Event-Driven

SPACs – remember them? US offerings in 2021 topped ~US$150bn, falling to US$13bn in 2022. Singapore joined the bandwagon in January 2022 and Hong Kong two months later.
That Hong Kong stock is Aquila Acquisition Corporation (7836 HK), and it recently announced a merger with ZG Group, a Chinese steel trading website.
That’s positive. Less positive is how de-SPACed shares tend to trade in the US.

Hana Micron’s Boost From Samsung/Nvidia Agreement

US graphics chip designer NVIDIA Corp (NVDA US) has, to date, sourced HBM3 chips exclusively from SK Hynix (000660 KS).
Shares in Samsung Electronics (005930 KS) promptly popped ~6% last Friday on news it had been added as a supplier to NVIDIA.
Hana Micron Inc (067310 KS), which boasts Samsung as its largest customer, similarly jumped, and is up 45% in the past week. Too much too quickly?

Mason Group (273 HK): A Wide Spread with the Scheme Vote on 3 October

Mason Group Holdings (273 HK)‘s scheme document is out, with the vote scheduled for 3 October. The IFA considers Red Emerald Capital’s HK$0.0338 per share offer fair and reasonable.
The key conditions are SFC approval and the scheme approved by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). Peer de-rating has helped the attractiveness of the offer.
Shareholders with blocking stakes have provided irrevocables or will accept due to the attractive ROI. At the last close and for the 21 November payment, the gross/annualised spread is 9.0%/52.1%.

Quiddity HSTECH Dec 23 Flow Expectations: One Low-Conviction Change, US$250mn One-Way

In this insight, we take a look at the potential index changes and the resultant capping flows for the HSTECH Index in December 2023.
There could be one ADD and one DELETE for HSTECH in December 2023 but I would treat them as low-conviction changes.
At present, I see one-way flows for the December 2023 rebalance to be around US$250mn but as prices change, our index change and flow expectations will change too.

Quiddity HSCEI Dec 23 Flow Expectations: At Least One Change Likely; There Could Be More

In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI in December 2023.
Based on the latest available data, I expect one ADD and one DEL for HSCEI in December 2023.
There is more than one potential ADD in the top 40 according to my estimates but recent history tells us some of these names are not “index-provider-friendly.“

3rd Oct Scheme Vote For Mason (273 HK)

On the 11 June, broker Mason Group (273 HK) announced a Scheme at HK$0.0338/share, a 20.7% premium to last close. Terms had not been declared final.
The Offeror is Red Emerald. which holds no shares in Mason. Shareholders with 47.55% of shares out have given irrevocables in support of the Scheme.
The Scheme Doc is now out. The EGM/Court Meeting will be held on the 3 Oct with expected payment around the 21 November. Trading wide to terms.

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Sep 07

Daily Brief Event-Driven: NTT’s Partial Offer for Marketing Consultant Intage (4326) – and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

NTT’s Partial Offer for Marketing Consultant Intage (4326) –
Intage Holdings (4326 JP): NTT’s Partial Tender Offer
StubWorld: Axiata Is Coming Up Cheap
CSI300 Index Rebalance Preview: 14 Potential Changes in December
Single-Day ETF Flow Event Not to Be Missed in Korea in December
JF Wealth Lock-Up – At Least US$465m to Be Unlocked, Needs Some Selling to Improve Its Liquidity

NTT’s Partial Offer for Marketing Consultant Intage (4326) –

Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP).
Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%.
The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership.

Intage Holdings (4326 JP): NTT’s Partial Tender Offer

NTT (Nippon Telegraph & Telephone) (9432 JP) has announced a partial tender offer for Intage Holdings (4326 JP) to make it a consolidated subsidiary.
The offer is for a minimum of 15.4m shares (40.00% ownership ratio) and a maximum of 19.6m shares (51.00%) at JPY2,400 per share, a 26.4% premium to the undisturbed price.
Irrevocables represent a 19.90% ownership ratio. The minimum acceptance condition requires a 20% minority acceptance rate. The offer is attractive and represents an all-time high.

