Event-Driven

Sabana Industrial REIT (SSREIT SP) disclosed a partial offer from Volare to acquire a maximum of 109.6 million units at $0.465 per unit, a 9.4% premium to the undisturbed price.
The partial offer is conditional on minimum acceptances representing 10.00% of outstanding units. Quarz Capital, the activist fund, says the offer is attractive.
ESR Group (1821 HK), the sponsor, is unlikely to tender. Based on a proration of 13.54% and at the last close price of S$0.425, the breakeven price is S$0.420.

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

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

Last Week In SPACE: Bank of Kyoto, WM Motors, Japanese Banks, Hong Kong Aerospace, CP ALL/MAKRO

Japanese banks are the hottest new thing but unless you think Bank of Kyoto is going to change its spots, it’s still best thought of as a range trade.
WM Motors opts for a backdoor listing via merging with WE Solutions Limited (860 HK). There’s probably a good reason for doing so.
You pay for the liquidity of Japanese banks by paying a higher PBR against not as much improvement in ROE. That’s life.

China Internet Investment Finance’s (810 HK): A Vague Offer Leads to a Sinking Feeling

China Internet Investment Finance Holdings (810 HK)/CIIF disclosed that it received a letter from a potential offeror, stating that it is considering making a voluntary conditional cash offer.
The possible offer will have two conditions – a 50% minimum acceptance condition and that the shares remain listed. No price or timeline has been disclosed.
An offer if it materialises, will likely be a take-under due to the presence of a willing seller (Chairman) seeking a liquidity event and CIIF’s unjustified share price run.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Relia, Kingston, Fengxiang, Jafco, Esso, Golden Energy

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: Mitsui & Co’s tilt for Relia Inc (4708 JP).
Key updates took place for: Kingston Financial (1031 HK), Shandong Fengxiang (9977 HK), Jafco Co Ltd (8595 JP), Golden Energy & Resources (GER SP), and Esso Thailand (ESSO TB).

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Jan 21

Daily Brief Event-Driven: Introducing KODEX Top 5 Plus ETF Rebalancing Event and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Introducing KODEX Top 5 Plus ETF Rebalancing Event
KOSPI 200 Ad Hoc Rebalance for Meritz Securities: DGB Financial Will Be Added
Golden Energy (GER SP): Long-Stop Date Extended as the Offer Looks Increasingly Light
Sun Capital Partners/K3 Capital Group: Agreed Underwhelming Offer
Sun Pharmaceutical Ind (SUNP IN): Acquisition Adds Late-Stage Biopharma Product in Derma Franchise
KCGI Formally Goes Activist on Osstem Implant

Introducing KODEX Top 5 Plus ETF Rebalancing Event

At this point, one constituent change is expected, and LG Chem is expected to replace KT&G.
The return of the equal-weighted long/short basket trade for the constituent changes in the past two years was recorded from 2.3% to 3.8%.
Both LG Chem and KT&G are expected to have a significant rebalancing flow impact. It can be an event that brings a juicy day trading return.

KOSPI 200 Ad Hoc Rebalance for Meritz Securities: DGB Financial Will Be Added

With JB Financial Group gone for Meritz Fire, the next one in line will enter KOSPI 200 in place of Meritz Securities. And the lucky one is DGB Financial.
DGB can expect an inflow of 8.23x ADTV and will face a 2.8x ADTV in one day on March 31.
Given the size of the preemptive flow that JB Financial is currently attracting, we should prepare for DBG to start receiving a similar level of price impact earlier than usual.

Golden Energy (GER SP): Long-Stop Date Extended as the Offer Looks Increasingly Light

The long-stop date for the satisfaction of the offer conditions has been extended from 9 April to 9 August, to help Dian Swastatika Sentosa (DSSA IJ) obtain shareholder approval.
An alternative explanation is that the Widjaja family’s offer for Golden Energy & Resources (GER SP) is increasingly looking unattractive in light of Stanmore Coal (SMR AU)’s share price rally.
The offer remains light and we think that there is a good chance that the Widjaja family will raise its offer (likely a bump to the delisting price) to succeed.

