Event-Driven

For the impending December rebalancing, the effective date is set for December 18th, while the ETF rebalancing trading will take place on December 15th.
Jusung Engineering and Eugene Technology are likely to be added, while Lake Materials and SFA Semicon are expected to exit the index.
Aside from constituent changes, Hansol Chemical is anticipated to significantly benefit from the passive impact as the primary beneficiary of the ceiling reversion.

Golden Eagle Energy: Share Sale Done. MTO Price Bumped

This transaction just keeps on giving. First, you received an additional dividend. Now the Offer price has been increased.
On the 26 July, Geo Energy Resources (GERL SP) announced an intention to acquire a 58.65% stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
Geo shareholders approved the purchase on the October 13 and the acquisition was completed on the 18 October. This triggered an MTO, which has been revised upward to IDR 1,305.50.

ZJLD Lock-Up – KKR’s US$680m Stake to Be Unlocked, Although the PE Could Opt to Wait

By Clarence Chu

ZJLD Group (6979 HK) raised US$676m in its Hong Kong IPO in April 2023. Its six-month lockup will expire on 26th Oct 2023.
ZJLD is a Chinese liquor company producing baijiu. As per F&S, the firm ranked third among all baijiu companies with three or more aroma types in terms of FY21 sales.
In this note, we will talk about the lock-up dynamics and updates since our last note.

Liontown Resources (LTR AU): State of Play

Liontown Resources (LTR AU) resumes trading today after announcing a raise of up to A$1.18bn to fully fund the Kathleen Valley Lithium Project to first production and beyond.
The equity component is up to A$421m and the placement price of A$1.8/share is a 35.5% discount to the last close.
The placement price is higher than the stock price prior to the Albemarle Corp (ALB US) offer and during a period when its peers have performed poorly.

Origin/Brookfield: Bump Expected Ahead Of 23 Nov Scheme Meeting

On 20th October, the ACCC cleared Brookfield to take over Origin Energy (ORG AU).
The transaction still needs shareholder approval and AustralianSuper with its too-big-to-ignore 13.68% stake reckons terms are below long-term value.
The Scheme Booklet is out with a 23 November Scheme Meeting. The IE backs out a fair value range of $8.45-$9.48/share, but as at June 30. A bump is imminent.

A Merger Share Swap Between Kolmar Korea and Yonwoo

On 19 October, Kolmar Korea announced that it will conduct a merger share swap with Yonwoo early next year to make it into a 100% wholly owned subsidiary.
We believe the merger share swap agreement between Kolmar Korea and Yonwoo is likely to have positive impact on both Kolmar Korea and Yonwoo.
After this share swap is completed, Yonwoo will be delisted. This merger is aimed at improving the inefficient governance structure caused by duplicate listings and improve management efficiency.

Quiddity Leaderboard SE600 Dec 23: Novartis-Sandoz, Dechra, CHR, and Others

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 December 2023 rebalance.
This includes a couple of intra-review index changes that could be triggered by the Dechra Pharmaceuticals (DPH LN) and Chr Hansen Holding A/S (CHR DC) takeover situations.

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Oct 19

Daily Brief Event-Driven: Shinko Electric (6967) Update – MitCorp In The Mix? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Shinko Electric (6967) Update – MitCorp In The Mix?
ANTA Sports Investor Day Targets DESCENTE (8114) For Growth
Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake
Kenedix J-REIT Family Merger – Still Room (But Less Time) To Move (Redux-Ish)
A Shift in TIGER Top 10 ETF December Rebalancing: KB Financial Newly In But Not Ecopro Co
IndusInd Bank (IIB IN): Passive Buying Coming Up as Foreign Room Crosses Key Threshold
Macau Casinos: MGM China Looks Solid
India – Free Float Changes to Drive Passive Inflows
Youngpoong Paper Mfg: Concerns About CFD Related Selling – Another Margin Call?
Lithium Power (LPI AU): Codelco’s Binding Offer at A$0.57

Shinko Electric (6967) Update – MitCorp In The Mix?

Yesterday about 5 minutes before the close, Shinko Electric Industries (6967 JP) went into kehai, rising 8.6%, then falling back to end + 3% on the day.
This morning, the stock opened down 2%, rose 4%, fell 4%, then rose 4%. All in the first 45 minutes. Then it fell back 4% and ended down 2% today.
The proximate cause of all of this was a Reuters article out 5mins before the close yesterday suggesting Mitsubishi Corp (8058 JP) is considering bidding for Shinko Electric.

ANTA Sports Investor Day Targets DESCENTE (8114) For Growth

Yesterday, Anta Sports Products (2020 HK) held its Investor Day in Beijing. They talked about Descente Ltd (8114 JP) and their plans.
The presentation made by the Descente China Chairman talked about the evolution of performance and the target for 2026, suggesting higher profit now and growth going forward than market expectations.
None of this changes my outlook for why Itochu Corp (8001 JP) is buying Descente shares in the market. And the stock is going up.

Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake

Reuters reported that Mitsubishi Corp (8058 JP) is considering a joint bid for Fujitsu Ltd (6702 JP)’s 50% stake in Shinko Electric Industries (6967 JP).
Fujitsu first flagged a potential stake sale in its 1HFY22 results last October. Previously rumoured suitors include Apollo Global Management, Bain Capital, Dai Nippon Printing, JIC and KKR.
Shinko’s shares are up 73% YTD, which is not excessive compared to Ibiden Co Ltd (4062 JP) (up 63.2% YTD). The valuation is undemanding, which facilitates a potential offer.

Kenedix J-REIT Family Merger – Still Room (But Less Time) To Move (Redux-Ish)

A month ago I wrote there was still time, and room, to move on the Kenedix Merger.
Now there’s less time, but the situation and relationships are better understood.
Tracking Excess Volume during the period since the announcement is interesting. And it may tell you less than you think.

A Shift in TIGER Top 10 ETF December Rebalancing: KB Financial Newly In But Not Ecopro Co

While Ecopro Co’s stock has undergone significant corrections since August, KB Financial has sustained an upward trajectory, leading to a significant reversal in float-adjusted market cap.
The current disparity between the two exceeds ₩2T, making it challenging to anticipate another reversal until the screening period.
Ecopro Co and LG Energy Solution also warrant attention due to the narrow gap in their float-adjusted market capitalization. We should monitor any changes in their market capitalization moving forward.

IndusInd Bank (IIB IN): Passive Buying Coming Up as Foreign Room Crosses Key Threshold

Foreign investors sold ~5.7m shares of Indusind Bank (IIB IN) from July to September. That selling has pushed foreign room above the key 15% threshold.
With foreign room crossing 15%, passive trackers will need to buy a chunk of Indusind Bank (IIB IN) stock at the end of November.
There will be positioning on Indusind Bank (IIB IN) though it appears some of that was taken off in the last couple of days.

Macau Casinos: MGM China Looks Solid

Macau’s mass GGR in 3Q23, including slots, was down just 6.7% on 3Q19 levels, but up 11.1% quarter-on-quarter.
The shifting regulatory sands across the gaming landscape has resulted in VIP baccarat revenue accounting for 24% of GGR in 3Q23, down from 43.8% in 3Q19, and 64.6% in 3Q13.
All concessionaires have been impacted by the collapse of the junket industry. But those who relied less on VIP flow have fared better on a comparative basis.

India – Free Float Changes to Drive Passive Inflows

Over the last few weeks, companies in India have been disclosing their shareholding pattern as of end-September. There are a few companies with significant float changes from end-March and/or end-June.
The changes in free float could be reflected in domestic and global indices over the next couple of months resulting in action from passive trackers.
We find 9 stocks where there could be inflows with passive trackers needing to buy over 1 day of ADV on most stocks.

Youngpoong Paper Mfg: Concerns About CFD Related Selling – Another Margin Call?

Youngpoong Paper Mfg’s shares declined sharply by 30% to 33,900 won today, trading only 190k shares (3% of ADTV).
There is high probability that this sell-off could be related to CFD related margin call.
Daiyang Metal, the largest shareholder of Youngpoong Paper Mfg, also dropped limit down today. The Korea Exchange has temporarily suspended trading of both Youngpoong Paper and Daiyang Metal.

Lithium Power (LPI AU): Codelco’s Binding Offer at A$0.57

Lithium Power International (LPI AU) has entered a scheme implementation deed with Corporacion Nacional del Cobre de Chile (Codelco) at A$0.57 per share, a 119.2% premium to the undisturbed price.
Shareholders representing 32.47% of outstanding shares will vote in favour of the scheme. Forums suggest that retail shareholders are broadly resigned to accepting the offer.
The offer is conditional on FIRB approval. The scheme meeting will be held on 23 January 2024. At the last close, the gross spread was 7.5%.

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Oct 18

Daily Brief Event-Driven: Ryoyo (8068) – Ryosan (8140): Recent and Former Activist Targets To Merge and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Ryoyo (8068) – Ryosan (8140): Recent and Former Activist Targets To Merge
Newcrest/Newmont & Potential S&P/ASX Changes
Pan Ocean To Sell 5.8% Stake in Hanjin Kal To Secure Funds to Acquire HMM
Liontown Resources (LTR AU): Trading Halt Extended; Passive Selling Update
Liquid Universe of European Ordinary and Preferred Shares: October‘23 Report
Quiddity Leaderboard F100/250 Dec 23: ~7 Changes Possible; LONG Playtech SHORT 888 Interesting
Lithium Power (LPI AU): Cedelco’s Offer

Ryoyo (8068) – Ryosan (8140): Recent and Former Activist Targets To Merge

Today post-close, Ryoyo Electro (8068 JP) and larger equity affiliate (20.1%) Ryosan Co Ltd (8140 JP) announced their final Management Integration Plan (merger by holdco) after signalling a deal May23.
Activist-Ish-Y Silchester sold their stake in Ryosan to Ryoyo in February at a 20% premium. Activist Murakami-san had a top10 Ryosan stake end-March, went substantial 27 June, now owns 10%.
Both low-margin/ROE electronics traders have been subject to activist campaigns over the years. Both “survived”. Now they are banding together to be a bigger independent low-margin electronics trader.

