Event-Driven

We discuss the end of the mandatory lock-up periods for 49 stocks in Korea in September 2023, among which 7 are in KOSPI and 42 are in KOSDAQ.
These 49 stocks on average could be subject to further selling pressures in September and could underperform relative to the market.
Among these 49 stocks, top five market cap stocks include Kakao Games (293490 KS), SK Oceanplant (100090 KS), Korea Zinc (010130 KS), Fadu (440110 KS), and Vaxcell-Bio Therapeutics (323990 KS).

MVIS Australia A-REITs Index Rebalance Preview: Abacus Group Could Be Deleted

The review period for the September rebalance ended yesterday. There could be one deletion from the index and a bunch of capping changes.
The index changes will lead to a one-way turnover of 3.4% resulting in a one-way trade of A$21m. There are two stocks with over A$5m to trade.
Short interest has increased on a few REITs recently while decreasing on most of the other names.

Unveiling the Potential of Korea Zinc’s Emerging Proxy Battle

Korea’s local market is perceiving the present HMG investment as a crucial indicator, signaling the initiation of an intense proxy battle for Korea Zinc.
Given the relatively constrained nature of the neutral minority stakes, falling below 30%, there is considerable attention on the potential for a immediate-term share buying race.
This is expected to trigger momentum trading flows directed at Korea Zinc. Such a scenario might lead the stock price to venture into an overshooting zone.

MVIS Australia Equal Weight Index Rebalance Preview: Potential Deletes & Capping Increase Turnover

JB Hi-Fi Ltd (JBH AU) and Charter Hall (CHC AU) could be deleted as the lowest ranked current index constituents.
There are three other stocks that are close to the deletion threshold and a change in the free float could result in the stocks being deleted.
Short interest has been increasing on JB Hi-Fi Ltd (JBH AU), Charter Hall (CHC AU) and Lendlease Group (LLC AU) and could be partially driven by potential index deletions.

(Mostly) Asia M&A, Aug 2023: Celltrion Inc/Healthcare, Itochu Techno, UMW, Boustead, SK Rent

For the month of August 2023, 11 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$29bn.
The average premium for the new deals announced (or first discussed) in August was 25%. The average YTD is 34%.
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.

Georg Fischer/Uponor: Extension of Offer Period

Georg Fischer AG (FI/N SW) has so far purchased a 9.5% stake of Uponor OYJ (UNR1V FH) in the market. Georg Fischer’s shareholding plus irrevocable undertakings represent in total 46.4% (30 August).
There has been no disclosure about the shares tendered so far. Georg Fischer has extended the offer period until 31 October, while waiting to receive clearance from the European Commission.
Gross spread is 0.03%, so probably it is not worth becoming involved. The reason for this low spread is the acquisition of shares in the market by Georg Fischer.

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Aug 31

Daily Brief Event-Driven: STAR CM (6698 HK): Grave Accusations and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

STAR CM (6698 HK): Grave Accusations
Ichigo (2337) Buyback – History and Shareholder Structure Give an Edge
REIT Pair Trade: Long DCREIT SP/ Short KDCREIT SP
GS AM Consortium/ Kahoot!: Extension of Acceptance Period, Spread

STAR CM (6698 HK): Grave Accusations

STAR CM Holdings (6698 HK), a variety program intellectual property creator and operator, was listed last December and promptly gained 475% by early August. All good so far.
Shares cratered on the 18 August (-23.4%) and are currently 76% adrift from its recent high. The reason? A viral clip from late pop diva Coco Lee discussing unfair treatment.
The music competition show, in which Coco appeared, pushed back on any impropriety; however, its broadcaster has temporarily suspended the program. This is no easy fix.

Ichigo (2337) Buyback – History and Shareholder Structure Give an Edge

Today after the close, Ichigo Inc (2337 JP) announced a stock buyback to go through the next 6 months. It is ¥3bn, which is not huge, but not nothing.
It seems like a constant refrain, but shareholder structure matters.
Ichigo has a history of doing buybacks (10% of shares out are in treasury), and the historical patterns are interesting when comparing announced intention and actual result.