Sun Capital Partners/K3 Capital Group: Agreed Underwhelming Offer

Sun Capital offers 350p/share for K3, 10.7x EV/NTM EBITDA, lower than median of peers at 11.3x and lower than my DCF-based estimate of 404.7p (implied 12.4x EV/NTM EBITDA).
In spite of the underwhelming figure, the deal is likely to go ahead: top shareholders/managers (30.4%) will contribute to Bidco, and irrevocables total 10%. Court/GM meetings are on 26 January.
Gross spread is 0.71%. Assuming it all goes smoothly, the estimated annual return assuming settlement by 28 February is 7%. Long.

Sun Pharmaceutical Ind (SUNP IN): Acquisition Adds Late-Stage Biopharma Product in Derma Franchise

By Tina Banerjee

Sun Pharmaceutical Industries (SUNP IN) is acquiring the U.S.-based late-stage biotechnology company, Concert Pharmaceuticals (CNCE US) for $576M in equity value. The transaction is expected to be completed in 1Q23.
Concert has completed the evaluation of the efficacy and safety of its lead candidate, deuruxolitinib in adult patients with moderate to severe Alopecia Areata in its phase 3 clinical program.
With the disease affecting up to ~1.5M people in the U.S., Alopecia represents potential blockbuster opportunity. Sun Pharma plans to file NDA for deuruxolitinib to the FDA in 1H23.

KCGI Formally Goes Activist on Osstem Implant

On 20 January, KCGI private equity fund formally started its corporate governance activist campaign on Osstem Implant (048260 KS).
KCGI officially going activist on the company, its strong fundamentals and deep discount valuations suggest that Osstem Implant’s price is likely to outperform KOSPI by a wide margin in 2023.
KCGI has demanded Kyoo-Ok Choi (Chairman of Osstem Implant) to resign.

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Jan 20

Daily Brief Event-Driven: Quiddity Primer for HSTECH Rebalance Events and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Quiddity Primer for HSTECH Rebalance Events
Olam Group (OLG SP): Entering the Final Stages to Unlock Value
Esso Thailand: Ignore Bangchak Corp’s Takeunder
MSCI Korea: Potential Inclusions & Exclusions in February 2023 Highlighted by Locals
KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)
Quiddity Final Expectations for NIFTY Mar 23: Pidilite Could Be an Interesting Pre-Event Bet
EQT/Va-Q-Tec: Generous Agreed Offer
Hong Kong CEO & Director Dealings (20 Jan): Asymchem Labs, Honbridge, Flat Glass, Gushengtang
EQD | KOSPI2 Index: Buy Calls/Call Spreads into CPI Release

Quiddity Primer for HSTECH Rebalance Events

The Hang Seng Tech Index (HSTECH INDEX) represents the 30 largest technology companies listed in Hong Kong which have high business exposure to certain technology themes.
This index was launched in 2020 and has gained significant passive tracking over the last two years.
In this insight, we take a brief look at the selection criteria and the historical price performance of past Rebalance Events.

Olam Group (OLG SP): Entering the Final Stages to Unlock Value

On 10 January, Olam Group (OLG SP) announced the potential IPO of Olam Agri through a dual primary listing in SGX ST and Saudi Arabia as early as 1H2023.
The Olam Agri IPO could raise US$1 billion, according to press reports. Olam will seek shareholder approval at an EGM for the transaction.
The IPO marks the final stages of the strategy to unlock value. Our SoTP valuation is S$1.85 per share, a 19% upside to the last close price of S$1.56.

Esso Thailand: Ignore Bangchak Corp’s Takeunder

Back on the 11 January, refiner/retailer Bangchak Corporation (BCP TB)‘s board approved the purchase of a 65.99% stake in Esso Thailand (ESSO TB) from Exxon Mobil.
The purchase price remains indeterminate (the indicative price is Bt8.84/share), based on a pricing adjustment mechanism as it relates to Esso’s financial accounts at the close of the stake purchase.
Esso is down 17% since the announcement, and 37% from its recent (Oct-22) high. That seems excessive.

MSCI Korea: Potential Inclusions & Exclusions in February 2023 Highlighted by Locals

We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (10 February) that are being highlighted by the locals.
The potential candidates for inclusion in the MSCI Korea Index emphasized by locals in February 2023 include Kakao Pay and Hanwha Aerospace.
The potential exclusion candidates in the MSCI Korea Index emphasized by locals include S-1 Corp, Celltrion Pharm, and Cheil Worldwide.

KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)

By Brian Freitas

Jb Financial Group (175330 KS) will replace Meritz Fire & Marine Insurance (000060 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 27 January.
We estimate passive KOSPI2 INDEX trackers will need to buy 3.494m shares (KRW 36.34bn; 4.04 days of ADV) of Jb Financial Group (175330 KS) at the close on 27 January.
DGB Financial Group (139130 KS) could be added to the KOSPI2 INDEX in April, replacing Meritz Securities (008560 KS) following its merger with Meritz Financial Group (138040 KS).

Quiddity Final Expectations for NIFTY Mar 23: Pidilite Could Be an Interesting Pre-Event Bet

With roughly a week left in the reference period, we take a look at the potential ADDs/DELs for the NIFTY 50, 100, and 500 Indices for the March 2023 Rebalance.
For NIFTY 50, Pidilite Industries (PIDI IN) is the highest-ranked Potential ADD while Bharat Petroleum Corp (BPCL IN) is the highest-ranked Potential DELETE according to our estimates.
In this insight, we take a look at the recent price performance of names that can potentially be involved in index changes and our flow expectations.

EQT/Va-Q-Tec: Generous Agreed Offer

The acceptance period for EQT’s €26/share offer (46% premium, 16.1x EV/23eEBITDA) runs until 16 February. Minimum acceptance is 62.5% (49.4% of the float). EQT intends to implement a domination agreement.
The deal makes sense from a strategic standpoint, although there are potential antitrust issues. The price offered seems generous considering my fair-value estimate of €18.67 (DCF-based).
Gross spread is 3.7% (8.6% estimated annual return assuming settlement by 30 June), which is okayish for a not so liquid stock in the European space. Long.

Hong Kong CEO & Director Dealings (20 Jan): Asymchem Labs, Honbridge, Flat Glass, Gushengtang

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 Asymchem Laboratories (6821 HK), Honbridge Holdings (8137 HK), Flat Glass (6865 HK), and Gushengtang (2273 HK).

EQD | KOSPI2 Index: Buy Calls/Call Spreads into CPI Release

Korean equities have recovered from the December sell-off but are still playing catch up versus other Asian indices over the last year
We see the upcoming CPI release as an underpriced event in the vol space
We consider some cheap derivative strategies on the upside to play the disinflation theme

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Jan 19

Daily Brief Event-Driven: LG Energy IPO Lock-Up – Last of the Lockups at US$3bn and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

LG Energy IPO Lock-Up – Last of the Lockups at US$3bn
HDFC/HDFC Bank Mega Merger: Foreign Holdings Move Lower; Foreign Room Higher
StubWorld: CPALL Trading “Cheap” To MAKRO
Hanwha Aerospace: A Surprise in MSCI’s February QCIR?
Fengxiang (9977 HK): Delisting Resolution Fails, MGO Closes 1 February
JAFCO (8595) Tender Offer Close Imminent – Decent Conviction to Not Be Long
S&P BSE/Sensex Quiddity Leaderboard Jun 23: Adani Enterprises, Wipro, & The Usual F&O Questions
KOSPI 200 Rebalance: JB Financial In & Meritz F&M Insurance Out

LG Energy IPO Lock-Up – Last of the Lockups at US$3bn

By Sumeet Singh

LG Energy Solution (373220 KS) (LGES) raised US$10.8bn in its South Korea IPO, after pricing at the top-end of the IPO price range.
The stock was listed on 27th Jan 22. Its one-year lockup is set to expire soon.
In this note, we will talk about the lock-up dynamics and updates since our last note

HDFC/HDFC Bank Mega Merger: Foreign Holdings Move Lower; Foreign Room Higher

By Brian Freitas

Foreign shareholding in HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) has dropped over the December quarter resulting in higher foreign room.
The merger is expected to complete in Q2/Q3 when we expect there will be large buying from MSCI trackers.
The merger (and the timing of implementation) will have implications for changes to the NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) at the forthcoming rebalances.

StubWorld: CPALL Trading “Cheap” To MAKRO

7-11 play CP ALL PCL (CPALL TB) is coming up “cheap” on my monitor versus cash & carry subsidiary Siam Makro Public (MAKRO TB).
Preceding my comments on CPALL/MAKRO 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%.

Hanwha Aerospace: A Surprise in MSCI’s February QCIR?

Hanwha Aerospace is still narrowly across the borderline. It is especially painful that the share price was corrected by more than 4% today.
But suppose the cutoff MC is set at less than ₩2.7T, and Aerospace succeeds in recovering slightly. In that case, it will likely manage to come within the borderline.
Given that the preemptive flow must not have been significant and the profit forecast has been upwards until recently, a price shooting may appear at the time of the announcement.

