Event-Driven

At the AGM yesterday, China Merchants China Direct Investments (133 HK)‘s director Elizabeth Kan was re-appointed, but by a wafer-thin margin: 29.97% of shares out FOR, and 29.44% AGAINST.
Stripping out Victor Chu’s stake (~2%?) and China Merchant’s (27.6%), or collectively ~29.6% of shares out, it’s fair to say the remainder of the shareholder register wants her out.
CMCDI is currently trading at a 55% discount to the latest NAV (as at 31st May 2024) of HK$30.42/share. Argyle continues to add to its position.

CrowdStrike Joins S&P 500

By Jesus Rodriguez Aguilar

On June 24, Crowdstrike Holdings (CRWD US) will officially join the S&P 500, which follows strong financial results and guidance. Investors anticipated this inclusion, driven by improved profitability and operational efficiency.
The volume traded has so far been on average 2x the 3-month daily average prior to the news. The enduring effect will be on liquidity (hedging basket for index exposure).
CrowdStrike’s inclusion in the S&P 500 index increases the representation of pure cybersecurity stocks. Median IBES consensus PT is $400 (7.5% upside).

EQD | The KOSPI 200 Is Ready to Pullback (Again)

By Nico Rosti

After 3 weeks up in a row the KOSPI 200 is ripe for a pullback.
The reversal is probably going to begin this coming week.
If the index goes higher, look at 391 resistance targets to initiate SHORT trades or to cover your LONGs.

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Jun 21

Daily Brief Event-Driven: TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already
Shin-Etsu Chem TOB for Rest of Mimasu Semi (8155) – Far Too Cheap, But No Squeaky Wheel No Grease
Tatsuta Electric (5809 JP): Eneos Refuses to Bump, Board Capitulates
ENEOS Launches Tatsuta Elec (5809) “Minority” Takeout at Same Price as 18mos Ago
Digging into Chosun Ilbo’s Report on SK Group’s SK Innovation & SK E&S Merger Plans
MMA Offshore (MRM AU): Disappointing Final Offer Poses a Vote Risk
Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close
Mimasu Semiconductor (8155 JP): Shin-Etsu (4063 JP)’s Tender Offer Launches
Barito Renewables Energy (BREN IJ): Back to Normal Trading & Index Implications
PC Partners (1263 HK) Muses SGX Listing & HKEx Withdrawal

TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already

JPX has commenced a market consultation on changes to the TSE Tokyo Price Index TOPIX (TPX INDEX) including expansion of the universe and periodic stock selection.
Based on current market cap/ liquidity, there could be 38 adds and 447 deletions for the TSE Tokyo Price Index TOPIX, though the changes only start in October 2026.
The deletions will be phased out of the index in 8 steps that will end in July 2028 and most of the stocks will move to the TOPIX Next-tier.

Shin-Etsu Chem TOB for Rest of Mimasu Semi (8155) – Far Too Cheap, But No Squeaky Wheel No Grease

Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), will launch the TOB to buy out Mimasu minority holders, as pre-announced 2mos ago.
Not surprising. They bought in 19yrs ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. It’s too cheap but in 18yrs, I recall zero activism here.
Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 53%. Then they need a bit to get them to 67% but it should be straightforward.

Tatsuta Electric (5809 JP): Eneos Refuses to Bump, Board Capitulates

18 months after announcing the offer, ENEOS Holdings (5020 JP) launched the Tatsuta Electric Wire & Cable (5809 JP) tender offer at unchanged JPY720, 4.9% below the last close price.
The Board requested a bump, but Eneos refused due to Tatsuta’s missed targets, no competing offer and the supportive updated IFA valuation
The lack of a bump, no vocal opposition, deal fatigue, the Board’s unexpected recommendation, weak earnings and 73.9% takeover premium will help acceptance.

ENEOS Launches Tatsuta Elec (5809) “Minority” Takeout at Same Price as 18mos Ago

ENEOS announced its deal for Tatsuta Electric Wire & Cable (5809 JP) 18mos ago. China approval took a while. Now they have launched.
The TOPIX Non-Ferrous Metals sector has returned 60%. TOPIX 50%. There is a new TSE Sheriff in town asking for PBR 1.0x. BVPS is up. Presumably, forward CF is up.
But the TOB Price is unchanged. That is disappointing. One reason why a higher price was rejected was that no other buyer approached to take over the company. 🤷🏻‍♂️

Digging into Chosun Ilbo’s Report on SK Group’s SK Innovation & SK E&S Merger Plans

SK Group plans to merge SK Innovation and 90%-owned SK E&S by month-end. Chosun Ilbo’s report solidifies market confidence due to its credibility and likely intentional leak by SK Group.
Initially considered but deemed lower priority than SK IE Technology sale; SK Group opts for this alternative due to challenging market conditions for SKITE sale.
SK Innovation and SKIET rise with hopes of resolving liquidity issues and avoiding sacrifice. SK Inc is negatively impacted by concerns over valuation double counting from this merger.

MMA Offshore (MRM AU): Disappointing Final Offer Poses a Vote Risk

Cyan Renewables has bumped its Mma Offshore (MRM AU) offer to A$2.70 per share, a 3.8% premium to the previous A$2.60 offer.
The bump is derisory in the context of recent earnings upgrades. Since the binding proposal, MMA has upgraded its FY24 EBITDA and EBIT guidance by 9.8% and 15.5%, respectively.
The AFR reported that around 30% of the register opposed the previous offer. A cursory 3.8% bump is unlikely to sway most of these dissenters to change their views.

Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close

The Sep 2024 Nikkei 225 Review base date is six weeks away. One can no extrapolate results quite accurately. It still gives us one ADD, one DELETE, and capping fun.
Recently, Yanai-san sold more Fast Retailing (9983 JP). More active holders own more stock (which may mean less interest to buy later), and only 1% to go to avoid capping.
There should be one DELETE, one ADD. There is a low-probability Dark Horse ADD but I expect Kokusai Electric (6525) to be added in March 2025.

