Event-Driven

We see 4 potential adds, 1 close add and 1 potential delete for the FTSE All-World/All-Cap indices at the upcoming QIR that will be implemented at close on 16 December.
The largest impact will be the passive selling on Golden Agri Resources (GGR SP) due to a nationality change from Singapore to Ineligible.
There is a big lock-up expiry on Delhivery where US$2.89bn of shares will be free for trading on 21 November – that is significantly larger than the potential passive buying.

Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done

On Friday, Sumitomo Corp (8053 JP) announced a bid for equity affiliate (they own 27+% but Nippon Steel 15%, top 2 is 40+%) Sumitomo Precision Products (6355 JP).
It’s a one-year high and 4-year high price, and 8x average 10yr EV/EBITDA but 4.6x 2024e EBITDA from the Mid Term Plan. And way below a 10-year high.
This gets done if Retail agrees to the tender. If 50% put in, that should do it. So I expect this gets done.

Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase

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 Pendal Group (PDL AU), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), 21Vianet Group (VNET US), 111 Inc (YI US), Golden Energy & Resources (GER SP).
Lowest spreads – Tyro Payments (TYR AU),Perpetual Ltd (PPT AU), OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), China Vast Industrial Urban Development (6166 HK), Moya Holdings.

Warrego (WGO AU) Bidding War Between Strike (STX AU) And Beach (BPT AU)

Beach Energy (BPT AU)’s all-cash proposal is A$0.20 per share and Strike Energy (STX AU)’s all-scrip proposal is 0.775x STX shares per Petrel Energy (WGO AU) share.
BPT’s all-cash offer provides value certainty. On the other hand, STX’s all-scrip offer lets shareholders get exposure to 100% interest in the West Erregulla project.
Both offers are reasonable but far from knockout bids, which suggests room for a further bidding round. At the last close, BPT’s offer is 3.2% higher than STX’s offer.

Selling Sogo Seibu Doesn’t Mean Seven & I Will Sell Ito-Yokado

By Michael Causton

Seven & I has at last agreed to sell the ailing Sogo Seibu chain – although not for enough to offset years of investment with little to show for it.
Some hope that this means the start of a house cleaning exercise to rid the group of its multiple under-performing retail assets, leaving a gleaming exemplar of rational efficiency.
This is unlikely, especially for the original Ito-Yokado general merchandise chain and a problem given the lack of growth potential in the group’s domestic business.

North Holdings 3/Caverion: Agreed Takeout

By Jesus Rodriguez Aguilar

The main shareholders of Caverion (27.08% in aggregate) are joining Bain Capital in a voluntary recommended public €7/share cash tender offer that seems adequate in the short term.
Nevertheless the offer price fails to account for the potential of Caverion, in my view. My fair value estimate (comps-based) is €9.01/share, thus an offer sweetening could be likely.
I consider it unlikely that the offer will fail, and although the current spread is not so attractive on a rate of return basis, I would be long the shares.

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Nov 13

Daily Brief Event-Driven: EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Weekly Deals Digest (13 Nov) – Toshiba, Uzabase, Origin Energy, Perpetual, Golden Energy, I-Tail
Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy
Last Week in Event SPACE: Tata Motors, Origin Energy, OZ Minerals, Toshiba
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Origin, Totoku Electric, Uzabase, Golden Energy, Perpetual
Hong Kong CEO & Director Dealings (11 Nov): C C Land, Impro Precision, SingAsia, Pharmaron

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

Weekly Deals Digest (13 Nov) – Toshiba, Uzabase, Origin Energy, Perpetual, Golden Energy, I-Tail

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 – I-Tail (ITC TB) is set to launch it’s up to US$600 million SET IPO.
Event-Driven developments – Toshiba Corp (6502 JP), Uzabase Inc (3966 JP), Golden Energy & Resources (GER SP), Perpetual Ltd (PPT AU)/Pendal Group (PDL AU), Origin Energy (ORG AU).

Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy

On Friday, MSCI announced the changes to its indices as part of the November SAIR. Most changes were expected, but there were a few surprises.
Friday was also the review cutoff for the FTSE Dec QIR. Next Friday has announcement of changes to the Hang Seng, Sensex and FTSE indices.
Big inflow to iShares Core MSCI Emerging Markets ETF (IEMG US) during the week as inflows to IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) continue.

Last Week in Event SPACE: Tata Motors, Origin Energy, OZ Minerals, Toshiba

Tata Motors Ltd (TTMT IN) will eliminate its ADS program. This is another potentially juicy trade.
Canada’s Brookfield, along with EIG look to take over Origin Energy (ORG AU), one of Australia’s largest energy companies.
This OZ Minerals Ltd (OZL AU) trade is fundamentally a bit short gamma on copper. If copper takes another dive, then it may no longer be interesting to be long.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Origin, Totoku Electric, Uzabase, Golden Energy, Perpetual

There are 48 – 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 were discussed on Smartkarma this week: Origin Energy (ORG AU), Totoku Electric (5807 JP), Uzabase Inc (3966 JP), and Golden Energy & Resources (GER SP)
Key updates took place for: Perpetual Ltd (PPT AU)/Pendal Group (PDL AU), Jinke Smart Services (9666 HK), Toshiba Corp (6502 JP), and Eagle Cement Corp (EAGLE PM).