Newcrest/Newmont & Potential S&P/ASX Changes

Newcrest Mining (NCM AU) shares stop trading after the close on 26 October and Newmont Mining (NEM US) CDIs will start trading from the open on 27 October.
Newmont Mining (NEM US) CDIs should replace Newcrest Mining (NCM AU) in the S&P/ASX indices from 27 October. But there could be index changes at the subsequent rebalances.
Based on the case of Block (SQ2 AU), we could see Newmont Mining (NEM US) CDIs deleted from the ASX20 Index in December and from the ASX50 Index in March/June.

Pan Ocean To Sell 5.8% Stake in Hanjin Kal To Secure Funds to Acquire HMM

On 17 October, Pan Ocean (028670 KS) announced that it will sell its 3.9 million shares (5.85% stake) in Hanjin KAL Corp (180640 KS) for about 163 billion won.
The main purpose of this stake sale is to secure more funds for Pan Ocean to potentially acquire HMM Co., Ltd. (011200 KS).
As evidenced by the recent increase in Baltic Dry Index, the potential expansion of the war in Israel could benefit major bulk shipping companies such as Pan Ocean.

Liontown Resources (LTR AU): Trading Halt Extended; Passive Selling Update

Liontown Resources‘ Suspension from Quotation “pending the release of an announcement regarding the finalisation of funding arrangements associated with the Kathleen Valley Project” could last till the open 20 October.
Short interest continued to increase prior to the trading halt and passive selling will be higher following Hancock increasing its stake to 19.9%.
The immediate funding for Liontown Resources (LTR AU) could come from debt sources with an equity raise coming later this year or early next year.

Liquid Universe of European Ordinary and Preferred Shares: October‘23 Report

By Jesus Rodriguez Aguilar

Since mid-September, spreads have generally tightened across our European liquid universe of ordinary and preferred shares (12 have tightened, 7 widened).
Recommended trades long preferred / short ordinary shares: Media-for-Europe, Sixt, Volkswagen (still the most interesting situation), Grifols, Atlas Copco.
Recommended trades long ordinary / short preferred shares: Fuchs, SSAB Svenska Stal.

Quiddity Leaderboard F100/250 Dec 23: ~7 Changes Possible; LONG Playtech SHORT 888 Interesting

In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the December 2023 Rebalance.
Dechra Pharmaceuticals (DPH LN) and Network International Holdings (NETW LN) are currently involved in takeover situations. When those deals close, intra-review changes can be triggered.
Including these changes, there could be up to one F100 change and seven F250 changes between now and the end of the year.

Lithium Power (LPI AU): Cedelco’s Offer

Lithium Power International (LPI AU) has announced it has entered into a Scheme Implementation Deed with Chilean state miner Codelco, the world’s largest copper producer.
Codelco is offering LPI shareholders A$0.57/share, a whopping 119% premium to last close. LPI’s major shareholder, Minera Salar Blanco SpA with 28.25%, is supportive. As is LPI’s board.
The Scheme Meeting is expected to be held on the 23 January with implementation on the 8 February. Clean deal.

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Oct 17

Daily Brief Event-Driven: India – Positioning on Some Interesting* Names and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

India – Positioning on Some Interesting* Names
J&T Global Express (1519 HK): Index Inclusion Possibility & Timelines
Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
WisdomTree Oct ’23 Rebalance: Estimated Flows for All Adds and Deletes in DEM, XSOE & DGS
Quiddity A/H Premium Tracker (To Oct13): Volatility Up Bigly, Wide Spreads Wider
Attractive Yield of Kumho Petrochem Pref Shares Amid 100 Billion Won of Common Shares Cancellation
Golden Eagle Energy: Last Day To Buy Cum-Divvie
Schaeffler/Vitesco: A Three-Step Merger Process
EQD | NIFTY WEEKLY Weak Bounce, Ready to Fall Next Week?

India – Positioning on Some Interesting* Names

Polycab India, Macrotech Developers, Paytm, Tata Communications, Tata Motors DVR, Apl Apollo Tubes, Persistent Systems and Suzlon Energy have run up over the recent past and have heightened investor attention.
The increase in market cap has put the stocks on active manager radars and could also result in the stocks being added to global indices in the near future.
We take a look at the positioning on the stocks and recommend pair trades to reduce market risk while trying to capture alpha.

J&T Global Express (1519 HK): Index Inclusion Possibility & Timelines

J&T Global Express (1936374D CH) is looking to raise HK$3.92bn (US$501m) in its IPO by selling 326.55m shares at HK$12/share, valuing the company at HK$105.75bn (US$13.52bn).
J&T Global Express (1936374D CH) will not get Fast Entry to any indices but should be added to the HSCI in March. Inclusion to Southbound Stock Connect will take longer.
Inclusion in other indices will take longer with the highest probability of index inclusion in September 2024.

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

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.

WisdomTree Oct ’23 Rebalance: Estimated Flows for All Adds and Deletes in DEM, XSOE & DGS

By Charlotte van Tiddens, CFA

HDFC Bank (HDFCB IN) is the largest buy (XSOE) – estimated flow $44m. Grupo Financiero Banorte SAB d (GFNORTEO MF) is the 2nd largest buy – estimated flow $40m.
Wistron Corp (3231 TT) is the largest sell – estimated flow $68m. POSCO Holdings (005490 KS) is the 2nd largest sell – estimated flow $59m.
Our estimate for the total value of new constituent buys is $1.38bn. We expect deletions to the value of $1.41bn to be sold down across the 3 funds.

