Category

Event-Driven

Jul 31
0

Daily Brief Event-Driven: KDDI (9433) – Own Share Tender Offer and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!)
  • Finally, Korea Launches English Search Service for All Disclosures Starting July 31st
  • NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented
  • JSR Corporation (4185 JP): Tender Offer Risk/Reward
  • Merger Arb Mondays (31 Jul) – Eoflow, JSR, Toshiba, Pacific Current, Costa, Estia, Newcrest, Dali
  • Weekly Deals Digest (30 Jul) – L’Occitane, Dali, Eoflow, Toshiba, Pacific Current, Estia
  • OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play
  • STAR50 Index Rebalance Preview: Potential Changes Playing Catchup
  • Dali Foods (3799 HK): 23 August Scheme Meeting. IFA Says Fair
  • EQD | S&P/​ASX200 WEEKLY Make-It-Or-Break-It

KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!)

By Travis Lundy

  • Today, with Q1 earnings, which I found less than great, KDDI Corp (9433 JP) announced a Tender Offer Buyback to repurchase up to 64,102,500 shares for up to ¥250.03175bn.
  • The Tender Offer – at ¥3900/share vs Last at ¥4,271/share (designed for cross-holding unwinds) – goes from 31-July through 28-August. It fills the 83.3% of the buyback programme announced 11-May.
  • Toyota Motor (7203 JP) has announced it would sell ¥250bn of shares into this Tender Offer. This is less interesting than it looks. The whole thing is.

Finally, Korea Launches English Search Service for All Disclosures Starting July 31st

By Sanghyun Park

  • Starting Monday, July 31st, the FSS-operated disclosure website, DART (Data Analysis, Retrieval, and Transfer System), will provide an English search service for all disclosures.
  • This measure will open up possibilities for diverse position strategies that require timeliness and comparability for Korean local stocks, leading to a significant turning point.
  • This calls for a more comprehensive approach in identifying the overall market flow. We should be attentive to potential alterations in the structure of foreign flows.

NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented

By Brian Freitas

  • Using the current index methodology throws up 5 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be BIG.
  • Using the proposed index methodology throws up 11 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be HUGE.
  • The market consultation being put on hold could indicate pushback from index users or the possibility of F&O contracts being introduced on some of the non-F&O index constituents.

JSR Corporation (4185 JP): Tender Offer Risk/Reward

By Arun George

  • JSR Corp (4185 JP)‘s pre-conditional tender offer from JIC is JPY4,350 per share. Since the deal announcement on 26 June, the gross spread has averaged 6.4%.
  • The wide gross spread reflects the risk in satisfying the pre-conditions related to country approvals, particularly in China. JIC, unusually can waive all or part of the conditions precedent.
  • The wild card is geopolitical developments. There are three China approval scenarios. The likely scenario is the deal approval under a normal procedure with a delay to the tender start.

Merger Arb Mondays (31 Jul) – Eoflow, JSR, Toshiba, Pacific Current, Costa, Estia, Newcrest, Dali

By Arun George

Weekly Deals Digest (30 Jul) – L’Occitane, Dali, Eoflow, Toshiba, Pacific Current, Estia

By Arun George

OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play

By Sanghyun Park

  • This is a classic swap arbitrage of shorting the acquirer and using the tendered shares to repay it. However, executing now would be meaningless as the swap ratio isn’t finalized.
  • Nevertheless, we should consider securing a long position in OCI Holdings in advance. The target (45%) is quite substantial, indicating that the practical allocation rate won’t plummet dangerously below 1.
  • Additionally, the likelihood of OCI Holdings’ swap price plummeting to completely nullify the 5.6% spread immediately after its determination appears to be low based on the current context.

STAR50 Index Rebalance Preview: Potential Changes Playing Catchup

By Brian Freitas

  • The review period for the September rebalance ends today. The changes could be announced on 25 August with the implementation taking place after the close on 8 September.
  • The upcoming launch of the STAR100 Index could result in the index committee continuing to use a 6-month minimum listing history resulting in two changes to the index.
  • One way turnover is estimated at 2.3% resulting in a one-way trade of CNY 2,658m. The impact on the deletions will be much larger than that on the inclusions.

