Event-Driven

The index announcements regarding the the changes to indices following the Rakuten (4755 JP) offering have been a bit weird.
Some of that may have to do with timing. Some is just weird
The result is that there is less to buy this week than I previously expected, and the buying gets dragged out longer.

StubWorld: China Conch Trades Cheap. As Does Anhui

The China Conch Venture Holdings (586 HK) / Anhui Conch Cement (600585 CH) ratio is at an all-time low. The implied stub is re-testing its all-time low.
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%.

Relia (4708 JP) Tender Offer Launches – STILL at the Wrong Price for the Wrong Reasons

In mid-January this year, Mitsui & Co Ltd (8031 JP) announced it would buy out minorities in Relia Inc (4708 JP) (longtime known as Moshi Moshi), a BPO/RPA/AI services company.
I said the deal was too cheap, with 44% upside to the midpoint of Target Advisor’s DCF fair value range. Investors needed to exercise their cowbell to get more.
Since then, TOPIX has returned ~15%, A peer basket 16%, H2 was possibly kitchen-sinked, but no Mar-2024 forecasts were provided. The Tender starts tomorrow. Noise is still warranted.

CNI Semiconductor Chips Index Rebalance: Multiple Inflows for the Inclusions

There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 9 June.
The inclusions will also be added to other indices over the next couple of weeks and there will be inflows from multiple index trackers.
The adds have outperformed and with 9 trading days to implementation of the changes and the inclusions also being added to other indices, there could be further outperformance near-term.

ChiNext/ChiNext 50 Index Rebalance: On Expected Lines as Adds Outperform Deletes

There will be 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index. Implementation is at the close on 9 June.
One-Way turnover for the Chinext Price Index is estimated at 3.17% while the one-way turnover for the ChiNext50 Index is 6.61%. The one-way trade across both indices is CNY 2.72bn.
The adds have outperformed the deletes by a huge margin over the last 3 months and there could be profit taking into implementation.

Full Details & Trading Ramifications of Official Revisions to CFD Trade Rules in Korea

It’s crucial to note that margin balances from CFDs will also be disclosed through each brokerage’s Home Trading System (HTS), providing insight into the risk of margin call-triggered covering trades.
It has been challenging to discern which are being targeted for illegal trading operations using CFDs. The disclosure of CFD margin balances can be an indicator to address this issue.
This may lead to a short-term selling spiral on suspected stocks, where illegal trading forces rush to liquidate their positions, and additional selling pressure targeting such activities exacerbates the situation.

Rakuten Bank (5838 JP) – Attractive Versus Domestic Neobank Peers, with Added Technical Support

By Victor Galliano

Rakuten Bank’s imminent TOPIX index inclusion is a further share price support, to a neobank with a fundamentally attractive outlook
Rakuten Bank trades on a LTM PE multiple of 10.9x, LTM PBV ratio of 1.5x and an ROE of 13.8%, the best ROE to PBV ratio of its neobank peers
Aside from its premium long-run growth prospects and low prospective PEG ratio, Rakuten Bank is also the lowest cost to serve Japanese neobank

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May 29

Daily Brief Event-Driven: Golden Eagle Retail (3308 HK): Controlling Family’s Privatisation Offer at HK$6.88 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Golden Eagle Retail (3308 HK): Controlling Family’s Privatisation Offer at HK$6.88
CES China Semiconductor Chips Index Rebalance: Six Changes in June
Assessing the Canon Buyback and Follow-On Performance
CSI500 Index Rebalance: Adds Starting to Outperform
Merger Arb Mondays (29 May) – Yitai, AAG Energy, Hailan, InvoCare, Silk Laser, Toyo Construction
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Tech Leads the Way
Golden Eagle (3308 HK): Wang Family Delisting Offer
Circling Uponor

Golden Eagle Retail (3308 HK): Controlling Family’s Privatisation Offer at HK$6.88

Golden Eagle Retail (3308 HK) disclosed a scheme privatisation offer from the controlling family at HK$6.88 per share, a 40.4% premium to the undisturbed price (HK$4.90 on 22 May).
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.
The offer price is final. The offer is reasonable particularly as the sentiment on the department store sector remains weak. This looks like a done deal.

