Event-Driven

Keisei Electric Railway Co (9009 JP) is trading “cheap” as Oriental Land (4661 JP) enjoys a zero-Covid revival.
Preceding my comments on Keisei/Oriental Land, 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%.

MSCI Feb 2023 QCIR Preview: Potential Changes as Review Period Ends

The review period for the February Quarterly Comprehensive Index Review (QCIR) of the MSCI indices ended yesterday. There will be a number of changes in the Asia Pacific region.
Most of the inclusions are in China and the country weight in the MSCI Emerging Markets Index should increase leading to outflows from other markets.
On average, the potential adds have outperformed the potential deletes over the last few weeks. At a glance, pre-positioning appears to be lighter than in the past.

Toshiba (6502) – Funding Mostly Secured, Still, Again, Maybe. Or Maybe Not. Or Not.

The original bid was supposed to be presented fully-funded by 30 September 2022. Then it was early November, then late November, then early December, late Dec, early Jan, end Jan.
Today we find out that The Banks and The Preferred JIP Bidding Consortium will aim to reach agreement by 3 Feb. The Bloomberg article details are newish, and odd.
Shares have deteriorated and vs Peers, they are at their lowest point in many months. And the details do not make me confident this deal is clean yet.

Sembcorp Marine-Keppel O&M Merger Circular Squeaks In Under The Wire – Next Steps

Last Friday, Sembcorp Marine (SMM SP) announced it had Approval-In-Principle for its Proposed Combination with Keppel Corp (KEP SP), contingent on the Circular being despatched by 31 January 2023.
At 6:50pm local time on 31 January, Sembcorp Marine released its 679-page Circular (and EGM Announcement (16 Feb EGM)). Phew!
Now we have a deal in sight, we have to think about next steps. SMM NEWCO needs a story vs flow. Orderbook is nice but may not cut it near-term.

Toshiba (6502 JP): Financing Deadline Slips Again as the 3Q Update Looms

Bloomberg reports that Japan Industrial Partners (JIP), the preferred bidder, has again extended the deadline for securing bank financing of around JPY1.2 trillion (US$8.8 billion).
A new issue has pushed the deadline to 3 February. If JIP manages to secure financing for an offer of around JPY5,100, the next challenge is securing Board support.
The 3QFY2022 update on 14 February needs to avoid further downgrades to keep the deal alive. Toshiba’s multiples are unattractive to peers. Remain on the sidelines for now.

Dufry/Autogrill: Deal Progress

By Jesus Rodriguez Aguilar

The deal is done with the transfer of Edizione’s 50.3% stake in Autogrill under way, and with all main hurdles cleared. Dufry must launch and offer to buy out minorities.
Autogrill shares closed at €6.698 on 30 January, also the implied value of the 0.158 Autogrill/Dufry share swap is 5.8% above the €6.33/share “initial” cash offer. The market expects more.
The deal will not fall through but the price is still being negotiated, possibly around €6.8-6.9/share. The issue will now become what dilution/leverage will Dufry’s patient shareholders endure.

ActivistTalk: Bed Bath & Beyond at Death’s Door

By Robert Sassoon

Bed Bath & Beyond (BBBY US) , the one-time iconic US homes good retailer, whose financial condition has continued to deteriorate rapidly, is barreling towards bankruptcy sooner rather than later
A default notice on one of its primary credit facilities has been served and failure to make a bond interest payment on Feb 1 could well seal its fate
There may not be any money left for its equity holders to recover which means there is a real prospect of the BBBY share price moving rapidly to zero

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Jan 31

Daily Brief Event-Driven: Adani Ent FPO – Early Demand Muted and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Adani Ent FPO – Early Demand Muted, Adani & Hindenburg Trade Barbs Again, But Not a Good Look
Renault & Nissan “Agree” On New Terms – A Diet Nothing🍔, Exchangeable into Shaq Fingerguns
Quiddity Flow Expectations HSTECH Mar 23: Two Index Changes Possible
Matheson To Exit Greatview Aseptic
TOPIX Inclusion: AXXZIA Inc (4936 JP) – Time to Take Profits
STAR50 Index Rebalance Preview: 5 Changes Forecast as Review Period Ends
JPX-Nikkei 400 Rebal 2023: End-Jan 2023
HMM Is Likely the First to Be Subject to the Mandatory Offer that Comes into Force
Greatview Aseptic (468 HK): Xinjufeng Technology Acquires Jardine Matheson’s Stake
Osstem Implant: Details of Tender Offer & Chairman Choi’s Children Exchange CB Call Options for BWs

Adani Ent FPO – Early Demand Muted, Adani & Hindenburg Trade Barbs Again, But Not a Good Look

The Adani Enterprises (ADE IN) FPO saw VERY muted demand (realtime available on NSE+BSE websites) on Day 1 Friday as the share price plummeted through the bottom of the range.
The Adani Group responded to Hindenburg late Sunday with a 400-page rebuttal, cloaked in nationalistic terms. Hindenburg responded saying the company failed to answer 62 of 88 questions.
This is not going away. They could lower the FPO price, or just pull the FPO. That won’t materially change the significant over-valuation of many Adani Group listco share prices.

Renault & Nissan “Agree” On New Terms – A Diet Nothing🍔, Exchangeable into Shaq Fingerguns

Today, a Nikkei article suggested (after other media suggested last week) that Renault SA (RNO FP) and Nissan Motor (7201 JP) have come to agreement about their new deal.
Post-Close, an announcement. Two striking things about this “agreement” a) it comes many months after they started negotiating, and b) we have few details, and c) we’re missing a bit.
Renault agrees to cap voting rights in Nissan. Nissan agrees to invest in RNO’s EV spinoff, and so far, they agree to strengthen the Alliance. What’s missing is interesting/key.

