Event-Driven

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), Trial Holdings (5882 JP), PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) and Merdeka Battery Materials (2012725D IJ) IPOs.
Event-Driven developments Aag Energy Holdings (2686 HK), Toshiba Corp (6502 JP), Toyo Construction (1890 JP), Liontown Resources (LTR AU), Mincor Resources NL (MCR AU), Origin Energy (ORG AU).

Merger Arb Mondays (03 Apr) – Toshiba, Toyo, AAG, Origin, United Malt, Liontown, Mincor, Healius

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), Genesis Minerals (GMD AU), Estia Health (EHE AU), Tyro Payments (TYR AU), Aag Energy Holdings (2686 HK), Toyo.
Lowest spreads Healius (HLS AU), Liontown Resources (LTR AU), Golden Energy & Resources (GER SP), Mincor Resources NL (MCR AU), GK Goh Holdings (GKG SP), SHL Japan Ltd (4327 JP).

Hyundai Elevator: Chairwoman Hyun Jeong-Eun Loses A Major Lawsuit Against Schindler Group

On 30 March, it was announced that Hyun Jeong-Eun (Chairwoman of the Hyundai Group) lost a final lawsuit against the Schindler Group.
The Supreme Court upheld an appeal court ruling that Chairwoman Hyun needs to pay 170 billion won (US$131 million) and delayed interest payments to Hyundai Elevator.
Although this major lawsuit loss for Chairwoman Hyun is a tremendous catalyst, the downturn in the construction sector and uncertainty in the reduction in Chairwoman’s stake remain key negatives.

Socionext Lock-Up – Up 2.67x Since IPO. US$930m Worth of Shares to Be Unlocked

By Clarence Chu

Socionext (6526 JP) was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup will expire on 9th Apr 2023.
Socionext is a fabless semiconductor provider which commenced operations after integrating the system on a chip (SoC) businesses of Fujitsu Semiconductor Limited and Panasonic Holding Corporation in 2015.
Coming up for six-month lockup expiry are the Development Bank of Japan, Fujitsu and Panasonic, the trio had each trimmed their respective stakes in the IPO.

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Apr 02

Daily Brief Event-Driven: Index Rebalance & ETF Flow Recap: Nikkei225 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp
Last Week in Event SPACE: Meituan, S.M.Entertainment, Toyo, Mincor, JD.com, AAG
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Bull Market?
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Liontown, United Malt, Estia, Mincor, Origin, Toyo, Toshiba

Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp

The March rebalances of the NIFTY indices and the Nikkei 225 (NKY INDEX) were implemented last week. Plus some ad hoc rebalances for the KOSPI2 INDEX and KOSDQ150 INDEX.
A quieter week coming up with multiple market holidays across markets. We also near the start of the review period for the MSCI May QCIR.
There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and iShares FTSE/Xinhua A50 China (2823 HK) during the week while there were outflows from some Korea ETFs.

Last Week in Event SPACE: Meituan, S.M.Entertainment, Toyo, Mincor, JD.com, AAG

One may presume that Prosus (PRX NA) moved their Meituan (3690 HK) shares received from their non-CCASS holdings of Tencent (700 HK). It does not tell us much else.
Allocation in the S.M.Entertainment Co (041510 KS) partial Offer was 44.14%. With shares trading ~₩95k, that was a pretty good outcome.
Toyo Construction (1890 JP) has asked the Japanese government to investigate YFO’s alleged breaches of FEFTA. Expect YFO to say they did no wrong. Expect Toyo to complain about it.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Bull Market?

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Liontown, United Malt, Estia, Mincor, Origin, Toyo, Toshiba

There are 44 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deal was discussed on Smartkarma this past week: Albemarle (ALB US)‘s Liontown Resources (LTR AU) tilt; Malteries Soufflet’s United Malt (UMG AU) Offer; Bain Capital’s Estia (EHE AU) Offer.
Key updates took place for Aag Energy Holdings (2686 HK), Toyo Construction (1890 JP), Toshiba Corp (6502 JP), andGolden Energy & Resources (GER SP).

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Apr 01

Daily Brief Event-Driven: JD.com (9618 HK) Announces TWO Spin-Offs (That Were Always Going To Be Spinoffs) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JD.com (9618 HK) Announces TWO Spin-Offs (That Were Always Going To Be Spinoffs)
Concentrix/Webhelp: A Good Deal for GBL
DB Hitek: KCGI Goes Activist & A Potential Inclusion in MSCI Korea Standard Index in 2023

JD.com (9618 HK) Announces TWO Spin-Offs (That Were Always Going To Be Spinoffs)

Two days ago, media reported Alibaba Group (9988 HK) / Alibaba (ADR) (BABA US) would split and possibly list several businesses. Last night Cainiao was reported as starting listing preparations.
Last night, JD.com Inc. (9618 HK) made two announcements it was proposing to spin off and list its JD Property and JD Industrial arms. This is NOT a spinoff war.
JD raised Series A and B for both companies. These were always going to be spins, like Health, Digits, and Logistics. JD Properties will be biggish.

