Event-Driven

Delta Electronics Thai (DELTA TB) has been added to the Market Surveillance Measure List twice in the last few months. That increases the probability of index deletion in December.
Given the big turnover every time Delta Electronics is added to and deleted from the index, there could be another go at weighting the SET50 Index by free-float market cap.
Deletion from the index will have a big impact on Delta Electronics Thai (DELTA TB) and the passive selling could help narrow the gap with Delta Electronics (2308 TT).

Swire Coke Sale Special Div Impacts B/A Ratio

Last night, Swire Pacific announced it planned to sell its US Coca Cola Distribution business to its parent company. That means a Circular, an IFA Opinion, and an EGM.
I expect a September EGM and the Special Div to follow in Q4. While I find the price low, I expect the deal to be approved by Swire shareholders.
This deal has an effect on the Swire B/A ratio. Some may get it. Some may not. Makes sense to be ready. Swire A is cheap. Swire B is cheaper.

Preemptive Short Position Buildup on SFA Engineering for Samsung’s Next Stake Sale

Samsung Display still holds a 5.85% stake. Hankyung reported that this remaining stake would also be disposed of in the future.
Then the key lies in timing. Considering the ongoing pattern of block deals being exposed during the pre-sounding phase, we may be able to capture clues for preemptive trading.
As seen from the chart depicting SFA’s loan balance and the percentage of short-selling to daily TV, we can observe a significant increase in activity just before today’s sale event.

AMFI Stock Reclassification Preview (June 2023): Outperformance Continues

We see 7 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 9 stocks from SmallCap to MidCap, and 10 stocks from MidCap to SmallCap.
The expected migrations from SmallCap to MidCap have outperformed the other migrations and some stocks have seen large price moves over the last couple of weeks.
Active managers would have started realigning their portfolios and that could continue for a couple of weeks. Unwind long positions into strength.

Quiddity Leaderboard NIFTY Sep 23: Non F&O Stocks Dilemma and Replacements for HDFC

In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50 and NIFTY 100 indices in the September 2023 rebalance.
The NIFTY Next 50 methodology was supposed to change in June 2023 but this has been kept on hold for now. This change could still take place before September 2023.
The HDFC/HDFC Bank Merger is expected to complete in the next few weeks and that could trigger intra-review index changes.

XxxLutz/Home24: Final Chance to Abandon the Boat

Following the additional acceptance period and settlement, XXXLutz has increased its stake up to c.94.65% of Home24 (H24 GR).
The Bidders, together with XXXLutz KG, have entered into a delisting agreement with home24, at the same time they will launching a delisting offer, at the prior offer price, €7.5/share.
The offer price was fair in my view. Liquidity will become razor thin post offer and there will be no domination and P&L transfer agreement. Tender regardless of acquisition price.

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Jun 29

Daily Brief Event-Driven: NTT’s Really Big/Weird Stock Split Goes Ex- 29 June 2023. Now With D-Points! and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

NTT’s Really Big/Weird Stock Split Goes Ex- 29 June 2023. Now With D-Points!
CFD Liquidation in Korea: Posco DX, Celltrion Siblings, and Potential Next Targets
Poly Culture (3636 HK)’s Pre-Conditional Merger By Absorption
Bain Capital/SoftwareOne: Room for a Better Offer
StubWorld: Swire Sells US Coke Ops To Parent
BBL/KBANK: Hitting a Wall

NTT’s Really Big/Weird Stock Split Goes Ex- 29 June 2023. Now With D-Points!

NTT (Nippon Telegraph & Telephone) (9432 JP) is splitting its stock 25:1 on record date 30 June 2023. That means it goes ex- at the new price on 29 June.
The day before, the stock is up nearly 5% on heavy volume. This is likely punters buying before it splits so one round lot will be <¥20,000 vs ~¥420,000 yesterday.
But there is a new attraction for retail, somewhat un-noticed.

CFD Liquidation in Korea: Posco DX, Celltrion Siblings, and Potential Next Targets

Yesterday and today, there have been observed cases in Korea that are suspected to be caused by a sudden drop in stock prices due to CFD liquidation trading.
Yesterday it was Celltrion with its two siblings, and today it is Posco DX. I have found candidates that may have similar stock price movements.
These candidates experienced a notable increase in their stock prices from late March to mid-April, and they have a relatively high margin transaction ratio.