Quiddity Flow Expectations HSTECH Mar 23: Two Index Changes Possible

In this insight, we take a look at the potential index changes and the resultant capping flows for the Hang Seng Tech Index (HSTECH INDEX) in March 2023.
According to our estimation, there could be two changes for the HSTECH in March 2023 and there could be one-way index flows of US$365mn.
The final index changes along with indicative capping and index weights could be published in Mid/Late-February 2023 and implemented in early-March 2023.

Matheson To Exit Greatview Aseptic

Shandong Xinjufeng Technology Packaging (301296 CH) is seeking to acquire Jardine Matheson Holdings (JM SP)‘s 28.22% stake in Greatview Aseptic Packaging (468 HK) at HK$2.65/share.
Greatview is currently suspended “pending the release of an announcement which contains inside information“, suggesting there is no follow on Offer for remaining shares.
Elsewhere, Matheson has resumed its share repurchase program, providing near-term support.

TOPIX Inclusion: AXXZIA Inc (4936 JP) – Time to Take Profits

Japan-Based skincare and cosmetics maker AXXZIA Inc (4936 JP) announced on 9th November 2022 they were planning to move from TSE Growth to TSE Prime.
Travis Lundy was Bullish on this name as he discussed in AXXZIA (4936 JP) – TOPIX Inclusion Is Likely In February and the stock has gained around 12% since then.
Today after the close, AXXZIA Inc (4936 JP) announced they had received the approval for their Prime Market move in February which could lead to a TOPIX Inclusion in March.

STAR50 Index Rebalance Preview: 5 Changes Forecast as Review Period Ends

The review period for the March rebalance ends today. We forecast 2 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
We expect the index committee to continue using a 6-month minimum listing history. The impact on the potential deletes is a lot higher than the impact on the potential adds.
With 5 changes to the index, estimated one-way turnover is 5.1% resulting in a one-way trade of CNY 4,549m. There is a reasonably large reverse funding trade.

JPX-Nikkei 400 Rebal 2023: End-Jan 2023

JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) 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 come in August 2023 based on trading data as of end-January 2023.

HMM Is Likely the First to Be Subject to the Mandatory Offer that Comes into Force

KDB recently initiated the process of selecting an advisory firm to sell its stake in HMM, which will likely be the first to implement the mandatory offer rule.
Potential bidders include Hyundai Glovis, LX Holdings, and Samsung SDS. As for POSCO Holdings, it recently said that it is not considering acquiring HMM.
Given that HMM is the only national shipping company, there is a good chance that multiple bidders will appear, which will lead to a premium to the market price.

Greatview Aseptic (468 HK): Xinjufeng Technology Acquires Jardine Matheson’s Stake

Shandong Xinjufeng Technology Packaging (301296 CH) agreed to acquire Jardine Matheson Holdings (JM SP)’s 28.22% stake in Greatview Aseptic Packaging (468 HK) at HK$2.65 per share.
Post-Completion, Xinjufeng will be the largest shareholder. As Xinjufeng’s shareholding will remain below the 30% voting threshold, the transaction will NOT result in a mandatory general offer.
The transaction price, which is a 22.7% premium to the last close, highlights Greatview’s value. Greatview’s forward P/E multiple is undemanding in comparison to peer P/E multiples.

Osstem Implant: Details of Tender Offer & Chairman Choi’s Children Exchange CB Call Options for BWs

We provide details of the Osstem Implant tender offer as well as Chairman Choi’s children exchange of CB call options for BWs.
We believe that the majority of the minority shareholders in Osstem Implant are not likely to sell their shares at 190,000 won per share but hold on to it.
Over a longer time frame, Osstem’s share price could reach higher levels driven by its improving sales and profit growth, deep valuation discount to global peers, and further M&A fight.

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Jan 30

Daily Brief Event-Driven: MSCI Wants a Consult on Adani Group – I’m Not Sure What They Can Do and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI Wants a Consult on Adani Group – I’m Not Sure What They Can Do
Clarifications About Osstem Implant Tender Event
Korea No Longer Collects Foreigners’ Real-Time Trade Data & Potential Increase in Spoofing Attempts
NIFTY100 Index Rebalance Preview: Big Impact & Could Increase Due to Capping
Merger Arb Mondays (30 Jan) – Kanematsu, Toyo, O2Micro, Origin Energy, Warrego, Tyro, Norwest
Quiddity Flow Expectations HSCEI Mar 23: One Change + Caps for Meituan, Alibaba, and Tencent
S&P/ASX Index Rebalance Preview: High Impact Changes in March

MSCI Wants a Consult on Adani Group – I’m Not Sure What They Can Do

The Adani Group listcos have been on a wild ride for the last few years, rising from 10x TTM EV/EBITDA in March 2020 to 60x at end-September 2022.
Adani Group “business incubator’ Adani Enterprises (ADE IN) last fall indicated it might raise $2.4bn of equity and combined 6 co market cap is down $135bn since.
A short seller report last week put the cat amongst the pigeons. Now MSCI is consulting investors about what it might do regarding Things.

Clarifications About Osstem Implant Tender Event

The acquirer would cancel the deal unless at least 2.394M shares (15.4% of SO) were tendered. This is the minimum purchase quantity condition that will trigger a cancellation.
If the minimum purchase volume is exceeded, will there be a pro rata allocation risk? The answer is no. The acquirer will purchase all the tendered shares
The cancellation risk seems slim as only 15.4% of the SO should be tendered, which doesn’t seem to be a challenging target.

