Event-Driven

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

On 30th November we proposed a restructure of a bullish FXI US trade
Since then FXI US has rallied 12% and implied vols have decreased significantly
We evaluate the call ladder that we highlighted and consider what to do next

💡 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 12

Daily Brief Event-Driven: Fujitsu (6702) Subsidiary Selldowns To Come and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Fujitsu (6702) Subsidiary Selldowns To Come
JCNC Is Even More Overstretched Vs. Astra
January TOPIX FFW Review – Some Big Sells
LG Energy Solution: Trading Strategy on End of ESOP Lockup & Valuation Comparisons
Petrodollars Fan Olam’s Agri Listing In Singapore And Saudi Arabia
Triton/Caverion: Hostile Competing Offer
K200 ETFs’ Swap Trading on Meritz & Fresh Buy-In JB Financial on Jan 27
EQD | HSI Index Vs SPX Index: Sell Chinese Equity Vol to Buy US Equity Vol
PIF and GIC Combined Invest About 1.2 Trillion Won in Kakao Entertainment

Fujitsu (6702) Subsidiary Selldowns To Come

Three years ago I wrote Fujitsu Subsidiary Selldowns or Buy-Ins? My choice then was Fujitsu Frontech which was bought out 8 months later.
A Bloomberg article today with quotes from an interview with the CEO of Fujitsu fuelled some movement today.
The “obvious” trade is Shinko Electric Industries (6967 JP) but you have to buy the new dream.

JCNC Is Even More Overstretched Vs. Astra

Jardine Cycle & Carriage (JCNC SP)‘s is currently trading tight at a ~6% discount to NAV.
The implied stub and JCNC/Astra International (ASII IJ) ratio are the highest outside the 2008 financial crisis.
Key catalysts for JCNC’s outperformance, such as the SIMSCI Index inclusion, have passed. JCNC is trading rich. Look to reverse the stub.

January TOPIX FFW Review – Some Big Sells

The January 2023 TOPIX FFW Trade was announced today. The two-way trade is worth about ¥325bn.
There are four ADDs previously discussed: Sun* (4053 JP), Appier Group (4180 JP), Chubu Steel Plate (5461 JP), and Chubu Steel Plate (5461 JP).
There are 57 downweights, 11 upweights (but only seven FFW buys). The rest is reverse funding to buy. There are 10 names with >$10mm AND >3 days ADV to sell.

LG Energy Solution: Trading Strategy on End of ESOP Lockup & Valuation Comparisons

This insight provides a trading strategy on LG Energy Solution (373220 KS) with a focus on the end of the ESOP shares lockup period on 27 January.
Currently, LG Energy Solution is trading at P/E of 46.5x in 2024 which is more than 100% higher than the P/E multiples of CATL (20.4x) and Tesla (19.2x) in 2024.
Our view is that in the long-term, LG Energy Solution should not trade at such high valuation premium to Tesla given the latter company’s higher return on capital.

Petrodollars Fan Olam’s Agri Listing In Singapore And Saudi Arabia

After selling a 35.43% stake in Olam Agri to Saudi Arabia’s Public Investment Fund last month, Olam Group (OLG SP) intends to dual list the company in Singapore and Saudi Arabia.
The stake sale implied a US$3.5bn value for the agricultural arm, or ~50% of OGL’s current market cap based on its remaining position in Olam Agri.
Olam Agri may raise up to US$1bn via the listing. A separate London listing of OGL’s food ingredient business is expected to occur subsequent to Olam Agri’s listing.

Triton/Caverion: Hostile Competing Offer

On 10 January, former significant shareholder Triton gatecrashed the Bain Capital consortium offer with an €8/share hostile competing offer, 14.3% premium to Bain’s). There could be upside up to c.€9.01.
Shareholder families have a c.27% (thus blocking) stake. Either they cash out in Triton’s offer, with a possible sweetener (a small increase could be likely) or will raise over Triton’s.
The shares are trading 0.62% above Triton’s offer on expectations of a bidding war and/or that offer is not declared unconditional by 30 June. Risk/return looks again positive. Long.