Concentrix/Webhelp: A Good Deal for GBL

By Jesus Rodriguez Aguilar

Concentrix has signed a deal to merge with Webhelp (unlisted) in a cash and shares deal worth roughly $4.8 billion, including net debt. Webhelp is 59.15% owned by GBL.
GBL obtains €1,787 million (vs. €1,721 million last valuation). GBL doesn’t miss on a good deal, even momentarily reversing the trend of increasing share of private assets in portfolio.
The discount, albeit recently tightening, stays at a high level, 36.9%, despite the good deal and higher portfolio visibility and cash holdings.

DB Hitek: KCGI Goes Activist & A Potential Inclusion in MSCI Korea Standard Index in 2023

It was announced on 30 March that a local activist firm called KCGI has invested 7.05% stake in DB Hitek, spending 196.4 billion won on buying this amount.
KCGI mentioned that DB Hitek’s corporate value is extremely undervalued that the company should cancel its treasury shares and establish independent Board of Directors.
The probability of DB Hitek being included in MSCI Korea Standard could rise materially if its market cap climbs to more than 4 trillion won in the coming weeks.

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Mar 31

Daily Brief Event-Driven: Toshiba – 3D Stake Reduction Reduces and Increases Risk and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba – 3D Stake Reduction Reduces and Increases Risk
Nikkei 225 March 2023 Rebal Tomorrow
Detailing & Assessing SK Innovation’s Exchange Offer with SK On Shares as Consideration (10% of SO)
Sembcorp Marine (SMM SP) JVs for S$8.6bn Multi-Year Offshore HVDC Converter Platforms Deal
Mincor: Did Twiggy Thwart BHP Offtake?
Another Block Deal Sale of Samsung SDS by the Lee Family to Pay for Inheritance Taxes
Hong Kong CEO & Director Dealings (30 Mar): Tian An, CSPC Pharmaceutical, Li Auto
Quiddity Leaderboard JPX-Nikkei 400: End-Mar 2023
SK Inc: Shares Cancellation & Updated NAV Valuation

Toshiba – 3D Stake Reduction Reduces and Increases Risk

By Mio Kato

An EDINET filing yesterday revealed that 3D Investment Partners had reduced their stake in Toshiba from 7.2% to 4.9%.
This significantly derisks the possibility of 3D becoming a forced seller and alters the risk reward here.
Nevertheless, it is still difficult to be especially bullish here given uncertainty regarding the tender vote is now a little higher.

Nikkei 225 March 2023 Rebal Tomorrow

The Nikkei 225 March 2023 Rebalance is 31 March at the close. There is about US$1.75bn of funding to sell against US$1.85bn of 3 names to buy.
The impact on the Buy Side is middling at 3, 6.4, and 6.9 days of ADV to buy. The three DELETES are larger on average but they are all smallcaps.
One trade – long an ADD vs a Peer – is still worth doing. Indexers buy the stock, it goes into a dark closet, and never comes out.

Detailing & Assessing SK Innovation’s Exchange Offer with SK On Shares as Consideration (10% of SO)

SK Innovation will buy back its shares, worth about 10% of the total issued shares, through a tender offer and offer SK On stocks as consideration instead of cash.
Even if there is allocation risk, as only 10% of SO are targeted, expectations that pricing discrepancy can sufficiently offset this should be the factor driving up the price today.
Additional trading openings? This depends on the disparity widening between the intrinsic value of SK On and the exchange ratio.

Sembcorp Marine (SMM SP) JVs for S$8.6bn Multi-Year Offshore HVDC Converter Platforms Deal

Sembcorp Marine (SMM SP) is a month in to its new existence as a business more than twice as large as its old business after absorbing Keppel O&M.
There have been some noises about cost-cutting, which could be key to an early return to profitability.
Today, mid-day, we get news of the biggest ever offshore renewables contract win in a JV with General Electric – a deal worth €6bn (SGD 8.64bn). It’s big.

Mincor: Did Twiggy Thwart BHP Offtake?

Earlier today (30 March), Mincor Resources NL (MCR AU) said BHP Group (BHP AU) would not agree to amend off-take agreement specifications, and will no longer accept lower-quality ore.
Mincor delivers 100% of its ore to BHP. It will continue to deliver on-specification ore to BHP, but has withdrawn its forward guidance.
Shares rolled over 5.7% to close at A$1.42/share, above Wyloo’s unconditional A$1.40/share. Offer.