Poly Culture (3636 HK)’s Pre-Conditional Merger By Absorption

After shares were suspended on the 20 June, art and culture play Poly Culture Group Corp H (3636 HK) has announced a pre-conditional privatisation at HK$8.88 per H-share.
This Offer, from SOE Poly Group, is by way of a Merger by Absorption, which incorporates a Scheme-like vote. There is no tendering condition.
The premium to last close is 77.6%; and a 112.5% premium to the five-day closing average.

Bain Capital/SoftwareOne: Room for a Better Offer

Bain Capital has made a CHF 18.5/share offer proposal for SoftwareONE Holding (SWON SW), 33% premium, CHF 2,933 million implied equity value, 9.8x EV/NTM EBITDA and 18.7 Fwd P/E.
The offer is supported by founding shareholders (c.29.1% aggregate), who’d co-invest alongside Bain. SoftwareOne, in the middle of a turnaround, trades cheap vs. peers and my fair-value estimate (CHF 19.92/share).
On IBES estimates, without significant cost-cutting, at CHF 20/share, Bain could achieve 18.6% IRR by year 6, thus could offer more. Gross spread is 3.7%. Considering prospects, I’d be long.

StubWorld: Swire Sells US Coke Ops To Parent

Swire Pacific (19 HK) has announced it is selling its US Coca-Cola ops to its parent for HK$30.4bn (US$3.9bn). That’s 40% of its market cap.
Preceding my comments on Swire 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%.

BBL/KBANK: Hitting a Wall

Bangkok Bank Public (BBL TB) is trading very close to its historic highs versus Kasikornbank PCL (KBANK TB) and keeps hitting a wall at that level.
The number of NVDRs issued on Bangkok Bank Public (BBL TB) has been rangebound while there has been a steady decrease for Kasikornbank PCL (KBANK TB).
At current level, the risk/reward looks favourable to a short Bangkok Bank Public (BBL TB) / long Kasikornbank PCL (KBANK TB) position for the near to medium term.

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Jun 28

Daily Brief Event-Driven: The Prosus/Naspers Ouroboros Spits Out Its Tail (Unwinds Cross-Holding to Go Back to Old Pair) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

The Prosus/Naspers Ouroboros Spits Out Its Tail (Unwinds Cross-Holding to Go Back to Old Pair)
What Arb Trading Opportunities Should We Target in SK Innovation’s Rights Offering?
NWS Holding (659 HK): Pre-Conditional VGO from the Cheng Family
Dali Foods (3799 HK): Founder’s Privatisation Offer at HK$3.75
Redox (RDX AU) IPO – Offering Details & Index Inclusion
PCOMP Index Rebalance Preview: Just the Ad Hoc Change
Poly Culture (3636 HK): HK$8.88 Per H Share Privatisation Offer
Quiddity Leaderboard TDIV Sep 23: Potential ~US$130mn Flows Caused by T100 DEL and AUM Change
Celltrion Group Merger Announcement in July & Oversold Post Disappointing Exclusion by OptumRX?
Quiddity Leaderboard T50/100 Jun 23: Wisdom Marine Facing TDIV Deletion

The Prosus/Naspers Ouroboros Spits Out Its Tail (Unwinds Cross-Holding to Go Back to Old Pair)

In mid-September 2019, Naspers (NPN SJ) listed Prosus (PRX NA) on international markets, but the law required Naspers own 70+% of Prosus and it created a dual-layer NAV Discount Trade.
In summer 2021, they announced an Exchange Offer, where Naspers holders could get Prosus, and Prosus would end up owning 49% of Naspers, creating a cross-holding circularity – an Ouroboros.
In summer 2022, they launched open-ended buyback programmes, and they’ve bought back a lot. NOW they are unwinding the Ouroboros, going back to the pre-EO structure. buybacks will continue.

What Arb Trading Opportunities Should We Target in SK Innovation’s Rights Offering?

We should seize the arbitrage trading opportunities between SSF and subscription rights during the rights trading window. SK Innovation’s SSF is highly liquid, being traded at nearly 0.5x spot.
The key is to catch the timing of basis widening. SK Innovation traditionally experiences significant intraday basis fluctuations, making it a crucial factor in maximizing our profitability.
The ex-date play, betting on the tendency for prices to close above the base price on the ex-date, may not hold significant appeal. This pattern has become less pronounced recently.