K200 ETFs’ Swap Trading on Meritz & Fresh Buy-In JB Financial on Jan 27

KOSPI 200 ETFs will have to sell Meritz FIRE and buy Meritz FINANCIAL at the close on January 27. JB Financial, the top reserved issue, will replace FIRE.
We should consider a Long Short for two Meritz companies just before the 27th. As a follow-up setup, we should aim for a potential widening of the swap arb spread.
As for the Long JB Financial, I would set the entry timing one week towards the implementation at the latest and look into Kodex Banks ETF (091170) for a hedge.

EQD | HSI Index Vs SPX Index: Sell Chinese Equity Vol to Buy US Equity Vol

Chinese equity vol has been high over the last few months with extreme market moves on a number of headlines but is starting to calm down
US equity volatility continues to screen cheap despite calls for a challenging year and likely recession
We consider 2 relative vol trades to play a narrowing of the spread

PIF and GIC Combined Invest About 1.2 Trillion Won in Kakao Entertainment

On 11 January, it was announced that Kakao Entertainment (103260 KS) has attracted large scale investments from Saudi Arabia’s Sovereign Fund (Public Investment Fund – PIF) and GIC (Singapore).
Maekyung Business Daily reported that PIF and GIC combined invested about 1.1 trillion won to 1.2 trillion won in Kakao Entertainment, valuing the company at about 10 trillion won.
This major investment in Kakao Entertainment by PIF and GIC should have a positive impact on Kakao Corp (035720 KS), the controlling shareholder of the company.

💡 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 11

Daily Brief Event-Driven: MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period
StubWorld: Swire And China’s Opening
Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight
Bubble Warning: China Internet Investment (810 HK) Suspended
Norwest Energy Rejects MinRes’ Offer
Korea Kolmar Holdings: Shares Cancellation of 17% of Market Cap + Deep Discount to NAV
Discussing the Currently Widened Pref-Ord Disparity in Korea
EQD | SPX and NDX : Its US CPI Time and We Look at Trading Opportunites in the Options Market
XXXLutz Consortium/Home24: Final Results and Delisting

MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period

We expect a number of changes to the MSCI Standard indices for the Asia Pacific region at the first Quarterly Comprehensive Index Review to be implemented on 28 February.
As usual, most changes are expected in China with a smattering of adds and deletes for the other markets.
On average, the adds have outperformed the deletes over the last few weeks and months and pre-positioning should continue for the next couple of weeks.

StubWorld: Swire And China’s Opening

Retailers /hoteliers will welcome the return of Chinese travellers, with ~US$250bn in annual spending. That should bode well for mall operators like Swire Properties and, in turn, Swire Pacific.
Preceding my comments on Swire 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%.

Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight

KT’s foreign room has been rising since early September last year. If this trend continues, it will likely approach the inclusion borderline of 15% within a month or two.
This trend is expected to continue for the time being as the tough relationship between the KT CEO and the government seems unlikely to be resolved in the short term.
The February inclusion is pretty tight, but May seems like we could be looking out for it.

Bubble Warning: China Internet Investment (810 HK) Suspended

China Internet Investment Finance Holdings (810 HK) (CII), an investment manager, is currently suspended pursuant to the Hong Kong Code on Takeovers and Mergers.
CII has thrice responded to unusual price action in its share price in the past four months. Shares are up a staggering ~1,000% in the past six months.
This insight provides some background information on CII. Trading at 64x book value, this is one avoidable company.

Norwest Energy Rejects MinRes’ Offer

In its Target Statement released this afternoon, Norwest Energy NL (NWE AU) has rejected Mineral Resources (MIN AU)‘s off-market scrip Offer.
Norwest concluded the Offer was opportunistic and did not boast an appropriate premium for control.
MinRes’ Offer closes on the 6 February – unless extended.

Korea Kolmar Holdings: Shares Cancellation of 17% of Market Cap + Deep Discount to NAV

On 10 January, Korea Kolmar Holdings (024720 KS) announced that it plans to cancel 1.1 million shares to be acquired through redemption of redeemable convertible preferred shares.
Korea Kolmar Holdings currently has a market cap of 314 billion won so this share cancellation represents nearly 17% of its market cap.
This large shares cancellation should have a positive impact on Korea Kolmar Holdings’ share price. It is also trading at 40% discount to its NAV.