Hong Kong CEO & Director Dealings (11 Nov): C C Land, Impro Precision, SingAsia, Pharmaron

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. However, such disclosures are by no means an absolute.
These insights may flag those companies where shares have been pledged. Stocks mentioned include C C Land Holdings (1224 HK), Impro Precision Industries (1286 HK), and SingAsia Holdings (8293 HK).

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Nov 12

Daily Brief Event-Driven: MSCI Korea Standard/Small Cap Rebalancing & Tradable Names and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI Korea Standard/Small Cap Rebalancing & Tradable Names
Origin Energy: Brookfield’s Energy Transition Bet
Seven & I Parts with Sogo & Seibu and Pockets ¥200bn
Shanghai/Shenzhen Northbound Connect: Weekly Moves (11 November 2022)
Shanghai/Shenzhen Southbound Connect: Weekly Moves (11 November 2022)

MSCI Korea Standard/Small Cap Rebalancing & Tradable Names

In addition to Hyundai Mipo Dockyard and LG Energy Solution, it is worth noting that Krafton will also have a significant passive inflow.
GS E&C can become a more focused flow trading target as it is an unexpected one that the market must have failed to notice.
Since most deletions will have a relatively sizeable passive impact on considerable liquidity, building up a short position with a basket from now on wouldn’t be a flawed approach.

Origin Energy: Brookfield’s Energy Transition Bet

Brookfield and EIG/MidOcean are Offering Origin Energy (ORG AU) shareholders $9.00/share, a 54.9% premium to last close, by way of a Scheme. The Offer is non-binding and indicative.
Negotiations kicked off at $7.95 for the LNG developer in early August. Exclusive due diligence has been granted.
A firm offer will be contingent on ACCC and FIRB approval. Such a takeover may actually play into the Albanese government’s future energy plans.

Seven & I Parts with Sogo & Seibu and Pockets ¥200bn

By Oshadhi Kumarasiri

Earlier today, Seven & I Holdings (3382 JP)’s board decided to sell the underperforming department store business Sogo Seibu to the SoftBank Group controlled Fortress Investment Group for around ¥200bn.
The sale of Sogo & Seibu looks like a positive development from all angles, but it could be already priced in as the rumours were there from February 2022 onwards.
Meanwhile, there are downside risks to Seven & I shares in the short term from falling gas prices and rising inflation in the US.

Shanghai/Shenzhen Northbound Connect: Weekly Moves (11 November 2022)

Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
Overall, net inflowover the past week was ~US$0.26bn, split between Shanghai (+US$0.08bn) and Shenzhen (+US$0.18bn).
The largest inflows were into Midea Group (000333 CH) and Shenzhen Mindray Bio-Medical Electronics (300760 CH). The largest outflows were in China Yangtze Power (600900 CH) and Kweichow (600519 CH).

Shanghai/Shenzhen Southbound Connect: Weekly Moves (11 November 2022)

Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry
Overall, the net inflow over the past week was ~HK$4.1bn, split (+HK$1.7bn) for Shanghai and (+HK$2.4bn) for Shenzhen.
The largest inflows were in Tencent (700 HK) and Wuxi Biologics (2269 HK). The largest outflows were inKoolearn (1797 HK)and China Mobile (941 HK).

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Nov 11

Daily Brief Event-Driven: Tata Motors ADS Delisting – Here We Go Again – Lots of Fun To Be Had! and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Tata Motors ADS Delisting – Here We Go Again – Lots of Fun To Be Had!
MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises
Tata Motors (TTM) To Delist ADSs: Details & Potential Trades
OZ Minerals (OZL) – Copper and Comps Have Caught Up
Golden Energy (GER SP): Widjaja Family’s Low-Balled Offer
Origin Energy’s (ORG AU) Indicative Offer of A$9.00 from Brookfield/EIG
Golden Agri-Resources (GGR SP) – FTSE Selling in December
Assessing LG Energy Solution’s Flow Imbalance Situation
EQD | Tencent (700 HK): Buy Calendar Spreads into Earnings
Perpetual (PPT AU) Rejects a Revised A$33 Offer; Pendal (PDL AU) Deal Looks Toast

Tata Motors ADS Delisting – Here We Go Again – Lots of Fun To Be Had!

Yesterday, with earnings, Tata Motors Ltd (TTMT IN) announced that it would delist its ADS, making an application on or around 13 January.
This sounds relatively benign because since 2004 when the ADS was listed, local funding capacity has increased substantially. It may no longer be needed.
But it is MUCH more interesting than that. There is lots of fun to be had here.

MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises

MSCI announced the changes as part of the November SAIR. For Asia Pacific, there are 48 adds and 55 deletes (including one nationality change).
The deletion of Wharf Holdings (4 HK) is the biggest surprise. The stock should trade weak given the large flow and days of ADV to sell.
There are listing changes for BeiGene (BGNE US), Li Auto (LI US), Xpeng (XPEV US) and Hutchison China MediTech Ltd (HCM US) to their Hong Kong listed lines.

Tata Motors (TTM) To Delist ADSs: Details & Potential Trades

Post market close yesterday, Tata Motors Ltd (TTMT IN) announced that it intended to delist Tata Motors ADR (TTM US) and terminate its ADS program.
The easiest option for most ADS holders will be to sell the ADS. That could take the ADS lower and to trade at a discount to the underlying shares.
Sell Tata Motors ADR (TTM US) outright or sell the ADS/buy Tata Motors Ltd (TTMT IN) for an arb trade.

OZ Minerals (OZL) – Copper and Comps Have Caught Up

In August, BHP Group Ltd (BHP AU) launched a $25/share bid – a price it saw as attractive and what target OZ Minerals Ltd (OZL AU) saw as opportunistic.
Copper had fallen, and peer stock prices had fallen too. Since then, copper has rebounded and peers have too so what was a 25-30% premium no longer exists.
This means the price of OZL should “enjoy” different dynamics going forward.

Golden Energy (GER SP): Widjaja Family’s Low-Balled Offer

Golden Energy & Resources (GER SP) has proposed in-specie-ing its holding in Golden Energy Mines (GEMS IJ), subsequent to which the Widjaja family will undertake an Exit Offer.
Ex-GEMS, the family is Offering S$0.16/share. That’s insulting. And the Offer was announced after GEAR’s share price had fallen 26%. The Exit Offer has been declared final.
GEAR’s jewel is the stake in GEMS, and shareholders are afforded future exposure. However, the stub ops are worth considerably more than S$0.16/share.

Origin Energy’s (ORG AU) Indicative Offer of A$9.00 from Brookfield/EIG

Origin Energy (ORG AU) received a conditional, non-binding indicative proposal from Brookfield and EIG at A$9.00 per share, a 54.9% premium to the undisturbed price (9 November).
The Board will grant eight weeks of due diligence access and intends to unanimously recommend a binding offer at A$9.00 per share. The offer is attractive.
Regulatory approvals are an overhang and would likely require price concessions. At the last close, the gross spread to the offer is 14.9%.

Golden Agri-Resources (GGR SP) – FTSE Selling in December

FTSE has announced that it will be changing Golden Agri Resources (GGR SP)‘s nationality from Singapore to Ineligible at the close on 16 December.
This means the stock will be deleted from the FTSE All-World Index at the close on 16 December. We estimate passive trackers will need to sell multiple days ADV.
Golden Agri Resources (GGR SP) trades cheaper than a lot of its peers but has outperformed them over the last year. There could be a short-term reversal.

Assessing LG Energy Solution’s Flow Imbalance Situation

LG Energy’s virtually locked-up shares rise to nearly 95%. This should at least partially explain why its price has substantially outperformed the KOSPI in recent months, showing strong downward rigidity.
Additional long-term money equivalent to 2-3% of SO can come in for 5% float shares. There is no precedent for a float crunch of this magnitude among top-cap local stocks.
It seems necessary to reconsider taking a shorting position for LG Energy even after the 9th of next month when the short-term passives inflow situation is completed.

EQD | Tencent (700 HK): Buy Calendar Spreads into Earnings

By Simon Harris

Tencent are due to report earnings next week on Nov 16th
Implied vols are bid up into the event causing an inverted term structure
We see an opportunity to buy long calendar spreads to play a reversion in vol surface

Perpetual (PPT AU) Rejects a Revised A$33 Offer; Pendal (PDL AU) Deal Looks Toast

Perpetual Ltd (PPT AU) has rejected a revised non-binding indicative proposal from Regal/BPEA EQT at A$33.00 per share, a 10% premium to the previously rejected offer of A$30.00 per share.
While the Regal Partners (RPL AU)/BPEA EQT revised offer is not quite a knockout bid, it is good enough to warrant the requested short due diligence period.
The PPT/Pendal Group (PDL AU) deal is seemingly dead. The A$23 million break fee is more than compensated by the A$172 million value uplift between Regal/BPEA EQT’s two proposals.

