Event-Driven

After being halted this morning before the start of trade, post-close, Yuexiu Property (123 HK) announced a fully-underwritten Rights Offering.
The Rights Offering intends to raise HK$8.36bn issuing 30 Rights for every 100 Shares held, at a subscription price of HK$9.00, a 23.3% discount to TERP.
This will take a moderately-levered property/services/leaseco and add more capital to it. Not terribly bullish. Looks opportunistic. And one has to look through 3 capital actions to see dividends ahead.

Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs

We now have an environment that allows Korea’s battery ETFs to include LG Chem in upcoming reviews. KODEX is in June, and TIGER is in July.
If LG Chem is included in each review, the expected one-day inflow is at 0.7-0.8x DTV, which can lead to a price impact similar to that of SKIET in 2021.
We should consider setups targeting this, including Long Short, which utilizes LG Energy Solution or LG Corp as a hedge.

Wesfarmer’s Non-Binding Offer For Silk

Wesfarmers Ltd (WES AU) has made a non-binding indicative Offer, by way of a Scheme, for Silk Laser Australia (SLA AU), an operator of specialist clinic networks across Australia.
The Offer Price of $3.15/share is a decent 30.2% premium to last close. Wilson Asset Management, with 9.3% of shares out, is supportive.
Wesfarmers has been granted 30 days to undertake due diligence on an exclusive basis.

Update on the Trading Opportunities Post OCI Spin-Off

By Douglas Kim

The Korea Exchange announced today (20 April) the change in index constituents and major dates for the Oci Co Ltd (010060 KS) spin-off.
Oci Co Ltd (010060 KS)’s shares will be suspended from trading from 27 April to 26 May 2023.
After the spin-off and relisting of holdco/opco shares, we believe that there is a greater probability of OCI Co (opco) shares outperforming OCI Holdings (holdco).

Quiddity Leaderboard-DAX Jun 23: SMA Solar, Hochtief, Adtran, Aroundtown

In this insight, we take a look at Quiddity’s estimates for the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
At present, I do not see any movements between the DAX and MDAX indices.
However, there could be two changes between the MDAX and SDAX index and there could be one more ADD/DEL for the SDAX index.

Apollo/John Wood Group: Due Diligence Access

“Feedback” from shareholders overturned numantine resistance from the Board of Wood, which has reluctantly decided to grant due diligence access to Apollo. New PUSU deadline is 17 May.
As top shareholder of Vallourec, Apollo knows the sector. At the 240p offer proposal, Wood would be valued at an undemanding 5.7x EV/Fwd EBITDA on consensus numbers.
My fair value estimate is 261.7p (average of SOTP-multiples and DCF). There is value in the sector and Apollo may have turned a corner. Long.

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Apr 20

Daily Brief Event-Driven: An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing
If HKBN Gets Taken Out, Who’s Next?
Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview
Rakuten Bank IPO Trading – Ample Upside

An Exposed Target for Flow Trading on KQ150 Ad-Hoc Change by BH’s KOSPI Transfer Listing

BH Co Ltd (090460 KS) will likely complete the transfer listing by early May, suggesting an ad-hoc change may occur before the regular rebalancing of the KOSDAQ 150 in June.
BH’s GICS sector is INFORMATION TECHNOLOGY. It means the top reserved issue at the previous review gets to replace BH. At this point, it will be HFR Inc (230240 KS).
We should build up a Long position on HFR right after KRX approves BH’s transfer and then close it on the next trading day after the KQ150 corporate action announcement.

If HKBN Gets Taken Out, Who’s Next?

HKBN Ltd (1310 HK) spiked 12.3% yesterday in response to media reports (like this one) that China Mobile (941 HK) was running a ruler over the company.
This follows Bloomberg reports last month and in May last year, that I Square’s HGC Global Communications and numerous PE outfits were kicking tyres of the Hong Kong broadband play.
Over the weekend, Hong Kong’s security chief was quoted as saying “the internet could become a major loophole when maintaining national security“. HKT (6823 HK) is a potential privatisation candidate.

Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview

Using data from the close on 19 April, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
There will also be capping and funding flows that will lead to a one-way turnover of 13.6% and a one-way trade of US$885m.
There are 10 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1 day ADV to trade.

Rakuten Bank IPO Trading – Ample Upside

By Sumeet Singh

Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), raised around US$630m in its Japan IPO.
RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
In our earlier notes, we have looked at various aspects of the deal. In this note, we talk about the deal dynamics and trading updates.