Another Block Deal Sale of Samsung SDS by the Lee Family to Pay for Inheritance Taxes

After the market close today, Samsung Sds announced a block deal of 1.51 million shares at a discount range of 3.5% to 4.5% to the closing price of 117,900 won.
Lee Seo-Hyun, the daughter of the late Samsung Chairman Lee Kun-Hee, is selling her 1.51 million shares of Samsung SDS (1.95% of oustanding shares) in a block deal.
The company faces continued overhang on additional stake sale due to the inheritance tax issue in the next 2-3 years. As a result, we would avoid the block deal sale.

Hong Kong CEO & Director Dealings (30 Mar): Tian An, CSPC Pharmaceutical, Li Auto

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 include Tian An China Investment (28 HK), CSPC Pharmaceutical Group (1093 HK), and Li Auto (2015 HK).

Quiddity Leaderboard JPX-Nikkei 400: End-Mar 2023

By Janaghan Jeyakumar, CFA

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-March 2023.

SK Inc: Shares Cancellation & Updated NAV Valuation

On 29 March, SK Inc announced that it will cancel 0.95 million in treasury shares, which represents 1.3% of the company’s outstanding shares and 5% of treasury shares.
One of the concerns about SK Inc in the past several weeks has been lower DPS of 5,000 won in 2022 versus DPS of 8,000 won in 2021.
Our base case valuation of SK Inc is NAV of 19.7 trillion won (NAV per share of 266,113 won), representing a 54% upside from current levels.

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Mar 29

Daily Brief Event-Driven: Meituan (3690 HK) Distro – Prosus Shares Hit CCASS. What We Know And What We Don’t Know and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Meituan (3690 HK) Distro – Prosus Shares Hit CCASS. What We Know And What We Don’t Know
Toyo Construction (1890) Tries a Different Tactic – FEFTA!
Korea FSC Officially Eases a Major Hurdle for a Tender Offer: Names to Watch
AAG Energy (2686 HK): Pre-Cons Done. Still A Rubbish Offer
Golden Energy: Dian Swastatika Goes To Vote. Nothing To See Here
KT Corp (030200 KS): Foreign Room Increase Could Mean MSCI Inclusion
Liontown (LTR AU) Rejects Albemarle’s Advances
Japan Real Estate Investment (8952 JP) : Offering Could Be a Catalyst for Outperformance Vs Peers
Additional Potential Inclusions in KOSPI 200 Rebalance in May 2023
Liontown Resources (LTR AU): A Bump to Albermale’s A$2.50 Offer Is Justifiable

Meituan (3690 HK) Distro – Prosus Shares Hit CCASS. What We Know And What We Don’t Know

Meituan (3690 HK) shares hit accounts on Friday, they showed up in the CCASS data. All but about 2.3mm shares worth. Another 248.8mm shares showed up on Monday.
That was the Prosus stake, which was expected as of November 2022 (evidently, they did not convert more Tencent shares in the interim.
The data tells us some things. It does not tell us much else. Be careful of the details.

Toyo Construction (1890) Tries a Different Tactic – FEFTA!

This morning, Reuters is reporting that Toyo Construction (1890 JP) has asked the Japanese government to investigate alleged breaches of the Foreign Exchange and Foreign Trade Act by YFO.
Why? The Very Japanese family office of Nintendo’s founding family used Cayman entities to purchase Toyo shares and Toyo was re-labeled as having businesses in “Core Sectors” in October 2021.
Toyo has also repeated its complaint about changed “intentions” on large shareholder filings. That bit of the complaint is 10 months old. A closer look at the details within.

Korea FSC Officially Eases a Major Hurdle for a Tender Offer: Names to Watch

Korea FSC will accept financial institutions’ LOC and LPs’ investment performance agreements as certifying documents for securing funds. This revision will be effective right from April 1 this year.
The impact from a preemptive trading perspective is likely to be significant. Additional stake purchases through tender offers will increase more aggressively, particularly when purchasing shares from the majority shareholder.
We should first pay attention to companies where private equity (PE) is the largest shareholder whose stake is relatively low (less than 50%): Hugel, Hana Tour Service, & Hanssem

AAG Energy (2686 HK): Pre-Cons Done. Still A Rubbish Offer

Back on the 17 February, AAG Energy Holdings (2686 HK) announced an underwhelming Offer of HK$1.85/share (declared final) by way of a Scheme from major shareholder Xinjiang Xintai (603393 CH).
Yesterday, Xinjiang Xintai shareholders approved the proposal. This was expected – it’s a total bargain.
AAG shareholders will likely get to vote on the Scheme in early May. They should vote it down.