CES China Semiconductor Chips Index Rebalance: Six Changes in June

There are 6 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 9 June.
All the inclusions are also additions to the CSI 500 Index and the passive flows will come from multiple trackers.
The adds have outperformed the deletes over the last couple of weeks and there could be further outperformance over the next two weeks.

Assessing the Canon Buyback and Follow-On Performance

10 days ago Canon Inc (7751 JP) announced its 18th ¥50bn buyback in 15yrs. They have a pattern, both in execution and outperformance.
Historically, they are reasonably aggressive. It may pay to observe market data to see when they are done. It may also pay to look at peer outperformance cycles.
Here I look at both – buyback cycle performance and cycle outperformance. Good so far, and now I see a tactical trade but it’s not overwhelming.

CSI500 Index Rebalance: Adds Starting to Outperform

There are 50 changes a side for the CSI Smallcap 500 Index at the upcoming rebalance that will be implemented at the close of trading on 9 June.
One way turnover at the rebalance is estimated at 9.45% leading to a one-way trade of CNY 5.93bn. The IT and Industrials sectors gain the most index spots.
8 adds to the CSI 500 Index are deletes from the CSI 300 Index while 3 deletes from the CSI 500 Index are adds to the CSI 300 Index.

Merger Arb Mondays (29 May) – Yitai, AAG Energy, Hailan, InvoCare, Silk Laser, Toyo Construction

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Estia Health (EHE AU), United Malt Group Ltd (UMG AU), HKBN Ltd (1310 HK), Hailan Holdings (2278 HK), Origin Energy (ORG AU).
Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Silk Laser Australia (SLA AU), Lian Beng (LBG SP), SBI Shinsei Bank (8303 JP), Penguin International (PBS SP).

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Tech Leads the Way

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

Golden Eagle (3308 HK): Wang Family Delisting Offer

PRC department store play Golden Eagle (3308 HK) has announced a privatisation offer, by way of a Scheme, at $6.88/share, a 40.41% premium to last close. The price is final.
The Offeror is the Wang family, Together with concert parties, they control 80.29%. 7.18% of the remaining 19.71% of the disinterested stakeholders have given an irrevocable.
Apart from shareholder approval, there are no key regulatory approvals to be obtained.

Circling Uponor

By Jesus Rodriguez Aguilar

Aliaxis SA (ALIVP BB) seeks market expansion and by offering a 55% premium (€25.75/share,10.0x EV/Fwd EBITDA) it’s quickly accumulated a 20% stake in Uponor OYJ (UNR1V FH), whose Board isn’t engaging.
The shares trade c.7% above the offer on expectations of others suitors, but the stake already owned by Aliaxis should act as a deterrent. My fair value estimate (EV/EBITDA) is €27.09/share.
The share price implies 6.6% perpetuity growth (in a mature industry) on a conservative 11.5% WACC. Oras (25% stake) isn’t giving into temptation. Aliaxis’d be happy with another 30%.

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May 28

Daily Brief Event-Driven: STAR50 Index Rebalance: Two Changes in June (As Expected) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

STAR50 Index Rebalance: Two Changes in June (As Expected)
SSE50 Index Rebalance: 5 Changes as Adds Give Up Recent Gains
SSE180 Index Rebalance: Small Impact but Not Widely Tracked
CSI300 Index Rebalance: 9 Changes as Discretion Used
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Toyo Construction, Silk Laser, Sing Tao, GK Goh Holdings
Index Rebalance & ETF Flow Recap: STAR50, SSE50, SSE180, KOSPI2, TW Top 50, HDFC/HDFCB, Rakuten Bank
Last Week In Event SPACE: Rakuten Bank/Group, Cathay/Swire Pacific, Japan Post

STAR50 Index Rebalance: Two Changes in June (As Expected)

The index committee has used a 6-month minimum listing history and that results in two changes. This is the first rebalance with less than 5 changes at a review.
One way turnover is estimated at 1.03% and will result in a one-way trade of CNY 1,025m. Given the adds are new listings, there will be some reverse funding flow.
There appears to be little pre-positioning on the adds while there is a bigger buildup on the deletes.