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Apr 19

Daily Brief Event-Driven: HKBN (1310 HK): China Mobile Is the Latest to Show Interest and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HKBN (1310 HK): China Mobile Is the Latest to Show Interest
Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion
YFO Goes Hard for Board Spill – Independents AND Executives
Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma
Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?
Quiddity Leaderboard ASX Jun 23: DHG Could Underperform Peers
ZJLD Group (6979 HK): Index Inclusion Possibility & Timelines
Oishi Group: IFA Backs ThaiBev’s Offer
Sega Sammy Holdings/Rovio Entertainment: Agreed Offer

HKBN (1310 HK): China Mobile Is the Latest to Show Interest

Reuters reported that China Mobile (600941 CH) is exploring a potential buyout of HKBN Ltd (1310 HK). The shares surged 12.3% to HK$6.57, above I Squared’s rumoured HK$6.00 offer.
To get an idea of the appropriate offer price, we examine shareholding dealings from substantial shareholders. Our analysis suggests that a scheme offer of around HK$8.50 would likely be required.
PAG is also a rumoured bidder. The flurry of interest around HKBN suggests a good probability that one of the bidders will come through with a formal offer.

Targeting the Widening of KT Corp ADR Premium Amid MSCI Inclusion

We should expect significant changes in KT’s ADR premium approaching the implementation date as foreign institutions leading the passive flow for MSCI Korea constituents have typically preferred ADRs.
Looking at the previous two occasions, the ADR disparity widened from the midpoint of the review period. And this trend continued for a while after the implementation.
Although KT’s ADR disparity has not yet significantly expanded, we may witness a similar pattern this time as well, given that it has been continuously moving in the premium recently.

YFO Goes Hard for Board Spill – Independents AND Executives

At end-March, Toyo Construction (1890 JP) started playing hardball against YFO. They rejected the EGM call; they sent a letter to METI crying “FEFTA Breach!”, and raised the div BIGLY.
The new div at ¥63/share was meant to get the share price over ¥1,000/share so the YFO bid at that price would not be meaningful. So far, no luck.
But YFO, which had threatened to propose a new slate, came out today with a list of nine, including two who would be executive directors. 👀👀

Yamada Denki (9831) Buyback Almost Done and Odd Dividend “Cut”, and a Lightbulb Dilemma

In May 2022, Yamada Denki (9831 JP) announced a very large buyback. GINORMOUS – in fact – at 23.9% of shares out ex-Treasury if maximum shares were bought.
So far, YDH is 83.5% through, and at the recent pace, they will end it 8 May having bought 183-184mm shares (21.9% of TSO) spending 86.6% of funds allocated.
That’s why the announcement lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.

Softbank (9984 JP) – Focus on the SVFs, Are the Private Companies Appropriately Marked?

By Victor Galliano

Softbank Vision Funds 1 and 2 were the biggest combined holdings at December 2022, accounting for 30% of group equity value; SVF private companies accounted for 73% of equity value
To December-end 2022, public companies in SVF2 were marked down by 52% versus investment cost, whereas SVF2 private companies were marked down by a more modest 33% versus investment cost
We believe that SVF2 private company valuations are at risk of further markdowns in 4QFY22 results, with many of these investments made close to the period of peak pandemic valuations

Quiddity Leaderboard ASX Jun 23: DHG Could Underperform Peers

In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run up to the June 2023 Rebalance.
Based on the latest data, I do not expect any changes for ASX 20, ASX 50, and ASX 100.
I expect Neuren Pharmaceuticals (NEU AU) to be added to ASX 200 and Domain Holdings Australia (DHG AU) to be deleted from ASX 200.

ZJLD Group (6979 HK): Index Inclusion Possibility & Timelines

ZJLD Group (ZJLD HK) is looking to raise between US$775m-US$933m (including the oversubscription option) in its IPO by selling 564.3m shares at a price range of HK$10.78-HK$12.98/share.
ZJLD Group (ZJLD HK) will not get Fast Entry to any indices but should be added to the HSCI and Stock Connect in September.
Peer performance has not been great this year and that could weigh on the ZJLD Group (ZJLD HK) listing.

Oishi Group: IFA Backs ThaiBev’s Offer

On the 10th March, Thai Beverage (THBEV SP) proposed taking 79.66%-held Oishi Group PCL (OISHI TB) private, at an Offer price of THB 59/share, a 26.9% premium to last close.
This Delisting Offer requires a shareholder vote which will take place on the 3<May. Payment may occur mid-to-late August.
In its report yesterday, the IFA reckons “that the shareholders should approve of the voluntary delisting“.