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Nov 10

Daily Brief Event-Driven: Toshiba – Realistic Valuation Disappoints Markets and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba – Realistic Valuation Disappoints Markets
Golden Energy & Resources (GER SP)’s Lacking Offer from the Widjaja Family
Super High Premium Buyout for Totoku Electric (5807) By Carlyle
Origin Energy (ORG AU): Indicative Proposal from Brookfield & MidOcean; Index Implications
PB Fintech (Policy Bazaar) Lockup Expiry – US$1bn+, Stock Down 60% but Everyone Is in the Money
Nexon Q3 In-Line-Ish, Underperformance Achievement Unlocked, Buyback Language Odd
Uzabase (3966) Agrees to Carlyle Takeover
Axis Bank (AXSB IN): Last of the SUUTI Selldown Removes Overhang
Perpetual Rejects EQT/BPEA/Regal’s Revised Offer But Seeks Pendal Merger Delay

Toshiba – Realistic Valuation Disappoints Markets

By Mio Kato

The Nikkei reported on Monday that JIP’s bid values Toshiba at roughly ¥2.2trn.
The stock has dropped to a level just below this valuation suggesting some anticipation of a Bain/JIC bid above that valuation.
While that is plausible, the cautiousness of JIP’s bid highlights the fundamental downside risk here in our view.

Golden Energy & Resources (GER SP)’s Lacking Offer from the Widjaja Family

Golden Energy & Resources (GER SP)‘s proposal from the Widjaja family – The distribution proposal (1.3936 GEMS share per share or IDR5,500 per GEMS share) and the delisting proposal (S$0.160).
For minorities, the good news is that the distribution share ratio is in line with the control ratio and offers are at a premium to historical share prices/multiples.
The bad news is that the distribution cash alternative is unattractive and the delisting offer values GEAR at a discount to the Stanmore Coal (SMR AU) stake adjusted for debt.

Super High Premium Buyout for Totoku Electric (5807) By Carlyle

Yesterday, Carlyle announced a buyout of Totoku Electric (5807 JP) at ¥5,660/share, which was a cool 155% premium to Tuesday’s close of ¥2,215. The stock was limit up today.
It will be limit up tomorrow, and the next day. And probably the next day.
This is a very interesting outcome. But it is actually not as expensive as it “looks.”

Origin Energy (ORG AU): Indicative Proposal from Brookfield & MidOcean; Index Implications

A Brookfield/MidOcean consortium has made a conditional, non-binding, indicative proposal to acquire 100% of the shares in Origin Energy (ORG AU) at A$9/share in cash.
The offer values Origin Energy (ORG AU)‘s equity at A$15.5bn and is a 54.9% premium to the last close. The premium is over 50% even using longer term VWAPs.
There will be changes to the S&P/ASX family of indices to maintain the number of index members. We will know more once an indicative timeline is published.

PB Fintech (Policy Bazaar) Lockup Expiry – US$1bn+, Stock Down 60% but Everyone Is in the Money

By Sumeet Singh

In Nov 2021, PB Fintech raised around US$793m in its India IPO, via selling a mix of primary and secondary shares. The lock-up on its pre-IPO shareholder will expire soon.
The company operates two platforms: Policybazaar operates in India’s online insurance product and service industry; and Paisabazaar platform operates in India’s online credit industry.
In this note, we will talk about the upcoming lockup expiry.

Nexon Q3 In-Line-Ish, Underperformance Achievement Unlocked, Buyback Language Odd

Nexon (3659 JP) reported Q3 earnings and full-year forecasts today. Revenue came in at the bottom end of August guidance, despite the higher-than-forecast USD/yen rate.
The forecast for full-year is below consensus. This may be seen as disappointing. The stock may fall on this.
But a buyback announcement and relative valuation suggests time to cover the short.

Uzabase (3966) Agrees to Carlyle Takeover

Carlyle has launched a bid for business news and data service owner Uzabase Inc (3966 JP). The bid is far below the price of a couple years ago.
But the price clears the 2022 high by 1 tick. Some will be OK with this, but some may not be.
At a 72% premium, optically it appears attractive, but given circumstances, it is not a total knockout, though I don’t know who would come in.

Axis Bank (AXSB IN): Last of the SUUTI Selldown Removes Overhang

The Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI) is offering 46.53m shares of Axis Bank Ltd (AXSB IN) at a floor price of INR 830.63/share.
This will take SUUTI’s stake in Axis Bank Ltd (AXSB IN) to zero and remove an overhang on the stock.
Coming in close to Bain’s partial stake sale last week, the stock could trade heavy. But Axis Bank Ltd (AXSB IN) still trades cheaper than peers.

Perpetual Rejects EQT/BPEA/Regal’s Revised Offer But Seeks Pendal Merger Delay

Perpetual Ltd (PPT AU) has announced – and subsequently rejected – a revised non-binding proposal from EQT/BPEA/ Regal Partners (RPL AU) of A$33/share, up from the initial Offer of $30/share.
PPT factored in the value, high conditionality, transaction, and execution risks, and determined the proposal was not in the best interests of shareholders.
Against PPT’s request for a delay, Pendal (PDL AU) will proceed to the first court hearing for this week to convene a Scheme Meeting, which may occur in mid-December.