NWS Holding (659 HK): Pre-Conditional VGO from the Cheng Family

Nws Holdings (659 HK) announced a pre-conditional voluntary general offer from the Cheng family at HK$9.15 or HK$9.47 per share (with a potential 2HFY2023 dividend of HK$0.32 per share).
The pre-condition related to regulatory approval from the Insurance Authority of Hong Kong and the Bermuda Monetary Authority is a formality due to the Cheng family’s current sway over NWS.
The key condition is approval by independent New World Development (17 HK) shareholders which is likely as the offer is attractive, reduces NWD’s gearing and results in a special dividend.

Dali Foods (3799 HK): Founder’s Privatisation Offer at HK$3.75

Dali Foods Group (3799 HK) disclosed a scheme privatisation offer from the founder at HK$3.75 per share, a 37.9% premium to the undisturbed price (HK$2.72 on 20 June).
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 price is final. While the offer price is unattractive compared to peer multiples and historical share prices, this looks like a done deal.

Redox (RDX AU) IPO – Offering Details & Index Inclusion

Redox (RDX AU), a leading chemical and ingredients distributor, is looking to raise A$402m (US$268m) in its IPO and is expected to start trading on the ASX on 3 July.
With the float expected to be over 30%, the stock is eligible for inclusion in the S&P/ASX indices but limited trading history could only mean S&P/ASX300 inclusion in March 2024.
With 70% of the shares subject to lock-up arrangements, buying from ASX300 passive trackers will be small and there will be limited inclusion in other indices too.

PCOMP Index Rebalance Preview: Just the Ad Hoc Change

With a couple of trading days to the end of the review period, we do not forecast any changes for the Philippines Stock Exchange PSEi Index (PCOMP INDEX) in August.
However, there could be an ad hoc change if Metro Pacific Investments Co (MPI PM) is delisted. The stock now trades above the tender offer price.
Bloomberry Resorts (BLOOM PM) is the highest ranked non-constituent and the stock has started to move higher again, likely driven in part by potential index inclusion.

Poly Culture (3636 HK): HK$8.88 Per H Share Privatisation Offer

Poly Culture Group Corp H (3636 HK) announced a pre-conditional privatisation offer from Poly Group at HK$8.88 per H Share, a 77.6% premium to the undisturbed price of HK$5.00.
The pre-condition of regulatory approvals is a formality as Poly Group is an SOE. The key condition is approval by at least 75% of independent H Shareholders (<10% rejection).
The offer price is final. There is no minimum acceptance condition. No independent H Shareholder holds a blocking stake. The offer is attractive, waving the way to success.

Quiddity Leaderboard TDIV Sep 23: Potential ~US$130mn Flows Caused by T100 DEL and AUM Change

In this insight, we take a look at Quiddity’s flow expectations for the September 2023 index rebalance.
Since the semi-annual rebalance events are in June and December, there will not be any “regular” changes caused by dividend-yield rankings.
However, external factors such as deletion from the selection universe and a shift in tracking AUM assumptions can still trigger US$130mn capping flows in September 2023.

Celltrion Group Merger Announcement in July & Oversold Post Disappointing Exclusion by OptumRX?

Invest Chosun recently reported that the three Celltrion Group companies including Celltrion Inc, Celltrion Healthcare, and Celltrion Pharm are close to announcing a merger in July.
Although Celltrion was not included this time as suppliers of Humira biosimilar products by OptumRX, there is still a potential for Cigna Express Scripts to include Celltrion’s product this year.
We think Celltrion Inc and Celltrion Healthcare’s share prices are oversold.

Quiddity Leaderboard T50/100 Jun 23: Wisdom Marine Facing TDIV Deletion

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.
At present, I see two changes for the T50 index and one change for the T100 index.
The T100 change is an important one as the expected DEL Wisdom Marine Lines (2637 TT) could also get deleted from the TDIV index.

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Jun 27

Daily Brief Event-Driven: JIC Launches a NOT-¥1trln Tender Offer for JSR (4185). Welcome? Yes. Overwhelming? Meh. and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JIC Launches a NOT-¥1trln Tender Offer for JSR (4185). Welcome? Yes. Overwhelming? Meh.
[UPDATE] Tax-Loss Selling in Australia – Time To Unwind the Basket
JSR Corporation (4185 JP): JIC’s Pre-Conditional Tender Offer at JPY4,350
LQ45 Index Rebalance Preview (July): Review Period Nearly Complete
DDH1 To Merge With Perenti
MUFG Seeks A Majority Stake In Mandala
Quiddity Leaderboard-DAX Jun 23: A SHORT Sartorius LONG Merck Trade Might Be Interesting
Silk Laser Firms Offer With Wesfarmers
Silk Laser Australia (SLA AU): Wesfarmers Binding Offer, Next Move EC Healthcare
DDH1 (DDH AU): Binding Offer from Perenti (PRN AU)

JIC Launches a NOT-¥1trln Tender Offer for JSR (4185). Welcome? Yes. Overwhelming? Meh.

