Category

Event-Driven

Daily Brief Event-Driven: Insulet Accuses EOFlow Of Stealing Trade Secrets and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Insulet Accuses EOFlow Of Stealing Trade Secrets
  • Summary of the Situation Regarding Insulet’s Lawsuit in the US Against Eoflow
  • L’Occitane (973 HK): HK$35 Offer from the Controlling Shareholder?
  • Amari Ni Mo… NTT (9432)
  • Insulet’s Lawsuit Against Eoflow, Medtronic’s Tender Offer, and Eoflow’s “Special Sauce”
  • Kyoden (6881 JP) MBO – An Small, Easy, Illiquid, Light But Not Horribly Unfair Done Deal at ¥600
  • L’Occitane (973 HK): Ripe for a Makeover?
  • India – Positioning on Some Interesting Names
  • InvoCare Agrees To TPG’s Lower Offer
  • Quiddity Primer for STAR 50 Index Rebalance Events


Insulet Accuses EOFlow Of Stealing Trade Secrets

By David Blennerhassett

  • From the outset, EOFlow (294090 KS) has traded wide (~7% of average) to Medtronic Plc (MDT US)‘s Offer. An apparent delay in filing with Korean regulators formed one argument. 
  • Now there’s a compelling reason. Key insulin pump competitor Insulet  (PODD US) has filed a lawsuit accusing EOFlow of the misappropriation of trade secrets, patent infringement, and trademark dilution.
  • Singapore-Based Flex (FLEX US) and three ex-employees of Insulet are also defendants. This does not bode well for the transaction. 

Summary of the Situation Regarding Insulet’s Lawsuit in the US Against Eoflow

By Sanghyun Park

  • This signifies the official commencement of a lawsuit against Eoflow in the United States, which has been considered one of the most significant risks for Eoflow.
  • Eoflow is externally saying that the aspect of patents claimed by Insulet is actually based on previously expired patents. Hence, Eoflow believes they can win this patent lawsuit.
  • This lawsuit emerged before the acquisition decision by Medtronic suggesting a need to consider trading the current spread based on the inference that the tender offer is still valid.

L’Occitane (973 HK): HK$35 Offer from the Controlling Shareholder?

By Arun George

  • According to Bloomberg, L’Occitane (973 HK) is set to receive a HK$35 per share privatisation offer from Reinold Geiger, the Chairman and the largest shareholder.
  • The rumoured price is attractive and represents an all-time high share price. Therefore, Acatis KVG, the shareholder with a blocking stake, would be supportive.
  • The rumoured price implies multiples at a discount to peer multiples, which explains Mr Geiger’s ambitions for a possible European listing to secure higher valuation multiples. 

Amari Ni Mo… NTT (9432)

By Travis Lundy

  • NTT reports a Q1 which looks like KDDI where the business looks like KDDI and a bit better than that where it doesn’t. Good. Not great. 
  • But NTT announced a ¥200bn buyback. Again good. Not great. 
  • And on Sunday, LDP politician Amari spoke on a Sunday news show about the possible govt selldown of NTT shares. 20yrs is a long time. So no overhang.

Insulet’s Lawsuit Against Eoflow, Medtronic’s Tender Offer, and Eoflow’s “Special Sauce”

By Douglas Kim

  • Insulet Corp (PODD US)’s lawsuit against Eoflow (294090 KS) caused a sharp decline in Eoflow’s share price today (down 10.7% to 24,950 won).
  • Insulet is accusing Eoflow of hiring several senior personnel that have helped Eoflow to develop a product that could take away market share from Insulet. 
  • The most important factor may be Eoflow’s “special sauce” which is some kind of technology/mechanism that allows this 17% greater efficiency/convenience for the wearable EOPatch insulin device.

Kyoden (6881 JP) MBO – An Small, Easy, Illiquid, Light But Not Horribly Unfair Done Deal at ¥600

By Travis Lundy

  • Today, the personal holding company of Kyoden Co Ltd (6881 JP) founder Hashimoto-san announced a Tender Offer to take the company private. 
  • Together with his company, he owns 64.75%. He only needs 1.93% to tender. The combination of Shokochukin, SMBC, and Yokohama Bank get him over the line. 
  • This is small, illiquid, and will trade tight, but it’s a done deal. 

L’Occitane (973 HK): Ripe for a Makeover?

By David Blennerhassett

  • In late 2018, there were reports that French beauty retailer L’Occitane (973 HK) had drawn interest from Advent International. That rumour came to naught. 
  • Similarly, late last month, L’Occitane clarified media reports that it had not received any Offer or proposal. 
  • After going into a trading halt this morning, reportedly (Reuters) Chairman Reinold Geiger has been discussing a possible offer of ~HK$35 for each L’Occitane share he doesn’t already own.

