Event-Driven

Copper is widely recognised to be in somewhat short supply, and EV/electrification would increase demand going forward (though slower Chinese homebuilding would soften it).
A number of developments suggest a further squeeze in prices could be near and copper price strength along with AUD weakness makes an AUD-denominated OZL Takeover Price easier to raise.
Short-Term positioning and longer-term supply constraints are currently battling for near-term import, but medium-term, there’s no escaping the imbalance. Looks like a buy now.

MSCI Korea Rebalance: Bottom 5% Continue to Underperform

In this insight, we provide a ranking system for targeting the bottom 5% of potential exclusion candidates in the upcoming MSCI Korea index rebalance in November.
The ranking system is based on a combined weighted rankings based on MSCI weight, market cap, and ADTV.
The six stocks that have received lowest weights include Meritz Financial Group, S 1 Corp, Amorepacific Group, CJ Corp, Green Cross Corp, and LG Household & Health Care-Pref.

Jasmine International: Last Minute Wrinkle To Broadband Sale

Jasmine International (JAS TB) is looking to sell its 99.8% interest in Triple T Broadband (TTTBB), and 19% stake in Jasmine Broadband (JASIF TB) to Advanced Info Service (ADVANC TB).
The sale required JASIF shareholder approval, but not all resolutions were approved at an EGM this week.
This is a setback. However, the transaction remains on track.

CSC/Intertrust: End of Offer Period

CSC and Intertrust have already obtained clearances from all different 13 required regulators. After several extensions, the Offer Period will now end on 31 October.
Intertrust has had a far from stellar performance on the stock market. Hence, I believe acceptances will be over 80%. The offer will be declared unconditional and the shares delisted.
Gross spread is 0.3% and the estimated annual return is 6.99% (settlement will be on or before 7 November. Long and tender/accept the offer.

Shanghai/Shenzhen Northbound Connect: Weekly Moves (21 October 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 outflow over the past week was ~US$1.8bn, split between Shanghai (-US$1.2bn) and Shenzhen (-US$0.6bn).
The largest inflows were into WuXi AppTec (603259 CH) and BOE Technology (000725 CH). The largest outflows were in Kweichow Moutai (600519 CH) and Inner Mongolia Yili Industrial (600887 CH).

Kotak Mahindra Bank (KMB IN): Foreign Room >20% Should See Staggered FTSE Inclusion Starting March

Foreign investor selling has taken the foreign headroom on Kotak Mahindra Bank (KMB) to 22%. That should result in the stock being added to the FTSE All-World Index in March.
The stock will initially be added to the index at an investability weight of 5%. Subject to >20% foreign headroom, the investability weight will increase by 5% at subsequent rebalances.
Continued foreign selling could result in an MSCI weight increase if the headroom increases above 25%. That could still be some time away though.

Shanghai/Shenzhen Southbound Connect: Weekly Moves (21 October 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 ~US$2.7bn, split (+US$1.38bn) for Shanghai and (+US$1.36bn) for Shenzhen.
The largest inflows were into Tencent (700 HK) and Wuxi (2269 HK). The largest outflows Tracker Fund of Hong Kong (2800 HK) and Hang Seng H Share Index (2828 HK).

💡 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

Oct 20

Daily Brief Event-Driven: Solactive Lithium Index Rebalancing: Noteworthy Names in Korea Before the Announcement and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Solactive Lithium Index Rebalancing: Noteworthy Names in Korea Before the Announcement
Bank of Kyoto (8369 JP) Holdco Maybe Rich-Ish – Watch for TOPIX Rebal SELL Flow
Singapore Medical (SMG SP): “Not Fair But Reasonable” Says IFA. TLW Needs To Bump
HDFC/HDFC Bank Mega Merger: End Game in Sight
S&P/ASX Quiddity Leaderboard Dec 22: Top Ranked ASX200 ADDs Look Interesting
EVOC’s H Share Class Meeting – And that Is a Pass

Solactive Lithium Index Rebalancing: Noteworthy Names in Korea Before the Announcement

LG Chem’s deletion is almost a done deal. The pouch-type pack goes to LG Energy, and the cathode business is not big enough to beat L&F.
Chunbo is an additive field that this index has not included so far. So, Chunbo will be added as a new addition rather than replacing someone else.
SK IE Tech is quite tricky. The key is to see separator and elecfoil as the same field. If so, SK IET is likely to replace Iljin Materials.

Bank of Kyoto (8369 JP) Holdco Maybe Rich-Ish – Watch for TOPIX Rebal SELL Flow

Bank of Kyoto (8369 JP) is currently at a 51% discount to the After Tax Value of its Equity Portfolio assuming its banking ops are priced at a RegionalBankAveragePBR.
That is, believe it or not, relatively narrow, and given the nature of the risks making it a range trade, it makes short-term timing probably a sell.
There is, helpfully, 6 days of ADV to sell in the TOPIX FFW adjustment on 28 April, and all five of the top holdings are also net sells (0.5-1.1 days).

Singapore Medical (SMG SP): “Not Fair But Reasonable” Says IFA. TLW Needs To Bump

On the 14 September, healthcare provider Singapore Medical (SMG SP) announced a low-balled voluntary MBO from TLW at S$0.37/share, a 13.8% premium to last close.
The Offer is conditional on 90% of shares out held by the Offeror, and the TLW shareholders plus irrevocables hold 51.67% all-in. This 90% conditionality is firm.
The Circular is now out. The IFA (Zico Capital) says the Offer is “not fair but reasonable”. That seems reasonable. The Offer has NOT been declared final.