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Nov 09

Daily Brief Event-Driven: Toshiba (6502 JP) – Weak Sauce from JIP and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba (6502 JP) – Weak Sauce from JIP
Jardine C&C (JCNC SP): Potential MSCI Inclusion as NAV Discount Shrinks
KLine (9107) Buyback Redux-Squared – Post-Buyback Could Get Squeezy
TIGER Top 10 Rebalancing: A Big Change Awaits
TOPIX Inclusion: Socionext (6526 JP) – Momentum Is Fading, Exit Now.
Jinke Smart (9666 HK) VGO Unconditional
FSN E-Commerce (Nykaa) Lockup Expiry – US$2.5bn Unlock with a Very Scattered Shareholding
Singtel Holds The Key To Gulf Energy’s Takeunder For Thaicom
Delhivery: Potential Index Inclusions Overshadowed by US$2.89bn Lock-Up Expiry
Eagle Cement: Offer Open. IFA Says Fair

Toshiba (6502 JP) – Weak Sauce from JIP

Media reported last night that JIP would bid ¥2.2trln for Toshiba. That’s about ¥5,000-5,100/share.
This morning, there is a bit more clarification. Funnily, that means there is less info here than people think.
But it is not a great look for either JIP or Toshiba at this point.

Jardine C&C (JCNC SP): Potential MSCI Inclusion as NAV Discount Shrinks

Jardine Cycle & Carriage (JCNC SP) was deleted from the SIMSCI Index in November 2020 and could be added back to the index at the upcoming SAIR.
If added to the index, we estimate passive MSCI trackers will need to buy 7.9m shares (US$176m; 11 days of ADV) at the close on 30 November.
Jardine Cycle & Carriage (JCNC SP) is trading at a tight discount to its listed holdings and the spread could widen post the MSCI implementation.

KLine (9107) Buyback Redux-Squared – Post-Buyback Could Get Squeezy

Kawasaki Kisen Kaisha (9107 JP) had a shareholder return program in place in May. Earnings forecasts on 3 Nov were slightly disappointing so the stock sold off but…
The large buyback allowed investors to try to game the situation. Some may have, but this morning on the execution, VERY few Real World Float holders sold.
That leaves the stock squeezy going into a buyback to repurchase 20% of the Max Real World Float (including short-created longs).

TIGER Top 10 Rebalancing: A Big Change Awaits

The two names in LONG (LG Energy Solution and Celltrion) and the two names in SHORT (Shinhan Financial and KB Financial) are almost a foregone conclusion.
POSCO Holdings is now ahead of Kakao Corp due to the recent sharp rise in its share price. But the gap between them is still quite tight.
This rebalancing will likely aggravate LG Energy’s flow crunch as it also awaits an MSCI up-weight (2x ADTV) in end-November and a KOSPI 200 up-weight (2x ADTV) on December 8.

TOPIX Inclusion: Socionext (6526 JP) – Momentum Is Fading, Exit Now.

By Janaghan Jeyakumar, CFA

Japan-Based System-On-Chip designer and IP purveyor Socionext (6526 JP) was listed in the “Prime” section of the Tokyo Stock Exchange (TSE) on 12th October 2022.
When a company gets listed in the Prime section, it subsequently gets included in the TOPIX Index requiring TOPIX-tracking funds to purchase the stock during an Inclusion Event.
Usually, this presents interesting trading opportunities to generate sharp market-neutral returns in the space of few trading days. Below is a look at the details for Socionext’s TOPIX Inclusion Event.

Jinke Smart (9666 HK) VGO Unconditional

Jinke Smart Services (9666 HK)’s VGO from Boyu Capital at HK$12.00 per share has been declared unconditional. Boyu has waived the 7.71% valid acceptances condition.
Boyu has likely two aims for the unusual VGO – secure anti-trust approval and a re-rating by becoming the largest shareholder. Anti-trust approval was received on 8 November.
Acceptances of 0.0081% of outstanding shares reflect the unattractive offer. The final closing date is 22 November. At the last close price, the spread to the offer is 2.7%.

FSN E-Commerce (Nykaa) Lockup Expiry – US$2.5bn Unlock with a Very Scattered Shareholding

By Sumeet Singh

In Nov 2021, Nykaa raised around US$720m in its India IPO, via mostly selling secondary shares.
Nykaa is a lifestyle focussed e-commerce platform and consumer brand offering a portfolio of beauty, personal care and fashion products, including its own branded products.
In this note, we will talk about the upcoming lockup expiry.

Singtel Holds The Key To Gulf Energy’s Takeunder For Thaicom

In April 2021, Gulf Energy (GULF TB)‘s surprising VTO for Intouch (INTUCH TB) was conditional, inter alia, on a waiver NOT to make a downstream offer for Thaicom (THCOM TB).
Now Gulf has announced an intention to acquire Intouch’s 41.13% stake in Thaicom for Bt 9.92/share, a 19.3% discount last close, the completion of which triggers an MTO.
The acquisition of shares from Intouch requires approval from Intouch shareholders. Gulf, with 46.44% of shares out, is required to abstain.