REIT Pair Trade: Long DCREIT SP/ Short KDCREIT SP

After underperforming since listing, Digital Core REIT (DCREIT SP) has outperformed Keppel DC REIT (KDCREIT SP) over the last few months.
However, Digital Core REIT (DCREIT SP) still trades at cheaper valuations as compared to Keppel DC REIT (KDCREIT SP).
There could be relative outperformance over the next few weeks and any underperformance can be used to enter positions in the pair. There is an important catalyst.

GS AM Consortium/ Kahoot!: Extension of Acceptance Period, Spread

It may take some time before shareholders can see how Kahoot’s significant investments in market share and business growth pay off in a positive bottom line.
GS AM already has c.59% and the current extension lasts until 8 September. Spread is 2.9%/15.4% (gross/annualised, assuming settlement by 13 November).
Taking a NOK 31.2 break, the last closing share price implies just 74% probability of deal completion, however I believe the spread will close following. I’d be long the shares.

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Aug 30

Daily Brief Event-Driven: Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros! and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!
Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Sep 2023)
Korea’s First Sector Inverse ETF: Discussing Flow Trading Impacts
Energy One: Busby Baulks At STG’s Offer
Shougang Fushan Resources (639 HK): Partial Offer Is Unconditional
Core Concept Technologies (4371 JP) – A BIGLY 2ndary Offering (Re-IPO), and Eventual TOPIX Inclusion
Zeus Co: Listing of JET Co Japanese Subsidiary and NAV Valuation
Zeus Co (079370 KS): Is J.E.T.’s Spin-Off Priced In?
AMFI Stock Reclassification Preview (Dec 2023): Overlap Between Active & Passive Flows

Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!

Shareholders of Prosus NV (PRX NA) and Naspers (NPN SJ) approved AGM agenda items late last week to enable the two Capitalisation Issues and Naspers’ Share Consolidation to move forward.
What Will Happen: Prosus will issue new N shares to its shareholders and Naspers will reject them. Naspers will issue new shares to its shareholders, and Prosus will reject them.
Naspers will own ~42.9% of Prosus, Prosus will own 0.02% of Naspers. Sales of Tencent shares will continue. Share Buybacks too. But the ouroboros will have spit out its tail.

Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)

The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.
There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.
Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Sep 2023)

The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
The largest passive inflows will be on East Buy (1797 HK), JD.com (9618 HK), Ping An (2318 HK), Sinopharm (1099 HK), BYD (1211 HK), Lenovo (992 HK) and Trip.com (9961).
The largest passive outflows will be on Alibaba (9988 HK), Li Auto (2015 HK), Meituan (3690 HK), AAC Technologies (2018 HK), Kuaishou (1024 HK), COGARD (2007) and CG Services (6098).

Korea’s First Sector Inverse ETF: Discussing Flow Trading Impacts

KB Asset Management has announced the release of an inverse ETF, containing the top 10 core stocks in the secondary battery sector.
Given the substantial fluctuations in SSF trading volume in Korea, the flow increase of this ETF might temporarily lead to an unusually high level of backwardation.
Also, we may observe a phenomenon known as ‘wag-the-dog’ as the flow of this inverse ETF could act as a triggering factor for a temporary spark.

Energy One: Busby Baulks At STG’s Offer

Yesterday (28 August) software provider Energy One Ltd (EOL AU) announced an indicative Offer, by way of a Scheme, from STG at A$5.85/share, a solid 44% premium to last close.
Energy One has granted STG due diligence on an exclusive basis and the board is supportive if terms are firmed. All looks good. However …
… Vaughan Busby, a NED and founding CEO of Energy One, is not aligned with the board. And he holds ~14%.

Shougang Fushan Resources (639 HK): Partial Offer Is Unconditional

Shougang Fushan Resources (639 HK) shareholders approved the partial offer to acquire a maximum of 125.0 million shares (2.47% of outstanding shares) at HK$2.40 per share and the whitewash waiver.
The partial offer is now unconditional and will close on 12 September. Considering the irrevocables not to tender, a 100% minority participation rate implies a minimum proration of 2.98%.
If the partial offer’s acceptance rate mirrors today’s general meeting minorities participation rate of 63.6%, it would imply a minimum proration of 4.69%.