StubWorld: Axiata Is Coming Up Cheap

Axiata Group (AXIATA MK)‘s NAV discount and implied stub are around their lows since the CelcomDigi (CDB MK) / Digi.com merger last November.
Preceding my comments on Axiata 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%.

CSI300 Index Rebalance Preview: 14 Potential Changes in December

Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.

Single-Day ETF Flow Event Not to Be Missed in Korea in December

Ecopro Co will replace Celltrion Inc. Their float market cap difference is nearly 5 trillion won, so it doesn’t seem likely that this will reverse by the end of November.
Ecopro may not have a very significant passive impact x ADTV, given its still high trading volume. On the other hand, Celltrion seems likely to be the target of traders.
From a trading perspective, it’s important to focus on the potential price impact of this flow event on Celltrion, which could be amplified depending on the possibility of merger cancellation.

JF Wealth Lock-Up – At Least US$465m to Be Unlocked, Needs Some Selling to Improve Its Liquidity

By Clarence Chu

JF Wealth Holdings (9636 HK) was listed on 10th March 2023, its one-year lockup will expire on 9th Sept 2023.
The firm had raised around US$129m in its Hong Kong IPO, at the bottom end of its indicative price range.
JF Wealth (JFW) is an online investment decision-making solution provider in China, focusing on the online investor content services market.

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Sep 06

Daily Brief Event-Driven: JFE Holdings (5411) Stock+CB Offering and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JFE Holdings (5411) Stock+CB Offering
Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions
Golden Eagle (3308 HK): CCASS Movements Are Standard Fare
EQD | NIFTY Index WEEKLY Resistance Analysis
Hong Kong CEO & Director Dealings (6 Sept): WuXi AppTec, Peking University, FriendTimes

JFE Holdings (5411) Stock+CB Offering

Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions

There are a bunch of stocks that are constituents of the S&P/ASX family of indices and could go private or merge prior to the next scheduled rebalance in December.
That will lead to ad hoc inclusions for the S&P/ASX 200 (AS51 INDEX) and could also lead to ad hoc inclusions for the S&P/ASX 50 and S&P/ASX 100 indices.
There is a fair amount of short interest on some of the potential inclusions and short covering due to index inclusion could take the stocks higher.

Golden Eagle (3308 HK): CCASS Movements Are Standard Fare

Back on the 28th May, PRC department store play Golden Eagle (3308 HK) announced a privatisation offer, by way of a Scheme, at $6.88/share, a 40.41% premium to last close.
The Offeror is the Wang family, who together with concert parties, held 80.29%. 7.18% of the 19.71% held by the disinterested stakeholders have given irrevocables in favour of the Scheme.
Ahead of the Scheme Meeting on September 15th, a significant amount of shares have moved out of CCASS. This is not something to concern investors.

EQD | NIFTY Index WEEKLY Resistance Analysis

By Nico Rosti

After a -5 weeks correction in August, the NIFTY Index has restarted its Bull run, ongoing from mid-March 2020. Let’s have a look to where MRM WEEKLY resistance levels are.
The current pattern is BULLISH, the index could rise easily another 2-3 weeks from here.
Target prices for a reversal (or pullback within the uptrend) are between 19846 -20294

Hong Kong CEO & Director Dealings (6 Sept): WuXi AppTec, Peking University, FriendTimes

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 WuXi AppTec (2359 HK), Peking University Resources (618 HK), and FriendTimes Inc (6820 HK).

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Sep 05

Daily Brief Event-Driven: September Nikkei 225 Review – Lasertec and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

September Nikkei 225 Review – Lasertec, Mercari, Nitori IN, Expected DELETEs Out (Matsui the Biggie)
Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT
March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split
Liontown Resources (LTR AU): Albemarle’s Final A$3.00 Offer
Korea’s Latest IPO Rule Change: Daily Differential Allocation
EQD | SP/ASX200 Index: Will It Break Out of Its Range?