SSE50 Index Rebalance: 5 Changes as Adds Give Up Recent Gains

There are 5 changes for the SSE50 Index that will be implemented at the close on 9 June. There is over 1x ADV to sell on a few deletions.
We estimate a one-way turnover of 5.3% at the June rebalance leading to a one-way trade of CNY 3.84bn. Index arb activity could add to the impact on the stocks.
The adds outperformed the deletes from February to April but have given up a lot of the outperformance over the last month.

SSE180 Index Rebalance: Small Impact but Not Widely Tracked

There are 18 changes for the SSE180 Index that will be implemented at the close of trading on 9 June.
The impact on the stocks is small but this is not a widely tracked index, so there could still be opportunities for some high risk/reward basket trades.
With Northbound Stock Connect eligibility no longer drawing on the SSE180 Index constituents, the index could lose relevance over time.

CSI300 Index Rebalance: 9 Changes as Discretion Used

There are 9 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 9 June.
While nearly all the changes are in line with forecasts, there are some stocks that have not been added or deleted as the index committee has used discretion.
The Energy sector is the biggest gainer in terms of index spots, while the Consumer Discretionary and Health Care sectors lose two index spots each.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Toyo Construction, Silk Laser, Sing Tao, GK Goh Holdings

There are 38 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
There were no new deals were discussed on Smartkarma this week.
Key updates took place for Toyo Construction (1890 JP), Silk Laser Australia (SLA AU), Sing Tao News Corp (1105 HK), and GK Goh Holdings (GKG SP).

Index Rebalance & ETF Flow Recap: STAR50, SSE50, SSE180, KOSPI2, TW Top 50, HDFC/HDFCB, Rakuten Bank

The announcement of the changes for the June rebalance of the local China indexes was made post market close on Friday.
A busy week is coming up with rebalance implementations, review cutoffs and announcements.
There were inflows to iShares MSCI Japan ETF (EWJ US), Wisdomtree Japan Hedged Eq (DXJ US) and Jpmorgan Betabuilders Japan (BBJP US) during the week.

Last Week In Event SPACE: Rakuten Bank/Group, Cathay/Swire Pacific, Japan Post

Rakuten Bank (5838 JP)‘s TOPIX inclusion is this week. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.
Swire Pacific (A) (19 HK)‘s P/B is back down to 0.31x as Cathay Pacific Airways (293 HK) tackles alleged language bias by flight attendants.
Understanding real money demand on the Rakuten (4755 JP) story is key. If there is any, that makes deal overhang smaller than it looks.

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May 27

Daily Brief Event-Driven: EOFlow Tender Offer: Preconditions for Closure and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

EOFlow Tender Offer: Preconditions for Closure, Cancellation Risk, & Targetable Allocation
ISC’s Tender Offer Possibility Is Decreasing, Indicating a Potential Shorting Opportunity

EOFlow Tender Offer: Preconditions for Closure, Cancellation Risk, & Targetable Allocation

The likelihood of the merger review not being approved appears to be low. Additionally, the purchase of only 3.8M additional shares is required, leading to a negligible cancellation risk.
It is particularly noteworthy that the offering price of ₩30,000, targeting minority shareholders, may be adjusted upward depending on future share price increases.
While there is a potential allocation risk, as Medtronic aims to delist the company, they are unlikely to lower the target quantity in the tender offer to a risky level.

ISC’s Tender Offer Possibility Is Decreasing, Indicating a Potential Shorting Opportunity

The possibility of SKC securing additional shares other than the planned 40% through a tender offer seems low. This is a basis for the recent short position build-up in ISC.
ISC began to experience an influx of short selling, leading to it being designated as an overheated short-selling stock, and short selling was restricted for one day on the 26th.
We need to pay attention to the potential disappointment in the market, which could lead to a sustained downward correction in the stock price.

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May 26

Daily Brief Event-Driven: Cosmo Energy (5021) In a Display of Stunningly Bad Governance; If You Disagree and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Cosmo Energy (5021) In a Display of Stunningly Bad Governance; If You Disagree, You Can’t Vote
HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications
Early Targetable Names in KOSPI 200 December Rebalancing
StubWorld: Swire Drifts Lower As Cathay Faces Discrimination Claim
EQD | Asian Derivative YTD Range Trade Ideas

Cosmo Energy (5021) In a Display of Stunningly Bad Governance; If You Disagree, You Can’t Vote

Cosmo Energy Holdings (5021 JP) and noted Japanese activist Yoshiaki Murakami and affiliates/companies have been duking it out for the better part of a year.
Now Cosmo is putting a Poison Pill to an AGM vote. And it has decided to not allow Murakami-san to vote his shares. Because he is an interested party.
INVESTORS NEED TO BE AWARE. This is the second time a company has sought to deny a shareholder its voting rights without legal basis. The last time the court agreed.

HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications

Media reports indicate that the HDFC Bank (HDFCB IN) merger with HDFC Limited (HDFC IN) is expected to complete in 4-5 weeks.
There will be inclusions to the NIFTY Index, Nifty Next 50 Index and S&P BSE SENSEX Index and capping changes to the Nifty Bank Index apart from changes to global indices.
While the impact on the merging entities is not big, there will be fairly large flows on some stocks that are index inclusions or affected by capping changes.

Early Targetable Names in KOSPI 200 December Rebalancing

Based on the average daily full market cap up until the last close, the following additions have been identified as high-probability candidates: Sam A Aluminum, Dentium, and Dongwon Industries.
Three constituents will likely leave as they rank at the bottom in descending order of full market cap among those failing the screening: Cuckoo Homesys, Zinus, and Hyundai Home Shopping.
Dongwon Industries seems to be the most attractive, but given the uncertainty surrounding its inclusion, it may be more appropriate to target Dentium.

StubWorld: Swire Drifts Lower As Cathay Faces Discrimination Claim

A double dose of StubWorld this week. Swire Pacific (A) (19 HK)‘s P/B is back down to 0.31x as Cathay Pacific (293 HK) tackles alleged language bias by flight attendants.
Preceding my comments on Japan Post 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%.

EQD | Asian Derivative YTD Range Trade Ideas

By Leon Gross

Hang Seng Index (HSI INDEX) Implieds are at Records Low, Cheap to Historic, Buy Options.
Many Asian Indices have Tight Ranges, Flat Returns YTD, Options Expensive to the Range.
HSBC Holdings (5 HK) and Citic Ltd (267 HK) are up than 23% YTD, (with the Hang Sang flat), hedge them with cheap options

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May 25

Daily Brief Event-Driven: Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand
StubWorld: Japan Post Holdings Coming Up “Cheap”
Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals
Quiddity Leaderboard SET50 Jun 23: Final Expectations
Rakuten Bank & SBI Sumishin Net Bank: Upcoming Passive Flow
Quiddity Leaderboard ES50 Sep 23: Ferrari RACEs into the Lead; US$1.2bn Potential Inflow

Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand

The Rakuten (4755 JP) offering is producing interesting analysis. My read on the telecom side is that things are better (or less bad) than they were.
Longer-Term, I see the idea. Shorter-term, there will still be questions until there are not. However, there could be a lot of non-fundamental “I want this” demand in the offering.
Questions to ask yourself are: 1) how much will get placed with investors who want it 20+% lower than 15 May highs? 2) how many shorts will cover?

StubWorld: Japan Post Holdings Coming Up “Cheap”

At 0.3x, Japan Post Holdings (6178 JP) is top of the heap in terms of dollar “UpValue” to move to PBR 1.0x under Japan’s governance changes.
Preceding my comments on Japan Post 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%.

Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals

Today, Toyo Construction (1890 JP) announced it was against YFO’s AGM shareholder proposals. And that the Special Committee was unanimously against YFO’s tender proposal.
The content is mixed. Some is probably correct (YFO hasn’t done a great job it appears). Some is clearly taking management’s statements at face value where it shouldn’t.
And some is just the passage of time. Last year, ¥1,000 was “too high.” This year it is “not enough.” Now Toyo and YFO are stuck with each other.

Quiddity Leaderboard SET50 Jun 23: Final Expectations

In this insight, we take a look at the potential ADDs/DELs for Thailand’s SET50 index rebalance in June 2023.
There are only few more days left for the base date and we believe there could be two ADDs/DELs for the SET 50 index.
The LONG Thai Life Insurance (TLI TB) – SHORT Bangkok Life Assurance (BLA TB) trade had a good spell of performance but now it might be time to rethink.

