Event-Driven

In late May, Toyota Group member Aisin (7259 JP) announced it would sell its 37% stake in Exedy Corp (7278 JP) . The market dropped. But that was the opportunity.
On 30 May, I said “Buy the deal, buy in the market. It’s cheap and vulnerable.” It’s up 21.5% since (the day after). Peers are down 15-20%.
The company completed its buyback. Murakami Group bought more. The stock (pro-forma) is at 0.62x book, 0.54x book for the non-cash portion. There’s LOTS of cash left.

Select Sector Indices – Updated Flows as Round-Trip Trade Hits US$35bn

The changes to the S&P 500 INDEX (SPX INDEX), S&P400 Index and S&P600 Index will be announced after market close on Friday.
The conclusions of the market consultation to change the index weighting methodology for the Select Sector Indices to reduce concentration and avoid reverse turnover should also be announced.
Changes in the index weighting methodology will result in a round-trip trade of US$35bn across the Select Sector indices. The largest turnover is in the XLP and XLK.

Fuji Soft (9749 JP): Bain’s Rumoured Counteroffer

Nikkei reports that Bain will launch a competing tender offer for Fuji Soft Inc (9749 JP) around JPY9,200-9,300 per share, around 5% higher than KKR’s offer.
The Board responded that Bain submitted a non-binding proposal on 26 July. The special committee will consider its feasibility if a binding proposal is submitted.
KKR has three options to respond to a higher Bain offer: revise it, launch a hostile offer at unchanged terms, or walk away. The first option is the most likely.

HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Sep 2024)

The September rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
The round-trip trade across all stocks across the four indices is estimated at HK$18.1bn (US$2.3bn).
Kuaishou, ASM Pacific Technology, JD.com, J&T Global, Sunny Optical and New Oriental Education are the largest buys while Alibaba, Tencent, Meituan, Xiaomi and HSBC Holdings are the biggest sells.

Trading Plays on Samsung C&T’s Holding Company Shift and Biologics Share Sell-Off

Samsung C&T’s holding company ratio is closing in on 50%, driven by the Biologics rally, which has Samsung on high alert for a forced conversion.
Watch Samsung’s moves to avoid forced holding company status. The old Biologics-for-Electronics swap isn’t viable, so they’ll likely sell Biologics shares to lower the ratio.
Samsung C&T might sell Biologics shares at a ₩80T market cap. They’ve boosted construction to manage assets and the holding ratio, but beyond ₩80T, risks increase.

Hang Seng, HSCEI, HSTECH Sep24 Rebal Final Capping Flows

The close of 3 September 2024 was the final price to determine capping for the Hang Seng Index Rebalances which will take place this Friday 6 September 2024 at close.
The numbers are largely unchanged, though price changes in the interim cause more Kuaishou Technology (1024 HK) to be bought, and more Xiaomi Corp (1810 HK) to be sold.
The biggest name in flows is, of course, ASM Pacific Technology (522 HK) which sees 15 days to buy.

Nationwide/Virgin Money (VUK AU): At The Pointy End Of The Offer

Back on the 21st March, Virgin Money UK (VUK AU/VMUK LN), UK’s sixth largest retail bank, entered into a Scheme with Nationwide Building Society, at 220 pence/share, in cash.
The consideration is a solid 38% premium to undisturbed. And shareholders backed terms at the 22nd May Court Meeting. Plus UK’s CMA signed off on the 19th July.
What now? FCA/PRA approvals are the key remaining conditions. These regulatory approvals are imminent.

MSC Aug 24 Rebalance: Brazil Takes the EM Flow, SA & China Downweighted Again (Tencent)

By Charlotte van Tiddens, CFA

South Africa was downweighted in ACW, EM and EM ex China for a second consecutive quarter.
Brazil was the largest upweight in ACW, EM and EM ex China.
Tencent was downweighted in the EM index but upweighted in ACW.

Potential Sale of SK Specialty and Deleveraging of the SK Group – Impact on SK Inc and NAV Analysis

In this insight, we discuss the potential sale of SK Specialty by SK Inc (034730 KS) which owns 100% stake in the company.
If SK Inc could sell SK Specialty at about 3 trillion won to 4 trillion won, this could reduce significantly reduce debt burden of SK Inc.
Our base case NAV value per share for SK Inc is 203,288 won per share, representing 38% upside from current levels.

Samsung C&T: Corporate Value-Up + Reduced Overhang Post Final Lee Family Inheritance Tax in 2025

We provide an updated NAV analysis of Samsung C&T, discuss the reduced overhang post final Lee family inheritance tax payment, and also provide further details of its Corporate Value-Up announcement.
Given 2025 will be the last year of major inheritance tax payment for the Lee family, there is likely to be reduced overhang associated with inheritance tax issue next year.
Our NAV analysis of Samsung C&T suggests NAV of 39.9 trillion won or NAV per share of 224,249 won which is 45% higher from current levels.

💡 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

Sep 03

Daily Brief Event-Driven: Sep24 Nikkei 225 Rebal – Last Minute Thoughts and Change in Predictions and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Sep24 Nikkei 225 Rebal – Last Minute Thoughts and Change in Predictions
Midea A/H Listing – 1H24 Updates – Strong Growth, Margins Uptick Continues
Today’s Battery Rally Offers a Great Angle for Sector Pair Trading with Value-Up Stocks
India: Potential Adds/Deletes from F&O Segment
China ETF Inflows & Implications: YTD Inflows Near US$100bn
Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Sep24)
POSCO Group Corporate Value Pre-Announcements: Trading Angle
PSC Insurance (PSI AU): A Done Deal
India: Index Implications of Additions to the F&O Segment
PSC Insurance (PSI AU): 26th Sept Vote On Ardonagh Group’s Offer

Sep24 Nikkei 225 Rebal – Last Minute Thoughts and Change in Predictions

The last two reviews have been announced on the second business day of the month of the review. The one before that on the third business day.
The review could be announced today or tomorrow. Wednesday would seem to be “late.”
There are still questions about implementation – thus “care” in previous insights. Here I explore the possibilities/probabilities/issues around the edges. And a Dark Horse which may be lighter than thought.

Midea A/H Listing – 1H24 Updates – Strong Growth, Margins Uptick Continues

By Sumeet Singh

Midea Group Co Ltd A (000333 CH), recently filed its PHIP as it aims to raise up to US$3bn in its H-share listing, as per media reports.
Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
We have covered the company and deal background in our previous notes. In this note, we talk about the updates from its 1H24 results.