September Nikkei 225 Review – Lasertec, Mercari, Nitori IN, Expected DELETEs Out (Matsui the Biggie)

Today, somewhat earlier than expected), the Nikkei Index Team announced the changes to the Nikkei 225.
Lasertec Corp (6920 JP), Mercari (4385 JP), and Nitori Holdings (9843 JP) are added. Nippon Sheet Glass (5202 JP), Mitsui E&S Holdings (7003 JP), and Matsui Securities (8628 JP) removed.
That triggers flows of about ¥480bn a side, and some big, big changes. The announcement helps understand new process better.

Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT

Mercari (4385 JP), Lasertec (6920 JP) and Nitori (9843 JP) will replace Nippon Sheet Glass (5202 JP), Mitsui E&S (7003 JP) and Matsui Securities (8628 JP) in the Nikkei 225.
As expected, Nitori Holdings (9843 JP) will be added at half the planned PAF since the trading value is low compared to the expected index weight.
Passive trackers need to buy between 1-17 days of ADV on the adds while selling between 1.2-16.5 days of ADV on the deletes. There is a big funding trade too.

March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split

Now that the September 2023 Nikkei 225 Rebal is announced, we look at the March 2024 rebal and its possibilities.
Socionext (6526 JP) is the only automatic ADD, but it might not be. ZOZO Inc (3092 JP) and Ryohin Keikaku (7453 JP) would be sector balance ADDs.
Fast Retailing (9983 JP) could get capped if it outperforms Nikkei 225 by ~10%+ to 31Jan2024. And Nitori Holdings (9843 JP) will see an add of ~14 days of ADV.

Liontown Resources (LTR AU): Albemarle’s Final A$3.00 Offer

Liontown Resources (LTR AU) has received a revised non-binding privatisation proposal from Albemarle Corp (ALB US) at A$3.00 per share, a 20.0% premium to the previously rejected offer of A$2.50.
The revised offer is attractive compared to the Kathleen Valley Lithium Project’s NPV range, peer multiples and historical share prices. The offer price is final, barring a superior proposal.
Liontown has granted Albemarle a limited period of exclusive due diligence. The Board intends to recommend a binding proposal at A$3.00 per share. The retail vote could be a risk.

Korea’s Latest IPO Rule Change: Daily Differential Allocation

Korea FSS has provided guidelines to assign different weights to IPO orders from Day 1 to Day 5. Bookrunners should give higher weights to institutions that place their orders early.
The question of whether this will deter the rush to place bulk orders close to the deadline and lead to a higher weighting of essential pricing is generating significant interest.
The volume of orders and allocation by price range could serve as practical clues for assessing post-IPO pricing, making it a crucial factor in formulating post-IPO trading strategies.

EQD | SP/ASX200 Index: Will It Break Out of Its Range?

By Nico Rosti

The S&P/ASX 200 INDEX has been stuck in the 7000-7600 range for the past 2 years, with a brief dive to 6500 during the summer of 2022.
If we consider the bottom at 6411 in October 2022, the index may have started to build an uptrend since then, but failed repeatedly to breach past the 7600 barrier.
After a brief correction in August 2023, the index is currently rising, but soon it will encounter WEEKLY resistance that could hamper its chances of breaking out of its range.

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Sep 04

Daily Brief Event-Driven: Carlyle Group Tender Offer for Seiko PMC (4963) At 89% Premium and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Carlyle Group Tender Offer for Seiko PMC (4963) At 89% Premium
S&P/ASX Index Rebalance (Sep 2023): Mostly Expected with a Few Surprises
Yuanta ETFs Rebalance: AI-Frenzy Means Tech Replaces Industrials; Shorts Surge; Big Positioning
China ETFs: Inflows Continue to Support the Market
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Review Period Complete
Quiddity ES50 Sep 23 Rebal: Ferrari/Vonovia Change Confirmed + Another US$2bn+ Flow Surprise!
Quiddity TDIV/50/100 Sep 23 Rebal: ALL 15 Changes Expected; US$420mn One-Way
Merger Arb Mondays (04 Sep) – Eoflow, JSR, Seiko PMC, ENM, NWS, Costa, Symbio, Origin
Quiddity A/H Premium Weekly (Sep 1): China Life, Wide Premia Industrials, Banks Starting To Move
Seiko PMC (4963 JP): Carlyle’s JPY1,070 Tender Offer