HDFC/HDFC Bank Mega Merger: End Game in Sight

Foreign shareholding in HDFC Limited (HDFC IN) has inched higher while moving a tad lower on HDFC Bank (HDFCB IN). Overall, no change in foreign room on the merged entity.
The merger could complete in Q1 2023 and there could be sizeable buying from MSCI trackers. There should be no change for FTSE trackers.
The recently announced market consultation by NSE Indices should result in no buying/selling from passive trackers; there will be some additions to the NIFTY Index and Nifty Next 50 Index.

S&P/ASX Quiddity Leaderboard Dec 22: Top Ranked ASX200 ADDs Look Interesting

In this insight, we take a look at the potential index changes for S&P ASX 200, 100, 50, and 20 in the run up to the December 2022 Rebalance.
The top 5 highest ranked ASX 200 Potential ADDs have 10+ days to buy and a couple of these names could become intra-review additions.
Pilbara Minerals (PLS AU) is an ASX 50 ADD and Lendlease Group (LLC AU) is an ASX 50 DEL as it stands.

EVOC’s H Share Class Meeting – And that Is a Pass

EVOC Intelligent Technology Company Limited H (2308 HK)’s delisting resolution was approved – 81.20 % of independent H Share votes cast FOR (7.05% of all independent H Shareholders AGAINST).
The gross spread recently increased from 2.9% (11 October) to 7.5% (13 October) due to nervousness about another failed privatisation attempt after two failed bids.
The last trading date is 20 October. At last close and for the 7 November payment date, the gross and annualised spread to the offer is 5.4% and 164.7%, respectively.

💡 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

Oct 19

Daily Brief Event-Driven: Toshiba (6502) – There Is Actual News and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba (6502) – There Is Actual News, and There Are Datapoints Which Masquerade as News
Tyro Payments In Talks With Westpac
Netmarble Debt Risk Victim: HYBE or NCsoft or Both?
Singapore Medical’s VGO: IFA Says It Is Not Fair but Reasonable
China VAST (6166 HK): Expect November Scheme Meeting As Pre-Cons Satisfied
NIFTY Indices: HDFC/HDFCB Merger Driven Market Consultation
Tyro Confirms Westpac as One of the Interested Suitors
Bobst’s Minorities Takeout: Additional Acceptance Period
Thailand SET50 Quiddity Leaderboard Dec 22: BJC Is the Most Interesting Name

Toshiba (6502) – There Is Actual News, and There Are Datapoints Which Masquerade as News

A week after JIP gets preferred status and we had rumoured bid prices, we now have an article saying JIC/Bain is still in it, and a new article today.
Today’s “new” article says JIP’s bid price is what the first leak suggested, which is below ¥6,000/share. Other articles suggest bidders are finding that securing financing is tough.
Investors should look at process and understand the difference between this one and most others. It matters. Some news is not news, other than telling you the dance has started.

Tyro Payments In Talks With Westpac

Back on the 8 September, payment provider Tyro Payments (TYR AU) rejected a proposal from a Potentia-led consortium at A$1.27/share, by way of a Scheme.
Tyro has now announced it has received approaches from several parties, including Westpac (WBC AU). “None of these approaches are sufficiently definite … to warrant further disclosure at this time“.
Shares are currently trading at A$1.59/share. Tyro recently raised its FY23 EBITDA guidance to A$28mn-34mn, up from A$23mn-29mn.

Netmarble Debt Risk Victim: HYBE or NCsoft or Both?

Netmarble did a one-year rollover for the stock loan used for the SpinX acquisition. The maturity is again one year, and the principal amount is ₩1.5T.
The HYBE stake is newly included as collateral at an estimated LTV ratio of 50% because the value of NCsoft’s stake further declined, and the LTV ratio was subsequently lowered.
Applying the 140% loss cut ratio to HYBE and NCsoft will lead to a margin call when each stock declines 30% from the current price.

Singapore Medical’s VGO: IFA Says It Is Not Fair but Reasonable

The IFA has declared the Singapore Medical (SMG SP) VGO (S$0.37 cash or one new share in the offeror) from management (chairman, CEO, exec director) is “not fair but reasonable.”
The offer is light, and hitting the 90% minimum acceptance condition will be challenging. There is a remote chance of a bump as the offer has not been declared final.
Irrevocables remain at 51.67% of outstanding shares. The current gross spread of 1.4% is not an attractive risk/reward profile. Take profits and head for the exit.

China VAST (6166 HK): Expect November Scheme Meeting As Pre-Cons Satisfied

Back on the 9 June, Urban planner China Vast Industrial Urban Development (6166 HK) received a pre-conditional Offer, by way of a Scheme, from China Jinmao Holdings (817 HK).
The cancellation (and final) price is HK$2.40/share, a ~30% premium to the undisturbed price. Pre-Conditions include approvals from SAMR, SASAC, and NDRC.
Those pre-cons have now been satisfied. The Scheme Doc is currently expected to be dispatched on or before the 31 October. There may be some slippage.

NIFTY Indices: HDFC/HDFCB Merger Driven Market Consultation

There was a lot of confusion around how NSE Indices would handle the HDFC Limited (HDFC IN) / HDFC Bank (HDFCB IN) merger in its indices.
The market consultation seeks to change the index methodology to bring it in line with other index providers. That will result in much lower turnover than the existing index methodology.
Pidilite Industries (PIDI IN) is a high probability add to the NIFTY Index possibly in the first quarter of 2023. There will also be changes to Nifty Next 50 Index.