Sega Sammy Holdings/Rovio Entertainment: Agreed Offer

Sega with better reputation and deeper pockets than Playtika, announces a €9.25/share recommended cash offer; 63% premium to Playtika’s announcement; it represents 2.1x EV/Fwd Revenue, 12.3x EV/Fwd EBITDA, 21.6x Fwd P/E.
Acceptance condition is over 90%, and irrevocables are 49.1%, so 80.4% of the float is needed, which is high. I value Rovio using DCF (9% WACC, 1.5% perpetuity growth rate).
My fair value base case estimate is €8.80/share (€9.45/bull case). I thus update my TP to €9.25. Spread is 0.59%/1.22% (gross/annualised), which is not massive.

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Apr 18

Daily Brief Event-Driven: MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences
Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch
StubWorld: Genting Berhad Is Cheap
Genesis To Acquire St Barbara’s Flagship As Merger Cancelled
Oishi Group (OISHI TB): IFA Recommends the THB59.00 Delisting Offer
Quiddity Leaderboard for UK F100/250 June 23: 20+ Days to Buy for Top-Ranked F250 Potential ADDs
Blackstone/Industrial REIT: Final Agreed Offer

MSCI May 2023 QCIR: Potential Changes & Things to Watch as Review Period Commences

The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) starts today. MSCI should choose a day from this week to compute market cap.
The most changes (especially adds) are expected in mainland China following an expansion of the universe for inclusion of stocks in Northbound Stock Connect.
There are stocks in India where there will be FIF changes triggering large flows and there are things to watch on some stocks in Korea and China.

Nikkei 225 Sep 2023 Rebalance Gets Interestinger – Possible Fast Retailing Cap and Zozo Stretch

With 3.5 months left in the dataset, the data is pretty close to settled. The interesting bits are elsewhere. There are three auto DELETEs and two auto ADDs. Maybe.
One auto-ADD is Toshiba, which may have a deal on it. That leaves two to add for sector balance. That could be Nitori (9843 JP) and Zozo (3092 JP).
Friday’s move on Fast Retailing brings in the issue of the new capping function. That would be a different US$2bn selldown. Lots of gory details here.

StubWorld: Genting Berhad Is Cheap

Genting Bhd (GENT MK)‘s implied stub and the simple ratio (GENT / Genting Singapore (GENS SP)) are at multi-year lows.
Preceding my comments on Genting are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Genesis To Acquire St Barbara’s Flagship As Merger Cancelled

Gold miner St Barbara Ltd (SBM AU)’s reverse merger with Genesis Minerals (GMD AU) always had a whiff of biting off more than they could chew. That’s now validated.
St Barbara has confirmed it will sell its flagship Leonora gold project to Genesis for $600mn (in cash and GMD scrip). The reverse merger has been cancelled.
Post transaction, St Barbara will hold up to ~19.5%, and be left with no debt and ~$197m in cash. Genesis will emerge with no debt, and ~$175mn cash (pre-transaction costs).

Oishi Group (OISHI TB): IFA Recommends the THB59.00 Delisting Offer

The Oishi Group PCL (OISHI TB) IFA opines that shareholders approve Thai Beverage (THBEV SP)’s delisting tender offer of THB59.00 per share at the EGM on 3 May.
The offer is conditional on Oishi shareholder approval which requires 75% approval by total outstanding shares and <10% rejection by total outstanding shares.
The offer is attractive to the IFA’s fair value of THB53.48-56.42 per share. At last close and the end-July completion, the gross and annualised spread is 2.2% and 8.1%, respectively.

Quiddity Leaderboard for UK F100/250 June 23: 20+ Days to Buy for Top-Ranked F250 Potential ADDs

In this insight, we take a look at the potential index changes for F100 and F250 in the run up to the June 2023 Rebalance.
Based on latest prices, there could be one change for F100 and four changes in F250 between now and the June 2023 Rebalance including Mediclinic International (MDC LN)‘s intra-review change.
Many of the high-ranked F250 potential additions could have very high impact according to our estimates.