Korea No Longer Collects Foreigners’ Real-Time Trade Data & Potential Increase in Spoofing Attempts

KRX (and Korea FSS) no longer collects foreign investors’ entire trade records in real time, as foreign investors are no longer traced based on their unique registration numbers.
Foreign investors are likely to engage in more aggressive short-term trading. We need to be prepared for significant price volatility, mainly for small and mid-cap stocks.
System changes for trade history management changes will be completed within the third quarter. So, we will likely witness new trading patterns from the fourth quarter of this year.

NIFTY100 Index Rebalance Preview: Big Impact & Could Increase Due to Capping

There are 2 trading days left in the review period. We expect 5 changes at the rebalance that will be announced end-February and implemented at the close on 30 March.
A lot of the stocks were AMFI migrations and Biocon Ltd (BIOS IN) is a potential deletion from the MSCI India Index at the February QCIR.
The drop in the Adani Group stocks that are part of the index will result in passive inflows on the non-F&O constituents due to capping at 15% of index weight.

Merger Arb Mondays (30 Jan) – Kanematsu, Toyo, O2Micro, Origin Energy, Warrego, Tyro, Norwest

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 – Alliance Aviation Services (AQZ AU), Kanematsu Electronics (8096 JP), 21Vianet Group (VNET US), Golden Energy & Resources (GER SP), Origin Energy (ORG AU), 111 Inc (YI US).
Lowest spreads – Essential Metals (ESS AU), Chip Eng Seng Corp (CHIP SP), Nitro Software Ltd (NTO AU), Norwest Energy NL (NWE AU), Conexio Corp (9422 JP), Nippon Steel Trading.

Quiddity Flow Expectations HSCEI Mar 23: One Change + Caps for Meituan, Alibaba, and Tencent

In this insight, we take a look at the potential index changes and the resultant capping flows for the Hang Seng China Enterprises Index (HSCEI INDEX) in March 2023.
According to our estimation, there could be one change for the HSCEI in March 2023 and there could be one-way index flows of US$440mn.
The final index changes along with indicative capping and index weights could be published in Mid/Late-February 2023 and implemented in early-March 2023.

S&P/ASX Index Rebalance Preview: High Impact Changes in March

We currently see 1 change for the ASX20, 2 for the ASX100, 4 changes for the ASX 200 and 9 adds/ 6 deletes for the ASX300 Index in March.
Passive trackers will need to trade over 3 days of ADV on 13 stocks, over 5 days of ADV on 9 stocks and over 10x ADV on 4 stocks.
Shorts have been covering positions on stocks where there are expected to be passive inflows and increasing positions on stocks that are expected to have passive outflows.

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Jan 29

Daily Brief Event-Driven: Adani Group: Hindenburg Report Spurs MSCI to Invite Feedback and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Adani Group: Hindenburg Report Spurs MSCI to Invite Feedback
Names to Watch for Inclusion in MSCI Korea May Review
Kanematsu Electronics (8096 JP): JPY6,200 Tender Offer from Kanematsu Corporation
Kanematsu Sustech (7961) ¥2250/Share Tender Offer by Parent – Supremely Illiquid But Interesting
Index Rebalance & ETF Flow Recap: NKY, LQ45, New Deal, URA, NIFTY, Stock Connect, SenseTime, Adani
Last Week in SPACE: Kawasaki Kisen Kaisha, Osstem, Fujitsu General, Adani Enterprises
Weekly Deals Digest (29 Jan) – AAG Energy, Acotec, Xingda, Origin Energy, Tyro, Kanematsu, Toyo
Kanematsu Electronics (8096) – ¥6200/Share Tender Offer by Parent – Easy Takeout
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Osstem, Warrego, Norwest Energy, Acotec, Sabana, Jafco, Toyo
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

Adani Group: Hindenburg Report Spurs MSCI to Invite Feedback

The Adani Group stocks have taken a dive following the Hindenburg Research report. Group market cap is down more than US$47bn with company promoters taking the biggest hit.
The Adani Enterprises FPO is almost certain to be undersubscribed. MSCI, in an unprecedented step, is monitoring publicly available information and is seeking feedback from the investment community.
We find that the real float of some Adani Group stocks is much lower than the headline numbers and there could be selling if MSCI lowers the FIF.

Names to Watch for Inclusion in MSCI Korea May Review

Posco International‘s recent merger with Posco Energy increased the share count. The distance from the float market cap borderline is catchable, given the current share price uptrend.
Hanwha Aerospace will likely fail inclusion in this February review. The gap with the hurdle is not large, so it can aim for inclusion in the May review.
Among Outside IMI, Korea Gas is tricky as it is a FOL stock. MSCI-concluded float is 30%, and the gap with the float market cap hurdle is still quite large.

Kanematsu Electronics (8096 JP): JPY6,200 Tender Offer from Kanematsu Corporation

Kanematsu Electronics (8096 JP) has recommended Kanematsu Corp (8020 JP)’s tender offer of JPY6,200 per share, an 32.9% premium to the undisturbed price (27 January).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the offer has been set to meet the 66.67% ownership ratio.
The tender offer is attractive as it represents an all-time share price high and a premium to peer multiples. This suggests a done deal.

Kanematsu Sustech (7961) ¥2250/Share Tender Offer by Parent – Supremely Illiquid But Interesting

Kanematsu Corp (8020 JP) announced two tender offers late Friday to take out minorities in subsidiaries. One larger, safer deal. One smaller, illiquid, but potentially interesting one.
This is the interesting one. It is being done at the wrong price, and it has investors who might care who have been long-time holders.
This could get interesting. You have a buyer. A target. It’s pretty clean except for shareholder structure. And the buyer has room to pay up.