Tyro Confirms Westpac as One of the Interested Suitors

Tyro Payments (TYR AU) confirmed that it has “received approaches from several parties expressing interest in a potential change of control transaction, including Westpac Banking (WBC AU).”
Tyro previously rejected a A$1.27 offer from the Potentia consortium. Grok’s get-out clause with Potentia sets the floor price of a competing bid at A$1.52 per share.
The last close of A$1.59 is higher than the floor price. Triangulating the value of a rival bid across several data points suggests a competing offer of around A$2.

Bobst’s Minorities Takeout: Additional Acceptance Period

JBF now controls 63.66% of the share capital of Bobst. Tendered shares represent just c.10.3%. The additional acceptance period runs until 21 October.
The CHF 78/share offer represents 6.6x EV/Fwd EBITDA vs. 7.5x for Swiss industrial machinery peers. Unsurprisingly, the shares have been trading slightly above terms since the (opportunistic) offer announcement.
If 3.01% of shares are tendered during the reopened period, JBF could potentially delist the company. Although this could be challenged in courts, buying above the offer price seems risky.

Thailand SET50 Quiddity Leaderboard Dec 22: BJC Is the Most Interesting Name

In this insight, we take a look at the potential index changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) between now and the December 2022 Rebalance.
There is an ongoing market consultation with significant implications for constituent selection and there is also a potential intra-review change due to the DTAC-TRUE merger.
Based on the latest available data, there could three or four index changes during the December 2022 Rebalance depending on the outcome of the DTAC-TRUE merger.

💡 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

Oct 18

Daily Brief Event-Driven: Recruit (6098) Launches ANOTHER Big Buyback and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Recruit (6098) Launches ANOTHER Big Buyback
Blibli IPO: Offering Details & Index Inclusion
Stamp Duty Relief For Hong Kong Foreigners. But Wait …
Thailand SET50 and SET100: Quiddity Index Rebalance Primer
Liquid Universe of European Ordinary and Preferred Shares: October ‘22 Report
Mitsubishi Estate Logistics (3481 JP): Offering Could Trigger Outperformance Vs Peers Like Last Time
China VAST: Pre-Condition Fulfilled for the China Jinmao Offer
SZSE1000 Index Rebalance Preview: Stock Connect & MSCI/FTSE Eligibility
EQD | Tesla (TSLA US): How to Play Earnings Via Options

Recruit (6098) Launches ANOTHER Big Buyback

In January 2022, Recruit Holdings (6098 JP) launched a Tender Offer buyback to buy back shares from NTT Data, Hakuhodo, and TBS.
Today, Recruit announced another buyback of up to 42mm shares (2.57% of shares out) spending up to ¥150bn, to go from now until 14 March 2023 (5mos).
This time the buyback should have better traction and market impact, but it is not overwhelming, and the impact will likely lessen at higher share prices.

Blibli IPO: Offering Details & Index Inclusion

Blibli (1437710D IJ) is offering 17.77bn shares in its IPO at a price range of IDR 410-460/share. That could raise up to US$530m and value the company up to US$3.64bn.
The stock will not get Fast Entry to the IDX30, LQ45, MSCI and FTSE indices, so no near-term support from passive buying.
The stock could make it into the MSCI Small Cap Index in February and the FTSE All-World/All-Cap Index in June. Earliest inclusion in IDX30/IDX80/LQ45 indices could be in July.

Stamp Duty Relief For Hong Kong Foreigners. But Wait …

Hong Kong Chief Executive John Lee Ka-chiu will deliver his inaugural policy address on the 19 October, where he is expected to announce a number of “ground-breaking” measures.
One such measure is non-residents who have owned property in Hong Kong for 3+ years may get their extra stamp duty refunded – if they take up permanent residency.
Secondary home prices have declined 8% year-to-date, and are approaching a five-year low. Goldman Sachs expects home prices to decline 30% in 2023 from last year’s levels.

Thailand SET50 and SET100: Quiddity Index Rebalance Primer

Thailand SET Index (SET INDEX) is a composite index which represents the price movement for all common stocks trading on the SET.
SET50 and SET100 indices are calculated, respectively, from the stock prices of the top 50 and 100 listed companies on SET in terms of market capitalization and liquidity.
In this insight, we take a look at the selection criteria and the historical price performance of past Rebalance Events.

Liquid Universe of European Ordinary and Preferred Shares: October ‘22 Report

Since mid-September, spreads have shown a mixed performance across our liquid universe with a slight bias towards widening.
Trade recommendations long ords / short prefs: BMW, Fuchs Petrolub, Handelsbanken, SSAB Svenska Stal.
Recommendations Long prefs / short ords: Sixt, VW, MFE-Media for Europe, Grifols, Atlas Copco.

Mitsubishi Estate Logistics (3481 JP): Offering Could Trigger Outperformance Vs Peers Like Last Time

Last Friday, small-cap logistics JREIT Mitsubishi Estate Logistics (3481 JP) (“MEL“) announced a follow-on equity offering to fund part of their recently-announced property acquisition.
The primary offer quantity is 51,000 units. In addition, there will also be an over-allotment quantity of 2,550 units. The total size of this offering could be roughly ¥23bn (~US$157mn).
Below is a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

China VAST: Pre-Condition Fulfilled for the China Jinmao Offer

China Vast Industrial Urban Development (6166 HK) announced that all the pre-conditions were fulfilled. China Jinmao Holdings (817 HK)’s offer is HK$2.40 per share.
The key condition is approval by at least 75% of disinterested shareholders (<10% of disinterested shareholders rejection). Shareholders with blocking stakes will be supportive.
The offer is light, but the headcount test is not applicable. At last close and for a year-end payment, the gross and annualised spread is 0.8% and 4.0%, respectively.