Carlyle Group Tender Offer for Seiko PMC (4963) At 89% Premium

Carlyle Group is buying Seiko Pmc Corp (4963 JP) from 54+% owner Dic Corp (4631 JP) and minorities in a Tender Offer with optical premium of 89%.
It looks good, takes advantage of tax code particularities, and the nature of the company disguises some value. Shareholder structure means this is basically a done deal before it starts.
With minimal foreign active investor ownership, and significant crossholder, ESOP, and director ownership, only a bit of retail actually needs to tender to make this successful.

S&P/ASX Index Rebalance (Sep 2023): Mostly Expected with a Few Surprises

There is 1 change for the S&P/ASX100 Index, 5 adds/ 6 deletes for the S&P/ASX 200 INDEX, and 10 adds/ 8 deletes for the S&P/ASX300 Index at the September rebalance.
There will be 4-14 days of ADV to trade on the S&P/ASX100 Index and S&P/ASX 200 INDEX adds while the impact on the deletions is between 3-12 days of ADV.
On average, the adds to the S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index have outperformed the deletes over the last few months.

Yuanta ETFs Rebalance: AI-Frenzy Means Tech Replaces Industrials; Shorts Surge; Big Positioning

There are 4 changes to the Yuanta/P-Shares Taiwan Top 50 ETF and 1 deletion for the Yuanta/P-Shares Taiwan Dividend Plus ETF in September.
The impact on the inclusions is larger in terms of flow but smaller in terms of days to ADV to buy. Shorts are higher on the deletions.
There appears to be big positioning on a lot of the stocks. But the ETF adds could move higher in the short-term on short covering.

China ETFs: Inflows Continue to Support the Market

Money continues to flow into mainland China ETFs taking the total inflows since 18 July to over US$25bn. This has likely helped stabilise the market and prevent a bigger fall.
The inflows continue to be largest on ETFs tracking headline indices – CSI 300, STAR50, CSI1000, CSI 500, SSE50, ChiNext. Plus there are inflows on some sectoral and thematic ETFs.
The skew between stocks gaining 20%+ over the period vs those dropping -20% or more has improved significantly over the last week.

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Review Period Complete

The review period for the MVIS Global Rare Earth/Strategic Metals Index ended 31 August. The changes will be announced on 8 September and implemented at the close on 15 September.
Coming in around the 85% cutoff, Rising Nonferrous Metals Share (600259 CH) is a potential inclusion. There are two stocks that are very close to the 98% deletion threshold.
Lake Resources Nl (LKE AU) is a deletion from the S&P/ASX 200 (AS51 INDEX) at the September rebalance and there could be more to sell if deleted from this index.

Quiddity ES50 Sep 23 Rebal: Ferrari/Vonovia Change Confirmed + Another US$2bn+ Flow Surprise!

The September 2023 index changes for the ES50 index was confirmed after the close on Friday 1st September 2023.
There will be two ADDs and two DELETEs. One set of changes was well anticipated by us. The other set comes as a major surprise to us.
Collectively, the two ADDs could see ~US$2.4bn index flows and the two DELs could see ~US$2.9bn index flows, with US$500mm of reverse funding flows.

Quiddity TDIV/50/100 Sep 23 Rebal: ALL 15 Changes Expected; US$420mn One-Way

The September 2023 index changes for the TDIV, T50, and T100 Indices were confirmed after the close on Friday 1st September 2023.
In this insight, we take a look at our final flow expectations for these index changes and the capping flow expectations for the TDIV index.
There could US$420mn one-way flows across these three indices during this rebalance event.