Dali Foods (3799 HK): 23 August Scheme Meeting. IFA Says Fair

By David Blennerhassett

  • Back on the 27 June, Dali Foods Group (3799 HK), announced a privatisation Offer by way of a Scheme from its founder/chairman/CEO Xu Shihui.
  • The cancellation price, which has been declared final, was HK$3.75/share, a decent 37.87% premium to undisturbed.
  • The Scheme Doc is now out. The Scheme Meeting is the 23 August. Xu and concert parties control 88.89%, therefore a blocking stake is 1.11% of shares out. 

EQD | S&P/​ASX200 WEEKLY Make-It-Or-Break-It

By Nico Rosti

  • The S&P/ASX 200 INDEX  has been stuck in the 7000-7400 range for 16 weeks until last week when it briefly pierced the upper range (but closed the week at 7403).
  • This WEEKLY trend pattern can lead to a multi-week rally when it rises for => + 3 weeks in a row (it’s a pattern that can include momentum trades).
  • The index is at a make-it-or-break-it junction: either it starts to trend higher towards the previous peak (7567, January 2023), or it will pullback into the 7000-7400 range.

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Jul 30
0

Daily Brief Event-Driven: KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190) and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190)
  • Index Rebalance & ETF Flow Recap: LQ45/IDX30, FXI, New Deal, KOSPI, KQ150, LG Energy, IN Float, TTMT
  • Concordia/Rothschild: Start of Offer Period
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Talon Energy, Pacific Current, Toshiba, Eoflow, 111 Inc
  • Last Week in Event SPACE: NTT, Delta Electronics, Fortescue Metals, Nomura Real Estate
  • Dali Foods (3799 HK): Scheme Vote on 23 August
  • OCI Holdings Announces a Tender Offer to Buy 45% Stake in OCI Co

KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190)

By Brian Freitas

Index Rebalance & ETF Flow Recap: LQ45/IDX30, FXI, New Deal, KOSPI, KQ150, LG Energy, IN Float, TTMT

By Brian Freitas

  • The changes to the LQ45/IDX30 were announced last week and will be implemented Monday. The PSE also announced that there would be no changes for the PCOMP INDEX in August.
  • There are a bunch of review cutoffs on Monday, most notably for the Nikkei 225 (NKY INDEX), STAR50 INDEX, the NIFTY family of indices and the KRX New Deal indices.
  • There were inflows to China focused ETFs and outflows from Taiwan and Korea focused ETFs during the week.

Concordia/Rothschild: Start of Offer Period

By Jesus Rodriguez Aguilar

  • The simplified tender offer for Rothschild & Co (ROTH FP) opened on 24 July and will last until 8 September (inclusive). The ex-dividend offer price is €38.60.
  • The offer represents 7.22x NTM Fwd P/E (ex-dividend), rather low for the top European M&A player and a high quality business. Merchant Banking division could have a lot of upside.
  • The enlarged family concert has bought shares in the market and has now c.66%. I anticipate the offer to go according to plan. Gross spread is nil.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Talon Energy, Pacific Current, Toshiba, Eoflow, 111 Inc

By David Blennerhassett

Last Week in Event SPACE: NTT, Delta Electronics, Fortescue Metals, Nomura Real Estate

By David Blennerhassett

  • NTT (9432 JP) will likely buy back more shares than previously expected as the government sells shares down. Buy dips vs peers KDDI and Softbank Corp. This is a long-term tilt.
  • There are some doubts over the fate of Delta Electronics Thai (DELTA TB)‘s SET50 membership, at present, but it should escape deletion in December 2023. 
  • Don’t punt Fortescue Metals (FMG AU) on the off-chance of a change of control in the wake pf the Forrest split. If anything, there might be a leakage of shares.

Dali Foods (3799 HK): Scheme Vote on 23 August

By Arun George

  • Dali Foods Group (3799 HK)‘s scheme document is out with the court meeting scheduled for 23 August. The IFA considers the HK$3.75 per share offer to be fair and reasonable. 
  • Key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake. 
  • Sector sentiment has modestly weakened. This looks done. At the last close and for the 8 September payment, the gross and annualised spread is 3.6% and 34.8%, respectively.