SZSE1000 Index Rebalance Preview: Stock Connect & MSCI/FTSE Eligibility

Nearing the end of the review period for the SZSE1000 Index, we estimate around 50 changes to the index. The first-order impact on the stocks is not large.
Stocks that are not currently in Buy/Sell Stock Connect will be added to the list. That makes them eligible for inclusion in the MSCI and FTSE indices in February/March.
5 of the potential adds could be added to the MSCI China Index in February and 34 of the potential adds could be added to the FTSE All-World/All-Cap in March.

EQD | Tesla (TSLA US): How to Play Earnings Via Options

By Simon Harris

TS LA reports earnings on October 19th, and we analyse expected moves using the options market
Stock has suffered some production issues, but we think company has potential to beat the lowered estimates
We identify some option strategies to play the event with goof risk/reward

💡 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

Oct 17

Daily Brief Event-Driven: HDFC/HDFCB Merger in the Home Stretch: Potential Changes to NIFTY50 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HDFC/HDFCB Merger in the Home Stretch: Potential Changes to NIFTY50, NIFTY100 & SENSEX Indices
United Tractors – Buyback Extended – Maybe 50% To Go
Ming Yuan Cloud (909 HK): Potential Multiple Index Deletions
Fengxiang’s Judical Auction Successful, MGO Upcoming
Tracing Back TIGER (WISE) Battery ETF Rebalancing on October 13
Merger Arb Mondays (17 Oct) – EVOC, Fengxiang, Lifestyle, Genex, Pendal, DTAC/True, Eagle Cement
Shorting Angle on Kakao Corp in the Wake of an Unprecedented Server Failure Incident
Weekly Deals Digest (16 Oct) – Yashili, Kingston, Elmo, Pushpay, DTAC/True, Giant Biogene, Betagro
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Fengxiang (9977 HK): Unconditional MGO Imminent

HDFC/HDFCB Merger in the Home Stretch: Potential Changes to NIFTY50, NIFTY100 & SENSEX Indices

The National Company Law Tribunal (NCLT) has ordered a meeting of HDFC Limited and HDFC Bank shareholders on 25 November to consider and approve the proposed Scheme of Amalgamation.
Pidilite Industries (PIDI IN) is a high probability ad hoc inclusion to the NIFTY Index (NIFTY INDEX) with Tata Power (TPWR IN) a lower probability inclusion candidate.
Tata Motors Ltd (TTMT IN) and Adani Enterprises (ADE IN) could be added to the SENSEX INDEX in December replacing HDFC Limited (HDFC IN) and Dr. Reddy’s Laboratories (DRRD IN).

United Tractors – Buyback Extended – Maybe 50% To Go

On 12 July, cash-rich mining mini-conglomerate (mining, contracting, equipment, etc) United Tractors (UNTR IJ) announced a buyback discussed in United Tractors (UNTR IJ) Buyback – Sure to Be Impactful.
The buyback was to go for three months but three months later, it was extended or another three months.
Performance has been good. How much has been bought back. Tough to know, but we can make some pretty educated guesses.

Ming Yuan Cloud (909 HK): Potential Multiple Index Deletions

Ming Yuan Cloud Group (909 HK) listed in September 2020 and was included in major indices (MSCI, FTSE, HSTECH) over the next few months.
The stock price slide over the last few months could lead to the deletion of the stock from the MSCI China Index and Hang Seng Tech Index (HSTECH INDEX).
Deletion and downward migration could result in an increase in the real float of the stock by 15% and add further downward pressure. Short interest has been increasing steadily.

Fengxiang’s Judical Auction Successful, MGO Upcoming

A successful bidder (identity unknown at the time of writing) has emerged for Shandong Fengxiang (9977 HK) controlling shareholder’s 70.92% stake at the base bid price of RMB1,372.2 million.
As the bidder will hold 30% or more of the voting rights, it will result in an MGO at RMB1.383 per share (HK$1.526 at the median BOC FX of 0.9056).
The transfer of the sale shares is subject to completion procedures. Our best guess is the offer completes end-January 2023. At the last close, the gross spread is 15.6%.

Tracing Back TIGER (WISE) Battery ETF Rebalancing on October 13

Long/Short basket trading on an equal weight using only six stocks for a 10% ceiling reversion with SungEel and Sebitchem would have delivered a daily yield of close to 2%.
An outright position on SungEel and Sebitchem and the biggest mover, Ecopro BM, alone would have delivered a pretty juicy yield of 4.2%.
The rebalancing of this ETF is an event that allows you to bet on highly predictable share price movements by forming a basket with a relatively small number of stocks.

Merger Arb Mondays (17 Oct) – EVOC, Fengxiang, Lifestyle, Genex, Pendal, DTAC/True, Eagle Cement

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 – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), 111 Inc (YI US), Genex Power Ltd (GNX AU), Shandong Fengxiang (9977 HK), O2Micro International (OIIM US).
Lowest spreads – Tyro Payments (TYR AU),OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), True Corp Pcl (TRUE TB), Cocoaland Holdings (COLA MK), China VAST.

Shorting Angle on Kakao Corp in the Wake of an Unprecedented Server Failure Incident

In the wake of this incident, the presidential office suggested that Kakao Corp should be brought into the framework of regulation as a national infrastructure operator.
This is likely to be the leading investment point that attracts the most attention from the market for Kakao.
Regulatory risks will inevitably act as a structural and long-term discount factor for Kakao Corp, and we need to design a short position based on this angle.