Discussing the Currently Widened Pref-Ord Disparity in Korea

Many of the PREFERRED shares in Korea entered the short-term oversold territory versus ORDINARY (on a 20-day moving average).
The liquidity boom that started in the local bond market at the beginning of the year seems to have led to the relative outperformance of ORDINARY.
We should consider collective trading, which utilizes the oversold condition across the entire PREF zone, rather than an individual approach to a specific PREF at this point.

EQD | SPX and NDX : Its US CPI Time and We Look at Trading Opportunites in the Options Market

US CPI data is due on Thursday 12th January and is likley to be another important data point
SPX Index is down nearly 5% since November and NDX Index is down nearly 8% over the same period
We look for short-term trading opportunities in the options market

XXXLutz Consortium/Home24: Final Results and Delisting

The offer has ended. The bidding consortium has secured 92.67% of home24 shares (including capital increase and share purchases). Completion still remains subject to customary antitrust approvals.
Unsurprisingly, the shares are now trading at a 8.07% discount to the offer price. Delisting is looming and holdouts have not a sell-out right.
It is still puzzling to me why >7% of shares have not been tendered. The bidders might make a delisting offer, but not necessarily at the offer 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 10

Daily Brief Event-Driven: Essential Metals (ESS AU)’s Enters a SID at A$0.50 with a Tianqi/IGO JV and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Essential Metals (ESS AU)’s Enters a SID at A$0.50 with a Tianqi/IGO JV
Quiddity Leaderboard-S&P/ASX Mar 23: Multiple Names with Decent Impact
How Should We Play with Kakao Pay’s MSCI Inclusion Event?
Norwest Energy (NWE AU): Valuation Read Across from Warrego’s Takeover Battle
Oak Holdings/Vantage Towers: Tendering Vs. Domination Agreement

Essential Metals (ESS AU)’s Enters a SID at A$0.50 with a Tianqi/IGO JV

Essential Metals (ESS AU) has entered a SID with a Tianqi Lithium (002466 CH)/IGO Ltd (IGO AU) JV at A$0.50, a 44.9% premium to the undisturbed price (6 January).
The scheme is subject to shareholder and FIRB approval. The FIRB should approve a 49% Aussie-owned offeror for a project to be processed in Australia.
There is a possibility of a competing bid as the offer is far from a knockout bid and ESS lacks substantial shareholders. The scheme meeting is in April.

Quiddity Leaderboard-S&P/ASX Mar 23: Multiple Names with Decent Impact

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for S&P ASX 20, 50, 100, 200, 300 in the run up to the March 2023 Rebalance.
I expect there to be one, two, and four changes, respectively, for the ASX 20, ASX 100, and ASX 200 indices in the March 2023 Rebalance.
For ASX 300, there could be 14 ADDs and 12 DELs in the March 2023 Rebalance including some high impact names based on days-to-trade.

How Should We Play with Kakao Pay’s MSCI Inclusion Event?

Kakao Pay is the only possibility to be included in the February MSCI IR. It comfortably beats both the full market cap and float market cap hurdles.
It can be assumed that the full-fledged emergence of local institutional flows targeting MSCI inclusion contributed to some extent to Kakao Pay’s outperformance early this year.
More extreme reverse flow trading could emerge. In other words, there is a possibility that the share price will turn into a sell-off even before the MSCI announcement.

Norwest Energy (NWE AU): Valuation Read Across from Warrego’s Takeover Battle

Mineral Resources (MIN AU)‘s off-market takeover offer at 1 MIN share for every 1,367 NWE shares closes on 6 February. The target’s statement will be despatched by early to mid-January.
The Norwest Energy NL (NWE AU) Board recommends shareholders take no action. The timing is opportunistic and motivated by recent Perth Basin consolidation activity.
Hancock’s latest bid for Warrego Energy (WGO AU) suggests that Norwest is worth at least 20% more than MinRes’ offer. Expect the Board to reject the offer.