OCI Holdings Announces a Tender Offer to Buy 45% Stake in OCI Co

By Douglas Kim

  • On 28 July, OCI Holdings (010060 KS) announced that it plans to conduct a tender offer to purchase up to 45% stake in OCI Co (456040 KS). 
  • The tender offer price of OCI Co is 139,000 won. The method of this tender offer is to issue new common shares of OCI Holdings.
  • In the short term (one month), we expect OCI Co’s shares to outperform OCI Holdings shares. This deal is structured to mainly benefit the OCI Group’s insiders.

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Jul 28
0

Daily Brief Event-Driven: Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed, But Toshiba Fatigue Is Strong
  • SK Telecom – Major Share Buyback & Cancellation
  • Nomura Real Estate To Buy Nomura RE Master Fund Units
  • KRX Autos Sept Rebalancing: Less Known, Still Juicy Trading Event with 4 Constituent Changes
  • EOFLOW/Medtronic Tender: Assessing the Wide Spread
  • A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback
  • GQG Mulls Offer As Pacific Current Balks At Regal’s NBIO
  • Quiddity Leaderboard CSI 300/​500 Dec 22: Massive Baskets, US$2.5bn One-Way
  • Bain Capital/​SoftwareOne: Bargaining for a Better Offer
  • Alpha Auto Group/​​Lookers: Sharp Turn

Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed, But Toshiba Fatigue Is Strong

By Travis Lundy

  • It has been four months since JIP officially announced their intention to launch a Tender Offer for Toshiba Corp (6502 JP) by end-July. 7 weeks since Toshiba’s Board supported it.
  • There’s been no material public griping. Peers are sharply higher. There have been news stories suggesting a Western Digital/Kioxia deal is close. That’s now extended. The Toshiba deal possibly too. 
  • But huge outperformance by peers, and possible clarity from Kioxia deal terms are unlikely to move the Toshiba Board to demand more. 

SK Telecom – Major Share Buyback & Cancellation

By Douglas Kim

  • On 27 July, SK Telecom announced a sizeable share buyback worth 300 billion won (including shares cancellation of 200 billion won) and quarterly dividend of 181 billion won. 
  • SK Telecom will pay a quarterly DPS of 830 won, which represents 1.8% of its current price of 45,900 won. 
  • SK Telecom is trying to boost its share price which has been negatively impacted by the regulators’ pressure to cut telecom tariff rates and also increase competition. 

Nomura Real Estate To Buy Nomura RE Master Fund Units

By Travis Lundy

KRX Autos Sept Rebalancing: Less Known, Still Juicy Trading Event with 4 Constituent Changes

By Sanghyun Park

  • At the current stage, with the three-month review period almost complete, there will likely be two additions and two deletions: 
  • Additions: KG Mobility (003620 KS) & Nexen Tire Corp (002350 KS) Deletions: Sebang Global Battery (004490 KS) & Kumho HT Inc (214330 KS)
  • In the past few years, KRX Autos has shown a significant price impact for constituent changes on the rebalancing trading day. This pattern will likely repeat in the upcoming rebalancing.

EOFLOW/Medtronic Tender: Assessing the Wide Spread

By Arun George

  • Medtronic Plc (MDT US) aims to acquire Eoflow (294090 KS) through share purchase agreements (SPA), a share subscription agreement (SSA) and a public tender offer at KRW30,000.
  • Since the deal announcement on 26 May, the spread has widened, reflecting deal risk around patent litigation risk, regulatory approvals and the minimum acceptance condition.
  • Our assessment of these risks suggests a low probability of a deal break. At the last close, the gross spread is an attractive 8.5%. 

A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback

By Sanghyun Park

  • The chances of SKT’s inclusion in the August MSCI Review seem slim. SKT narrowly missed meeting the 15% threshold on both Day 1 and Day 2 during this review.
  • SK Telecom’s buyback completion can be accelerated to align with the MSCI November Review period, just like the previous case of KT Corp back in April.
  • The estimated size of passive funds flowing into SKT is approximately ₩160 billion, which is expected to be around 5.5 times the average daily trading volume (ADTV).

GQG Mulls Offer As Pacific Current Balks At Regal’s NBIO

By David Blennerhassett

  • Yesterday (26 July), asset manager Pacific Current (PAC AU)  announced a cash/scrip NBIO from Regal Partners (RPL AU).
  • Under Regal’s proposal, Pacific Current shareholders would receive an implied $10.77/share. Pacific Current considers the current share price doesn’t reflect the underlying value of its portfolio and business.
  • Now GQG Partners (GQG AU) has announced it intends to submit its own NBIO. No price was mentioned.