Weekly Deals Digest (16 Oct) – Yashili, Kingston, Elmo, Pushpay, DTAC/True, Giant Biogene, Betagro

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 – Giant Biogene Holding (GBH HK) pre-marketing a US$500 million HKEx IPO. Betagro (BTG TB) closes its books early for its THB17.4 billion (US$462 million) IPO.
Event-Driven developments – Kingston Financial (1031 HK), Yashili International Holdings (1230 HK), China Vast Industrial Urban Development (6166 HK), Elmo Software (ELO AU), Pushpay Holdings (PPH NZ), DTAC/True.

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

Fengxiang (9977 HK): Unconditional MGO Imminent

Shandong Fengxiang (9977 HK) is a company engaged in chicken breeding, slaughtering, and processing.
Its controlling shareholder with 70.9% of shares out, via domestic shares, was unable to meet its debts, and had been forced into a judicial auction to sell its holding.
The auction has completed. This forced stake sale should trigger an MGO, one that is likely to be unconditional. Expect an official announcement shortly.

💡 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

Oct 16

Daily Brief Event-Driven: Plenus (9945) To Go Private in MBO – Looks Like a Done Deal and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Plenus (9945) To Go Private in MBO – Looks Like a Done Deal
Kingston’s All-Time Lows to Draw an Offer from Mrs Chu?
MSCI Korea November SAIR: Three Adds & Four Deletes
Index Rebalance & ETF Flow Recap: CSI500, SSE180, KOSPI2, Sensex, MSCI IN/KR, TW Div+, Socionext
Last Week In Event SPACE: Renault/Nissan, Toshiba, Golden Energy, Bilibili, Shinsei, Macau Casinos
FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: New Methodology! Massive Flow Implications!
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Elmo Software; Golden Energy, Kingston Financial, Pushpay
Hong Kong CEO & Director Dealings: 14th Oct: Lion Rock, VCredit, Zhongsheng, Concord New Energy
FTSE TWSE 50 & 100 Quiddity Leaderboard Dec 22: Greatek Facing Div+ Index Deletion

Plenus (9945) To Go Private in MBO – Looks Like a Done Deal

Kyushu-Based food services business and restaurant operator Plenus Co Ltd (9945 JP) announced Friday that its main holder had announced a Tender Offer. The Board voted to support the effort.
The Tender Offer is at ¥2,640/share, a 37.5% premium to last, and which is just higher than the highest closing price since listing.
This looks like a deal easy to get done. Decent premium, well above book, lifetime high on a low vol stock, not an awful multiple, and founder+cross-holders have 50%.

Kingston’s All-Time Lows to Draw an Offer from Mrs Chu?

Kingston Financial (1031 HK) entered a trading halt pending an announcement under the Hong Kong Code on Takeovers and Mergers on 14 October. The shares are at all-time lows.
It is likely that Pollyanna Chu Yuet Wah (CEO and co-founder), the largest shareholder representing 75.61% of ordinary shares (80.09% of diluted shares), is seeking to privatise Kingston.
As privatisation through a Bermuda scheme involves the headcount test, a decent premium is required – an offer at the 1-year average price of HK$0.33 implies a 63% premium.

MSCI Korea November SAIR: Three Adds & Four Deletes

As the recent share price volatility has grown, there have been significant changes in those on the borderline at the MSCI November SAIR.
Additions: Hyundai Mipo Dockyard (010620), LOTTE Corp (004990), and Ecopro (086520) & Deletions: Meritz Financial Group (138040), Amorepacific Group (002790), SK Chemicals (285130), and Green Cross (006280).
We must wait on many names until the end, making the price impact more dramatic than usual, as the flow can be concentrated after the announcement.

Index Rebalance & ETF Flow Recap: CSI500, SSE180, KOSPI2, Sensex, MSCI IN/KR, TW Div+, Socionext

The review period for the MSCI November SAIR starts this week and will run till 31 October. We also near the end of the review period for many local indices.
AIPL has announced a S&P BSE SENSEX Index market consultation while FTSE has announced the result of the FTSE TWSE Taiwan Dividend+ Index market consultation.
There were big weekly inflows to ETFs that track China, Taiwan, Korea and Hong Kong equities.

Last Week In Event SPACE: Renault/Nissan, Toshiba, Golden Energy, Bilibili, Shinsei, Macau Casinos

In April, reportedly Renault (RNO FP) might sell Nissan (7201 JP) shares to support EV investments. We have news talks are coming to a head. The results won’t be pretty.
The Nikkei says the JIP consortium is the “Preferred Bidder” for Toshiba Corp (6502 JP). That is a stalking horse. The proposed price of ¥2.5trn is also a stalking horse
Reportedly the Widjaja Family may be looking to take Indonesian/Australian energy/met coal play Golden Energy & Resources (GER SP) private.

FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: New Methodology! Massive Flow Implications!

On 20th September 2022, FTSE Russell commenced a market consultation with a goal of increasing the constituent count of the FTSE TWSE Taiwan Dividend+ Index from 30 to 50.
On 13th October 2022, FTSE Russell confirmed that the number of constituents in the FTSE TWSE Taiwan Dividend+ Index will be increased from 30 to 50.
In this insight, we take a look at the updated Ground Rules and Quiddity’s expectations for index flows during the December 2022 Rebalance.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Elmo Software; Golden Energy, Kingston Financial, Pushpay

There are 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new (possible) deals discussed this week: KKR’s tilt for Elmo (ELO AU); Widjaja Family’s move on Golden Energy & Resources (GER SP), Chu’s bid for Kingston Financial (1031 HK)
Key updates took place for Toshiba Corp (6502 JP), Pushpay Holdings (PPH NZ), True Corp Pcl (TRUE TB) / Total Access Communication (DTAC TB), and PTB Group (PTB AU).