Core Concept Technologies (4371 JP) – A BIGLY 2ndary Offering (Re-IPO), and Eventual TOPIX Inclusion

Last week I wrote about another situation, noting Equity Offering Into TOPIX Inclusion is a standard construct. Here we have another.
DX and HR Support company Core Concept Technologies Inc (4371 JP) today announced a large (it ups Real World Float by 64%, and is 33 days of ADV) secondary offering.
The “reason” for the offering mentions a desire to move to TSE Prime in future.

Zeus Co: Listing of JET Co Japanese Subsidiary and NAV Valuation

Our NAV valuation of Zeus Co suggests an implied price target of 32,991 won, which is 13% lower than current share price.
Given the lack of upside, we would avoid Zeus shares at current prices.
Currently, JET Co is listed on Tokyo PRO Market Exchange. JET Co is expected to switch its listing to the Tokyo Standard Market Exchange.

Zeus Co (079370 KS): Is J.E.T.’s Spin-Off Priced In?

Zeus Co Ltd (079370 KS), a maker of semiconductor equipment, flat panel display equipment, and facility automation solutions, intends to spin off 95%-held J.E.T. Co (6228 JP) next month.
J.E.T., a semiconductor etching equipment play, will list on the 25 September. Pricing is expected around the 5 September.
Zeus’ share price has fallen 33% in the past month. That may be justified.

AMFI Stock Reclassification Preview (Dec 2023): Overlap Between Active & Passive Flows

We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 13 stocks from SmallCap to MidCap, and 13 stocks from MidCap to SmallCap.
The expected migrations from SmallCap to MidCap have outperformed the other potential migrations with all stocks moving higher over the last six month.
Active managers could continue to realign their portfolios. Some of the upward migrations will have passive flows in the next few days and over the next few months.

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Aug 29

Daily Brief Event-Driven: China: Huge ETF Inflows & Impact on Stocks and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

China: Huge ETF Inflows & Impact on Stocks
Positioning for the Timing of HLB, the Latest Target in the KOSDAQ Exodus
StubWorld: China Conch Plumbs New Lows
KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
Vingroup: VinFast’s Valuation Makes No Sense
Seven & I: An Update on Investor Activism
EQD | Nikkei 225 (NKY) Rising but for How Long?
Quiddity Leaderboard ES50 Sep 23: US$1.3bn Flow for Ferrari Likely; Announcement Soon
EQT/SUSE: Terms and Spread

China: Huge ETF Inflows & Impact on Stocks

Nearly US$20bn has flowed into mainland China listed ETFs since 18 July and could be driven by the National Team supporting the market.
Most of the inflows have been focused on large cap indices including CSI 300, STAR50, CSI 500, SSE50, ChiNext and other sectoral and thematic ETFs.
The largest impact has been on the SSE STAR50 (STAR50 INDEX) constituents, but that has not stopped the slide in the stocks.

Positioning for the Timing of HLB, the Latest Target in the KOSDAQ Exodus

HLB’s process of selecting a lead underwriter for the KOSPI listing has been witnessed in Yeouido.
The price impact becomes most evident on the board approval date as the point at which this impact is most pronounced is substantially accelerated due to the market’s learning effect.
There is a strong likelihood that HLB will have its board decision by mid-September, necessitating our preparation for a position setup targeting this timing.

StubWorld: China Conch Plumbs New Lows

The China Conch Venture Holdings (586 HK)/ Anhui Conch Cement (600585 CH) ratio, and the implied stub, are now at all-time lows.
Preceding my comments on China Conch/Anhui 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%.

KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December

Nearly two-thirds of the way through the review period, we see nine potential changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
The potential adds are dominated by the Materials sector while the potential deletions are mainly from the Consumer Discretionary sector.
The impact on the potential inclusion ranges from 0.14-12 days of ADV while the impact on the potential deletions varies from 3.1-30 days of ADV.