Japan Investment Corp (JIC) has launched a Tender Offer on top photoresist maker JSR Corp (4185 JP), at ¥4,350/share.
That is a decent price, but it is not overwhelming. Furthermore, process for determining (and understanding) “fair” remains inadequate.
Significant foreign ownership, a high price, Japanese equity excitement, etc, all make this a situation where we likely see a pop (the last bit), a fade, then a re-drift better.

[UPDATE] Tax-Loss Selling in Australia – Time To Unwind the Basket

In Tax-Loss Selling in Australia – Brief Historical Analysis And A Trade Basket at the start of June I proposed a basket.
We are getting to the end of June. Time to unwind that short basket. The named ticker was -26%. The 70-name basket underperformed ASX200 by 4.4%.
One can now go long the basket into end-June as historically it outperforms S&P-ASX200 over two months. If one did not short, one can still go long. Basket below.

JSR Corporation (4185 JP): JIC’s Pre-Conditional Tender Offer at JPY4,350

JSR Corp (4185 JP) has recommended JIC’s pre-conditional tender offer of JPY4,350 per share, a 34.5% and 10.6% premium to the undisturbed price and last close, respectively.
The pre-conditions relate to various country approvals. China’s approval should be challenging due to Japan’s recent curbs on Chinese exports of chipmaking equipment.
The offer is long-dated and opens in late December. The offer price is attractive compared to peer multiples and just a touch below the all-time share price high.

LQ45 Index Rebalance Preview (July): Review Period Nearly Complete

The review period for the LQ45 Index ends on 30 June. The changes should be announced in the last week of July, becoming effective after the close on 31 July.
Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
The impact of passive trading will be higher on the deletions than the inclusions since lower liquidity stocks are replaced with higher liquidity stocks.

DDH1 To Merge With Perenti

Specialty mining driller DDH1 (DDH AU) has announced a merger, by way of a Scheme, with Perenti Global (PRN AU).
Under the proposed terms, DDH1 shareholders will receive for each DDH1 share held $0.1238 cash plus 0.7111 Perenti shares, for an implied value of A$1.01/share, or a 17.4% premium.
Directors and shareholders with a combined 38% of DDH1 shares have indicated an intention to vote in favour of the transaction. Scheme implementation is expected in early October 2023.

MUFG Seeks A Majority Stake In Mandala

Mitsubishi UFJ Financial (MUFG US) and 92.7%-held Adira Dinamika Multi Finance (ADMF IJ) have entered into SPAs with key shareholders to acquire an 80.6% stake in Mandala Multifinance (MFIN IJ).
MUFG and Adira appear to be paying IDR 3,297/share or IDR 7tn all-in. The SPAs are subject to regulatory approvals with completion expected in early 2024.
Upon completion, MUFG will hold 70.6% in Mandala and Adira 10% in the Indo car/motorcycle loan lender. This will trigger a Mandatory Tender Offer for the remaining 19.4%.

Quiddity Leaderboard-DAX Jun 23: A SHORT Sartorius LONG Merck Trade Might Be 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.
Software AG (SOW GR)‘s takeover situation could result in intra-review index changes prior to the September 2023 rebalance.
Fresenius Medical Care (FME GR) and Deutsche Lufthansa AG (LHA GR) are close to becoming DAX ADDs as they require very small price gains to trigger Fast Entry additions.

Silk Laser Firms Offer With Wesfarmers

On the 19 April, Silk Laser Australia (SLA AU), an operator of specialist clinic networks across Australia, announced a $3.15/share NBIO from Wesfarmers Ltd (WES AU)
Ahead of the expiry of Wesfarmers’ due diligence, EC Healthcare (2138 HK) snuck in a $3.35/share NBIO. Wesfarmers opted out of its matching rights. Although due diligence remained ongoing.
SLA has now announced a binding implementation agreement with Wesfarmers at A$3.35/share. No word, as yet, from EC Healthcare. Nor is one expected.