Oak Holdings/Vantage Towers: Tendering Vs. Domination Agreement

The agreement between Vodafone and the consortium values the company at a generous 24x EV/Fwd EBITDA, 19% premium over the 3-month VWAP (14.7% above my DCF-based fair value estimate).
Nevertheless the spread (+0.44%) signals that Oak Holdings may not obtain the necessary 95% to squeeze-out. Risk arb funds are betting on higher returns from a Domination Agreement.
On rather aggressive assumptions (90% payout, 4.5% rate of return, 2.5% growth) a dividend-discount model provides a €39.6/share valuation. This could still turn into another messy Kabel Deustschland scenario.

💡 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 09

Daily Brief Event-Driven: Yamada Denki (9831) – GINORMOUS Buyback 2/3 Done. Stock Price Reaction Limited. and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Yamada Denki (9831) – GINORMOUS Buyback 2/3 Done. Stock Price Reaction Limited.
PEXA (PXA) Replaces Pendal (PDL) In the S&P ASX 200, Getting into the Distro Mix
Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event
Merger Arb Mondays (09 Jan) – Origin Energy, Warrego, Nitro, Norwest, Halcyon, Kingston
Dissecting KRX Annual ETF Market Report & Noteworthy Trends for ETF Arbitrages
Essential Metals (ESS AU): Scheme With Tianqi/IGO

Yamada Denki (9831) – GINORMOUS Buyback 2/3 Done. Stock Price Reaction Limited.

Yamada Denki (9831 JP) has bought back nearly 16% of shares out ex-Treasury in the 7.5 months since last fiscal year earnings were announced. It went limit up on Day1.
Then it stopped – despite the buyback being 15% of expected volume every day for a year and a HUGE piece of Real World Float.
There is 8% left to buy at current prices – 16-18% of volume the next 4.5mos. And it is still a dirt cheap capital structure and somewhat sticky shareholder structure.

PEXA (PXA) Replaces Pendal (PDL) In the S&P ASX 200, Getting into the Distro Mix

On Friday after the close, S&P DJI Indices announced that PEXA Group (PXA AU) would replace Pendal Group (PDL AU) in the S&P ASX 200 on 12 January at close.
This is unsurprising. Pendal was scheduled to exit in January due to takeover. PEXA was already an interim S&P ASX 200 member after the distribution by Link Administration (LNK AU).
The timing is conveniently in the timeframe for the LNK distribution of PXA shares to its shareholders implemented on the 10th.

Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event

In mid-December, digital UX creation agency (90% of revenues) and “talent agency” (10%) announced it would move from TSE Growth to TSE Prime mid-December 2022.
This was in Janaghan’s “Not Ready” list in TOPIX Inclusions: Who Is Ready (Dec 2022) because it did not meet two of the requirements. But it turns out it did.
This is therefore a TOPIX inclusion event at end-January 2023.

Merger Arb Mondays (09 Jan) – Origin Energy, Warrego, Nitro, Norwest, Halcyon, Kingston

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), Genesis Minerals (GMD AU), 21Vianet Group (VNET US), Golden Energy & Resources (GER SP), Tyro Payments (TYR AU), Origin Energy (ORG AU).
Lowest spreads – Norwest Energy NL (NWE AU), Nitro Software Ltd (NTO AU), Chip Eng Seng Corp (CHIP SP), Conexio Corp (9422 JP), Nippon Steel Trading Corporation (9810 JP).

Dissecting KRX Annual ETF Market Report & Noteworthy Trends for ETF Arbitrages

Korea’s ETF market achieved top-line growth last year as well. AUM increased by 7% YoY, a significant achievement considering that global ETF AUM has shrunk by 8%.
Since one-third of local ACTIVE ETFs are equity types (particularly SECTOR), we can conclude that the local equity ETF market has not shrunk but has migrated to ACTIVE.
Recently listed sector ETFs are expected to play an accelerating role in expanding the scope of these arb opportunities as they expand beyond electric vehicles/secondary batteries to groups/defense.

Essential Metals (ESS AU): Scheme With Tianqi/IGO

Small lithium player Essential Metals (ESS AU) has entered into a Scheme with the Tianqi Lithium JV, comprising Tianqi Lithium (9696 HK) (51%) and IGO Ltd (IGO AU) (49%).
The Scheme Consideration of A$0.50/share is a 45% premium to last close, and a 36.3% premium to the 30-day VWAP.
Standard Scheme conditions apply. FIRB required. The Scheme Booklet is due out in March, with a shareholder meeting expected in April 2023. Possible implementation in May 2023.