Quiddity A/H Premium Tracker (To Oct13): Volatility Up Bigly, Wide Spreads Wider

The Brand-Spanking New (9 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
We used to do it. We brought it back better, with lots of cool interactive tables, and charts, heat maps, and comparative data. And 50 Trade Recommendations.
The last 9 weeks (since the start of the new Trcker and Portfolio 8 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%, -0.29%, -0.71%.

Attractive Yield of Kumho Petrochem Pref Shares Amid 100 Billion Won of Common Shares Cancellation

On 16 October, Kumho Petrochem (011780 KS) announced that it will cancel 0.77 million shares on 23 October, representing 2.6% of its outstanding shares or about 100 billion won.
We particularly like Kumho Petrochem preferred shares which provide a dividend yield of nearly 6.7% which is 2x the dividend yield of the common shares.
Foreigners have been net buyers of Kumho Petrochem preferred shares this year while they have been net sellers of its common shares this year.

Golden Eagle Energy: Last Day To Buy Cum-Divvie

Back on the 26 July, Geo Energy Resources (GERL SP) announced an intention to acquire a majority stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
GEO shareholders have now approved the purchase of a 58.7% stake in Golden Eagle from Indonesian conglomerate Rajawali Group, triggering an MTO at IDR1,255/share, which is subject to Indonesia’s OJK.
In addition, GEE announced a special/additional dividend, with a cum-entitlement today, the 17th of October.

Schaeffler/Vitesco: A Three-Step Merger Process

By Jesus Rodriguez Aguilar

Schaeffler (SHA GR) offers €91.00/share for Vitesco Technologies Group (VTSC GR), in cash, 20% premium to 3-month VWAP, 3.3x EV/Fwd EBITDA. There is no minimum acceptance rate.
Later Schaeffler will unify its share classes (current voting ratio 3.01) to use them as currency for Vitesco shareholders not accepting the cash offer (essentially the parent company of Schaeffler).
Vitesco shareholders are being generously rewarded (my fair value estimate is #€74/share), I believe most will tender. Spread is 1.04%/3.70% (gross/annualised, assuming settlement by 31 January). I’d buy below €90/share.

EQD | NIFTY WEEKLY Weak Bounce, Ready to Fall Next Week?

By Nico Rosti

The NIFTY 50 Index closed last week up at 19751.05, 2nd week up, in synch with the S&P 500 INDEX WEEKLY bounce.
The index has not moved up much from a price perspective, weak bounce. Resistance levels must be monitored: if the index rallies this week it could pull back next week.
The trade orientation is to go SHORT once the NIFTY reaches Q2/Q3 OVERBOUGHT resistance levels in the 20167-20230 price area, this week. SHORT Trade at Close is also valid.

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Oct 16

Daily Brief Event-Driven: Japan – Increase in Shorts on Some Interesting* Stocks and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Japan – Increase in Shorts on Some Interesting* Stocks
EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings
TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors
S&P/ASX200 Index Ad Hoc Rebalance Preview: Replacement for Invocare (IVC)
Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say
Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading
Merger Arb Mondays (16 Oct) – NWS, Haitong Intl, Eoflow, Liontown, Origin Energy, Estia, Pact, JSR

Japan – Increase in Shorts on Some Interesting* Stocks

CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, GMO Payment Gateway, Kurita Water Industries and Open House have all underperformed the Nikkei 225 over the recent past.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.

EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings

Latest filings on Insulet Corp (PODD US)’s voluntary dismissal without prejudice only to Flex (FLEX US), Eoflow (294090 KS)’s motion to restart Korean sales, dismiss a count and a timetable.
Examining the court filings suggests Medtronic Plc (MDT US)’s access to court unredacted documents is restricted. Medtronic’s limited access makes evaluating the transaction’s potential litigation risk challenging.
Eoflow’s defence in the court documents is based on reverse engineering and procedural arguments. The KRX will rule on Eoflow’s share trading suspension by 1 November.

TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors

In April 2022, I wrote about Tsi Holdings (3608 JP) saying in the first three bullet points it could double in two years. It doubled in one.
They bought back shares held by JDB in April 2022, then they launched another buyback program in January 2023, and completed it last month.
Now they have launched another to buy back 8.46% with a ToSTNeT-3 for half on Monday AM. The rest is expected on market through end-March 2024.

S&P/ASX200 Index Ad Hoc Rebalance Preview: Replacement for Invocare (IVC)

Light & Wonder (LNW AU) will replace United Malt Group Ltd (UMG AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 17 October.
Invocare Ltd (IVC AU) is expected to stop trading after the close on 3 November and Boss Resources (BOE AU) is best placed to be the replacement.
There are stocks that are close on the heels of Boss Resources (BOE AU) and will compete for a place. Two of those could be added at the December rebalance.

Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say

Post-Close Friday it was announced that Light & Wonder (LNW AU) Chess Depositary Interests would replace United Malt Group Ltd (UMG AU) at the close on 17 October.
This was announced before US markets opened. Light & Wonder (LNW US) shares popped 5.65%, closing 5.8% through the Aussie line.
This is a possibly deceptive index add. I’d be quite careful.

Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading

First, we can take on some risk and build up a short position using SSFs from now, aiming for an aggressively low price (likely Day 1) during the rights trading.
If this approach seems somewhat risky, the second is to wait until the rights trading and, although accepting some sacrifice in the spread, build positions relatively risk-free.
We can also actively build up a long position in the significantly backwardated SSFs from now and, instead, set up an aggressive short on the underlying shares.

Merger Arb Mondays (16 Oct) – NWS, Haitong Intl, Eoflow, Liontown, Origin Energy, Estia, Pact, JSR

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 – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), Haitong International Securities Group (665 HK), Orecorp Ltd (ORR AU), Liontown Resources (LTR AU).
Owest spreads Yaizu Suisankagaku Industry (2812 JP), Healius (HLS AU), Pact Group Holdings (PGH AU), Origin Energy (ORG AU), T&K Toka Co Ltd (4636 JP), Healthway Medical Corp (HMED SP).

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Oct 15

Daily Brief Event-Driven: Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown
Last Week In Event SPACE: EOFlow, Fast Retailing, JMDC, Origin Energy
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Tensions Rise
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Newcrest Mining, Haitong Int’l, Liontown, NWS, IMAX China
Quiddity Leaderboard ChiNext & ChiNext 50: Final Expectations

Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye

The Allkem/Livent “merger of equals” discussed in Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises and Allkem/Livent: Enlarged Charging Unit is on track.
As of the end of last month, all approvals are received or are expected to be received. The Scheme Booklet is expected next month. Deal is expected to close end-CY2023.
The deal STILL has interesting side issues with index. Even more interesting than Newcrest/Newmont. This is an update with more detail as we probably have 8-10 weeks left.

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown

An ad hoc S&P/ASX 200 (AS51 INDEX) rebalance will be implemented at the close on 17 October with Light & Wonder (LNW AU) replacing United Malt Group Ltd (UMG AU).
The rebalances of Wisdomtree Emerging Markets (DEM US), Wisdomtree Em Small Cap (DGS US) and Wisdmtree Emerg Mkt Ex-St Ow (XSOE US) will be implemented on 18 October.
There were net outflows from onshore China ETFs with inflows to larger cap ETFs and outflows mainly from the CSI Smallcap 500 Index and CSI 1000 Index trackers.

Last Week In Event SPACE: EOFlow, Fast Retailing, JMDC, Origin Energy

Should the nominated directors, to be voted on by EOFlow (294090 KS)‘s shareholders at the November EGM, include Medtronic Plc (MDT US) executives, then game on.
Fast Retailing (9983 JP) STILL has a Nikkei 225 problem, which means it probably has to underperform Nikkei 225 slightly between now and the Base Date (31 July 2024).
JMDC (4483 JP) has been one of the more annoying partial tenders out there. Even post-facto, it is tough to know what the disposition was. This is extraordinarily vexing.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Tensions Rise

By Simon Harris

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

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Newcrest Mining, Haitong Int’l, Liontown, NWS, IMAX China

I tally 45 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma this week: Haitong Securities Co Ltd (A) (600837 CH)‘s Offer for Haitong International Securities Group (665 HK).
Key updates took place for: Origin Energy (ORG AU), Estia Health (EHE AU), Newcrest Mining (NCM AU), Liontown Resources (LTR AU), NWS (659 HK),IMAX China (1970 HK), and Eoflow (294090 KS).

Quiddity Leaderboard ChiNext & ChiNext 50: Final Expectations

The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
In this insight, we take a look at our final expectations for the ADDs and DELs for the December 2023 and their flow implications.

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Oct 14

Daily Brief Event-Driven: What EOflow Insiders Are Saying on the Current Situation & An Objective Interpretation of It and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

What EOflow Insiders Are Saying on the Current Situation & An Objective Interpretation of It
S&P/ASX 200 Index Adhoc Change: Light & Wonder (LNW) To Replace UMG
WisdomTree Oct 2023 Rebalance (Wed, 18 Oct)
Naspers: Discount to Prosus Market Value Reaches Narrowest Level Since Prosus Listing

What EOflow Insiders Are Saying on the Current Situation & An Objective Interpretation of It

They said that EOflow has made a strategic decision not to raise any objections to the court’s injunction to temporarily suspend the sale and marketing activities of EOPATCH.
They stated their commitment to making efforts to actively prove that they are not subject to KRX’s substantive delisting examination. Hence, they aim to resume trading from November 1st.
They subtly hinted at a degree of caution, suggesting that the final agreement with Medtronic might undergo slight modifications to align with the outcome of this preliminary injunction.

S&P/ASX 200 Index Adhoc Change: Light & Wonder (LNW) To Replace UMG

Shareholders have approved United Malt Group Ltd (UMG AU)‘s acquisition by Malteries Soufflet and UMG is expected to stop trading after the close on 17 October.
United Malt Group Ltd (UMG AU) will be replaced by Light & Wonder (LNW AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 17 October.
This is a surprise and there is unlikely to be a lot of pre-positioning on Light & Wonder (LNW AU). Buy Light & Wonder (LNW US) during US hours.

