Event-Driven

Nearly US$37bn has flowed into mainland China listed ETFs since 2 January and could be driven by the National Team supporting the market. Central Huijin has announced their ETF buying.
Most of the inflows have been focused on large cap indices including CSI 300, SSE50, CSI 500, CSI 1000, ChiNext, STAR50 and Chinext50 indices.
While the inflows were initially focused on the CSI 300, there has been a diversification recently with big inflows to the SSE50, CSI 500, CSI 1000 and ChiNext indices.

Dai-Ichi Life for Benefit One (2412) – We Have a Deal! Bumped Small

Post-Close, the Nikkei carried a breathless headline that Dai Ichi Life Insurance (8750 JP) had agreed a deal for Pasona Group (2168 JP)‘s stake in Benefit One Inc (2412 JP).
Not long afterwards, TDNet Filings provided Benefit One results, a change to BeneOne’s Opinion on the M3 Offer, and Board Resolution to Support/Recommend DIL’s TOB, now at ¥2,173 and ¥1,526/share.
Looks like a done deal. And this will also likely delay the start of the DIL Bid to 26-28 February timeframe.

Pasona (2168) – Less Wrong Than Before But How Wrong Still Depends on Nambu-San

Today, Dai Ichi Life Insurance (8750 JP) announced a TOB for Benefit One Inc (2412 JP) having agreed a deal with Pasona Group (2168 JP) to sell into a buyback.
Pasona will get ¥1,526/share, and having agreed, it announced the expected special profit to be booked in the FY to 31 May 2024.
At ¥113.6bn on a consolidated basis (¥122.3bn on parent), less ¥1.165bn of associated costs, that’s ¥112.4bn at the lower end. That’s ¥2,870/share. Then there’s the rest of the business.

TCM (570 HK): We’ve Been Here Before

China Traditional Chinese Medicine (570 HK) (“TCM”) is the traditional Chinese medicine arm of SASAC-managed China National Pharmaceutical Group Corporation (CNPGC), one of the largest healthcare groups in China.
By my reckoning, TCM has fielded three Offers in the past decade, all from Sinopharm Hongkong, an indirect wholly-owned subsidiary of CNPGC and TCM’s major shareholder.
TCM was suspended “pursuant to the Code on Takeovers and Mergers” earlier today. The Real McCoy? A no-deal again from CNPGC/Sinopharm? And why didn’t the last Offers complete?

Benefit One (2412 JP): Dai-Ichi Life (8750 JP) Prevails with a JPY2,173 Offer

Benefit One Inc (2412 JP) has recommended Dai Ichi Life Insurance (8750 JP)’s revised offer of JPY2,173, a 2.4% and 90.1% premium to the previous offer and undisturbed price, respectively.
The Board and Pasona Group (2168 JP) secured the highest price. M3 Inc (2413 JP) tabled an alternative proposal but Pasona had concerns about the plan’s tax treatment.
Based on the irrevocables, the minimum acceptance condition requires a 31.6% minority acceptance rate, achievable due to the high premium and the competitive bidding process.

Investigating Potential Block Deals Involving Korea’s Financial Holding Companies

Stake sales by Affinity and Bearing PE are attractive due to the absence of special partnerships with Shinhan Financial Group, indicating favorable exit potential at current stock prices.
KB Financial draws attention due to Carlyle’s ₩240B EB investment in 2020. Carlyle can now convert to shares at ₩48,000/share, yielding 37.08%.
Woori Financial is intriguing. IMM PE and Eugene PE hold stakes, investing ₩450B and ₩386B respectively. Their yields are 32.55% and 10.45% respectively. No constraints on divestment.

Quiddity Leaderboard KOSPI 200 Jun 24: L&F (066970) Likely To Miss Out on Fast Entry in March

KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX).
In this insight, we take a look at the names leading the race to become ADDs and DELs during the upcoming semiannual review in June 2024.
There could be up to four changes in the KOSPI 200 index in the run up to the June 2024 index rebal event including an intra-review fast entry change.

Welbe (6556 JP): Polaris Capital-Backed MBO Tender Offer at JPY1,089

Welbe Inc (6556 JP) has recommended a Polaris Capital-sponsored MBO tender offer of JPY1,089 per share, a 30.0% premium to the undisturbed price (8 February).
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 46.67% ownership ratio.
Based on the irrevocables, the minimum acceptance condition requires a 30.1% minority acceptance rate. While a knockout offer, the acceptance condition is achievable.

ITC Ltd (ITC IN): Impact of BAT’s Potential Stake Sale

British American Tobacco (BATS LN) owns 29.03% of ITC Ltd (ITC IN) and could sell a portion of its stake. But BAT will hold at least 25% of the company.
British American Tobacco (BATS LN) paring its stake could also lead to SUUTI gradually reducing its own holding in the company.
Any stake sales would not result in buying from global passive trackers while there will be small buying from local index trackers. Increased float could pressure the stock.

JAPAN ACTIVISM: Murakami-San Does a Rug-Pull on Pac Metals (5541)…. Again

A couple of weeks ago I wrote here about noted activist Murakami-san and his new 5+% position in Pacific Metals (5541 JP). I warned it might be a rug pull.
It turns out, from subsequent filings, that it may have been a rug pull. This isn’t the first time. It isn’t even the first time on this stock.
That said, there are goings on here, and it pays to watch them.