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

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

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

Jan 08

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

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Last Week In SPACE: Shinsei Bank, Warrego Energy, Korean Bank Activism, Japfa
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi
ASX200 Index Rebalance: PEXA to Replace Pendal
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Warrego Energy, Acotec Scientific, Halcyon Agri, Thaicom
Weekly Deals Digest (08 Jan) – Acotec, Halycon, Warrego, Nitro, Norwest, VinFast
Hong Kong CEO & Director Dealings (8 Jan): Tian An, Differ Group, Pharmaron, Joinn Lab, Gushengtang
EQD | NKY Index: Equity Vol Has yet to React to Increased Bond Vol. Use Current Lull to Pick up Vega

Last Week In SPACE: Shinsei Bank, Warrego Energy, Korean Bank Activism, Japfa

SBI Holdings (8473 JP) is still expected to buy out SBI Shinsei Bank (8303 JP) minorities sooner rather than later
Not one to rest on its laurels, Hancock immediately bumped its Offer for Warrego Energy (WGO AU) to A$0.36/share, up from A$0.28/share, provided it gets to 40%. We need more popcorn.
APCM reckons Korean banks can pay out more than 50% of net income to their shareholders annually.

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi

End December was the end of the review cutoff for a lot of indices that will rebalance within the next couple of months.
PEXA Group (PXA AU) replaces Pendal Group (PDL AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 12 January.
There were big outflows from Hong Kong and China focused ETFs led by Hang Seng H Share Index ETF (2828 HK) and Tracker Fund of Hong Kong Ltd (2800 HK).

ASX200 Index Rebalance: PEXA to Replace Pendal

PEXA Group (PXA AU) will replace Pendal Group (PDL AU) in the S&P/ASX 200 (AS51 INDEX) at the close of trading on 12 January.
Passive S&P/ASX 200 (AS51 INDEX) trackers will receive PEXA Group (PXA AU) shares from their Link Administration (LNK AU) holdings and will have to buy the rest from the market.
There will be selling in Pendal Group (PDL AU) from S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index trackers as well as from global trackers.

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: Warrego Energy, Acotec Scientific, Halcyon Agri, Thaicom

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.
No new deals were discussed on Smartkarma in the past week.
Key updates took place for: Warrego Energy (WGO AU), Acotec Scientific Holdings (6669 HK), Halcyon Agri (HACL SP), and Thaicom Pcl (THCOM TB).

Weekly Deals Digest (08 Jan) – Acotec, Halycon, Warrego, Nitro, Norwest, VinFast

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 – Quiet week as VinFast (1905332D VN) continues to pre-market a US$1bn IPO.
Event-Driven developments – Acotec Scientific Holdings (6669 HK), Nitro Software Ltd (NTO AU), Norwest Energy NL (NWE AU), Warrego Energy (WGO AU), Halcyon Agri (HACL SP).

Hong Kong CEO & Director Dealings (8 Jan): Tian An, Differ Group, Pharmaron, Joinn Lab, 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 Tian An China Investment (28 HK), Differ Group Auto (6878 HK), Pharmaron Beijing Co Ltd-H (3759 HK), Joinn Laboratories (H) (6127 HK), and Gushengtang (2273 HK).

EQD | NKY Index: Equity Vol Has yet to React to Increased Bond Vol. Use Current Lull to Pick up Vega

JGB band shifting has been unable to calm down Fixed Income markets
The BOJ is being forced to intervene in both bond and currency markets due to a pick-up in volatility
Equity vol has yet to react and we see an opportunity to pick-up some gamma/vega

💡 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 07

Daily Brief Event-Driven: Potential Block Deal Targets in Korea for a Preemptive Position Buildup and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Potential Block Deal Targets in Korea for a Preemptive Position Buildup
Thaicom: Gulf Energy’s Low-Balled MTO Now Open For Acceptances

Potential Block Deal Targets in Korea for a Preemptive Position Buildup

TPG and Anchor experienced EOD risk due to the recent plunge in Kakao Bank’s stock price. So, they will sell shares if the current price rise continues a little further.
All three PEs of Shinhan Financial are currently expected to be seeking an early exit although they expressed last year that they would remain strategic shareholders.
Other notable targets are Hahn & Co’s Hanon Systems and K Car and MBK Partners’ ConnectWave, likely via a phased stake sale in tranches.