India – Positioning on Some Interesting Names

By Brian Freitas


InvoCare Agrees To TPG’s Lower Offer

By David Blennerhassett

  • After pitching a A$13/share NBIO on the 15 May, TPG has now inked a Scheme Implementation agreement with InvoCare (IVC AU) at A$12.70/share, inclusive of a A$0.60/share fully franked dividend. 
  • This compares to PE-outfit TPG’s A$12.65/share NBIO on the 7 March – which Australia’s leading funeral services provider InvoCare promptly rejected.  
  • A comparatively benign flu season, and an expected ~10% decline in 1H23 EBITDA, largely account for InvoCare’s change of heart.

Quiddity Primer for STAR 50 Index Rebalance Events

By Janaghan Jeyakumar, CFA

  • STAR 50 Index represents the performance of the top 50 securities by market capitalization and liquidity listed on the Science and Technology Innovation (STAR) Board of the Shanghai Stock Exchange.
  • This is one of the most significant indices in Mainland China when considering the average passive AUM per stock as a percentage of float.
  • In this insight, we take a brief look at the index selection methodology and the historical price and volume performance of STAR 50 index rebalance baskets.

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Daily Brief Event-Driven: 2023 JPX Nikkei 400 Rebal – 38 IN and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • 2023 JPX Nikkei 400 Rebal – 38 IN, 36 OUT, 4.2% One Way Flow
  • Kenedix Merger: Big Passive Inflows on the Cards
  • Toshiba (6502) Tender Offer – Kioxia Optionality
  • Zomato Lock-Up – A US$650m+ Worth Acquisition Linked Lockup Release
  • EOFLOW/Medtronic Tender: Insulet’s US Complaint Materially Increases Deal Break Risks
  • KKR/OHB: Agreed Take-Private Offer
  • What Is KDB’s Plan B for Asiana Airlines?
  • InvoCare (IVC AU): SID Signed with TPG at A$12.7/Share


2023 JPX Nikkei 400 Rebal – 38 IN, 36 OUT, 4.2% One Way Flow

By Travis Lundy

  • The Tenth Annual JPX Nikkei 400 Index Review was announced on Monday 7 August. There are 38 Inclusions, 36 Deletions. They are mostly in line with Janaghan Jeyakumar, CFA‘s predictions.
  • The BIG SELL is T&D Holdings (8795 JP), which surprised me. The top BUY is ROHM Co Ltd (6963 JP) which was not on the Quiddity Leaderboard.
  • Otherwise, the ADDs and DELETEs are 1.8-2.0 days of ADV, there are several NEW CAPs and some RECAPS among LARGE CAPS

Kenedix Merger: Big Passive Inflows on the Cards

By Brian Freitas


Toshiba (6502) Tender Offer – Kioxia Optionality

By Travis Lundy

  • Yesterday, JIP finally announced its Tender Offer for Toshiba Corp (6502 JP) as discussed in JIP Tender Offer for Toshiba (6502) Finally Here 
  • I got a few questions this morning on the earnings call comments from Chairman Watanabe regarding what might happen if a Kioxia Transaction were announced mid-JIP Tender.
  • My assumption before, during, and after, is that the Board wants this deal done. And doesn’t really want to take any responsibility for pushing any more.

Zomato Lock-Up – A US$650m+ Worth Acquisition Linked Lockup Release

By Sumeet Singh

  • In Aug 2022, Zomato completed the acquisition of Blinkit’s outstanding shares via issuing its own shares. These issued shares will come up for lockup release on 10th Aug 2023.
  • Zomato is one of two leading food delivery app operators in India. Its acquisition of Blinkit marked its foray into the instant grocery segment.
  • In this note, we will talk about the lock-up dynamics and recent updates.

EOFLOW/Medtronic Tender: Insulet’s US Complaint Materially Increases Deal Break Risks

By Arun George


KKR/OHB: Agreed Take-Private Offer

By Jesus Rodriguez Aguilar

  • KKR’s launching a cash offer for space tech firm OHB SE (OHB GR) at €44/share, 37% premium, 8.1x EV/Fwd NTM EBITDA, 16.1x Fwd P/E for an implied equity value of c.€769 million.
  • The Fuchs family will retain its majority shareholding. OHB’s strong balance sheet might be leveraged to further consolidate the industry. The offer price seems slightly cheap but not outrageous.
  • I believe a price hike is unlikely. Gross spread is 3.75%. Considering a break of €32.2, the market is pricing an 86% probability of success. I’d be long the shares.