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Feb 08

Daily Brief Event-Driven: An Optimal Way to Sourcing and Screening Data for Low PBR Theme Stocks in Korea and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

An Optimal Way to Sourcing and Screening Data for Low PBR Theme Stocks in Korea
New World Development (17 HK): Stock Trading Cheap as Passive Selling Nears
Quiddity Primer for KOSPI 200 Index Rebal Events (2024)
China Traditional Chinese Med (570 HK): Third Time’s the Charm as Sinopharm Revives Its Interest?
China Traditional Chinese Medicine (570.HK) – Will This Privatization Rumor Come True ?
KOSPI200 Index Adhoc Rebalance: Potential Replacements for SsangyongC&E
Kerry Express (KEX TB)’s MTO Update
Rule Changes to Swap Ratio Calculations for Merger Swaps in Korea
A First Major Class Action Lawsuit Against KT&G’s Directors by FCP + KT&G’s Results Analysis in 2023
EQD | KOSPI 200 Rally: WEEKLY Resistance Levels

An Optimal Way to Sourcing and Screening Data for Low PBR Theme Stocks in Korea

We can use KRX to access PER, PBR, and dividend yield. However, except for PER, the data, being based on the most recent information, limits its usefulness for proactive positions.
So, we should look into FnGuide, which aggregates and provides exclusive consensus data. This website also requires payment for access.
However, FnGuide provides some data for free, including PBR. Therefore, we can make use of this within the scope of its free offerings.

New World Development (17 HK): Stock Trading Cheap as Passive Selling Nears

New World Development (17 HK) stock has continued to drop and the decrease in market cap should result in selling from passive trackers at the end of the month.
New World Development (17 HK) has underperformed its peers and now trades at cheaper valuations on most parameters.
Passive trackers will need to sell over 100m shares of New World Development. That could provide liquidity for investors that see value and for shorts to cover their positions.

Quiddity Primer for KOSPI 200 Index Rebal Events (2024)

KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX).
KOSPI 200 is also used as the underlying index for various financial products such as ETPs, ELS, index funds, and futures/options.
In this insight, we take a brief look at the index selection methodology and the historical price and volume performance of KOSPI 200 index rebalance baskets.

China Traditional Chinese Med (570 HK): Third Time’s the Charm as Sinopharm Revives Its Interest?

Bloomberg reports that Sinopharm is reviving its interest in privatising China Traditional Chinese Medicine (570 HK)/CTCM. Sinopharm has contacted banks about financing and is considering partnering with other investors.
Sinopharm’s best bet is to partner with Ping An Insurance Group of (601318 CH) and privatise through a scheme. In this scenario, no disinterested shareholder would hold a blocking stake.
Due to Sinopharm’s previous privatisation attempts, shareholders will be wary of the latest rumour. Nevertheless, the valuation is undemanding compared to peer multiples.

China Traditional Chinese Medicine (570.HK) – Will This Privatization Rumor Come True ?

By Xinyao (Criss) Wang

We once again heard privatization rumor of China TCM, but China TCM denied it at this stage. We still recommend investors to remain vigilant until receive definite official announcement.
One important background of privatization is the integration of SOE carried out in recent years. We do not rule out the possibility that Taiji Group would drive this privatization.
It may not be an optimal time for the proposal of privatization by major shareholders. Other shareholders may not want to give up high-quality stocks, which makes privatization challenging.

KOSPI200 Index Adhoc Rebalance: Potential Replacements for SsangyongC&E

Hahn & Co hold 79.9% of Ssangyong Cement Industrial (003410 KS) and have made a tender offer to acquire the remaining 20.1% at KRW 7,000/share.
Ssangyong Cement Industrial (003410 KS) should be deleted from the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) once Hahn & Co acquire 90% of the company.
Aekyung Chemical (161000 KS) is a potential addition to the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) but inclusion is dependent on Hahn & Co reaching 90% of shares out.

Kerry Express (KEX TB)’s MTO Update

On the 29th December 2023, Kerry Logistics Network (636 HK) (KLN) announced it would in-specie its entire 52.1% stake in Kerry Express Thailand (KEX TB).
Given S.F. Holding (002352 CH) holds a 51.5% stake in KLN, it will hold 26.8% in KET post-in-specie, triggering an unconditional MTO. The MTO price will be THB5.50/share.
Thai SFC approval has now been satisfied. The MTO should commence around the 13th Feb. with payment ~26th March. KLN, cum-entitlement to KEX, is the 19 Feb.

Rule Changes to Swap Ratio Calculations for Merger Swaps in Korea

The Financial Services Commission plans to delegate merger swap ratio determination to corporate autonomy. Initially, only mergers between non-affiliated companies will be affected, with potential extension to affiliate mergers later.
The Financial Services Commission aims to start the legislative process in mid-February and complete the amendment by the third quarter of this year.
This change will enhance trading dynamics by decreasing the likelihood of prices aligning with the ratio just before merger announcements due to pre-information leakage.

A First Major Class Action Lawsuit Against KT&G’s Directors by FCP + KT&G’s Results Analysis in 2023

By Douglas Kim

One of the biggest news facing KT&G this year as been a class action lawsuit against KT&G’s directors by Flashlight Capital Partners.
KT&G announced that it will cancel 3.5 million shares (about 315 billion won) on 16 February, which represent 2.6% of its outstanding shares and 16.7% of treasury shares.
One of the major reasons why we remain positive on KT&G is that there is a relatively high probability of the company announcing cigarette price hikes in 2H 2024.

EQD | KOSPI 200 Rally: WEEKLY Resistance Levels

The KOSPI 200 INDEX last week displayed and impressive bounce, maybe too impressive, too quick, too fast.
A short-selling ban is in place until June 2024 for this market, but that does not mean it cannot pull back: according to our models the KOSPI 200 INDEX is OVERBOUGHT.
We expect a pullback next week, unless the index closes this week down, in that case SHORT resistance levels will be reset.