Vingroup: VinFast’s Valuation Makes No Sense

VinFast (VFS US), the EV arm of Vietnamese conglomerate Vingroup Jsc (VIC VN), commenced trading on the 14 August. And promptly took off.
VinFast’s current market cap is ~4x General Motors (GM US)‘s, twice that of Mercedes-Benz (MBG GR)‘s, and the second-largest pure-play EV-maker after Tesla (TSLA US).
Vingroup’s holding in VinFast is worth 13x its market cap. This is not sustainable.

Seven & I: An Update on Investor Activism

By Oshadhi Kumarasiri

Sogo & Seibu’s labor union threatens strike if job protection talks stall. This emphasizes the number of considerations Seven & I Holdings (3382 JP) had to consider during changes.
Had ValueAct shown more patience, they might have worked with Seven & I to improve the struggling Eto Yokado supermarkets business.
Thus, ValueAct’s investor activism campaign seem unlikely to achieve a full restructuring of underperforming businesses at Seven & I.

EQD | Nikkei 225 (NKY) Rising but for How Long?

By Nico Rosti

Rebound on Nikkei 225 INDEX may not last for long, 2-3 weeks tops, it will encounter resistance no later than mid of September (most unfavorable month for stocks gains).
Resistance levels to watch vary, depending on number of weeks up. For this week and the next, a new pullback could start from 32476 and 32817.
If the index goes =>33000, it means it is rallying and will not correct into September, the rally then could last into October.

Quiddity Leaderboard ES50 Sep 23: US$1.3bn Flow for Ferrari Likely; Announcement Soon

The ES50 Index is one of the most highly-tracked indices in mainland Europe and the annual index review takes place in September.
The index changes will be confirmed after the close on 1st September 2023.
In this insight, we take a final look the names leading the race to become ADDs/DELs for the upcoming index review.

EQT/SUSE: Terms and Spread

EQT offers €16/share to delist SUSE (SUSE GR) (split into consideration and interim dividend) and merge it into a Luxembourg SA. On 24 August, EQT published the offer document.
There will be no squeeze-out. The multiples offered (4.8x EV/NTM Fwd Revenue, 14x EV/Fwd NTM EBITDA, source: IBES) are generally consistent with European software companies.
With the stock trading at a 3% gross spread, I see limited upside from here and no interloper risk. Annualised spread is 33.4%. Long and tender.

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Aug 28

Daily Brief Event-Driven: Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing
STAR50 Index Rebalance: Two Changes; Pre-Positioning Appears Light
Merger Arb Mondays (28 Aug) – Eoflow, UMW, Boustead, Costa, Estia, Pacific Current, Golden Eagle
EQD | KOSPI 200 Index’s Decisive Week: New WEEKLY LONG Supports

Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing

Jio Financial Services (JIOFIN IN) started trading on 21 August following its demerger from Reliance Industries (RIL IN). The stock was locked limit down on its first four trading days.
Passive NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) trackers hold Jio Financial Services (JIOFIN IN) stock and will need to sell over the next few days.
We estimate passive trackers will need to sell around 188m shares (US$487m) of Jio Financial Services (JIOFIN IN) next week and the stock could head lower in the short term.

STAR50 Index Rebalance: Two Changes; Pre-Positioning Appears Light

As expected, the index committee has used a 6-month minimum listing history and that results in two changes to the SSE STAR50 (STAR50 INDEX) in September.
Piotech (688072 CH) and Hwatsing Technology (688120 CH) will replace Suzhou Nanomicro Technology (688690 CH) and Zhuhai CosMX Battery (688772 CH) in the index.
One-Way turnover is estimated at 2.83% and will result in a one-way trade of CNY 3,562m. There does not appear to be a lot of pre-positioning on the stocks.

Merger Arb Mondays (28 Aug) – Eoflow, UMW, Boustead, Costa, Estia, Pacific Current, Golden Eagle

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), Costa Group Holdings (CGC AU), Eoflow (294090 KS), ENM Holdings (128 HK), Symbio Holdings (SYM AU), Mason Group Holdings (273 HK), JSR.
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Celltrion Healthcare (091990 KS), T&K Toka Co Ltd (4636 JP), Yaizu Suisankagaku Industry (2812 JP), Sanei Architecture Planning (3228 JP).