What Is KDB’s Plan B for Asiana Airlines?

By Douglas Kim

  • There have been increasing local news flows about KDB’s potential “Plan B” for Asiana Airlines in case the merger between Asiana Airlines and Korean Air Lines is finally cancelled.
  • The final decisions by the European and US regulators on whether to pass/block this merger are likely to take place in 4Q 2023. 
  • The higher probability scenarios are for one or both of these regulators to block this deal. As such, KDB will need to come up with Plan B.

InvoCare (IVC AU): SID Signed with TPG at A$12.7/Share

By Brian Freitas

  • Invocare has entered into a scheme implementation deed with TPG at A$12.7/share. This is higher than the initial offer of A$12.65/share but lower than the revised offer of A$13/share.
  • There is an extra A$0.26/share in franking credits for Invocare Ltd (IVC AU) shareholders that can use them.
  • Passives will need to sell nearly 11m shares of Invocare Ltd (IVC AU) on the last trading day and there will be an adhoc inclusion to the S&P/ASX 200 Index.

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Daily Brief Event-Driven: JIP Tender Offer for Toshiba (6502) Finally Here and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • JIP Tender Offer for Toshiba (6502) Finally Here
  • JPX Nikkei 400 Index Rebalance: Some Big Impact Names
  • Bank of Kyoto (8369) – Too Far Too Fast
  • Toshiba – The Tender Arrives
  • Samsung Electronics: Prefs Need to Catch Up
  • Estia & Bain Enter Into Scheme Agreement
  • Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks
  • TOPIX Inclusions: Who Is Ready (Aug 2023)
  • Estia Health (EHE AU): Bain Capital’s Binding Proposal
  • OreCorp Inks Deal With Silvercorp. Perseus In The Wings?


JIP Tender Offer for Toshiba (6502) Finally Here

By Travis Lundy

  • The JIP TOB for Toshiba is here. Finally. It is still too low. Since the announcement, when it was too low, peers are up a lot, and memory looks healthier.
  • But it is not clear that activists who pushed this for years want to push any more. There appears to be Toshiba Fatigue, as I warned in March.
  • That makes this deal look “safe” but there are technical aspects which make it less “comfortable” than normal large and long-awaited deals. 

JPX Nikkei 400 Index Rebalance: Some Big Impact Names

By Brian Freitas

  • There are 38 adds/36 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
  • Based on the adds, deletes and capping changes, we estimate one way turnover of 4.35% and a two-way trade of JPY 461bn (US$3.24bn).
  • There are a few stocks that will have same way flow from other index trackers within a few weeks of the JPX Nikkei 400 Index rebalance.

Bank of Kyoto (8369) – Too Far Too Fast

By Travis Lundy

  • Bank of Kyoto (8369 JP) has been on a relative tear recently. This is a bit surprising.  On a static equity-portfolio discount measure, it has outperformed regional banks.
  • On a static regional bank PBR basis, it has outperformed its equity portfolio and the discount to the After Tax Equity Portfolio Value (ATEPV) is the smallest in eight years.
  • Is there a sea change? There is a possibility, however remote, that domestic investor disappointment rears its voting head. That’s the dream scenario. But I don’t see it coming soon.

Toshiba – The Tender Arrives

By Mio Kato

  • At long last the end to the Toshiba saga appears at hand with JIP’s belated tender offer being formally announced today at the previously quoted price of ¥4,620. 
  • With a minimum target of 66.7% this does not seem guaranteed to pass but we nevertheless believe that odds are good. 
  • The question is whether there is any room for a small hike in the price as alluded to by the Chairman.

Samsung Electronics: Prefs Need to Catch Up

By Brian Freitas

  • Over the last year, the discount of Samsung Electronics Pref Shares (005935 KS) to Samsung Electronics (005930 KS) has increased from 5% to 17%.
  • The preferred shares have adequate liquidity, a large issue market cap, and now trade at a much higher dividend yield. A special dividend will further increase the dividend yield differential.
  • Breaking from history, the preferred shares discount has continued to increase as the stock has moved higher. With the preferred shares trading near its widest discount, that could change.

Estia & Bain Enter Into Scheme Agreement

By David Blennerhassett

  • After its initial bid of $3.00/share was rejected by Estia Health (EHE AU), Bain returned on the 7 June with a $3.20/share non-binding proposal and was granted exclusive due diligence.
  • Estia and Bain Capital have now entered into a Scheme Implementation Agreement at A$3.20/share, a 50% premium to undisturbed. 
  • A shareholder meeting is expected to be held in November with implementation expected prior to the end of 2023. 

Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks

By Arun George

  • Japan Industrial Partners (JIP) will launch the Toshiba Corp (6502 JP) tender offer of JPY4,620 per share from 8 August to 20 September.
  • The Board has reaffirmed its recommendation to accept the offer. JIP’s inability to raise its bid is used as an excuse to ignore the material peer rerating and unattractive terms.
  • The 1Q results undermine the Board’s view of an overstated DCF and show its unwillingness to entertain a potential Kioxia merger as a superior alternative, increasing deal risks. 

TOPIX Inclusions: Who Is Ready (Aug 2023)

By Janaghan Jeyakumar, CFA

  • Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
  • Plus Alpha Consulting (4071 JP) will be included in TOPIX at the end of August 2023 and so far the stock has performed negatively as expected (see link).
  • Our long-term TOPIX pre-event name CELSYS (3663 JP) has seen its share price decline sharply in the last few weeks which raises some important questions.

Estia Health (EHE AU): Bain Capital’s Binding Proposal

By Arun George

  • Estia Health (EHE AU) has entered a SID with Bain Capital at A$3.20 per share, a 49.5% premium to the undisturbed price (21 March).
  • The offer is attractive in comparison to historical share prices and multiples. The offer is also attractive in comparison to the Japara Healthcare (JHC AU) precedent transaction. 
  • The MAC clause, particularly around material regulatory events, could be risky. At the last close and for an end-of-December payment, the gross and annualised spread is 3.7% and 9.5%, respectively.

OreCorp Inks Deal With Silvercorp. Perseus In The Wings?

By David Blennerhassett

  • Western Australian-based miner OreCorp Ltd (ORR AU) has signed a Scheme Implementation Deed with Canada’s Silvercorp Metals (SVM CN).
  • Assuming the Scheme is successful, OreCorp shareholders will receive A$0.15 in cash and 0.0967 new Silvercorp shares – or an implied value of A$0.60 – for each OreCorp share held.
  • A shareholder meeting is expected to be held in mid-November with implementation expected end-Nov, early-Dec. Separately, Perseus (PRU AU) is understood to be kicking OreCorp’s tyres.

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Daily Brief Event-Driven: Korea – Positioning in Ecopro and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX
  • Japan – Increase in Shorts on Some Interesting Stocks
  • Merger Arb Mondays (07 Aug) – JSR, ITOCHU, Allkem, Origin, Symbio, Pacific Current, United Malt, MPI
  • Weekly Deals Digest (06 Aug) – Toshiba, E-Guardian, ITOCHU, Allkem, Symbio, Pacific Current, MPI
  • Yaizu Suisankagaku Industry (2812 JP): J-STAR’s JPY1,137 Tender Offer
  • EQD | Hang Seng Index (HSI) WEEKLY LONG: Support Levels and Probability


Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX

By Brian Freitas


Japan – Increase in Shorts on Some Interesting Stocks

By Brian Freitas



Weekly Deals Digest (06 Aug) – Toshiba, E-Guardian, ITOCHU, Allkem, Symbio, Pacific Current, MPI

By Arun George


Yaizu Suisankagaku Industry (2812 JP): J-STAR’s JPY1,137 Tender Offer

By Arun George

  • Yaizu Suisankagaku Industry (2812 JP)/YSK has recommended J-STAR’s tender offer of JPY1,137 per share, a 35.0% premium to the undisturbed price (4 August).
  • The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
  • YSK is cash rich, and the offer is below book value. The tender offer is a reasonable alternative in challenging trading conditions that have slashed operating margin targets. 

EQD | Hang Seng Index (HSI) WEEKLY LONG: Support Levels and Probability

By Nico Rosti

  • The Hang Seng Index (HSI) closed down last week (CC=-1), briefly touching OVERSOLD territory, it may close higher this week. 
  • The HSI trend pattern currently identified with the Market Reversal Matrix (MRM) is quite bullish, on average.
  • Support levels to go LONG are between 19367 (Q2/Median) and Q3 at 19021.