Mimasu Semiconductor (8155 JP): Shin-Etsu (4063 JP)’s Tender Offer Launches

Mimasu Semiconductor Industry (8155 JP) notes that the pre-condition for Shin Etsu Chemical (4063 JP)’s JPY3,700 tender offer has been satisfied. The tender runs from 21 June to 5 August.
The share price has traded at or above the offer on 15 out of 38 trading days, partly due to expectations of a counteroffer.
While the offer is below the midpoint of the IFA DCF valuation range, it represents an all-time high. The lack of activists or competing offers suggests a done deal.

Barito Renewables Energy (BREN IJ): Back to Normal Trading & Index Implications

Barito Renewables Energy (BREN IJ) listed on the IDX in October 2023 and inclusion in global indices was expected in June and August.
The IDX threw a spanner in the works by placing Barito Renewables Energy (BREN IJ) onto its Watchlist under criteria 10. That resulted in cancellation of index inclusion in June.
Barito Renewables Energy (BREN IJ) will come off the Watchlist today and that could see a renewed move higher in the stock over the next few weeks.

PC Partners (1263 HK) Muses SGX Listing & HKEx Withdrawal

On the 18th June, personal computer (PC) parts and accessories play PC Partner (1263 HK) announced a profit alert for 1H24.
That’s positive. What is also interesting is that the board is considering an SGX listing, by way of introduction, and applying for the withdrawal of the HKEx listing.
Precedents are thin on the ground. And for good reason. The process is not straightforward.

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Jun 20

Daily Brief Event-Driven: JPX Proposes BIG Changes To TOPIX Rules and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JPX Proposes BIG Changes To TOPIX Rules, Affects IPOs More Than Market
Guzman Y Gomez IPO: Listing & Index Inclusion Timeline
Hyundai Motor’s Special Shareholder Return Plan Likely Unveiled in August IR Event
Capitol Health (CAJ AU): All-Scrip Non-Binding Merger with Integral Diagnostics
Another Major Win for Eoflow [U.S. Federal Appeals Court Issues a Decision]
Mizuho Cross-Shareholding – US$11bn of Cross-Shareholding, with at Least US$2bn to Sell over FY24-26
MMA Offshore (MRM AU): Cyan Lifts Offer

JPX Proposes BIG Changes To TOPIX Rules, Affects IPOs More Than Market

In 2021 the JPX established new Listing Rules, and in April 2022 introduced new market segments (Prime/Standard/Growth) to much fanfare. Today, the TSE basically said those changes were meaningless.
Today, the TSE announced proposed new rules for TOPIX constituent selection. There is a 2-month consultation period, then rules come out end-Sep 2024. Expect few changes from the Proposal.
NextGen TOPIX will be created October 2026. 3-4 dozen ADDs, 500-600 DELETEs to create an index of 1,100-1,200 names. Some obvious large impacts 2+yrs from now, but this changes IPOs.

Guzman Y Gomez IPO: Listing & Index Inclusion Timeline

Guzman Y Gomez (0817833D AU) has raised A$335.1m in a primary + secondary offering, valuing the company at A$2.23bn. The stock starts trading on the ASX Ltd (ASX AU) today.
Just over 54% of the shares are escrowed which means there is a lot of stock that will be available for sale on listing day.
Guzman Y Gomez (0817833D AU) could be added to the S&P/ASX 300 Index in September and there could be global index inclusions in November and December.

Hyundai Motor’s Special Shareholder Return Plan Likely Unveiled in August IR Event

Hyundai’s IR team appears to have communicated that a new shareholder return policy would be unveiled at the rescheduled CEO Investor Day in August.
Hyundai aims to boost shareholder returns above 30% by canceling ₩800B to ₩1T in shares annually. The new dividend strategy won’t debut in August; last year’s three-year plan stands.
Equal cancellation ratios apply to common and three types of preferred shares. August’s timing, with ISA tax reforms potentially favoring preferred shares, may enhance prefs’ price impact relative to ords.

Capitol Health (CAJ AU): All-Scrip Non-Binding Merger with Integral Diagnostics

On 17 June, Capitol Health (CAJ AU) disclosed a non-binding merger proposal from Integral Diagnostics (IDX AU) at 0.12849 Integral shares per Capitol share.
Integral has been granted a four-week exclusivity period that ends on 15 July. The transaction will require approval from the ACCC and Capitol shareholders.
The offer is attractive compared to historical exchange ratios, trading ranges and peer multiples. At the last close, the gross spread was 11.7%.

Another Major Win for Eoflow [U.S. Federal Appeals Court Issues a Decision]

On 19 June, Eoflow announced that the U.S. Federal Appeals Court issued a decision to overturn the provisional injunction.
In other words, the U.S. federal court ordered the first trial’s preliminary injunction banning overseas sales of Eoflow to be overturned.
A jury trial is set at end of November 2024. Depending on the ruling, either side may appeal and a second trial may follow or there may be a settlement.

Mizuho Cross-Shareholding – US$11bn of Cross-Shareholding, with at Least US$2bn to Sell over FY24-26

By Sumeet Singh

Following up on our earlier cross-shareholding notes, in this note we look at Mizuho Financial Group (8411 JP)‘s cross-shareholding.
Mizuho had a stake over US$100m in at least 34 listed Japanese stocks, amounting to a total of around US$7bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

MMA Offshore (MRM AU): Cyan Lifts Offer

Back on 25 March, marine and subsea services provider MMA Offshore (MRM AU) entered into a Scheme with Singapore’s Cyan Renewables, a wholly-owned vehicle of Seraya Partners.
The A$2.60/share Offer in cash, a 11% premium to last close, was within the IE’s fair value range of A$2.03 to A$2.83. However, shares have consistently traded through terms.
Cyna has now bumped the Offer to A$2.70/share – best & final. Thorney (7.95% of shares out) is supportive. The Scheme Meeting will still be held on the 1 July.