Silk Laser Australia (SLA AU): Wesfarmers Binding Offer, Next Move EC Healthcare

Silk Laser Australia (SLA AU)‘s binding offer from Wesfarmers Ltd (WES AU) is at A$3.35 per share which is in line with EC Healthcare (2138 HK)’s non-binding proposal.
While EC Healthcare is a relative minnow, it secured HK$1 billion (A$191 million) financing in May, which suggests a chance of returning with a higher offer.
If EC Healthcare deployed the HK$1.0 billion loan for the acquisition, it would imply a price of A$3.60 per share, 7.6% above Wesfarmers’ offer.

DDH1 (DDH AU): Binding Offer from Perenti (PRN AU)

DDH1 (DDH AU) has entered a SID with Perenti Global (PRN AU) at A$0.1238 cash plus 0.7111 PRN shares for each DDH share, a 17.4% premium to DDH’s 5-day VWAP.
The key conditions are shareholder scheme approval and ACCC clearance. Shareholders representing 38.0% of outstanding shares will vote in favour of the scheme.
The offer is attractive compared to peer multiples, and the net exchange ratio is fair on a 1-year basis. A critical risk is volatility risk around PRN shares.

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Jun 26

Daily Brief Event-Driven: JIC To Launch ¥1 Trillion Takeover on JSR (4185) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JIC To Launch ¥1 Trillion Takeover on JSR (4185)
Merger Arb Mondays (26 Jun) – Eoflow, ENM, Estia, InvoCare, United Malt, Arclands, Chindata
KOSDAQ150 Index Rebalance Preview: A Dozen Potential Changes from Now to December

JIC To Launch ¥1 Trillion Takeover on JSR (4185)

The Nikkei followed by other media outlets revealed Saturday that the JIC (株式会社産業革新投資機構) were in talks with JSR Corp (4185 JP) to acquire the photoresist maker for ¥1 trillion.
JSR’s release (Japanese/English) noted that they are considering the matter, but no decision has been made. They note, however, a Board of Directors meeting on Monday 26 June 2023.
Articles suggest a Tender Offer “this year”, delisting next. ¥1 trillion is a 50% premium. Or 35%. I expect shares go limit up, then we will get more news post-close.

Merger Arb Mondays (26 Jun) – Eoflow, ENM, Estia, InvoCare, United Malt, Arclands, Chindata

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), Silk Laser Australia (SLA AU), United Malt Group Ltd (UMG AU), ENM Holdings (128 HK), Chindata Group (CD US), Estia Health (EHE AU).
Lowest spreads – Healius (HLS AU), Musgrave Minerals (MGV AU), Liontown Resources (LTR AU), Toyo Construction (1890 JP), Mincor Resources NL (MCR AU), Lian Beng (LBG SP).

KOSDAQ150 Index Rebalance Preview: A Dozen Potential Changes from Now to December

Nearly a third of the way through the review period, we see 12 potential changes for the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the December rebalance.
There could be one change to the index in July/August following Nice Information Service Co (030190 KS)‘s transfer from the KOSDAQ Market to the KOSPI Market.
The potential adds have outperformed the potential deletes over the last few months and there could be further outperformance as we go through the review period.

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Jun 25

Daily Brief Event-Driven: JSR Corporation (4185 JP): JIC’s Tender Offer Looming? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JSR Corporation (4185 JP): JIC’s Tender Offer Looming?
Index Rebalance & ETF Flow Recap: NKY, KOSPI2, New Deal, SET50, MOG Digitech, Syngenta IPO
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Loose Lips Sinks Ships
Last Week in Event SPACE: Great Wall Motor, China Feihe, EcoPro, PCCW
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Amara, SBI Shinsei Bank, Yashili, EOFlow

JSR Corporation (4185 JP): JIC’s Tender Offer Looming?

Nikkei reports that Japan Investment Corporation (JIC) is in talks to acquire JSR Corp (4185 JP) for around JPY1 trillion (US$7 billion) through a tender offer.
JSR responded, “No decision has been made at this moment, although JSR is considering this matter.” The Board will discuss the proposal on Monday.
Minorities will be supportive as the JPY1 trillion valuation implies a tender price of JPY4,850 per share, a 50% premium to the last close and an all-time share price high.