Today’s Battery Rally Offers a Great Angle for Sector Pair Trading with Value-Up Stocks

Today’s surge in Korean battery stocks stems from sector rotation and improved fundamentals, with SK On’s healthier balance sheet and Samsung SDI’s new U.S. plant fueling optimism.
But with POSCO affiliates showing standout performance relative to their peers., the value-up factor is once again shaking things up and driving those differences in relative performance.
Today’s price action suggests using the value-up factor for long-short strategies, especially with KRX hinting at sector quotas in the value-up index.

India: Potential Adds/Deletes from F&O Segment

Following SEBI’s review of eligibility criteria for entry/exit of stocks in the derivatives segment, there could be 18 deletions/79 inclusions in the F&O segment over the next 6 months.
The new framework could lead to mechanical entry and exit of stocks in the F&O segment with minimal intervention from SEBI.
The introduction of some large cap stocks in the F&O segment could lead to their inclusion in the NIFTY Index, SENSEX Index and other local indices.

China ETF Inflows & Implications: YTD Inflows Near US$100bn

Nearly US$100bn has flowed into mainland China listed ETFs year to date and could be driven by the National Team led by Central Huijin supporting the market.
Nearly all the net inflows have been focused on the CSI 300, CSI 1000, CSI 500, SSE50, ChiNext and STAR50 indices. Flows to sector ETFs have been mixed.
Over 70% of the net inflows have gone to the CSI 300 Index with another 18% going to the CSI 500 Index and CSI 1000 Index.

Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Sep24)

June/July/August saw 1,673/825/202 new Corporate Governance Reports filed and 8/5/9 new “Mgmt Conscious of Capital Cost/Stock Price” policies filed, respectively. The TSE’s very simple tool comes in 15 days.
Our tools show every report, links to every document, and now a new diff file tool. input a name, see the difference between the Old/New Reports. We hope it helps.
This tool is designed to be a shelf reference. We update it once a month, and every CorpGovReport and new “Management Conscious” report updated since a CGR update is here.

POSCO Group Corporate Value Pre-Announcements: Trading Angle

On 29 August, the three major POSCO Group companies including POSCO Holdings announced that they plan to provide detailed explanations of their Corporate Value Up plans in 4Q 2024.
In general, the companies that have provided more detailed plans for their Corporate Value Up plans have done better recently.
However, now there are cases such as the three main POSCO Group companies whose share prices are rising just by announcing that they will provide Corporate Value Up plans later.

PSC Insurance (PSI AU): A Done Deal

On 22 August, the Psc Insurance (PSI AU) IE considered Ardonagh’s A$6.19 offer fair and reasonable as it is within the A$5.69 to A$6.65 valuation range.
The offer is conditional on shareholder approval of the scheme. No disinterested shareholder holds the 25% blocking stake. The scheme meeting is on 26 September.
The offer is attractive and represents an all-time high. At the last close and for the 11 October payment, the gross/annualised spread is 1.3%/12.1%.

India: Index Implications of Additions to the F&O Segment

Following SEBI’s review of eligibility criteria for entry/exit of stocks in the derivatives segment, there could be 18 deletions/79 inclusions in the F&O segment over the next 6 months.
The introduction of some stocks in the F&O segment could lead to their inclusion in the NIFTY, SENSEX, Nifty Bank and CNXIT indices and weight changes in the Nifty Next50.
The inclusion of stocks in indices with a fixed number of constituents will result in deletion of some stocks from these indices. There should be methodology changes too.

PSC Insurance (PSI AU): 26th Sept Vote On Ardonagh Group’s Offer

Back on the 8th May, PSC Insurance (PSI AU), a diversified insurance service provider, entered into a Scheme with Ardonagh Group, at A$6.19/share, in cash.
That’s a 27.6% premium to undisturbed, and a lifetime high. Directors and key executives holding ~39.6% of shares out, are supportive.
The Scheme Booklet is now out, with a Scheme Meeting to be held on the 26th September. Expected implementation on the 11 October. The IE says fair & reasonable.

💡 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

Sep 02

Daily Brief Event-Driven: Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh… and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…
Quiddity STAR 50/100 Sep 24 Rebalance: 100% Hit Rate; US$1bn+ One-Way Flows
STAR50/STAR100 Index Rebalance: Adds Rally, Deletes Drop as Positioning Builds Up
Merger Arb Mondays (02 Sep) – Canvest, China TCM, GA Pack, CPMC, Shinko, Arvida, SilverLake
Bajaj Housing Finance IPO: Offering Details & Index Inclusion
CPMC Holdings (906.HK) Privatization Update – ORG Is Pushing Baosteel to Raise Its Offer
HK Connect SOUTHBOUND Flows (To 30 Aug 2024); Weak Econ Data, But a Rebound in SB Net Buys
Alpha Generation Through Share Buybacks in Korea: Bi-Monthly (July and August 2024)
A/H Premium Tracker (To 30 Aug 2024): SB/NB Volumes Down, NB Net Now Impossible to Track
EQD / NSE Vol Update / Skew & PCR Indicate Active Use of OTM Puts to Hedge NIFTY50 at All-Time-Highs

Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…

On 30 August, 7&i shareholder Artisan Partners (holder since 2019, now at 1%) wrote an open letter to the Board of Directors of Seven & I Holdings (3382 JP)
There are several comments in bold. “It is imperative that the board of directors negotiate with ACT immediately to achieve the best possible outcome for shareholders” is one.
The letter is a bit preachy, a bit fluffy, and a bit misleading in parts. But it requests the Company brief shareholders on the negotiations by 19 September 2024.

Quiddity STAR 50/100 Sep 24 Rebalance: 100% Hit Rate; US$1bn+ One-Way Flows

The September 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 30th August 2024.
There will be 2 changes for the STAR 50 index and 6 changes for the STAR 100 index.
The STAR 50 and STAR 100 rebalances will collectively trigger one-way flows of more than US$1bn during the September 2024 index rebal event.

STAR50/STAR100 Index Rebalance: Adds Rally, Deletes Drop as Positioning Builds Up

There are 2 constituent changes for the STAR50 INDEX and 6 changes for the STAR100 Index at the September rebalance that will be implemented at the close on 13 September.
There are no surprises for the SSE STAR50 (STAR50 INDEX) while there are 3 surprise adds for the STAR100 Index with the profitability criterion being ignored.
The adds to the SSE STAR50 (STAR50 INDEX) have outperformed the deletes over the last month and positioning is larger in some stocks compared to others.