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Jun 19

Daily Brief Event-Driven: Blackstone Does a BIG Deal for Infocom (4348) – Minorities Get ¥6 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Blackstone Does a BIG Deal for Infocom (4348) – Minorities Get ¥6,060/Share
[JAPAN ACTIVISM] – Murakami Group Goes Activisting on Exedy (7278) – Room To Run
Pref-Centred Dividend Plays with Expanded ISA Tax Benefits in Value-Up Context
L’Occitane (973 HK): No, PLP Is Not Getting A Back-End Bump
KOSDAQ150 Adhoc Index Rebalance: Eco&Dream to Replace Paradise Co
Infocom (4348 JP): Blackstone’s Long-Awaited JPY6,060 Tender Offer
LS Materials: A Sharp Increase in Short Selling Post Block Deal Sale
KDDI and Lawson: Loyalty Points Just the Start
Quiddity SET 50 Jun 24 Rebal: 4 Changes Confirmed; LONGs up 5.2% Vs SHORTs in a Month
JSE June ’24 Rebalance: Top Buys (Banks!) And Sells (NPN, PRX)

Blackstone Does a BIG Deal for Infocom (4348) – Minorities Get ¥6,060/Share

15 weeks ago, a specialised media outlet suggested Teijin Ltd (3401 JP) was in process to sell its stake in Infocom Corp (4348 JP).
I caught up later, after the stock had run up significantly, but writing bullishly here and here. Since then, the stock is up another 33-35%.
Today we finally got the announced deal. Blackstone will buy the stock at a valuation of ¥280bn, paying ¥6,060/share for the minority stake, and buying back Teijin’s stake at ¥4,340/share.

[JAPAN ACTIVISM] – Murakami Group Goes Activisting on Exedy (7278) – Room To Run

Late May, Aisin (7259 JP) announced a sell-down of its 34% stake in Exedy Corp (7278 JP) – a big non-dilutive offering, pricing 11% below undisturbed. Exedy announced a buyback.
Announced on the 27th of May, shares fell sharply the next day, it priced on the 3rd, and offering shares traded on the 10th. Then the price started climbing back.
My first and second pieces argued that buyback accretion, index impact, and change in register shape all meant it was a buy. Activist Murakami agreed, now he has 6.5%.

Pref-Centred Dividend Plays with Expanded ISA Tax Benefits in Value-Up Context

Local stock market focuses on ISA tax benefits expansion; political push for higher tax-exempt limits seen as pivotal event.
Investors expect dividend stocks to outperform due to ISA tax advantages: tax exemptions within limits and lower 9.9% taxation on excess amounts, boosting ISA-based equity investments.
ETF influence declining; ISA tax benefits may boost dividend plays, heightening interest in preferred stocks tied to efforts to redeem them, impacting equity costs.

L’Occitane (973 HK): No, PLP Is Not Getting A Back-End Bump

In a long-awaited development, L’Occitane (973 HK) announced during the lunchbreak yesterday, a scrip alternative. Plus Pleasant Lake Partners (PLP) (3.25%) will accept the Offer (either in cash or scrip).
This was positive news. And the market reacted accordingly, up ~1.0% in the afternoon session.
One quirk in the doc was the perception those electing the scrip alternative may get a higher % in the unlisted Offeror. A back-end bump for PLP? (Hint: No).

KOSDAQ150 Adhoc Index Rebalance: Eco&Dream to Replace Paradise Co

Paradise Co Ltd (034230 KS) will move from the KOSDAQ Market to the KOSPI Market from the open of trading on 24 June.
E&D Co Ltd (101360 KS) will be added to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 21 June to replace Paradise Co Ltd (034230 KS).
Paradise Co Ltd (034230 KS) belongs to the Consumer Discretionary sector and there is a possibility of inclusion to the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) in December.

Infocom (4348 JP): Blackstone’s Long-Awaited JPY6,060 Tender Offer

Following months of press speculation, Infocom Corp (4348 JP) announced a Blackstone (BX US) tender offer at JPY6,060 per share, a 177.3% premium to the undisturbed price.
After the share consolidation, Infocom will repurchase Teijin Ltd (3401 JP)’s stake at a share repurchase price of JPY4,231. The process is expected to be completed in early October.
The offer is a knockout bid helped by auction. This is a done deal with payment commencing from 7 August. At the last close, the gross spread was 0.5%.

LS Materials: A Sharp Increase in Short Selling Post Block Deal Sale

On 14 June, KeiStone Partners sold 2.51 million shares (3.7% of outstanding shares) of LS Materials at the block deal sales price of 26,350 won per share.
In the next several weeks/months, there will likely be increased concerns about additional selling of LS Materials by KeiStone Partners.
Due to recent block deal sale, higher short selling volume, and concerns about additional selling by Keistone Partners, LS Materials shares could face further weakness in the next 6-12 months.

KDDI and Lawson: Loyalty Points Just the Start

By Michael Causton

KDDI will complete its acquisition of a 50% share in Lawson this month and the chain will then delist.
KDDI is promising a rapid introduction of services and fresh ideas to leverage its new retail arm.
It will begin by unifying premium loyalty point membership under the Ponta brand and offer new services that it hopes will help boost share. What out LY.