Blackstone/Industrial REIT: Final Agreed Offer

Blackstone launches a recommended 168p/share cash offer (via a scheme of arrangement) for Industrials REIT, which needs funding to increase its portfolio (and scale) and lower its blended cost ratio.
The asset class seems attractive in an economic upturn. The offers represents a 42% premium, 1.04x to latest reported NTA, 1.2x P/23e BVPS; 22.1x Fwd P/E (source IBES).
The offer should succeed, although irrevocables are just 6.3% (plus 22.4% letters of intent). Spread is 0.89%/4.52% (gross/annualised). While not terribly exciting, I would be long, in case of sweetening.

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Apr 17

Daily Brief Event-Driven: Rakuten Bank (5838) IPO – Let’s Go! (Part 2) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Rakuten Bank (5838) IPO – Let’s Go! (Part 2)
Arclands (9842) Overpays for Arclands Service Holdings (3085)
Merger Arb Mondays (17 Apr) – Newcrest, Essential, Healius, Lian Beng, Golden Energy, Arcland
Aiming for Price Movement Patterns with Low Market Exposure in MSCI Korea May Review
Rights Arbitrage
Weekly Deals Digest (16 Apr) – Lian Beng, Arcland, Essential, Genesis, Newcrest, Rakuten Bank, ZJLD
Liquid Universe of European Ordinary and Preferred Shares: April ‘23 Report

Rakuten Bank (5838) IPO – Let’s Go! (Part 2)

SBI Sumishin Net Bank (7163 JP) lowered its listing price vs what were already lowered expectations from a year prior. Then Rakuten Bank (5838 JP) lowered its IPO range.
SBI Sumishin dilly-dallied around IPO price for three days then went nuts, rising 40% as of Friday morning. Rakuten Bank’s IPO looks dirt cheap now.
But it is worthwhile comparing it on a spectrum of OTHER Japanese banks and neobanks.

Arclands (9842) Overpays for Arclands Service Holdings (3085)

On Friday Arcland Sakamoto (9842 JP) and restaurant franchise subsidiary Arcland Service (3085 JP), which it launched in 1993 and IPOed in 2007, announced they had agreed to merge.
Arcland SHD runs 18 restaurant brands, of which Katsuya is most well-known, with a total of 750 or so restaurants managed globally. It has grown consistently.
The merger ratio is at an all-time high for Arcland SHD. This should be a done deal but I might expect some complaints. I think Arclands is probably overpaying.

Merger Arb Mondays (17 Apr) – Newcrest, Essential, Healius, Lian Beng, Golden Energy, Arcland

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), Alliance Aviation Services (AQZ AU), Estia Health (EHE AU), United Malt Group Ltd (UMG AU), Aag Energy Holdings (2686 HK), Origin Energy (ORG AU).
Lowest spreads – Healius (HLS AU), Essential Metals (ESS AU), Liontown Resources (LTR AU), Lian Beng (LBG SP), Golden Energy & Resources (GER SP), Mincor Resources NL (MCR AU).

Aiming for Price Movement Patterns with Low Market Exposure in MSCI Korea May Review

We should aim for price movement patterns with relatively low market exposure. One of them is the post-effective upward price movement of deletions.
The relative price performance for one week after the implementation compared to KOSPI 200 was consistently positive, ranging from 2.41% to 6.82%.
Given the recent price movement of four deletion candidates, there is again a high possibility that the price distortion caused by MSCI flow will revert after the effective date.

Rights Arbitrage

The rights issue is fully underwritten and should bolster the balance sheet. This is akin to a placing by market volume. There are arbitrage opportunities (although not limitless borrowing available).
The arbitrage is a long position on a synthetic put. Rights will trade up to 17:30 on 3 May.
The new shares coming is a giant block compared to the existing shares outstanding. There may be a wave of selling from 4 May, and the shares should drop then.

Weekly Deals Digest (16 Apr) – Lian Beng, Arcland, Essential, Genesis, Newcrest, Rakuten Bank, ZJLD

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 Bank (5838 JP), ZJLD Group (ZJLD HK), Mankind Pharma (6596876Z IN) and Merdeka Battery Materials (2012725D IJ) IPOs.
Event-Driven developments – Lian Beng (LBG SP), Arcland Service (3085 JP), Essential Metals (ESS AU), Genesis Minerals (GMD AU), Healius (HLS AU), Newcrest Mining (NCM AU).

Liquid Universe of European Ordinary and Preferred Shares: April ‘23 Report

Since mid-March, spreads have generally tightened across our liquid universe (6 have widened, 12 tightened, 1 at same level).
Possible trades long ordinary / short preferred shares: Fuchs Petrolub, Henkel, Handelsbanken, SSAB Svenska Stal.
Possible trades long preferred / short ordinary shares: Sixt, VW, Danieli, Grifols, Atlas Copco.