Quiddity Leaderboard CSI 300/​500 Dec 22: Massive Baskets, US$2.5bn One-Way

By Janaghan Jeyakumar, CFA

  • 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.
  • I currently expect 13 ADDs/DELs for CSI 300 and 50 ADDs/DELs for CSI 500. 

Bain Capital/​SoftwareOne: Bargaining for a Better Offer

By Jesus Rodriguez Aguilar

  • The board of SoftwareONE Holding (SWON SW) rejected on 24 July a revised CHF 19.50-20.50 offer from Bain Capital and said it began a strategic review to seek the best value.
  • CHF 19.5 represents a 40% premium, Gross spread to the low point of the range is 4.2%. 0x EV/NTM EBITDA and 19.5 Fwd P/E.
  • This could trigger upwards revisions and would justify the Board asking for a higher offer. I’d hold on to the shares as Bain Capital could increase the offer a bit.

Alpha Auto Group/​​Lookers: Sharp Turn

By Jesus Rodriguez Aguilar

  • The deal looked dead in the water during a week until, on 27 July, Global Auto Holdings raised its offer for Lookers PLC (LOOK LN) by 8%, to 130p/share (46.6% premium).
  • The increased offer will now be carried out via takeover, and represents an implied EV of £968 million, 6.1x EV/Fwd NTM EBITDA and 9x Fwd P/E (on latest Consensus figures).
  • Considering the number of failed deals in the sector, I believe the offer looks very decent and the deal should now close. Spread is 5.2%/23.7% (gross /annualised). Long. 

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Jul 27
0

Daily Brief Event-Driven: July TOPIX FFW Rebal – Update With 2 Days To Go on $3bn a Side and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • July TOPIX FFW Rebal – Update With 2 Days To Go on $3bn a Side
  • Tata Motors (TTMT IN) – Goodbye to the DVR Arb
  • Quiddity HSCEI Sep 23 Flow Expectations Update: US$367mn One-Way, Beigene Vs Peers Interesting
  • Quiddity HSTECH Sep 23 Flow Expectations Update: Last Trade Sucessful; Some New Trade Ideas
  • Pacific Current Group (PAC AU): Regal Partners’ Attractive Indicative Offer

July TOPIX FFW Rebal – Update With 2 Days To Go on $3bn a Side

By Travis Lundy

  • In the two weeks since the announcement, Large ADDs (>2d ADV, >$5mm) have outperformed Large DELs by 1.3%. Smaller ADDs vs DELs (>2d, >$2<$5mm) have outperformed by 1.3%.
  • Using only >$20mm >2d DELs vs Top 5 $amt >2d ADDs, that’s a bit better than 1%. And the really obvious large ones? Not so obvious.
  • There is still a large reverse funding trade, with some large sells. 

Tata Motors (TTMT IN) – Goodbye to the DVR Arb

By Brian Freitas

Quiddity HSCEI Sep 23 Flow Expectations Update: US$367mn One-Way, Beigene Vs Peers Interesting

By Janaghan Jeyakumar, CFA

  • In three more weeks, the index changes and the indicative capping changes for the September 2023 rebalance will be officially announced. 
  • We first looked at the potential HSCEI index changes and the resultant capping flows for September 2023 in Quiddity HSCEI Sep 23 Flow Expectations: Two Changes Likely, US$276mn One-Way 
  • In this insight, we take a look at Quiddity’s updated flow expectations which account for the changes in prices in the last ~1.5 months.

Quiddity HSTECH Sep 23 Flow Expectations Update: Last Trade Sucessful; Some New Trade Ideas

By Janaghan Jeyakumar, CFA

Pacific Current Group (PAC AU): Regal Partners’ Attractive Indicative Offer

By Arun George

  • Pacific Current (PAC AU) has disclosed a non-binding indicative proposal from Regal Partners (RPL AU) at A$7.50 cash per share and 2.2 GQG Partners (GQG AU) shares per PAC share.
  • The implied offer price of A$11.12 per share based on GQG’s last close price is a juicy 42.6% premium to the undisturbed price of A$7.80 per share (26 July).
  • The offer is attractive compared to historical ranges and peer multiples. Expect the Board to grant due diligence access to facilitate a binding proposal.