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Feb 07

Daily Brief Event-Driven: The Next Step in Lawson’s Big Boots Adventure – KDDI and MitCorp to Take It Private and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

The Next Step in Lawson’s Big Boots Adventure – KDDI and MitCorp to Take It Private
Lawson (2651 JP): KDDI Corp (9433 JP) Pre-Conditional Tender Offer at JPY10,360
Oriental Land: A Storm Brewing from Activist Coalition
L’Occitane (973 HK): Blackstone Pondering an Offer
Red 5/Silver Lake: US$1.5bn Aussie Gold Merger
NIFTY NEXT50 Index Rebalance Preview: Potential Adds Continue to Run
NIFTY100 Low Volatility 30 Index Rebalance Preview: One Change in March
L’Occitane (973 HK): Here We Go Again
Lawson & KDDI: Not Just Because Japanese E-Commerce Is an Omnichannel Model
Novartis Strikes for Possible Myelofibrosis Blockbuster

The Next Step in Lawson’s Big Boots Adventure – KDDI and MitCorp to Take It Private

Today, just before the close, the Nikkei sprung a headline saying KDDI Corp (9433 JP) would take over Lawson Inc (2651 JP). The stock immediately headed to limit up.
Post-Close, details emerged. KDDI will buy the 50% that MitCorp does not own, this will become a 50/50 JV. TOB launch at ¥10,360 will be in April. Squeezeout in September.
This appears to be the Next Step in Lawson’s Big Boots Adventure. The premium is too light. The price is too low. And that is not counting the synergies.

Lawson (2651 JP): KDDI Corp (9433 JP) Pre-Conditional Tender Offer at JPY10,360

Lawson Inc (2651 JP) has recommended a pre-conditional tender offer from KDDI Corp (9433 JP) at JPY10,360 per share, an 18.8% premium to the undisturbed (5 February).
The pre-conditions relate to regulatory approvals in Japan, China, South Korea, and the EU. The offer is expected to start in April, suggesting no significant issues, particularly with SAMR approval.
Based on the irrevocables, the minimum acceptance condition requires a 30.2% minority acceptance rate, achievable as the offer represents an all-time high.

Oriental Land: A Storm Brewing from Activist Coalition

By Oshadhi Kumarasiri

Activist investor, Elliott Management has acquired over a 2% stake in Mitsui Fudosan (8801 JP) and is urging it to sell its 6% stake in Oriental Land (4661 JP).
Elliott appears to have identified the path of least resistance, as Mitsui Fudosan had already indicated a willingness to sell its Oriental Land shares last year.
If Elliott’s campaign proves successful, it will inadvertently benefit Palliser, which is currently challenging Keisei Electric Railway Co (9009 JP) with a similar proposal.

L’Occitane (973 HK): Blackstone Pondering an Offer

Bloomberg reports that L’Occitane (973 HK) draws takeover interest from Blackstone (BX US), which is considering partnering with Chairman and largest shareholder Reinold Geiger.
Blackstone needs an attractive takeover premium due to the presence of significant disinterested shareholders (Mr. Geiger and Acatis KVG).
Shareholders will be wary of the latest rumour due to Mr Geiger’s aborted offer on 4 September 2023. Nevertheless, the valuation is undemanding compared to peer multiples.

Red 5/Silver Lake: US$1.5bn Aussie Gold Merger

Aussie gold miners Red 5 Ltd (RED AU) and Silver Lake Resources (SLR AU) have announced a “merger of equals” via a Scheme of Arrangement.
Red is offering 3.434 new shares for every SLR share, and will hold ~51.7% of the merged entity, with SLR shareholders holding the remaining 48.3%.
This has the unanimous backing of both boards. Yet SLR appears to be given short shrift on the merger ratio. Plus SLR holds ~11.9% of shares out in Red.

NIFTY NEXT50 Index Rebalance Preview: Potential Adds Continue to Run

With the review period for the March rebalance complete, there could be 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
Estimated one-way turnover is 13.9% resulting in a one-way trade of INR 28.6bn. Four inclusions will have over 1x ADV to buy; five deletions will have 2.5x+ ADV to sell.
The potential adds have outperformed the potential deletes by 28.6% over the last month. With positioning from a rebalance perspective mostly done, gradually unwind over the next few weeks.

NIFTY100 Low Volatility 30 Index Rebalance Preview: One Change in March

There could be one change for the Nifty100 Low Volatility 30 Index that will be implemented at the close on 28 March.
Constituent changes, volatility changes and capping changes will result in one-way turnover of 12.6% and in a one-way trade of INR 3.7bn.
While the deletion is fairly certain, there are a few non-constituents around the same level of volatility and price movements over the next few weeks will determine the inclusion.

L’Occitane (973 HK): Here We Go Again

From 2018 onward, French beauty retailer L’Occitane (973 HK) has apparently drawn interest from the likes of Advent International and its controlling shareholder Chairman Reinold Geiger – amongst others.
There is substance to these “Offers” – Geiger confirmed in August 2023 he was contemplating a conditional voluntary general Offer. He holds 72.65% of shares out according to the HKEx.
The latest news, with no definitive source, is that Blackstone is mulling the possibility of teaming up with Geiger on a buyout.

Lawson & KDDI: Not Just Because Japanese E-Commerce Is an Omnichannel Model

By Michael Causton

KDDI’s agreement with Lawson and Mitsubishi to make a tender offer for the convenience store chain is a game-changer for what has become a slow growth convenience store sector.
There are myriad potential synergies across e-commerce, new store types and also the promising new revenue stream of retail media. Lawson may be worth more than KDDI’s offer suggests.
And while Lawson may be behind Seven Eleven and Familymart, on some KPIs, like HQ revenues, it is No. 1 and also matches Seven Eleven on same-store sales.

Novartis Strikes for Possible Myelofibrosis Blockbuster

By Jesus Rodriguez Aguilar

Novartis offers an agreed €68/share, 89% premium, for MorphoSys AG (MOR US) in a bet that pelabrisib could become a blockbuster to treat myelofibrosis (possibly reaching peak sales of $1.1-1.5 billion).
Considering that the shares of Morphosys were trading in the low teens in November, I believe that shareholders will be happy to part with the shares.
Spread (gross/annualised) is 4.65%/18.09% (assuming settlement by 20 May). Novartis believes pelabrisib is definitely worth the risk. Long.

