Corp (6902 JP) to raise around US$4.7bn before the end of the year.
  • Toyota is the company’s largest shareholder and its largest customer.
  • In this note, we will talk about the deal dynamics.

Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying

By Brian Freitas

Kotak Mahindra Bank – US$1.2 Billion Lockup Release

By Sumeet Singh

  • In Jun 2023, CPPIB raised around US$750m via selling a 1.6% stake in Kotak Mahindra Bank (KMB IN). Prior to that it had sold a similar amount in Mar 2022.
  • CPPIB will be released from its placement linked lockup early next month.
  • In this note, we will talk about the lockup dynamics and past deals performance.

CIMC Vehicles (1839 HK): Possible H Share Buyback Offer

By Arun George

  • CIMC Vehicle Group Co Ltd (1839 HK) possible H Share buyback offer, excluding China International Marine Cntnrs Gp (2039 HK)’s shares, is HK$7.00, an 8.7% premium to the undisturbed price. 
  • The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There could also be a 90% minimum acceptance condition.
  • The offer is light, but independent H shareholders holding blocking stakes will likely be supportive. The final offer will be made on “same or better terms”, suggesting a potential bump.

Hang Seng Indices (HSI, HSCEI, HS Tech) Recapping the Recaps – A Bit More To Trade

By Travis Lundy

  • The final datapoints for the December Hang Seng Indices rebalances were recorded today, slightly altering the initially expected weights and flows. 
  • The expected flows have slightly increased since the initial estimates on 15 then 17 November.
  • Across all three indices, I see a net total of roughly HK$13.4bn a side to trade. 

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2023)

By Brian Freitas

CIMC Vehicles (1839 HK): Parent Privatisation?

By David Blennerhassett

  • CIMC Vehicles (1839 HK) is currently suspended pursuant to Hong Kong’s Code on Takeovers and Mergers.
  • SOE-Backed CIMC Group controls ~74% of CMIC Vehicle’s H-shares. Presumably, if any Offer was to unfold, it would be from the parent.
  • And what price for the H-shares? Around HK$9/share, a life-time high, would be in keeping with premiums seen in precedent PRC-incorporated privatisations. 

CIMC Vehicles (1839 HK): $7.00/Share Indicative Offer From Parent – Really?!

By David Blennerhassett

  • After CIMC Vehicle Group Co Ltd (1839 HK) was suspended yesterday pursuant to Hong Kong’s Takeover Code, the expectation was an H-share Offer from its parent, SOE-backed CIMC Group.
  • CIMC subsequently announced an indicative Offer yesterday evening, from its parent, at a $7.00/share for each H-share, a pitiful 8.6% premium to last close. There is no concurrent A-share Offer.
  • CIMC traded around $7.00 late September, and comfortably traded through the indicative terms for most of July. 

Asahi Offering: Discount Presents a Good Entry Point As Price Hikes & Tax Reforms Strengthen Asahi

By Oshadhi Kumarasiri

  • Two weeks ago, Asahi Group Holdings (2502 JP) revealed plans for a secondary offering, aiming to sell 33.48m common shares in international markets.
  • In this insight, we delve into the fundamentals of the business, identifying an opportunity if the offering is priced at a decent discount compared to Asahi’s current price.
  • We think recent price hikes and ongoing alcohol tax reforms position Asahi to outperform Kirin Holdings (2503 JP) in the next 3-4 years.

Quiddity Leaderboard F100/​​​250 Dec 23: Final Expectations; Two Trading Days for Announcement

By Janaghan Jeyakumar, CFA

  • The F100 and F250 December 2023 index changes are likely to be announced after the close on Wednesday 29th December 2023.
  • In this insight, we take a look at the potential index changes for F100 and F250 based on rankings as of 27th November 2023.
  • There could be one change for the F100 index and six separate changes for the F250 index. Some names lurking close to the border can still make it.

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Nov 28
0

Daily Brief Event-Driven: 2024 High Conviction: Buy Hollysys and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • 2024 High Conviction: Buy Hollysys
  • StubWorld: Rumoured Interest In PCCW’s Fibre
  • CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon
  • T&K Toka (4636 JP): Bain Decision Time as Progress Made on a Pre-Condition
  • Breaking Down Korean Regulators’ Official Details on New Short Selling System
  • ChiNext/​​ChiNext 50 Index Rebalance: Adds Outperforming Deletes Now
  • Another Day Ending in Y, Another Low-Balled Takeover – This Time Glosel (9995)
  • Wuxi Lead GDR Listing – Early Look – Another One in the Pipeline, Will Be Net Cash Post-Deal
  • Ecopro Materials: Overshooting Share Price and Upcoming End of Lockup in December
  • EQD | KOSPI 200 Stalling: Where to Go LONG on the Pullback?

