Event-Driven

Yonhap News reported on the exclusive coverage of Ecopro BM and L&F’s KOSPI transfer listing.
L&F announced through the disclosure that they are considering the KOSPI transfer listing. Ecopro BM told another local news outlet that they are not currently reviewing the KOSPI transfer listing.
It seems that L&F’s KOSPI transfer listing is almost a confirmed fact. However, the Ecopro company in question may be Ecopro Co, not Ecopro BM.

Yuanta ETFs Rebalance Preview: Soaring Stocks, Rising Shorts; AI Beats Shipping

Using data from the close on 19 July, there could be 5 changes to the Yuanta/P-Shares Taiwan Top 50 ETF and 2 deletions for the Yuanta/P-Shares Taiwan Dividend Plus ETF.
Stocks that are expected to benefit from the AI revolution could gain ETF inclusion while shipping stocks are the ones expected to be deleted from the ETF.
There has been a huge increase in shorts on some of the potential inclusions and on most of the potential deletions. That will affect how stocks trade near term.

Quiddity Leaderboard T50/100 Sep 23: AI Frenzy Causes Many Changes to Expectations

In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the September 2023 Rebalance.
Some semiconductor/electronic component stocks have seen their share prices skyrocket in recent months due to AI-related excitement causing drastic shifts in Leaderboard rankings.
In my last insight, I expected two T50 changes and one T100 change. Now I expect five T50 changes and three T100 changes.

Quiddity Leaderboard TDIV Sep 23: AUM Assumption Changes Again; SHORTs Down 15.6% Vs Index

In this insight, we take a look at Quiddity’s flow expectations for the September 2023 index rebalance.
Since my last insight, my estimate for the tracking AUM estimate assumption for September 2023 has increased and has caused changes to my flow expectations.
Separately, the SHORTs suggested in my last insight have underperformed the index by 15.6% in 3 weeks. I have updated my thoughts on that as well.

Searchlight/Gresham House: Attractive Spread

Searchlight agreed to acquire via scheme of arrangement UK asset manager Gresham House PLC (GHE LN) for 1,105p/share in cash, c.£470 million, 12.6x EV/Fwd NTM EBITDA, 17.6x Fwd P/E. Terms are final.
Irrevocables plus letters of intent total 33%. Although the consensus median TP is 1,170p/share (c. 5.8% higher), it seems difficult to argue with a 63% premium.
Taking 680p break, the shares are pricing an 89% probability of completion. Spread is 4.3%/10.3% (gross/annualised), which explains why the shares have been liquid since the offer announcement. Long.

Essential Metals/Develop Global: Rock Steady With MinRes Support

At the 20 April Scheme Meeting, Mineral Resources (MIN AU) (with 19.55%) and other shareholders voted against the Tianqi Lithium JV transaction for Essential Metals (ESS AU).
This left Essential in no man’s land until MinRes (presumably) made a move. But on the 3 July, Develop Global (DVP AU) announced a binding Scheme with ESS.
The all-scrip Scheme transaction has the backing of MinRes, which also owns a ~13% stake in Develop. This deal – this time- looks all stitched up.

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Jul 19

Daily Brief Event-Driven: S&P/ASX200 Ad Hoc Index Rebalance & Update to Potential Changes in September and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

S&P/ASX200 Ad Hoc Index Rebalance & Update to Potential Changes in September
StubWorld: SZ International’s Logistics Spin-Offs
Ventia Services (VNT) Selected to Join ASX 200 – Not A Surprise
Quiddity Leaderboard ES50 Sep 23: Massive Flows; Might Be Time for LONG Ferrari – SHORT Vonovia
Quiddity Leaderboard SE600 Sep 23: CD Projekt Could Become an Intra-Review ADD
EQD | Hang Seng Index (HSI) WEEKLY Deep-But-Brief Pullback
Investigating HMM’s Latest Bond Conversion Situation for a Shorting Setup

S&P/ASX200 Ad Hoc Index Rebalance & Update to Potential Changes in September

Ventia (VNT AU) will replace Blackmores Ltd (BKL AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 21 July.
The ad hoc change will lead to changes in the list of potential adds and deletes at the regular scheduled rebalance in September.
Weebit Nano Ltd (WBT AU) is now a potential add in September and could see some pre-positioning in the near future.