Golden Energy: Dian Swastatika Goes To Vote. Nothing To See Here

Dian Swastatika (DSSA IJ) shareholders will vote on the in-specie distribution of Golden Energy Mines and the exit offer of Golden Energy & Resources (GER SP) on the 2 May.
This requires a simple majority vote, and the Widjaja family-controlled PT Sinar Mas Tunggal holds 59.9% in DSSA. This is rubber-stamped.
For what it’s worth, DSSA’s “independent advisors” concluded the Offer is fair. To the Widjaja family as majority owners, it most certainly is. To the DSSA minority shareholders… 👀

KT Corp (030200 KS): Foreign Room Increase Could Mean MSCI Inclusion

KT Corp (030200 KS) missed out on inclusion to the MSCI Korea Index at the May 2022 SAIR following a drop in foreign room below 15%.
Bottoming out at 6.5%, foreign room has started to increase again. The last data point shows foreign room at 14.43%, just shy of the 15% threshold for inclusion eligibility.
If foreign room increases above 15% in the next three weeks, KT Corp (030200 KS) will be added to the MSCI Korea Index at the May QCIR.

Liontown (LTR AU) Rejects Albemarle’s Advances

Lithium play Liontown Resources (LTR AU) has now thrice rejected Albemarle Corp (ALB US)‘s proposals.
Liontown has labeled Albermarle’s third bid of A$2.50/share as opportunistic.
Albemarle has picked up 2.2% in Liontown. But that is dwarfed by Tim Goyder’s (chairman)’s 15% stake, who is not engaged at the current bid price.

Japan Real Estate Investment (8952 JP) : Offering Could Be a Catalyst for Outperformance Vs Peers

By Janaghan Jeyakumar, CFA

Today after market close, one of Japan’s largest office JREITs Japan Real Estate Investment (8952 JP) announced a US$150mn follow-on equity offering to fund their recent acquisition of two properties.
The primary offer quantity will be 35,200 units and there is an over-allotment quantity of 2,464 units.
In this insight, we take a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

Additional Potential Inclusions in KOSPI 200 Rebalance in May 2023

In this insight, we discuss the potential new inclusions in KOSPI 200 rebalance in May 2023.
The five stocks that are potential inclusions in KOSPI 200 rebalance in May 2023 include Kumyang, Cosmo Chemical, Dentium, Jeju Air, and Youlchon Chemical.
Kumyang and Cosmo Chemical are up on average 177% YTD. We would not chase these two stocks as their share prices have already risen considerably.

Liontown Resources (LTR AU): A Bump to Albermale’s A$2.50 Offer Is Justifiable

Liontown Resources (LTR AU) has rejected an unsolicited non-binding privatisation proposal from Albemarle Corp (ALB US) at A$2.50 per share, which is a 63.9% premium to the undisturbed price (27 March).
The offer is attractive in comparison to peer multiples and historical share prices. Liontown suggests that the offer does not appropriately value the Kathleen Valley Lithium Project.
A bump to the Board’s desired A$3.00 offer is justifiable based on the Kathleen Valley NPV sensitivity analysis related to spodumene prices. Albemarle remains willing to engage.

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Mar 28

Daily Brief Event-Driven: Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling
SM Entertainment: Tender Offer Allocation Ratios Announced
Target & Timing for Flow Trading Position Setup in NICE I&S KOSPI Transfer Event
Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
Cosmo Energy (5021) – It’s Even More On
Golden Energy (GER SP): DSS Vote on 2 May; Appraiser Unconvincingly States that Offer Is Fair
Origin Energy (ORG AU): Brookfield/EIG Binding Offer; ACCC Approval the Key Risk
AAG Energy (2686 HK): Pre-Condition Satisfied as Doubts Sets In
Origin Energy And Brookfield/MidOcean Enter Into Scheme Deed
Estia Health: Bain’s Non-Binding Proposal

Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling

Following the settlement of Meituan (3690 HK) shares from Tencent (700 HK)‘s in-specie dividend, nearly all the shares are now in CCASS.
Meituan (3690 HK) has underperformed Tencent (700 HK) by nearly 50% and Alibaba Group (9988 HK) by 27% since the announcement of the in-specie dividend.
Short interest is higher over the last couple of months but is far lower than the selling that could come through, especially on the Prosus (PRX NA) holding.

SM Entertainment: Tender Offer Allocation Ratios Announced

Korea Investment & Securities announced the final competition rate for the tender offer of SM Entertainment by Kakao Group (8,333,641 shares of SM Entertainment at 150,000 won per share).
The competition ratio of the tender offer was 2.2655436 to 1. Accordingly, the allocation ratio was set at 44.1395170%.
At the current price of 95,100 won, SM Entertainment’s shares are undervalued by about 25% to 45% over the next 6-12 months, in our view.

Target & Timing for Flow Trading Position Setup in NICE I&S KOSPI Transfer Event

NICE I&S will likely complete the transfer schedule in early May, meaning that an ad-hoc change may occur before the regular rebalancing of the KOSDAQ 150 in June.
If this gets completed before SK Oceanplant’s transfer listing schedule, the top reserved issue in NICE’s GICS sector (INDUSTRIALS) will be included. It is Sun Kwang (003100 KS).
As evidenced in the case of LX Semicon, we should set up a preemptive position for potential ADDITION at the time of the T or T-1 KRX corporate action announcement.

Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses

The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
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 0.5x ADV on many index constituents.

Cosmo Energy (5021) – It’s Even More On

In mid-January, things between activist Yoshiaki Murakami and Cosmo Energy Holdings (5021 JP) came to a head. Cosmo announced a large buyback and possible takeover defence measures.
The buyback was a beefy chunk of the float because of the expected profit payout. On 9 February, Cosmo lowered its NP guidance by 40%. FY22 div stays at ¥150/share.
Last Thursday, Cosmo presented its NEW Mid-Term Management Plan. ROE targets similar. Profit targets up. Minimum div goes up; payout ratio goes up. More comes if financial health targets met.

Golden Energy (GER SP): DSS Vote on 2 May; Appraiser Unconvincingly States that Offer Is Fair

The Dian Swastatika Sentosa (DSSA IJ)/DSS EGM to gain shareholder approval will be held on 2 May. The DSS appraiser (unsurprisingly) opines that the Widjaja family offer is fair.
The appraiser valued Golden Energy & Resources (GER SP) at S$0.980. However, the valuation approach is sorely lacking, particularly for the value excluding the Golden Energy Mines (GEMS IJ) stake.
Our SoTP valuation is S$1.29 per share, 32% above the revised offer. We continue to think another bump is required to get this deal done.

Origin Energy (ORG AU): Brookfield/EIG Binding Offer; ACCC Approval the Key Risk

Origin Energy (ORG AU) has entered into a binding proposal with Brookfield/EIG. The offer terms are changed to A$5.78 and US$2.19 per share. The offer is worth A$8.912 excluding dividends.
Since the announcement of the first indicative offer on 10 November 2022, the average implied value of the revised offer is A$8.97 per share vs A$9.00 for the previous offer.
ACCC approval will be the key overhang and is expected to take around six months. At the last close, the gross spread to the offer is 9.1%.

AAG Energy (2686 HK): Pre-Condition Satisfied as Doubts Sets In

Aag Energy Holdings (2686 HK) noted that the pre-condition for Xinjiang Xintai Natural Gas (603393 CH) privatisation offer at HK$1.85 per share has been satisfied (which was expected).
The gross spread has widened to 16.4% due to concerns that the recent solid FY22 results, lack of dividends and the skinny premium would nudge minorities to vote NO.
It remains unclear if the dissatisfied retail minorities have enough votes to block the scheme. The downside remains low as the shares are trading 5% below the undisturbed price.

Origin Energy And Brookfield/MidOcean Enter Into Scheme Deed

In the wake of the Aussie government’s gas price intervention, the Brookfield/MidOcean consortium reduced its Offer for Origin Energy (ORG AU) to ~A$8.90/share, down from A$9.00/share, on the 22 Feb.
At the time, Origin appeared supportive. Origin and Brookfield/MidOcean have now entered into a Scheme Implementation Deed.
Some subtle – and more favourable to all investors – changes have been made to terms. Pricing is attractive. ACCC is the big question mark.

Estia Health: Bain’s Non-Binding Proposal

Aged care provider Estia Health (EHE AU) has appointed UBS to advise on Bain Capital’s $3.00/share non-binding proposal.
The indicative Offer arrives a little over two months after Kerry Stokes-backed Seven Group Holdings (SVW AU) off-loaded its 10% stake at ~ $2.00/share.
Separately, Regal Fund announced it has taken a 7% stake.

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Mar 27

Daily Brief Event-Driven: Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS, Here We Go Again!
Nikkei 225 Index Rebalance: Passives Trade on Friday
Toyo Construction (1890) Plays Offence – A New Mid-Term Mgmt Plan with High Shareholder Payout
Weekly Deals Digest (26 Mar) – Toshiba, Toyo, Healius, Mincor, Rakuten Bank, SBI Sumishin, Harita
Merger Arb Mondays (27 Mar) – AAG Energy, Jiangnan, Toshiba, Toyo, Estia, Mincor, Golden Energy

Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS, Here We Go Again!

By Sumeet Singh

On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares. Its value has since declined to US$17bn
We have covered the background of the event in our previous notes. In this note, we talk about the recent updates.