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Jul 26
0

Daily Brief Event-Driven: L’Occitane (973 HK): Controlling Shareholder Mulling a Bid? and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • L’Occitane (973 HK): Controlling Shareholder Mulling a Bid?
  • NTT (9432) – LDP Consideration of Full Sale Is Not Necessarily Overhang
  • KRX New Deal Index Rebalance Preview: Review Period Nearly Complete
  • India – Potential Float Changes & Impact
  • An Update on Medtronic’s Tender Offer of Eoflow
  • ​​​LQ45 Index Rebalance: Two Changes in a Few Days
  • KRX Latest Press Release: CFD Inspection Results & Immediate Impacts to Monitor
  • Quiddity Leaderboard SET50 Dec 23: DELTA Deletion Fears Unrealistic
  • Strike Energy Yanks Its NBIO For Talon
  • Apollo/Applus: Blocking Minorities

L’Occitane (973 HK): Controlling Shareholder Mulling a Bid?

By Arun George

  • L’Occitane (973 HK) is drawing takeover interest from Reinold Geiger, the Chairman and the largest shareholder, according to Bloomberg. Mr Geiger has been exploring financing options for the potential deal.
  • The presence of a significant disinterested shareholder, Acatis KVG, necessitates an attractive takeover premium. Acatis KVG trimmed its stake in July 2021 at HK$30.01 per share.
  • L’Occitane released a solid 1QFY2024 update today with constant currency growth of 24.5% YoY. Irrespective of a bid materialising, the valuation is undemanding compared to peer multiples. 

NTT (9432) – LDP Consideration of Full Sale Is Not Necessarily Overhang

By Travis Lundy

  • Six weeks ago, LDP Policy Research Council chairman KAGIUDA led a discussion about full NTT privatisation to fund defence. Today he said serious deliberations begin in August. Shares fell today.
  • The LDP wants non-tax resources to increase defence/social spending. Selling would require a change in NTT Law, but the argument is that communications have changed/internationalised.
  • As discussed in NTT (9432 JP) – Would the Govt Sell All Its Shares? Why? How? How Long? Overhang?, there are questions on overhang. BUT… presumably there are mitigants. 

KRX New Deal Index Rebalance Preview: Review Period Nearly Complete

By Brian Freitas

  • The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
  • There is one change currently for each of the Secondary Battery, Bio and Game indices. Then there are a couple of changes for the Internet and BBIG indices.
  • There are four stocks that will have over 2 days of ADV to trade from passive trackers and these stocks could move around announcement of the changes.

India – Potential Float Changes & Impact

By Brian Freitas

  • Over the last few weeks, companies in India have been disclosing their shareholding pattern as of end-June. There are a few companies with significant float changes from end-March and/or end-December.
  • 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 see 6 stocks where there could be passive inflows and 2 stocks that could have passive outflows – but there are caveats.

An Update on Medtronic’s Tender Offer of Eoflow

By Douglas Kim

  • In this insight, we provide an update of Medtronic’s tender offer of Eoflow. 
  • The foreign ownership of Eoflow has surged in the past two months from 6.5% on 25 May to 33.2% as of 24 July. 
  • We continue to believe that there is 95%+ probability of this M&A getting completed at the tender offer price of 30,000 won and Eoflow eventually becoming delisted in 2H 2023. 

​​​LQ45 Index Rebalance: Two Changes in a Few Days

By Brian Freitas

KRX Latest Press Release: CFD Inspection Results & Immediate Impacts to Monitor

By Sanghyun Park

  • KRX stated in this press release that they have identified the suspected stocks involved in illegal trading and have reported them to the financial authorities (Korea FSC and Korea FSS).
  • The primary concern in the short term seems to revolve around whether the battery stocks are among the ones suspected of illegal trading, as reported to the financial authorities.
  • We must remain vigilant and ready for the potential recurrence of CFD-related price plunges, as seen in the recent two instances, affecting specific stocks in the short term.