Hong Kong CEO & Director Dealings: 14th Oct: Lion Rock, VCredit, Zhongsheng, Concord New Energy

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 Lion Rock (1127 HK), VCredit (2003 HK), Zhongsheng (881 HK), and Concord New Energy (182 HK).

FTSE TWSE 50 & 100 Quiddity Leaderboard Dec 22: Greatek Facing Div+ Index Deletion

In this insight, we take a look at the names leading the race to become ADDITIONs/DELETIONs for the Taiwan 50 and Taiwan Mid-Cap 100 Indices for the December 2022 Rebalance.
There could be one change in the Taiwan 50 Index and three changes in the Taiwan Mid-Cap 100 index.
There are multiple names close to the borders and there could be more ranking changes before the base date for review (21st November 2022).

💡 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

Oct 15

Daily Brief Event-Driven: Kingston Financial (1031 HK): What Will Chu Choose To Do? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Kingston Financial (1031 HK): What Will Chu Choose To Do?
EQD | FXI (FXI US): – Could Chinese Equities Lead the Way Higher? Use Options for Delta
Shanghai/Shenzhen Northbound Connect: Weekly Moves (14 October 2022)
Shanghai/Shenzhen Southbound Connect: Weekly Moves (14 October 2022)

Kingston Financial (1031 HK): What Will Chu Choose To Do?

Hong Kong brokerage Kingston Financial (1031 HK) was suspended this morning pursuant to Hong Kong’s Takeovers Code.
Chu Yuet Wah is the largest shareholder with 74.6% of shares out.
Shares are down 98% from the January 2018 peak. A chunky premium may be on the cards if a firm Offer unfolds.

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

By Simon Harris

20th National Congress of the Communist Party is due to kick off this week
Will economic growth be top of the agenda and is there any scope to adjust the Covid strategy?
With many potential growth factors, use derivatives to gain delta exposure

Shanghai/Shenzhen Northbound Connect: Weekly Moves (14 October 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 outflow over the past week was ~US$1.8bn, split between Shanghai (-US$2.0bn) and Shenzhen (+US$0.20bn).
The largest inflows were into Satellite Chemical (002648 CH) and CATL (A) (300750 CH). The largest outflows were in Kweichow Moutai (600519 CH) and China Merchants Bank A (600036 CH).

Shanghai/Shenzhen Southbound Connect: Weekly Moves (14 October 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 ~US$0.5bn, split (+US$0.26bn) for Shanghai and (+US$0.24bn) for Shenzhen.
The largest inflows were into Tracker Fund of Hong Kong Ltd (2800 HK) and Tencent (700 HK). The largest outflows were in Meituan (3690 HK) and Semiconductor Manufacturing International (981 HK).

💡 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

Oct 14

Daily Brief Event-Driven: FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Market Consultation Results Announced; BIG Trade and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Market Consultation Results Announced; BIG Trade
StubWorld: Macau Plays Need To Up Non-Gaming Game
Elmo Software Confirms Takeover Interest from Various Parties
ELMO Software (ELO AU): KKR Returns To The Well
S&P BSE/Sensex Quiddity Leaderboard Dec 22: Adani Names with F&O Question Marks Still in the Race
Becketts/Euromoney Institutional Investor: Spread

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Market Consultation Results Announced; BIG Trade

The number of FTSE TWSE Taiwan Dividend+ Index constituents will be increased from 30 to 50 in one step at the December rebalance.
There are a few other changes to the index methodology, mainly around the cutoff ranks for inclusion/exclusion with a few additional constraints.
We forecast 25 adds and 4 deletes to the index with one-way trade over US$2.2bn and big impact on many stocks due to inclusion, exclusion, capping and funding.

StubWorld: Macau Plays Need To Up Non-Gaming Game

Reportedly Macau authorities are not satisfied with some concessionaire proposals from gaming firms and require them to increase investment into non-gaming facilities under a concession retendering process
Preceding my comments on some of the gaming plays such as Melco International Development (200 HK) and Genting Bhd (GENT MK) 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%.

Elmo Software Confirms Takeover Interest from Various Parties

Elmo Software (ELO AU) confirmed takeover interest from several parties, including Accel-KKR. Elmo previously disclosed on 14 June that it had discussions on a non-binding offer at A$6.10 per share.
The previous talks ended because the bidder (Accel-KKR) could not progress to a binding offer due to changing tech valuations. Elmo has materially underperformed ASX SaaS peers since 14 June.
The current conditions suggest a higher risk that the talks will fizzle out. Despite today’s 28% pop, the shares remain undemanding compared to peer multiples providing support to the shares.

ELMO Software (ELO AU): KKR Returns To The Well

Cloud-Based solutions provider Elmo Software (ELO AU) has confirmed it has received multiple expressions of interest from various parties, including Accel-KKR.
No agreement has been reached with any parties, no pricing mentioned, nor whether data room access has been afforded.
Earlier this year ELMO held discussions with Accel-KKR in regard to a change of control proposal at $6.10/share. That figure is a stretch in this market.