WisdomTree Oct 2023 Rebalance (Wed, 18 Oct)

By Charlotte van Tiddens, CFA

The annual WisdomTree rebalance takes place next week Wednesday in the closing auction. Turnover on the JSE at the rebalance last year (20 Oct) was R30.6bn, 1.5 times the 5-day average.
There are several SA stocks being added to and deleted from the range of WisdomTree EM funds.
Our buy flow estimate for SA additions is R1.3bn, our sell flow estimate for SA deletions is R1.8bn. This excludes up and down weightings.

Naspers: Discount to Prosus Market Value Reaches Narrowest Level Since Prosus Listing

By Charlotte van Tiddens, CFA

In yesterday’s trading session, Naspers and Prosus followed the market lower leading up to and after the US CPI print (headline worse than expected, core inline).
Naspers and Prosus closed 1.4% and 1.9% lower, reducing Naspers’ discount to Prosus’ market value to its narrowest level since Prosus listed. The discount closed at 10.4% (currently 10.9%).
Naspers has outperformed Prosus by 2.2% during the last 3 trading days.

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Oct 13

Daily Brief Event-Driven: WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: 45% Turnover & US$2.5bn to Trade and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: 45% Turnover & US$2.5bn to Trade
Shinko Electric (6967) – Waiting for a Package
WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week
Fast Retailing (9983) Beats Guidance, Stronger Forecasts, STILL Has a Nikkei 225 Problem
NWS Holding (659 HK): Offer Opens with NWD Vote on 2 November
Korea Finally Offers Reliable Data Channel on Companies with Improved Dividend Procedures
Zomato Lock-Up – A US$240m+ Softbank Linked Lockup Release
WisdomTree Emerging Markets Ex-State-Owned Enterprises Index Rebalance: 16% Turnover, US$660m Trade
Estia & Bain: 15th Nov Shareholder Vote
Quiddity Leaderboard CSI 300/500 Dec 23: Basket Trade Off to A Positive Start; US$2.8bn One-Way

WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: 45% Turnover & US$2.5bn to Trade

The WisdomTree Emerging Markets SmallCap Dividend Index is a fundamentally weighted index that measures the performance of small cap stocks within Emerging Markets.
The October rebalance will result in a one-way turnover of ~45% and in a one-way trade of US$1.24bn. There are ~300 stocks with over 1 day of ADV to trade.
With only 4 trading days to implementation, there could be large moves on stocks with large flows and impact over the next few days.

Shinko Electric (6967) – Waiting for a Package

Shinko Electric Industries (6967 JP) has been on the block. 2nd Round Bids were apparently due last month, but with “Economic Security” considerations, one wonders if that stretches a bit.
The stock is now at the low end of its range vs Ibiden, and the timing is right for a deal which could give it a pop.
A “split price” takeover seems reasonable as a structure. I expect upside. Still.

WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week

The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
The October rebalance will result in a one-way turnover of ~37% and in a one-way trade of US$926m. There are 92 stocks with over 1 day of ADV to trade.
In Asia, the largest buy flows are expected on Astra International (ASII IJ) and the largest sell flows on POSCO Holdings (005490 KS).

Fast Retailing (9983) Beats Guidance, Stronger Forecasts, STILL Has a Nikkei 225 Problem

Fast Retailing (9983 JP) today announced better than guided results, and 10% revenue growth, 18% OP growth to August 2024. NP is light, but still well higher than street consensus.
At 10.37% Nikkei 225 weight, it is still above the target for 31 July 2024. If it does not underperform Nikkei 225 between now and then, US$2bn to sell end-Sep24.
If people like the growthiness, that can be absorbed. But if the stock were to go up 10% vs Nikkei, there’d be US$2bn, then maybe another US$2bn to sell.

NWS Holding (659 HK): Offer Opens with NWD Vote on 2 November

Nws Holdings (659 HK)’s IFA opines that the conditional voluntary general offer from the Cheng family is fair and reasonable. The offer + 2H dividend is HK$9.46 per share.
The key condition is (majority vote) approval by independent NWD shareholders (EGM on 2 November). The timetable is designed such that the shareholders will also receive the NWS final dividend.
NWD has a high but declining AGM minority participation rate. Retail forums suggest support for the transaction. On balance, we believe that this deal gets up.

Korea Finally Offers Reliable Data Channel on Companies with Improved Dividend Procedures

The Obligatory Corporate Governance Report Disclosure System will stand as the only source for furnishing trustworthy data on the proportion of listed companies that have genuinely adopted enhanced dividend procedures.
From a dividend strategy perspective, the companies of primary interest for strategic trading are predominantly those falling under the scope of this disclosure obligation.
Next year, it’s anticipated that with dependable data, we will have the means to craft dividend strategies aimed at this specific group.

Zomato Lock-Up – A US$240m+ Softbank Linked Lockup Release

By Sumeet Singh

In Aug 2022, Zomato (ZOMATO IN) completed the acquisition of 91% of Blinkit’s outstanding shares via issuing its own shares. These shares were released from their lockup in Aug 2023.
Softbank then sold a part of its stake in Aug 2023, the rest of its stake will come out of lockup soon.
In this note, we will talk about the lock-up dynamics and recent updates.

