Event-Driven

Back on the 26 April, First Pacific (142 HK) and three other entities, proposed delisting Metro Pacific Investments (MPI PM) at PHP 4.63/share. This was subsequently bumped to PHP 5.20.
A Special Stockholders’ Meeting was held on August 8, and MPI stakeholders approved all the resolutions. An SGM for independent First Pac shareholders will be held on the 24 August.
The Tender Offer is now open and closes on the 7 September, with (expected) settlement on 19 September – provided the Tender Offer delisting conditions are met.

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Aug 11

Daily Brief Event-Driven: Hongkong Land: Exchange Square Sale Would Be BIG News. (If True) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hongkong Land: Exchange Square Sale Would Be BIG News. (If True)
StubWorld: Japex/Inpex, Amorepacific, Wynn, Shimao, Takara, Silicon Integrated/United Micro
Two Noteworthy Issues in Korea’s SSF/SSO Selection in September Round
Metro Pacific Investments (MPI PM): Risk/Reward as Uncertainty Hangs on the Delisting Threshold
Quiddity Leaderboard ASX Sep 23: Potential Surprises and Final Thoughts
Beenos: Ramps Up Buybacks

Hongkong Land: Exchange Square Sale Would Be BIG News. (If True)

According to Sing Tao, two PRC firms and a mainland bank have formed a consortium to acquire Hongkong Land (HKL SP)‘s 33-storey Three Exchange Square.
This “news” is straight out of left field. For its part, HKL said the market rumour is pure speculation.
HKL’s P/B of 0.24x is closing in on its all-time low of 0.21x during the depths of Covid.

StubWorld: Japex/Inpex, Amorepacific, Wynn, Shimao, Takara, Silicon Integrated/United Micro

For a change of pace, this insight briefly canvasses a clutch of Holdco’s trading at extreme levels.
Preceding the chart-heavy insight 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%.

Two Noteworthy Issues in Korea’s SSF/SSO Selection in September Round

Recent information leaked through local media reveals that KRX has ultimately opted not to list Ecopro Co’s SSF in the upcoming September round.
Given the unusually high trading volume of at-the-money (ATM) options in the local SSO market, the market’s interest in covered calls for dividend-yielding stocks can be substantial.
So, we should pay attention to stocks whose SSO is already listed or will be newly listed in September among those that have shifted their ex-dividend dates to post-dividend confirmation.

Metro Pacific Investments (MPI PM): Risk/Reward as Uncertainty Hangs on the Delisting Threshold

Metro Pacific Investments Co (MPI PM)‘s voluntary delisting tender offer from a consortium at PHP5.20 (net price of PHP5.1677 per share) will run from 9 August to 7 September.
The delisting proposal was approved on 8 August. Excluding the consortium’s votes, only 37.4% of minorities (representing 13.73% of outstanding shares) voted YES for the delisting proposal.
A key risk is satisfying the 95% delisting threshold, which would require a minorities acceptance rate of 86.4%. The risk/reward is unattractive at the current spread of 4.4% (net 3.8%).

Quiddity Leaderboard ASX Sep 23: Potential Surprises and Final Thoughts

In this insight, we take a look at the potential index changes for ASX 300, 200, 100, 50, and 20 in the September 2023 Rebalance.
I expect one change for ASX 100 and 3 ADDs and 4 DELs for ASX 200. There could be 11 ADDs and 9 DELs for ASX 300.
ASX 300 member Leo Lithium (LLL AU) is currently suspended from trading and that could have interesting implications for the stock’s ASX 300 membership.

Beenos: Ramps Up Buybacks

By Oshadhi Kumarasiri

Beenos revealed a ¥300m buyback plan in 2QFY23 and recently declared a ¥500m buyback in 3QFY23. This incremental buybacks is likely to continue due to disposal of incubator investments.
The cash balance of 34% of total assets and over 49% of market cap, supports the ongoing buyback trend even if incubator divestments take longer than expected.
Hence, we expect Beenos Inc (3328 JP)’s Holdco discount to move closer to the 20% mark, potentially resulting in a 75% upside in the short term.