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Apr 16

Daily Brief Event-Driven: Arcland Service (3085 JP): Share Exchange Offer from Arclands Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Arcland Service (3085 JP): Share Exchange Offer from Arclands Corp
Last Week in Event SPACE: Tencent, Ecopro, Japan’s Governance, Jardines, Citizen
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Nothing to See Here!
Price/Flow Impact on Four Constituent Changes in KODEX Top 5 Plus ETF Rebalancing in June
Index Rebalance & ETF Flow Recap: HSI, S&P/ASX, KOSDAQ150, TAMSCI, Kotak Mahindra Bank
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Liann Beng, Newcrest, OZ Minerals, Glory Star New Media

Arcland Service (3085 JP): Share Exchange Offer from Arclands Corp

Arcland Service (3085 JP)/Arcland SHD has recommended Arcland Sakamoto (9842 JP)/Arclands’ share exchange offer at 1.87 Arclands shares per Archland SHD share.
The implied offer value of JPY3,051.84 per share at Arclands’ last close price is a 35.3% premium to the undisturbed price of JPY2,256.00 per share (14 April).
The offer requires Arcland OGM (25 May) and Arcland SHD EGM (22 June) shareholder approval. Arcland SHD shareholders will be supportive as the deal metrics are attractive.

Last Week in Event SPACE: Tencent, Ecopro, Japan’s Governance, Jardines, Citizen

Prosus (PRX NA) moved 96mn shares of Tencent (700 HK) into CCASS. Tencent shares fell hard. If the share price fell because of a block offering, that would be unwarranted.
Ecopro (086520 KS) is up an eye-watering 590% in the past three months, primarily on Ecopro BM (247540 KS)‘s outperformance, together with sentiment towards soon-to-be-listed 52.8% held Ecopro Materials.
Japan’s Finance Minister said that companies need to improve their PBRs, and that “increasing corporate value of listed companies would allow for Japan to realise sustainable growth.”

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Nothing to See Here!

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

Price/Flow Impact on Four Constituent Changes in KODEX Top 5 Plus ETF Rebalancing in June

Samsung SDI and LG Chem are expected to be newly included in the index, while Hana Financial and KT&G Corporation are predicted to be excluded.
The correlation between the price movement and the flow direction on the rebalancing trading day of constituent changes from the past reviews was quite high.
We can set the price impact expectation for the upcoming review even more aggressively, given that the size of the flow x DTV is more significant than in previous cases.

Index Rebalance & ETF Flow Recap: HSI, S&P/ASX, KOSDAQ150, TAMSCI, Kotak Mahindra Bank

The review period for the MSCI May QCIR starts on Monday. The most ~~changes~~ inclusions by far are expected to be in China.
There will be an ad hoc change for the S&P/ASX 100 Index, S&P/ASX 200 (AS51 INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 18 April.
After a period of sustained outflows, there were some inflows to the IShares Core MSCI Asia Ex Japan ETF (3010 HK) during the week.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Liann Beng, Newcrest, OZ Minerals, Glory Star New Media

There are 42 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma this past week: Singaporean construction firm Lian Beng (LBG SP) announced a voluntary unconditional cash Offer from the controlling Ong family,
Key updates took place for Newcrest Mining (NCM AU) and OZ Minerals Ltd (OZL AU), and Glory Star New Media Group Holdings (GSMG US).

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Apr 15

Daily Brief Event-Driven: Citizen Watch (7762) : Super-Aggressive Buyback Likely Ending Soon – Beware of Risks Both Ways and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Citizen Watch (7762) : Super-Aggressive Buyback Likely Ending Soon – Beware of Risks Both Ways
A High Conviction Long Short Trade in KODEX Battery ETF Rebalancing in June
Ecopro BM: Considering on a CB Issuance of 500 Billion Won
Genesis Minerals (GMD AU): Alternate Transaction and Placement to Buy St Barbara’s Key Assets

Citizen Watch (7762) : Super-Aggressive Buyback Likely Ending Soon – Beware of Risks Both Ways

In mid-February 2023, Citizen Watch (7762 JP) announced another buyback. It had averaged nearly two small buybacks a year for the past four years for a total of ¥10bn.
This new one was ¥40bn, which assuming a 20% share price jump was 12% of ADV for a year. Bigly! We got the 20% jump, then not much more.
But Citizen has been buying fiercely. In the first 25 days of trading they averaged 25.8% of volume and bought back 11.5% of shares out. There’s a story here.