Merger Arb Mondays (04 Sep) – Eoflow, JSR, Seiko PMC, ENM, NWS, Costa, Symbio, Origin

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 – Seiko Pmc Corp (4963 JP), 111 Inc (YI US), Costa Group Holdings (CGC AU), Symbio Holdings (SYM AU), Eoflow (294090 KS), Orecorp Ltd (ORR AU).
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Pacific Current (PAC AU), T&K Toka Co Ltd (4636 JP), Allkem Ltd (AKE AU), Celltrion Healthcare (091990 KS).

Quiddity A/H Premium Weekly (Sep 1): China Life, Wide Premia Industrials, Banks Starting To Move

The Brand-Spanking New (three weeks old) A-H Monitor has tables, charts, measures galore.
Last week was slightly disappointing but the Recommendations Outperformed the universe.
New stimulus measures are partly supply side, and a little bit demand side, but they’re not big enough yet to move the needle. Mainland ETF buying smells like National Team.

Seiko PMC (4963 JP): Carlyle’s JPY1,070 Tender Offer

Seiko Pmc Corp (4963 JP) has recommended Carlyle Group / (CG US)’s tender offer of JPY1,070 per share, an 88.7% premium to the undisturbed price.
Dic Corp (4631 JP) will not tender but vote for the share consolidation at the EGM. Post consolidation, DIC will sell its 54.51% stake to Carlyle at JPY799 per share.
Achieving the minimum ownership ratio (12.16%) requires a 26.7% acceptance rate, which is doable as the offer is attractive. The tender offer runs from 4 September to 17 October.

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Sep 03

Daily Brief Event-Driven: Index Rebalance & ETF Flow Recap: STAR50 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF
Last Week In Event SPACE: Vingroup/VinFast, Prosus/Naspers, STAR CM
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Energy One, Costa Group, DDH1, ENM, Penguin
JPX-Nikkei 400 Rebal 2024: End-Aug 2023
Quiddity ASX Sep 23 Rebal: 15 Inflow/Outflow Names; Beware of Short Buildup; US$450mn One-Way
SBI Shinsei Bank (8303) EGM Done. TOPIX Removal on Weds, Last Day Is 27 Sep, Money Comes Next Year.
26 Sept Scheme Vote For ENM (128 HK)

Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF

The HSI, HSCEI, HSTECH and HSCI rebalances will take place at the close on 4 September since the market was closed on 1 September due to Typhoon Saola.
There will be a few announcements next week with Nikkei 225 early in the week and the MVIS series post close on Friday. Plus the STAR50 rebalances on Friday.
Another week of huge inflows into mainland China ETFs focused on the CSI 300 Index, STAR50 INDEX and CSI Smallcap 500 Index.

Last Week In Event SPACE: Vingroup/VinFast, Prosus/Naspers, STAR CM

Marginal float helped fuel the VinFast (VFS US) bubble. Then it popped.
The Prosus (PRX NA)/Naspers (NPN SJ) Circularity Detour and subsequent unwind created the B-Share construct which means they can maintain the voting control in South Africa without maintaining economic control.
The backlash against Star CM Holdings (6698 HK) calls into question the broader Chinese entertainment industry, and how it strikes a balance between viewership/profitability and ethical boundaries.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Energy One, Costa Group, DDH1, ENM, Penguin

I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Quiet week – only one new deal: STG’s Offer for Energy One Ltd (EOL AU).
Key updates took place for Costa Group Holdings (CGC AU), DDH1 (DDH AU), ENM Holdings (128 HK), and Penguin International (PBS SP).

JPX-Nikkei 400 Rebal 2024: End-Aug 2023

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 potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2024 based on trading data as of end-August 2023.

Quiddity ASX Sep 23 Rebal: 15 Inflow/Outflow Names; Beware of Short Buildup; US$450mn One-Way

The September 2023 review results for ASX indices were announced after the close on Friday 1st September 2023.
There will be 15 ADD names and 15 DELETE names across ASX 100, ASX 200, and ASX 300. Collectively, the ADDs could see one-way flow of roughly US$450mn.
Many names have a significant number of days to trade. Some of these names have seen a spike in short interest recently. This should be an interesting flow event.