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Aug 10

Daily Brief Event-Driven: Insulet Accuses EOFlow Of Stealing Trade Secrets and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Insulet Accuses EOFlow Of Stealing Trade Secrets
Summary of the Situation Regarding Insulet’s Lawsuit in the US Against Eoflow
L’Occitane (973 HK): HK$35 Offer from the Controlling Shareholder?
Amari Ni Mo… NTT (9432)
Insulet’s Lawsuit Against Eoflow, Medtronic’s Tender Offer, and Eoflow’s “Special Sauce”
Kyoden (6881 JP) MBO – An Small, Easy, Illiquid, Light But Not Horribly Unfair Done Deal at ¥600
L’Occitane (973 HK): Ripe for a Makeover?
India – Positioning on Some Interesting Names
InvoCare Agrees To TPG’s Lower Offer
Quiddity Primer for STAR 50 Index Rebalance Events

Insulet Accuses EOFlow Of Stealing Trade Secrets

From the outset, EOFlow (294090 KS) has traded wide (~7% of average) to Medtronic Plc (MDT US)‘s Offer. An apparent delay in filing with Korean regulators formed one argument.
Now there’s a compelling reason. Key insulin pump competitor Insulet (PODD US) has filed a lawsuit accusing EOFlow of the misappropriation of trade secrets, patent infringement, and trademark dilution.
Singapore-Based Flex (FLEX US) and three ex-employees of Insulet are also defendants. This does not bode well for the transaction.

Summary of the Situation Regarding Insulet’s Lawsuit in the US Against Eoflow

This signifies the official commencement of a lawsuit against Eoflow in the United States, which has been considered one of the most significant risks for Eoflow.
Eoflow is externally saying that the aspect of patents claimed by Insulet is actually based on previously expired patents. Hence, Eoflow believes they can win this patent lawsuit.
This lawsuit emerged before the acquisition decision by Medtronic suggesting a need to consider trading the current spread based on the inference that the tender offer is still valid.

L’Occitane (973 HK): HK$35 Offer from the Controlling Shareholder?

According to Bloomberg, L’Occitane (973 HK) is set to receive a HK$35 per share privatisation offer from Reinold Geiger, the Chairman and the largest shareholder.
The rumoured price is attractive and represents an all-time high share price. Therefore, Acatis KVG, the shareholder with a blocking stake, would be supportive.
The rumoured price implies multiples at a discount to peer multiples, which explains Mr Geiger’s ambitions for a possible European listing to secure higher valuation multiples.

Amari Ni Mo… NTT (9432)

NTT reports a Q1 which looks like KDDI where the business looks like KDDI and a bit better than that where it doesn’t. Good. Not great.
But NTT announced a ¥200bn buyback. Again good. Not great.
And on Sunday, LDP politician Amari spoke on a Sunday news show about the possible govt selldown of NTT shares. 20yrs is a long time. So no overhang.

Insulet’s Lawsuit Against Eoflow, Medtronic’s Tender Offer, and Eoflow’s “Special Sauce”

Insulet Corp (PODD US)’s lawsuit against Eoflow (294090 KS) caused a sharp decline in Eoflow’s share price today (down 10.7% to 24,950 won).
Insulet is accusing Eoflow of hiring several senior personnel that have helped Eoflow to develop a product that could take away market share from Insulet.
The most important factor may be Eoflow’s “special sauce” which is some kind of technology/mechanism that allows this 17% greater efficiency/convenience for the wearable EOPatch insulin device.

Kyoden (6881 JP) MBO – An Small, Easy, Illiquid, Light But Not Horribly Unfair Done Deal at ¥600

Today, the personal holding company of Kyoden Co Ltd (6881 JP) founder Hashimoto-san announced a Tender Offer to take the company private.
Together with his company, he owns 64.75%. He only needs 1.93% to tender. The combination of Shokochukin, SMBC, and Yokohama Bank get him over the line.
This is small, illiquid, and will trade tight, but it’s a done deal.

L’Occitane (973 HK): Ripe for a Makeover?

In late 2018, there were reports that French beauty retailer L’Occitane (973 HK) had drawn interest from Advent International. That rumour came to naught.
Similarly, late last month, L’Occitane clarified media reports that it had not received any Offer or proposal.
After going into a trading halt this morning, reportedly (Reuters) Chairman Reinold Geiger has been discussing a possible offer of ~HK$35 for each L’Occitane share he doesn’t already own.