A High Conviction Long Short Trade in KODEX Battery ETF Rebalancing in June

WCP will likely be included in the rebalancing of Samsung KODEX Secondary Battery Industry ETF in June. And we should consider the possibility of this happening to be quite high.
We can expect a daily passive inflow of around 0.3x compared to WCP’s typical DTV. The practical correlation with the price should be higher than the theoretical level.
We should consider using SKIET, which engages in the same business in the same sector, as a hedge. WCP/SKIET Long Short achieved considerable performance within the past week’s window.

Ecopro BM: Considering on a CB Issuance of 500 Billion Won

By Douglas Kim

According to Hankyung Business Daily, Ecopro BM Co Ltd (247540 KS) is considering on issuing a CB worth 500 billion won to various private equity and asset managment companies.
We would be negative on the potential CB issuance of nearly 500 billion won by Ecopro BM.
The potential issuance of this CB is a signal from the management that it is trying to capitalize on the recent sharp increases in share price to raise more capital.

Genesis Minerals (GMD AU): Alternate Transaction and Placement to Buy St Barbara’s Key Assets

Genesis Minerals (GMD AU) and St Barbara Ltd (SBM AU) have dropped their merger plans. Instead, GMD will acquire SBM’s Leonora gold assets for a total consideration of A$600 million.
The transaction is favourable for GMD shareholders. GMD is getting the assets at an attractive price. GMD will fund the acquisition through a A$450 million placement at A$1.15 per share.
The transaction provides a way out for long-suffering SBM shareholders as they retain exposure to gold assets and have option value on the sale of SBM’s remaining assets.

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Apr 14

Daily Brief Event-Driven: S&P/ASX Adhoc Index Rebalance: SVW in ASX100 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200
MSCI Taiwan May QCIR: Potential Inclusions to Drive Deletions
KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)
Analysis of Adani Group Shareholder Structure Changes in Q1 – Stock Moved
Hong Kong CEO & Director Dealings (13 Apr): Melco, CMGE, Differ, Sino Biopharmaceutical
Jardine Strategic’s Dissentient Shareholders: The Sensible And Workable Approach
Temenos (TEMN SW; TMSNY US): M&A Looks Imminent
Quiddity Leaderboard NIFTY Sep 23: LTIMINDTREE Could Be an Intra-Review NIFTY 50 ADD

S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200

Shareholders have approved OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU) and OZL is expected to stop trading after the close on 18 April.
OZ Minerals Ltd (OZL AU) will be replaced by Bellevue Gold (BGL AU) in the S&P/ASX 200 (AS51 INDEX) and by Seven Group Holdings (SVW AU) in the S&P/ASX 100.
There has been huge short covering on Seven Group Holdings (SVW AU) and Bellevue Gold (BGL AU) over the last few months.

MSCI Taiwan May QCIR: Potential Inclusions to Drive Deletions

Based on closing prices from 12 April, we forecast 2 adds and 2 deletes for the MSCI Taiwan Index at the May QCIR.
Global Unichip (3443 TT) is a high probability index inclusion and that will drive the deletion of Giant Manufacturing (9921 TT) from the index.
Wistron Corp (3231 TT) is a potential inclusion and that could result in the deletion of Win Semiconductors (3105 TT) from the index.

KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)

Following SK Oceanplant (100090 KS) moving from the KOSDAQ to KOSPI Market, the stock will be deleted from the KOSDAQ 150 Index and replaced with Sun Kwang (003100 KS).
The change will be implemented at the close on 18 April and passive trackers will need to trade over 1x ADV on both stocks.
Sun Kwang (003100 KS) was a high probability index inclusion in June, so this brings forward the inclusion by a couple of months.

Analysis of Adani Group Shareholder Structure Changes in Q1 – Stock Moved

Every quarter, Indian companies report their “Shareholding Pattern” for all to see. They show holdings by category type, and holders over 1%.
The big news in Q1 in AdaniLand was the failed FPO, thwarted by the Hindenburg Research report, and the Adani Promoter sale of stakes in 4 companies to GQG Partners.
The details in the change of the shareholder structure are, however, interesting.