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Jan 25

Daily Brief Event-Driven: Haier Group to Buy $1.8B Stake in Shanghai RAAS from Grifols – A New Chapter Begins and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Haier Group to Buy $1.8B Stake in Shanghai RAAS from Grifols – A New Chapter Begins

Haier Group to Buy $1.8B Stake in Shanghai RAAS from Grifols – A New Chapter Begins

By Xinyao (Criss) Wang

Geopolitical risks have led to foreign companies planning to withdraw from China.It’s also difficult to allow foreign companies to control China’s core strategic assets.So, Grifols and RAAS’ “breakup” is inevitable.
This acquisition is an important milestone in the development of Haier’s big health industry. RAAS’s valuation also has room to rise further after being acquire by Haier due to synergies.
In the case of slowing growth in the home appliance market, this is a wise move for Haier.However, potential goodwill impairment in GDS is a risk for Haier/RAAS and investors.

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Jan 23

Daily Brief Event-Driven: TSE Action to Implement Management Conscious of Capital Cost and Stock Price – The Data Tool and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

TSE Action to Implement Management Conscious of Capital Cost and Stock Price – The Data Tool
T&K TOKA (4636 JP): Bletcherous Bain Bump Doesn’t Even Reach Blandiloquent – Another Offensive Deal
KOSDAQ150 Adhoc Index Rebalance: Seronics to Replace L&F
CSI500 Index Rebalance Preview: High Turnover & Big Flow
Trading At Terms As Orecorp Rebuffs Perseus’ All-Cash Bid
Quiddity Leaderboard ASX Mar 24: Exp ADDs Vs DELs Trade Successful; More to Come?
T&K Toka (4636 JP): Bain Bumps to JPY1,410 as Dalton Agrees to Tender
OreCorp (ORR AU): Perseus Rivals Silvercorp with an All-Cash Takeover Offer
GENDA Lock-Up – Since Selling in the IPO, Midas Capital’s Remaining Stake Is up Another 60%
EQD | Nikkei 225 – MONTHLY Rally Trajectory Analysis + Resistance Targets

TSE Action to Implement Management Conscious of Capital Cost and Stock Price – The Data Tool

A few days ago, 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】
That translates to “Action to Implement Management That is Conscious of Cost of Capital and Stock Price”. The TSE asked companies in Mar-2023 to formulate and disclose a policy.
Some have. Some have not. The TSE made a list. They will update the list every month. However, their list is wholly inadequate, so we made it better.

T&K TOKA (4636 JP): Bletcherous Bain Bump Doesn’t Even Reach Blandiloquent – Another Offensive Deal

I expected a blandiloquent but bletcherous bump from Bain. Discussed in T&K TOKA (4636 JP): Expect ANOTHER Blandiloquent But Bletcherous Bump From Bain. We got bletcherous.
But at a mere ¥10 uplift to ¥1,410, we did not get blandiloquent. That’s insulting. But as suggested in the first piece, there was NAVF Risk. And we got it.
NAVF agreed to sell its 24+% to Bain at ¥1,410 in return for being able to buy 15% of the bidco, fully-levered (i.e. they roll in at minimal cost).

KOSDAQ150 Adhoc Index Rebalance: Seronics to Replace L&F

L&F Co Ltd (066970 KS) will move from the KOSDAQ Market to the KOSPI Market on 29 January. That means KOSDAQ 150 Index deletion at the close on 26 January.
As the highest ranked non-constituent from the Information Technology sector at the December rebalance, Seronics Co Ltd (042600 KS) will be added to the index.
Short interest on L&F Co (066970 KS) is 1.8m shares (KRW 364bn; 4.98% of shares outstanding; 7.24% of float; 2.4x ADV). There could be recalls from passives and forced covering.

CSI500 Index Rebalance Preview: High Turnover & Big Flow

With three-quarters of the review period nearly complete, we forecast 50 changes (the maximum permitted) for the CSI 500 Index at the close on 14 June.
There is a big sector skew in the potential changes. We estimate a one-way turnover of 9.1% at the June rebalance resulting in a one-way trade of CNY 5.34bn.
The potential adds and deletes and the CSI 500 Index have performed in line since August and the current setup appears attractive.

Trading At Terms As Orecorp Rebuffs Perseus’ All-Cash Bid

In OreCorp: Silvercorp Switches To Off-Market Bid, after Silvercorp Metals (SVM CN) switched to an off-market Offer for Orecorp Ltd (ORR AU), I expected Perseus Mining (PRU AU) to counter.
Orecorp announced this morning Perseus (with 19.9% of shares out) has pitched an all-cash Offer of A$0.55/share, primarily conditional on getting to 50.1%
Orecorp has responded by saying Perseus Offer is not superior to Silvercorp cash/scrip terms. Perhaps it’s Orecorp’s way of (temporarily) skirting the break fee and letting the market decide.

Quiddity Leaderboard ASX Mar 24: Exp ADDs Vs DELs Trade Successful; More to Come?

In this insight, we take a look at the potential index changes for ASX 300, 200, 100, 50, and 20 in the run-up to the March 2024 index review.
The conclusion of the Costa Group Holdings (CGC AU) M&A deal could trigger an index change in February 2024.
Separately, there could be a “surprise” index change in March 2024 caused by a long-term trading suspension.

T&K Toka (4636 JP): Bain Bumps to JPY1,410 as Dalton Agrees to Tender

T&K Toka Co Ltd (4636 JP) has recommended Bain’s revised tender offer of JPY1,410 per share, a highly disappointing 0.7% premium to the previous JPY1,400 offer.
Bain’s marginal bump was due to securing Dalton’s support through the Nichii Gakkan Co (9792 JP) playbook. Dalton will tender its shares and make a 15% re-investment in the offeror.
Shareholders representing a 60.82% ownership ratio, including share options, will accept, paving the way to success. With shares trading 4.7% above terms, it is time to move on.