Fengxiang (9977 HK): Delisting Resolution Fails, MGO Closes 1 February

Shandong Fengxiang (9977 HK)‘s delisting resolution was overwhelmingly voted against by independent H Shareholders. The results were not helped by the poor turnout.
PAG’s MGO at HK$1.5132 per H Share is not conditional on the approval of the delisting resolution. The MGO remains open with a final closing date of 1 February.
PAG currently holds 85.44% of the outstanding shares. At the last close and for a 10 February payment, the gross and annualised spread is 1.6% and 28.9%, respectively.

JAFCO (8595) Tender Offer Close Imminent – Decent Conviction to Not Be Long

The Jafco Co Ltd (8595 JP) Greenmail Tender Offer to take Murakami-san out of his position is nearing its close.
Investors should make a decision imminently about where they believe the stock should trade in Price/NAV terms after the buyback is complete, once management is “stabilised.”
My earlier piece written on the day of the announcement needs a few corrections. Those are below.

S&P BSE/Sensex Quiddity Leaderboard Jun 23: Adani Enterprises, Wipro, & The Usual F&O Questions

In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the June 2023 Rebalance.
Adani Enterprises (ADE IN) could be added and Wipro Ltd (WPRO IN) could be deleted from the SENSEX Index. There could be multiple changes for BSE 100, 200, and 500.
Below is a look at our estimated rankings for potential ADDs/DELs, their recent price performance vs peers, and potential trading opportunities.

KOSPI 200 Rebalance: JB Financial In & Meritz F&M Insurance Out

On 18 January, the KRX announced rebalance to KOSPI 200 index. The new addition to KOSPI 200 is JB Financial Group and the deletion is Meritz Fire & Marine Insurance.
We expect JB Financial to continue to outperform the market in the first half of this year.
However, we do not expect the sharp appreciation of JB Financial versus the other leading Korean banking stocks post JB Financial’s inclusion in KOSPI 200 on 30 January.

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Jan 18

Daily Brief Event-Driven: Hong Kong Aerospace Tech’s (1725 HK) US$1bn Rocket-Launch Site and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hong Kong Aerospace Tech’s (1725 HK) US$1bn Rocket-Launch Site
Meritz Fire & Marine Insurance: Treasury Shares Cancellation of 5.9% of Outstanding Shares
Kingston Financial’s (1031 HK) Vote on 9 February
DAX/MDAX/SDAX Quiddity Leaderboard Mar 23: Vantage Tower and Other Interesting Names
ETF Arbitrage in Korea: Names Suitable for Pair Trades
Kingston Financial (1031 HK): 9th Feb Scheme Vote. IFA Says Fair

Hong Kong Aerospace Tech’s (1725 HK) US$1bn Rocket-Launch Site

On the 9th of January, 2023, the Republic of Djibouti signed an MOU with Hong Kong Aerospace Technology (1725 HK) (HKAT) to develop a (reported) US$1bn international commercial “spaceport”.
In the middle of last year, Djibouti announced plans to launch two nanosatellites to facilitate farming and other related activities.
HKAT, a recent back-door listing, has a market cap of US$258mn. Wholly-owned subsidiary Gang Hang Ke (Shenzhen) Space Technology, has been successfully involved in the launch of ten satellites.

Meritz Fire & Marine Insurance: Treasury Shares Cancellation of 5.9% of Outstanding Shares

After the market close today, Meritz Fire & Marine Insurance announced that it will cancel 6.57 million treasury shares, representing 5.9% of its outstanding shares.
This treasury shares cancellation by Meritz F&M Insurance should have a continued positive impact on its share price.
Share cancellation by Meritz F&M Insurance and the need to adjust to higher merger ratio are likely to lead to Meritz F&M Insurance outperforming MFG in the next few days.

Kingston Financial’s (1031 HK) Vote on 9 February

The Kingston Financial (1031 HK) scheme document is out with the scheme meeting scheduled for 9 February. The IFA considers the offer to be fair and reasonable.
Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection) and the headcount test. No shareholder holds a blocking stake.
Peer re-rating increases the headcount test risk. At the last close and for the 10 March payment, the gross and annualised spread is 5.3% and 42.2%, respectively.