Merger Arb Mondays (02 Sep) – Canvest, China TCM, GA Pack, CPMC, Shinko, Arvida, SilverLake

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), Greatview Aseptic Packaging (468 HK), Shanghai Henlius Biotech (2696 HK).
Lowest spreads: Tohokushinsha Film (2329 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), Fancl Corp (4921 JP), Alps Logistics (9055 JP).

Bajaj Housing Finance IPO: Offering Details & Index Inclusion

Bajaj Housing Finance (BHF IN) is looking to list on the exchanges by selling INR 65.6bn of stock at a valuation rumoured to be between INR 560-590bn.
The anchor allocations will be completed later this week, and the stock is expected to start trading on 16 September.
Bajaj Housing Finance (BHF IN)‘s maximum float will be around 10% and that will limit inclusion to just one global index in the following 6 months.

CPMC Holdings (906.HK) Privatization Update – ORG Is Pushing Baosteel to Raise Its Offer

By Xinyao (Criss) Wang

Huarui Offer has been approved by SAMR, which marks a solid step forward.Meanwhile, ORG’s management stated that the reduction of Huangshan Novel shares is to raise funds to acquire CPMC.
While Baosteel may want to “test the waters”, the signals ORG is sending is it will make every effort to advance the acquisition of CPMC and is accelerating the process.
The return on Huarui Offer isn’t attractive.We recommend waiting for Baosteel to raise its Offer, or simply choosing to add more positions in China TCM, whose privatization is more lucrative.

HK Connect SOUTHBOUND Flows (To 30 Aug 2024); Weak Econ Data, But a Rebound in SB Net Buys

SOUTHBOUND was a net seller the prior week for HK$1.5bn, the first week in 29 where SB was a net seller. It was all ETFs. Stocks were a net buy.
This week, they reverted to net buying. Financials and Utilities were strong net buys. ETFs again a net sell. Total SOUTHBOUND volumes also picked up.
SOEs, SOE Banks, Energy, Utilities, and finally Anta Sports Products (2020 HK) saw net buying after salutary earnings.

Alpha Generation Through Share Buybacks in Korea: Bi-Monthly (July and August 2024)

In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in July and August 2024.
On average, the share buyback announcements by 46 companies represented 2% of outstanding shares.
Major companies that have announced share buybacks in Korea in the past two months include KT&G, Mirae Asset Securities, and POSCO Holdings.

A/H Premium Tracker (To 30 Aug 2024): SB/NB Volumes Down, NB Net Now Impossible to Track

Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. SOUTHBOUND gross volumes up, but not high.
SOUTHBOUND rebounded cutting its weekly net sell streak at one. ETFs again a net sell. NORTHBOUND net data is not not released on a daily/weekly basis; only quarterly.
As expected (with AH 20d Premia returns at multi-year highs 3wks ago), AH Premia fell slightly, narrow premia falling more than wide premia. I continue to expect more H-vs-A gains.

EQD / NSE Vol Update / Skew & PCR Indicate Active Use of OTM Puts to Hedge NIFTY50 at All-Time-Highs

By Sankalp Singh

Recovery in Risk-Premia was short-lived. Pressure from a lack of upcoming event-risk has driven short-dated IVs lower.
Nifty50 at All-Time-Highs – PCR & Skew extend further towards puts. Implying active hedging of core long equity positions using OTM puts.
“High & Down” Vol-state persists. Expect a continued slide lower in IVs. Retain previous week’s tactical stance – allocations to Short Iron Condors & Skew Harvesting structures.

💡 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

Sep 01

Daily Brief Event-Driven: (Mostly) Asia-Pac M&A: Seven & I and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia-Pac M&A: Seven & I, Silverlake Axis, Shanghai Henlius, CPMC, Shinko Electric, Arvida
Keep an Eye on Samsung C&T & SK Square as the Next Hot Picks for Value-Up Announcements
Weekly Deals Digest (01 Sep) – ESR, Canvest, China TCM, CPMC, Shinko, Silverlake, Terumo, Midea
Last Week in Event SPACE: Shin Kong/Taishin Financial, Jardine Matheson, Toyota Motors, Huafa Props
China Healthcare Weekly (Sep.1)-Biotech Sell Asset,Pharmaceutical Distribution Company,HEC CJ Pharma
(Mostly) Asia M&A, Aug 2024: Orora, Fuji Soft, J Tower, Seven & I, Taishin/Shin Kong, PropertyGuru

(Mostly) Asia-Pac M&A: Seven & I, Silverlake Axis, Shanghai Henlius, CPMC, Shinko Electric, Arvida

I tally 42 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals were discussed this week: the Taishin Financial Holding (2887 TT) / Shin Kong Financial Holding (2888 TT) merger; and Silverlake Axis (SILV SP)‘s hybrid Offer.
Key updates took place on Huafa Property Services (982 HK), Shanghai Henlius (2696 HK),CPMC (906 HK), Seven & I (3382 JP), Shinko Electric (6967 JP), and Arvida (ARV NZ).

Keep an Eye on Samsung C&T & SK Square as the Next Hot Picks for Value-Up Announcements

Construction and semiconductors are key targets due to their low value-up representation. For shareholder returns, keep an eye on Samsung C&T and SK Square.
Expect announcements before the mid-September value-up index, with early September releases mirroring LG Electronics’ prior notices and detailed plans arriving by Q4.
Even with prior notices, details will leak. Samsung C&T and SK Square are likely to prioritize short-term shareholder returns over long-term growth, potentially leading to a bigger price impact.

Weekly Deals Digest (01 Sep) – ESR, Canvest, China TCM, CPMC, Shinko, Silverlake, Terumo, Midea

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: Midea Group Co Ltd A (000333 CH) premarketing its H Share listing, Terumo Corp (4543 JP) placement and 99 Speed Mart Retail Holdings (99SPD MK) US$530 million IPO.
Event-Driven developments: ESR Group (1821 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), CPMC Holdings (906 HK), Shinko Electric Industries (6967 JP).

Last Week in Event SPACE: Shin Kong/Taishin Financial, Jardine Matheson, Toyota Motors, Huafa Props

CTBC’s (likely) goal is to boost Shin Kong (2888 TT)‘s shares, so as to make the Taishin Financial Holding (2887 TT) merger unpalatable for Shin Kong shareholders. That smells of opportunity.
Jardine Matheson Holdings (JM SP) is trading cheap to NAV and its implied stub. It may well get cheaper.
Toyota Motor (7203 JP)‘s resulting supply/demand profile is mixed, but on balance, expect to see positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.