OreCorp (ORR AU): Perseus Rivals Silvercorp with an All-Cash Takeover Offer

Perseus Mining (PRU AU)’s competing all-cash takeover offer for Orecorp Ltd (ORR AU) is A$0.55, a 4.0% premium to the implied value of the Silvercorp Metals (SVM CN) off-market takeover offer.
The Board opines that the PRU offer is not superior. Since announcing the revised SVM scheme on 23 November, the PRU offer has averaged 3.0% lower than the SVM offer.
The SVM offer, which closes on 23 February, has struggled to gain traction. PRU has the balance sheet to sweeten its offer and gain shareholder traction.

GENDA Lock-Up – Since Selling in the IPO, Midas Capital’s Remaining Stake Is up Another 60%

By Clarence Chu

GENDA (9166 JP) (GENDA) was listed on the TSE on 28th July 2023. The IPO had been a mix of primary and secondary shares.
Genda develops and operates amusement facilities in Japan, primarily operating under its Genda GiGO Entertainment subsidiary.
Coming up for six-month lockup expiry are the pre-IPO shareholders, notably Midas Capital, and the firm’s executives and directors.

EQD | Nikkei 225 – MONTHLY Rally Trajectory Analysis + Resistance Targets

The seasonal matrix indicates a possibility for the Nikkei 225 (NKY INDEX) to continue its current rally into April and that rally should end in May.
The index at the moment is very overbought, we expect some form of WEEKLY pullback soon, please consult our previous insight to find the WEEKLY resistance levels.
The pullback should be seen as a WEEKLY pullback within a larger, longer MONTHLY (multi-month) uptrend, i.e. an opportunity to buy and/or add positions at better prices.

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Jan 22

Daily Brief Event-Driven: Shinko Electric (6967) Takeover: Changing Break/Gap Risk as Comps Gain and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Shinko Electric (6967) Takeover: Changing Break/Gap Risk as Comps Gain
The Hunt for the Japanese Laggards, Here Are 47 Attractive Companies
Ping An A/H Premium: Blow Out Could Lead to Sharp Reversal
Merger Arb Mondays (22 Jan) – JSR, Benefit One, T&K Toka, Guppy’s, Genetron, Weiqiao, Probiotec
KRX Introduces Market Orders for Single Stock Futures: Potential Trading Impacts
A/H Premium Tracker (To 19 Jan 2024): Hs Shellacked Vs As. Near Multi-Year High Average AH Premia
Mainland Connect NORTHBOUND Flows (To 19 Jan 2024): BIG Net Sells, Again, Before National Team Buys
Quiddity Leaderboard ES50 Sep 24: Billion Dollar Flows Not Far Away
CSI300 Index Rebalance Preview: A Dozen Changes for June
HK Connect SOUTHBOUND Flows (To 19 Jan 2024); High Div SOEs Again BIG Buys as CBBC Hedging Hurts

Shinko Electric (6967) Takeover: Changing Break/Gap Risk as Comps Gain

The JIC Deal for Shinko Electric Industries (6967 JP) started trading wide when announced five weeks ago. It is still at 9% for perhaps 9 months.
There is FUD. There are Flows. Just like JSR (4185). Some of that FUD can be explained by “gap risk” on deal break…. or can it? We look at risks.
5 weeks ago, there was more positioning risk than fundamental risk. But now main comp Ibiden has outperformed Shinko by 17%. Gap risk is fundamentally lower now. Bump risk exists.

The Hunt for the Japanese Laggards, Here Are 47 Attractive Companies

By Mohshin Aziz

Tokyo Stock Exchange (TSE) has published the list of companies that are conscious of stock capital and share price; this will be a recurring monthly feat
The initial compliance rate is encouraging and should continue to grow as peer pressure is relentless and doing nothing is not an option. The shake-up is happening
We narrow down a list of companies that are the most compelling laggard opportunities based on their low price to book ratio (PBR) and strong balance sheet

Ping An A/H Premium: Blow Out Could Lead to Sharp Reversal

Ping An Insurance (601318 CH) trades at a 40% premium to Ping An Insurance (2318 HK). The premium has blown out the last week and there could be a reversal.
The difference in Ping An’s AH premium versus the HSAHP Index has shrunk to its narrowest level in the last 10 years.
Shareholding in Ping An Insurance Group of (601318 CH) via Northbound Connect has dropped and shareholding in Ping An Insurance (H) (2318 HK) via Southbound Connect has increased steadily.

Merger Arb Mondays (22 Jan) – JSR, Benefit One, T&K Toka, Guppy’s, Genetron, Weiqiao, Probiotec

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 – GUPPY’s Inc (5127 JP), Hollysys Automation Technologies (HOLI US), Shinko Electric Industries (6967 JP), Probiotec Ltd (PBP AU), Irc Ltd (1029 HK), Genetron Holdings Ltd (GTH US).
Lowest spreads – T&K Toka Co Ltd (4636 JP), Tietto Minerals Ltd (TIE AU), Benesse Holdings (9783 JP), Benefit One Inc (2412 JP), Orecorp Ltd (ORR AU).

KRX Introduces Market Orders for Single Stock Futures: Potential Trading Impacts

KRX notified local brokerages last week about allowing market orders for single stock futures (SSF) from April. Currently, 192 SSFs are listed.
Anticipating short-term effects, heightened frequency and impact of erroneous orders may cause spot market confusion. KRX plans real-time bid disclosure for SSFs to prevent price distortions.
Nonetheless, we will likely observe SSF price volatility surges. Real-time bid exposure could exacerbate volatility due to premature information revelation. Preemptive position setups considering these factors are advised.