EQD | KOSPI 200 Index’s Decisive Week: New WEEKLY LONG Supports

By Nico Rosti

The KOSPI 200 INDEX has reached a tipping point: the previous Bull run trend is cracking, there is a high chance the index will drop.
The current MRM WEEKLY pattern is bearish: if the index falls for more than 1 week it may tailspin into a 4-6 weeks correction in September.
Cover your LONG holdings, support can be found at 325 (Q2), 315 (Q3) and 297 (Inner Fence).

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Aug 27

Daily Brief Event-Driven: Medical Data Vision (3902) – SBI Upping Their Stake Means Opportunity and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Medical Data Vision (3902) – SBI Upping Their Stake Means Opportunity
Lunit (Specializes in AI-Based Cancer Diagnosis and Treatment): Rights Offering of 202 Billion Won
Index Rebalance & ETF Flow Recap: HSCEI, HSI, HSTECH, Yuanta ETFs, China ETFs, REMX, KOSPI
(Mostly) Asia-Pac Weekly Risk Arb Wrap: SK Rent A Car, UMW, BPlant, E Guardian, EOflow, Oishi
Quiddity A/H Premium Monitor 🦄 (As of 25 Aug 2023)
Last Week In Event SPACE: JSR, Intouch/Thaksin, Softbank/ARM, M&A Research, Premier
Weekly Deals Digest (27 Aug) – Golden Eagle, Costa, Boustead, UMW, ARM, Integral, S.F. Holding

Medical Data Vision (3902) – SBI Upping Their Stake Means Opportunity

On Friday after the close, SBI Holdings (8473 JP) – which currently owns 24.63% of Medical Data Vision (3902 JP) – announced it would buy another 2,043,200 shares.
This market purchase would lift them to just under 30% by year-end.
There have been similar trades done by others in the past and they were worth looking at.

Lunit (Specializes in AI-Based Cancer Diagnosis and Treatment): Rights Offering of 202 Billion Won

On 24 August, Lunit announced a rights offering capital increase of 202 billion won.
Lunit’s current share price is 155,700 won and its market cap is 1.9 trillion won. The expected rights offering price is 30% discount to current price.
We have a positive view of Lunit and its rights offering. Lunit is one of the leading companies in Korea that specializes in AI-based cancer diagnosis and treatment solutions.

Index Rebalance & ETF Flow Recap: HSCEI, HSI, HSTECH, Yuanta ETFs, China ETFs, REMX, KOSPI

The JPX Nikkei 400 index rebalance will take place on Wednesday, MSIC on Thursday and HSI, HSCEI, HSTECH and HSCI on Friday.
There are review cutoffs for the MVIS family of indices, and multiple announcements of changes to various indices during the week.
There were inflows to mainland China ETFs, iShares India ETF (INDA), Ishares India Small-Cap (SMIN) and iShares EmergingMarkets ex China (EMXC) while there were outflows for iShares Emerging Markets (EEM).

(Mostly) Asia-Pac Weekly Risk Arb Wrap: SK Rent A Car, UMW, BPlant, E Guardian, EOflow, Oishi

I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals this week: SK Rent A Car (068400 KS)‘s Tender Offer; Sime Darby (SIME MK)‘s Offer for UMW (UMWH MK); KLK‘s Offer for Boustead Plantations (BPLANT MK).
Key updates took place for Golden Eagle Retail (3308 HK), JSR Corp (4185 JP), E Guardian Inc (6050 JP), Eoflow (294090 KS), and Oishi Group PCL (OISHI TB).

Quiddity A/H Premium Monitor 🦄 (As of 25 Aug 2023)

This week it is changed from H/A Discount to A/H Premium, by popular demand. Some Northbound data is added. We kept the unicorn.
Last week saw a win/loss ratio of 21:13. Average recommended pair on the week earned 0.9% if Sunday recos executed Monday close, 1.35% if executed Monday VWAP.
6 Unwinds and 3 new trades recommended this week. As always, feedback desired to make this even better.