StubWorld: SZ International’s Logistics Spin-Offs

Shenzhen International (152 HK) seeks to spin off logistic assets on a PRC exchange; and 51.56%-held Shenzhen Expressway Co H (548 HK) intends to place out A shares.
Preceding my comments on SZ Int’l/SZ E’Way are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Ventia Services (VNT) Selected to Join ASX 200 – Not A Surprise

After the Blackmores Ltd (BKL AU) Scheme Meeting result was announced earlier today, post-close the S&P/ASX team announced Ventia (VNT AU) would replace it on 21 July at the close.
This is not that surprising. Janaghan Jeyakumar, CFA expected it in June, and it was a super-close second recently for him for the Sep rebalance.
Given the shareholder structure and flow dynamics, it’s worth taking a closer look.

Quiddity Leaderboard ES50 Sep 23: Massive Flows; Might Be Time for LONG Ferrari – SHORT Vonovia

The ES50 Index is one of the most highly-tracked indices in mainland Europe and the annual index review takes place in September.
As ES50 index changes generally involve large cap names, these Rebalance events have historically had significant volume and ADV impact.
In this insight, we take a look the names leading the race to become ADDs/DELs for the upcoming index review in September 2023.

Quiddity Leaderboard SE600 Sep 23: CD Projekt Could Become an Intra-Review ADD

In this insight, we take a look at the names leading the race to become ADDs/DELs for the SE600 and EURSTX Indices for the September 2023 Rebalance.
SimCorp A/S (SIM DC) could trigger an intra-review ADD prior to the September 2023 Rebalance.
Apart from that, I expect four other changes during the regular rebalance in September 2023. These expected ADDs and DELs are different from those in my last insight.

EQD | Hang Seng Index (HSI) WEEKLY Deep-But-Brief Pullback

The Hong Kong Hang Seng Index (HSI) last week closed strongly up. This week it’s pulling back, but MRM pattern readings forecast a very short-lived pullback (-1 to -2 weeks).
The suggested strategy is: let the index play out its pullback (warning: it can be volatile) and then enter LONG trades when the probability is good.
Suggested support price areas are between 18965 (Q2) and 18732 (Q3) – or this Friday at Close (as long as the close is negative).

Investigating HMM’s Latest Bond Conversion Situation for a Shorting Setup

Those that the local market is particularly interested in are the 192nd convertible bonds (CB) held by KDB, along with the 193rd bonds with warrants (BW) owned by KOBC.
These two bonds’ call option exercise date is September 25th. Upon conversion of these bonds, 200M new shares will be issued (41% of SO and a 30% dilution).
The key is the trade-off between not disrupting the selling process and avoiding any breach of trust. The prevailing local sentiment suggests that KDB and KOBC will choose stock conversion.

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Jul 18

Daily Brief Event-Driven: Nidec (6594) Goes Hostile On Takisawa Machine Tool (6121) – I’ve Got 🍿🍿 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Nidec (6594) Goes Hostile On Takisawa Machine Tool (6121) – I’ve Got 🍿🍿
Seizing Shorting Opportunities on Krafton as ARM Seeks Anchor Investors
Keisei Electric: Valuation Distortion Set to Unravel with Fantasy Springs’ Opening in Spring 2024
Quiddity Leaderboard F100/250 Sep 23: Two F100 Change and Three F250 Changes Likely
Quiddity Leaderboard-DAX Sep 23: SHORT Sartorius LONG Merck Trade STILL Interesting
Inflexion/DWF: Compelling Value

Nidec (6594) Goes Hostile On Takisawa Machine Tool (6121) – I’ve Got 🍿🍿

Last year Nidec Corp (6594 JP) approached machine tool maker Takisawa Machine Tool (6121 JP) interested in an integration with their sub. Takisawa said “Talk to the hand.”
Now Nidec – a blue chip (from Kyoto no less, which traditionally abhors hostile activity) – has gone hostile on Takisawa bidding 65-100% depending how you see undisturbed.
Lots of moving parts on this one, but in the end, Retail probably decides this.

Seizing Shorting Opportunities on Krafton as ARM Seeks Anchor Investors

One noteworthy aspect is SK Square’s strategic move towards gradually shifting its investment portfolio from platform businesses to companies within the semiconductor supply chain.
Given SK’s aim to acquire a 1-2% stake as an anchor investor in ARM, selling the Krafton stake is necessary to secure sufficient funds for the potential ARM investment.
We may consider positioning to capitalize on SK Square’s potential block deal for its Krafton stake, aligning with the schedule for selecting anchor investors in August for the ARM listing.

Keisei Electric: Valuation Distortion Set to Unravel with Fantasy Springs’ Opening in Spring 2024

By Oshadhi Kumarasiri

Since the announcement of the proposed Tokyo Disney Sea expansion in 2015, Keisei Electric Railway Co (9009 JP)‘s price perfromance has significantly diverged from Oriental Land (4661 JP)‘s price performance.
The valuation disparity may result from the Disney Sea expansion’s impact, possibly due to Keisei Electric’s value-oriented investor base.
Fantasy Springs’ opening could resolve the valuation distortion, leading to potential rewards in a Long Keisei Electric and Short Oriental Land trade.

Quiddity Leaderboard F100/250 Sep 23: Two F100 Change and Three F250 Changes Likely

In this insight, we take a look at the potential index changes for F100 and F250 in the run up to the September 2023 Rebalance.
I currently expect two changes for the F100 index and three changes for the F250 index.
As always, there are several names lurking just outside the borders and could be involved in index changes in September 2023 if there are sharp price changes.

Quiddity Leaderboard-DAX Sep 23: SHORT Sartorius LONG Merck Trade STILL Interesting

In this insight, we take a look at the names leading the race to become ADDs/DELs for the DAX, MDAX, and SDAX Indices in the September 2023 Rebalance.
As things stand, I do not see any changes for the DAX index as-is, but there are couple of names requiring only small price gains to trigger Fast Entry changes.
I see one change between MDAX and SDAX and one separate ADD/DEL for the SDAX index in the September 2023 rebalance.

Inflexion/DWF: Compelling Value

DWF Group (DWF LN) is discussing with Inflexion regarding a 100p/share offer (£342 million implied equity value, 53% premium, 8.2x Fwd P/E, but 18% discount to IPO price). PUSU is 7 August.
Spread to the offer price is 16.2%. The market is pricing a 53% chance to complete the deal, which seems low. Poor cash generation and leverage are already known.
The shares trade at 6.7x Fwd P/E, 7.6% dividend yield and 18.6% FCF yield (IBES estimates). Considering that management has said it would recommend the offer, my TP is 100p.

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Jul 17

Daily Brief Event-Driven: SK Telecom (017670 KS): Foreign Room Increase Has Implications and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

SK Telecom (017670 KS): Foreign Room Increase Has Implications
Merger Arb Mondays (17 Jul) – Chindata, Eoflow, JSR, IMAX, Mason, Estia, Musgrave, Origin, InvoCare
Lutronic Tender Offer by Hahn & Company: 2nd Round
Quiddity Leaderboard ASX Sep 23: Intra-Review Replacement for BKL and Many Other Expected Changes
EQD | KOSPI 200 Index WEEKLY Rising: How Far Can It Go?
EQD | Nikkei 225 (NKY) WEEKLY Falling: Support (Short-Term)
Liquid Universe of European Ordinary and Preferred Shares: July‘23 Report

SK Telecom (017670 KS): Foreign Room Increase Has Implications

Foreign investors have been selling SK Telecom (017670 KS) for over a year now. That has taken foreign room from near zero to close to 15% now.
That could mean index inclusion for SK Telecom (017670 KS) with timing dependent on when the 15% foreign room threshold is crossed.
SK Telecom (017670 KS) has performed in line with KT Corp (030200 KS) but trades at higher valuations on most parameters.

Merger Arb Mondays (17 Jul) – Chindata, Eoflow, JSR, IMAX, Mason, Estia, Musgrave, Origin, InvoCare

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), Chindata Group (CD US), ENM Holdings (128 HK), Estia Health (EHE AU), Poly Culture Group Corp H (3636 HK), Costa Group Holdings (CGC AU).
Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Toyo Construction (1890 JP), Kenedix Residential Investment (3278 JP), Penguin International (PBS SP), Challenger Technologies (CHLG SP).

Lutronic Tender Offer by Hahn & Company: 2nd Round

According to local media (Seoul Economic Daily), Hahn & Company plans to make a second round of tender offer for Lutronic Corp, in order to meet the delisting requirements.
The tender offer price is 36,700 won, the same as the first tender offer price.
We believe that Hahn & Co is likely to successfully complete this second round of tender offer of Lutronic and it is likely to be delisted in the coming months.

Quiddity Leaderboard ASX Sep 23: Intra-Review Replacement for BKL and Many Other Expected Changes

In this insight, we take a look at the potential index changes for ASX 300, 200, 100, 50, and 20 in the run up to the September 2023 Rebalance.
Blackmores Ltd (BKL AU) could get deleted from the index family, triggering intra-review changes in the next few days.
Including the intra-review changes, ASX 300 could see 12 ADDs and 10 DELs, ASX 200 could see 4 changes, and ASX 100 could see one change between now and September.

EQD | KOSPI 200 Index WEEKLY Rising: How Far Can It Go?

A previously published insight correctly highlighted an high-probability opportunity to go LONG and join the KOSPI 200‘s current multi-month Bull run.
The index closed the week strongly up, now we want to evaluate how far this new leg up could go: a total of +3/+4 weeks up, price targets =359-385.
Holders of KOSPI 200 LONG positions: Covered Calls can be written at Strikes between 346 and 360, expiry August 10th (4 weeks). A pullback is highly probable from 360.

EQD | Nikkei 225 (NKY) WEEKLY Falling: Support (Short-Term)

Nikkei 225 (NKY INDEX) has pulled back from its peak. Direction currently unclear but last week’s positive Close was super weak (+0.1%) , may lead to lower prices this week.
If the index falls this week, a -1 or -2 weeks down is the most common pattern, followed by a rebound. Reversal probability is =75% for -2 weeks down.
Valid support levels for buy-the-dips are between 32067 and 31554. If lower, up to -3 weeks down this pattern is still bullish, from -4 weeks it turns bearish.

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

Since mid-June, spreads have generally widened across our liquid universe (10 have widened, 8 widened, 1 at same level).
Recommended trades long ordinary / short preferred shares: Fuchs, Henkel, Schindler, SSAB Svenska Stal.
Recommended trades long preferred / short ordinary shares: Carlsberg, Ericsson, Media-for-Europe, Sixt, VW, Grifols, Atlas Copco.

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Jul 16

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

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Index Rebalance & ETF Flow Recap: ASX, Chinext, URA, Korea Stocks, NKY
Last Week in Event SPACE: Celltrion, Fast Retailing, Canon, Costa, Chindata
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Summer Lull

Index Rebalance & ETF Flow Recap: ASX, Chinext, URA, Korea Stocks, NKY

Busy week in India with the adhoc changes to the NIFTY, NSE Nifty Next 50, S&P BSE SENSEX and Nifty Bank due to the HDFC Limited and HDFC Bank merger.
The IDX could announce the changes to the IDX30, LQ45 and IDX80 indices in the coming week, though there is no firm schedule for announcements.
Yet another week of inflows to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF and outflows from the Hang Seng H Share Index ETF (2828 HK).

Last Week in Event SPACE: Celltrion, Fast Retailing, Canon, Costa, Chindata

According to Invest Chosun, Celltrion Inc (068270 KS) plans to submit a merger registration statement to the KRX in July, with Mirae Asset Securities acting as the lead underwriter.
Fast Retailing (9983 JP) investors are in a conundrum. The stock is doing well. With one quarter to go, the company just raised its full-year EPS target by 8.3%.
Canon (7751 JP)‘s most recent buyback should be done now-ish. They have been ~15-20% of volume over the past month. The Trade would be short Canon vs Ricoh (7752 JP).

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Summer Lull

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 15

Daily Brief Event-Driven: KRX’s Revised CFD Oversight Guidelines & Ongoing Suspicious Incidents and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

KRX’s Revised CFD Oversight Guidelines & Ongoing Suspicious Incidents

KRX’s Revised CFD Oversight Guidelines & Ongoing Suspicious Incidents

The important point is that the regulations also incorporate a provision mandating the disclosure of the actual end traders’ identities when brokerages engage in CFD transactions disguised as proprietary trading.
Recent suspicious incidents raise concerns because they are carried out through brokerages’ proprietary trading practices, making them relatively more difficult for local regulatory authorities to detect and monitor.
We need to closely monitor the market’s abnormal volatility following the strengthened new rules on CFDs and carefully consider the setup for responding to these changes.

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Jul 14

Daily Brief Event-Driven: Canon (7751) Buyback Almost Done and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Canon (7751) Buyback Almost Done, TPX Selldown to Come = Trade Vs Ricoh or Basket
IMAX China (1970 HK): Parent Privatisation
Fast Retailing UPs Forecasts, Which Creates A Sell/Short Opportunity
IMAX China (1970 HK): IMAX Corp’s Privatisation Offer
Will Hana Financial Acquire KDB Life Insurance?
EQD | S&P/ASX200: Ideas to Profit From a Directionless Market

Canon (7751) Buyback Almost Done, TPX Selldown to Come = Trade Vs Ricoh or Basket

Canon Inc (7751 JP) announced a second buyback this fiscal year on 15 June. As discussed here previously, Canon buybacks are short, sharp, and sweet.
The recent one should be done imminently (15 May start ended 13 July). 16 June start? (Note: Canon reports buyback results at 3pm local time, and did not report today).
This time we have a double-setup with buyback ending and a large TOPIX sell on Canon on 28 July.

IMAX China (1970 HK): Parent Privatisation

This morning (13 July), IMAX China Holding (1970 HK) announced a take-private transaction from its parent IMAX Corp (IMAX US) at HK$10/share.
The Offer price is a 9.65% premium to last close but a 39.47% premium over the closing price on the last full trading day. Evidently, there was news leakage.
IMAX US holds 71.63% in IMAX China, therefore the blocking stake at the Schene Meeting is 2.837% of shares out.

Fast Retailing UPs Forecasts, Which Creates A Sell/Short Opportunity

Fast Retailing (9983 JP) investors are in a conundrum. The stock is doing well. With one quarter to go, the company just raised its full-year EPS target by 8.3%.
It also raised its H2 dividend by 20+% so the full-year div will be more than 20% higher than previously forecast and up 35+% since last year. All good.
Except for the selling. Potentially lots of selling. And more outperformance begets more selling. Then even more selling in 2024. And 2025? What about 2025? More outperformance begets more selling.

IMAX China (1970 HK): IMAX Corp’s Privatisation Offer

IMAX China Holding (1970 HK) disclosed a scheme privatisation offer from IMAX Corp (IMAX US) at HK$10.00 per share, a 39.5% premium to the undisturbed price (HK$7.17 on 10 July).
The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake.
The offer price is final. While the offer price is light compared to peer multiples and historical share prices, the deal will likely succeed.

Will Hana Financial Acquire KDB Life Insurance?

On 13 July, it was reported in the local media that the Korea Development Bank selected Hana Financial as the preferred bidder for the sale of KDB Life Insurance.
The potential overpaying for KDB Life and the rising delinquency rates of loans by all the major banks in Korea are likely to result in continued underperformance of Hana Financial.
If Hana Financial is able to acquire KDB Life Insurance, this would boost Hana Financial as the 8th largest life insurance company in Korea in terms of asset size.

EQD | S&P/ASX200: Ideas to Profit From a Directionless Market

The S&P/ASX 200 INDEX has been stuck in the 7000-7400 range for the past 16 weeks.
If the index continues to be trendless for some more weeks, it’s possible to profit from repeatedly writing Covered Calls against ASX 200 index holdings.
Strike target areas for Covered Calls begin in the 7319-7409 (July 20 expiry). Deeper OTM Strikes are safe, but the premiums are smaller.

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Jul 13

Daily Brief Event-Driven: July TOPIX FFW Rebal – Bigger Than Expected and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

July TOPIX FFW Rebal – Bigger Than Expected
Korea – A Look at Ecopro, Kumyang & JYP Entertainment
EQD | S&P500 E-Mini (ES) DAILY SHORT, Speculative High-Probability Trade
Industrivärden H1, Discount and Target NAV

July TOPIX FFW Rebal – Bigger Than Expected

Last Friday, the FFW changes for the TOPIX July Free Float Weight Review were announced. There have also been other recent announcements creating flows on 30 July.
Some of these other recent announcements represent a possible change in ad hoc methodology.
Total Flow for 30 July is ~$3.3bn a side driven by selling flows (3/4 of the buy flows are reverse funding). $2.1bn of selling is > 3 days ADV.

Korea – A Look at Ecopro, Kumyang & JYP Entertainment

We take a look at Ecopro Co Ltd (086520 KS), Kum Yang (001570 KS) and Jyp Entertainment (035900 KS) since they appear to be on investor radars.
Foreign investors have been buyers while retail have been sellers in Ecopro Co and Kum Yang over the last month, while foreign investors have continued to buy Jyp Entertainment.
Short interest on all stocks has dropped over the last month, though there has been a recent tick up in shorts on Jyp Entertainment (035900 KS).

EQD | S&P500 E-Mini (ES) DAILY SHORT, Speculative High-Probability Trade

The S&P500 E-Mini (ES) is approaching a DAILY resistance level at a point in time where it could perform a quick reversal – a SHORT trade opportunity.
Watch the 4483-4525 price area, today is the 3rd consecutive day up, the reversal could begin in that area, today or tomorrow.
The probability for a quick reversal, after 3 days up, in the 4483-4525 price area, is between 67% to 79%, depending on the resistance levels reached.

Industrivärden H1, Discount and Target NAV

The discount to NAV of C shares is 7.4%, well below the “usual” 15% conglomerate discount, and also below the 5-year average of 10%.
C shares are trading at a 0.3% discount to A shares. The reduction in the discount could be driven by acquisitions by the Lundbergs of C shares.
My target NAV is SEK 158,144 million, a 18% increase. My target TP for the C shares of Industrivärden, assuming a 10% discount to NAV, is SEK 329.5 (15% higher).

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Jul 12

Daily Brief Event-Driven: LG Energy – Quick Thoughts on US$2bn EB Offering by Parent and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

LG Energy – Quick Thoughts on US$2bn EB Offering by Parent
LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion
LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations
Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion
Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes
Chindata: Bain’s Move Spurs China Merchants Into Action
Shougang Fushan Resources (639 HK): Partial Offer at HK$2.40
POSCO DX Could Switch Its Listing from KOSDAQ to KOSPI by End of 2023

LG Energy – Quick Thoughts on US$2bn EB Offering by Parent

By Sumeet Singh

LG Chem Ltd (051910 KS) aims to raise around US$2bn via offering 2028 and 2030 puttable USD exchangeable bonds for LG Energy Solution (373220 KS) shares.
LG Chem (LGC) had been rumoured to sell down some of its stake in LG Energy Solutions (LGES), hence, this deal will remove the overhang on LGES.
In this note, we have a quick look at the deal and provide our thoughts on the structure.

LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion

On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion to raise funs to expansion into its rechargeable battery materials.
Investors in LG Energy Solution will likely have a more positive view of this EB issue rather than a block sale of common shares, because of lack of price discount.
We believe LG Chem is not done in selling its shares of LGES as we think LG Chem is likely to sell additional 5-10% stake in LGES in 3-5 years.

LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations

The exchange prices are ₩687,500 and ₩715,000 at a premium of 25-30% to the closing price of LG Energy Solution today.
The commencement date for both the 5-year and 7-year bonds’ exchange is August 28th.
We should design a strategic setup that targets a band play within the current price range and the low ₩700,000 range.

Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion

Plus Alpha Consulting (4071 JP) listed on TSE Growth at end-June 2021 at ¥2300/share, which was 90x the trailing fiscal year’s earnings. but only about 65x then-current year earnings.
The stock popped 20+% on Day 1 to close ¥2803. Last Friday, two years and 13% higher at ¥3185/share, the company announced a Secondary Offering and move to TSE Prime.
It’s a big offering. It’s a smaller TOPIX inclusion event. Next spring we’ll see more upweights.

Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes

Based on prices and turnover from 10 July, there could be one deletion from the index in July. Plus there will be capping and float changes.
There are four stocks that meet the inclusion criteria but all are non-pure play companies and the index is already at the limit of 15 non-pure play companies.
There will be a large impact on a lot of stocks but the flows are not very large due to the limited assets tracking the index.

Chindata: Bain’s Move Spurs China Merchants Into Action

My read of Bain’s Offer last month, was a tactic to flesh out a competing Offer. It seemed unlikely Bain would get the regulatory approval to take Chindata (CD US) private.
Now state-backed China Merchants Capital Holdings International Ltd. has made a non-binding offer of $9.20/ADS, compared to $8/ADS from Bain.
This Offer is indicative. But an SOE taking over data centres makes a lot of sense.

Shougang Fushan Resources (639 HK): Partial Offer at HK$2.40

Shougang Fushan Resources (639 HK) has launched a partial offer to acquire a maximum of 125.0m shares (2.47% of outstanding) at HK$2.40 per share, a 17.6% premium to the undisturbed price.
The partial offer is conditional on approval by more than 50% of disinterested shares and the shareholder approval of the whitewash waiver. There is no minimum acceptance condition.
The 2020 partial offer, which was at a 9.3% premium to the undisturbed price and -17% below the current offer, was overwhelmingly approved. Therefore, the current offer should be approved.

POSCO DX Could Switch Its Listing from KOSDAQ to KOSPI by End of 2023

On 10 July, it was reported in the Hankyung Business Daily that Posco DX (022100 KS) could switch its listing from KOSDAQ to KOSPI by the end of 2023.
One of the key reasons for the change in the listing venue from KOSDAQ to KOSPI is that POSCO Group believes this could lead to improved valuations for the company.
We believe the valuations of Posco DX have become too high. Therefore, we have a Negative View of Posco DX at current prices.

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Jul 11

Daily Brief Event-Driven: ChiNext/ChiNext50 Index Rebalance Preview: Potential Changes & Basket Performance and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

ChiNext/ChiNext50 Index Rebalance Preview: Potential Changes & Basket Performance
TOPIX Inclusions: Who Is Ready (Jul 2023)
JSR (4185 JP) Takeover – Why So Wide? FUD and Flows
Chindata (CD US): China Merchants Capital’s Rival Privatisation Offer
S&P/ASX Index Rebalance Preview: Potential Changes in September
Costa – Another Bite at the Apple for Paine Schwartz?
Hyundai G.F. Holdings: A Holdco Creation With In-Kind Investment in HDS & Hyundai Green Food
Posco DX’s KOSPI Transfer Listing: Hankyung Exclusive Report
Opportunistic Deal with Grounds for a Bump-Up

ChiNext/ChiNext50 Index Rebalance Preview: Potential Changes & Basket Performance

One third of the way through the review period, we forecast 10 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in December.
Passive trackers are estimated to trade around +/-0.5 days ADV on most of the potential adds/deletes, though there are some deletes that will have over 1 day ADV to sell.
The potential inclusion to one or both indices have outperformed the potential deletes by a huge margin in the 5 months. We’d wait for a pullback to re-enter positions.

TOPIX Inclusions: Who Is Ready (Jul 2023)

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
Anycolor (5032 JP) and Lifedrink (2585 JP) have already confirmed their moves to the Prime Market and are expected to have TOPIX Inclusion Events at the end of July 2023.
More recently, Plus Alpha Consulting (4071 JP) announced their move to the Prime Market and are likely to have a TOPIX Inclusion Event at the end of August 2023.

JSR (4185 JP) Takeover – Why So Wide? FUD and Flows

In the last week of June, Japanese government-affiliated Japan Investment Corp (“JIC”) announced it would take over JSR Corp (4185 JP). A “surprise” but perhaps not totally.
It traded tight, then it traded back out. Then worse. Then worse again. There were good reasons for this. There were perhaps less good reasons too.
FUD and Flows mean that it is likely to continue to trade wide for the near future.

Chindata (CD US): China Merchants Capital’s Rival Privatisation Offer

China Merchants Capital (CMC) disclosed a competing preliminary non-binding proposal to acquire Chindata Group (CD US) at US$9.20 per ADS, a 15.0% premium to Bain Capital’s US$8.00 per ADS offer.
Astonishingly, Chindata did not publicly disclose the CMC offer, which was sent to the special committee on 9 June, i.e., 34 days ago.
CMC must get Bain Capital’s support due to its 92.34% voting rights. The presence of a credible competing proposal will require Bain Capital to match CMC’s offer.

S&P/ASX Index Rebalance Preview: Potential Changes in September

We forecast 22 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
Some of the changes are high probability while others are close to cutoffs. The impact of passive trading will be pretty large on a lot of stocks.
Short interest on the potential deletes indicates some pre-positioning but there should still be a fair bit more to do.

Costa – Another Bite at the Apple for Paine Schwartz?

Back in October 2022, Costa Group (CGC AU), one of Australia’s largest fresh fruit and vegetable producers, was understood to have been approached by its former major shareholder, Paine Schwartz.
This was discussed in Costa Group’s Low-Hanging Fruit: Paine Schwartz Renews Interest. At the time, media reports speculated Paine Schwartz had no current intention of making a takeover bid.
Last week, Paine Schwartz made an A$3.50/share NBIO by way of a Scheme. Paine Schwartz currently holds 14.84%.

Hyundai G.F. Holdings: A Holdco Creation With In-Kind Investment in HDS & Hyundai Green Food

Last week, Hyundai Dept Store Group announced that it will establish a single holding company structure with Hyundai G.F. Holdings controlling all of the group affiliates.
Hyundai G.F. Holdings plans to make an in-kind investment in Hyundai Department Store (HDS) to make Hyundai Green Food and Hyundai Department Store as subsidiaries.
This in-kind investment in HDS and Hyundai Green Food by Hyundai G.F. Holdings is not a deal that adds clear-cut value to Hyundai G.F. Holdings’ shareholders.

Posco DX’s KOSPI Transfer Listing: Hankyung Exclusive Report

Posco DX has begun the selection process for its lead underwriter for its transfer to the KOSPI market and plans to complete the transfer listing within this year.
Considering the recent retail insanity witnessed in most local large-cap battery stocks, Posco DX will likely experience further intensified short-term price fluctuations with this new development as a catalyst.
The likely replacement for Posco DX’s KOSDAQ 150 spot is Konan Technology, which has become a top reserved issue in Posco DX’s GICS sector (Information Technology) in the previous review.

Opportunistic Deal with Grounds for a Bump-Up