SBI Shinsei Bank (8303) EGM Done. TOPIX Removal on Weds, Last Day Is 27 Sep, Money Comes Next Year.

Today, the EGM to approve the share consolidation (resulting in minority squeezeout and delisting) took place.
It was a done deal. So now it is done.
All that remains is for the technically adept to do what they expect they need to do.

26 Sept Scheme Vote For ENM (128 HK)

Back on the 2 June, small-cap fashion wear retailer ENM Holdings (128 HK) received a delisting Offer from major shareholder, Chinachem, at HK$0.58/share, in cash.
The Scheme Doc is now out after thrice being delayed. The EGM/Court Meeting will be held on the 26 September with expected payment around the 14 November.
There’s a whiff of opportunism embedded in the Offer. But being loss-making and illiquid, I’d expect the vote to still get up.

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Sep 02

Daily Brief Event-Driven: ENM Holdings (128 HK): A Wide Spread with the Scheme Vote on 26 September and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

ENM Holdings (128 HK): A Wide Spread with the Scheme Vote on 26 September

ENM Holdings (128 HK): A Wide Spread with the Scheme Vote on 26 September

ENM Holdings (128 HK)‘s scheme document is out, with the vote scheduled for 26 September. The IFA considers Chime Corporation’s HK$0.58 per share offer fair and reasonable.
The spread of 7.4% reflects vote risk – cash required for the proposal is lower than the net cash, and the offer price is below the IFA’s SoTP valuation (HK$0.658).
Shareholder approval of the scheme is aided by no shareholder holding a blocking stake, a low AGM minority participation rate and no visible retail opposition to the offer.

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Sep 01

Daily Brief Event-Driven: End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2023 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2023
MVIS Australia A-REITs Index Rebalance Preview: Abacus Group Could Be Deleted
Unveiling the Potential of Korea Zinc’s Emerging Proxy Battle
MVIS Australia Equal Weight Index Rebalance Preview: Potential Deletes & Capping Increase Turnover
(Mostly) Asia M&A, Aug 2023: Celltrion Inc/Healthcare, Itochu Techno, UMW, Boustead, SK Rent
Georg Fischer/Uponor: Extension of Offer Period

End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2023

By Douglas Kim

We discuss the end of the mandatory lock-up periods for 49 stocks in Korea in September 2023, among which 7 are in KOSPI and 42 are in KOSDAQ.
These 49 stocks on average could be subject to further selling pressures in September and could underperform relative to the market.
Among these 49 stocks, top five market cap stocks include Kakao Games (293490 KS), SK Oceanplant (100090 KS), Korea Zinc (010130 KS), Fadu (440110 KS), and Vaxcell-Bio Therapeutics (323990 KS).

MVIS Australia A-REITs Index Rebalance Preview: Abacus Group Could Be Deleted

The review period for the September rebalance ended yesterday. There could be one deletion from the index and a bunch of capping changes.
The index changes will lead to a one-way turnover of 3.4% resulting in a one-way trade of A$21m. There are two stocks with over A$5m to trade.
Short interest has increased on a few REITs recently while decreasing on most of the other names.

Unveiling the Potential of Korea Zinc’s Emerging Proxy Battle

Korea’s local market is perceiving the present HMG investment as a crucial indicator, signaling the initiation of an intense proxy battle for Korea Zinc.
Given the relatively constrained nature of the neutral minority stakes, falling below 30%, there is considerable attention on the potential for a immediate-term share buying race.
This is expected to trigger momentum trading flows directed at Korea Zinc. Such a scenario might lead the stock price to venture into an overshooting zone.

MVIS Australia Equal Weight Index Rebalance Preview: Potential Deletes & Capping Increase Turnover

JB Hi-Fi Ltd (JBH AU) and Charter Hall (CHC 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.
Short interest has been increasing on JB Hi-Fi Ltd (JBH AU), Charter Hall (CHC AU) and Lendlease Group (LLC AU) and could be partially driven by potential index deletions.

(Mostly) Asia M&A, Aug 2023: Celltrion Inc/Healthcare, Itochu Techno, UMW, Boustead, SK Rent

For the month of August 2023, 11 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$29bn.
The average premium for the new deals announced (or first discussed) in August was 25%. The average YTD is 34%.
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.

Georg Fischer/Uponor: Extension of Offer Period

By Jesus Rodriguez Aguilar

Georg Fischer AG (FI/N SW) has so far purchased a 9.5% stake of Uponor OYJ (UNR1V FH) in the market. Georg Fischer’s shareholding plus irrevocable undertakings represent in total 46.4% (30 August).
There has been no disclosure about the shares tendered so far. Georg Fischer has extended the offer period until 31 October, while waiting to receive clearance from the European Commission.
Gross spread is 0.03%, so probably it is not worth becoming involved. The reason for this low spread is the acquisition of shares in the market by Georg Fischer.

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Aug 31

Daily Brief Event-Driven: STAR CM (6698 HK): Grave Accusations and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

STAR CM (6698 HK): Grave Accusations
Ichigo (2337) Buyback – History and Shareholder Structure Give an Edge
REIT Pair Trade: Long DCREIT SP/ Short KDCREIT SP
GS AM Consortium/ Kahoot!: Extension of Acceptance Period, Spread

STAR CM (6698 HK): Grave Accusations

STAR CM Holdings (6698 HK), a variety program intellectual property creator and operator, was listed last December and promptly gained 475% by early August. All good so far.
Shares cratered on the 18 August (-23.4%) and are currently 76% adrift from its recent high. The reason? A viral clip from late pop diva Coco Lee discussing unfair treatment.
The music competition show, in which Coco appeared, pushed back on any impropriety; however, its broadcaster has temporarily suspended the program. This is no easy fix.

Ichigo (2337) Buyback – History and Shareholder Structure Give an Edge

Today after the close, Ichigo Inc (2337 JP) announced a stock buyback to go through the next 6 months. It is ¥3bn, which is not huge, but not nothing.
It seems like a constant refrain, but shareholder structure matters.
Ichigo has a history of doing buybacks (10% of shares out are in treasury), and the historical patterns are interesting when comparing announced intention and actual result.

REIT Pair Trade: Long DCREIT SP/ Short KDCREIT SP

After underperforming since listing, Digital Core REIT (DCREIT SP) has outperformed Keppel DC REIT (KDCREIT SP) over the last few months.
However, Digital Core REIT (DCREIT SP) still trades at cheaper valuations as compared to Keppel DC REIT (KDCREIT SP).
There could be relative outperformance over the next few weeks and any underperformance can be used to enter positions in the pair. There is an important catalyst.

GS AM Consortium/ Kahoot!: Extension of Acceptance Period, Spread

By Jesus Rodriguez Aguilar

It may take some time before shareholders can see how Kahoot’s significant investments in market share and business growth pay off in a positive bottom line.
GS AM already has c.59% and the current extension lasts until 8 September. Spread is 2.9%/15.4% (gross/annualised, assuming settlement by 13 November).
Taking a NOK 31.2 break, the last closing share price implies just 74% probability of deal completion, however I believe the spread will close following. I’d be long the shares.

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✓ Company Data and News
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Aug 30

Daily Brief Event-Driven: Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros! and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!
Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Sep 2023)
Korea’s First Sector Inverse ETF: Discussing Flow Trading Impacts
Energy One: Busby Baulks At STG’s Offer
Shougang Fushan Resources (639 HK): Partial Offer Is Unconditional
Core Concept Technologies (4371 JP) – A BIGLY 2ndary Offering (Re-IPO), and Eventual TOPIX Inclusion
Zeus Co: Listing of JET Co Japanese Subsidiary and NAV Valuation
Zeus Co (079370 KS): Is J.E.T.’s Spin-Off Priced In?
AMFI Stock Reclassification Preview (Dec 2023): Overlap Between Active & Passive Flows

Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!