A/H Premium Tracker (To 19 Jan 2024): Hs Shellacked Vs As. Near Multi-Year High Average AH Premia

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. But that didn’t help.
SOUTHBOUND flows were bigly positive and NORTHBOUND flows a large net sell. Nevertheless AH Premia had their best week in ages as HK large caps, mid-caps, small-caps got shellacked.
Now at new 52wk wides on A premia. Now within 3% of 5+ year highs.

Mainland Connect NORTHBOUND Flows (To 19 Jan 2024): BIG Net Sells, Again, Before National Team Buys

The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
Last week saw NORTHBOUND net SELL RMB 23.5bn of A-shares on strong average activity. Big net selling on Weds. National Team stepped in Thurs. NORTHBOUND stepped in to sell Friday.
Renewables were a bit more mixed this week but still a net sell by NORTHBOUND. It is not clear what stops persistent net selling.

Quiddity Leaderboard ES50 Sep 24: Billion Dollar Flows Not Far Away

The ES50 Index is one of the most highly-tracked indices in Europe and the annual index review takes place in September every year.
This annual index rebal event usually results in some of the most significant index flow events in Europe every year typically amounting to billions of dollars.
In this insight, we take an early look the names leading the race to become ADDs/DELs for the upcoming index review in September 2024.

CSI300 Index Rebalance Preview: A Dozen Changes for June

With three-quarters of the review period nearly complete, there could be 12 changes for the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) in June.
We estimate one-way turnover of 1.3% at the June rebalance leading to a one-way trade of CNY 5.06bn. There are a lot of stocks with over 1x ADV to trade.
There have been big ETF inflows to the CSI 300 Index trackers, but the potential adds have still outperformed the index and the potential deletes.

HK Connect SOUTHBOUND Flows (To 19 Jan 2024); High Div SOEs Again BIG Buys as CBBC Hedging Hurts

An ugly week for HK stocks but SOUTHBOUND flows showed decent net buying at HK$14.7bn on the week. High-Div SOEs continue to be in favour.
What appears to have been strong net selling on the mainland combined with CBBC unwinds in Hong Kong related to mainland-linked stocks caused HK to have a baaaaad week.
The separately published AH Monitor highlights a Really Tough Week. Hs got KILLED vs their A-share counterparts as CBBCs sold the HK names and National Team bought A-shares.

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Jan 21

Daily Brief Event-Driven: GUPPY’s (5127 JP): Medley (4480 JP) Tender Offer at JPY3 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

GUPPY’s (5127 JP): Medley (4480 JP) Tender Offer at JPY3,250
Index Rebalance & ETF Flow Recap: ASX, KS200, KQ150, HSIII, STTF, L&F, Costa Group, Japan, Bud APAC
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Genetron, Guppy, Weiqiao Textile, Taisho Pharma, T&K Toka
Genetron (GTH US): Wide Spread Ahead of the 21 February Vote
Activia Properties (3279) – Short-Term Higher-Impact Buyback on Better Fundamental Results
Weekly Deals Digest (21 Jan) – Benefit One, GUPPY’s, T&K Toka, Weiqiao, Genetron, Amer Sports
Last Week in Event SPACE: Benefit One, China Unicom, Zhejiang Expressway/ Zheshang Sec, Hollysys

GUPPY’s (5127 JP): Medley (4480 JP) Tender Offer at JPY3,250

GUPPY’s Inc (5127 JP) has recommended Medley (4480 JP)’s tender offer of JPY3,250 per share, an 81.0% premium to the undisturbed price (19 January).
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 10.19% ownership ratio.
Despite the premium, the offer is light vs the IFA DCF valuation. Based on the irrevocables, the minimum acceptance condition requires a 23.4% minority acceptance rate, which is achievable.

Index Rebalance & ETF Flow Recap: ASX, KS200, KQ150, HSIII, STTF, L&F, Costa Group, Japan, Bud APAC

The review period for a global index commenced last week and will run through this week as well.
The announcement of the changes for the LQ45 Index should be announced in the coming week and will be implemented at the close on 31 January.
Huge inflows to CSI 300 Index trackers during the week while there was a big outflow from Tracker Fund of Hong Kong (2800 HK).

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Genetron, Guppy, Weiqiao Textile, Taisho Pharma, T&K Toka

I tally 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals discussed this week on Smartkarma: Genetron Holdings Ltd (GTH US)‘s take-private transaction; andMedley (4480 JP)‘s buy out of GUPPY’s Inc (5127 JP).
Key updates took place on: Orecorp (ORR AU), Weiqiao Textile (2698 HK), Benefit One (2412 JP), Taisho Pharmaceutical (4581 JP), T&K Toka (4636 JP), and Hollysys Automation Technologies (HOLI US).

Genetron (GTH US): Wide Spread Ahead of the 21 February Vote

Genetron Holdings Ltd (GTH US) shareholders will vote on the consortium’s US$4.08 per ADS offer on 21 February. The offer is light in comparison to historical trading ranges.
Completion is conditional on shareholder approval, dissenting shareholders representing less than 15% of outstanding shares and regulatory approvals (NDRC, MoC and SAFE).
Despite the light offer, the completion conditions should be met. At the last close price and end of March completion, the gross and annualised spread is 7.7% and 45.5%, respectively.

Activia Properties (3279) – Short-Term Higher-Impact Buyback on Better Fundamental Results

Activia Properties (3279 JP) announced results Wednesday. Higher DPU on better rental income looks to continue next period, but an asset disposal will produce some drag ahead.
Activia Properties also announced a buyback of 10% of ADV for the next four months.
The REIT is slightly cheap to peers. Yield spread to JGBs is high which is good. It needs to be 10% higher to restart accretive equity offerings.