China Healthcare Weekly (Sep.1)-Biotech Sell Asset,Pharmaceutical Distribution Company,HEC CJ Pharma

By Xinyao (Criss) Wang

Biotech will continue selling early-stage pipeline in a sluggish market, but this will further lower its valuation as financing won’t improve quickly.
Pharmaceutical distribution companies are facing challenges, driving ongoing consolidation in the industry. However, this trend will ultimately benefit the growth of leading companies in the long run.
If investors truly understand “the essence” of HEC Changjiang Pharma, they will be more calm/rational to look at this absorption merger and the inclusion of Hang Seng family of indexes.

(Mostly) Asia M&A, Aug 2024: Orora, Fuji Soft, J Tower, Seven & I, Taishin/Shin Kong, PropertyGuru

For the month of August 2024, 10 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$56bn.
The average premium for the new transactions announced (or first discussed) in August was ~47%. The average premium YTD is ~44%.
This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% 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

Aug 31

Daily Brief Event-Driven: Brookfield Explores Sovereign Funds for Grifols Takeover Bid and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Brookfield Explores Sovereign Funds for Grifols Takeover Bid
Kum Yang: A Major Capital Raise Possible in 4Q24 Which Is Likely to Dilute Existing Shareholders
Potential Price Decline Amplification from NPS’s Appraisal Rights Exercise Against NCSoft
End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2024

Brookfield Explores Sovereign Funds for Grifols Takeover Bid

By Jesus Rodriguez Aguilar

Press reports Brookfield is seeking support from sovereign wealth funds, including those from Abu Dhabi (ADQ) and Singapore (GIC), to back its bid, though discussions remain in the early stages.
The news about the potential involvement of ADQ and GIC are positive as any support or addition of new investors increases the likelihood of a takeover bid for Grifols.
The discount is closing accordingly, at mid-session August 30, the share-price spread has tightened to 15.4%, the lowest ever. I suggest maintaining the position long B (or ADR)/short A shares.

Kum Yang: A Major Capital Raise Possible in 4Q24 Which Is Likely to Dilute Existing Shareholders

In the past week, there were numerous local news accounts about a rights offering of nearly 800 billion won by Kum Yang. This has not been confirmed by the company.
Although Kum Yang has not committed to a rights offering, there is a high probability of such capital raise in 4Q24 which is likely to dilute existing shareholders.
Kum Yang remains a highly speculative stock. The management has lost so much credibility in the past year. We would stay away from it as far as possible.

Potential Price Decline Amplification from NPS’s Appraisal Rights Exercise Against NCSoft

During NCSoft’s exercise period starting August 14, the spread was tight, with NPS likely to exercise rights if it widens above 5% in the final days.
NPS is unlikely to exercise its full 6.3% stake, but may sell 2% if the stock price drops below ₩180,000, widening the spread over 5%.
This may increase NCSoft’s division costs and overhang risk, potentially amplifying stock price decline. Monitoring NCSoft’s stock early next week is crucial.

End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2024

We discuss the end of the mandatory lock-up periods for 49 stocks in Korea in September 2024, among which 3 are in KOSPI and 46 are in KOSDAQ.
These 49 stocks on average could be subject to further selling pressures in September and could underperform relative to the market.
The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in September include LS Materials, CIS, and Kyobo Securities.

💡 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

Aug 30

Daily Brief Event-Driven: LG Corp Plans to Purchase 200 Billlion Won of LG Electronics and 300 Billion Won of LG Chem and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

LG Corp Plans to Purchase 200 Billlion Won of LG Electronics and 300 Billion Won of LG Chem
Notable Developments in the November Review of the Global Index Korea Standard
Arvida (ARV NZ): 25th Sept Vote On Stonepeak’s Offer
Doosan Mergers: One Canceled, One Still Moving Forward
CPMC Holdings (906 HK): The Battle Is Heating up as ORG Clears a Key Regulatory Hurdle
Doosan Group Cancels Plans to Merge Doosan Robotics and Doosan Bobcat
First Case of New Pre-Disclosure Rule: LG Corp Buys ₩300B LG Chem Shares
Arvida Group (ARV NZ): Scheme Vote on 25 September
Quiddity Leaderboard BSE/SENSEX Dec 24: Zomato Needs F&O Membership to Avoid BSE 100 Deletion
CPMC (906 HK): SAMR Green Lights ORG’s Offer

LG Corp Plans to Purchase 200 Billlion Won of LG Electronics and 300 Billion Won of LG Chem

On 29 August, LG Corp announced that it plans to purchase about 200 billion won worth of LG Electronics and about 300 billion won worth of LG Chem.
After these share purchases, LG Corp’s stake in LG Electronics will increase from 30.47% to 31.59%, and its stake in LG Chem will increase from 30.06% to 31.29%.
LG Corp plans to purchases these shares starting 1 November 2024. The share purchases will be conducted in two stages and will be completed by 31 March 2025.

Notable Developments in the November Review of the Global Index Korea Standard

Hyundai Rotem is right on the edge for Small Cap→Standard, so it is the only one having a real chance of being included in the November review.
Doosan Robotics’ float rate will rise to 40% after issuing 20,219,376 new shares, making it a top candidate for inclusion among Outside IMI and comfortably surpassing the cutoff.
With high trading volume volatility, it’s early to predict passive impact. Watch for momentum buildup like LS Electric and monitor the trading volume of Hyundai Rotem and Robotics closely.

Arvida (ARV NZ): 25th Sept Vote On Stonepeak’s Offer

Back on the 22 July, Arvida (ARV NZ), a leading retirement living and aged care provider, announced a Scheme from Stonepeak at NZ$1.70/share, in cash, a 65% premium to undisturbed.
The Scheme Booklet is now out, with a Scheme Meeting to be held on the 25th September. Expected implementation on the 13th November.
The Scheme Consideration of NZ$1.70/share is within the Independent Adviser’s valuation range at NZ$1.63 to NZ$1.94/share. Arvida’s directors unanimously recommend shareholders to vote in favour of the Scheme.