S&P BSE/Sensex Quiddity Leaderboard Dec 22: Adani Names with F&O Question Marks Still in the Race

In this insight, we take a look at the names leading the race to become ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the December 2022 Rebalance.
The reference period for the trading data used for the index selection ends on 31st October 2022.
At present, I see one change for SENSEX, three changes for BSE 100, and six changes for BSE 200.

Becketts/Euromoney Institutional Investor: Spread

The scheme is just pending court sanction and the remaining regulatory approval, with closing reasonably expected to happen in Q4 2022.
I believe Euromoney is going cheap, but the current debt markets make it harder to raise money/counterbid. Euromoney is trading at 16.3x EV/Fwd EBIT vs. RELX at 17.3x.
The shares are liquid. Gross spread is 1.3%, with estimated annual return of 7.9% assuming settlement by 15 December. Long.

💡 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

Oct 13

Daily Brief Event-Driven: Socionext (6526 JP): Index Inclusion Timeline and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Socionext (6526 JP): Index Inclusion Timeline
GLP J-Reit (3281 JP): Offering Could Trigger Outperformance Vs Peers
True/DTAC: NBTC’s Last Roll Of The Dice?
HK Connect: Sep ’22 Inclusion Post-Event Analysis
PTB Group (PTB AU): 16 Nov Scheme Meeting. IE Says Fair
SillaJen Trade Resumption: Day Trading Setup Betting on Shooting Star Pattern
DTAC/True Merger: NBTC Set to Decide on the Merger on 20 October
GLP J-REIT Placement – Most of the past Deals Have Done Well, This One Could Be Tricky

Socionext (6526 JP): Index Inclusion Timeline

Socionext (6526 JP) traded 15.1% higher than its IPO price on listing day. That gives it a market cap of JPY 141.4bn (US$963m).
Socionext (6526 JP) will be added to the TPX INDEX in November and could be added to the MSCI SmallCap Index in February and the FTSE All-Cap Index in June.
The close yesterday indicates there could be more buying behind while the TOPIX inclusion in November will be a source of short-term demand for the stock.

GLP J-Reit (3281 JP): Offering Could Trigger Outperformance Vs Peers

Today after the close, large-cap logistics JREIT GLP J-REIT (3281 JP) (“GLP”) announced a follow-on equity offering to fund part of their recently-announced property acquisition.
The primary offer quantity is 215,962 units. In addition, there will also be an over-allotment quantity of 5,809 units. The total size of this offering could be roughly ¥33bn (~US$227mn).
Below is a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

True/DTAC: NBTC’s Last Roll Of The Dice?

With near-on nine-month having lapsed since True Corp Pcl (TRUE TB) and Total Access Communication (DTAC TB) submitted an amalgamation report, the NBTC may conclude/clarify a sweeping resolution today.
That resolution, prompted by DTAC and True, is expected to establish the NBTC has no authority to consider approving or rejecting the merger, although remedial measures may be enforced.
Further rumours abound as I type that the NBTC decision may be delayed another week.

HK Connect: Sep ’22 Inclusion Post-Event Analysis

By Ke Yan, CFA, FRM

After one month from the September batch of Hong Kong Connect inclusion, we provide an analysis on the stock inclusion for 12 stocks.
We analysed the inclusion by performance post announcement, performance post inclusion, inflows and analyst coverage.
We continued to observed outperformance post the HSCI announcement but not the actual inclusion despite the fact that southbound inflows has a significant impact on the trading volume.

PTB Group (PTB AU): 16 Nov Scheme Meeting. IE Says Fair

Back on the 18 August, aviation engine repair play PTB Group (PTB AU) entered into a Scheme Implementation Deed with PAG Holding, at $1.595/share, a 40.5% premium to last close.
The Scheme Booklet has now been lodged with ASIC. The Independent Expert reckons the Offer is fair and reasonable.
The Scheme Meeting will be held on the 16 November, as previously flagged in August’s SID, with an expected implementation on the 9 December.

SillaJen Trade Resumption: Day Trading Setup Betting on Shooting Star Pattern

We should pay attention to two significant flows. INFLOW: Covering of those holding short positions & OUTFLOW: Rebalancing of local PASSIVEs that failed to remove SillaJen.
Osstem, which was in a similar situation, showed this shooting star pattern on its trade resumption day. Of course, this setup will work limitedly because SillaJen is shorting-restricted.
Nevertheless, SillaJen will likely show this pattern more dramatically in the shooting phase as its short interest is more than three times that of Osstem.

DTAC/True Merger: NBTC Set to Decide on the Merger on 20 October

The NBTC Board has confirmed that it will decide on the DTAC/True merger on 20 October as it will receive yet another report from consultants on 14 October.
The Bangkok Post reported today that NBTC would conclude that it has no authority to consider approving or rejecting the deal but will issue measures to govern it.
The current share price ratio of 8.873x vs implied swap ratio of 10.221x is the lowest since the announcement of the potential VTO. Buy the share price ratio.