Quiddity SET 50 Jun 24 Rebal: 4 Changes Confirmed; LONGs up 5.2% Vs SHORTs in a Month

The June 2024 index changes for Thailand’s SET 50 index were announced after market close yesterday (17th June 2024).
Initially we expected only three changes but after the index methodology was revised in May 2024, we revised our expectations and we had 4 expected ADDs/DELs.
All 4 expected ADDs/DELs turned out to correct. In this insight, we take a look at our estimation of expected flows and potential trade ideas based on the flow dynamics.

JSE June ’24 Rebalance: Top Buys (Banks!) And Sells (NPN, PRX)

By Charlotte van Tiddens, CFA

On Friday, JSE indices will be rebalanced in the closing auction.
There will be no constituent changes to the Top 40, FINI, FINDI, INDI or RESI indices (ALSI gets reviewed in March and September).
The upcoming rebalance will be the first review since the vanilla and SWIX indices were merged in March

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Jun 18

Daily Brief Event-Driven: L’Occitane (973 HK): Share Alternative a Crucial Step Towards the Offer Being Declared Unconditional and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

L’Occitane (973 HK): Share Alternative a Crucial Step Towards the Offer Being Declared Unconditional
Exedy Corp (7278 JP): Murakami Becomes a Substantial Shareholder
Hengdeli Holdings (3389 HK): Negative EV Play Halted
Quiddity Leaderboard HSTECH Sep 24: No Changes but US$425mn One-Way Flows Due to Capping
Quiddity Leaderboard HSCEI Sep 24: Two Changes Possible; US$256mn One-Way
SET50 Index Rebalance: 4 Changes Next Week; One Could Surprise
L’Occitane (973.HK) – The Privatization Is About to Succeed
India Shelter Finance US$240m Lock-Up Expiry – Multi-Bagger Gains Are Ripe for the Taking

L’Occitane (973 HK): Share Alternative a Crucial Step Towards the Offer Being Declared Unconditional

L’Occitane (973 HK) announced the share alternative at an exchange ratio of 10 rollover shares for each offer share, subject to a cap of 5% of outstanding shares.
The share alternative option will help the offer and was likely required to get Pleasant Lake Partners’ support (3.25% of outstanding shares). There is minimal vocal opposition to the offer.
Irrevocables/Letters of support represent 49.83% of disinterested shares. An attractive offer and the share alternative facilitate meeting the minimum acceptance condition, which requires an 80% disinterested acceptance rate (ex. irrevocables).

Exedy Corp (7278 JP): Murakami Becomes a Substantial Shareholder

Murakami’s entity, City Index Eleventh, and daughter reported a 5.46% position in Exedy Corp (7278 JP). The shares purchases began two days after the Aisin (7259 JP) secondary offering.
Murakami’s average buy-in price is JPY2,607.30 per share, 2.3% higher than the recent secondary offering price of JPY2,549.
Murakami’s disclosure suggests two possibilities: the start of an activist campaign or a short-term pump-and-dump play. Recent precedents suggest the latter.

Hengdeli Holdings (3389 HK): Negative EV Play Halted

Watch accessory play Hengdeli Holdings (3389 HK) is currently suspended pursuant to the Takeovers Code.
Potentially founder Zhang Yuping (holding 17%), CEO Tony Cheung (16%) and/or Swatch Group (UHR SW) (9.94%) may table an Offer. My money is on Zhang.
This is a very illiquid name. What is interesting is that Hengdeli has net cash of HK$1.3bn – as at 31 December 2023 – against a market cap of HK$0.59bn.

Quiddity Leaderboard HSTECH Sep 24: No Changes but US$425mn One-Way Flows Due to Capping

The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
In this insight, we take a look at the rankings of potential ADDs and potential DELs for the September 2024 index rebal event.
We do not see any index changes in September 2024 but there could be one-way flows of US$425mn due to capping.

Quiddity Leaderboard HSCEI Sep 24: Two Changes Possible; US$256mn One-Way

The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI index rebal event in September 2024.
Based on the current data, I see two ADDs and two DELs.

SET50 Index Rebalance: 4 Changes Next Week; One Could Surprise

There will be 4 changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the close on 28 June.
All changes are in line with our forecasts, but one stock could be a surprise inclusion for some.
Passive trackers will need to buy 3.9% of float in I-TAIL, 3.7% of float in Berli Jucker, 1.5% of float in Ngern TidLor and 1% of float in Bangchak Corporation.

L’Occitane (973.HK) – The Privatization Is About to Succeed

By Xinyao (Criss) Wang

So far, about 49.8% of disinterested shares from Irrevocable Undertakings/Non-binding Letters of Support would accept the Share Offer. Success is within reach based on a “good enough” privatization price.
The Share Alternative is mainly aimed at investors who are hoping for the future re-listing of L’Occitane in the overseas markets – They can still get a vantage point.
However, re-listing seems still distant/uncertain. The value of Rollover Shares in the future remains uncertain. Investors would face risks if they choose the Share Alternative. The Cash Alternative is preferred.

India Shelter Finance US$240m Lock-Up Expiry – Multi-Bagger Gains Are Ripe for the Taking

By Clarence Chu

India Shelter Finance (0570670D IN) listed in India on 20th Dec 2023 after raising US$144m. The pre-IPO investors had trimmed a portion of their stakes in the IPO
India Shelter Finance (ISF) is a retail-focused HFC targeting the self-employed customer with a focus on first time home loan takers in the low and middle income group.
Coming up for six-month lockup expiry on 18th Jun 2024 are the firm’s pre-IPO shareholders and a portion of the promoters’ stakes.