Doosan Mergers: One Canceled, One Still Moving Forward

Maekyung reported that Doosan Robotics and Bobcat will cancel their merger, but the merger between Robotics and Enerbility’s spun-off company will proceed.
The merger’s risks have been overblown in Robotics’ stock, which might rebound. Bobcat’s stock outlook is uncertain, with fading merger hopes potentially hurting short-term sentiment.
The Robotics-Enerbility merger might also be canceled under regulatory pressure, but this could hurt Enerbility’s stock due to debt concerns; forcing the merger may increase costs.

CPMC Holdings (906 HK): The Battle Is Heating up as ORG Clears a Key Regulatory Hurdle

ORG Technology Co., Ltd. A (002701 CH) has received SAMR clearance, the key regulatory hurdle, for its HK$7.21 voluntary offer for CPMC Holdings (906 HK).
SAMR approval paves the way for the ORG precondition to be satisfied in September. Changping Industrial’s HK$6.87 offer first close is on 3 September.
Changping Industrial has little choice but to revise its terms. It has a short window to seize the initiative by bumping its offer before ORG’s competing and higher offer opens.

Doosan Group Cancels Plans to Merge Doosan Robotics and Doosan Bobcat

On 29 August, the Doosan Group announced that it is cancelling the merger between Doosan Robotics (454910 KS) and Doosan Bobcat Inc (241560 KS).
However, the plan to split Doosan Enerbility into a newco and then merge Doosan Bobcat with the newco will remain in place.
Doosan Group is still trying to complete the first two portions of reorganization (Split of Doosan Enerbility and Merger Swap Between Doosan Enerbility and Doosan Robotics), resulting in continued uncertainty.

First Case of New Pre-Disclosure Rule: LG Corp Buys ₩300B LG Chem Shares

LG Corp has announced it will buy ₩300B of LG Chem shares during trading hours, marking the first use of the new 30-day advance notice rule.
LG Corp will buy LG Chem shares in two stages with 30-day advance notices. So, today’s announcement is a preliminary notice ahead of these 30-day advance notices.
This transaction’s flow impact on LG Chem doesn’t seem substantial. But this first two-stage advance notice could provide key insights into price impact patterns.

Arvida Group (ARV NZ): Scheme Vote on 25 September

The Arvida (ARV NZ) IE considers Stonepeak’s NZ$1.70 offer fair and reasonable as it is within the NZ$1.63 to A$1.94 valuation range.
The transaction will require OIO approval, statutory supervisors’ consent and shareholder approval. The Metlifecare Ltd (MET NZ) precedent suggests that the OIO and statutory supervisor should be forthcoming.
The offer is attractive and recent changes in substantial shareholders are benign. At the last close and for the 13 November payment, the gross/annualised spread was 3.0%/15.2%.

Quiddity Leaderboard BSE/SENSEX Dec 24: Zomato Needs F&O Membership to Avoid BSE 100 Deletion

In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, and 200 indices in the December 2024 index rebal event.
We see four expected ADDs/DELs for BSE 100 and six expected ADDs/DELs for BSE 200.
The BSE 100 handling rules for names without futures and options (F&O) sometimes punish companies that have enjoyed good share price rallies and Zomato could fall into such a trap.

CPMC (906 HK): SAMR Green Lights ORG’s Offer

ORG Technology (002701 CH), via the Offeror Huarui Fengquan Development Limited, has announced SAMR has given its approval. ORG still requires MOFCOM, NDRC, and SAFE to sign off.
Interestingly, SASAC/NCSSF-backed Champion Holdings, the competing/initial bidder for CPMC (906 HK), secured MOFCOM, NDRC, and SAFE before SAMR clearance. Champion’s regulatory pre-conditions took a little over seven months to secure.
What now? SAMR is China’s primary antitrust regulator (overlapping with NDRC). So this is positive for ORG. However, I’d still stick to ORG’s pre-condition long stop in terms of timing.

💡 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

Aug 29

Daily Brief Event-Driven: Jardine Matheson (JM SP): Trading “Cheap” and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Jardine Matheson (JM SP): Trading “Cheap”
Hyundai Motor’s Value-Up Disclosure: Trading Implications from Release Timing & Pref-Skewed Buyback
Huafa Props (982 HK): A Quick Word On Voting
Alpha Generation from the New Entries in the ‘KOSDAQ Rising Stars’
MV Australia Equal Weight Index Rebalance Preview: One Add & A Few Deletes
HM Sampoerna (HMSP IJ): Global Index Deletion Following IDX Segment Shift
Quiddity Leaderboard ES50 Sep 24: DSM Addition Unlikely; Engie Could Replace Kering (US$1bn+ Flows)
Impact of Woori Financial’s Tongyang Life Acquisition Below ₩1.5T on Value-Up Flows
Misunderstood Takeover Target
Silverlake Axis (SILV SP): Goh’s Hybrid Offer

Jardine Matheson (JM SP): Trading “Cheap”

I see Jardine Matheson Holdings (JM SP)‘s discount to NAV and implied stub at 12-month lows.
Recent interim results were okay. Stripping out DFI Retail Group Holdings (DFI SP)‘s outperformance, the remainder of the Jardine stable delivered weaker numbers.
Further afield, the implied stub is marginally below the long-term average since the Jardine Strategic Holdings (JS SP) circularity was collapsed in April 2021.

Hyundai Motor’s Value-Up Disclosure: Trading Implications from Release Timing & Pref-Skewed Buyback

Hyundai’s TSR target is 35%+ (dividends plus buybacks), up 10 percentage points from previous years. They’ve also set a new annual dividend of ₩10,000, paid evenly quarterly.
Hyundai’s Value-Up targets may not fully meet market expectations, but the key is the timing. By aligning early with government policies, Hyundai has reduced risks and secured investment flow.
Hyundai plans a pref-skewed buyback, likely continuing this approach as retiring preferred shares first may boost ROE.

Huafa Props (982 HK): A Quick Word On Voting

Huafa Property (982 HK) shareholders overwhelmingly approved (99.52% [of shares present and/or via proxy] FOR; 0.48% AGAINST) the Scheme yesterday. This part was expected. The headcount test was less certain.
The final headcount tally, on a look-through basis into HKSCC Nominees by CCASS Participants, was 111 FOR, 14 AGAINST. Again, a pretty clear pass.
Normally a Scheme Vote, if approved, wouldn’t warrant a full note. But when the headcount test is involved, it is worthwhile understanding the mechanics.