Last Week In Event SPACE: JSR, Intouch/Thaksin, Softbank/ARM, M&A Research, Premier

Why is JSR Corp (4185 JP) trading wide? FUD and Flows.
Intouch Holdings (INTUCH TB) plumbs new 12-month lows for its implied stub, and NAV discount as the former PM returns from exile.
You would NOT want to short M&A Research Institute (9552 JP) into the inclusion. But the ascension to TOPIX is not a surprise.

Weekly Deals Digest (27 Aug) – Golden Eagle, Costa, Boustead, UMW, ARM, Integral, S.F. Holding

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 – ARM Holdings (1822695D US), Integral Corporation (5842 JP) and S.F. Holding (002352 CH) IPOs.
Event-Driven developments – Boustead Plantations (BPLANT MK), UMW Holdings (UMWH MK), Eoflow (294090 KS), Golden Eagle Retail (3308 HK), Costa Group Holdings (CGC AU), Metro Pacific Investments Co (MPI PM).

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Aug 26

Daily Brief Event-Driven: Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea
Boustead Plantations’ Lifetime High Offer Price

Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea

In the inaugural constituent selection, FnGuide revealed a noteworthy pattern. Given the smaller market capitalization of the electrolyte suppliers, FnGuide has included only the largest among them in this ETF.
SoulBrain, categorized by FnGuide as an electrolyte supplier like Chunbo, has significantly outperformed Chunbo. As a result, there is a considerable likelihood that SoulBrain will replace Chunbo in December.
The price impact from ETF rebalancing trading has disappeared substantially in Korea. We should focus on the first rebalancing of newly listed ETFs that haven’t yet established a learning effect.

Boustead Plantations’ Lifetime High Offer Price

Palm oil play Kuala Lumpur Kepong (KLK MK) has entered an agreement with Boustead Holdings, Boustead Plantations (BPLANT MK)‘s largest shareholder, to acquire a 33% plus 1 share stake.
Upon the completion of the agreement, KLK will make a Mandatory Offer for all shares not owned in BPlant. The Offer Price is RM1.55/share, a lifetime high.
The agreement conditions are rudimentary. The MGO has no minimum acceptance condition. This is done.

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Aug 25

Daily Brief Event-Driven: Hanwha Ocean: Big Shares Dilution from Rights Offering of 2 Trillion Won and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hanwha Ocean: Big Shares Dilution from Rights Offering of 2 Trillion Won
StubWorld: Intouch “Cheap” As Thaksin Returns
UMW Holdings (UMWH MK): Sime Darby’s Pre-Conditional MGO
Quiddity Leaderboard SE600 Sep 23: 6 ADDs/DELs As Things Stand; More Possible
ARM Holdings Pre-IPO – Pre-Privatisation to Pre-Listing Changes – Slower Growth, Lower Margins
Boustead Plantations (BPLANT MK): Pre-Conditional MGO at RM1.55
Sime Darby/UMW: It’s All About Scale
Liberty/Telenet: Re-Opening of Tender Offer

Hanwha Ocean: Big Shares Dilution from Rights Offering of 2 Trillion Won

After the market close on 23 August, Hanwha Ocean (042660 KS) confirmed that it will conduct a massive rights offering of 2 trillion won.
The expected rights offering price is 22,350 won, which is 36% discount to current price.
We believe this rights offering is likely to dilute the existing shareholders and negatively impact Hanwha Ocean’s share price.

StubWorld: Intouch “Cheap” As Thaksin Returns

Intouch Holdings (INTUCH TB) plumbs new 12-month lows for its implied stub, and NAV discount as the former PM returns from exile.
Preceding my comments on Intouch 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%.

UMW Holdings (UMWH MK): Sime Darby’s Pre-Conditional MGO

Sime Darby (SIME MK) entered a conditional sale and purchase agreement (SPA) to acquire PNB’s 61.18% stake in UMW Holdings (UMWH MK) for RM5.00 per share.
Once the SPA becomes unconditional, Sime Darby must launch an MGO for the remaining UMW shares at RM5.00 per share, an 8.2% premium to the last close.
The SPA is conditional on Sime Darby’s shareholder approval. The SPA and MGO are targeted to be completed in 4Q23 and 1Q24, respectively.

Quiddity Leaderboard SE600 Sep 23: 6 ADDs/DELs As Things Stand; More Possible

In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the SE600 and EURSTX Indices for the September 2023 Rebalance.
I currently expect 6 ADDs and 6 DELETEs for the SE600 index in the September 2023 rebalance but these rankings could change prior to the base date.
After the September 2023 rebalance, SimCorp A/S (SIM DC) could get deleted from the SE600 index and trigger an intra-review index change.

ARM Holdings Pre-IPO – Pre-Privatisation to Pre-Listing Changes – Slower Growth, Lower Margins

By Sumeet Singh

Softbank Group (9984 JP) aims to raise around US$8-10bn via selling some of its stake in ARM Holdings’ US IPO.
ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In this note, we compare its recent performance versus its performance prior to its privatisation and discuss the changes since then.

Boustead Plantations (BPLANT MK): Pre-Conditional MGO at RM1.55

Kuala Lumpur Kepong (KLK MK) will acquire 33.00% of Boustead Plantations (BPLANT MK)‘s outstanding shares from Boustead Holdings/BHB at RM1.55 per share. The purchase is conditional on BHB shareholder approval.
Once the purchase becomes unconditional, the joint offerors (KLK, BHB, LTAT) will be required to launch an MGO at RM1.55 per share, a 13.1% premium to the last close.
The MGO will have no minimum acceptance condition. The offer is attractive and represents an all-time high. The MGO is expected to be complete in 4Q23.

Sime Darby/UMW: It’s All About Scale

In one of the largest M&A transactions in Malaysia, Sime Darby (SIME MK) intends to acquire a 61.2% stake in UMW Holdings (UMWH MK) from Permodalan Nasional Bhd for RM3.57bn.
Sime Darby is paying RM5/share, a token 9.9% premium to last close, but more like 25% when factoring in apparent news leakage.
Once the stake sale is completed, Sime Darby will launch an unconditional MGO for all remaining shares not held. This transaction is expected to be wrapped up in early 2024.

Liberty/Telenet: Re-Opening of Tender Offer

Liberty has waived the 95% threshold condition. Liberty has now mandatorily opened again the tender given it owns more than 90% (93.43%), on same terms until 13 September (settlement 27 September).
At 5.9x EV/Fwd EBITDA (vs. 5.4x EV/20e EBITDA for Orange Belgium minorities), the offer is relatively cheap, but also reflects the uncertainties surrounding Citymesh’s entrance and risk of market share losses.
Spread is positive. After the second acceptance period closes, I believe the delisting is extremely likely. With limited liquidity and floor dividend no longer guaranteed, recommendation is accept the offer.

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Aug 24

Daily Brief Event-Driven: EOFlow/Medtronic: What Lawsuit? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

EOFlow/Medtronic: What Lawsuit?
Korea – Positioning in Ecopro, JYP Entertainment, Hanwha Ocean, Hanmi Semi, CJ Corp, E-Mart
Golden Eagle Retail (3308 HK): Scheme Vote on 15 September
M&A Research Institute Holdings (9552) TOPIX Inclusion
EOFLOW/Medtronic Tender: Irrational Exuberance
Quiddity Leaderboard F100/250 Sep 23: Several Changes Including Potential Surprises

EOFlow/Medtronic: What Lawsuit?

On the 8th of August, Insulet Corp (PODD US) filed a lawsuit accusing Eoflow (294090 KS) of the misappropriation of trade secrets, patent infringement, and trademark dilution.
The filing was pretty heavy on accusations. EOFlow declined ~11% on the news.
Undeterred, Medtronic (MDT US) continues to preach all is peachy, suggesting the EOFlow merger is a go, and Medtronic will deal with the lawsuit, as and when.

Korea – Positioning in Ecopro, JYP Entertainment, Hanwha Ocean, Hanmi Semi, CJ Corp, E-Mart

Ecopro (086520 KS), Jyp Entertainment (035900 KS), Hanwha Ocean (042660 KS), Hanmi Semiconductor (042700 KS), CJ Corp (001040 KS) and E Mart (139480 KS) have been on investors/traders radars recently.
There will be liquidity demand on the stocks in a week and there is pre-positioning on a lot of the stocks.
Since 10 August, retail investors have net bought Jyp Entertainment and E Mart, foreigners have net bought Ecopro, Hanwha Ocean and Hanmi Semiconductor, while local institutions have net bought CJ Corp.