Rakuten Bank & SBI Sumishin Net Bank: Upcoming Passive Flow

SBI Sumishin Net Bank (7163 JP) and Rakuten Bank (5838 JP) listed over the last couple of months and the stocks will be added to various indices over the year.
First up, Rakuten Bank (5838 JP) will be added to the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) at the close on 30 May.
Then both stocks will be added to other global indices between August and December bringing in passive flows and helping support the stock.

Quiddity Leaderboard ES50 Sep 23: Ferrari RACEs into the Lead; US$1.2bn 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.

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May 24

Daily Brief Event-Driven: Rakuten Bank – Big TOPIX Inclusion Next Week and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Rakuten Bank – Big TOPIX Inclusion Next Week
KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
Two of KS200/KQ150 Additions Are Prime-Targeted for Shorting Due to Their Inflated Float Shares
KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline
Quiddity Leaderboard SE600 Jun 23: Credit Suisse Deletion Imminent; Multiple Changes in June
Silk Laser Australia (SLA AU): David Vs Goliath Bidding Battle
Silk Laser: EC Healthcare’s Superior Counter
Advent & CenterBridge/Aareal Bank AG: All Conditions Met

Rakuten Bank – Big TOPIX Inclusion Next Week

Rakuten Bank priced its IPO low and then immediately bounced. Earnings came in as forecast, and the forecast next year did too. Highish PBR, high ROE, not-so-high-PER on low ROA.
The stock fell on 16 May after Rakuten Bank announced its capital raising. That was probably a knee-jerk reaction, and had no reason.
Next week sees the TOPIX inclusion. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.

KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill

Following the spin-off, Dongkuk Steel Mill (001230 KS) will be deleted from the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and replaced with Youlchon Chemical (008730 KS).
Youlchon Chemical (008730 KS) just missed being added to the index at the June rebalance but will be added a couple of weeks after the regular rebalance.
Shorts on Dongkuk Steel Mill (001230 KS) have increased over the last month but overall short interest is way below historical levels.

Two of KS200/KQ150 Additions Are Prime-Targeted for Shorting Due to Their Inflated Float Shares

Lutronic Corp and Jeisys Medical have considerably lower DTV in comparison to their float shares. It is highly probable that they have artificially increased their float shares.
Coincidentally, these two stocks are the ones that have experienced the most dramatic increase in borrow balance after the result announcement.
These two stocks are being targeted for short-selling from a post-event perspective because the market believes they will exhibit abnormal passive (price) impact due to their inflated float shares.

KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline

Applying the T+3 relisting date as the effective date will again lead to noteworthy changes to the timeline of rebalancing flow trading.
It seems unnecessary to concentrate shorting on the trading halt day for Dongkuk Steel. We should aim for price corrections driven by passive flows on the T+2 period before effective.
Despite the Dongkuk Steel shareholders’ approval on the 12th, Youlchon Chemical’s price experienced a significant decline. The ongoing risk of major shareholder stake sales appears to have overshadowed this event.

Quiddity Leaderboard SE600 Jun 23: Credit Suisse Deletion Imminent; Multiple Changes in June

In this insight, we take a look at the names leading the race to become ADDs/DELs for the STX Europe 600 and EUROSTX Indices for the June 2023 Rebalance.
I currently expect Credit Suisse (CSGN SW) and Mediclinic International (MDC LN) to be deleted in the next few trading days
Separately, there could be five ADDs and DELs during the regular review in June 2023.

Silk Laser Australia (SLA AU): David Vs Goliath Bidding Battle

Silk Laser Australia (SLA AU) disclosed a non-binding indicative offer from EC Healthcare (2138 HK) at A$3.35 per share, a 6.3% premium to Wesfarmers Ltd (WES AU)’s offer of A$3.15.
The Board has concluded that EC Healthcare’s offer is superior. Wesfarmers has matching rights which expire on 30 May.
Wesfarmers has the balance sheet and synergies to bump its offer. However, it is uncertain if EC Healthcare can engage in a bidding war due to a modest balance sheet.

Silk Laser: EC Healthcare’s Superior Counter

Back 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).
Wesfarmers was granted 30 business days to undertake due diligence on an exclusive basis. Ahead of that expiry, EC Healthcare (2138 HK) has crashed the party with a $3.35/share NBIO.
Silk’s board considers ECH’s proposal to be superior. Wesfarmers has five business days to respond. I expect they will.