GLP J-REIT Placement – Most of the past Deals Have Done Well, This One Could Be Tricky

By Sumeet Singh

GLP J-REIT (3281 JP) is looking to raise around US$220m in its placement to acquire five assets, and increase its stake in a sixth one.
We have covered a number of past deals by the company, almost all of which have done well.
In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

💡 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

Oct 12

Daily Brief Event-Driven: SBI Obtains Approval – Has Plan To Buy 0.965% of Shinsei – It Isn’t Strategic and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

SBI Obtains Approval – Has Plan To Buy 0.965% of Shinsei – It Isn’t Strategic, It’s Technical
Golden Energy & Resources: Widjaja Family Betting Ridiculous Cashflow Continues
Clarifying KRX’s Confusing Heads-Up Designation System for KOSPI 200/KOSDAQ 150 Review
Pushpay: BGH Resurrects The Catholic Opportunity
MSCI Korea November SAIR: Potential Deletes Continue to Slide
MSCI Korea: Potential Inclusions & Exclusions in November 2022 Highlighted by Locals
Toshiba (6502) – JIP Gets Preferred Bidder Status and We Get The First Price Leak
PTB Scheme Meeting on 16 November
Lock & Lock – Announces Dividends Worth 25% of Market Cap
Cyberattacks at Numerous US Airports by Suspects from Russia

SBI Obtains Approval – Has Plan To Buy 0.965% of Shinsei – It Isn’t Strategic, It’s Technical

SBI Holdings (8473 JP)‘s unit SBI Regional Bank Holdings KK (SBI 地銀ホールディングス株式会社) today announced it had received FSA authorisation to turn the company into a Bank Holding Company.
There are some technicalities involved. SBI announced it would buy 2.5mm shares of Shinsei on-market to get to 50.05% by end-March 2023. This will disappoint some, but…
I expect investors should continue to look at the big picture. Technicalities are technicalities. Strategy is strategy. The big picture is unchanged and there isn’t that much room to manoeuvre.

Golden Energy & Resources: Widjaja Family Betting Ridiculous Cashflow Continues

Golden Energy & Resources (GER SP), an Indonesian/Australian energy/met coal play, may be subject to an acquisition from its controlling shoulder, the Widjaja Family.
GEAR reported 1H22 (to June) earnings of US$279mn, an 859% gain yoy, as contributions from the newly acquired stake in an Australian coal mine from BHP (BHP AU) kicked in.
The family is potentially betting on one to two more years of outsized cashflow as the world’s coal habit remains healthy.

Clarifying KRX’s Confusing Heads-Up Designation System for KOSPI 200/KOSDAQ 150 Review

The KRX gives three heads-up types: WARNING (illegal trading), ADMINISTRATIVE (insolvency), & ATTENTION (inappropriate accounting). Those losing eligibility are ADMINISTRATIVE (KOSPI 200) and ADMINISTRATIVE + ATTENTION (KOSDAQ 150).
Those designated as WARNING keep the eligibility for KOSPI 200/KOSDAQ 150 unless delisting is decided. We can find these heads-up designations on the KRX website, which is available in English.
Osstem is currently an ATTENTION issue, so ineligible at this point. Knotus was designated as a WARNING issue in June and underwent a trade suspension. Nevertheless, it maintains eligibility.

Pushpay: BGH Resurrects The Catholic Opportunity

Back on the 26 April, church donor management tech play Pushpay Holdings (PPH NZ) announced “unsolicited, non-binding and conditional expressions of interest or approaches from third parties“. No price was mentioned.
Roughly a month later, BGH Capital and Sixth Street, both existing shareholders, entered into a cooperation agreement with respect to a potential transaction for Pushpay. Again, no price was provided.
Pushpay has now announced it has received a non-binding proposal. Word on the street this involves BGH. Still, no price was made public. A 30% premium to undisturbed is ~NZ$1.34/share.

MSCI Korea November SAIR: Potential Deletes Continue to Slide

With a week to the start of the review period, we forecast one inclusion and a lot more deletions for the MSCI Korea Index at the November SAIR.
The impact from passive fund trading is pretty large on the potential and close deletes while the impact is a lot more muted on the sole potential add.
There will be pre-positioning on most of the names already and part of that shows up in sharply higher short interest on a few stocks.

MSCI Korea: Potential Inclusions & Exclusions in November 2022 Highlighted by Locals

We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (10 November) that are being highlighted by the locals.
The potential inclusion candidates in the MSCI Korea Index emphasized by the locals in November 2022 include Hyundai Mipo Dockyard (010620 KS) and Hanwha Aerospace (012450 KS).
Potential exclusion candidates include Seegene Inc (096530 KS), Meritz Financial Group (138040 KS), and Green Cross (006280 KS).

Toshiba (6502) – JIP Gets Preferred Bidder Status and We Get The First Price Leak

Overnight, a few news outlets are running with the story that Toshiba Corp (6502 JP) has granted “preferred bidder” status to the Japan Industrial Partners (JIP)-led consortium bid.
JIP had originally signed up with public-private fund JIC, forming one of the four bids (the other three being CVC, Bain, and Brookfield) but JIP and JIC split last month.
“Preferred Bidder status” is just that. It’s not exclusive, but one can read between the lines. But the articles have interesting details, including the first trial ballon price leak.

PTB Scheme Meeting on 16 November

PTB Group Ltd (PTB AU)‘s scheme meeting is on 16 November. The IE considers the offer of A$1.595 + dividend up to A$0.03 per share (total of A$1.625) fair.
The key condition is approval from shareholders – headcount test and approval by at least 75% of the votes cast on the resolution. The two largest shareholders will vote YES.
We continue to think that offer is attractive. At the last close price and for the 9 December payment, the gross and annualised spread is 2.2% and 13.8%, respectively.

Lock & Lock – Announces Dividends Worth 25% of Market Cap

After the market close today, Lock&Lock announced that it will pay out dividends per share of 1,653 won worth 83 billion won, representing 25% of the company’s market cap.
The shareholders date of record that could receive the dividends is as of 30 September 2022.
Although the high dividend payment should benefit the existing shareholders, we are not sure on the company’s ability to continue to maintain high dividend payout ratio.

Cyberattacks at Numerous US Airports by Suspects from Russia