Event-Driven

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

By Douglas Kim

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

Prior to announcement, net cash of Boiron SA (BOI FP) represented 1/3rd of market cap. Most of that cash will now be distributed, conditional on deal success.
Although the premium is 36%, at 9.2x EV/Fwd EBIT, the offer seems cheap vs. comparables. The deal is neutral for the Boirons, whom will get a c.€126 million special dividend.
The offer facilitates the entry of a private equity healthcare specialist. Delisting requires acceptances from 57.6% of the float. Gross spread is +0.4%. Investors may require an offer around €52.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Jul 10

Daily Brief Event-Driven: Socionext Placement – Valuation More Reasonable but past Secondary Offerings Have a Mixed Record and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Socionext Placement – Valuation More Reasonable but past Secondary Offerings Have a Mixed Record
Merger Arb Mondays (10 Jul) – JSR, Yachiyo, InvoCare, Costa, Musgrave, Metro Pacific, Healthway
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Taking a Breather
EQD | Hang Seng Index (HSI) WEEKLY Looking for Short-Term Direction

Socionext Placement – Valuation More Reasonable but past Secondary Offerings Have a Mixed Record

By Sumeet Singh

Three shareholders of Socionext (6526 JP) aim to raise around US$1.4bn via selling all of their shares in Socionext.
We have covered the background of the deal in our earlier note, Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains.
In this note, we talk about the updates and look at the performance of some of the past Japan deals.

Merger Arb Mondays (10 Jul) – JSR, Yachiyo, InvoCare, Costa, Musgrave, Metro Pacific, Healthway

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), ENM Holdings (128 HK), Chindata Group (CD US), Estia Health (EHE AU), Poly Culture Group Corp H (3636 HK), Costa Group Holdings (CGC AU).
Lowest spreads – Healius (HLS AU), Hailan Holdings (2278 HK), Liontown Resources (LTR AU), Toyo Construction (1890 JP), Oishi Group PCL (OISHI TB), Yachiyo Industry (7298 JP), Penguin.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Taking a Breather

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

EQD | Hang Seng Index (HSI) WEEKLY Looking for Short-Term Direction

By Nico Rosti

The Hong Kong Hang Seng Index (HSI INDEX) has been in a downtrend since January 2018. Long-term direction unclear, but the WEEKLY period is mildly OVERSOLD, it may bounce soon.
The case for a LONG trade is valid if the market does not fall > 2 consecutive weeks from June 30th’s Close (18916.43). High-probability LONG trades from 17786.
SHORT trade strategy possible but requires patience: if the market rises, it could rise for 2-3 weeks, based on MRM’s pattern readings. Better wait and short that scenario, not earlier.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Jul 09

Daily Brief Event-Driven: KRX Official: Key Points of Earlier Derivatives Market Opening & Market Impacts to Consider and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

KRX Official: Key Points of Earlier Derivatives Market Opening & Market Impacts to Consider
Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex

KRX Official: Key Points of Earlier Derivatives Market Opening & Market Impacts to Consider

The derivatives market will commence trading 15 minutes earlier, starting from July 31st. On July 7, KRX published guidelines that consolidate crucial factors for traders to consider regarding this alteration.
From a theoretical standpoint, the early discovery of derivative prices influenced by pre-market external variables can help mitigate excessive shocks in the spot market.
Considering suspected matched order fraud, particularly involving large-cap battery stocks, we should anticipate attempts to further exacerbate volatility in the early stages of the spot market using this earlier opening.

Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex

Hang Seng has announced the conclusions of the market consultation. Primary-listed foreign stocks will be eligible for inclusion in the HSI INDEX and HSTECH INDEX from the December rebalance.
The coming week has the rebalances for the NIFTY Index, Nifty Next 50 Index, Nifty Bank Index and SENSEX Index as a result of the HDFC Limited/ HDFC Bank merger.
There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and outflows from Hang Seng H Share Index ETF (2828 HK) during the week.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Jul 07

Daily Brief Event-Driven: Delisting of 5 Korean Preferred Stocks on 17 July and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Delisting of 5 Korean Preferred Stocks on 17 July
Quiddity Leaderboard for Hang Seng Index Sep 23: Beigene Vs Peers An Interesting Trade
Hyundai G.F. Holdings’ Stock Swap with Hyundai Green Food & Hyundai Dept Store
EQD | KOSPI 200 Index WEEKLY: Time to Go LONG?