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Jun 17

Daily Brief Event-Driven: Unexpected Inheritance Tax Rate Reduction Included in July Tax Reform: Impact on Value-Up Trading and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Unexpected Inheritance Tax Rate Reduction Included in July Tax Reform: Impact on Value-Up Trading
Merger Arb Mondays (17 Jun) – Fancl, Tatsuta, A8, China TCM, GAPack, CPMC, Malaysia Airports, Bapcor
MV Global Junior Gold Miners Index Rebalance: Round-Trip Trade of Over US$400m
NASDAQ 100 Index Rebalance: Arm Holdings Replaces Sirius XM
Great Eastern (GE SP): Inching Towards Suspension
EQD / Weekly Vol Update / Positive Risk-Sentiment & Short Trading Week Put Pressure on IV Levels
Liquid Universe of European Ordinary and Preferred Shares: June‘24 Report

Unexpected Inheritance Tax Rate Reduction Included in July Tax Reform: Impact on Value-Up Trading

Senior Presidential Secretary said this morning that a tax reform, including reducing inheritance tax rates to the OECD average, will be disclosed in late July with the tax reform plan.
Stocks sensitive to reduced inheritance tax, notably Hyundai Motor Group subsidiaries like Hyundai Glovis and Hyundai Motor, could see significant attention amid governance restructuring efforts under Chung Eui-sun.
Retroactive application and its extent may impact markets, potentially affecting groups like Samsung, influencing diverse investment strategies based on specifics.

Merger Arb Mondays (17 Jun) – Fancl, Tatsuta, A8, China TCM, GAPack, CPMC, Malaysia Airports, Bapcor

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: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), Fancl Corp (4921 JP), Asia Cement China (743 HK), Ansarada Group Ltd (AND AU).
Lowest spreads: Tatsuta Electric Wire & Cable (5809 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Alumina Ltd (AWC AU), Nagatanien Holdings (2899 JP).

MV Global Junior Gold Miners Index Rebalance: Round-Trip Trade of Over US$400m

There are no constituent changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in June but there are a lot of float and capping changes.
Estimated one-way turnover is 3.9% resulting in a round-trip trade of US$418m. There are 17 stocks with over 1x ADV to trade from passive trackers.
The largest inflows are expected in Cia de Minas Buenaventura SAA (BVN US), Equinox Gold (EQX US) and Red 5 Ltd (RED AU).

NASDAQ 100 Index Rebalance: Arm Holdings Replaces Sirius XM

ARM Holdings (ARM US) will replace Sirius Xm Holdings (SIRI US) in the Nasdaq-100 Stock Index (NDX INDEX) after the close of trading on 21 June.
Passive trackers will need to buy just over US$500m of ARM Holdings (ARM US) while the estimated selling in Sirius Xm Holdings (SIRI US) is smaller.
There could be passive selling in NVIDIA Corp (NVDA US), but this will be a lot smaller than the expected buying from the Technology Select Sector SPDR (XLK US) ETF.

Great Eastern (GE SP): Inching Towards Suspension

Back on the 10th May, OCBC (OCBC SP) made a voluntary unconditional general Offer for the 11.56% in life/non-life insurer Great Eastern Holdings (GE SP) not held.
At a 36.9% premium to last close, the S$25.60/share Offer Price appeared fair. Yet GE has consistently traded through terms, potentially as someone seeks to block delisting, and negotiate terms.
OCBC has now declared terms final. The IFA says “not fair, but reasonable” – and recommends shareholders accept the Offer. GE will be suspended at the close of the Offer.

EQD / Weekly Vol Update / Positive Risk-Sentiment & Short Trading Week Put Pressure on IV Levels

By Sankalp Singh

IVs move lower at an accelerated pace driven by holiday shortened week & risk-seeking sentiment.
Vol-Regime has switched to “High & Down” state, projecting an elongated period of falling IV levels.
Nifty50 Smile & Skew dynamics continue to compress. Vol term structure has moved from Backwardation to Contango in conjunction with falling IVs

Liquid Universe of European Ordinary and Preferred Shares: June‘24 Report

By Jesus Rodriguez Aguilar

Since mid-May, share-price spreads have not shown a clear trend across our European liquid universe of ordinary and preferred shares (9 have tightened, 7 widened, 1 remained at same level).
Recommended trades long preferred / short ordinary shares: Atlas Copco, Grifols, Media-for-Europe, Sixt, Volkswagen.
Recommended trades long ordinary / short preferred shares: Henkel, SSAB Svenska Stal.

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Jun 16

Daily Brief Event-Driven: Great Eastern Holdings (GE SP): Playbook as OCBC Offer Declared Final and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Great Eastern Holdings (GE SP): Playbook as OCBC Offer Declared Final, IFA Opines NOT Fair
(Mostly) Asia-Pac M&A: Fancl, Jeisys Medical, A8 New Media, Bapcor, Helios Techno,Tatsuta Electric
MV Australia A-REITs Index Rebalance: Abacus Storage King Deleted (Finally!)
MV Global Rare Earth/Strategic Metals Index Rebalance: Two Deletions & Other Changes
MV US Listed Semiconductor 25 Index Rebalance: US$1bn to Sell in NVIDIA
Weekly Deals Digest (16 Jun) – Sun Corp, Fancl, Tatsuta, Great Eastern, A8, Webtoon, Shift Up
Last Week in Event SPACE: Keisei Electric, CMCDI, Sigma Healthcare, Sun Corp, Segantii
MV Australia Equal Weight Index Rebalance: IDP Education (IEL) & Lendlease Group (LLC) Out
MarketVector Vietnam Local Index Rebalance: Two Adds and Other Changes

Great Eastern Holdings (GE SP): Playbook as OCBC Offer Declared Final, IFA Opines NOT Fair

Great Eastern Holdings (GE SP) IFA opines that the OCBC (OCBC SP) S$25.60 offer is NOT fair but reasonable as it is below the valuation range of S$28.87-S$36.19 per share.
In response, OCBC declared the price final, and the final closing date is 12 July. Great Eastern will likely breach free float requirements and be suspended when the offer closes.
The offer will likely follow the Boustead Projects/Boustead Singapore blueprint, where SGX RegCo eventually (took seven months) enabled dissenters to receive a fair offer with a 24% uplift.