WisdomTree Emerging Markets Ex-State-Owned Enterprises Index Rebalance: 16% Turnover, US$660m Trade

The WisdomTree Emerging Markets ex-State-Owned Enterprises Index measures the performance of emerging markets stocks that are not state-owned enterprises.
The October rebalance will result in a one-way turnover of ~16% and in a one-way trade of US$329m. There are 16 stocks with over US$3m to trade.
HDFC Bank (HDFCB IN) will be added to the index while there will be selling in Taiwan Semiconductor (TSMC) (2330 TT).

Estia & Bain: 15th Nov Shareholder Vote

On the 7 August, aged care provider Estia Health (EHE AU) and Bain Capital entered into a Scheme Implementation Agreement at A$3.20/share (less any dividends), a 50% premium to undisturbed
The Scheme Booklet is now out. A shareholder meeting will be held on the 15th of November with implementation expected on the 30th of November.
Estia paid a fully franked dividend of A$0.12/share on the 15th of September. Currently trading tight to the adjusted terms of A$3.08/share. This still needs FIRB approval.

Quiddity Leaderboard CSI 300/500 Dec 23: Basket Trade Off to A Positive Start; US$2.8bn One-Way

CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in December 2023.
A couple of baskets I suggested in my last insight have both outperformed the CSI 300 index by more than 2% in less than a month.

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Oct 12

Daily Brief Event-Driven: JMDC (4483) Partial Offer Results – Tough Tender and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JMDC (4483) Partial Offer Results – Tough Tender, I’d Watch For “THE Block” (Maybe)
EOFlow’s Suspension Is Not (All) Negative
Eoflow: Temporary Trading Suspension
EOFLOW/Medtronic Tender: On Life Support
POSCO DX (022100 KS): Index Impact of KOSDAQ to KOSPI Transfer
A Noteworthy ETF Flow Trading Opportunity Targeting the Pair Comprising Kia & Posco Future M
Estia Health (EHE AU): Scheme Meeting on 15 November

JMDC (4483) Partial Offer Results – Tough Tender, I’d Watch For “THE Block” (Maybe)

Results for the Omron Corp (6645 JP) Partial Tender Offer for JMDC (4483 JP) are out.
The Pro-Ration was 51.63%, at the lower end of my initial estimate of 50-58% range, and at the higher end of my revised range (42-56%).
The pro-ration, the nature of the shapes (technical term) tendered, and what that suggests for Noritsu Koki’s position suggests the back end could be more squeezy than not.

EOFlow’s Suspension Is Not (All) Negative

On the 6th of October, a US district court judge entered a preliminary injunction (PI) against EOFlow (294090 KS), pending a trial. This development should have been expected.
Less expected was the suspension of EOFlow shares today, and the cessation of sales globally.
The latter measure appears extreme, noting the PI addresses only sales in the US, which EOFlow is not permitted anyway, without FDA approval. There’s clearly more than meets the eye.

Eoflow: Temporary Trading Suspension

On 10 October, the Korea Exchange announced a temporary suspension of trading of Eoflow (294090 KS) shares starting 11 October.
Eoflow decided at its board of directors meeting the previous day (10th) to suspend production and sales of Eoflow patches until the outcome of the lawsuit is resolved.
In this insight, we provide various scenario analysis including the worst case, best case, and in-between cases of the Eoflow M&A tender offer process.

EOFLOW/Medtronic Tender: On Life Support

In reaction to the preliminary injunction, Eoflow (294090 KS) shares were suspended as it is reviewing whether it is subject to a substantive review for KOSDAQ listing eligibility.
Medtronic Plc (MDT US) is in an unprecedented situation of potentially acquiring a company whose shares are suspended, has a preliminary injunction against it and exposure to possible liabilities.
Medtronic could have prevented this development by reaffirming its commitment to the deal. The transaction is on increasingly shaky grounds, which is reflected in the 38.2% gross spread.

POSCO DX (022100 KS): Index Impact of KOSDAQ to KOSPI Transfer

Posco DX (022100 KS) has applied to the KRX for a transfer from the KOSDAQ market to the KOSPI market.
Based on history, the approval for the transfer and the listing change could take place in the next two months.
That means a deletion from the KOSDAQ 150 Index (KOSDQ150 INDEX) and inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX). But the timeline is important.

A Noteworthy ETF Flow Trading Opportunity Targeting the Pair Comprising Kia & Posco Future M

Kia is set to make a comeback, while the exclusion of Posco Future M is on the horizon.
The screening date is set for November 30th, and the effective date is December 18th, which means the ETF rebalancing will take place on December 15th.
The exposure period to the market is relatively short, so it’s essential to acknowledge the limited accumulation of learning effects. This suggests we can anticipate a notably substantial price impact.

Estia Health (EHE AU): Scheme Meeting on 15 November

The Estia Health (EHE AU) IE considers Bain’s A$3.20 (A$3.08 excluding paid dividends) offer fair and reasonable as it is above its valuation range of $2.83 to A$3.21 per share.
The offer is subject to FIRB and possibly aged care industry approvals. The MAC clause risk, particularly around material regulatory events, is diminishing.
This is a done deal. At the last close price and for the 30 November payment, the gross and annualised spread is 1.3% and 9.7%, respectively.