Weekly Deals Digest (21 Jan) – Benefit One, GUPPY’s, T&K Toka, Weiqiao, Genetron, Amer Sports

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 – Amer Sports (AS US), Ola Electric (1700674D IN) and Mixue Group (MIX HK) IPOs.
Event-Driven developments – Benefit One Inc (2412 JP), GUPPY’s Inc (5127 JP), T&K Toka Co Ltd (4636 JP), Weiqiao Textile Co (2698 HK), Genetron Holdings Ltd (GTH US).

Last Week in Event SPACE: Benefit One, China Unicom, Zhejiang Expressway/ Zheshang Sec, Hollysys

Dai Ichi Life (8750 JP) has the wherewithal, and probably the synergies to make a bump for Benefit One (2412 JP) work. M3 is clearly not in the driver’s seat.
China United Network (600050 CH) is, for all intent and purpose, a pseudo-A to China Unicom (762 HK). Go long Unicom, short United due to Unicom’s significantly cheaper valuation.
Zhejiang Expressway (576 HK) has had a stonking run since its rights issue. Look to unwind this set-up and take the other side: short Expressway, long Zheshang Securities (601878 CH).

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Jan 20

Daily Brief Event-Driven: Identifying Specific Implementation Plans for Korea’s Low-PBR Improvement Policy and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Identifying Specific Implementation Plans for Korea’s Low-PBR Improvement Policy
Genetron Holdings (GTH US): Clear Diagnosis
Medley (4480) To Buy Out Guppy’s (5127) At ¥3,250 (9.4x Aug26 EV/FCF)
Meaty Target
EQD | NIFTY Pullback Already OVERSOLD: Prepare for WEEKLY LONG Trade

Identifying Specific Implementation Plans for Korea’s Low-PBR Improvement Policy

The Korean government has introduced policies ahead of April’s elections, with a recent notable announcement addressing the “Korea Discount” by enhancing low PBR stock valuations.
A leading proposal involves creating an index of low PBR companies. There are hints of listing ETFs tracking this index, with potential directives compelling pension funds to invest.
Identifying early inclusions is vital. High-likelihood candidates are low PBR large caps with maintained earnings, dividends/share buyback potential, including Hyundai Dept, E-Mart, Hyundai Steel, IBK, Korean Re, & DL E&C.

Genetron Holdings (GTH US): Clear Diagnosis

Back on the 11th October 2023, Genetron Holdings Ltd (GTH US), a precision oncology platform, entered into a definitive take-private transaction, at $4.08/ADS, a 15% premium to undisturbed.
The EGM for shareholders to vote on the transaction will be held on the 21 February. The record date is the 9 Feb.
This merger requires approval from at least two-thirds of the votes cast, and 59.7% are supportive. Trading at a gross spread of 7.7%. This is a clean deal.

Medley (4480) To Buy Out Guppy’s (5127) At ¥3,250 (9.4x Aug26 EV/FCF)

Medley (4480 JP) operates recruitment platforms in healthcare, elsewhere. GUPPY’s Inc (5127 JP) does too. They also offer exam prep for two niches where they have super-high market share.
GUPPY’s was listed 18mos ago, and the founder wants out. The deal is a nice premium (+86%) but it isn’t as generous a deal as it could be.
That said, the shareholder structure looks like this deal gets done pretty easily.

Meaty Target

By Jesus Rodriguez Aguilar

Marel HF (MARL IR) announced a third proposal from John Bean Technologies (JBT US) for a cash and shares offer, equivalent €3.60/share, to be launched in Q1, with 24.7% irrevocable undertakings.
There is strong market growth potential, due to growing middle-class demanding a higher proportion of animal protein in their diet. The overall sector, despite global economic woes, seems piping hot.
My base-case fair value estimate is €3.54 (9.0% WACC, 2% implied perpetuity growth rate). The median IBES consensus TP is €3.50. On this basis, the offer price seems fair. Buy.

EQD | NIFTY Pullback Already OVERSOLD: Prepare for WEEKLY LONG Trade

Last week at Close the NIFTY Index was OVERBOUGHT, this week it became quickly OVERSOLD, bouncing off from a price area near the Inner Fence support levels for CC=-1.
Another week down is possible but we see strong support in the 21250-20800 price area.
Should that support area be reached, it would be a good opportunity to re-enter this index’s Bull market.

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Jan 19

Daily Brief Event-Driven: Bud APAC (1876 HK): Nursing a Hangover; Now Comes a Passive Overhang and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Bud APAC (1876 HK): Nursing a Hangover; Now Comes a Passive Overhang
Spotting Position Patterns: TIGER Battery ETF January Review & KODEX ETF’s March Rebalancing
IRC (1029 HK)’s MBO’s MGO: Still An Avoid
Quiddity Leaderboard SE600 Mar 24: Two Intra-Review and 5 Regular Changes Likely

Bud APAC (1876 HK): Nursing a Hangover; Now Comes a Passive Overhang

Budweiser Brewing APAC (1876 HK) has seen investors run for the hills over the last year. The halving of the stock price could mean deletion from passive portfolios.
Other Hong Kong listed brewers, China Resources Beer Holdings (291 HK) and Tsingtao Brewery Co Ltd H (168 HK) have been beaten down too and have underperformed their Asian peers.
The deletion from passive portfolios could provide a buying opportunity in Budweiser Brewing APAC (1876 HK) at the end of February (or earlier if the stock drops due to positioning).

Spotting Position Patterns: TIGER Battery ETF January Review & KODEX ETF’s March Rebalancing

TIGER ETF (305540) rebalanced on January 11th, with Ecopro Materials correcting by 4%, contrasting a 20% surge from Jan 8-10. TIGER recorded net purchases aligning with a 2% inclusion weight.
Preemptive positions by local hedge funds were observed from Jan 8-10, closing on the 11th. Despite a KOSPI decline and minimal sector movement, Ecopro Materials exhibited this unusual price pattern.
Observing this pattern implies a potential recurrence during the March rebalancing of KODEX ETF. Notably, local hedge funds may initiate similar preemptive positions. We should consider this in position setup.