(Mostly) Asia-Pac M&A: Fancl, Jeisys Medical, A8 New Media, Bapcor, Helios Techno,Tatsuta Electric

I tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals discussed this week: Fancl (4921 JP)‘s Tender offer, A8 New Media (800 HK)‘s Scheme, and Jeisys Medical (287410 KS)‘s delisting offer. Bain also approached Bapcor (BAP AU).
Key updates took place on: Sigma Healthcare (SIG AU), Alumina (AWC AU), Greatview Aseptic Packaging (468 HK), Helios Techno (6927 JP), and Tatsuta Electric Wire & Cable (5809 JP).

MV Australia A-REITs Index Rebalance: Abacus Storage King Deleted (Finally!)

Abacus Storage King (ASK AU) will be deleted from the Vaneck Vectors Australian Property ETF (MVA AU) in June. There are float changes and capping changes too.
Estimated one-way turnover is 3.33% and will result in a one-way trade of A$19m. There are a couple of stocks with over 1x ADV to trade.
There has been a recent spike in shorts on Abacus Storage King (ASK AU) but passive selling will be larger than the short interest.

MV Global Rare Earth/Strategic Metals Index Rebalance: Two Deletions & Other Changes

Core Lithium Ltd (CXO AU) and Piedmont Lithium (PLL US) will be deleted from the VanEck Rare Earth/Strategic Me (REMX US) at the close on 21 June.
Constituent changes, float changes and capping changes result in an estimated one-way turnover of 6.4% and in a one-way trade of US$28m.
The largest inflows will be in Sociedad Quimica y Minera de Chile (SQM US), Pilbara Minerals (PLS AU), Arcadium Lithium (ALTM US), Lithium Americas (LAC US) and Sigma Lithium (SGML).

MV US Listed Semiconductor 25 Index Rebalance: US$1bn to Sell in NVIDIA

There are no constituent changes for the VanEck Vectors Semiconductor (SMH US) ETF in June but there are a lot of float and capping changes.
There is US$1bn to sell in NVIDIA Corp (NVDA US) while there will be passive buying in Advanced Micro Devices (AMD US) and Intel Corp (INTC US).
The selling in NVIDIA Corp (NVDA US) will offset part of the potential passive buying from Technology Select Sector SPDR (XLK US) and other similar ETFs.

Weekly Deals Digest (16 Jun) – Sun Corp, Fancl, Tatsuta, Great Eastern, A8, Webtoon, Shift Up

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: MMG (1208 HK) US$1.2 billion rights issue. Shift Up (462870 KS) and Webtoon Entertainment (WBTN US) IPOs.
Event-Driven developments: Sun Corp (6736 JP), Fancl Corp (4921 JP), Tatsuta Electric Wire & Cable (5809 JP), Great Eastern Holdings (GE SP), A8 New Media (800 HK), Bapcor.

Last Week in Event SPACE: Keisei Electric, CMCDI, Sigma Healthcare, Sun Corp, Segantii

The Palliser/Keisei Electric Railway Co (9009 JP) is an unconvincing trade. Avoid being long Keisei vs Oriental Land (4661 JP) except in short-term impact events. Avoid the drift trade also.
On the subject of activism, keep an eye on China Merchants China Direct Investments (133 HK)‘s 20th June AGM. If Kan’s re-election is rejected, this stock should gain more momentum.
A Sigma Healthcare (SIG AU)/Chemist Warehouse merger carried regulatory risk. And now the ACCC has raised a raft of concerns.

MV Australia Equal Weight Index Rebalance: IDP Education (IEL) & Lendlease Group (LLC) Out

IDP Education (IEL AU) and Lendlease Group (LLC AU) will be deleted from the MV Australia Equal Weight Index at the June rebalance.
Constituent, float and capping changes will result in a one-way turnover of 5% and in a round-trip trade of A$228m.
There are many stocks from the S&P/ASX index family that will have same way or opposing flows from VanEck Vectors Australian Equal Weight ETF (MVW AU).

MarketVector Vietnam Local Index Rebalance: Two Adds and Other Changes

Viettel Construction (CTR VN) and EVN Finance (EVF VN) will be added to the MarketVector Vietnam Local Index at the close on 21 June.
Estimated one-way turnover is 5.2% and that results in a one-way trade of US$27m. There are 3 stocks with more than 1x ADV to buy from passives.
There will be over US$1m to buy in Vinhomes (VHM VN), Bank for Foreign Trade of Vietnam (VCB VN) and Vingroup Jsc (VIC VN).

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Jun 15

Daily Brief Event-Driven: The Latest on the Rumors Surrounding the Death of Chung Mong-Koo of Hyundai Motor Group and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

The Latest on the Rumors Surrounding the Death of Chung Mong-Koo of Hyundai Motor Group
Another Block Deal Sale of Ecopro Materials
Fancl (4921 JP): Kirin (2503 JP)’s Light JPY2,690 Tender Offer
Fancl (4921) TOB – Kirin (2503) Does the Inevitable and Takes Out Minorities. Lightish But…
Helios Techno Holding (6927) – RS Won’t Bid Higher, Market Sees Value
FII’s High Short Positions on Indian Markets : Crisis or Opportunity
Block Deal Sale of 3.6% Shares of Enchem
EQD | Is the HSI Correction Going to Continue? (Yes, For 1-2 Weeks)

The Latest on the Rumors Surrounding the Death of Chung Mong-Koo of Hyundai Motor Group

Early this morning, rumors spread that Hyundai’s honorary chairman Chung Mong-koo was hospitalized and died, causing stock prices to surge, but Hyundai denied this news.
Control of Hyundai hinges on increasing the stake in Mobis. Chung Eui-sun aims to keep Mobis’s stock low, but Chung Mong-koo’s health complicates timing and strategy.
Mobis’s trading point depends on Chung Mong-koo’s health. Three scenarios: he’s healthy, critically ill, or deceased. Current rumors’ price impacts are unlikely to subside soon.

Another Block Deal Sale of Ecopro Materials

Shares of EcoPro Materials are down 16% today to 112,300 won, due to another block deal sale of by BRV Capital in the after hours trading on 13 June.
After the second block deal sale on 14 June, BRV’s stake declined further from 21.2% to 18.2%.
This block deal sale at a big discount is likely to raise overhang concerns about further block deal sales by BRV Capital in the coming months/years.

Fancl (4921 JP): Kirin (2503 JP)’s Light JPY2,690 Tender Offer

Fancl Corp (4921 JP) recommended Kirin Holdings (2503 JP)’s tender offer of JPY2,690, a 42.7% premium to the undisturbed price.
The timing looks opportunistic as Fancl’s shares are down 20% YTD. The offer period is from 17 June to 29 July.
While the offer is attractive vs peer multiples, it is light vs historical trading ranges. Securing the required acceptance rate could prove challenging as the offer price is light.

Fancl (4921) TOB – Kirin (2503) Does the Inevitable and Takes Out Minorities. Lightish But…

Kirin Holdings (2503 JP) bought a 33% stake from the founder and several others in August 2019. Five years later, they are coming back for the rest.
The price here is ¥2,690/share which is a 42.7% premium from yesterday’s close. Kirin paid 20+% more in 2019. Earnings fell, but they paid 37x NTM. This is 32x.
This is lightish… but… this should get done. Activism would be difficult. There are enough shareholders who should be OK getting out. This should trade tight.

Helios Techno Holding (6927) – RS Won’t Bid Higher, Market Sees Value

Today at noon JST, Rs Technologies (3445 JP) released an announcement on TDNet, “Our policy regarding the tender offer for Helios Techno Holding Co., Ltd. shares”
In it, they indicated that the price offered – ¥825/share – is a price which “fully returns to general shareholders the increased enterprise value that will result from [transaction] synergies.”
They acknowledge the market price is trading higher than the TOB Price, but say they have no plans to raise the Tender Offer Price. So now what? It depends.

FII’s High Short Positions on Indian Markets : Crisis or Opportunity

By Nimish Maheshwari

It is important for investors to not get swayed by popular narratives and instead look at the data and historical patterns to make informed decisions.
While a large short position by FIIs may seem concerning, it could actually signal a potential opportunity for positive returns in the Nifty 50 index.
By understanding the reasons behind this contrarian move and the historical trends, investors can navigate bet when FII’s short positions are high.

Block Deal Sale of 3.6% Shares of Enchem

After the market close on 14 June, it was reported that Woori PE/other investors will be selling 705,384 shares of Enchem in a block deal, representing 3.6% of outstanding shares.
The block deal discount rate ranges from 6.9% to 8.92%, resulting in potential block deal sale price of 270,500 won to 276,500 won.
We would not subscribe to this block deal and we are concerned about the valuations of Enchem after a sharp share price appreciation this year.

EQD | Is the HSI Correction Going to Continue? (Yes, For 1-2 Weeks)

By Nico Rosti

The Hang Seng Index correction has restarted this week, after a brief 1-week bounce.
The index may continue to downtrend for another 1-2 weeks, then a reversal should come and the uptrend should restart.
Look at the price support area in the 17500-17000 range, because that is where my model indicates the highest chance of LONG reversal.

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Jun 14

Daily Brief Event-Driven: Technology Select Sector Index (XLK US): NVIDIA Could Flip Places with Apple; HUGE Flows and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Technology Select Sector Index (XLK US): NVIDIA Could Flip Places with Apple; HUGE Flows
Specifics of Korea’s Official Short-Selling Regulations, Announced This Morning
Sigma/Chemist Warehouse Merger: ACCC Has (Many) Issues
HKTV (1137 HK): 9th July Vote On Share Buy-Back

Technology Select Sector Index (XLK US): NVIDIA Could Flip Places with Apple; HUGE Flows

The Technology Select Sector SPDR (XLK US) ETF tracks the Technology Select Sector Index and has an AUM of over US$70bn.
NVIDIA Corp (NVDA US) has broken through the US$3tn market cap barrier and is very close to Apple (AAPL US) in terms of free float market cap.
If NVIDIA ranks higher than Apple on free float market cap at the close on Friday, there could be huge inflows to NVIDIA and outflows from Apple a week later.

Specifics of Korea’s Official Short-Selling Regulations, Announced This Morning

Limiting extensions to four times after a 90-day repayment and mandating repayment after 12 months increases short-selling costs. The revision omits limits on position-holding cycles, disappointing retail investors.
Today’s release did not set a timeline for short-selling resumption. The ruling party has requested it after March 2025, with key officials present suggesting next year March resumption.
Regarding the electronic system implementation, core content aligns with the draft, but newly revealed institution numbers add a new perspective. Uncertainties remain on integrating overseas stock borrowing into the system.

Sigma/Chemist Warehouse Merger: ACCC Has (Many) Issues

Back on the 11th December 2023, pharmacy distributor Sigma Healthcare (SIG AU) announced a “transformational merger” – in effect a reverse takeover – with mega chain Chemist Warehouse (CWG).
In Sigma Healthcare (SIG AU): Chemist Warehouse’s Reverse Takeover I flagged pushback from ACCC; but on balance thought the merger should still get up.
Travis Lundy struck a more tentative tone in Sigma Healthcare: ASX200 Inclusion Now, MUCH More Squeezy Fun Later. Maybe… Rightfully so it seems. The ACCC has now raised competition concerns.