Index Rebalance & ETF Flow Recap: NKY, LQ45, New Deal, URA, NIFTY, Stock Connect, SenseTime, Adani

The review period for the upcoming rebalance of the MSCI, Nikkei 225, NIFTY, Nifty Next 50, SSE STAR50 and KRX New Deal Indices ends on 31 January.
The IDX30, LQ45, IDX80, Global X Uranium ETF (URA US) rebalances will be implemented on 31 January while the PSEi Index (PCOMP INDEX) rebalance will be implemented on 3 February.
There were inflows to Asian country ETFs and iShares MSCI Emerging Markets (EEM), and outflows from IShares MSCI Min Vol EM ETF (EEMV) and iShares MSCI Pacific ex Japan (EPP).

Last Week in SPACE: Kawasaki Kisen Kaisha, Osstem, Fujitsu General, Adani Enterprises

Be long Kawasaki Kisen Kaisha (9107 JP) vs MOL and NYK. The shares are cheap on a forward basis. KLine is reducing the Real World Float, causing further potential squeeze.
Sabana Industrial REIT (SSREIT SP)‘s Partial Offer at 0.88x book is not overwhelming, but it is also not a control stake. It is probably priced near-right.
IF Osstem (048260 KS)‘s price were to go higher, it is conceivable there could be a bump, but don’t bet on it as long as the stock trades <KRW 190,000.

Weekly Deals Digest (29 Jan) – AAG Energy, Acotec, Xingda, Origin Energy, Tyro, Kanematsu, Toyo

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 – New Ruipeng Pet Group (RPET US) and Hesai Group file for US$100 million IPOs for listing in the US.
Event-Driven developments – Aag Energy Holdings (2686 HK), Acotec Scientific Holdings (6669 HK), Xingda International (1899 HK), Kanematsu Electronics (8096 JP), Toyo Construction (1890 JP), Origin Energy (ORG AU).

Kanematsu Electronics (8096) – ¥6200/Share Tender Offer by Parent – Easy Takeout

Kanematsu Corp (8020 JP) announced two tender offers Friday to take out subsidiaries. One more liquid one. One very small sub. This is the larger, easier deal.
Kanematsu Electronics is an IT shop, designing and executing system integration and maintenance services. It is a great business. The takeout is a 33% premium to an all-time high.
It might still be a bit cheap, but it is not egregious, and it would be quite difficult to block.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Osstem, Warrego, Norwest Energy, Acotec, Sabana, Jafco, Toyo

There are 43 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma in the past week: MBK and Unison Capital MBO-style Tender Offer for Osstem Implant (048260 KS).
Key updates took place for: Warrego (WGO AU), Norwest Energy NL (NWE AU), Acotec (6669 HK), Sabana Industrial REIT (SSREIT SP), Jafco (8595 JP), and Toyo Construction (1890 JP).

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

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

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Jan 28

Daily Brief Event-Driven: Xingda Int’l (1899 HK): Partial MBO Open For Tendering and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Xingda Int’l (1899 HK): Partial MBO Open For Tendering
Acotec (6669 HK): Current Proration of 82.7%
Tyro Offers Due Diligence To Potentia
Siemens/Siemens Gamesa: Running for the Exit

Xingda Int’l (1899 HK): Partial MBO Open For Tendering

Back on the 7th December, Xingda International (1899 HK) announced a partial Offer from a consortium comprising management (known as the Five parties) at HK$1.88/share, a 24.5% premium to undisturbed.
Pre-Conditions were satisfied on the 15 December and the Composite Document was dispatched last night.
The first close is the 24 February. Payment under the Offer is expected to be the 21 March.

Acotec (6669 HK): Current Proration of 82.7%

With a minimum acceptance hurdle of 50% and irrevocables of 60.14%, Acotec Scientific Holdings (6669 HK)‘s partial offer was always going to turn unconditional.
As per last night’s announcement, valid acceptances were 78.59%. The Offer has automatically been extended to the 9 February – this is the final close. Pro-ration is currently 82.7%.
The minor quirk for partial Offers is that payment occurs within seven business days of the final close, not seven days from the Offer turning unconditional.

Tyro Offers Due Diligence To Potentia

After Potentia bumped indicative terms to A$1.60/share last month, Tyro Payments (TYR AU)‘s board considered the revised terms remained below what is considered fair, and has ceased all discussions.
Following discussions between Tyro and Potentia, the Tyro Board is now providing Potentia with a 4-week period of due diligence to “enable Potentia to develop a significantly improved proposal“.
No indicative price was mentioned. Mike Cannon-Brookes’ Grok Ventures was open to a competing proposal of A$1.85/share.

Siemens/Siemens Gamesa: Running for the Exit

By Jesus Rodriguez Aguilar

On 25 January, the EGM of Siemens Gamesa approved the delisting of the shares, which the company requested to the CNMV.
The standing purchase order for the shares, at €18.05/share (same as the offer price, sellers will bear the brokerage, trading and settlement fees) will last until 7 February.
Gross spread is nil. Shortly after 7 February, Siemens Gamesa will be an unlisted illiquid share. Recommendation is sell into the sustained purchase order.