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Daily Brief Event-Driven: Last Week in Event SPACE: Nippon Yusen and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Last Week in Event SPACE: Nippon Yusen, Takara, Kawasaki Kisen Kaisha, PCCW/HKT, ANZ
  • Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding
  • Quiddity Primer for SSE 50/180/380 Index Rebalance Events
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Itochu Techno, Superloop/Symbio, Dali Foods, Allkem, Oishi


Last Week in Event SPACE: Nippon Yusen, Takara, Kawasaki Kisen Kaisha, PCCW/HKT, ANZ

By David Blennerhassett


Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding

By Brian Freitas


Quiddity Primer for SSE 50/180/380 Index Rebalance Events

By Janaghan Jeyakumar, CFA

  • SSE 50 and SSE180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on Shanghai Stock Exchange. 
  • SSE 380 consists of 380 mid-cap stocks which are selected from the remaining Shanghai listed A-shares after the constituents of SSE 180 Index. 
  • In this insight, we take a brief look at the index selection methodology and the historical price and volume performance of the SSE 50/180/380 index rebalance baskets.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Itochu Techno, Superloop/Symbio, Dali Foods, Allkem, Oishi

By David Blennerhassett


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Daily Brief Event-Driven: PCCW’s Stub Ops Spill More Red Ink and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • PCCW’s Stub Ops Spill More Red Ink
  • Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc


PCCW’s Stub Ops Spill More Red Ink

By David Blennerhassett

  • Net of HKT Ltd (6823 HK), PCCW Ltd (8 HK) recorded negative EBITDA of HK$378mn in the 1H23.
  • This is the largest six-month negative EBITDA figure since the EBITDA loss of HK$427mn in 2H22, and the third largest in the past decade. 
  • PCCWs current discount to NAV is at an unsustainable 5%.

Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc

By Sanghyun Park

  • In a surprising move, SK Inc confirmed the interim dividend amount (₩1,500) on July 26, and the ex-dividend date is set for August 10.
  • As a result, this enables risk-free dividend arb trading in Korea as SK Inc carries single-stock futures, whose liquidity level is around 70% of the spot since July 26.
  • The backwardation level has not yet pushed this arbitrage to a profitable level. Nevertheless, it’s still possible to observe the basis spread moving to a meaningful extent before the ex-date.

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Daily Brief Event-Driven: Nippon Yusen (9101) BIG Buyback Announced and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Nippon Yusen (9101) BIG Buyback Announced
  • SF Holding (002352 CH): H-Share Listing & Index Implications
  • Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach
  • StubWorld: Takara Holdings Trading “Rich”
  • Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns
  • KT&G: First Shares Cancellation in 14 Years
  • Overhang Concerns from Remaining Irum TNC Exchangeable Bonds Conversion on Ecopro BM Shares
  • Tanzanian Reset And Indiana’s Arbitration
  • EQD | NIFTY Index WEEKLY Correction May Be Ending


Nippon Yusen (9101) BIG Buyback Announced

By Travis Lundy

  • In March, NYK announced a new Mid-Term Management Plan discussed in Nippon Yusen – New MidTermPlan = New Shareholder Return Policy. They promised a full Shareholder Return Policy in May. 
  • There was limited new SRP discussion in the 9 May earnings announcement. The MTMP suggested ¥200bn over 2yrs. The (Japanese) earnings announcement did too. Then May ended. 
  • Now the Buyback Plan is out. ¥200bn over 9mos. That is different. This could move. 

SF Holding (002352 CH): H-Share Listing & Index Implications

By Brian Freitas

  • S.F. Holding (002352 CH) could raise between HK$26-33bn (US$3.4-4.2bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
  • The H-shares could get Fast Entry to certain indices and regular entry to others depending on the number of shares that are allotted to cornerstone and/or strategic investors.
  • The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.

Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach

By Arun George

  • On 28 July, Toshiba Corp (6502 JP) disclosed that JIP delayed the tender start to “sometime in August 2023” vs the target “in the last ten days of July 2023.
  • Toshiba reports 1Q results on 7 August. A solid 1Q will undermine the Board’s recommendation of the offer in part on the premise that the IFA’s DCF valuation is unrealistic.
  • The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip away at the offer’s attractiveness. 

StubWorld: Takara Holdings Trading “Rich”

By David Blennerhassett

  • On an implied stub and simple ratio, Takara Holdings (2531 JP) is trading rich to 60.9%-held Takara Bio Inc (4974 JP).
  • Preceding my comments on Takara 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%.

Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns

By Sanghyun Park

  • Nextrade aims to secure the business permit within the next year’s second half. They intend to launch their services by the end of next year or early the following year.
  • All eyes are focused on the proposal to be operational from 8:30 AM to 11:59 PM, with the afternoon call auction session running from 3:00 PM to 6:00 PM.
  • It would be crucial to observe how the elongation of the time period for specific issues to be reflected in prices could potentially lead to changes in intraday flow patterns.