Nikkei 225 Index Rebalance: Passives Trade on Friday

Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) will replace Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) in the Nikkei 225.
Estimated one-way turnover at the rebalance is 1.08% and will result in a round-trip trade of JPY 412.8bn (US$3.16bn) at the close on 31 March.
There has been recent pre-positioning on the stocks as well as movement in short interest over the last couple of months.

Toyo Construction (1890) Plays Offence – A New Mid-Term Mgmt Plan with High Shareholder Payout

YFO continues its fight on Board governance. Toyo Construction has shifted so the Board and a Special Committee will now examine the input Toyo says YFO has not provided.
Toyo also objected because it said YFO’s bid could not be sustained based on Toyo’s economics. Toyo’s fight should have been offence. With a new Medium-Term Management Plan, it is.
Toyo now promises strong revenue and double digit OP growth, and a ¥50/share (5.3%) dividend. Toyo is trying to pay off shareholders to support it against YFO. That’s fair/good.

Weekly Deals Digest (26 Mar) – Toshiba, Toyo, Healius, Mincor, Rakuten Bank, SBI Sumishin, Harita

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), SBI Sumishin Net Bank (7163 JP), Trial Holdings (5882 JP) and PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) IPOs.
Event-Driven developments – Toshiba Corp (6502 JP), Toyo Construction (1890 JP), Golden Energy & Resources (GER SP), Estia Health (EHE AU), Healius (HLS AU), Mincor Resources NL (MCR AU).

Merger Arb Mondays (27 Mar) – AAG Energy, Jiangnan, Toshiba, Toyo, Estia, Mincor, Golden Energy

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), 111 Inc (YI US), Genesis Minerals (GMD AU), Aag Energy Holdings (2686 HK), Tyro Payments (TYR AU), Estia Health (EHE AU).
Lowest spreads – Mincor Resources NL (MCR AU), Healius (HLS AU), Golden Energy & Resources (GER SP), Boustead Projects (BOCJ SP), GK Goh Holdings (GKG SP), Nippon Steel.

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Mar 26

Daily Brief Event-Driven: KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)
Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Estia Health (EHE AU): Bain Capital’s A$3.00 Offer
KOSPI 200: Special Changes & Rising Delinquency Ratios of Banks in Korea
Last Week in Event SPACE: Toshiba, Toyota Industries, Meituan, Kingsoft, Rakuten Bank
KOSDAQ150 Ad Hoc Index Rebalance: Humasis (205470 KS) To Replace Cellivery (268600 KS)
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Healius, Mincor, Osstem, Golden Energy, S.M.Entertainment

KOSPI200 Ad Hoc Index Rebalance: DGB Financial (139130 KS) To Replace Meritz Sec (008560 KS)

As expected, DGB Financial Group (139130 KS) replaces Meritz Securities (008560 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 31 March.
We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of DGB Financial Group (139130 KS) at the close of trading on 31 March.
DGB Financial Group (139130 KS) trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.

Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank

There are a bunch of implementations in the coming week, the largest being the Nikkei 225 (NKY INDEX) March rebalance.
There are some ad hoc changes to the KOSPI2 INDEX and KOSDAQ 150 Index following constituent stocks being designated as Administrative Issues and Investment Attention Issues.
Inflows to the iShares MSCI Emerging Markets ex China ETF (EMXC US) have continued and has taken AUM to a new high.

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

Estia Health (EHE AU): Bain Capital’s A$3.00 Offer

Estia Health (EHE AU) confirmed it has received a non-binding indicative proposal from Bain Capital at A$3.00 per share, a 28.2% premium to the undisturbed price (23 March).
The offer is attractive in comparison to historical share prices and multiples and implies a premium to Regis Healthcare (REG AU)’s (the key peer) multiples.
However, the offer is light in comparison to precedent transactions multiples. The largest shareholder has also suggested the terms are light, which suggests a requirement for a bump.

KOSPI 200: Special Changes & Rising Delinquency Ratios of Banks in Korea

The Korea Exchange announced special changes in KOSPI 200 index.
Effective 3 April, Meritz Securities (008560 KS) will be excluded from the KOSPI 200 index and DGB Financial Group (139130 KS) will replace it.
We think that there could be slightly better capital flow into DGB Financial as compared to other regional/smaller banks in Korea including BNK Financial

Last Week in Event SPACE: Toshiba, Toyota Industries, Meituan, Kingsoft, Rakuten Bank

Toshiba Corp (6502 JP)‘s Board is clearly giving this to shareholders and saying “We did our job. Now it’s up to you.”
Toyota Industries (6201 JP) admits to falsifying some engine emission tests. But the market dinging the company ~20% is excessive.
US$16bn of Meituan (3690 HK) shares from Tencent (700 HK) got delivered on 24 March 2023. That’s a lot.

KOSDAQ150 Ad Hoc Index Rebalance: Humasis (205470 KS) To Replace Cellivery (268600 KS)

Following Cellivery Therapeutics (268600 KS) designation as an Administrative Issue and an Investment Attention Issue, the stock will be deleted from the KOSDAQ 150 Index and replaced with Humasis (205470 KS).
The timing of the index change is currently uncertain but will be implemented latest by the close of trading on 17 April.
Humasis (205470 KS) was limit up on Friday following the ex-date of a 1:3 scrip issue. The stock could continue to move higher over the next week.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Healius, Mincor, Osstem, Golden Energy, S.M.Entertainment

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.
Four new deal was discussed on Smartkarma this past week: Australian Clinical Labs (ACL AU)/Healius (HLS AU), Wyloo/Mincor (MCR AU), JIC/Toshiba Corp (6502 JP), and MBk/ Osstem Implant (048260 KS).
Key updates took place for Essential Metals (ESS AU), Golden Energy & Resources (GER SP), and S.M.Entertainment Co (041510 KS).

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Mar 25

Daily Brief Event-Driven: Toshiba – Thoughts On The Tender Opinion and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba – Thoughts On The Tender Opinion
Assessing KT’s MSCI Re-Inclusion in May QCIR with Foreign Room Finally Hitting 15%
Toyota Industries: Guilty As Charged. But Excessively Punished
Porsche Automobile Holding: FY 22 Results and Discount

Toshiba – Thoughts On The Tender Opinion

By Mio Kato

Toshiba released documents on the tender and a notice that the FY end dividend would be cancelled shortly after our last report was published.
They are interesting in that the Special Committee’s opinions are relatively frank but details on the valuation process are almost non-existent.
In addition, the information regarding other bids and alternatives was a little surprising to us.

Assessing KT’s MSCI Re-Inclusion in May QCIR with Foreign Room Finally Hitting 15%

It is virtually certain that KT’s foreign rooms will exceed 15% today or tomorrow. This month, foreign net sales of 200-300k are continuing almost every day.
Assuming the Cutoff of the MSCI Korea Standard to be 2.7 trillion won and setting the float rate to 25%, KT beats the hurdles quite comfortably.
If KT achieves re-inclusion with a 25% float rate, a passive inflow worth 140 billion won is expected to occur. This is a 3.55x ADTV.

Toyota Industries: Guilty As Charged. But Excessively Punished

Toyota Industries (6201 JP), one of the world’s leading forklift manufacturers, has admitted to fabricating the results of parts testing, forcing some forklift shipments to be halted.
TICO has decided to suspend the shipping of three models of forklifts equipped with the suspect engines, which account for ~6% of total forklift sales (in terms of count).
Shares, quite rightly, have taken a hit. But this correction appears excessive.

Porsche Automobile Holding: FY 22 Results and Discount

By Jesus Rodriguez Aguilar

Net debt of Porsche SE (HoldCo) amounted to €6,672 million, as a result from the debt financing of around €7.1 billion to purchase ordinary shares of Porsche AG (operating company).
Porsche SE trades at a 49.2% discount to NAV, but maintaining the dividend involves maintaining the net debt position and its detrimental effect on value.
The attractiveness of Porsche SE shares has been reduced as a result of the acquisition of the Porsche AG stake, still the discount is massive, even accounting for litigation risk.

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Mar 24

Daily Brief Event-Driven: Toshiba Board to Shareholders: “Yes and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba Board to Shareholders: “Yes, Meh But We Did Our Job, Now It’s Up To You (We’re Tired Too)”
Toshiba – The End… Hopefully
Toshiba (6502 JP): JIP’s JPY4,620 Tender Offer, Now for the Really Hard Part
KOSPI 200 Flow Trading: Those Subject to a Significant Float Rate Change
NIFTY NEXT50 / NIFTY100 Index Rebalance: Flows Change as Index Capping Methodology Changes
KOSDAQ150 Ad Hoc Index Rebalance: EM-Tech (091120 KS) To Replace SBW Life (151910 KS)
Quiddity Leaderboard TWSE Div+ Jun 23: 3 ADDs/DELs and US$700mn+ of Capping Flows!
Chinese Developers’ Overview – Shift in Sentiment but a Few Still Needs Some Equity
Rakuten Bank IPO Points That the Market Could Be Undervaluing Rakuten’s Businesses & Investments
KOSDAQ 150: Special Changes (SBW Life Science: Deletion & EM-Tech: Addition)

Toshiba Board to Shareholders: “Yes, Meh But We Did Our Job, Now It’s Up To You (We’re Tired Too)”

Just post-close, the Nikkei reported Toshiba’s Board had agreed a JIP deal at “around ¥2trln.” Toshiba confirmed HOURS later indicating language was still being hashed out. And the dividend cancelled.
Toshiba “supports” the deal because it aligns a single shareholder with management goals. They cannot recommend to general shareholders because it is too low. But JIP was the only bidder.
It raises the question of whether activists will submit to “Toshiba Fatigue” at what the Board admits is too low a price, or whether there is still fight left.

Toshiba – The End… Hopefully

By Mio Kato

The Nikkei reported today that Toshiba’s board had chosen to accept JIP’s buyout offer.
The purported pricing of ¥2trn is a relatively modest premium but is not a surprise and no surprise is a positive here in our view.
All that remains is shareholder approval and while we doubt there will be too many celebrations on that front, there is likely to be relief.

Toshiba (6502 JP): JIP’s JPY4,620 Tender Offer, Now for the Really Hard Part

Toshiba Corp (6502 JP) announced a pre-conditional tender offer by Japan Industrial Partners (JIP), the preferred bidder at JPY4,620 per share, a 9.7% premium to the last close price.
The special committee opines that the offer is the best price that can be expected today, which sounds like we are recommending the offer as it is the only one.
The offer has several negatives: a 14% price reduction during the process, below the undisturbed price, below the mid-point IFA DCF range and no serious effort on Plan B.

KOSPI 200 Flow Trading: Those Subject to a Significant Float Rate Change

Samsung SDS and Meritz Financial will welcome a 6%p and 30%p increase, respectively, in the upcoming rebalancing in June.
Assuming a K200 tracking fund size of 65 trillion won, they are expected to receive 2.69x and 5.47x ADTVs, respectively. This is enough for us to consider a preemptive position.
However, in the case of Samsung SDS, we need to consider potential price correction by the scheduled block deal (1.95%) and develop a multi-phased approach to minimize timing conflicts.

NIFTY NEXT50 / NIFTY100 Index Rebalance: Flows Change as Index Capping Methodology Changes

On 17 February, NSE Indices announced the results of the March index review for the Nifty Next 50 Index (NIFTYJR INDEX). There are 5 adds and 5 deletes.
Last evening, NSE Indices announced a change in the index methodology where the cumulative weight of non-F&O stocks in the index will be capped at 10% (down from 15% earlier).
This changes the flows at the March rebalance that will be implemented at the close of trading on 29 March.

KOSDAQ150 Ad Hoc Index Rebalance: EM-Tech (091120 KS) To Replace SBW Life (151910 KS)

Following Nanos Co Ltd (151910 KS)‘s designation as an Investment Attention Issue, the stock will be deleted from the KOSDAQ150 Index and replaced with Em Tech Co Ltd (091120 KS).
Passive trackers are estimated to buy 1.3 days of ADV on Em Tech Co (091120 KS) while they will need to sell 1.1 days of ADV on Nanos (151910 KS).
Em Tech Co Ltd (091120 KS) was up yesterday but the stock is still way off its highs. The stock should trade higher over the next few days.

Quiddity Leaderboard TWSE Div+ Jun 23: 3 ADDs/DELs and US$700mn+ of Capping Flows!

By Janaghan Jeyakumar, CFA

In this insight, we take look at Quiddity’s estimations for index changes and capping flows for the Taiwan Div+ index for the June 2023 review.
I currently see 3 ADDs and 3 DELs but there are several names close to the border and expectations could change before the base date as prices move around.
I also currently expect capping flows of US$705mn one-way with multiple names with more than five days to trade.

Chinese Developers’ Overview – Shift in Sentiment but a Few Still Needs Some Equity

By Clarence Chu

Having first introduced the three red line guidance in late 2020, the government has begun shifting its stance, and relaxing some of its regulatory oversight.
In this note, we looked at recent news developments and how some larger developers fared against the three red lines criterion.
Of the large developers we looked at, there are a few names which stand out which could potentially do a capital raising given their financial standing.

Rakuten Bank IPO Points That the Market Could Be Undervaluing Rakuten’s Businesses & Investments

By Oshadhi Kumarasiri

As Rakuten Bank (5838 JP) prepares for an IPO in April 2023, we see the potential for Rakuten’s NAV discount to narrow significantly from its current level of over 52%.
We think the market could be unaware of the hidden value in smaller Rakuten businesses and other investments.
Rakuten-Bank, which seems like a small piece of Rakuten’s ecosystem producing as much as 26-31% of Rakuten’s market-cap could open markets’ eyes to the undervaluation of Rakuten businesses & investments.

KOSDAQ 150: Special Changes (SBW Life Science: Deletion & EM-Tech: Addition)