Thaicom: Gulf Energy’s Low-Balled MTO Now Open For Acceptances

Back on the 7 November, Intouch Holdings (INTUCH TB)‘s board approved the sale of its 41.13% stake in Thaicom Pcl (THCOM TB) to Gulf Energy Development Public Company (GULF TB).
The sale price was Bt 9.92/share, a 19.3% discount last close. Intouch shareholders overwhelmingly approved the sale on the 28 December, which subsequently triggered an MTO.
The Offer is now open for acceptances. The Offer closes on the 9 February. Intouch will pass through 100% of the sale proceeds via a special dividend.

💡 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 06

Daily Brief Event-Driven: TOPIX Inclusions: Who Is Ready (Jan 2023) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

TOPIX Inclusions: Who Is Ready (Jan 2023)
Ping An A/H Premium: Buy the A’s, Sell the H’s
Halcyon Agri: MGO One Step Closer As SASAC Approves SPA
Korea M&A Outlook in 2023: What’s for Sale?
Warrego: Gina Bumps As MinRes (Potentially) Circles
EQD | Tencent (700 HK): Use Derivatives to Protect Recent Gains
Warrego (WGO AU): Hancock Ups Its Offer to A$0.36 as MinRes Looms Large
Backtracing Korea NPS Trades on Local Stocks Through KRX FAIR

TOPIX Inclusions: Who Is Ready (Jan 2023)

By Janaghan Jeyakumar, CFA

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
This insight is a follow-up to TOPIX Inclusions: Who Is Ready (Dec 2022).
Our latest top pick for TOPIX Inclusion pre-events is Artspark Holdings (3663 JP).

Ping An A/H Premium: Buy the A’s, Sell the H’s

Ping An Insurance (H) (2318 HK) has outperformed Ping An Insurance (601318 CH) by 38% since our last Insight. With the AH premium near parity, we take profit.
We also reverse the position and go long Ping An Insurance (601318 CH) and short Ping An Insurance (H) (2318 HK) to play the premium expansion trade.
Northbound holding of Ping An Insurance (601318 CH) has increased over the last couple of months while Southbound holding of Ping An Insurance (H) (2318 HK) has decreased.

Halcyon Agri: MGO One Step Closer As SASAC Approves SPA

Back on the 16 November, Halcyon Agri (HACL SP) announced Sinochem, holding 65.2% of shares out, had entered into an SPA to sell 36% to China Hainan Rubber (601118 CH).
Upon completion of the SPA, Hainan Rubber will make an MGO, conditional on a 50% tendering acceptance. Sinochem has provided an undertaking not to tender its remaining 29.2% stake.
Halcyon has now announced SASAC has given the green light for the SPA. Outstanding conditions include MoC and NDRC. Those approvals should fall into place shortly.

Korea M&A Outlook in 2023: What’s for Sale?

More than 20 trillion won (US$16 billion) worth of deals are up for M&As in 2023.
However, due to high interest rates and differences on valuations among buyers and sellers, the M&A market in Korea is likely to continue to be weak in 2023.
In this insight, we discuss 24 companies that are up for M&As this year in Korea, including Hanon Systems, SK Shieldus, and K Car.

Warrego: Gina Bumps As MinRes (Potentially) Circles

Talk about a crowded register. Gina Rinehart’s Hancock has 25.91%, Strike Energy (STX AU) has 19.9%, and now a new player, possibly MinRes (MIN AU), has taken a ~15% stake.
186mn shares in Warrego, or 15.2% were crossed in after market yesterday at HK$0.35/share. Regal Funds is understood to be one large seller. No shareholding disclosure has emerged.
Not one to rest on its laurels, Hancock immediately bumped the Offer to A$0.36/share, up from A$0.28/share, provided it gets to 40%. We need more popcorn.