Quiddity Leaderboard SET50 Dec 23: DELTA Deletion Fears Unrealistic

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the potential ADDs/DELs for Thailand’s SET50 index rebalance in December 2023.
  • Delta Electronics Thai (DELTA TB) – one of the largest SET 50 members – has been in the Market Surveillance Measure list a couple of times already this year.
  • Although this creates some doubts over the fate of DELTA’s SET50 membership, at present, I believe DELTA will escape deletion in December 2023. 

Strike Energy Yanks Its NBIO For Talon

By David Blennerhassett

  • O&G junior Talon Energy (TPD AU) announced it had received a non-binding Offer from Strike Energy (STX AU). 
  • The all-scrip bid – by way of a Scheme – entailed an implied A$0.20/share in Strike shares plus Talon shareholders retaining their holding in Talon’s Mongolia gas project.
  • After Talon said it intended to undertake a process of evaluation of the Proposal before offering due diligence, Strike promptly withdrew its bid.

Apollo/Applus: Blocking Minorities

By Jesus Rodriguez Aguilar

  • The spread has been in positive territory since the announcement. Apollo only bid the minimum requested by the Board. Investors hope for a counteroffer or Apollo sweetening its offer. 
  • Exceeding the 75% threshold is key for Apollo to be able to quickly and effectively carry out the delisting of Applus+, the objective stated in the  offer announcement. 
  • Risk arbitrageurs holding now over 25%, may give that gentle push, otherwise delisting will be in jeopardy. A sweetening/counteroffer in the range €10-10.5/share seems very likely.

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Jul 25
0

Daily Brief Event-Driven: Alpha Generation Through Share Buybacks in Korea: June & July 2023 and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Alpha Generation Through Share Buybacks in Korea: June & July 2023
  • KOSPI Size Indices – Plenty of Overlap With Other Index Flows
  • Quiddity Leaderboard NIFTY Sep 23: 5 ADDs/DELs for NIFTY Next 50 Unless the Methodology Changes
  • FXI Rebalance Preview: One Potential Change in September
  • GS AM Consortium/ Kahoot!: Agreed Fair Offer

Alpha Generation Through Share Buybacks in Korea: June & July 2023

By Douglas Kim

  • In this insight, we discuss the alpha generation through companies that announced share buybacks in Korea in June and July 2023.
  • We provide a list of 38 stocks in the Korean stock market that have announced share buyback programs in June and July 2023.
  • The top four market cap stocks that have announced share repurchases include Celltrion Inc, Celltrion Healthcare, Hyundai Elevator, and SFA.

KOSPI Size Indices – Plenty of Overlap With Other Index Flows

By Brian Freitas

  • The review period for the September rebalance of the KOSPI Size Indices started 1 June and will end 31 August. The changes will be implemented at the close 7 September.
  • We see 8 migrations from MidCap to LargeCap, 7 migrations from LargeCap to MidCap, 6 new adds to MidCap, and 16 migrations from SmallCap to MidCap.
  • Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.

Quiddity Leaderboard NIFTY Sep 23: 5 ADDs/DELs for NIFTY Next 50 Unless the Methodology Changes

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50 and NIFTY 100 indices in the September 2023 rebalance.
  • The NIFTY Next 50 methodology was supposed to change in June 2023 but this has been kept on hold for now. This change could still take place before September 2023.
  • In this insight, we take a look at our expectations for index changes under both the existing methodology and the proposed new methodology.

FXI Rebalance Preview: One Potential Change in September

By Brian Freitas

GS AM Consortium/ Kahoot!: Agreed Fair Offer

By Jesus Rodriguez Aguilar

  • Kahoot! ASA (KAHOOT NO) saw better times on the stock market during the pandemic. To revive fortunes, GS AM has enlisted top shareholders and offers NOK 35/share “best and final” price.
  • This represents 29.1x EV/Fwd NTM EBITDA, 3.3% FCF yield. I believe the offer price is fair. Interloper risk seems low: a competing bid should come above NOK 38.5, surely overpaying.
  • Spread is 0.74%/2.15% (gross/annualised, assuming settlement by 30 November). With better opportunities elsewhere, I would wait for the share price to come under NOK 34.5 to open a position.