DAX/MDAX/SDAX Quiddity Leaderboard Mar 23: Vantage Tower and Other Interesting Names

In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
Vantage Towers (VTWR GR) is currently undergoing a Tender Offer and this could have interesting index consequences over the next few weeks.
As it stands, there seems to be one change between MDAX and SDAX and there are multiple names hovering close to the border for DAX, MDAX, and SDAX.

ETF Arbitrage in Korea: Names Suitable for Pair Trades

As for the one using the creation/redemption mechanism, the tracking error (market value – NAV) is still too tight to call this an arbitrage opening.
Then, at this point, we need to pay attention to ETF arbitrage from a pair trade perspective. There are a total of 3 pairs we can consider for this.
The mean reversion cycle is still not short. However, the diversion range is not extensive, so we can aim for a relatively stable setup in a market with increased volatility.

Kingston Financial (1031 HK): 9th Feb Scheme Vote. IFA Says Fair

The Scheme Booklet is now out and Kingston Financial (1031 HK)‘s shareholders can vote on Chu Yuet Wah’s Offer on the 9 February.
The Cancellation price of HK$0.30/share was a 47.78% premium to the undisturbed prices. It will not be increased.
Currently trading at a gross/annualised spread of 5.3%/44.4%, assuming payment on the 10 March.

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Jan 17

Daily Brief Event-Driven: Thinking About Japanese Banks – Go Big and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Thinking About Japanese Banks – Go Big, Go Small, Go Insurance
Mitsui & Co To Buy Out Relia (4708) – Moshi Moshi Is TOO CHEAP
Quiddity Primer for HSCEI Rebalance Events
EQD | Alibaba (BABA US): Leverage up Longs Using Call Ratios
Osstem Implant: Potential M&A Fight Between KCGI And Founder Choi
Liquid Universe of European Ordinary and Preferred Shares: January ‘23 Report
WM Motor Reverse Merger and Placement – The US$2bn Merger and US$500m Planned Placement

Thinking About Japanese Banks – Go Big, Go Small, Go Insurance

Japanese Banks have had a good run recently. From the day before the BOJ changed the 10yr yield target in December in its YCC programme to today, +30% vs TOPIX.
The question is how that is spread out. There are lots of banks. Some are cheaper than others. Some are better than others. Can we draw conclusions to trade better?
If you are looking at Japanese Banks to play a change in BOJ policy when Governor Kuroda’s term ends shortly, there are definitely conclusions one can draw. I offer comments.

Mitsui & Co To Buy Out Relia (4708) – Moshi Moshi Is TOO CHEAP

Mitsui&Co has been in Relia Inc (4708 JP) for a long time. As part of investing in BPO/RPA/AI services, they are buying out Relia, merging it with a KDDI sub.
They are buying it at an all-time high, and a 50% premium. Looks nice. But it’s not nice enough.
This is one of those times when I can reiterate, Japan Needs More Cowbell.

Quiddity Primer for HSCEI Rebalance Events

The Hang Seng China Enterprises Index (HSCEI INDEX) is one of the most widely discussed indices in the Hang Seng Indices family.
The HSCEI serves as a benchmark to reflect the overall performance of “Mainland” Securities listed in Hong Kong.
In this insight, we take a brief look at the selection criteria and the historical price performance of past Rebalance Events.

EQD | Alibaba (BABA US): Leverage up Longs Using Call Ratios

BABA US is up 85% from October lows and continues to trade well in 2023 up 32% in January
Stock has benefitted from not only improved economic sentiment but also an end to the 2-year crack down on the Internet Sector
We suggest using call ratios to increase upside leverage prior to earnings release

Osstem Implant: Potential M&A Fight Between KCGI And Founder Choi

The case involving KCGI (a local corporate activist private equity fund) and Osstem Implant (048260 KS) is one of the more interesting situations rising in the Korea’s M&A/corporate activism markets.
Osstem Implant is the number one dental implant company in Korea/Asia and the fourth largest player in this segment globally.
We believe Osstem Implant could outperform the market in 2023 due to improving fundamentals, cheap valuations, and a potential M&A fight between KCGI and Chairman Choi.

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

Since mid-December, spreads have shown a mixed performance across our liquid universe (9 have widened, 9 tightened, 1 at same level).
Trade recommendations long ords / short prefs: Fuchs Petrolub, Henkel, Handelsbanken, SSAB Svenska Stal.
Trade recommendations long prefs / short ords: Sixt, VW, Danieli, MFE-Media for Europe, Grifols, Atlas Copco, Ericsson.