Delhivery: Potential Index Inclusions Overshadowed by US$2.89bn Lock-Up Expiry

Delhivery (DELHIVER IN) raised US$675m in its IPO and started trading on 24 May. The stock dropped below its IPO price a couple of weeks ago.
Lock-Ups on pre-IPO investors expire on 20 November with 598m shares (US$2.89bn) becoming available for sale. Sell before then or hold off on buying.
Delhivery (DELHIVER IN) is a potential inclusion to the MSCI Small Cap and FTSE All-World indices in the next month. Passive buying will be overshadowed by lock-up expiry.

Eagle Cement: Offer Open. IFA Says Fair

Back on the 5 October, San Miguel (SMC PM) announced the acquisition of Eagle Cement (EAGLE PM) at P22.02/share. On the 28 October, Philippine Competition Commission said it had no issue.
The Tender Offer is now out, and the Offer is open for acceptance. The IFA considers the Offer price to be fair.
The Offer closes on the 5 December with an expected payment on the 14 December.

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Nov 07

Daily Brief Event-Driven: MSCI Korea November SAIR: Potential Changes and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI Korea November SAIR: Potential Changes, Impact, Short Interest & Pre-Positioning
Mitsui & Co (8031) Buyback – Big Profit, Big Div, Big Buyback, Some Index Selling
MSCI SEA EM Nov SAIR: High Impact Deletions Expected
Weekly Deals Digest (06 Nov) – Perpetual, Pendal, Nitro, ReadyTech, VNET, Singapore Medical, Blibli
Merger Arb Mondays (07 Nov) – Yashili, Fengxiang, Kingston, Pendal, Perpetual, ReadyTech, Nitro
Toshiba (6502) – Funding Deadline Risk Was Known 6+ Weeks Ago
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
MSCI India November SAIR: Potential Changes & Higher Foreign Holding
Elliot Tenders Its Stake

MSCI Korea November SAIR: Potential Changes, Impact, Short Interest & Pre-Positioning

We see 1 potential inclusion and 12 potential deletions for the MSCI Korea Index at the November SAIR. The final changes will depend on what day MSCI uses.
Nearly all the stocks have over 4 days of ADV to trade from passive trackers. There have been big moves on short interest and excess volume on some stocks.
The announcement will be made Friday morning pre-market open and there could be some big moves in the stocks this week.

Mitsui & Co (8031) Buyback – Big Profit, Big Div, Big Buyback, Some Index Selling

Mitsui & Co Ltd (8031 JP) on 1 November reported its results for H1 2022. H1 Revenue +37.1%yoy, OP+27.2%yoy, NP+33.2%yoy to ¥539bn. Full-year NP forecast +22.5% to ¥980bn.
Mitsui raised its dividend forecast (previously scheduled to rise from ¥105/share to ¥120/share) to ¥130/share and announced a ¥140bn buyback, adding to the ¥100bn announced in May completed in September.
The first ¥58.6bn was done in a ToSTNeT-3 buyback. Now there is another ¥79.4bn to go. There’s also a fair bit of index selling the next 6mos.

MSCI SEA EM Nov SAIR: High Impact Deletions Expected

There should be quite a few deletions for South East Asia Emerging Markets. The number of potential inclusions is smaller and have a smaller probability of being added.
While the passive flow on the potential deletions is not massive, the impact in terms of days of ADV to trade is very high in most cases.
There has been a steady increase in cumulative excess volume on a few of the potential deletions and there will be unwinding against the passive flow.

Weekly Deals Digest (06 Nov) – Perpetual, Pendal, Nitro, ReadyTech, VNET, Singapore Medical, Blibli

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Blibli (1437710D IJ) priced at IDR450, Giant Biogene Holding (2367 HK) solid trading debut.
Event-Driven developments – Nitro Software Ltd (NTO AU), Perpetual Ltd (PPT AU), ReadyTech Holdings Ltd (RDY AU), China VAST, Singapore Medical (SMG SP), 21Vianet Group (VNET US).

Merger Arb Mondays (07 Nov) – Yashili, Fengxiang, Kingston, Pendal, Perpetual, ReadyTech, Nitro

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), 111 Inc (YI US), Pendal Group (PDL AU), Genex Power Ltd (GNX AU), O2Micro International (OIIM US).
Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Tassal (TGR AU), OZ Minerals Ltd (OZL AU), China Vast Industrial Urban Development (6166 HK), PTB.

Toshiba (6502) – Funding Deadline Risk Was Known 6+ Weeks Ago

There are several bits of news in the past few weeks indicating financing commitments might not meet the 7 Nov deadline. Principal among them the JIC/JIP split many weeks ago.
That suggested the 30 Sep and subsequent deadlines would be delayed. And it appears we now have the reason for it, and that is another cause of financing commitment delay.
This development suggests activists have another quiver in their arrow should privatisation not succeed. Toshiba has cheapened in the meantime.