Index Rebalance & ETF Flow Recap: NKY, KOSPI2, New Deal, SET50, MOG Digitech, Syngenta IPO

There were a couple of ad hoc rebalances in Korea last week for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX EQUITY) and KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY).
Coming Friday will mark the end of the review period for the next rebalance of the HSI, HSCEI, HSTECH, HSCI, LQ45, PCOMP as well as the SET50 June implementation.
With Japan indices moving higher, the largest inflows went into ETFs tracking the Nikkei 225 (NKY INDEX) and other local/global indices.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Loose Lips Sinks Ships

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

Last Week in Event SPACE: Great Wall Motor, China Feihe, EcoPro, PCCW

RMB dual counter started trading. Great Wall Motor (2333 HK)‘s A-shares trade at 3x the multiple. THAT is a big discount to harvest.
China Feihe (6186 HK)‘s CFO exits an indirect stake of 6.38% around Feihe’s all-time low.
EcoPro Co Ltd (086520 KS) has swatted aside analyst downgrades and the indictment of its chairman to touch an all-time high

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Amara, SBI Shinsei Bank, Yashili, EOFlow

There are 44 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
No new deals were announced this week although the major shareholders of Amara Holdings (AMA SP) are in discussions with a third party
Key updates took place for SBI Shinsei Bank (8303 JP), Yashili International Holdings (1230 HK), and Eoflow (294090 KS)

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Jun 24

Daily Brief Event-Driven: Celltrion Merger Announcement in July: Trading Angles Utilizing Appraisal Rights Exercise Dynamics and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Celltrion Merger Announcement in July: Trading Angles Utilizing Appraisal Rights Exercise Dynamics
Silver Lake/Software AG: Bain Clears the Way

Celltrion Merger Announcement in July: Trading Angles Utilizing Appraisal Rights Exercise Dynamics

According to Invest Chosun, Celltrion plans to submit a merger registration statement to the KRX in July, with Mirae Asset Securities acting as the lead underwriter.
Given that the approximate timing of the merger registration statement submission has already been exposed to the market, we can track the difference between the spot and exercise prices.
Celltrion Inc will likely attempt to minimize the appraisal rights price. We can consider capitalizing on this possibility by shorting Celltrion Inc while going long on the other two companies.

Silver Lake/Software AG: Bain Clears the Way

Silver Lake announced it waived the minimum acceptance threshold of 50% + 1 share in its offer for Software AG (SOW GR) . The acceptance period has been extended until 28 June.
Bain Capital abandons the pursuit and will sell its 10.01% stake to Silver Lake, which will now controls 41%, plus another 10% from a convertible bond.
Silver Lake is now pressing the minority shareholders to tender. Spread is 1.44%/15.13% (gross/annualised), assuming settlement on 31 July. I believe that Silver Lake will be successful. Long and tender.

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Jun 23

Daily Brief Event-Driven: Nikkei 225 Index Rebalance Preview (Sep 2023): Ranking and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Ranking, Capping, Funding & Other Changes
SK Square’s Special Dividend Momentum Trading: Entry Timing at Month End.
Quiddity Leaderboard ES50 Sep 23: Ferrari Retains the Lead; US$1.26bn Potential Inflow
SK Square: Share Cancellation and More Share Buyback Likely from Sale of SK Shieldus in 2H 2023
Quiddity Leaderboard SE600 Sep 23: One Intra-Review Change and 4 Regular ADDs/DELs Likely
Vivendi Acquires A Stake In PCCW’s Viu

Nikkei 225 Index Rebalance Preview (Sep 2023): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We take another stab at identifying potential inclusions and exclusions.
There will be a big impact on the potential index changes. Fast Retailing (9983 JP)‘s index weight could be capped and there will be a big funding trade.
There are many things to watch out for that could affect the impact on the inclusions, including stock splits among potential adds and stepwise inclusion of stocks in the index.

SK Square’s Special Dividend Momentum Trading: Entry Timing at Month End.

The market’s attention has shifted to the second part, which is the additional utilization of a portion of the harvest result for shareholder returns.
There is a significant possibility that the timing to allocate the ₩200B for shareholder returns will be advanced to late July or early August.
We should set up a position aiming for the potential for a special dividend, which may lead to momentum trading flow just before the quarterly ex-div date later this month.