KT&G: First Shares Cancellation in 14 Years

By Douglas Kim

  • KT&G announced that it will buy back 3.47 million shares (2.5% of outstanding shares) and cancel them. This would be the first share cancellation for KT&G in 14 years. 
  • If the company’s DPS is 5,200 won for 2023 fiscal year, this would represent dividend yield of 6.2% at current prices.
  • Although we have a positive view on KT&G’s share buyback and cancellation of 3.47 million shares, the company could do much more to improve its shareholder returns to its shareholders. 

Overhang Concerns from Remaining Irum TNC Exchangeable Bonds Conversion on Ecopro BM Shares

By Douglas Kim

  • It has been reported in local media that investors in exchangeable bonds issued by Irum TNC converted about 0.24 million shares of EBs into Ecopro BM equity on 26 July.
  • There are increasing concerns that the remaining EB could be released into the market in the coming months. 
  • After the poor 2Q 2023 results, we believe the consensus is likely to reduce sales and profit estimates of Ecopro BM from 2023 to 2025.

Tanzanian Reset And Indiana’s Arbitration

By David Blennerhassett

  • Back in 2018, mini-exploration mining play – rare earths, gold, and base metals –  Indiana Resources (IDA AU) had its Tanzanian retention licence revoked. With no compensation.
  • Indiana pursued its claim through the World Bank-backed ICSID’s tribunal, which subsequently ordered the Tanzanian government to pay US$109.5mn in damages and costs, versus Indiana’s current market cap of US$21mn.
  • Not surprisingly, the Tanzanian government is pushing back on the claim. The question is whether Indiana will ever get paid. And Indiana’s not the only company seeking revocation retribution.

EQD | NIFTY Index WEEKLY Correction May Be Ending

By Nico Rosti

  • The NIFTY Index has been falling for 2 weeks and is reaching mildly OVERSOLD territory. If this was a retracement during the main rally, it may be time to BUY.
  • The Market Reversal Matrix’s shows a bullish pattern, the time+price combined probability of success for LONG trades from current prices, after 2 weeks down, is >66%.
  • Price area to go LONG: 19400 to 18792, you can go LONG this week and also next week, if down (CC=-3).

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Daily Brief Event-Driven: Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps
  • ITOCHU Techno-Solutions (4739 JP): ITOCHU’s JPY4,325 Tender Offer
  • KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue
  • E-Guardian (6050 JP): CHANGE Holdings’ Partial Tender Offer
  • Hong Kong CEO & Director Dealings (2 August): Flat Glass, Arts Optical, Sky Light Holdings
  • Quiddity Leaderboard BSE/​​​​SENSEX Dec 23: 7 Changes for BSE 100 and 5 Changes for BSE 200
  • SBI Affiliate To Buy 45-49% of E-Guardian (6050) In Partial Tender Offer
  • EQD | SPX INDEX WEEKLY Supports After US Credit Downgrade


Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps

By Travis Lundy

  • Itochu Corp (8001 JP) today announced it had agreed with 61%-owned Itochu Techno Solutions (4739 JP) sub to take over CTC and squeeze out minorities. 
  • The stock released earnings mid-day, somehow, but not on TDNet until post-close. The stock jumped in the last two hours. The Tender Offer is at a 10% premium to close.
  • Growth will be up, and there are lots of financial assets and net receivables so this is 8+x March 2025. Itochu is not overpaying. But there will be no counter.

ITOCHU Techno-Solutions (4739 JP): ITOCHU’s JPY4,325 Tender Offer

By Arun George

  • Itochu Techno Solutions (4739 JP) has recommended Itochu Corp (8001 JP)’s tender offer of JPY4,325 per share, an 18.7% premium to the undisturbed price (1 August).
  • 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 5.43% ownership ratio.
  • The minimum acceptance condition requires a 14% minority acceptance rate. This is doable as the tender price is attractive and equals the 20-year share price high.

KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue

By Travis Lundy

  • Today, Kawasaki Kisen Kaisha (9107 JP) announced Q1 earnings. As expected, net was WAY down on weak container business. But the company revised up H1 and Full-Year.
  • KLINE increased its FY2023 payout, upping its expected buyback plan from ¥50bn to ¥60bn. This is still cheap at 8.5x and 0.7x book, and there is non-container growth. 
  • The structure of the buyback deserves attention. It may deserve a very short-term trade. The buyback construct has the possibility of “fun and games.”