EQD | Tencent (700 HK): Use Derivatives to Protect Recent Gains

Stock is up over 80% from October lows and almost 10% in 2023 already
Sentiment over fundamentals appears to be driving the rally and stock is back in the worlds top 10 most valuable companies
We consider some option strategies to roll profits and reduce exposure

Warrego (WGO AU): Hancock Ups Its Offer to A$0.36 as MinRes Looms Large

Hancock increased its Warrego Energy (WGO AU) off-market takeover bid by 28.6% from A$0.28 to A$0.36 per share along with a 40% minimum acceptance condition.
Hancock’s latest move is an attempt to ward off a potential offer from a third suitor who has built up a 15% stake (rumoured to be Mineral Resources (MIN AU)).
Strike Energy (STX AU)’s all-scrip offer remains the highest as it is the next takeover target. However, Gina Rinehart’s ego suggests that she will persist no matter the cost.

Backtracing Korea NPS Trades on Local Stocks Through KRX FAIR

Last year, NPS raised the weighting of defense, renewables, and reopening (entertainment and leisure) stocks. In contrast, NPS mainly reduced exposure to construction, banking, and semiconductors.
In December, NPS is building a fairly aggressive long position in China Reopening. In addition, trading assumed to be portfolio rebalancing for the local chemical sector was detected.
NPS’ stake in most major holdings exceeds 5%. This allows us to monitor NPS’ trading history almost in real time through KRX FAIR.

💡 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 05

Daily Brief Event-Driven: 2023 High Conviction – SBI Shinsei Bank (8303 JP) – Still Reading Between the Lines and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

2023 High Conviction – SBI Shinsei Bank (8303 JP) – Still Reading Between the Lines
Acotec (6669 HK): Boston Scientific’s Partial Offer Open For Tendering
What Is NPS Buying & Selling?
Futu Holdings: Cross-Border Broking In Crosshairs
Halcyon Agri (HACL SP) MGO: SPA Effective, Next Is Satisfaction of Conditions Precedent
Japfa Ltd: Trading Cheap After AustAsia In-Specie Distribution
HSI Index Rebalance Preview: Better Late Than Never?
Warrego (WGO AU): Has MinRes Gatecrashed the Party?
Appreciate Group/Paypoint: There May Be Higher Rewards in Vouchers

2023 High Conviction – SBI Shinsei Bank (8303 JP) – Still Reading Between the Lines

SBI Shinsei Bank (8303 JP) was my High Conviction reco in late 2020 for 2021 at ~¥1200/share. It was my High Conviction reco in late 2021 for 2022 at ¥1900/share.
I did not get around to writing it in late December 2022, but on the first day of trading I offer Shinsei as a 2023 high conviction recommendation.
What’s new? Not a lot, but Reading Between The Lines is still top drawer stuff.

Acotec (6669 HK): Boston Scientific’s Partial Offer Open For Tendering

On the 12 December, Acotec Scientific (6669 HK) announced a HK$20/share partial Offer from Boston Scientific, a 31.6% premium to last close, but below August 2021’s IPO price of HK$23.80/share.
Boston Scientific will acquire at least 156.7mn shares (50.01%), up to 203.7mn (65%). Irrevocables total 60.14%, comprising shares held by CA Medtech/CPE Investment, Jing Li (chairman, CEO), and Bliss Way.
The Composite Doc is now out and the Offer is open for acceptances. This Offer is done. The key question is the final proration.

What Is NPS Buying & Selling?

In this insight, we discuss a list of 60 stocks in Korea where NPS recently added or reduced 1% or more stake (27 adds and 33 reduce).
Among the stocks NPS increased its stake, many of them are clear beneficiaries of the end of zero COVID policies in China including Hotel Shilla, Amorepacific Corp, and GKL.
Among the top market cap stocks where the NPS decreased its stake by 1% or more, they include Lg Innotek, Hyundai E&C, Hyundai Mipo, and Posco International.

Futu Holdings: Cross-Border Broking In Crosshairs

Just one day ahead of its dual primary listing in Hong Kong, Futu Holdings Ltd (FUTU US) postponed its Listing by Introduction.
According to the China Securities Regulatory Commission, Futu has been illegally operating cross-border securities trading without approval.
Suitably, the share prices of Futu and UP Fintech (TIGR US), another online brokerage forced to quit accepting new onshore investors. It’s probably too premature to buy the dip.