Alpha Generation from the New Entries in the ‘KOSDAQ Rising Stars’

In this insight, we discuss the potential alpha generation from new entries in the “KOSDAQ Rising Stars.”
For the KOSDAQ Rising Stars New Entries in 2023, there was a massive outperformance. Of course, we want to reiterate that past performance is NOT indicative of future performance.
On 28 August 2024, KRX provided a list of 39 KOSDAQ Rising Stars companies (including 29 existing ones and 10 new companies).

MV Australia Equal Weight Index Rebalance Preview: One Add & A Few Deletes

With 2 days left to review cutoff, there could be 1 inclusion and 3 deletions for the index at the September rebalance.
Even if there are no constituent changes, capping changes will lead to one-way turnover of 4.4% and a round-trip trade of A$212m.
The final list of inclusions/exclusions will depend on price movements till Friday and whether the index provider makes any significant changes to the free float of stocks in the universe.

HM Sampoerna (HMSP IJ): Global Index Deletion Following IDX Segment Shift

By Dimitris Ioannidis

HM Sampoerna (HMSP IJ) has been announced as a deletion from the Large cap of the Global Index at the September 2024 review.
The reason for the security’s removal is due to a change of listing from an eligible to an ineligible exchange segment of the Indonesian Stock Exchange (IDX).
Forecasted passive fund supply is ~$24.6m and ~11.9 ADV at the close of 20 September 2024. The significant ADV is because of the security’s low free float.

Quiddity Leaderboard ES50 Sep 24: DSM Addition Unlikely; Engie Could Replace Kering (US$1bn+ Flows)

The ES50 Index is one of the most highly-tracked indices in Europe and the annual index review takes place in September every year.
In this insight, we take a look at Quiddity’s estimation of the latest ranks of potential ADDs and DELs for the upcoming index rebal event in September 2024.
The rankings will be finalized at the end of this week. Currently, we see one expected ADD/DEL but the expectations can change since there are three more trading days left.

Impact of Woori Financial’s Tongyang Life Acquisition Below ₩1.5T on Value-Up Flows

Woori Financial’s value-up plan centers on improving the CET1 ratio to boost shareholder returns, with the total return ratio directly tied to the CET1 ratio.
The market believed that if the acquisition cost stayed under ₩1.9 trillion, the CET1 ratio impact would be minimal, potentially leading to mid-term gains from non-banking profits.
Though this may hurt Tongyang Life’s short-term stock, it opened the door for local institutional investors, especially NPS, to consider Woori Financial for value-up investments.

Misunderstood Takeover Target

By Jesus Rodriguez Aguilar

Allfunds Group, a global WealthTech firm born in Spain, attracts market interest, but no firm offers yet. Its top two shareholders (48.1%) are open to selling at the right price.
Since listing, Allfunds’ total return has been -59%, driven by interest rate hikes, major distributors shifting to low-risk assets, stock overhang from top shareholders, and low share liquidity.
ChatGPTAllfunds’ forward P/E of 12.9x (vs. peers at 18.6x) and 9.5% FCF yield undervalue its strong business model, momentum, market share gains, robust cash conversion, and solid balance sheet.

Silverlake Axis (SILV SP): Goh’s Hybrid Offer

Goh Peng Ooi, the Executive Chairman and founder, has made a voluntary unconditional general Offer for the 25.9% in Silverlake Axis (SILV SP) not held.
The S$0.36/share cash Offer for the software solutions play is a 20% premium to last close. Or a 31.9% premium to the 12-month VWAP.
The quirk in the terms is the option to receive A$0.30/share (in cash), plus one new redeemable preference share in the Offeror, to be redeemed at A$0.18/share after five years.

💡 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

Aug 28

Daily Brief Event-Driven: Updates on The Couche-Tard Deal for 7&I (3382 JP) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Updates on The Couche-Tard Deal for 7&I (3382 JP)
Toyota Partial Offer Results – What Next?
Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October
Huafa Prop (982 HK)’s CCASS Movements: Nothing To See Here
KOSPI 200 December Rebalancing: Key Points to Watch for in Proactive Position Build-Up
Tohokushinsha Film (2329 JP): 3D Persists Despite Strong Pushback
Understanding Potential Issues Within SK Group from Hynix’s Kioxia CB Conversion
MV Australia A-REITs Index Rebalance Preview: One Close Add & Capping Changes
JSE Sep 24 Rebalance: PPH Expected to Enter Top 40, AMS to Fall Out
LG Corp: Three Key Catalysts + NAV Valuation

Updates on The Couche-Tard Deal for 7&I (3382 JP)

Today saw the publication of three different articles regarding the Alimentation Couche-Tard (ATD CN) approach and offer to purchase all the shares of Seven & I Holdings (3382 JP)
The first in the Nikkei said ATD could push offer a high price, even up to ¥8 trillion. The second mentioned debt financing being feasible because of prodigious cash flow.
The third in Bloomberg noted that 7&i had requested the government upgrade its FEFTA status to “core”, which would lead to a more burdensome/restrictive government approval process.

Toyota Partial Offer Results – What Next?

Today after the close, Toyota Motor (7203 JP) reported the results of their ¥800bn Tender Offer Buyback, originally intended to repurchase 290.12mm shares from cross-holders.
In the end, 343.83mm shares were tendered (53.71mm shares more than originally expected, worth about ¥150bn at Tender Price). That creates back-end “issues” which must be considered.
The resulting supply/demand profile is mixed, but on balance, I expect sees positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.

Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October

By Dimitris Ioannidis

Kioxia and Tokyo Metro with valuations of ~$10bn and ~$4.6bn are expected to be listed in October 2024 and become the largest Japanese IPOs since Softbank Corp (9434 JP) in 2018.
Kioxia Holdings (6600 JP) is currently forecasted to fail fast entries of both Global indices due to low IPO free float.
Tokyo Metro is expected to be added via fast-entry in one Global Index because of higher IPO free float. Forecasted demand of ~$140m is expected on the fifth trading day.

Huafa Prop (982 HK)’s CCASS Movements: Nothing To See Here

Ahead of Huafa Property Services Group (982 HK)‘s Scheme Meeting tomorrow, the 28th August, 42.57% of shares outstanding moved out of CCASS on the 8th July.
One argument for Huafa trading wide-ish to terms is due to “suspicious” CCASS moves between the Offer announcement and the vote.
Some investors even cite the Golden Throat Holdings (6896 HK) debacle. This is not a Golden Throat situation. Not even close. It is decidedly less interesting and benign.