Quiddity Leaderboard ES50 Sep 23: Ferrari Retains the Lead; US$1.26bn Potential Inflow

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

SK Square: Share Cancellation and More Share Buyback Likely from Sale of SK Shieldus in 2H 2023

SK Square announced that it will cancel treasury shares worth 2.5 million shares on 4 October 2023, which represents 1.8% of its current outstanding shares.
Our NAV analysis of SK Square suggests NAV of 9.4 trillion won or NAV per share of 66,421 won, representing a 45% upside from current levels.
SK Square’s positive shareholder return policies including higher share buybacks, cancellations, and dividends are result in further outperformance of SK Square relative to KOSPI this year.

Quiddity Leaderboard SE600 Sep 23: One Intra-Review Change and 4 Regular ADDs/DELs Likely

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.
There could be one intra-review deletion for the SE600 index in July or August.
I see 4 ADDs and 4 DELs for the SE600 index in the September 2023 Rebalance.

Vivendi Acquires A Stake In PCCW’s Viu

PCCW Ltd (8 HK) is selling an initial 26.1% equity stake in its streaming platform Viu, to Vivendi SA (VIV FP)‘s Canal+, for US$200mn.
Via a staggered investment, Canal+ can increase its equity to US$300mn. In addition, a further investment, at Canal+’s option, could result in increasing its stake in Viu to 51%.
Elsewhere, PCCW’s 18% discount to NAV is the narrowest in over two years.

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Jun 22

Daily Brief Event-Driven: HS Holdings (8699 JP) Buyback – Adds More to BVPS and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HS Holdings (8699 JP) Buyback – Adds More to BVPS
Quiddity Leaderboard ASX Sep 23: Many Changes Ahead
Hong Kong CEO & Director Dealings (21 June): China Feihe’s CFO Sells Around All-Time Low
Nikkei 225 Sep 2023 Review – The Mercari Conundrum
KFin Tech Lock-Up – US$183m Lockup Expiry Could See PE Investor Trim Further
KRX New Deal Index Rebalance Preview: Interesting Changes Emerging
Hyundai Elevator Chairwoman Hyun Seeks Capital from H&Q Korea
Alpha Auto Group/Lookers: Consolidation at a Cheap Offer Price

HS Holdings (8699 JP) Buyback – Adds More to BVPS

HS Holdings (8699 JP) remains an interesting hodgepodge of assets. It owns just under 50% of Mongolia’s biggest bank, recently IPOed Khan Bank (KHAN MO).
It has a pile of cash. And it has a glorified pawn shop business in Japan. The bank shares must be sold, to a significant degree, by end of year.
Today it announced a buyback tomorrow of 6.4% of shares out. I expect it is one of two large individual holders. We’ll probably know more within a week.

Quiddity Leaderboard ASX Sep 23: Many Changes Ahead

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.
I currently expect one change for the ASX 100 index and five changes (including one intra-review change) for the ASX 200 index.
There could be 7 ADDs and 5 DELs for the ASX 300 index.

Hong Kong CEO & Director Dealings (21 June): China Feihe’s CFO Sells Around All-Time Low

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 China Feihe (6186 HK)

Nikkei 225 Sep 2023 Review – The Mercari Conundrum

Mercari Inc (4385 JP) is potentially a leading candidate for inclusion in the Nikkei 225 in September.
There are other technical reasons to think it is not.
This insight looks at the issue of why it might be a leading candidate and why it might not be.

KFin Tech Lock-Up – US$183m Lockup Expiry Could See PE Investor Trim Further

By Clarence Chu

KFin Technologies (1804170D IN) was listed on 29th Dec 2022, when it raised around US$180m in its India IPO. Its six-month lockup will expire on 24th Jun 2023.
KFin Technology (KFin) is a technology driven financial services platform providing comprehensive services and solutions to the capital markets ecosystem.
Coming up for six-month expiry is General Atlantic (the Promoter) and other pre-IPO shareholders. The Promoter had been the sole selling shareholder in the IPO.

KRX New Deal Index Rebalance Preview: Interesting Changes Emerging

The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. Plus there are a couple of changes for the BBIG indices.
SK Biopharmaceuticals Co Ltd (326030 KS) has overtaken SK Bioscience (302440 KS) on average market cap and there will be large flows on both stocks at the rebalance.

Hyundai Elevator Chairwoman Hyun Seeks Capital from H&Q Korea

It was reported in the local media that Hyundai Elevator Chairwoman Hyun Jeong-Eun is close to completing a deal with H&Q Korea in a deal worth nearly 300 billion won.
The three major reasons driving higher share price of Hyundai Elevator in the last three months include share buyback/cancellation, potential M&A, and solid 1Q 2023 results.
With noticeable downturn in the Korean construction sector, Hyundai Elevator could face worsening industry prospects for both residential and commercial elevators in the next 12-24 months in Korea.