IRC (1029 HK)’s MBO’s MGO: Still An Avoid

Back on the 1st November, Nikolai Levitskii, Russian iron-ore play IRC (1029 HK)‘s chairman and largest shareholder, acquired 4.72% of shares out, lifting his stake above 30%, triggering an MGO.
The Offer is conditional on Levitskii holding more than 50% of shares out. His intention is to maintain IRC’s listing. At the first close, he held 35.77% (5.16% had tendered).
The current spread is 9.2%. MIC, with 16.67% of shares out, has yet to tender. Nor do I expect them to. Plus IRC is on the OFAC sanction list. Avoid.

Quiddity Leaderboard SE600 Mar 24: Two Intra-Review and 5 Regular Changes Likely

The SE600 index is one of the most widely followed benchmark indices in Europe. This index is rebalanced on a quarterly basis.
In this insight, we take a look at the potential index changes that could take place between now and the end of the March 2024 index rebal event.
Based on the latest available data, I expect there to be up to seven index changes in the first quarter of 2024.

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Jan 18

Daily Brief Event-Driven: TOPIX Jan FFW Change – Visional (4194) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

TOPIX Jan FFW Change – Visional (4194), Anycolor (5032), Furuya Metal (7826)
Weiqiao Textile (2698 HK): Pre-Condition Satisfied as Prudence Edges Towards a Blocking Stake
KOSPI Size Indices – The Outperformance Continues
STTF Rebalance Preview: One Potential Change in March
Quiddity Leaderboard F100/250 Mar 24: Intra-Review Replacements for NETW and LXI REIT
A 140% Increase in Share Cancellations by Korean Companies from 2021 to 2023
EQD | SPX DAILY LONG Reversal Probability Increasing
Weiqiao Textile (2698 HK): Pre-Cons Done. Payment (Perhaps) Late March
Naspers (NPN) X Prosus (PRX) Pairs Trade Opportunity as Naspers Comes Under Pressure

TOPIX Jan FFW Change – Visional (4194), Anycolor (5032), Furuya Metal (7826)

Late last week, the TSE announced the changes in FFW for companies which have FY-end in the calendar Q2. Changes at 30 Jan close also include Phased Weighting Changes.
There are two additions and 61 upweights (including net effect of PWR/PWIs). There are 456 down-weights with two-way flows of about US$1bn. There is a tiny funding trade.
Visional (4194 JP) and Furuya Metal (7826 JP) are the two adds. Other large dollar upweights are Asahi Intecc (7747 JP) and Anycolor (5032 JP).

Weiqiao Textile (2698 HK): Pre-Condition Satisfied as Prudence Edges Towards a Blocking Stake

Weiqiao Textile Co (2698 HK)’s offer pre-condition is satisfied. Prudence has increased its shareholding to 3.39% of the outstanding shares (9.79% of H Shares), marginally short of a blocking stake.
The HK$3.50 offer has been declared final, which rules out a bump. Therefore, Prudence’s strategy could be to play the gross spread or to block the deal.
The Shandong Luoxin Pharmaceutical (8058 HK) precedent supports the gross spread play view. However, unlike the precedent, Prudence is marginally short of a blocking stake in Weiqiao Textile.

KOSPI Size Indices – The Outperformance Continues

The review period for the March rebalance of the KOSPI Size Indices started 1 December and will end 29 February. The changes will be implemented at the close 14 March.
We currently see 3 migrations from MidCap to LargeCap, 3 new adds to LargeCap, 6 migrations from LargeCap to MidCap, and 11 migrations from SmallCap to MidCap.
Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.

STTF Rebalance Preview: One Potential Change in March

Emperador (EMI SP) currently fails the liquidity test and could be removed from the SPDR Straits Times Index ETF (STTF SP) in March.
Frasers Centrepoint Trust (FCT SP) is currently the highest ranked non-constituent and could be added to the ETF. FCT has a 6% higher market cap compared to Olam (OLG SP).
We estimate trackers will need to buy 5 days of ADV in Frasers Centrepoint Trust (FCT SP) and sell over 37 days of ADV in Emperador (EMI SP).

Quiddity Leaderboard F100/250 Mar 24: Intra-Review Replacements for NETW and LXI REIT

In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the March 2024 index rebal event.
Although I do not see any regular ADDs/DELs for the March 2024 rebalance, there might be one or two intra-review changes during the first quarter of 2024.
These intra-review changes will be triggered by the completion of M&A events and it is important to know which names are leading the race to become intra-review ADDs.

A 140% Increase in Share Cancellations by Korean Companies from 2021 to 2023

By Douglas Kim

The total amount of share cancellations by Korean companies increased sharply in the past three years. Share cancellations of 6.1 trillion won in 2023 represented a 140% increase from 2021.
Although the total amount of share cancellations of 6.1 trillion won in 2023 seems fairly large, this represented only 0.24% of total market caps of Korean companies.
We also provide a list of seven Korean companies that have been targeted by activist investors to cancel more shares and improve corporate governance.

EQD | SPX DAILY LONG Reversal Probability Increasing

The S&P 500 INDEX at the moment has lost its momentum and is pulling back towards the Q2 (4751) and Q3 (4713) support levels, where it would be DAILY OVERSOLD.
A DAILY reversal could happen today or tomorrow from prices between 4750 and 4700.
This trade is a quick scalp, the goal is to profit from a 1-bar reversal, after that we cannot predict the market direction, so caution is advised.

Weiqiao Textile (2698 HK): Pre-Cons Done. Payment (Perhaps) Late March