KOSPI 200 December Rebalancing: Key Points to Watch for in Proactive Position Build-Up

The momentum for getting ahead on positions with KOSPI 200 rebalancing is holding steady. With around 60% of the screening period behind us, it’s time to start preparing our positions.
The current rebalancing’s screened changes have a relatively lower price volatility, suggesting a stronger chance for more aggressive position build-up now compared to previous rebalancings.
Trading volumes vary greatly among these changes, affecting their passive impact sizes. Consider using different weights in basket trading instead of equal weights.

Tohokushinsha Film (2329 JP): 3D Persists Despite Strong Pushback

On 24 July, 3D Investment Partners proposed to privatise Tohokushinsha Film (2329 JP) through a tender at JPY600-650. 3D has extended the offer validity period from 23 to 30 August.
The controlling shareholder, Mr Hisako, claims he is not a seller regardless of price. The Board goes through the motions, knowing that Mr Hisako will decide the offer’s fate.
3D’s persistence suggests that Mr Hisako’s resolve might be checked by bumping the offer. As this outcome is likely, the shares will continue to trade through terms.

Understanding Potential Issues Within SK Group from Hynix’s Kioxia CB Conversion

Hynix’s potential 15% stake in Kioxia doesn’t violate the 20% rule because KFTC’s mandatory stake rule doesn’t apply to foreign investments.
SK Group may transfer Hynix’s 15% Kioxia stake to SK Square by splitting Hynix and merging its investment arm with SK Square for future AI investments.
SK Square may attract more attention than Hynix short-term, as Kioxia’s stake via Hynix could boost market expectations for value transfer to SK Square.

MV Australia A-REITs Index Rebalance Preview: One Close Add & Capping Changes

The review period for the September rebalance ends on 30 August. We do not see any constituent changes for the index but there will be capping changes.
Home Consortium Ltd (HMC AU) is just outside inclusion zone at the moment and outperformance over the rest of the week could result in inclusion.
Home Consortium Ltd (HMC AU)‘s inclusion and capping changes will result in a one-way turnover of 5% and in a round-trip trade of A$62m.

JSE Sep 24 Rebalance: PPH Expected to Enter Top 40, AMS to Fall Out

By Charlotte van Tiddens, CFA

Last night, the price snapshot was taken for the JSE September rebalance. The rebalance is scheduled to take place during the closing auction on Friday the 20th of September.
PPH is expected to enter the Top 40 with AMS falling out. No changes are expected for the FINI, FINDI, INDI or RESI.
There are several noteworthy free float changes across ALSI constituents, particularly amongst foreign counters (detail below).

LG Corp: Three Key Catalysts + NAV Valuation

Three key catalysts for LG Corp include potential inclusion in Korea Value Up Index, an IPO of LG CNS in 1Q 2025, and an increasing probability of higher shareholder returns.
An IPO of LG CNS is likely in 1Q 2025. LG CNS is currently valued at about 7 trillion won and LG Corp has a 50% stake.
Our base case NAV valuation analysis of LG Corp suggests implied NAV of 15.3 trillion won or NAV per share of 96,957 won, which is 19.8% higher than current price.

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

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

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

Aug 27

Daily Brief Event-Driven: Silverlake Axis (SILV SP): Voluntary Unconditional Offer and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Silverlake Axis (SILV SP): Voluntary Unconditional Offer
Shinko Electric (6967) Deal Approval Delayed; From Here, Big Gap-, Small Break-, Some Delay-Risk
KRX Value-Up Index Will Have Two Separate Indices, Excellent & Promising, With 150 Constituents
Huafa Property (982 HK): Buy With Both Hands
Shinko Electric (6967 JP): Tender Start Timelines Delayed
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Nuvoton Could Drop Some More
HK Connect SOUTHBOUND Flows (To 23 Aug 2024); Net Breaks the 28-Week Buying Streak on ETF Selling
Quiddity Leaderboard T50/100 Sep 24: Nuvoton Tech TDIV DEL Likely; Shin Kong M&A Consequences
Quiddity TDIV Sep 24 Flow Expectations: Final Expectations; One Deletion; US$253mn One-Way
KOSPI Size Indices: Momentum Stalls; (Some) Upward Migrations Sell-Off

Silverlake Axis (SILV SP): Voluntary Unconditional Offer

Silverlake Axis (SILV SP) has disclosed a voluntary unconditional offer from the Goh family and Ikhlas Capital. The default cash consideration is S$0.36, a 20.0% premium to the undisturbed price.
The combi consideration is S$0.30 in cash and one new redeemable preference share (RPS) in the offeror, which will be mandatorily redeemed after five calendar years at S$0.18 per RPS.
While not declared final, the offer is reasonable but not a knockout bid. The offeror is likely to use the voluntary delisting method to privatise Silverlake.

Shinko Electric (6967) Deal Approval Delayed; From Here, Big Gap-, Small Break-, Some Delay-Risk

Today after the close, Shinko Electric Industries (6967 JP) offered a progress report on the approvals for the JIC Consortium Tender Offer originally “scheduled” to start in late August 2024.
“Procedures and Steps Necessary under the competition laws of Vietnam and China have not been completed” so the Tender Offeror expects to commence the Tender Offer in/after late January 2025.
The announcement appears to suggest no update is likely for another five months or until the Tender Offer starts. That will introduce questions of further delay.

KRX Value-Up Index Will Have Two Separate Indices, Excellent & Promising, With 150 Constituents

KRX plans to launch the Value-Up Index as two separate indices: the “Excellent Value-Up Index” and the “Promising Value-Up Index.”
The universe will include 150 constituents from KOSPI 200 and KOSDAQ 150. Allocation between indices is undecided, with sector limits on number and weight confirmed.
The key indicators (ROE, PBR, shareholder return rate) remain unchanged. The Promising Index’s weights are undisclosed, but the Excellent Index favors financial and automotive stocks.

Huafa Property (982 HK): Buy With Both Hands

A state-owned Offeror pitching a lifetime high Offer Price – with a solid premium – for an illiquid company? Sounds like a slam dunk.
Yet property manager Huafa Property Services Group (982 HK) has perennially traded wide to Huafa Industrial Co., Ltd. Zhuhai (600325 CH)‘s terms. This is not justified.
The Scheme Meeting/SGM is tomorrow (28 August), with payment on (or before) the 30 September. Or a gross/annualised return of 4%/46%. Buy here. Then buy some more.