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Jan 27

Daily Brief Event-Driven: IDX30/LQ45/IDX80 Index Rebalance: 4 Days to Implementation and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

IDX30/LQ45/IDX80 Index Rebalance: 4 Days to Implementation
SenseTime (20 HK): Index Inclusions Incoming?
Northbound Stock Connect Expansion: Updated Details
JAFCO Tender Offer Results – Low Pro-Ration Surprise, Murakami Overhang
Adani Enterprises FPO Update: Hindenburg, Anchors, and Righteous Indignation
Acotec (6669 HK): Boston Scientific’s HK$20 Partial Offer Unconditional
Where To Go With Warrego?
AAG Energy (2686 HK): Is Xinjiang Xintai Returning for Another Bid?
Xingda (1899 HK): HK$1.88 Partial Offer Now Open
Nitto Denko Q3 Results and Buyback Announced

IDX30/LQ45/IDX80 Index Rebalance: 4 Days to Implementation

There are 3 changes for the IDX30 Index, 6 changes for the LQ45 Index, and 7 changes for the IDX80 Index at the rebalance to be implemented on 31 January.
Largest passive inflows are expected to be on Sumber Alfaria Trijaya Tbk Pt (AMRT IJ) and Surya Esa Perkasa (ESSA IJ).
With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.

SenseTime (20 HK): Index Inclusions Incoming?

SenseTime Group (20 HK) was added to the Non-SDN Chinese Military-Industrial Complex Company (NS-CMIC) list on 10 December 2021. So, the stock is not a part of any global indices.
There is a possibility that the stock is no longer restricted to U.S. investors and that could lead to multiple index inclusions over the next few months.
Inclusion in the MSCI China Index could take place in February or May while inclusion in the FTSE All-World Index could take place in March.

Northbound Stock Connect Expansion: Updated Details

On 19 January, the HKEX clarified the liquidity criteria as well as treatment of Differentiated Voting Rights (DVR) stocks and the criteria for current Northbound stocks to become Sell-only.
We currently see 975 China A-shares becoming eligible for Northbound Stock Connect when the extension is implemented.
With the extension likely to be implemented in June, there will be additions to the MSCI China Index, FTSE All-World Index and FTSE All-Cap Index in August and September.

JAFCO Tender Offer Results – Low Pro-Ration Surprise, Murakami Overhang

Jafco Co Ltd (8595 JP) announced the results of its Tender Offer Buyback today. They wanted to buy 16.8mm shares including 13.9mm from Murakami-san. He sold 9.63mm. Oops.
Pro-Ration was 69.25% which means that Murakami entities are still long about 4.276mm shares or 5.83% of shares out.
There should be some index selling, and some Murakami Overhang. There may be more overhang at recent prices.

Adani Enterprises FPO Update: Hindenburg, Anchors, and Righteous Indignation

The Adani Enterprises (ADE IN) Further Public Offering (“FPO”) expected to raise Rs 200bn has its first leg publicly complete with anchor investors taking Rs 59.849bn.
Noted shortseller Hindenburg Research published a long report suggesting Adani Enterprises and indeed the Adani Group were over-priced according to fundamentals and were the result of a “con.”
Now the book build starts. Deal structure and Adani Group CFO comments continue to suggest that Liquidity is a Bug, not a Feature.

Acotec (6669 HK): Boston Scientific’s HK$20 Partial Offer Unconditional

As expected, Acotec Scientific Holdings (6669 HK)’s partial offer from Boston Scientific (BSX US) at HK$20 per share is now unconditional. The final closing date is 9 February.
The current acceptances representing 78.59% of outstanding shares imply current proration is 82.71%. Current pro-ration suggests CA Medtech post-offer shares will be counted towards the public float.
Based on the current proration of 82.71% and at the last close price of HK$19.78 per share, the breakeven price is HK$19.00 per share.

Where To Go With Warrego?

It’s a fair bet Hancock Prospecting and Mineral Resources (MIN AU) are actively discussing the final stages for Warrego Energy (WGO AU) behind the scenes.
It is unlikely MinRes aggressively builds a ~19% stake in a company subject to a two-way takeover battle, and declares its position “strategic” with no intention of making an Offer.
This stake may be a bargaining chip from MinRes to keep Hancock on the sidelines in its tilt for Norwest Energy NL (NWE AU).

AAG Energy (2686 HK): Is Xinjiang Xintai Returning for Another Bid?

Aag Energy Holdings (2686 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers on 26 January.
It is likely that Xinjiang Xintai Natural Gas (603393 CH), the largest shareholder representing 56.95% of outstanding shares is seeking to privatise AAG.
The potential bid is likely privatisation through a scheme. Multiples from Xinjiang Xintai’s previous voluntary cash offer in 2018 suggest an offer north of HK$2.00.

Xingda (1899 HK): HK$1.88 Partial Offer Now Open

Xingda International (1899 HK)’s partial offer from a management-controlled offeror at HK$1.88 per share is now open. The IFA opines it to be fair and reasonable.
The partial offer is conditional on the offeror/concert parties, which have a 45.60% stake, hitting 50.01% voting rights and approval by the requisite majority of shareholders on the acceptance form.
The 4.41% minimum acceptance is not onerous. Based on a proration of 8.88% and at the last close price of HK$1.59 per share, the breakeven price is HK$1.56 per share.

Nitto Denko Q3 Results and Buyback Announced

Nitto Denko (6988 JP) today announced Q3 results, lower full-year guidance with one-quarter left to go, sharply undercutting implied Q4 results vs the Street.
The company also announced a buyback of 4.1-4.7% of shares out over the next 6mos. Assuming the share price falls in reaction, this could be closer to the top end.
The buyback is non-negligible as a portion of Likely Real World Float and as such the situation is worth a look – for those with a position and those without.