Hong Kong CEO & Director Dealings (13 Apr): Melco, CMGE, Differ, Sino Biopharmaceutical

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 insight include: Melco International Development (200 HK), CMGE Tech (302 HK), Differ Group Auto (6878 HK), and Sino Biopharmaceutical (1177 HK)

Jardine Strategic’s Dissentient Shareholders: The Sensible And Workable Approach

Back on the 8 March 2021, Jardine Matheson (JM SP) made a cash acquisition for the 15% of Jardine Strategic (JS SP)‘s share capital it did not already own.
The US$33/share Offer price was arguably light. But with the amalgamation requiring 75% approval and Matheson providing an irrevocable to vote its 84.89% stake for the transaction, it was done.
On the 20 April 2022, the Bermuda Court dismissed Jardine’s application to strike out dissenting shareholders who acquired shares after the Offer was announced. Last month, Jardine lost its appeal.

Temenos (TEMN SW; TMSNY US): M&A Looks Imminent

By Vijay Lohia, CFA

Temenos is an attractive takeover candidate with multiple M&A speculation in the media in the last 12-18 months.
The probability of Temenos being taken over continues to increase especially after the fresh round of banking industry turmoil witnessed in the last few weeks.
At a buy-out multiple of 10x EV/sales, Temenos would be worth CHF110 per share which is roughly 72% upside from here.

Quiddity Leaderboard NIFTY Sep 23: LTIMINDTREE Could Be an Intra-Review NIFTY 50 ADD

In this insight, we take a look at the names leading the race to become ADDs/DELs for the NIFTY 50 and NIFTY 100 indices in the September 2023 rebalance.
A couple of these names could become intra-review additions if the HDFC Limited (HDFC IN) – HDFC Bank (HDFCB IN) Merger closes prior to the September 2023 Rebalance.
Apart from that, there could be five ADDs/DELs for the NIFTY 100 index which by definition will also be added/deleted from the NIFTY Next 50 index.

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Apr 13

Daily Brief Event-Driven: Tencent (700 HK) – This Is Not the Selldown You Are Looking For and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Tencent (700 HK) – This Is Not the Selldown You Are Looking For
Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?
An Alternative Flow Trading Angle for K200 Rebalancing in June
Enchem: Block Deal Sale of 14% of Outstanding Shares
Quiddity Leaderboard for BSE/SENSEX Jun 23: Six BSE 100 Changes and Four BSE 200 Changes
Cash Call at 38% Discount

Tencent (700 HK) – This Is Not the Selldown You Are Looking For

On April 11, Prosus (PRX NA) made an Update on Repurchase Programme that it had repurchased shares in the market from the 3-7 April. They do so every week.
This one said they would move 96 million shares of Tencent (700 HK) currently held in non-transferrable shares into CCASS so they could be sold.
The ADRs dropped in New York time. Tencent shares fell hard today. If the share price fell because of a block offering, that would be unwarranted.

Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?

With no changes made at the March rebalance, we are still stuck at 76 index constituents. And it’s been a year later than originally planned to reach 80 index constituents.
We list 10 potential inclusions in June. Adding all 10 stocks will lead to around 5% one-way turnover, so there could be a mix of larger and smaller stocks added.
There will be at least 1x ADV to trade on nearly all inclusions. Short interest is over 4% of float on some stocks and there has been a recent jump.

An Alternative Flow Trading Angle for K200 Rebalancing in June

In KOSPI 200 IT Sector Index rebalancing in June, we should consider using Samsung SDS as a hedge for short positions on KakaoPay from a day trading perspective.
The expected performance of traditional flow trading based on passive impact has become uncertain due to flexible rebalancing trading by local pensions and short selling resumption on K200 new entrants.
As such, flow events on these sector indices that are still pretty much under the radar in the market could be a meaningful alternative for us.

Enchem: Block Deal Sale of 14% of Outstanding Shares

By Douglas Kim

Chosun Business Daily reported today that Enchem is considering on conducting a block deal sale of nearly 14% of its outstanding shares, representing about 160 billion won.
Brahman PS Investment is the likely seller in this block deal sale. If the block deal sale is successful, Brahman will have gained more than 6x on its original investment.
We would not be buyers of the block deal sale mainly due to unattractive valuations, volatile profitability, and not enough block deal sale discount.

Quiddity Leaderboard for BSE/SENSEX Jun 23: Six BSE 100 Changes and Four BSE 200 Changes

In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the June 2023 Rebalance.
There are only few more days left in the reference period used for the constituent selection process for the June 2023 Rebalance.
Currently, I see 6 ADDs/DELs for the BSE 100 index and 4 ADDs/DELs for the BSE 200 index.