Advent & CenterBridge/Aareal Bank AG: All Conditions Met

By Jesus Rodriguez Aguilar

All conditions of the takeover offer have been fulfilled after the ECB approved the acquisition of a majority stake in Aareal. Settlement will take place by 7 June.
The shares closed 3.33% higher vs. prior trading session, above the offer price(!). Aareal is trading at an undemanding 0.6x P/BV and 10.7x NTM Fwd P/E. No dividend is expected.
The bidders specifically left open the possibility of a squeeze-out/delisting. If the 90% threshold is confirmed, I believe Atlantic will compulsorily acquire the remaining shares at €33/share.

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May 23

Daily Brief Event-Driven: Taiwan Top 50 ETF Rebalance: One Change Expected in June and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Taiwan Top 50 ETF Rebalance: One Change Expected in June
Rakuten US$2.4bn Placement – Recent Updates and Comparison to past Deals
Quiddity Leaderboard TDIV Jun 23: Five Changes and US$922mn One-Way Flows
Nippon Prologis (3283 JP) Offering: Lower Premium Vs Peers than Last Time
Quiddity Leaderboard T50/100 Jun 23: One T50 Change and Four T100 Changes (With TDIV Implications)
Nucleus Clyde/Curtis Banks: Update

Taiwan Top 50 ETF Rebalance: One Change Expected in June

Today was the review cutoff for the June rebalance of the Yuanta/P-Shares Taiwan Top 50 ETF. We see one potential change at the review.
Passive trackers are estimated to buy nearly 6 days of ADV on Pegatron Corp (4938 TT) while selling around 1.7 days of ADV on Silergy Corp (6415 TT).
Short interest on Pegatron Corp (4938 TT) has continued to drop as the stock has moved higher; Silergy Corp (6415 TT)‘s short interest has risen as the stock has dropped.

Rakuten US$2.4bn Placement – Recent Updates and Comparison to past Deals

By Sumeet Singh

Rakuten (4755 JP) aims to raise up to US$2.4bn (JPY323bn) via a global offering.
We have covered various aspects of the deal in our earlier notes, see here and here.
In this note, we will talk about the updates since our last note, as well as the performance of some of the past large primary raises in Japan.

Quiddity Leaderboard TDIV Jun 23: Five Changes and US$922mn One-Way Flows

In this insight, we take a look at Quiddity’s flow expectations for the June 2023 index rebalance.
I currently see 5 ADDs/DELs. Some of these names are different from the ones I specified in my previous insight.
I have also discussed some long-short trading ideas involving names with significant flow implications.

Nippon Prologis (3283 JP) Offering: Lower Premium Vs Peers than Last Time

Japan’s largest logistics REIT Nippon Prologis Reit (3283 JP) (“NPR”) announced a US$183mn follow-on equity offering to fund their recent acquisition of a logistics facility.
The primary offer quantity will be 86,851 units out of which 51,090 units and 35,761 units are expected to be allocated for domestic and international investors, respectively.
Below is a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

Quiddity Leaderboard T50/100 Jun 23: One T50 Change and Four T100 Changes (With TDIV Implications)

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 June 2023 Rebalance.
I see one change for the T50 index and four changes for the T100 index.
Even though our standalone flow expectations for the T100 index is insignificant, there is one name with important flow consequences in June 2023.

Nucleus Clyde/Curtis Banks: Update

By Jesus Rodriguez Aguilar

Deal remains subject to approvals from FCA, PRA, SRA and clearance by CMA. Curtis said the scheme will likely be delayed until Q3 2023. There’re potential antitrust and tech integration issues.
Curtis trades at 15x Fwd P/E and the spread has widened to 7.7%. Some event-driven funds are cashing in partially while others are taking advantage of the blip.
I think there’s still a reasonably good chance of a deal happening (implied c.68%), but considering issues in recent situations (Wood, EMIS, THG, even Caverion), investors’ concerns can be understood.