Golden Eagle Retail (3308 HK): Scheme Vote on 15 September

Golden Eagle Retail (3308 HK)‘s scheme document is out, with the court meeting scheduled for 15 September. The IFA considers the HK$6.88 per share offer fair and reasonable.
The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). The shareholder with a blocking stake has provided an irrevocable.
This is a done deal which help by the material derating of peers. At the current price of HK$6.75 and for the 17 October payment, the gross/annualised spread is 1.9%/13.4%.

M&A Research Institute Holdings (9552) TOPIX Inclusion

Yesterday, M&A Research Institute (9552 JP) announced it would list on the TSE Prime section on 29 August, which means it will join TOPIX at the close of 28-Sep-2023.
This is NOT a surprise. On 27 June, the company announced a secondary offering of 1.631mm shares (by the founder/CEO), and said it had applied for TSE Prime transfer.
I take a look at how this could play out.

EOFLOW/Medtronic Tender: Irrational Exuberance

Eoflow (294090 KS) shares were up 4.4% on the back of Medtronic Plc (MDT US)’s earnings call comment that it expects the acquisition to close at the end of 2023.
The bear view is that Medtronic’s messaging remained unchanged as it is still assessing Insulet Corp (PODD US) lawsuit and the potential impact on the timing and/or pricing.
The bull view is that Medtronic’s comment underscores its commitment to close the transaction. It’s tough to take a call on risk/reward profile – at best it’s a brave buy.

Quiddity Leaderboard F100/250 Sep 23: Several Changes Including Potential Surprises

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 expect four changes for F100 and seven changes for F250 based on the latest available data.
However, with five more trading days left for the base date and with many names lurking close to the border, the rankings can still change.

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Aug 23

Daily Brief Event-Driven: Quiddity Leaderboard-DAX Sep 23: No More Catalyst for the Short Sartorius – LONG Merck Trade and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Quiddity Leaderboard-DAX Sep 23: No More Catalyst for the Short Sartorius – LONG Merck Trade
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: A Week to Go
Hanwha Ocean: Potential Capital Raise of Nearly 2 Trillion Won
KOSPI Size Indices – Plenty of Migrations to Attract Active Flows
Golden Eagle (3308 HK): 15th September Scheme Meeting

Quiddity Leaderboard-DAX Sep 23: No More Catalyst for the Short Sartorius – LONG Merck Trade

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) was deleted from the MDAX index triggering a couple of interim changes in the last week of July 2023.
Currently, I do not expect any changes for the DAX or MDAX indices in September 2023 but I expect one change for the SDAX index.

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: A Week to Go

The changes for the next rebalance will use closing prices from 31 August, will be announced after the close on 8 September with implementation at the close on 15 September.
One stock is very close to the 85% cumulative market cap inclusion threshold, while there are two stocks that are near the 98% cumulative market cap deletion threshold.
With one inclusion and capping changes, estimated one-way turnover at the rebalance will be 3.5% resulting in a one-way trade of US$20m. That could change over the next week.

Hanwha Ocean: Potential Capital Raise of Nearly 2 Trillion Won

Hanwha Ocean’s share price declined by 5% today, mainly due to local media reports about a potential capital raise of nearly 2 trillion won to 2.5 trillion won.
Although the company has not officially announced a rights offering, we believe the probability of Hanwha Ocean announcing a major rights offering is relatively high in the next 3-6 months.
We estimate this probability range is closer to about 60-70%. The company needs additional capital to improve its highly leveraged balance sheet and to make major investments.

KOSPI Size Indices – Plenty of Migrations to Attract Active Flows

The review period for the September rebalance of the KOSPI Size Indices started 1 June and will end 31 August. The changes will be implemented at the close 7 September.
We see 7 migrations from MidCap to LargeCap, 6 migrations from LargeCap to MidCap, 7 new adds to MidCap, and 17 migrations from SmallCap to MidCap.
Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.

Golden Eagle (3308 HK): 15th September Scheme Meeting