HKTV (1137 HK): 9th July Vote On Share Buy-Back

Back on the 22nd May, online shopping platform play Hong Kong Television Network (1137 HK) announced a buy-back of 11.25% of shares out, at $2.15/share, a 20.8% premium to undisturbed.
Should the Offer complete, co-founder Ricky Wong’s stake, together with concert parties, increases to 51.55% (before exercising options), up from 45.75% currently. Optically, it’s a opportunistic share grab.
The Offer Doc is now out, with an EGM to vote on the whitewash waiver on the 9th July.

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Jun 13

Daily Brief Event-Driven: Helios Techno Holding (6927) TOB – Today Could Be The Day and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Helios Techno Holding (6927) TOB – Today Could Be The Day
Tatsuta Electric (5809 JP) Crunch Time = Bump Time?
Tatsuta Electric (5809 JP): Eneos Finally Secures SAMR Approval but Needs to Bump
A8 New Media (800 HK): A Scheme with a 162% Takeover Premium
Proposed Merger Between Rebellions and Sapeon – To Challenge Nvidia
Quiddity Leaderboard NIFTY Sep 24: Multiple Changes Possible for NIFTY 50; Some New Trade Ideas
Changes in Law for Allocation of Treasury Shares as New Shares Post Spin-Offs in Korea in 2H 2024
NIFTY NEXT50 Index Rebalance Preview: Active Meets Passive
A8 Media (800 HK): A 163% Premium to Undisturbed? Yes Please.

Helios Techno Holding (6927) TOB – Today Could Be The Day

Rs Technologies (3445 JP) announced a TOB on Helios Techno Holding (6927 JP) 12 days ago. At a 74% premium, but that was too cheap. I discussed it here.
Shares went limit up for two days then traded huge volume the first full day last Wednesday. The lowest trade so far in open trading is 3% through terms.
57% of Shares Out Ex-Treasury have traded in five days. Anyone who bought 5% on Day 1 has to file a Large Shareholder Report today.

Tatsuta Electric (5809 JP) Crunch Time = Bump Time?

ENEOS Holdings (5020 JP) announced a deal to buy out their affiliate Tatsuta Electric Wire & Cable (5809 JP) 18 months ago. The TOB was expected to start June 2023.
June 2023 came around and China’s SAMR still hadn’t approved. ENEOS provided quarterly updates in Sep and Dec and monthly updates since. The May update was different.
The May update cut the “re-update” schedule to mid-month June. There are reasons to look at what has changed since the Dec 2022 announcement.

Tatsuta Electric (5809 JP): Eneos Finally Secures SAMR Approval but Needs to Bump

18 months after announcing the offer, ENEOS Holdings (5020 JP) secured SAMR approval for the Tatsuta Electric Wire & Cable (5809 JP) tender offer at JPY720 per share.
The tender offer is expected to be launched on 21 June, subject to securing the recommendation from the special committee and the Board.
A bump is required due to the material market rerating since 21 December 2022. An offer of JPY828, a 15.1% premium to the current offer, implies a P/B of 1x.

A8 New Media (800 HK): A Scheme with a 162% Takeover Premium

A8 New Media (800 HK) disclosed a Cayman scheme privatisation offer from Mr Liu Xiaosong (Founder, Chairman, CEO) at HK$0.36 per share, a 162.8% premium to the last close price.
The massive premium is unsurprising, as A8’s EV has been negative since April 2023 due to headwinds from the weak Chinese leasing sector and uncertainty about cash use.
The high takeover premium, no shareholder holding a blocking stake, and low AGM minority participation rate point to a done deal. However, this is a small-cap illiquid stock.

Proposed Merger Between Rebellions and Sapeon – To Challenge Nvidia

On 12 June, SK Telecom (017670 KS) confirmed that its affiliate Sapeon plans to merge with its competitor Rebellions by end of this year.
Sapeon and Rebellions’ largest global competitor is Nvidia. A key aim of the merger is to challenge Nvidia and try to take away its global dominance in AI chips.
If the combined Sapeon and Rebellion can take away just 1% market share resulting in 1% of Nvidia’s market cap, this would suggest valuation of US$31 billion.

Quiddity Leaderboard NIFTY Sep 24: Multiple Changes Possible for NIFTY 50; Some New Trade Ideas

NIFTY 50 represents the 50 largest stocks listed in the National Stock Exchange (NSE) of India and the NIFTY Next 50 index tracks the next 50 largest names.
In this insight, we take a look at the names leading the race to become ADDs/DELs during the September 2024 index rebal event.
Since my last insight, we have observed a couple of important changes to candidate rankings and that has resulted in some changes to our index change expectations.

Changes in Law for Allocation of Treasury Shares as New Shares Post Spin-Offs in Korea in 2H 2024

On 11 June, the FSC announced that the restrictions on allocation of treasury shares as new shares post spin-offs is expected to be made into law in 2H 2024.
Meanwhile, starting 1 July, the financial regulators will make it more difficult for Korean companies to conduct spin-offs that have separate allocation of treasury shares as new shares.
The top five stocks with highest percentage of treasury shares/outstanding shares are up on average 40.5% YTD.

NIFTY NEXT50 Index Rebalance Preview: Active Meets Passive

With a substantial part of the review period complete, there could potentially be 7 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September.
Estimated one-way turnover is 17.7% resulting in a one-way trade of INR 47.2bn (US$566m). 8 stocks will have over 1x ADV to trade from passive trackers.
There are a bunch of stocks that are potential migrations between Mid Cap and Large Cap segments in the AMFI Classification system and there will be flows from active managers.

A8 Media (800 HK): A 163% Premium to Undisturbed? Yes Please.