Alpha Auto Group/Lookers: Consolidation at a Cheap Offer Price

Long expected consolidation is arriving to UK car retailers. Alpha Auto agreed to acquire Lookers PLC (LOOK LN) via scheme at 120p/share, c.£465.4 million, 35.3% premium, 8.4x Fwd P/E.
The sector appears materially undervalued, with Lookers before announcement on 6.2x Fwd P/E, 4% FY23e yield (4x cover). My fair value estimate is 143p/share (multiples and DCF), 19% above offer price.
Spread 1.17%/4.32% (gross/annualised, assuming settlement around 1 October). Top shareholders have only signed letters of intent (40% aggregate). I’d be long in case of sweetening. VTU LN could be next.

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Jun 21

Daily Brief Event-Driven: Shinsei’s TOB Period Almost Done – What Next? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Shinsei’s TOB Period Almost Done – What Next?
StubWorld: EcoPro Continues To Defy Logic
KOSPI200 Index Rebalance Preview: A Busy December Rebalance
Doosan Bobcat Placement – Past Deals Have Been Mixed but the Stock Has Been Doing Well
Exploring Two Lucrative Arbitrage Trading Opportunities in CJ CGV’s Monumental Rights Offer
Doosan Bobcat Block Deal Sale: Concerned About North America Construction Sector Downturn
Quiddity Leaderboard for F100/250 Sep 2023: One F100 Change and Two F250 Changes Likely

Shinsei’s TOB Period Almost Done – What Next?

The Tender Offer by SBI Holdings (8473 JP) to take private SBI Shinsei Bank (8303 JP) is almost done. The tender closes on 23 June.
The stock has not traded below theTOB Price since the announcement. People have built positions. Expect minimal liquidity from here on out. I expect a somewhat ‘weak’ result.
Now starts a series of ‘technical’ events and deadlines which will culminate for some in delisting at end-Q3/start-Q4 and for some ends in years after an Appraisal Rights case.

StubWorld: EcoPro Continues To Defy Logic

EcoPro Co Ltd (086520 KS) has swatted aside analyst downgrades and the indictment of its chairman to touch an all-time high.
Preceding my comments on EcoPro are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

KOSPI200 Index Rebalance Preview: A Busy December Rebalance

Just over a quarter of the way through the review period, we see six changes for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the December rebalance.
There are a few stocks that are close adds at the current time and a move higher can take them into inclusion zone leading to more deletions.
While there is little to no short interest on the potential inclusions, short interest on the potential deletions ranges from 4.3-12.2 days of ADV and 0.5-3.5% of free float.

Doosan Bobcat Placement – Past Deals Have Been Mixed but the Stock Has Been Doing Well

By Sumeet Singh

Doosan Enerbility (034020 KS) aims to raise around US$220m via selling around 4.9% of Doosan Bobcat Inc (241560 KS) .
This will be the third selldown in the company in less than a year with the previous two deals in Nov 22 and May 23 having delivered mixed results
In this note, we will run the deal through our ECM framework and comment on other deal dynamics.

Exploring Two Lucrative Arbitrage Trading Opportunities in CJ CGV’s Monumental Rights Offer

A capital increase event of this size allows for a classic arbitrage trading strategy involving the acquisition of subscription rights and the simultaneous sale of an equal amount of SSF.
We can aim to profit from the price movements between warrants and SSF during the warrants trading period by getting out of the positions before the trading period ends.
We will also likely encounter a significantly juicy price difference between warrants+subscription and SSF, given a discount rate of 25% with an enormous capital increase rate,

Doosan Bobcat Block Deal Sale: Concerned About North America Construction Sector Downturn

After the market close on 20 June, Doosan Enerbility announced that it will sell 5 million shares of Doosan Bobcat through a block deal worth about 300 billion won.
The block deal price range is from 54,800 won to 56,200 won, which represents a discount range from 6.18% to 8.51% (versus current price).
We have a negative view of Doosan Bobcat block deal as we expect lower share price of Doosan Bobcat in 2H 2023 due to construction sector downturn in North America.

Quiddity Leaderboard for F100/250 Sep 2023: One F100 Change and Two F250 Changes Likely