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May 22

Daily Brief Event-Driven: Nikkei 225 Vs TOPIX Dynamics and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Nikkei 225 Vs TOPIX Dynamics
Merger Arb Mondays (22 May) – HKBN, Newcrest, InvoCare, United Malt, Golden Energy, Penguin, Shinsei
Korea: What Are Foreign Investors Buying & Selling?
Meritz Financial: Main Target for Flow Trading in KS200 June Rebalancing

Nikkei 225 Vs TOPIX Dynamics

This past week saw dramatic moves in Japanese stock markets. TOPIX +3.1% N225 +4.8% – up the 6th week in a row – closing at their highest in 33 years.
Flows were positive the week before, and I expect we’ll see next week they were positive this past week. But most striking was the interplay between Nikkei 225 and TOPIX.
If foreign inflows increase, Nikkei is likely to outperform TOPIX both because of its existence and previous use, and its construction. And that means watching one’s trades, shorts, and executions.

Merger Arb Mondays (22 May) – HKBN, Newcrest, InvoCare, United Malt, Golden Energy, Penguin, Shinsei

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Estia Health (EHE AU), HKBN Ltd (1310 HK), United Malt Group Ltd (UMG AU), Hailan Holdings (2278 HK), Aag Energy Holdings (2686 HK).
Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Lian Beng (LBG SP), SBI Shinsei Bank (8303 JP), Allkem Ltd (AKE AU), Penguin International (PBS SP).

Korea: What Are Foreign Investors Buying & Selling?

Foreign investors have been buying stock in Korea. They now hold 32% of the KOSPI market cap and 18.5% of the KOSDAQ market cap.
As a percentage of market cap, foreigners have been big buyers of Yg Entertainment, Hyundai Rotem and Meritz Financial Group. Selling has been on Ecopro Co and Posco Future M.
Shorts have increased on Ecopro Co Ltd (086520 KS) and Posco Future M (003670 KS) while there has been covering on Kakao Pay (377300 KS) and POSCO Holdings (005490 KS).

Meritz Financial: Main Target for Flow Trading in KS200 June Rebalancing

Meritz Financial confirmed the total number of treasury shares resulting from the mergers, amounting to 5.04% of SO. When combined with the largest shareholder’s stake, the float rate becomes 47.75%.
We should focus on direct rebalancing flow through KS200 ETFs on T-1 effective rather than setting it up preemptively. The estimated total AUM of ETFs directly mirroring KS200 is ₩17T.
Meritz Financial is expected to receive an inflow of around ₩43B, equivalent to 1.35x ADTV. This is a significant flow impact size as a single-day event.

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May 21

Daily Brief Event-Driven: Last Week in Event SPACE: Shinsei Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Last Week in Event SPACE: Shinsei Bank, China Everbright, Rakuten, Sony Corp
Official Results of KOSPI 200 Sector Indices Rebalancing: Kakao Pay’s Sector Change Confirmed
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Bad Data Is Good?
(Mostly) Asia-Pac Weekly Risk Arb Wrap: InvoCare, Newcrest/Newmont, Penguin Int’l, Golden Energy

Last Week in Event SPACE: Shinsei Bank, China Everbright, Rakuten, Sony Corp

Expect some upset on SBI Shinsei Bank (8303 JP)‘s Offer, the possibility of some activism, but it all plays out in the back end. Not the front end.
Rakuten (4755 JP) is doing a large equity offering to get the monkey off its back with regard to over-leverage, near-term debt refinancing, and WC for Rakuten Mobile.
Fund manager China Everbright (165 HK)‘s implied stub and simple ratio (CEL / Everbright Securities Co (A) (601788 CH)) are at multi-year lows.

Official Results of KOSPI 200 Sector Indices Rebalancing: Kakao Pay’s Sector Change Confirmed

The fact that KS200 IT has a significantly higher AUM provides a flow trading opportunity. This is due to the change in GICS for Kakao Pay from IT to Financials.
It has been observed that Kakao Pay’s DTV has recently decreased significantly. This may result in the flow size reaching up to 1.4 times DTV.
It is advisable to design an outright short position for day trading purposes. Additionally, a more aggressive approach can be considered by combining a long position on Samsung SDS.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Bad Data Is Good?

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

(Mostly) Asia-Pac Weekly Risk Arb Wrap: InvoCare, Newcrest/Newmont, Penguin Int’l, Golden Energy