WM Motor Reverse Merger and Placement – The US$2bn Merger and US$500m Planned Placement

By Sumeet Singh

On 11th Jan 2023, WM Motor Technology Co Ltd announced its intention to merge with Apollo Future Mobility (860 HK) .
WM Motor failed to list in Hong Kong last year and this is essentially its attempt to undertake a reverse merger at a valuation well below its previous funding rounds.
In this note, we will talk about the deal dynamics and take an early look at its implications.

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Jan 16

Daily Brief Event-Driven: Bank of Kyoto (8369) – Not a Normal Regional Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Bank of Kyoto (8369) – Not a Normal Regional Bank
Misunderstandings & Truth About Samchully & Daesung Holdings Entering KOSPI 200

Bank of Kyoto (8369) – Not a Normal Regional Bank

Bank of Kyoto (8369 JP) is a classic “deep value” trade. It has a low PBR, and… “Dude, it’s equity portfolio alone is worth more than the whole bank.”
It has a larger market cap than most super-low PBR Japanese regional banks, is more liquid, and the narrative is quite easy to tell.
Japanese Banks are the hottest new thing but unless you think This Particular Leopard is going to change its spots, it is still best thought of as a range trade.

Misunderstandings & Truth About Samchully & Daesung Holdings Entering KOSPI 200

Hankyung’s report is a clear misunderstanding under the current index methodology. The possibility of Samchully and Daesung Holdings’ KOSPI 200 inclusion is NONE.
However, the issue of deteriorating the market representation of the K200 index, which is caused by the top stocks outside the index, is gaining attention in the local financial space.
So, we should prepare for the possibility that KRX will revise the methodology. In this case, an intense preemptive flow for the top names outside the KOSPI 200 can appear.

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Jan 15

Daily Brief Event-Driven: Last Week In SPACE: Cosmo and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Last Week In SPACE: Cosmo, Olam, Yamada Denki, Jardine Cycle/Astra, Tianneng Power/Battery, Fujitsu
DearU’ Bubble + NCsoft’s Universe = The Largest K-Pop Fandom Platform in Korea
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Esso Thailand, Essential Met, Norwest Energy, Halcyon Agri
Hong Kong CEO & Director Dealings (15 Jan): WWPKG, Tianyun International, Yeahka, Flat Glass

Last Week In SPACE: Cosmo, Olam, Yamada Denki, Jardine Cycle/Astra, Tianneng Power/Battery, Fujitsu

Given the likelihood of more buybacks and pressure on capital allocation and structuring of the renewable energy business, Cosmo Energy (5021 JP) is more of a buy than a sell.
Olam Group (OLG SP) is a tricky beast to analyze. A key issue for investors is valuing Olam, ex- Olam Agri, ex- OFI.
Unloved as it is, Yamada Denki (9831 JP) is still cheap.

DearU’ Bubble + NCsoft’s Universe = The Largest K-Pop Fandom Platform in Korea

DearU’s acquisition of NCSoft’s Universe K-Pop fandom platform will expand DearU Bubble’s number one position in the K-Pop fandom platform in Korea.
The sale of Universe by NCSoft is a win-win situation for both DearU and NCsoft.
Applying a 25x P/E to an estimated net profit of 50 billion won in 2024 would suggest an market cap of 1.25 trillion won for DearU, representing a 52% upside.

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

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: Esso Thailand, Essential Met, Norwest Energy, Halcyon Agri

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.
Two new deals were discussed on Smartkarma in the past week: Bangchak Corporation (BCP TB)‘s takeunder for Esso Thailand (ESSO TB); Tianqi/OGO’s Offer for Essential Metals (ESS AU).
Key updates took place for: Norwest Energy NL (NWE AU) and Halcyon Agri (HACL SP).

Hong Kong CEO & Director Dealings (15 Jan): WWPKG, Tianyun International, Yeahka, Flat Glass

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 WWPKG Holdings Co Ltd (8069 HK), Tianyun International Holdings (6836 HK), Yeahka Limited (9923 HK), GHKGBA (1396 HK), and Flat Glass (6865 HK).