India – Positioning on Some Interesting Names

Power Finance, Astral, IDFC First Bank, Cummins India, HDFC Asset Management, Ashok Leyland, Polycab India and Supreme Industries have all run up over the recent past and have investor attention.
The increase in market cap has put the stocks on active manager radars and could also result in the stocks being added to global indices in the near future.
We take a look at the positioning on the stocks and recommend pair trades to reduce market risk while trying to capture alpha.

InvoCare Agrees To TPG’s Lower Offer

After pitching a A$13/share NBIO on the 15 May, TPG has now inked a Scheme Implementation agreement with InvoCare (IVC AU) at A$12.70/share, inclusive of a A$0.60/share fully franked dividend.
This compares to PE-outfit TPG’s A$12.65/share NBIO on the 7 March – which Australia’s leading funeral services provider InvoCare promptly rejected.
A comparatively benign flu season, and an expected ~10% decline in 1H23 EBITDA, largely account for InvoCare’s change of heart.

Quiddity Primer for STAR 50 Index Rebalance Events

STAR 50 Index represents the performance of the top 50 securities by market capitalization and liquidity listed on the Science and Technology Innovation (STAR) Board of the Shanghai Stock Exchange.
This is one of the most significant indices in Mainland China when considering the average passive AUM per stock as a percentage of float.
In this insight, we take a brief look at the index selection methodology and the historical price and volume performance of STAR 50 index rebalance baskets.

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Aug 09

Daily Brief Event-Driven: 2023 JPX Nikkei 400 Rebal – 38 IN and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

2023 JPX Nikkei 400 Rebal – 38 IN, 36 OUT, 4.2% One Way Flow
Kenedix Merger: Big Passive Inflows on the Cards
Toshiba (6502) Tender Offer – Kioxia Optionality
Zomato Lock-Up – A US$650m+ Worth Acquisition Linked Lockup Release
EOFLOW/Medtronic Tender: Insulet’s US Complaint Materially Increases Deal Break Risks
KKR/OHB: Agreed Take-Private Offer
What Is KDB’s Plan B for Asiana Airlines?
InvoCare (IVC AU): SID Signed with TPG at A$12.7/Share

2023 JPX Nikkei 400 Rebal – 38 IN, 36 OUT, 4.2% One Way Flow

The Tenth Annual JPX Nikkei 400 Index Review was announced on Monday 7 August. There are 38 Inclusions, 36 Deletions. They are mostly in line with Janaghan Jeyakumar, CFA‘s predictions.
The BIG SELL is T&D Holdings (8795 JP), which surprised me. The top BUY is ROHM Co Ltd (6963 JP) which was not on the Quiddity Leaderboard.
Otherwise, the ADDs and DELETEs are 1.8-2.0 days of ADV, there are several NEW CAPs and some RECAPS among LARGE CAPS

Kenedix Merger: Big Passive Inflows on the Cards

The shareholders of Kenedix Office Investment (8972 JP), Kenedix Residential Investment (3278 JP) and Kenedix Retail REIT (3453 JP) meet in a couple of weeks to vote on the merger.
The stocks are trading in line with the merger ratio and the initial spike following merger announcement has been followed by some selling.
The market cap of the combined entity should now be large enough for migration to indices with larger tracking assets bringing in large passive flows on merger completion.

Toshiba (6502) Tender Offer – Kioxia Optionality

Yesterday, JIP finally announced its Tender Offer for Toshiba Corp (6502 JP) as discussed in JIP Tender Offer for Toshiba (6502) Finally Here
I got a few questions this morning on the earnings call comments from Chairman Watanabe regarding what might happen if a Kioxia Transaction were announced mid-JIP Tender.
My assumption before, during, and after, is that the Board wants this deal done. And doesn’t really want to take any responsibility for pushing any more.

Zomato Lock-Up – A US$650m+ Worth Acquisition Linked Lockup Release

By Sumeet Singh

In Aug 2022, Zomato completed the acquisition of Blinkit’s outstanding shares via issuing its own shares. These issued shares will come up for lockup release on 10th Aug 2023.
Zomato is one of two leading food delivery app operators in India. Its acquisition of Blinkit marked its foray into the instant grocery segment.
In this note, we will talk about the lock-up dynamics and recent updates.