2024 High Conviction: Buy Hollysys

By David Blennerhassett

  • Despite Hollysys Automation (HOLI US) receiving a myriad of proposals over the past three years, nothing moved forward.  Calling an SGM to spill the board would change that status quo. 
  • But Hollysys’ board stonewalled the SGM, pinning its reason – and a proposed injunction – on the subjective ownership of Ace Lead, and in turn, its 6.7% holding in Hollysys. 
  • That injunction was dismissed last week. An SGM will now be held late January. A firm merger proposal is expected in the middle of next month. This is a buy.

StubWorld: Rumoured Interest In PCCW’s Fibre

By David Blennerhassett

  • Reportedly, Chinese investors, as well as Middle Eastern sovereign wealth funds, have expressed interest in acquiring a “significant ” minority stake in PCCW Ltd (8 HK)‘s fibre ops. 
  • Preceding my comments on PCCW 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%.

CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon

By Brian Freitas

  • There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 8 December.
  • This is yet another index inclusion for Hygon Information Technology C (688041 CH) – the stock continues to move higher on expected passive buying over the next two weeks.
  • Over the last 6 months, the adds have underperformed the deletes but there has been a significant improvement in performance over the last 2 months.

T&K Toka (4636 JP): Bain Decision Time as Progress Made on a Pre-Condition

By Arun George

  • T&K Toka Co Ltd (4636 JP) has satisfied the precondition of selling its Hangzhou Toka Ink stake to hold less than 30%. The offer is targeted for early January.
  • Due to Dalton’s stake building, the shares have consistently traded above Bain’s pre-conditional JPY1,400 offer. Bain can either launch the tender with unchanged terms or bump the offer.
  • A bump is likely as, despite the irrevocables, satisfying the minimum acceptance condition is challenging. The Board will struggle to recommend the offer if the shares remain above terms. 

Breaking Down Korean Regulators’ Official Details on New Short Selling System

By Sanghyun Park

  • Concerning the newly imposed 90-day mandatory repayment period for institutional investors, the elimination of the recall risk during this period is not included in this improvement plan.
  • The right to re-establish the same short-selling position after the 90-day repayment period is unlimited. We should pay attention to the potential of this creating new trading events.
  • Institutions borrowing stocks from overseas are not subject to the 105% collateral ratio. However, everyone is subject to the 90-day repayment period, even for investors who borrow stocks from overseas.

ChiNext/​​ChiNext 50 Index Rebalance: Adds Outperforming Deletes Now

By Brian Freitas

  • There will be 6 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index. Implementation is at the close on 8 December.
  • There is a lot of overlap between the adds and deletes across both indices with the one-way trade across both indices estimated to be CNY 2.4bn.
  • The adds and deletes have drifted lower over the last few months. However, the adds have outperformed the deletes significantly in the last month.

Another Day Ending in Y, Another Low-Balled Takeover – This Time Glosel (9995)

By Travis Lundy

  • Today, Macnica Fuji Electronics Hol (3132 JP) (Macnica Holdings) announced that it would launch a tender offer to buy 100% of Glosel (9995 JP), a semiconductor trading company. 
  • Glosel is special because it has three main assets. 1) 61% of net assets are inventory (<3mo), 2) 34% of net assets are net receivables (<3mos), 3) 8+% is securities.
  • For that, Glosel’s Board decided 0.71x book was OK. Nah. The register is reasonably wide open, and this is a delayed start. Someone might get noisy, but < 50/50 bet.

Wuxi Lead GDR Listing – Early Look – Another One in the Pipeline, Will Be Net Cash Post-Deal

By Clarence Chu

  • Wuxi Lead Intelligent Equipmen (300450 CH) is looking to raise around US$300m in its upcoming Switzerland GDR listing.
  • As per media reports, Wuxi Lead was said to be looking to raise US$495m via a Swiss GDR issuance, having secured approval to sell up to 78.3m shares.
  • Given the decline in its share price over the year, the eventual deal size could come to around US$300m as of its current last close.

Ecopro Materials: Overshooting Share Price and Upcoming End of Lockup in December

By Douglas Kim

  • In this insight, we discuss the upcoming end of lockup in December for Ecopro Materials and why we believe Ecopro Materials’ share price will be much lower in 6-12 months. 
  • A combination of the potential inclusion in KOSPI Fast Entry plus the temporary ban on short selling of stocks in Korea has helped to push up Ecopro Materials’ share price.
  • However, despite this sharp share price run-up, we think the risk-reward is horrible on this stock in terms of bigger downside risk in the next 6-12 months. 

EQD | KOSPI 200 Stalling: Where to Go LONG on the Pullback?

By Nico Rosti

  • The KOSPI 200 INDEX has been rising for 4 weeks, it’s OVERBOUGHT and may soon perform a quick pullback, followed possibly by another rally.
  • The upcoming pullback is likely to be short-lived, in this insight we analyze where the pullback can reach, and where it should be possible to go LONG again.
  • The price area to watch is 330-326: if the index reaches there, the LONG trade odds will be good (assuming the uptrend will continue into the end of the year).

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