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Oct 11

Daily Brief Event-Driven: NWS (659 HK): Pre-Cons Done. Now and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

NWS (659 HK): Pre-Cons Done. Now, About That Final Divvie …
Origin/Brookfield: ACCC Rubber Stamped. Now Shareholders Will Have Their Say
TOPIX October 2023 Rebalance: Round Trip Trade of US$20bn; Upweights Outperform Downweights
HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December
Kenedix Merger: Significant Passive Inflows Expected in Three Weeks
Origin Energy (ORG AU): ACCC Approves, Shareholders Justifiably Want a Bump
Rakuten Bank IPO Lock-Up – Parent and Company Will Come Out of Lockup
CMB/Euronav: Mandatory Offer
Quiddity Leaderboard BSE/SENSEX Dec 23: Bandhan Bank Could Underperform State Bank

NWS (659 HK): Pre-Cons Done. Now, About That Final Divvie …

Back on the 26 June, Chow Tai Fook (CTFE) made a pre-conditional voluntary Offer for New World (17 HK)‘s 60.88%-held NWS (659 HK) at HK$9.15/share, a 22.2% premium to undisturbed.
The Cheng-family-backed CTFE and connected parties held 45.24% of NWD, therefore the parent was effectively injecting ~US$2.75bn of cash into NWD for its NWS stake.
The pre-cons are now done, with a 13 October despatch date for the Composite Document. Technically, this could be wrapped up before NWS’ final dividend ex-date. That’s worth exploring further.

Origin/Brookfield: ACCC Rubber Stamped. Now Shareholders Will Have Their Say

Brookfield Asset Management/MidOcean Energy’s tilt for Origin Energy (ORG AU), faced two major hurdles.
The first was ACCC approval. Not just over competition issues, but also the perceived/apparent public benefit from Brookfield’s future commitment to renewable generation. ACCC has now cleared the transaction.
The second is currying favour with shareholders, several of whom, including AustralianSuper (13.68% stake), reckon the Offer is substantially below long-term value. This needs a bump.

TOPIX October 2023 Rebalance: Round Trip Trade of US$20bn; Upweights Outperform Downweights

At the October rebalance, Free Float Weight (FFW) will be reduced on 284 stocks and increased on 458 stocks. 43 stocks will be removed from Phased Weight Reduction.
Estimated one-way turnover is 1.77% resulting in a one-way trade of ¥1.45tn. 364 stocks have over 4 days ADV to trade, 97 stocks have over 8 days ADV to trade.
Over the last 6 months, the stocks with inflows (>US$25m) have outperformed the stocks with outflows (>US$25m) with most of the outperformance coming in the last three months.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December

With no stocks in inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December.
Capping changes will result in a one-way turnover of 2.16% and that will result in a round-trip trade of US$556m.
The impact of capping changes has doubled over the last month and there will be more changes from now till the official capping is done on 28 November.

Kenedix Merger: Significant Passive Inflows Expected in Three Weeks

The three-way merger of Kenedix Office Investment Co (8972 JP), Kenedix Residential Investment (3278 JP) and Kenedix Retail REIT (3453 JP) will be implemented in less than 3 weeks.
With the market cap of the merged entity at US$4.85bn, there will be upgrades to indices with larger tracking assets and significant passive buying at the time of merger implementation.
All three stocks have outperformed their peers since merger announcement and over the last month and at least part of the upcoming passive flow is baked into the price.

Origin Energy (ORG AU): ACCC Approves, Shareholders Justifiably Want a Bump

The ACCC has approved Brookfield/EIG’s proposed acquisition of Origin Energy (ORG AU). The Brookfield/EIG offer is A$5.78 and US$2.19 per share, worth A$8.83 at the last close.
The bidders now face the challenge of convincing shareholders to accept the offer and avoid incurring ticking fees. The scheme booklet will be despatched in the coming weeks.
Several shareholders have justifiably argued that the offer is light. Our SoTP valuation is A$9.46 per share, 7.1% above the implied offer price of A$8.83.

Rakuten Bank IPO Lock-Up – Parent and Company Will Come Out of Lockup

By Sumeet Singh

Rakuten Bank (5838 JP) (RB), the online banking arm of Rakuten Group (4755 JP), raised around US$630m in its Japan IPO. Its IPO linked lockup will expire soon.
RB is the largest internet bank in Japan, by number of accounts. As of Jun 23, it had 14.0m deposit accounts with a total deposit base of JPY9.4tn.
In this note, we will talk about the lock-up dynamics and updates since our last note.

CMB/Euronav: Mandatory Offer

By Jesus Rodriguez Aguilar

CMB and Frontline Ltd (FRO US) smoke the peace pipe: CMB will buy Frontline out of Euronav NV (EURN US) at $18.43/share (25% premium) and agree to Euronav selling 24 VLCCs to FRO.
After an EGM gives the green light, CMB will launch a mandatory $18.43/share cash offer for Euronav. The three-way transaction is fairly priced (1.0x P/NAV) for all players, including the Euronav minorities.
There shouldn’t be any antitrust issues. Spread is 4.02%/7.66% (gross/annualised assuming settlement by 30 April 2024). Recommendation is long and tender (there won’t be any squeeze-out).

Quiddity Leaderboard BSE/SENSEX Dec 23: Bandhan Bank Could Underperform State Bank