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Jan 26

Daily Brief Event-Driven: Solactive Global Uranium & Nuclear Components Index Rebalance: 6 Adds and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Solactive Global Uranium & Nuclear Components Index Rebalance: 6 Adds, 5 Deletes
The Olympus Peer-Relative Crash – Due to ADR Cancellation Overhang?
MBK/Unison Capital Korea Do a Deal for Osstem Implant (048260 KS) Thwarting Activist KCGI
Norwest Backs MinRes’ Bumped Offer
Toshiba – Preparing for 2QFY23
Samsung Electronics 1P Pushed to a Substantial Diversion (Below -2σ) Today
Origin Energy (ORG AU): Risk/Reward Profile
Quiddity Leaderboard for Thailand SET50 Jun 23:Ramkhamhaeng Hospital Is an Interesting Case
Adani Enterprises US$2.4bn FPO – Updates, Pricing, Structure, Anchor and Some More

Solactive Global Uranium & Nuclear Components Index Rebalance: 6 Adds, 5 Deletes

Solactive has announced the constituent changes for the Global Uranium & Nuclear Components Index. There are 6 adds and 5 deletes with implementation at the close on 31 January.
Estimated one-way turnover is in excess of 12% and will result in a one-way trade of US$207m. There are 11 stocks with estimated passive flows greater than 5x ADV.
Some of the inclusions have had BIG rallies over the last couple of months and there could be profit taking on those names in the next few days.

The Olympus Peer-Relative Crash – Due to ADR Cancellation Overhang?

Olympus has been sold down relatively hard in the last couple of months. At the same time, we are at crunch time for the cancellation of the US ADR.
This may create short-term overhang, but the medium-term overhang from substantial foreign net buying in H1 when USDJPY was going up may be larger.
This insight looks at the relative performance vs Peers, vs forward earnings expectations, USDJPY, etc.

MBK/Unison Capital Korea Do a Deal for Osstem Implant (048260 KS) Thwarting Activist KCGI

Just over a year ago, leading Korean dental implant and dentistry supply company Osstem Implant (048260 KS) announced the largest-ever embezzlement case in Korea. The stock was suspended.
There were fears about forced selling by the founder, and PE funds circled. Activist KCGI probably bought in Q3 but built a 5+% stake by end-December 2022.
Korean PE Firms MBK and Unison Capital have now launched an MBO-style Tender Offer to buy 2.4-11.2mm shares in the company at a sharp premium to the pre-activism undisturbed price.

Norwest Backs MinRes’ Bumped Offer

Back on the 10 January, Norwest Energy NL (NWE AU) rejected Mineral Resources (MIN AU)‘s off-market scrip Offer.
It was apparent what MinRes needed to bump. This was an easy win if they do. On cue, they have now increased the scrip terms and NWE’s directors are supportive.
Scrip terms are now 1 MinRes for every 1,300 NWE shares – from 1,367. I think NWE could have held out for more, but it is what it is.

Toshiba – Preparing for 2QFY23

By Mio Kato

We have turned slightly more bearish on Toshiba’s near term fundamental prospects as we now have concerns about the industrial side of its semiconductor business.
The re-emergence of a WDC-Kioxia deal and the likelihood of a change in BOJ policy make us wonder whether bankers might want to wait a little on financing.
As such, while recent weakness makes an aggressively negative view difficult we do not feel that upside risks are particularly threatening either.

Samsung Electronics 1P Pushed to a Substantial Diversion (Below -2σ) Today

SamE PREF’s relative underperformance compared to ORD has been getting a bit worse lately. And finally, today, it went down below -2.0σ on a 20-day moving average.
This much diversion is the first in recent months, and the pref discount is close to last year’s peak. The dividend yield difference is also the widest in recent years.
The current diversion appears to be a byproduct of the SamE overbuying amid the recent market rally, and we should expect a quick reversion.

Origin Energy (ORG AU): Risk/Reward Profile

Origin Energy (ORG AU)’s exclusivity agreement with Brookfield/EIG expired on 24 January. Brookfield/EIG is reportedly continuing its due diligence on its A$9.00 per share offer.
Time often kills deals. There is speculation that recent price caps would result in Brookfield/EIG walking away or trying to recut the deal terms. ACCC approval is also an overhang.
Peers’ share prices have risen despite the price cap which weakens the case for a recut to the deal terms. Brookfield/EIG clearly want Origin as it twice bid against itself.

Quiddity Leaderboard for Thailand SET50 Jun 23:Ramkhamhaeng Hospital Is an Interesting Case

In this insight, we take a look at the potential ADDs/DELs for the SET50 index rebalance in June 2023.
Based on the latest available data, I expect 3 ADDs/DELs but there are multiple names lurking close to the border.
Srisawad (SAWAD TB) and Sansiri Public (SIRI TB) are leading the SET50 and SET100 Reserve Lists respectively and could become intra-review ADDs if the DTAC-TRUE merger closes in 1H 2023.

Adani Enterprises US$2.4bn FPO – Updates, Pricing, Structure, Anchor and Some More

By Sumeet Singh

Adani Enterprises is looking to raise INR200bn (US$2.4bn) via a further public offering (FPO). Bookbuild will begin tomorrow (27th Jan 23) and last till the end of the month.
Adani Enterprises is the flagship company of the Adani Group. The group’s entities’ stock performance over the past few years has made the founder one of the richest persons globally.
We have covered most aspects of the deal in our earlier note published. In this note, we talk about the recent updates and the deal pricing and structure.

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Jan 25

Daily Brief Event-Driven: KLINE (9107) – Chances for an Additional Buyback At Q3 Earnings? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

KLINE (9107) – Chances for an Additional Buyback At Q3 Earnings?
YFO To Take the Fight To Toyo Construction’s Board
KRX New Deal Index Rebalance Preview: Some Big Impact Names
Norwest Energy (NWE AU): The Board Perplexing Succumbs to MinRes’ Revised Offer
China Internet Investment (810 HK): 98% Downside
Coway Is a Prime Candidate for Corporate Activism in Korea
Quiddity Leaderboard STOXX Europe Mar 23: 5 ADDs/DELs and Potential Downweights for EDF and VTWR
A Tender Offer of Osstem Implant by MBK & Unison Capital?
Detailing Maekyung Report on MBK’s Tender Offer to Osstem Implant Shareholders at a 20% Premium

KLINE (9107) – Chances for an Additional Buyback At Q3 Earnings?

KLine is the cheapest of the three Japan majors in terms of forward consensus PER. And forward EPS ratios are improving as the company buys back shares.
The CEO mentioned in December the possibility of additional shareholder return this fiscal year based on cashflow.
In this insight, we look at what he knew then, and what he might know now, and the chances for an additional buyback (and how it might work).

YFO To Take the Fight To Toyo Construction’s Board

YFO offered another Press Release yesterday. This one outlines what they see as Corporate Governance failures and offers a NEW POLICY.
The Corporate Governance failures are indeed, failures. Toyo’s Board has failed to be transparent with shareholders, and in not at least addressing the takeover proposal, has failed its duties.
NEW POLICY? Elect new independent directors “capable of improving the long-term corporate value and maximizing the interests of the general shareholders.” Soft war starts now.

KRX New Deal Index Rebalance Preview: Some Big Impact Names

The review period for the March rebalance ends on 31 January, the changes will be announced towards end February and implemented at the close of trading on 9 March.
We forecast one add/delete for the Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).

Norwest Energy (NWE AU): The Board Perplexing Succumbs to MinRes’ Revised Offer

Mineral Resources (MIN AU) has revised its offer from 1 MinRes share for every 1,367 NWE shares to 1 MinRes share for every 1,300 NWE shares. The offer is unconditional.
The Norwest Energy NL (NWE AU) Board now recommends the offer. Most of the value uplift is due to the 17.4% increase in MinRes’ share price since 15 December.
MinRes’ revised off-market takeover offer is fair in comparison to Warrego Energy (WGO AU)’s bids and historical ranges. However, this is predicated on the MinRes maintaining its share price run.

China Internet Investment (810 HK): 98% Downside

Bubble-Stock China Internet Investment Finance Holdings (810 HK) (CIIFH) was suspended on the 10 January pursuant to the Hong Kong Code on Takeovers and Mergers.
It has now announced a possible voluntary conditional takeover. No price was mentioned and terms remain indeterminate.
CIIFH, which invests primarily in listed Hong Kong securities, is trading at an eye-watering 59.5x NAV. 98% downside from here is conceivable.

Coway Is a Prime Candidate for Corporate Activism in Korea

In this insight, we discuss the major reasons why Coway Co Ltd (021240 KS) is a prime candidate for corporate activism in Korea.
Netmarble has done a poor job with Coway post its acquisition in 2019.
An action plan for Coway is to return at least half of its net profit through dividends and share buybacks/cancellations.

Quiddity Leaderboard STOXX Europe Mar 23: 5 ADDs/DELs and Potential Downweights for EDF and VTWR

In this insight, we take a look at the names leading the race to become ADDs/DELs for the STOXX Europe 600 and EURO STOXX Indices for the March 2023 Rebalance.
Based on the latest available data, I see five ADDs/DELs for the STOXX Europe 600 Index during the March 2023 review.
Separately, Electricite De France Sa (EDF FP) and Vantage Towers (VTWR GR) could have index outflows triggered by extraordinary float adjustments before or during the March 2023 review.

A Tender Offer of Osstem Implant by MBK & Unison Capital?

On 24 January, it was reported in Maeil Business Daily that MBK and Unison Capital are ready to take over the management rights of Osstem Implant through a tender offer.
For now, Osstem Implant, MBK Partners, and Unison Capital have not confirmed on the validity of this news.
We would attach a 70-90% probability that indeed MBK Partners and Unison Capital Korea are ready to launch a tender offer on Osstem Implant.

Detailing Maekyung Report on MBK’s Tender Offer to Osstem Implant Shareholders at a 20% Premium

Maekyung exclusively reports MBK will do a tender offer to Osstem Implant shareholders at a 20% premium to buy a 15% stake.
As Maekyung is a first-tier news outlet in Korea, we have to see enough credibility in this report. We should expect to see it in an official regulatory filing soon.
We should design a play that actively utilizes the tender offer event very elaborately. Here, we need to consider immediate offerings and potential delisting from a longer-term perspective.

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Jan 24

Daily Brief Event-Driven: Seven & I: Activist ValueAct Seeking a Spin-Off of The US Business and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Seven & I: Activist ValueAct Seeking a Spin-Off of The US Business
Partial Tender for Sabana Industrial REIT – Large Additional Player to the Activist Mix
Toyo Construction (1890 JP): YFO Fires Another Salvo at the Board
Warrego (WGO AU): End-Game Scenarios
Five Most Aggressive Corporate Activists Moving the Korean Market: Align, KCGI, FCP, Truston, & LIFE
République Française/EDF: Squeeze-Out
NIFTY50 Index Rebalance Preview: No Changes Likely in March

Seven & I: Activist ValueAct Seeking a Spin-Off of The US Business

By Oshadhi Kumarasiri

New York-based hedge fund ValueAct has told Seven & I Holdings (3382 JP)’s shareholders to support them in their bid to spin off the 7-Eleven US convenience store business.
Spinning off the only growth driver of the business does not seem like an idea that Seven & I or its shareholders are likely to entertain.
We fear that ValueAct could be looking for reasons to call-off its investor-activism-campaign and perhaps is trying to squeeze out every last bit of gains as it exits its positions.