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

MSCI India November SAIR: Potential Changes & Higher Foreign Holding

Post the end of the review period, we see 7 potential adds and 2 potential deletes for the MSCI India Index at the November SAIR.
Inclusion in the index will require passive trackers to buy 6-21 days of ADV on the stocks. That increases to 16-45 days of delivery volume.
Cumulative excess volume indicates pre-positioning on most potential adds. Foreign Portfolio Investors (FPI) have increased their holding on all potential adds over the July-September quarter.

Elliot Tenders Its Stake

By Jesus Rodriguez Aguilar

4 November was the deadline to tender. PMI threatened to walk away if it didn’t reach 90%. Some funds that opposed the deal trimmed their stakes, likely bought by arbs.
The FT has reported that Elliot (10.5% stake) has tendered and that by 4 November over 80% acceptances were recorded. PMI is very likely to reach now over 90% acceptances.
Results will be announced on 7 November, with settlement on 11 November. The squeeze-out procedure is likely be initialed as soon as possible after settlement. Gross spread is 0.87%.

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Nov 06

Daily Brief Event-Driven: Index Rebalance & ETF Flow Recap: TW Div+ and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Index Rebalance & ETF Flow Recap: TW Div+, CSI500, ChiNext, SSE180, KS200, KQ150, FTSE CH50, AMFI
Last Week in Event SPACE: Toshiba, Perpetual/Pendal, News Corp/Fox Corp
Hong Kong CEO & Director Dealings: 4 Nov: Cross Harbour, C C Land, Zhuguang Holdings Group
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Perpetual, Nitro, Fengxiang, Pushpay, Singapore Medical

Index Rebalance & ETF Flow Recap: TW Div+, CSI500, ChiNext, SSE180, KS200, KQ150, FTSE CH50, AMFI

MSCI announces the changes at the November SAIR pre-market open (Asia time) on 11 November. That day is also the market cap cutoff for the FTSE December QIR.
There are some pretty big changes to the flows for the FTSE TWSE Taiwan Div+ Index following changes to forward dividend estimates and stock prices.
Quiet week for ETF flows with large inflows to Huatai-PB CSI 300 ETF (510300 CH) and Tracker Fund of Hong Kong Ltd (2800 HK).

Last Week in Event SPACE: Toshiba, Perpetual/Pendal, News Corp/Fox Corp

There is potentially a premium of about 20-25% being assessed for the possibility of a deal for Toshiba Corp (6502 JP), but there is also fundamental risk beyond this.
Perpetual Ltd (PPT AU) rejects EQT/BPEA/Regal’s Offer, a proposal that is contingent on PPT ceasing its Scheme with Pendal Group (PDL AU)
News Corp (NWS AU) is trading rich. The net EV/EBITDA for the stub ops trades closely matches to Fox (FOXA US). And Fox is preferable over NWS’ print media business.

Hong Kong CEO & Director Dealings: 4 Nov: Cross Harbour, C C Land, Zhuguang Holdings Group

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. However, such disclosures are by no means an absolute.
These insights may flag those companies where shares have been pledged. Stocks mentioned include Cross Harbour (32 HK), C C Land (1224 HK), and Zhuguang Holdings Group Co (1176 HK).

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Perpetual, Nitro, Fengxiang, Pushpay, Singapore Medical

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.
One new deal was discussed on Smartkarma this week: EQTBPEA/Regal’s tilt for Perpetual Ltd (PPT AU).
Key updates took place for: Nitro Software Ltd (NTO AU), Pushpay Holdings (PPH NZ), Singapore Medical (SMG SP), and Shandong Fengxiang (9977 HK).

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Nov 04

Daily Brief Event-Driven: Arbs Take Another Hit as Regal’s Offer for Perpetual Puts Pendal Deal at Risk and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Arbs Take Another Hit as Regal’s Offer for Perpetual Puts Pendal Deal at Risk
EQT/Baring/Regal’s Tilt For Perpetual Muddies Waters on Pendal (PDL AU) Deal
News Corp (NWS AU)’s Proposed Merger With Fox Corp. Again.
FTSE China 50 Index Rebalance Preview: Two Changes Now, Could Be More
Perpetual Turns from Predator to Prey with Regal/BPEA EQT’s Offer
Singapore Medical: TTW Bumps To S$0.40
Launching Single-Stock ETFs in Korea: Market Flow Impact Analysis

Arbs Take Another Hit as Regal’s Offer for Perpetual Puts Pendal Deal at Risk

Regal Partners and BPEA have made a conditional, non-binding indicative proposal to acquire Perpetual Ltd at A$30/share in cash. Perpetual would need to terminate the SID with Pendal Group.
Perpetual Ltd (PPT AU)‘s Board has rejected the offer. Today’s price action is partially driven by arbs selling Pendal shares and buying back their Perpetual shorts.
The Pendal Group / Perpetual Ltd price ratio is trading below the levels from August and could move higher if Perpetual and/or the consortium decide not to move ahead.