EOFLOW/Medtronic Tender: Insulet’s US Complaint Materially Increases Deal Break Risks

Insulet Corp (PODD US) filed with the United States District Court a complaint for patent infringement against Eoflow (294090 KS), Flex (FLEX US), Luis Malave, Steven DiIanni, and Ian Welsford.
Insulet’s primary allegation is that Eoflow’s EOPatch device is built using Insulet’s proprietary trade secrets and infringes three Insulet US patents (‘741, ’883 and ‘950 patents).
The most likely scenarios are that Medtronic Plc (MDT US) and Insulet sign a licensing agreement (resulting in a possible tender offer price cut) or Medtronic walks.

KKR/OHB: Agreed Take-Private Offer

By Jesus Rodriguez Aguilar

KKR’s launching a cash offer for space tech firm OHB SE (OHB GR) at €44/share, 37% premium, 8.1x EV/Fwd NTM EBITDA, 16.1x Fwd P/E for an implied equity value of c.€769 million.
The Fuchs family will retain its majority shareholding. OHB’s strong balance sheet might be leveraged to further consolidate the industry. The offer price seems slightly cheap but not outrageous.
I believe a price hike is unlikely. Gross spread is 3.75%. Considering a break of €32.2, the market is pricing an 86% probability of success. I’d be long the shares.

What Is KDB’s Plan B for Asiana Airlines?

There have been increasing local news flows about KDB’s potential “Plan B” for Asiana Airlines in case the merger between Asiana Airlines and Korean Air Lines is finally cancelled.
The final decisions by the European and US regulators on whether to pass/block this merger are likely to take place in 4Q 2023.
The higher probability scenarios are for one or both of these regulators to block this deal. As such, KDB will need to come up with Plan B.

InvoCare (IVC AU): SID Signed with TPG at A$12.7/Share

Invocare has entered into a scheme implementation deed with TPG at A$12.7/share. This is higher than the initial offer of A$12.65/share but lower than the revised offer of A$13/share.
There is an extra A$0.26/share in franking credits for Invocare Ltd (IVC AU) shareholders that can use them.
Passives will need to sell nearly 11m shares of Invocare Ltd (IVC AU) on the last trading day and there will be an adhoc inclusion to the S&P/ASX 200 Index.

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Aug 08

Daily Brief Event-Driven: JIP Tender Offer for Toshiba (6502) Finally Here and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JIP Tender Offer for Toshiba (6502) Finally Here
JPX Nikkei 400 Index Rebalance: Some Big Impact Names
Bank of Kyoto (8369) – Too Far Too Fast
Toshiba – The Tender Arrives
Samsung Electronics: Prefs Need to Catch Up
Estia & Bain Enter Into Scheme Agreement
Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks
TOPIX Inclusions: Who Is Ready (Aug 2023)
Estia Health (EHE AU): Bain Capital’s Binding Proposal
OreCorp Inks Deal With Silvercorp. Perseus In The Wings?

JIP Tender Offer for Toshiba (6502) Finally Here

The JIP TOB for Toshiba is here. Finally. It is still too low. Since the announcement, when it was too low, peers are up a lot, and memory looks healthier.
But it is not clear that activists who pushed this for years want to push any more. There appears to be Toshiba Fatigue, as I warned in March.
That makes this deal look “safe” but there are technical aspects which make it less “comfortable” than normal large and long-awaited deals.

JPX Nikkei 400 Index Rebalance: Some Big Impact Names

There are 38 adds/36 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
Based on the adds, deletes and capping changes, we estimate one way turnover of 4.35% and a two-way trade of JPY 461bn (US$3.24bn).
There are a few stocks that will have same way flow from other index trackers within a few weeks of the JPX Nikkei 400 Index rebalance.

Bank of Kyoto (8369) – Too Far Too Fast

Bank of Kyoto (8369 JP) has been on a relative tear recently. This is a bit surprising. On a static equity-portfolio discount measure, it has outperformed regional banks.
On a static regional bank PBR basis, it has outperformed its equity portfolio and the discount to the After Tax Equity Portfolio Value (ATEPV) is the smallest in eight years.
Is there a sea change? There is a possibility, however remote, that domestic investor disappointment rears its voting head. That’s the dream scenario. But I don’t see it coming soon.

Toshiba – The Tender Arrives

By Mio Kato

At long last the end to the Toshiba saga appears at hand with JIP’s belated tender offer being formally announced today at the previously quoted price of ¥4,620.
With a minimum target of 66.7% this does not seem guaranteed to pass but we nevertheless believe that odds are good.
The question is whether there is any room for a small hike in the price as alluded to by the Chairman.