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

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

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Jan 14

Daily Brief Event-Driven: Melco Trading “Cheap” As Macau Opens Up and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Melco Trading “Cheap” As Macau Opens Up
IFM Increases Its Stake in Naturgy

Melco Trading “Cheap” As Macau Opens Up

After Macau’s government renewed the concession periods for the city’s six incumbent gambling concessionaires for another 10 years, the key players are up 86% on average
Both Melco International Development (200 HK) and Melco Resorts & Entertainment (MLCO US) have gained a little over 100%.
Melco’s NAV discount is back out to 36%. The simple ratio – Melco/MCLO – is around the lowest level since Melco began consolidating MCLO in early 2017.

IFM Increases Its Stake in Naturgy

Australian institutional investor IFM has informed the Spanish National Securities Market Commission (CNMV) that it has increased its stake in Naturgy Energy Group SA (NTGY SM) to just over 14%.
Corporate politics: IFM is still far from the 17% threshold that would grant two sits on the Board of Naturgy (and the initial minimum acceptance condition in the partial offer).
Speculative buy (TP €27.42, DCF-based). IFM’s intention of increasing its stake may continue to drive up the share 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

Jan 13

Daily Brief Event-Driven: Cosmo Energy (5021) Vs Murakami – It’s On! and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Cosmo Energy (5021) Vs Murakami – It’s On!
Japan Excellent (8987). It WAS Most Excellent. That’s Now Done.
Tianneng (819 HK): EV Battery Play Seeks Swiss Listing
Esso Thailand: Bangchak Corp’s Takeunder
Selected European Holdcos and DLC: New Year‘23 Report
EQD | FXI (FXI US): – Could Chinese Equities Lead the Way Higher? Use Options for Delta-Follow Up

Cosmo Energy (5021) Vs Murakami – It’s On!

In March 2022, longtime Cosmo Energy Holdings (5021 JP) holder Mubadala sold the last 15.7% of Cosmo Energy in a block sale after having sold 5% 8 months earlier.
A month later it was revealed noted Japanese activist Murakami-san had bought 5.1%. A week later it was 8.3%. Then he bought more. Cosmo announced a buyback in May 2022.
By November Murakami-san had 19.8%. But behind the scenes there had been discussions and those are now coming to light. Cosmo has announced possible defence measures.

Japan Excellent (8987). It WAS Most Excellent. That’s Now Done.

4.5 months ago I wrote about a possible “Sustained Flow Event” on Japan Excellent (8987 JP). Since then, the stock has outperformed every other Office REIT. It’s up since then.
Outperformance within Office REITs has been a minimum of 3.5%, and a maximum of ~20.8% vs the biggest peer, with an average and median outperformance of 11.7% and 13.4% respectively.
This idiosyncratic story has come to an end. It may be a temporary end, but I don’t see the next catalyst.

Tianneng (819 HK): EV Battery Play Seeks Swiss Listing

In January 2021, Tianneng Power (819 HK)‘s (TPI) battery unit Tianneng Battery (688819 CH) (TBG) was listed on China’s Star Market, as discussed in Tianneng: Star Market Battery Spin-Off Priced.
TBG is now proposing the issuance of GDRs, accounting for 10% of existing shares out, to be listed on the SIX Swiss Exchange.
A circular has been issued and TPI shareholders go to the vote on the 31 January. TPI currently holds 86.53% in TBG worth >300% of its market cap.

Esso Thailand: Bangchak Corp’s Takeunder

Refiner/retailer Bangchak Corporation (BCP TB)‘s board has approved the purchase of a 65.99% stake in Esso Thailand (ESSO TB) from Exxon Mobil (XOM US).
The purchase price is subject to a price adjustment mechanism and will only be known upon completion of the SPA. The indicative Offer Price is THB 8.84, 20% below undisturbed.
Once completed – tentatively anticipated in the 3Q23 – a mandatory tender offer will be triggered for the remaining 34.01% of shares out in Esso.

Selected European Holdcos and DLC: New Year‘23 Report

Discounts to NAV of covered holdcos have generally widened since mid-December.
Discounts to NAV (11 January): C.F.Alba, 48.9%; GBL, 36.3%; Heineken Holding, 19.5%; Industrivärden C, 14.3%; Investor B, 15.9%; Porsche Automobile Holding, 45%. The spread of Rio Tinto DLC tightened to 10.8%.
Spreads tend to widen in bear markets but short-term recoveries provide opportunities on tightening discounts. Recommended trades are: GBL, Porsche Automobile Holding, Rio Tinto (DLC), CF Alba (long position).

EQD | FXI (FXI US): – Could Chinese Equities Lead the Way Higher? Use Options for Delta-Follow Up