E-Guardian (6050 JP): CHANGE Holdings’ Partial Tender Offer

By Arun George

  • E Guardian Inc (6050 JP) has announced a partial tender offer and third-party allotment with Change Inc (3962 JP). CHANGE will subscribe for 1.5 million shares at JPY2,099 per share.
  • The tender offer is for a minimum of 3.7 million and a maximum of 4.3 million shares at JPY3,000 per share, a 42.9% premium to the undisturbed price.
  • The tender offer is reasonable. The minimum acceptance condition requires a 37% minority acceptance rate. A 100% minority participation rate implies a minimum proration is 42.39%. 

Hong Kong CEO & Director Dealings (2 August): Flat Glass, Arts Optical, Sky Light Holdings

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.
  • Stocks mentioned in this regular insight include Flat Glass (6865 HK), Arts Optical Intl Hldgs (1120 HK), and Sky Light Holdings Ltd (3882 HK).

Quiddity Leaderboard BSE/​​​​SENSEX Dec 23: 7 Changes for BSE 100 and 5 Changes for BSE 200

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, and 200 Indices in the December 2023 Rebalance.
  • In July, we saw the deletion of HDFC Limited (HDFC IN) from several indices in this family which triggered multiple intra-review index changes.
  • At present, I do not see any changes for the SENSEX index but I see seven ADDs/DELs for BSE 100 and five ADDs/DELs for BSE 200.

SBI Affiliate To Buy 45-49% of E-Guardian (6050) In Partial Tender Offer

By Travis Lundy

  • Today, Change Inc (3962 JP) (30%-owned by SBI Holdings (8473 JP)) announced a Tender Offer to buy 32-36.9% of E-Guardian, followed by a third-party placement to get them to 45-49%.
  • Small cap E-Guardian does internet services support, ad processing, cyber security (their fastest growing segment) and top line has been growing.
  • The partial offer is big enough to matter, and up 50%. It is worth a look for people who like small cap special sits.

EQD | SPX INDEX WEEKLY Supports After US Credit Downgrade

By Nico Rosti

  • The S&P 500 INDEX rally that started in October 2022 is currently encountering some turbulence, possibly due to various factors including the recent US credit downgrade by Fitch.
  • The current WEEKLY pullback may be an opportunity to accumulate LONG position, buy& hold trade.
  • The price area to buy where is between 4540 and 4332: probability of the uptrend resuming from there is between 50% and 75% based on current pattern readings.

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Daily Brief Event-Driven: Insiders Selling at Ecopro BM and Kum Yang and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Insiders Selling at Ecopro BM and Kum Yang
  • Offshore China ETFs Rebalance Preview: Two Changes in September
  • Superloop/Symbio’s Indicative Merger
  • Nice Information Service: KRX Approves Switching Its Listing from KOSDAQ to KOSPI
  • Symbio (SYM AU): Superloop’s Indicative Offer
  • Selected European HoldCos and DLC: July’23 Report


Insiders Selling at Ecopro BM and Kum Yang

By Douglas Kim

  • Ecopro BM (247540 KS) and Kum Yang (001570 KS)’s shares are down 2.5% and 4.5%, respectively today, driven by news of insiders at these companies selling their shares.
  • It is estimated that the total amount of Ecopro BM shares sold by insiders and related parties was about 20 billion won in July by more than 12 insiders/related parties.
  • We are increasingly concerned about insiders selling at Ecopro BM and Kum Yang. Coupled with lofty valuations, we think there is a higher probability of downside risk on these names. 

Offshore China ETFs Rebalance Preview: Two Changes in September

By Brian Freitas


Superloop/Symbio’s Indicative Merger

By David Blennerhassett

  • Broadband provider Superloop Ltd (SLC AU)  has made an indicative Offer, by way of a Scheme, for cloud communication software outfit Symbio Holdings (SYM AU).
  • Under the proposal, Symbio shareholders would receive A$1.425 (cash) and 2.14 new Superloop shares for each Symbio share held, for an implied price of A$2.85/share, a 20% premium to undisturbed.
  • A four-week period of reciprocal exclusivity has been agreed to further progress the proposal.

Nice Information Service: KRX Approves Switching Its Listing from KOSDAQ to KOSPI

By Douglas Kim

  • On 1 August, the Korea Exchange approved the transfer of listing of Nice Information Service Co (030190 KS) from KOSDAQ to KOSPI. 
  • Nice Information Service will also be deleted from KOSDAQ 150 index and it will be replaced by Hydro Lithium (101670 KS). 
  • The recent share price decline in Nice Info Service has resulted in more attractive valuations for the company.