Halcyon Agri (HACL SP) MGO: SPA Effective, Next Is Satisfaction of Conditions Precedent

The SPA for China Hainan Rubber Industry (601118 CH) to acquire 36.00% of Halcyon Agri (HACL SP)’s outstanding shares from Sinochem International Corporation A (600500 CH) at US$0.315 is effective.
Conditions precedent which relate to Chinese regulatory approvals should be satisfied shortly. Completion will trigger an MGO at US$0.315 or S$0.423 (US$/S$ rate fixed on the closing date).
The MGO has a 50%+ minimum acceptance condition which requires around 40% of minorities acceptance rate. We think that this is achievable as the offer is attractive.

Japfa Ltd: Trading Cheap After AustAsia In-Specie Distribution

Agri-Food play Japfa Ltd (JAP SP) recently distributed in-specie its 62.5% stake in AustAsia Group (2425 HK).
Japfa continues to hold a 55.4% stake in Japfa Comfeed Indonesia (JPFA IJ), together with unlisted ops focused on animal proteins in Vietnam, India, Bangladesh, and Myanmar.
Japfa is estimated to be trading at around a 41% discount to NAV and ~4x EV/EBITDA.

HSI Index Rebalance Preview: Better Late Than Never?

There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.

Warrego (WGO AU): Has MinRes Gatecrashed the Party?

The AFR reports that Mineral Resources (MIN AU) was the buyer of 15% of outstanding shares at A$0.35, 25.0% above Hancock and 4.5% above Strike Energy (STX AU)’s offer.
MinRes’ move is motivated by the desire to have a say in the recent Perth Basin consolidation. It recently lobbed an all-scrip takeover offer for Norwest Energy NL (NWE AU).
Warrego Energy (WGO AU)‘s three largest shareholders are now the three suitors. The emergence of MinRes (if confirmed) suggests that the takeover battle is far from done.

Appreciate Group/Paypoint: There May Be Higher Rewards in Vouchers

PayPoint has launched an agreed cash and shares offer for closest rival Appreciate. On completion, PayPoint shareholders will hold c. 95% and Appreciate shareholders c. 5% of the merged firm.
The offer price doesn’t seem generous (my fair value estimate is 53p vs. 43.45p package value). Event-driven investor Samson Rock is the top shareholder with a 19.7% stake.
Gross spread is 5.9% (including dividend). I believe there are grounds for an offer sweetening, and although both stocks are illiquid, the risk/reward looks appealing, in my view.

💡 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 04

Daily Brief Event-Driven: Acotec (6669 HK): Boston Scientific’s HK$20 Partial Offer Now Open and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Acotec (6669 HK): Boston Scientific’s HK$20 Partial Offer Now Open
HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
(Mostly) Asia M&A 2022 Roundup: Bigtincan, St Barbara/Genesis, Acotec, Conexio, ENEOS, Nidec OKK
CSI300 Index Rebalance Preview: Early Look at Potential Changes in June
SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro

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

Acotec Scientific Holdings (6669 HK)’s partial offer from Boston Scientific (BSX US) at HK$20 per share is now open. The IFA opines it to be fair and reasonable.
The partial offer is conditional on the offeror hitting 50.01% voting rights. Irrevocables ensure that it will be declared unconditional on or before the first closing date (26 January).
Based on a minimum proration of 71.31% and at the current share price of HK$17.20 per share, the estimated breakeven price is HK$10.38 per share.

HSCI Index Rebalance Preview and Stock Connect: A Lot of Change

We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only.
There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

(Mostly) Asia M&A 2022 Roundup: Bigtincan, St Barbara/Genesis, Acotec, Conexio, ENEOS, Nidec OKK

For the month of December, 10 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$6bn.
The average premium for the new deals announced (or first discussed) in December was ~46%, giving an average for 2022 of 41%.
This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

CSI300 Index Rebalance Preview: Early Look at Potential Changes in June

Two thirds of the way through the review period, we see 15 potential index changes at the June rebalance that will be implemented at the close on 9 June.
We estimate a one-way turnover of 2.35% at the June rebalance leading to a one-way trade of CNY 5.57bn.
The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last six months, though there is some near-term deterioration.

SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro