Event-Driven

Anycolor (5032 JP) IPOed a year ago, rose several-fold, saw the underwriting broker offer a huge target price, then it fell. There was an offering. And then the murders began.*
The offering in January, discussed here, created overhang, and the stock fell sharply in the next 6 weeks. Blowout earnings came in mid-March. Along with a TSE Prime transfer application.
Now we have the Prime promotion on 8 June, which leads to a TOPIX inclusion on 28 July.

Tax-Loss Selling in Australia – Brief Historical Analysis And A Trade Basket

I am not a tax advisor and I do not play one on TV but it is a subject of interest in Australia, as an AFR article last year shows.
The general gist of the idea is that retail investors in Australia will take gains on things which run up in price, or get taken over, then look for losses.
Below I present a study using data from 2012-2022 of how a basket portfolio trade might work.

Medtronic’s Delisting Offer For EOFlow

Back on the 25 May, healthcare company Medtronic Plc (MDT US) announced it had entered into a set of definitive agreements to acquire EOFlow (294090 KS).
Via a three-step process – SPAs, issuance of new shares, and a Tender Offer – Medtronic will seek majority control, together with a view to delisting EOFlow.
Completion is expected in 4Q23. Regulatory approvals – domestic and foreign – form part of the conditions. Trading wide to terms.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Jun 01

Daily Brief Event-Driven: MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Changes Afoot and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Changes Afoot
Yashili (1230 HK): Scheme Doc Out. 23 June Court Meeting
Yashili (1230 HK): Scheme Vote on 23 June
Flow Trading Opportunities Brought by the AI Rally: KRX Semicon Rebalancing in September
End of Mandatory Lock-Up Periods for 45 Companies in Korea in June 2023
Quiddity Final Thoughts for F100/250 June 23: Multiple High-Impact Changes Likely
Mason Group (273 HK): Halted Pursuant To Takeover’s Code
SET50 Index Rebalance Preview: Should Be Two Changes in June
(Mostly) Asia M&A, May 2023: Allkem / Livent, InvoCare, Golden Eagle, Yita Coal, Shinsei Bank
Hanjin Kal: Fight For Control Amid FTC Regulatory Concerns of Korean Air & Asiana Airlines Merger

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Changes Afoot

The review period for the June rebalance ended on 31 May. Announcement of the changes will be made on 9 June with implementation at the close on 16 June.
There could be 3 or 4 A-share additions due to their inclusion in Northbound Stock Connect. That in turn expands the index universe and could result in 2-3 deletions.
If there are 4 adds and 2 deletes at the June rebalance, estimated one-way turnover at the rebalance will be 13.4% and will result in a one-way trade of US$81m.

Yashili (1230 HK): Scheme Doc Out. 23 June Court Meeting

At long last, Yashili International Holdings (1230 HK) has dispatched the Scheme Document.
The Court Meeting and EGM will be held on the 23 June. The IFA says the Offer is fair. At a ~160% premium to undisturbed, it certainly is.
Assuming the transaction gets up, payment will occur on or before the 13 July.

Yashili (1230 HK): Scheme Vote on 23 June

The Yashili International Holdings (1230 HK) scheme document is out with the court meeting scheduled for 23 June. The IFA considers the HK$1.20 per share offer to be fair and reasonable.
Key conditions include approval by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). The shareholder with a blocking stake should be supportive.
This is a done deal. At the last close and for the 13 July payment, the gross and annualised spread is 1.7% and 15.3%, respectively.

Flow Trading Opportunities Brought by the AI Rally: KRX Semicon Rebalancing in September

KRX Semicon has experienced a considerable increase in AUM due to the recent AI rally. Two ETFs tracking SEMICON have a combined AUM of ₩0.6T.
The following five stocks are screened as potential additions: ITM Semiconductor, Hyundai Energy Solutions, TEMC, Fine Semitech, and AT Technology.
While it may not be a major flow event, it still presents a trading opportunity worth considering, especially in September, which is relatively less eventful in terms of flows.

End of Mandatory Lock-Up Periods for 45 Companies in Korea in June 2023

By Douglas Kim

We discuss the end of the mandatory lock-up periods for 45 stocks in Korea in June 2023, among which 6 are in KOSPI and 39 are in KOSDAQ.
These 45 stocks on average could be subject to further selling pressures in June and could underperform relative to the market.
Among these 45 stocks, the top five market cap stocks include Won Tech, Voronoi, Zinus, Bionote, and NanoTIM.

Quiddity Final Thoughts for F100/250 June 23: Multiple High-Impact Changes Likely

In this insight, we take a look at Quiddity’s final predictions for index changes for the F100 and F250 indices for the June 2023 Rebalance.
The index changes are likely to be confirmed after market close today.
We expect one change for the F100 index and six changes for the F250 index.

Mason Group (273 HK): Halted Pursuant To Takeover’s Code

Broker Mason Financial Holdings (273 HK) is suspended pursuant to the Hong Kong Code on Takeovers and Mergers.
Shares are down 95% from its June 2015 peak, and 54% since the onset of Covid. The company last turned a profit in 2018.
The largest shareholder is the chairman of Shimao Group (813 HK).

SET50 Index Rebalance Preview: Should Be Two Changes in June

With the review period complete, we see Thai Life Insurance (TLI TB) and WHA Corp Pcl (WHA TB) being added to the SET 50 Index in June.
Jaymart PCL (JMART TB) is a certain deletion from the index while the second deletion will be determined on the criteria used for liquidity or on market cap.
JMT Network Services (JMT TB) was deleted from the MSCI Thailand index yesterday and could be deleted from the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) next.

(Mostly) Asia M&A, May 2023: Allkem / Livent, InvoCare, Golden Eagle, Yita Coal, Shinsei Bank

For the month of May, 8 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$15bn.
The average premium for the new deals announced (or first discussed) in May was 32%.
This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

Hanjin Kal: Fight For Control Amid FTC Regulatory Concerns of Korean Air & Asiana Airlines Merger

By Douglas Kim

There is a relatively high probability (70-80%+) that the FTCs in Europe and the United States will officially block the merger between Korean Air and Asiana Airlines in 2H 2023.
This could result in the Korea Development Bank (KDB) selling its 10.58% stake in Hanjin KAL Corp which could result in a fight for the control of Hanjin Kal.
Our NAV analysis of Hanjin Kal suggests NAV of 3.8 trillion won or implied target price of 57,259 won per share, representing 13% upside from current levels.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 31

Daily Brief Event-Driven: HSI and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (June 2023)
Medtronic’s M&A, Tender Offer, and Taking Private of Eoflow
NIFTY NEXT 50 Index Market Consultation: Non-F&O Stocks Could Be Dropped
Quiddity Leaderboard JPX-Nikkei 400: End-May 2023
Challenger Technologies (CHLG SP): Loo Family/Dymon Asia’s Skinny Unconditional S$0.56 Offer
Challenger Tech’s Derisory Unconditional Offer
Peace Within the Board and Focus on Organic Growth

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

The June rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
The largest inflows will be on Meituan (3690 HK), JD.com (9618 HK), Zijin Mining (2899 HK), Baidu (9888 HK), Trip.com (9961 HK) and JD Logistics (2618 HK).
The largest outflows will be on HSBC Holdings (5 HK), Li Auto (2015 HK), Kuaishou Technology (1024 HK), China Construction Bank H (939 HK) and NetEase (9999 HK).

Medtronic’s M&A, Tender Offer, and Taking Private of Eoflow

By Douglas Kim

In this insight, we provide the details of Medtronic’s M&A and tender offer for Eoflow.
Currently, Eoflow is trading at 28,050 won which is 6.5% lower than the tender offer price of 30,000 won.
Eoflow’s share price is currently comfortably below 30,000 won and we believe this deal has 95-98%+ probability of getting completed within the current M&A framework.

NIFTY NEXT 50 Index Market Consultation: Non-F&O Stocks Could Be Dropped

NSE Indices have started a market consultation on dropping stocks that are not a part of the Futures & Options segment from the Nifty Next 50 Index (NIFTYJR INDEX).
This will be done in two phases with a weight reduction for non-F&O stocks in June and deletion from the index in September.
That will result in 11 inclusions to the Nifty Next 50 Index (NIFTYJR INDEX) in September and bring in a lot of flow to the stocks.

Quiddity Leaderboard JPX-Nikkei 400: End-May 2023

The JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted (capped) market-value-weighted index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to be announced in early August 2023 based on trading data as of end-May 2023.

Challenger Technologies (CHLG SP): Loo Family/Dymon Asia’s Skinny Unconditional S$0.56 Offer

Challenger Technologies (CHLG SP) has disclosed a voluntary unconditional offer from Dymon Asia and the Loo Family at S$0.56 per share, a 1.8% premium to the undisturbed price (29 May).
The little to no offer premium will leave minorities aggrieved. Hitting the 90% compulsory acquisition threshold implies a minority acceptance rate of 31.3%. The offer has not been declared final.
The offer is set to follow the recent SGX voluntary unconditional offer playbook – a lowball offer followed by declaring the offer final after a cursory bump.

Challenger Tech’s Derisory Unconditional Offer

Consumer electronics retailer Challenger Technologies (CHLG SP) has announced a voluntary unconditional cash offer of S$0.56/share. The Offer price has not been declared final.
The Offeror is led by Dymon Asia Private Equity and Challenger’s CEO Loo Leong Thye, who collectively hold 54.37%.
Including other Loo family members and additional irrevocables, there is a high probability Challenger breaches the public float at the conclusion of the offer and be suspended.

Peace Within the Board and Focus on Organic Growth

By Jesus Rodriguez Aguilar

The board’s renewal and the arrival of a new CEO (both should be a positive catalyst) are on track and will be completed in the coming weeks.
Gone the takeover angle, Cellnex’s new strategy focuses on organic growth and deleveraging, aiming an investment grade rating and reducing net debt by end of FY2024 (already 5.6x net debt/2023e EBITDA).
Cellnex trades at 15.3x EV/Fwd EBITDA, vs. 28.8x American Towers and 24.4x Inwit. TCI may still look for ways to increase the value of its investment.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 30

Daily Brief Event-Driven: Rakuten (4755) – TSE Neglects Its Ad Hoc Powers – Less Bigly Index But Biglier Non-Index and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Rakuten (4755) – TSE Neglects Its Ad Hoc Powers – Less Bigly Index But Biglier Non-Index
StubWorld: China Conch Trades Cheap. As Does Anhui
Relia (4708 JP) Tender Offer Launches – STILL at the Wrong Price for the Wrong Reasons
CNI Semiconductor Chips Index Rebalance: Multiple Inflows for the Inclusions
ChiNext/ChiNext 50 Index Rebalance: On Expected Lines as Adds Outperform Deletes
Full Details & Trading Ramifications of Official Revisions to CFD Trade Rules in Korea
Rakuten Bank (5838 JP) – Attractive Versus Domestic Neobank Peers, with Added Technical Support

Rakuten (4755) – TSE Neglects Its Ad Hoc Powers – Less Bigly Index But Biglier Non-Index

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

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

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%.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

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.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

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.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

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

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

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.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

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