Symbio (SYM AU): Superloop’s Indicative Offer

By Arun George

  • Symbio Holdings (SYM AU) has disclosed a non-binding indicative proposal from Superloop Ltd (SLC AU) at A$1.425 cash per share and 2.14 SLC shares per SYM share. 
  • The implied offer price of A$2.85 per share is a 19.7% premium to the undisturbed price of A$2.38 per share. A 4-week reciprocal exclusivity period starts on 1 August.
  • The offer is not close to being a knockout bid. Superloop states that it will progress the transaction on “a disciplined basis“, suggesting some risk towards a binding proposal.

Selected European HoldCos and DLC: July’23 Report

By Jesus Rodriguez Aguilar

  • Discounts to NAV of covered holdcos have generally widened during July. Discounts to NAV: C.F.Alba, 47.5%; GBL, 39.1%; Heineken Holding, 16.4%; Industrivärden C, 6.6%; Investor B, 15%; Porsche Automobile Holding, 43.8%.
  • The spread of Rio Tinto DLC tightened to 19%. Rio Tinto is a candidate for an Australian top hat structure.
  • Interesting situations: Heineken Holding/Heineken, Porsche SE/vs. listed assets and Rio DLC.

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Daily Brief Event-Driven: JAPAN PASSIVE: Who Owns What 2023? and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • JAPAN PASSIVE: Who Owns What 2023?
  • Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
  • End of Mandatory Lock-Up Periods for 40 Companies in Korea in August 2023
  • Toshiba – Earnings Preview 1QFY24
  • Macquarie Korea Infra Fund Announces A Rights Offering Worth 361 Billion Won
  • EQD | Nikkei 225 (NKY) MONTHLY Trajectories
  • (Mostly) Asia M&A, July 2023: Costa Group, Pacific Current, IMAX, Takisawa Machine Tools, Yachiyo


JAPAN PASSIVE: Who Owns What 2023?

By Travis Lundy

  • The 2023 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. 
  • Even if you do not “play” index changes, understanding impact is important. Advantest is up 100% in 3mos. Existing passive ownership and new passive buying were crucial to that performance.
  • Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks in Japan. 

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends

By Brian Freitas

  • The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
  • There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
  • If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn). 

End of Mandatory Lock-Up Periods for 40 Companies in Korea in August 2023

By Douglas Kim

  • We discuss the end of the mandatory lock-up periods for 40 stocks in Korea in August 2023, among which 2 are in KOSPI and 38 are in KOSDAQ.
  • These 40 stocks on average could be subject to further selling pressures in August and could underperform relative to the market. 
  • Among these 40 stocks, the top five market cap stocks include HK inno.N, PhilEnergy, CJ CGV Co Ltd, Sure Soft Tech, and CanariaBio.

Toshiba – Earnings Preview 1QFY24

By Mio Kato

  • Toshiba announced on Friday that JIP’s upcoming tender offer would not make the July end deadline. 
  • At this point delays for Toshiba are par for the course and we do not think anything needs to be read into this. 
  • With earnings coming up next week we examine the likely trends and the possibility of a revision to guidance.

Macquarie Korea Infra Fund Announces A Rights Offering Worth 361 Billion Won

By Douglas Kim

  • On 28 July, Macquarie Korea Infra Fund (088980 KS) announced that it will conduct a rights offering worth 361 billion won, representing 7.4% of its current market cap. 
  • The major uses of funds from the rights offering include acquisition of a city gas supplier (128 billion won) and investment in Incheon-Gimpo Expressway private investment project (128 billion won).
  • We have a positive view of this rights offering. We believe the acquisition of CN City Energy and the investment in Incheon-Gimpo Expressway will add additional value on the company. 

EQD | Nikkei 225 (NKY) MONTHLY Trajectories

By Nico Rosti

  • The Nikkei 225 (NKY INDEX) rallied +27% in the first 6 months of 2023. 6 months closed up, July closed (barely) down. The index can rise further in Aug/Sep.
  • If August is down, a LONG opportunity: look at support prices between 32391 and 30600,  good probability to see the market going higher from there.
  • If rallying in August, Nikkei could rise between +1.73% (33745) and +3.29% (34265). Continuation of the rally into September could reach higher prices but will encounter resistance at +8.29% (35922).

(Mostly) Asia M&A, July 2023: Costa Group, Pacific Current, IMAX, Takisawa Machine Tools, Yachiyo

By David Blennerhassett

  • For the month of July 2023, 6 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$2.2bn.
  • The average premium for the new deals announced (or first discussed) in July was 40%. The average YTD is 36%.
  • 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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