Partial Tender for Sabana Industrial REIT – Large Additional Player to the Activist Mix

On Friday, after the close, 5.4% owner of Sabana Industrial REIT (SSREIT SP) announced it had offered to buy another 10.0% in a Partial Offer at a recent high price.
The Price of the Tender Offer at S$0.465/share matches a recent (and 7-year) high and a 0.88x multiple against June 2022 NAV of S$0.53/share.
It’s a small deal (US$35mm) for a small REIT (US$350mm) but there’s an activist and an engaged not-quite sponsor, and this would make a third large unitholder in the mix.

Toyo Construction (1890 JP): YFO Fires Another Salvo at the Board

Due to the inability of getting a fair hearing from Toyo Construction (1890 JP)’s Board, YFO’s strategy now is to replace some of the Board at the June AGM.
YFO’s latest press release also catalogues the Board’s shockingly poor corporate governance in relation to its tender offer at JPY1,000. Crucially, a special committee is yet to be formed.
There is no timeline update on the tender which was set to start in late January. YFO continues to maintain that it will not withdraw its proposal.

Warrego (WGO AU): End-Game Scenarios

Warrego Energy (WGO AU)’s offers from Hancock and Strike Energy (STX AU) close on 31 January and 13 February, respectively. As time passes, the chance of a further bump is slim.
Mineral Resources (MIN AU) is the kingmaker. A MinRes/Strike pairing results in a combined min of 49.83% to a max of 73.93% of outstanding shares (if Hancock retains its stake).
A MinRes/Hancock pairing results in a combined min of 45.21% to a max of 69.32% of outstanding shares (if Strike retains its stake). This is the likely scenario.

Five Most Aggressive Corporate Activists Moving the Korean Market: Align, KCGI, FCP, Truston, & LIFE

In this insight, we discuss the five most aggressive corporate activist firms that have been moving the Korean equity market in the past year.
They include Align Partners Capital Management, KCGI, Flashlight Capital Partners, Truston, and LIFE Asset Management.
Share prices of 15 companies that the corporate activist firms have invested in Korea are up on average 9.7% YTD, outperforming KOSPI which is up 7.1% in the same period.

République Française/EDF: Squeeze-Out

By Jesus Rodriguez Aguilar

On 6 July, the French Prime Minister said that France would have 100% of EDF. I recommended BUY at €8.98 in the wake of a very willing big-pocketed buyer.
The French state now holds 92.71% of voting rights in EDF, and intends to initiate the squeeze-out within three months from closing (up to 22 March).
Although the shares are still liquid, gross spread is 0-2 bps, and therefore there is no trade worth considering, in my view, just selling into the sustained purchase order/await squeeze-out.

NIFTY50 Index Rebalance Preview: No Changes Likely in March

With only 5 trading days to go in the review period, we see no constituent changes to the NIFTY Index (NIFTY INDEX) at the March rebalance.
Pidilite Industries (PIDI IN) is the highest ranked non-index constituent, but its free float market cap does not exceed 1.5x the free-float market cap of Bharat Petroleum Corp (BPCL IN).
We do not expect LTIMindtree (LTIM IN) to be added to the index in March post the merger between Larsen & Toubro (LT IN) and Mindtree Ltd (MTCL IN).

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Jan 23

Daily Brief Event-Driven: Fujitsu General (6755) – Fujitsu’s Stake On The Block and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Fujitsu General (6755) – Fujitsu’s Stake On The Block
Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End
Merger Arb Mondays (23 Jan) – Origin Energy, Warrego, Golden Energy, Yashili, Kingston, O2Micro
Weekly Deals Digest (22 Dec) – Kingston, Fengxiang, Yashili, Golden Energy, Olam, SSREIT, Warrego
LG Energy Solution: Another MSCI Upweight Event Coming in May

Fujitsu General (6755) – Fujitsu’s Stake On The Block

10 days ago I wrote Fujitsu (6702) Subsidiary Selldowns To Come after Bloomberg carried an article with the CEO. Not new news, but I was struck by the implications.
Yesterday saw an article which pushed Fujitsu General (6755 JP) nearly 14% higher yesteday. Fujitsu Ltd (6702 JP) had launched an auction for its 42% stake. First round bids due imminently.
This takes the urgency to a new level. People jumped into an already illiquid stock. How far can this go?

Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.
Lasertec Corp (6920), Oriental Land (4661) and Renesas Electronics (6723) remain our top inclusions, while Toyobo Co Ltd (3101), Nippon Light Metal (5703) and Toho Zinc (5707) could be deleted.
Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.

Merger Arb Mondays (23 Jan) – Origin Energy, Warrego, Golden Energy, Yashili, Kingston, O2Micro

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 – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), Golden Energy & Resources (GER SP), Genesis Minerals (GMD AU), Origin Energy (ORG AU), 111 Inc (YI US).
Lowest spreads – Essential Metals (ESS AU), Nitro Software Ltd (NTO AU), Norwest Energy NL (NWE AU), Chip Eng Seng Corp (CHIP SP), Conexio Corp (9422 JP), Nippon Steel Trading.

Weekly Deals Digest (22 Dec) – Kingston, Fengxiang, Yashili, Golden Energy, Olam, SSREIT, Warrego

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 – iQIYI Inc (IQ US), Bilibili Inc (BILI US) placements, VinFast (1905332D VN) continues to pre-market a US$1bn IPO.
Event-Driven developments – China Internet (810 HK), Shandong Fengxiang (9977 HK), Kingston Financial (1031 HK), Golden Energy & Resources (GER SP), Olam Group (OLG SP), Sabana Industrial REIT (SSREIT SP).

LG Energy Solution: Another MSCI Upweight Event Coming in May