Delisting of 5 Korean Preferred Stocks on 17 July

By Douglas Kim

The Korea Exchange officially announced today that the following five preferred stocks will be delisted on 17 July.
These five stocks including Samsung Heavy Industries Pref, SK Networks Pref, DB Hitek Pref, Hyundai BNG Steel Pref, and Heungkuk Fire & Marine Insurance Pref 2B fell sharply today.
Despite the warning by the Korea Exchange since end of May, it was not until today that these five stocks dropped sharply. On average, these five stocks fell 44% today.

Quiddity Leaderboard for Hang Seng Index Sep 23: Beigene Vs Peers An Interesting Trade

In this insight, we take a look at some of the names with high likelihood of being involved in index changes for the Hang Seng Index in September 2023.
The index changes for the September 2023 rebalance could be announced in mid-August and implemented in early-September.
Although the index methodology is highly subjective and predicting index changes is extremely tricky, the HSI is an important index in the region and here are our thoughts for September.

Hyundai G.F. Holdings’ Stock Swap with Hyundai Green Food & Hyundai Dept Store

Hyundai G.F. Holdings will conduct a tender offer to Hyundai Green Food and Hyundai Dept Store shareholders. The tendering period is August 11-September 1.
The target volume is 10,125,700 (Hyundai Green Food) and 4,669,556 (Hyundai Dept Store), corresponding to 29.89% and 19.95% of the outstanding shares, respectively.
We should approach this event trading with caution, taking into account the risk of an unhedged setup while monitoring the potential widening of the spread opening during the tendering period.

EQD | KOSPI 200 Index WEEKLY: Time to Go LONG?

By Nico Rosti

The Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) has been (mildly) falling for 4 weeks, it may be now ready to resume its multi-month uptrend.
Friday July 7th would be a good time to enter this LONG trade at support prices between 337 and 333 (ideal range; it’s riskier below 333).
Hedge your bets in case the market keeps falling more next week and the following (it shouldn’t… but it can).

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Jul 06

Daily Brief Event-Driven: And Now For Something Truly Offensive – Honda Pays <0.5x Book for Yachiyo and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

And Now For Something Truly Offensive – Honda Pays <0.5x Book for Yachiyo
Impact of Allowing Negotiated Block Trades for Eight Futures Spreads, Incl. SSF SP
SENSEX Ad Hoc Rebalance: JSW Steel Replaces HDFC

And Now For Something Truly Offensive – Honda Pays <0.5x Book for Yachiyo

Every now and then, you get a tender offer proposal which is truly offensive. This is one.
Yes, existing ICE-related autoparts makers are under the cosh as they face down obsolesence induced by competition from EVs. Fuel tank makers like Yachiyo are at risk.
But this bid started at <0.3x book, and ended at <0.5x book, despite significant net financial assets and lots of unrecognised DTAs.

Impact of Allowing Negotiated Block Trades for Eight Futures Spreads, Incl. SSF SP

It is highly probable that SP trading will increase after July 31st, as this will provide a more conducive environment for the seamless rollover of large positions.
Considering the actual impact on the market, we may have to pay more attention to the potential surge in trading volume for single-stock futures SP.
We see a rise in aggressive position setups in event trading, including rights offerings. This may lead to a more substantial price impact by increasing the intensity of such trading.

SENSEX Ad Hoc Rebalance: JSW Steel Replaces HDFC

Following HDFC Limited (HDFC IN)‘s delisting, JSW Steel Ltd (JSTL IN) will be added to the S&P BSE SENSEX Index (SENSEX INDEX EQUITY) at the close on 12 July.
The change was largely expected, but passive trackers need to buy over 5 days of ADV and nearly 12 days of delivery volume of JSW Steel Ltd (JSTL IN) .
The HDFC Limited (HDFC IN) delisting could help Wipro Ltd (WPRO IN) in avoiding deletion from the S&P BSE SENSEX Index (SENSEX INDEX EQUITY) in December.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Jul 05

Daily Brief Event-Driven: Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?
Costa Group (CGC AU): Paine Schwartz Wants It Back
Arteria Networks (4423) Tender Launches 5 July.
HDFC/HDFC Bank Merger: Foreigners Sell HDFC; LTIM in NIFTY; JSP in NEXT50
Toyo Construction (1890) Plans Governance Review, Promises Neutrality on a YFO TOB Proposal Decision
Yachiyo Industry (7298 JP): Honda’s Pre-Conditional Tender Offer
Costa Group (CGC AU): Paine Schwartz’s Indicative Proposal
Quiddity Leaderboard BSE/SENSEX Dec 23: HDFC Intra-Review Replacements & Other Expected Changes
Hainan Meilan’s (357 HK)’s Arbitration Case Is Not Without Merit
SSE50 Index Rebalance Preview: Potential Adds Powering Higher

Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?