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Jul 24
0

Daily Brief Event-Driven: LG Energy Solution (373220 KS) – Potential Float Increase Coming Up and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • LG Energy Solution (373220 KS) – Potential Float Increase Coming Up
  • 111 (YI US): The Privatisation Offer Gets a Reboot
  • Merger Arb Mondays (24 Jul) – JSR, 111, Estia, Newcrest, InvoCare, Origin, Golden Eagle, Dali Foods
  • Fortescue: Twiggy’s Share Separation
  • EQD | KOSPI 200 Index WEEKLY: Rising After a Brief Pullback
  • Inflexion/​DWF: Deal Announcement
  • EQD | NIFTY Index WEEKLY: Topping (In The) Tails

LG Energy Solution (373220 KS) – Potential Float Increase Coming Up

By Brian Freitas

  • Selling from the ESOP program in the first quarter could result in an increase in LG Energy Solution (373220 KS)‘s float in local and global indices.
  • The largest buying from passive trackers could take place next month with over 3% of the real float needing to be bought.
  • Short interest has increased in the last month and short covering could take the stock higher ahead of the passive buying.

111 (YI US): The Privatisation Offer Gets a Reboot

By Arun George

  • 111 Inc (YI US), China’s largest virtual pharmacy network, amended an SC 13D filing on 13 July, which belatedly updated the consortium’s privatisation offer of US$3.66 per ADS. 
  • The consortium has been revamped such that the lead investors (Dr Gang Yu, Dr Junling Liu and Shanghai Guosheng Capital Management) are joined with 13 additional investors.
  • The development facilitates the signing of a definite agreement. The consortium represents 95.27% of the voting power, which ensures a successful vote. At last close, the gross spread is 9.6%.

Merger Arb Mondays (24 Jul) – JSR, 111, Estia, Newcrest, InvoCare, Origin, Golden Eagle, Dali Foods

By Arun George

Fortescue: Twiggy’s Share Separation

By David Blennerhassett

  • Prior to recent developments, Andrew Forrest held a 36.25% stake in Fortescue Metals (FMG AU).
  • An ASIC shareholder disclosure into the giant iron-ore miner earlier this year fuelled speculation, culminating in an ASX notice Andrew was separating from his wife after 31 years of marriage. 
  • A private statement assures there will be no impact on the control of FMG. But that won’t put a stop to the rumour mill.

EQD | KOSPI 200 Index WEEKLY: Rising After a Brief Pullback

By Nico Rosti

  • The KOSPI 200 (KOSPI2 INDEX EQUITY) last week closed the week down (CC=-1) after a strong rise the previous week. Could be getting ready to rise higher.
  • The index last week tested supports in the Market Reversal Matrix’s Q2/Median support area (around 335).
  • Valid support levels for the coming week (if CC=-2) are between 333 (Q2) and 324 (Q3).

Inflexion/​DWF: Deal Announcement

By Jesus Rodriguez Aguilar

  • There were no surprises and Inflexion launched the offer for DWF Group (DWF LN) well ahead of the 7 August PUSU deadline. DWF shares increased by c. 15%.
  • The final proposal maintains what was announced: 97p in cash plus a 3p dividend,8.0x EV/Fwd NTM EBIT and 8.2x Fwd P/E, and an 18% discount to the IPO price.
  • The closing share price pre-first announcement was 56.5p, taking it as break, the market is pricing a 94% chance to complete the deal. Spread is 2.6%/6.2% (gross/annualised). Long.

EQD | NIFTY Index WEEKLY: Topping (In The) Tails

By Nico Rosti

  • The NIFTY Index has been in a strong rally since early April 2023, returning almost +17% as of last Friday’s Close. The MRM tool shows the index is OVERBOUGHT WEEKLY .
  • The NIFTY Index has reached a “Tails” area of the current pattern: forecasts in these price areas are less reliable, but the MRM tool indicates the index is topping.
  • SHORT trades can be implemented at prices > Last Close (19745). Higher prices are possible, it could take +1/+2 weeks for the index to complete its topping process.

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Jul 23
0

Daily Brief Event-Driven: SBI Shinsei Bank (8303) Calls Its EGM and Appraisal Rights Seekers Prepare for Battle and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • SBI Shinsei Bank (8303) Calls Its EGM and Appraisal Rights Seekers Prepare for Battle
  • Last Week in Event SPACE: Takisawa Machine Tools, Kesei Electric/Oriental, Shenzhen Int’l/Way, HMM
  • Index Rebalance & ETF Flow Recap: ASX, SK Telecom, Yuanta ETFs
  • EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Where Is the Stimulus

SBI Shinsei Bank (8303) Calls Its EGM and Appraisal Rights Seekers Prepare for Battle

By Travis Lundy

  • The SBI Holdings Tender Offer for SBI Shinsei Bank (8303 JP) was completed about four weeks ago, and in something of a surprise, only 3.7% of 26.98% minority holdings tendered.
  • The stock traded above terms every day during the Tender Offer Period. People accumulated in order to pursue their appraisal rights later. That is big. 
  • This week, SBI Shinsei announced the schedule of dates relating to the squeezeout EGM. The record date was early. The reverse stock split announced is as expected, possibly game-able.

Last Week in Event SPACE: Takisawa Machine Tools, Kesei Electric/Oriental, Shenzhen Int’l/Way, HMM

By David Blennerhassett

Index Rebalance & ETF Flow Recap: ASX, SK Telecom, Yuanta ETFs

By Brian Freitas

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Where Is the Stimulus

By Simon Harris

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

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Jul 22
0

Daily Brief Event-Driven: Privatization of HMM: Enormous Shares Dilution Risk and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Privatization of HMM: Enormous Shares Dilution Risk
  • Alpha Auto Group/​Lookers: From Done Deal to Uncertain Situation

Privatization of HMM: Enormous Shares Dilution Risk

By Douglas Kim

  • The Korean government has initiated the M&A privatization of HMM, the largest container shipping company in Korea. 
  • We are Negative on the shares of HMM Co., Ltd. (011200 KS) in the next 6-12 months. We expect additional 20% to 30%+ downside risk on HMM in this period.
  • Although HMM has a strong balance sheet, more investors are likely to emphasize on the negatives including excessive share dilution risk and worsening environment for the global shipping industry.

Alpha Auto Group/​Lookers: From Done Deal to Uncertain Situation

By Jesus Rodriguez Aguilar

  • Lookers disclosed that Cinch (largest shareholder with 19.52% stake) plans to vote against the scheme. The shares have dropped to halfway between the pre-offer price and Alpha Auto’s offer.
  • The shares are pricing a 45% probability of deal completion. This sector has a track record of failed deals, so it is understandable that investors are spooked.
  • Top Lookers shareholders are keen on selling and an offer from Lithia could well happen. At around 103p I’d be long, as I consider the risk reward is balanced. 

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Jul 21
0

Daily Brief Event-Driven: Important Rule Changes in Block Deals Pre-Disclosure in Korea: Analyzing Trading Dynamics and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Important Rule Changes in Block Deals Pre-Disclosure in Korea: Analyzing Trading Dynamics
  • Lasertec (6920) – The State of Things May Be Different Than You Think
  • Quiddity Primer for CSI 300/500 Index Rebalance Events

Important Rule Changes in Block Deals Pre-Disclosure in Korea: Analyzing Trading Dynamics

By Sanghyun Park

  • Insiders holding more than 10% of SO must disclose block deals 30 days in advance if they plan to sell more than 1% of SO or an amount exceeding ₩5B.
  • The trading window and pricing range for short positions, based on the assumption of deal-taking, will likely vary significantly as the timing of price reflection will see a drastic change.
  • There is an increasing likelihood that major shareholders will accelerate their planned block deals and bring them to the market in abundance before October.

Lasertec (6920) – The State of Things May Be Different Than You Think

By Travis Lundy

  • Lasertec (6920) is a shoo-in for Nikkei 225 inclusion in September according to the quantitative analysis. The amount to buy is a small multiple of ADV, making the inclusion “unimpressive.”
  • It is probably worth looking at the details of ownership, of volume, and of relationship to other stocks in the same general sector.
  • It is also worth thinking about flow channels (stock up or down changes flows) and forward fundamental calculations.

Quiddity Primer for CSI 300/500 Index Rebalance Events

By Janaghan Jeyakumar, CFA

  • 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.
  • During the periodic index rebalance events, a large number of stocks move into or out of these indices giving rise to significant flow events and attractive trading opportunities.
  • In this insight, we take a brief look at the index selection methodology and the historical price and volume performance of the CSI 300/500 index rebalance baskets.

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