Samsung Electronics: Prefs Need to Catch Up

Over the last year, the discount of Samsung Electronics Pref Shares (005935 KS) to Samsung Electronics (005930 KS) has increased from 5% to 17%.
The preferred shares have adequate liquidity, a large issue market cap, and now trade at a much higher dividend yield. A special dividend will further increase the dividend yield differential.
Breaking from history, the preferred shares discount has continued to increase as the stock has moved higher. With the preferred shares trading near its widest discount, that could change.

Estia & Bain Enter Into Scheme Agreement

After its initial bid of $3.00/share was rejected by Estia Health (EHE AU), Bain returned on the 7 June with a $3.20/share non-binding proposal and was granted exclusive due diligence.
Estia and Bain Capital have now entered into a Scheme Implementation Agreement at A$3.20/share, a 50% premium to undisturbed.
A shareholder meeting is expected to be held in November with implementation expected prior to the end of 2023.

Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks

Japan Industrial Partners (JIP) will launch the Toshiba Corp (6502 JP) tender offer of JPY4,620 per share from 8 August to 20 September.
The Board has reaffirmed its recommendation to accept the offer. JIP’s inability to raise its bid is used as an excuse to ignore the material peer rerating and unattractive terms.
The 1Q results undermine the Board’s view of an overstated DCF and show its unwillingness to entertain a potential Kioxia merger as a superior alternative, increasing deal risks.

TOPIX Inclusions: Who Is Ready (Aug 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.
Plus Alpha Consulting (4071 JP) will be included in TOPIX at the end of August 2023 and so far the stock has performed negatively as expected (see link).
Our long-term TOPIX pre-event name CELSYS (3663 JP) has seen its share price decline sharply in the last few weeks which raises some important questions.

Estia Health (EHE AU): Bain Capital’s Binding Proposal

Estia Health (EHE AU) has entered a SID with Bain Capital at A$3.20 per share, a 49.5% premium to the undisturbed price (21 March).
The offer is attractive in comparison to historical share prices and multiples. The offer is also attractive in comparison to the Japara Healthcare (JHC AU) precedent transaction.
The MAC clause, particularly around material regulatory events, could be risky. At the last close and for an end-of-December payment, the gross and annualised spread is 3.7% and 9.5%, respectively.

OreCorp Inks Deal With Silvercorp. Perseus In The Wings?

Western Australian-based miner OreCorp Ltd (ORR AU) has signed a Scheme Implementation Deed with Canada’s Silvercorp Metals (SVM CN).
Assuming the Scheme is successful, OreCorp shareholders will receive A$0.15 in cash and 0.0967 new Silvercorp shares – or an implied value of A$0.60 – for each OreCorp share held.
A shareholder meeting is expected to be held in mid-November with implementation expected end-Nov, early-Dec. Separately, Perseus (PRU AU) is understood to be kicking OreCorp’s tyres.

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Aug 07

Daily Brief Event-Driven: Korea – Positioning in Ecopro and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX
Japan – Increase in Shorts on Some Interesting Stocks
Merger Arb Mondays (07 Aug) – JSR, ITOCHU, Allkem, Origin, Symbio, Pacific Current, United Malt, MPI
Weekly Deals Digest (06 Aug) – Toshiba, E-Guardian, ITOCHU, Allkem, Symbio, Pacific Current, MPI
Yaizu Suisankagaku Industry (2812 JP): J-STAR’s JPY1,137 Tender Offer
EQD | Hang Seng Index (HSI) WEEKLY LONG: Support Levels and Probability

Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX

Ecopro Co Ltd, Kum Yang, Jyp Entertainment, Hanwha Ocean, Hanmi Semiconductor and Posco DX have all rallied recently and could find their way into global passive portfolios.
There could be liquidity events in some of the stocks as early as the end of the month and there is pre-positioning on a lot of the stocks.
Retail investors have been big buyers in Ecopro Co and Kum Yang while foreign investors have been buyers in Jyp Entertainment, Hanwha Ocean, Hanmi Semiconductor and Posco DX.

Japan – Increase in Shorts on Some Interesting Stocks

Nisshin Seifun Group, Oji Holdings, Nippon Shinyaku, CyberAgent Inc, NGK Insulators, Lixil Group and Sharp Corp have all underperformed the Nikkei 225 (NKY INDEX) over the last 3-4 months.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has started to increase and there could be more pre-positioning yet to come over the next few weeks.