Cash Call at 38% Discount

The timing was ripe for a rights issue after the share price had gained 64% since 24 October and addresses the capital structure, a need to win relevant contracts.
The rights issue is priced at a 38.6% discount (with a negative impact on the share price). TERP is €8.8438, theoretical value of the right is €1.1762).
Exclusively considering the cash injection and new number of shares, TP would be €9.07/share, with the caveat of the large dilution and uncertainty about the execution of the restructuring.

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Apr 12

Daily Brief Event-Driven: Japan’s Governance Changes I – The PBR 1.0 Target and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Japan’s Governance Changes I – The PBR 1.0 Target
Newcrest: Newmont Bumps And Granted DD
StubWorld: Ecopro’s Spike Makes No Sense
Lian Beng (LBG SP): Ong Family’s Derisory Unconditional Offer at S$0.62
TOPIX Inclusions: Who Is Ready (Apr 2023)
Temenos (TEMN SW): World’s No.1; Improving Fundamentals; M&A Candidate
Newcrest Mining (NCM AU): Newmont Returns with a Revised Offer
Lian Beng: Family Takeout At <50% of NAV

Japan’s Governance Changes I – The PBR 1.0 Target

The TSE went through a multi-year period of planning a “Market Restructuring” which ended on 4 April 2022 as the TSE split into three Sections, TSE Prime, Standard, and Growth.
After that, the TSE formed a “Council of Experts” (some very senior people) that would follow up on the changes, and recommend new measures. In January, new rule proposals dropped.
There was talk of a hard end to the transition period. Also, the Council harped on Awareness of Capital Cost and Efficiency. Most notably, for companies with PBR < 1.

Newcrest: Newmont Bumps And Granted DD

Under the revised proposal, Newmont (NEM US) has bumped the all-scrip terms for Newcrest Mining (NCM AU) to 0.400 Newmont shares – from 0.380 – for each Newcrest share held.
Including a permissible franked special dividend of up to US$1.10/share, the revised proposal represents an implied value of A$32.87/share. Newmont indicated the revised bid represents its best and final price.
Newcrest has granted Newmont confirmatory due diligence to put forward a binding proposal.

StubWorld: Ecopro’s Spike Makes No Sense

Ecopro (086520 KS) is up an eye-watering 590% in the past three months, primarily on Ecopro BM (247540 KS)‘s outperformance, together with sentiment towards soon-to-be-listed 52.8% held Ecopro Materials.
Preceding my comments on Ecopro are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Lian Beng (LBG SP): Ong Family’s Derisory Unconditional Offer at S$0.62

Lian Beng (LBG SP)/LBG has disclosed a voluntary unconditional offer from the Ong family at S$0.62 per share, an 8.8% premium to the undisturbed price (6 April).
The offer price is unattractive in comparison to peer multiples and precedent transactions. The price is not final. As the family aims to privatise LBG, a bump is likely.
The offer will likely follow the Boustead Projects (BOCJ SP) playbook, where Boustead Singapore Limited (BOCS SP) tabled a take-it-or-leave-it derisory 5.6% bump to its low-balled offer.

TOPIX Inclusions: Who Is Ready (Apr 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.
In the last two months, Amvis Holdings Inc (7071 JP), AXXZIA Inc (4936 JP), and Sosei Group (4565 JP) have confirmed their moves to the Prime Market.
These names appeared in our lists (A or B) of candidates with high “readiness” for TOPIX Inclusions in our recent insights.

Temenos (TEMN SW): World’s No.1; Improving Fundamentals; M&A Candidate

By Vijay Lohia, CFA

Overall, the sentiments are extremely negative with most sell-side analysts having a Sell/Neutral rating on the stock.
We believe either A) Revenue and earnings growth will pick up under the new management team, or B) Temenos will be taken over by some private equity firm.
While revenue growth has remained subdued, the company’s moat remains intact in our view.

Newcrest Mining (NCM AU): Newmont Returns with a Revised Offer

Newcrest Mining (NCM AU) disclosed a revised non-binding indicative privatisation proposal from Newmont Mining (NEM US) at 0.400 Newmont shares per Newcrest share + US$1.10 special dividend.
Since the 6 February announcement, the average implied value of the revised offer is A$29.14 per share, which is 11.6% higher than the average of the previous offer of A$26.12.
The offer is attractive in terms of historical prices and VWAP ratios but carries the volatility risk around Newmont shares and FX rates. Expect a binding proposal.

Lian Beng: Family Takeout At <50% of NAV