Shareholders of Prosus NV (PRX NA) and Naspers (NPN SJ) approved AGM agenda items late last week to enable the two Capitalisation Issues and Naspers’ Share Consolidation to move forward.
What Will Happen: Prosus will issue new N shares to its shareholders and Naspers will reject them. Naspers will issue new shares to its shareholders, and Prosus will reject them.
Naspers will own ~42.9% of Prosus, Prosus will own 0.02% of Naspers. Sales of Tencent shares will continue. Share Buybacks too. But the ouroboros will have spit out its tail.

Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)

The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.
There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.
Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.

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

The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
The largest passive inflows will be on East Buy (1797 HK), JD.com (9618 HK), Ping An (2318 HK), Sinopharm (1099 HK), BYD (1211 HK), Lenovo (992 HK) and Trip.com (9961).
The largest passive outflows will be on Alibaba (9988 HK), Li Auto (2015 HK), Meituan (3690 HK), AAC Technologies (2018 HK), Kuaishou (1024 HK), COGARD (2007) and CG Services (6098).

Korea’s First Sector Inverse ETF: Discussing Flow Trading Impacts

KB Asset Management has announced the release of an inverse ETF, containing the top 10 core stocks in the secondary battery sector.
Given the substantial fluctuations in SSF trading volume in Korea, the flow increase of this ETF might temporarily lead to an unusually high level of backwardation.
Also, we may observe a phenomenon known as ‘wag-the-dog’ as the flow of this inverse ETF could act as a triggering factor for a temporary spark.

Energy One: Busby Baulks At STG’s Offer

Yesterday (28 August) software provider Energy One Ltd (EOL AU) announced an indicative Offer, by way of a Scheme, from STG at A$5.85/share, a solid 44% premium to last close.
Energy One has granted STG due diligence on an exclusive basis and the board is supportive if terms are firmed. All looks good. However …
… Vaughan Busby, a NED and founding CEO of Energy One, is not aligned with the board. And he holds ~14%.

Shougang Fushan Resources (639 HK): Partial Offer Is Unconditional

Shougang Fushan Resources (639 HK) shareholders approved the partial offer to acquire a maximum of 125.0 million shares (2.47% of outstanding shares) at HK$2.40 per share and the whitewash waiver.
The partial offer is now unconditional and will close on 12 September. Considering the irrevocables not to tender, a 100% minority participation rate implies a minimum proration of 2.98%.
If the partial offer’s acceptance rate mirrors today’s general meeting minorities participation rate of 63.6%, it would imply a minimum proration of 4.69%.

Core Concept Technologies (4371 JP) – A BIGLY 2ndary Offering (Re-IPO), and Eventual TOPIX Inclusion

Last week I wrote about another situation, noting Equity Offering Into TOPIX Inclusion is a standard construct. Here we have another.
DX and HR Support company Core Concept Technologies Inc (4371 JP) today announced a large (it ups Real World Float by 64%, and is 33 days of ADV) secondary offering.
The “reason” for the offering mentions a desire to move to TSE Prime in future.

Zeus Co: Listing of JET Co Japanese Subsidiary and NAV Valuation

By Douglas Kim

Our NAV valuation of Zeus Co suggests an implied price target of 32,991 won, which is 13% lower than current share price.
Given the lack of upside, we would avoid Zeus shares at current prices.
Currently, JET Co is listed on Tokyo PRO Market Exchange. JET Co is expected to switch its listing to the Tokyo Standard Market Exchange.

Zeus Co (079370 KS): Is J.E.T.’s Spin-Off Priced In?

Zeus Co Ltd (079370 KS), a maker of semiconductor equipment, flat panel display equipment, and facility automation solutions, intends to spin off 95%-held J.E.T. Co (6228 JP) next month.
J.E.T., a semiconductor etching equipment play, will list on the 25 September. Pricing is expected around the 5 September.
Zeus’ share price has fallen 33% in the past month. That may be justified.

AMFI Stock Reclassification Preview (Dec 2023): Overlap Between Active & Passive Flows