EQT/Baring/Regal’s Tilt For Perpetual Muddies Waters on Pendal (PDL AU) Deal

Perpetual (PPT AU) has received an indicative proposal in which EQT/Baring Private Equity Asia takes Perpetual’s private clients and corporate trustee businesses, and Regal (RPL AU) the asset management arm.
The A$1.75bn buyout proposal, by way of a $30/share cash Offer – and an undefined Regal scrip alternative – was rejected by Perpetual as it “materially undervalues” the company.
The twist in the proposal is that it is contingent on the termination of the earlier-announced Scheme between Perpetual and Pendal Group (PDL AU)

News Corp (NWS AU)’s Proposed Merger With Fox Corp. Again.

Back on the 17 October, News Corp (NWS AU) announced it had begun exploring a potential combination with Fox Corporation (FOXA US).
A merger of two parts of Rupert Murdoch’s media empire would combine Fox News and TMZ assets with NWS’ newspaper and online news operations.
Murdoch split his empire in 2013, placing the print business in a newly created NWS, and the TV and entertainment under Fox,

FTSE China 50 Index Rebalance Preview: Two Changes Now, Could Be More

Tianqi Lithium (9696 HK) and JD Health (6618 HK) could be inclusions while XPeng (9868 HK) and Longfor Properties (960 HK) are near certain deletions.
There are a few stocks that are close to the deletion threshold and could be deleted from the index if they continue to sell off over the next few weeks.
Tianqi Lithium (9696 HK) is also a high probability inclusion to the FTSE All-World Index at the December rebalance. That will bring in additional inflows to the stock.

Perpetual Turns from Predator to Prey with Regal/BPEA EQT’s Offer

Perpetual Ltd (PPT AU) rejected a conditional, non-binding indicative proposal from Regal Partners (RPL AU)/BPEA EQT at A$30.00 per share, an 11.5% premium to the undisturbed price.
Regal/BPEA EQT’s aim is to present shareholders with a choice – pay a premium to merge with Pendal Group (PDL AU) or receive a lower risk premium from Regal/BPEA EQT.
The Perpetual/Pendal deal is increasingly on shaky grounds. The skinny premium suggests that Regal/BPEA EQT have headroom to bump the offer to get the Board to engage.

Singapore Medical: TTW Bumps To S$0.40

I should have stuck to my guns. Singapore Medical (SMG SP)‘s original Exit Offer was low-balled. The IFA all but conceded this. I mused that TTW probably needed to bump.
And now TTW has, bumping the Offer by 8.1% to S$0.40/share, and declaring the terms final.
The Offer remains subject to TTW holding 90% (with 77.42% in the bag already). The Offer has been extended to the 5 December.

Launching Single-Stock ETFs in Korea: Market Flow Impact Analysis

The target market size that will be affected by the Default Option is estimated to be ₩92T. Up to 30% of them (₩30T) can flow into single-stock ETFs.
Competing against TDFs, half of this ₩30T is a conservative estimate for single-stock ETFs. Then, up to 40% of the ₩15T becomes the flow size entering the local stock market.
KODEX’s Samsung Electronics single-stock ETF may dominate the market. In this case, at least ₩3-4T can flow into Samsung Electronics Ord.

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Nov 03

Daily Brief Event-Driven: FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Good Start and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Good Start, Some Surprises, More to Come!
Singapore Medical’s VGO: Revised Offer of S$0.40 Is Good to Go
KOSPI200 Index Rebalance Preview: Potential Changes, Excess Volumes & Pre-Positioning
Sweden’s EQT Partners to Invest Big in SK Shieldus: Impact on SK Square

FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Good Start, Some Surprises, More to Come!

By Janaghan Jeyakumar, CFA

In October 2022, FTSE Russell confirmed that the number of constituents in the FTSE TWSE Taiwan Dividend+ Index will be increased from 30 to 50 during the December 2022 Rebalance.
The estimated one-way flow was ~US$2bn and I discussed my flow expectations for this event in FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: New Methodology! Massive Flow Implications!
With less than three weeks remaining to the base date, below is an updated look at my latest flow expectations for this event.

Singapore Medical’s VGO: Revised Offer of S$0.40 Is Good to Go

Singapore Medical (SMG SP)‘s voluntary conditional offer from management (chairman, CEO, exec director) has been increased from S$0.37 to S$0.40 per share (share option unchanged).
The revised offer is final unless there is a competitive situation. The offeror came to the realisation that a bump was required to meet the 90% minimum acceptance condition.
Acceptances stand at 77.42% of outstanding shares. The revised offer is now reasonable and should be sufficient to nudge holdouts to accept. At last close, the gross spread is 5.3%.

KOSPI200 Index Rebalance Preview: Potential Changes, Excess Volumes & Pre-Positioning