We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.

Costa Group (CGC AU): Paine Schwartz Wants It Back

Costa Group Holdings (CGC AU) listed in 2015 when Paine & Partners sold 40% of its stake in the company.
Paine Schwartz Partners bought a 13.84% stake last year, increased it in March, and has now made an offer to buy out the remaining shares at A$3.5/share in cash.
Short interest was over nearly 11 days of ADV to cover and short covering could take the stock higher sooner. This is a buy here.

Arteria Networks (4423) Tender Launches 5 July.

Seven weeks ago, Marubeni Corp (8002 JP) and Secom Co Ltd (9735 JP) announced a joint deal to acquire the rest of ARTERIA Networks Corp (4423 JP).
As I wrote in the previous piece, the premium was good, but the price was not great. The Board rejected the price, then agreed when the bidders wouldn’t go further.
Now we have a deal and the Tender Offer starts 5 July. It was cheap to start. It’s still too cheap. But this one is tough to block.

HDFC/HDFC Bank Merger: Foreigners Sell HDFC; LTIM in NIFTY; JSP in NEXT50

HDFC Limited (HDFC IN) will stop trading at the close on 12 July and will be deleted from all indices at the close on that day.
As expected, LTIMindtree (LTIM IN) will be added to the NIFTY Index while Jindal Steel & Power (JSP IN) will be added to the NSE Nifty Next 50 Index.
Importantly, HDFC Limited (HDFC IN)‘s foreign shareholding has dropped over the quarter ended 30 June and that has index implications for future passive flows to HDFC Bank (HDFCB IN).

Toyo Construction (1890) Plans Governance Review, Promises Neutrality on a YFO TOB Proposal Decision

The Nikkei has an article today with details of an interview with new Toyo Construction (1890 JP) Chairman Yoshida and President Obayashi. There will be a 2-3 month governance review.
It will review decision-making process, “profit management” (利益管理), and business investment decisions (事業への投資判断). Chairman Yoshida had a quote on neutrality on a YFO proposal. My wording there was carefully chosen.
The President also said they expect ongoing synergies with Infroneer, and will maintain MTMP/Mitsui OSK Partnership management plans. Their words were chosen carefully too.

Yachiyo Industry (7298 JP): Honda’s Pre-Conditional Tender Offer

Yachiyo Industry (7298 JP) has recommended Honda Motor (7267 JP)’s pre-conditional tender offer of JPY1,390 per share, a 17.5% premium to the undisturbed price.
Post-Completion, Honda will transfer a 81% stake to Samvardhana Motherson Automotive Systems Group BV. The pre-conditions relate to various country approvals (China, the US, Brazil, and India).
The offer is expected to open in October. Achieving the 66.67% minimum ownership ratio requires a 32.6% minority acceptance rate which is doable as the offer is reasonable.

Costa Group (CGC AU): Paine Schwartz’s Indicative Proposal

Costa Group Holdings (CGC AU) has disclosed an indicative non-binding proposal from Paine Schwartz Partners at A$3.50 per share (A$3.54 including potential interim dividend).
The Board has granted eight weeks of non-exclusive due diligence. The due diligence, which started on 6 June, ends on 1 August.
The offer price is attractive compared to peer multiples and historical trading ranges. At the current price of A$3.35, the gross spread is 4.5% (5.7% including dividend).

Quiddity Leaderboard BSE/SENSEX Dec 23: HDFC Intra-Review Replacements & Other Expected Changes

In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, and 200 Indices in the December 2023 Rebalance.
The HDFC/HDFC Bank Merger is expected to trigger index changes in the next few days and we take a look at our expectations for these intra-review changes.
Apart from that, I see no other changes for SENSEX in December 2023. However, there could be up to six changes for both BSE 100 and BSE 200.

Hainan Meilan’s (357 HK)’s Arbitration Case Is Not Without Merit

Back On 29 September 2019, Hainan Meilan International Airport (357 HK) entered into a subscription agreement with Hopu-affiliate Aero Infrastructure, for 200mn new H shares at HK$4.69/share.
That issuance failed as CSRC approval was not secured by the Long Stop. Hopu reckoned HMIA reneged on its duties to secure approval and lodged a notice of arbitration.
HKIAC recently agreed and opines HMIA did not use its best endeavours to complete the subscription. Hopu is seeking up to HK$6.962bn in compensation. Quite the overhang.

SSE50 Index Rebalance Preview: Potential Adds Powering Higher

Two thirds of the way through the review period, we see 10 potential adds/8 potential deletes in December. However, there can be a maximum of 5 changes at a review.
We estimate a one-way turnover of 5.8% at the December rebalance leading to a one-way trade of CNY 4.67bn. Index arb balances could increase the impact on the stocks.
The potential adds have outperformed the potential deletes over the last six months and there has been renewed outperformance over the last month.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Jul 04

Daily Brief Event-Driven: HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
United Malt/Malteries Soufflet: I’ll Drink To That!
EQD | Introducing the Market Reversal Matrix (MRM): Predict Trend Reversal with Bayesian Models
CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes
Musgrave Minerals (MGV AU): Ramelius’ Offer Edges past Westgold’s Offer
(Mostly) Asia M&A, June 2023: DDH1, Dali Foods, NWS Holdings, JSR Corp, Lutronic, Chindata
Healthway Medical (HMED SP): OUE Healthcare’s Delisting Offer

HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds

Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.

United Malt/Malteries Soufflet: I’ll Drink To That!

Back on the 28 March, United Malt Group Ltd (UMG AU) entered into a NBIO with Malteries Soufflet at an Offer Price of $5.00/share, a 45.3% premium to undisturbed.
After a lengthy due diligence process, the two companies have now entered into a binding agreement of A$5.00/share, by way of a Scheme. UMG’s board has unanimously recommended the bid.
The Offer is subject to FIRB and other regulatory approvals. Malteries Soufflet and UMG are the second and fourth-largest maltsters in the world.

EQD | Introducing the Market Reversal Matrix (MRM): Predict Trend Reversal with Bayesian Models

By Nico Rosti

A market-timing device that classifies historical trend patterns/reversals in “buckets”, to generate a “matrix” showing the market’s average trend reversal “behavior” at the end of each trend “type”.
A purely statistical approach: using Bayesian Models to determine the probability of DAILY or WEEKLY trend reversal at precise LONG/SHORT support prices at fixed points in time.
The analogy with the game of Blackjack: knowing the probability of a trend reversal can be 30% or 90% (not always =50%) can be a significant edge for the investor.

CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes

Two thirds of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.
The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.

Musgrave Minerals (MGV AU): Ramelius’ Offer Edges past Westgold’s Offer

Musgrave Minerals (MGV AU) has recommended a cash and scrip off-market takeover offer from Ramelius Resources (RMS AU) at 1 RMS share for every 4.21 MGV shares + A$0.04 cash.
RMS’ offer is attractive compared to adjusted exchange ratios and peer multiples. The offer, which has a 50.1% minimum acceptance condition, has secured commitments from shareholders representing 12.13% of shares.
At the last close, RMS’ offer is 14.9% higher than Westgold Resources (WGX AU)’s rival scrip off-market takeover offer of 1 WGX share for every 5.37 MGV shares.

(Mostly) Asia M&A, June 2023: DDH1, Dali Foods, NWS Holdings, JSR Corp, Lutronic, Chindata

For the month of June, 13 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$9bn.
The average premium for the new deals announced (or first discussed) in June was 42%.
This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

Healthway Medical (HMED SP): OUE Healthcare’s Delisting Offer

Healthway Medical Corp (HMED SP) received a delisting proposal from OUE Lippo Healthcare (IHC SP) at S$0.048 per share, a 45.5% premium to the undisturbed price (28 June).
The key conditions are HMED shareholder approval and the offeror and concert parties representing >50% of voting rights (satisfied due to irrevocables).
The offer price is attractive. The EGM is likely to be held in late September. The current price of S$0.046 implies a gross spread of 4.3%.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Jul 03

Daily Brief Event-Driven: Toyo Construction AGM : YFO Wins on Dramatic Foreign Shareholder Discontent and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toyo Construction AGM : YFO Wins on Dramatic Foreign Shareholder Discontent
HSCI Index Rebalance Preview and Stock Connect: The Final List for September
KRX’s Official Selection Results of SSF & SSO Adds/Deletes: New Rules & Trading Ramifications
United Malt (UMG AU): Malteries Soufflet’s Binding Offer
Merger Arb Mondays (03 Jul) – Dali Foods, Poly Culture, NWS, Yitai, JSR, DDH1, Silk Laser
CSI300 Index Rebalance Preview: Early Look at Potential Changes in December
Weekly Deals Digest (02 Jul) – JSR, Dali Foods, NWS, Poly Culture, Yitai, DDH1/Perenti, Tryt
Hong Kong CEO & Director Dealings: Red Star’s New Controlling Shareholder
Apollo/Applus: Somewhat Cheap Offer and First Mover Advantage

Toyo Construction AGM : YFO Wins on Dramatic Foreign Shareholder Discontent

In my piece Yamauchi Family Office Buys More Toyo; Toyo Claims More Malfeasance, ISS Supports YFO I said I thought YFO would lose, but it would be close.
I thought it hinged on the shape of the register. It turns out it did. And it turns out they won, and it was close. Analysis is presented.
What next? The new board takes its seats and may entertain a new takeover offer. I could see a buyout price a fair bit higher than here.

HSCI Index Rebalance Preview and Stock Connect: The Final List for September

There could be 25 inclusions, including many new listings, to the Hang Seng Composite Index (HSCI) in September. Another 6 stocks are close adds on liquidity and market cap.
We see 19 potential deletes and 2 close deletes on market cap, 5 potential deletes on prolonged trading suspension, and 2 close deletes on liquidity.
There are 8 potential deletions where holdings via Stock Connect are more than 20% of shares outstanding. There could be some unwinding of positions over the next couple of months.

KRX’s Official Selection Results of SSF & SSO Adds/Deletes: New Rules & Trading Ramifications

The latest update will feature the addition of 25 single stock futures, as well as five single stock options from KOSPI. Eight single stock futures will be removed.
The selection will now take place twice a year, in March and September. Also, the selection requirement includes being included in the KOSPI 200 and KOSDAQ Global.
The shortened selection cycle and the significant potential for the change range to vary based on index review results can indeed have a notable impact.

United Malt (UMG AU): Malteries Soufflet’s Binding Offer

The AFR reports that United Malt Group Ltd (UMG AU) has received a binding offer from Malteries Soufflet at A$5.00 per share, a 13.6% premium to the last close price.
The high spread reflected the risk of a no-deal or price cut due to the weak 1HFY23 results and lack of updates since the end of the 10-week due diligence.
The offer is conditional on shareholders and FIRB approval. Shareholders will be supportive and breathe a sigh of relief at receiving a binding offer with unchanged terms.

Merger Arb Mondays (03 Jul) – Dali Foods, Poly Culture, NWS, Yitai, JSR, DDH1, Silk Laser

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), United Malt Group Ltd (UMG AU), Chindata Group (CD US), ENM Holdings (128 HK), Tesserent Ltd (TNT AU), Poly Culture.
Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Toyo Construction (1890 JP), Musgrave Minerals (MGV AU), Metro Pacific Investments Co (MPI PM), Kenedix Residential Investment (3278 JP).

CSI300 Index Rebalance Preview: Early Look at Potential Changes in December

Two thirds of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
We estimate a one-way turnover of 1.98% at the December rebalance leading to a one-way trade of CNY 5.32bn.
The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last five months, though there is some near-term underperformance.

Weekly Deals Digest (02 Jul) – JSR, Dali Foods, NWS, Poly Culture, Yitai, DDH1/Perenti, Tryt

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 – Tryt Inc (9164 JP), Amman Mineral Internasional (1416286D IJ), Alibaba (ADR) (BABA US)‘s Cainiao & Cloud Intelligence Group, J&T Global Express (1936374D CH) IPOs.
Event-Driven developments – JSR Corp (4185 JP), Dali Foods Group (3799 HK), Nws Holdings (659 HK), Poly Culture Group Corp H (3636 HK), Yitai Coal, DDH1 (DDH AU).

Hong Kong CEO & Director Dealings: Red Star’s New Controlling Shareholder

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
The key stock mentioned in this regular insight is Red Star Macalline Group Corp (1528 HK).

Apollo/Applus: Somewhat Cheap Offer and First Mover Advantage

On 30 June, Apollo placed itself ahead of competitors with a €9.5/share cash offer for Applus Services SA (APPS SM), whose shares rose to €9.9, in the hope of a counter offer.
The market is capable of forcing Apollo to sweeten its proposal to reach 75% acceptances. Many risk arbitrageurs have positions in Applus and may not settle for the current premium.
This situation has been flagged for a while. If already long, it is worth holding for a possible better offer, which could come around €10/share, a 5.2% increase.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Jul 02

Daily Brief Event-Driven: Last Week in Event SPACE: Naspers/Prosus and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Last Week in Event SPACE: Naspers/Prosus, Swire Pacific, NTT, Aussie Tax-Loss Selling
Index Rebalance & ETF Flow Recap: KQ150, LQ45, PCOMP, HDFC/HDFCB, Delta Electronics, Redox IPO, AMFI
(Mostly) Asia-Pac Weekly Risk Arb Wrap: DDH1/Perent, NWS, Mandala Multifinance, JSR Corp, Silk Laser
The TSE’s New ‘Better’ Index: JPX Prime 150
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Chasing Stocks Higher

Last Week in Event SPACE: Naspers/Prosus, Swire Pacific, NTT, Aussie Tax-Loss Selling

The Naspers (NPN SJ) / Prosus (PRX NA) circularity was too complex. Lots of people hated it. It was actually easier than most thought, but optically was difficult to reconcile.
Swire Pacific (19 HK) was a clear buy: there is no justification for assigning a similar discount for cash from the US Coke ops as you would to unlisted ops
A residual NTT (9432 JP) individual small-holder shareholding tenure reward does not get split 25:1 when the stock gets split 25:1. It doesn’t mean much, but it’s an interesting artefact.

Index Rebalance & ETF Flow Recap: KQ150, LQ45, PCOMP, HDFC/HDFCB, Delta Electronics, Redox IPO, AMFI

The review period for a bunch of indices ended last week though the announcement of the changes will take 4-6 weeks.
There are no rebalance implementations in the coming week though focus will move to the implementation of the HDFC Limited/ HDFC Bank merger and index changes the following week.
There were big inflows to China focused ETF with a lot of money going into Semiconductor and Chip focused ETFs.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: DDH1/Perent, NWS, Mandala Multifinance, JSR Corp, Silk Laser

There are 47 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Five new deals this week: DDH1 (DDH AU), NWS Holdings (659 HK), Poly Culture Group Corp H (3636 HK), Mandala Multifinance (MFIN IJ), and JSR Corp (4185 JP).
Key updates took place forSilk Laser Australia (SLA AU) and Challenger Technologies (CHLG SP).

The TSE’s New ‘Better’ Index: JPX Prime 150

In April 2022, after long prep and considerable public comment as to desires and design, the TSE launched its new market segments designed to encourage governance and foreign investment.
At the time, the TSE wanted to showcase Japan’s best blue chips. In March, JPX announced JPX Prime 150, designed to make visible
In March 2023, JPX announced JPX Prime 150, to “make visible the leading Japanese companies that are estimated to create value.” Ambitious? Yes. Fated to fail? Probably. Badly constructed? Definitely.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Chasing Stocks Higher

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

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Jul 01

Daily Brief Event-Driven: End of Mandatory Lock-Up Periods for 41 Companies in Korea in July 2023 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

End of Mandatory Lock-Up Periods for 41 Companies in Korea in July 2023
Quiddity Leaderboard JPX-Nikkei 400: Final Predictions for August 2023
Take Private Looming
Axel Johnson/Dustin Group AB: Mandatory Offer

End of Mandatory Lock-Up Periods for 41 Companies in Korea in July 2023

By Douglas Kim

We discuss the end of the mandatory lock-up periods for 41 stocks in Korea in July 2023, among which 6 are in KOSPI and 35 are in KOSDAQ.
These 41 stocks on average could be subject to further selling pressures in June and could underperform relative to the market.
Among these 41 stocks, the top five market cap stocks include Lunit, Sungeel Hitech, KG Mobility, Enchem, and E&D Co.

Quiddity Leaderboard JPX-Nikkei 400: Final Predictions for August 2023

The JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted (capped) market-value-weighted index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to be announced in early August 2023 based on trading data as of end-June 2023.

Take Private Looming

On 28 June, after market close Fomento De Construcciones Y Co (FCC SM) announced the repurchase and redemption of 7% of its shares at €12.5/share (38% premium, €5.4 billion implied market cap).
According to my calculations, Carlos Slim will hold, directly and indirectly, c. 88.2% of the share capital post repurchase. That, to me, heralds a delisting offer further down the road.
The offer represents 7.1x EV/Fwd EBITDA, 8.9x Fwd P/E (on IBES forecasts). Median TP is €14.7. Gross spread is 5.3% (plus the €0.5 dividend). It seems a safe long.

Axel Johnson/Dustin Group AB: Mandatory Offer