Merger Arb Mondays (07 Aug) – JSR, ITOCHU, Allkem, Origin, Symbio, Pacific Current, United Malt, MPI

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Chindata Group (CD US), Estia Health (EHE AU), Invocare Ltd (IVC AU), ENM Holdings (128 HK), Eoflow (294090 KS), JSR Corp (4185 JP).
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Penguin International (PBS SP), Itochu Techno Solutions (4739 JP), Oishi Group PCL (OISHI TB), Kenedix Retail REIT (3453 JP).

Weekly Deals Digest (06 Aug) – Toshiba, E-Guardian, ITOCHU, Allkem, Symbio, Pacific Current, MPI

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 – Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN), Lalatech Holdings Co Ltd (LALA HK) and Lianlian DigiTech (2104619D CH) IPOs.
Event-Driven developments – E Guardian Inc (6050 JP), Itochu Techno Solutions (4739 JP), Toshiba Corp (6502 JP), Symbio Holdings (SYM AU), Metro Pacific Investments Co (MPI PM).

Yaizu Suisankagaku Industry (2812 JP): J-STAR’s JPY1,137 Tender Offer

Yaizu Suisankagaku Industry (2812 JP)/YSK has recommended J-STAR’s tender offer of JPY1,137 per share, a 35.0% premium to the undisturbed price (4 August).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
YSK is cash rich, and the offer is below book value. The tender offer is a reasonable alternative in challenging trading conditions that have slashed operating margin targets.

EQD | Hang Seng Index (HSI) WEEKLY LONG: Support Levels and Probability

By Nico Rosti

The Hang Seng Index (HSI) closed down last week (CC=-1), briefly touching OVERSOLD territory, it may close higher this week.
The HSI trend pattern currently identified with the Market Reversal Matrix (MRM) is quite bullish, on average.
Support levels to go LONG are between 19367 (Q2/Median) and Q3 at 19021.

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Aug 06

Daily Brief Event-Driven: Last Week in Event SPACE: Nippon Yusen and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Last Week in Event SPACE: Nippon Yusen, Takara, Kawasaki Kisen Kaisha, PCCW/HKT, ANZ
Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding
Quiddity Primer for SSE 50/180/380 Index Rebalance Events
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Itochu Techno, Superloop/Symbio, Dali Foods, Allkem, Oishi

Last Week in Event SPACE: Nippon Yusen, Takara, Kawasaki Kisen Kaisha, PCCW/HKT, ANZ

This may get squeezy after Nippon Yusen Kk (9101 JP) announced a ¥200bn over 9mos. Do not be short. Be long.
On an implied stub and simple ratio, Takara Holdings (2531 JP) is trading rich to 60.9%-held Takara Bio Inc (4974 JP).
Remain bullish Kawasaki Kisen Kaisha (9107 JP) vs TOPIX, especially near-term. But this is a much less exciting and squeeze-able opportunity than before,

Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding

The review period for a bunch of indices ended early last week and the announcement of the changes will be made in the next few weeks.
Hydro Lithium (101670 KS) will replace Nice Information Service Co (030190 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the close on Monday.
There have been big net inflows into China focused ETFs and outflows from Taiwan focused ETFs during the week.

Quiddity Primer for SSE 50/180/380 Index Rebalance Events

SSE 50 and SSE180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on Shanghai Stock Exchange.
SSE 380 consists of 380 mid-cap stocks which are selected from the remaining Shanghai listed A-shares after the constituents of SSE 180 Index.
In this insight, we take a brief look at the index selection methodology and the historical price and volume performance of the SSE 50/180/380 index rebalance baskets.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Itochu Techno, Superloop/Symbio, Dali Foods, Allkem, Oishi

I tally 43 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals this week: Itochu Corp (8001 JP)‘s Tender Offer for Itochu Techno Solutions (4739 JP), and the Superloop Ltd (SLC AU) / Symbio Holdings (SYM AU) merger.
Key updates took place forDali Foods Group (3799 HK), Allkem Ltd (AKE AU), and Oishi Group PCL (OISHI TB)

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Aug 05

Daily Brief Event-Driven: PCCW’s Stub Ops Spill More Red Ink and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

PCCW’s Stub Ops Spill More Red Ink
Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc

PCCW’s Stub Ops Spill More Red Ink

Net of HKT Ltd (6823 HK), PCCW Ltd (8 HK) recorded negative EBITDA of HK$378mn in the 1H23.
This is the largest six-month negative EBITDA figure since the EBITDA loss of HK$427mn in 2H22, and the third largest in the past decade.
PCCWs current discount to NAV is at an unsustainable 5%.

Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc

In a surprising move, SK Inc confirmed the interim dividend amount (₩1,500) on July 26, and the ex-dividend date is set for August 10.
As a result, this enables risk-free dividend arb trading in Korea as SK Inc carries single-stock futures, whose liquidity level is around 70% of the spot since July 26.
The backwardation level has not yet pushed this arbitrage to a profitable level. Nevertheless, it’s still possible to observe the basis spread moving to a meaningful extent before the ex-date.

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Aug 04

Daily Brief Event-Driven: Nippon Yusen (9101) BIG Buyback Announced and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Nippon Yusen (9101) BIG Buyback Announced
SF Holding (002352 CH): H-Share Listing & Index Implications
Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach
StubWorld: Takara Holdings Trading “Rich”
Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns
KT&G: First Shares Cancellation in 14 Years
Overhang Concerns from Remaining Irum TNC Exchangeable Bonds Conversion on Ecopro BM Shares
Tanzanian Reset And Indiana’s Arbitration
EQD | NIFTY Index WEEKLY Correction May Be Ending

Nippon Yusen (9101) BIG Buyback Announced

In March, NYK announced a new Mid-Term Management Plan discussed in Nippon Yusen – New MidTermPlan = New Shareholder Return Policy. They promised a full Shareholder Return Policy in May.
There was limited new SRP discussion in the 9 May earnings announcement. The MTMP suggested ¥200bn over 2yrs. The (Japanese) earnings announcement did too. Then May ended.
Now the Buyback Plan is out. ¥200bn over 9mos. That is different. This could move.

SF Holding (002352 CH): H-Share Listing & Index Implications

S.F. Holding (002352 CH) could raise between HK$26-33bn (US$3.4-4.2bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
The H-shares could get Fast Entry to certain indices and regular entry to others depending on the number of shares that are allotted to cornerstone and/or strategic investors.
The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.

Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach

On 28 July, Toshiba Corp (6502 JP) disclosed that JIP delayed the tender start to “sometime in August 2023” vs the target “in the last ten days of July 2023.”
Toshiba reports 1Q results on 7 August. A solid 1Q will undermine the Board’s recommendation of the offer in part on the premise that the IFA’s DCF valuation is unrealistic.
The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip away at the offer’s attractiveness.

StubWorld: Takara Holdings Trading “Rich”

On an implied stub and simple ratio, Takara Holdings (2531 JP) is trading rich to 60.9%-held Takara Bio Inc (4974 JP).
Preceding my comments on Takara 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%.

Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns

Nextrade aims to secure the business permit within the next year’s second half. They intend to launch their services by the end of next year or early the following year.
All eyes are focused on the proposal to be operational from 8:30 AM to 11:59 PM, with the afternoon call auction session running from 3:00 PM to 6:00 PM.
It would be crucial to observe how the elongation of the time period for specific issues to be reflected in prices could potentially lead to changes in intraday flow patterns.

KT&G: First Shares Cancellation in 14 Years

KT&G announced that it will buy back 3.47 million shares (2.5% of outstanding shares) and cancel them. This would be the first share cancellation for KT&G in 14 years.
If the company’s DPS is 5,200 won for 2023 fiscal year, this would represent dividend yield of 6.2% at current prices.
Although we have a positive view on KT&G’s share buyback and cancellation of 3.47 million shares, the company could do much more to improve its shareholder returns to its shareholders.

Overhang Concerns from Remaining Irum TNC Exchangeable Bonds Conversion on Ecopro BM Shares

It has been reported in local media that investors in exchangeable bonds issued by Irum TNC converted about 0.24 million shares of EBs into Ecopro BM equity on 26 July.
There are increasing concerns that the remaining EB could be released into the market in the coming months.
After the poor 2Q 2023 results, we believe the consensus is likely to reduce sales and profit estimates of Ecopro BM from 2023 to 2025.

Tanzanian Reset And Indiana’s Arbitration

Back in 2018, mini-exploration mining play – rare earths, gold, and base metals – Indiana Resources (IDA AU) had its Tanzanian retention licence revoked. With no compensation.
Indiana pursued its claim through the World Bank-backed ICSID’s tribunal, which subsequently ordered the Tanzanian government to pay US$109.5mn in damages and costs, versus Indiana’s current market cap of US$21mn.
Not surprisingly, the Tanzanian government is pushing back on the claim. The question is whether Indiana will ever get paid. And Indiana’s not the only company seeking revocation retribution.

EQD | NIFTY Index WEEKLY Correction May Be Ending

By Nico Rosti

The NIFTY Index has been falling for 2 weeks and is reaching mildly OVERSOLD territory. If this was a retracement during the main rally, it may be time to BUY.
The Market Reversal Matrix’s shows a bullish pattern, the time+price combined probability of success for LONG trades from current prices, after 2 weeks down, is >66%.
Price area to go LONG: 19400 to 18792, you can go LONG this week and also next week, if down (CC=-3).

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✓ Company Data and News
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Aug 03

Daily Brief Event-Driven: Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps
ITOCHU Techno-Solutions (4739 JP): ITOCHU’s JPY4,325 Tender Offer
KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue
E-Guardian (6050 JP): CHANGE Holdings’ Partial Tender Offer
Hong Kong CEO & Director Dealings (2 August): Flat Glass, Arts Optical, Sky Light Holdings
Quiddity Leaderboard BSE/SENSEX Dec 23: 7 Changes for BSE 100 and 5 Changes for BSE 200
SBI Affiliate To Buy 45-49% of E-Guardian (6050) In Partial Tender Offer
EQD | SPX INDEX WEEKLY Supports After US Credit Downgrade

Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps

Itochu Corp (8001 JP) today announced it had agreed with 61%-owned Itochu Techno Solutions (4739 JP) sub to take over CTC and squeeze out minorities.
The stock released earnings mid-day, somehow, but not on TDNet until post-close. The stock jumped in the last two hours. The Tender Offer is at a 10% premium to close.
Growth will be up, and there are lots of financial assets and net receivables so this is 8+x March 2025. Itochu is not overpaying. But there will be no counter.

ITOCHU Techno-Solutions (4739 JP): ITOCHU’s JPY4,325 Tender Offer

Itochu Techno Solutions (4739 JP) has recommended Itochu Corp (8001 JP)’s tender offer of JPY4,325 per share, an 18.7% premium to the undisturbed price (1 August).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 5.43% ownership ratio.
The minimum acceptance condition requires a 14% minority acceptance rate. This is doable as the tender price is attractive and equals the 20-year share price high.

KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue

Today, Kawasaki Kisen Kaisha (9107 JP) announced Q1 earnings. As expected, net was WAY down on weak container business. But the company revised up H1 and Full-Year.
KLINE increased its FY2023 payout, upping its expected buyback plan from ¥50bn to ¥60bn. This is still cheap at 8.5x and 0.7x book, and there is non-container growth.
The structure of the buyback deserves attention. It may deserve a very short-term trade. The buyback construct has the possibility of “fun and games.”

E-Guardian (6050 JP): CHANGE Holdings’ Partial Tender Offer

E Guardian Inc (6050 JP) has announced a partial tender offer and third-party allotment with Change Inc (3962 JP). CHANGE will subscribe for 1.5 million shares at JPY2,099 per share.
The tender offer is for a minimum of 3.7 million and a maximum of 4.3 million shares at JPY3,000 per share, a 42.9% premium to the undisturbed price.
The tender offer is reasonable. The minimum acceptance condition requires a 37% minority acceptance rate. A 100% minority participation rate implies a minimum proration is 42.39%.

Hong Kong CEO & Director Dealings (2 August): Flat Glass, Arts Optical, Sky Light Holdings

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.
Stocks mentioned in this regular insight include Flat Glass (6865 HK), Arts Optical Intl Hldgs (1120 HK), and Sky Light Holdings Ltd (3882 HK).

Quiddity Leaderboard BSE/SENSEX Dec 23: 7 Changes for BSE 100 and 5 Changes for BSE 200

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.
In July, we saw the deletion of HDFC Limited (HDFC IN) from several indices in this family which triggered multiple intra-review index changes.
At present, I do not see any changes for the SENSEX index but I see seven ADDs/DELs for BSE 100 and five ADDs/DELs for BSE 200.

SBI Affiliate To Buy 45-49% of E-Guardian (6050) In Partial Tender Offer