Shinko Electric (6967 JP): Tender Start Timelines Delayed

Shinko Electric Industries (6967 JP) pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The tender start has been delayed from late August to around late January 2025.
The delay was due to outstanding China SAMR and Vietnam regulatory approvals. The stretched timeline suggests that SAMR will likely conditionally approve the deal.
While Ibiden Co Ltd (4062 JP)’s underperformance lowers the deal’s break price, timing, not break risk, remains the key concern. At the last close, the gross/annualised spread was 3.7%/7.5%.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Nuvoton Could Drop Some More

With the review period complete, Nuvoton Technology (4919 TT) is a near certain deletion from the Yuanta/P-Shares Taiwan Dividend Plus ETF in September.
Passive trackers will need to sell 20m shares in Nuvoton Technology (4919 TT). That is over 10% of float and the stock could continue to remain under pressure.
The potential deletion still appears to be under positioned. There could be renewed selling in the stock over the next few weeks.

HK Connect SOUTHBOUND Flows (To 23 Aug 2024); Net Breaks the 28-Week Buying Streak on ETF Selling

SOUTHBOUND was a net seller this past week for HK$1.5bn, the first week in 29 where SB was a net seller. It was all ETFs. Stocks were a net buy.
Gross volumes remain very low. Net volumes de minimis. Very August-ish. No sectors stood out.
The largest net buy was CSPC Pharmaceutical Group (1093 HK) where the net buying was the same size as the fifth largest net sell (Tencent (700 HK))

Quiddity Leaderboard T50/100 Sep 24: Nuvoton Tech TDIV DEL Likely; Shin Kong M&A Consequences

The T50 index represents the top 50 largest stocks by market capitalization in the Taiwan Stock Exchange (TWSE). The T100 index represents the next 100 largest names (51-150 ranks).
Today is the base date for the September 2024 index rebal event and the expected ADDs/DELs discussed in this insight are our final index change expectations.
Separately, we also have a look at the T50/100 index implications of the Shin Kong Financial Holding (2888 TT) – Taishin Financial Holding (2887 TT) merger situation.

Quiddity TDIV Sep 24 Flow Expectations: Final Expectations; One Deletion; US$253mn One-Way

The TDIV index tracks the top 50 names in the Taiwan Stock Exchange with the highest dividend yields. It is a yield-weighted index with unique capping rules.
Today is the base date for determining constituent weights/capping for the TDIV index September 2024 index rebal event.
We expect one deletion in September 2024 and we estimate the one-way capping flow to be around US$253mn.

KOSPI Size Indices: Momentum Stalls; (Some) Upward Migrations Sell-Off

The review period for the September rebalance of the KOSPI Size Indices commenced on 1 June and will end on 31 August. Only 4 trading days to go.
We see 7 migrations from MidCap to LargeCap, 1 new addition to LargeCap, 12 stocks moving from SmallCap to MidCap and 3 new additions to MidCap.
The upward migrations have underperformed the downward migrations over the last month as a few stocks have sold off hard. Some despite being included in global indices.

💡 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

Aug 26

Daily Brief Event-Driven: Shin Kong (2888.TW) And Taishin (2887.TW) Agree to Merge and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Shin Kong (2888.TW) And Taishin (2887.TW) Agree to Merge, But It Isn’t Clean, And It’s A Bad Price
Korea FSS Chief Calls for 10% Premium/Discount on Doosan Merger, Boosting Swap Spread to 30%
NIFTY MIDCAP150 Index Rebalance: 19 Changes a Side; Lots of Overlap with Other Index Flow
Quiddity NIFTY Sep 24 Rebal: US$647mn One-Way Capping for NIFTY Next 50; All Changes Were Predicted
Huafa Property Services (982 HK): What’s Going on as Shares Trades Very Wide Ahead of the Vote?
NIFTY NEXT50 Index Rebalance: 7 Changes on Expected Lines
Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
Merger Arb Mondays (26 Aug) – China TCM, Henlius, Canvest, GA Pack, Huafa, Tohokushinsha
Henlius (2696 HK): Was There Any Doubt?
KRX Sector Indexes’ Rebalancing Event, Often off Traders’ Radar but with Significant Price Impacts

Shin Kong (2888.TW) And Taishin (2887.TW) Agree to Merge, But It Isn’t Clean, And It’s A Bad Price

After rumours were rekindled a week earlier, on 22 August 2024, Taishin Financial Holding (2887 TT) and Shin Kong Financial Holding (2888 TT) announced they would merge.
The ratio is 0.6022 shares of Taishin for every share of Shin Kong putting NEWCO assets at about the level of Taiwan #3 CTBC Financial. That’s bad.
There’s history here. LOTS of history. This would need approvals from the FSC and FTC, but CTBC is already a spoiner, and the SKFH Board Meeting was anything but clean.

Korea FSS Chief Calls for 10% Premium/Discount on Doosan Merger, Boosting Swap Spread to 30%

FSS Governor Lee challenged the legality of the Robotics-Bobcat merger ratio, citing Article 176-5 of the Capital Markets Act, allowing a 10% premium or discount.
Following the FSS Governor’s statements, Doosan must likely apply a 10% premium/discount to the Robotics-Bobcat merger, creating a 30% spread based on current stock prices.
Doosan may still revise or cancel the merger, but the FSS Governor’s comments might boost Bobcat short-term. Given the uncertainty, aggressive trading is risky.

NIFTY MIDCAP150 Index Rebalance: 19 Changes a Side; Lots of Overlap with Other Index Flow

There are 19 changes a side for the NIFTY Midcap 150 Index at the September rebalance. There are many stocks with same-way flows from passive trackers of other indices.
Estimated one-way turnover is 9.8% resulting in a one-way trade of INR 8.2bn (US$98m). With US$40.1bn tracking the index actively, the impact on the stocks will be much larger.
The adds have outperformed the deletes this year, though near-term performance has been meh. There was a similar trend in March and the adds could outperform nearer to implementation.

Quiddity NIFTY Sep 24 Rebal: US$647mn One-Way Capping for NIFTY Next 50; All Changes Were Predicted

The September 2024 Rebalance results for the NIFTY broad market Indices were announced after the close on Friday 23rd August 2024.
There will be two changes for NIFTY 50 and five changes for NIFTY 100 during the September 2024 index rebal event. All of these changes were as predicted.
All NIFTY 50 and NIFTY 100 changes will also be reflected in the NIFTY Next 50 index which could see US$647mn one-way capping flows.

Huafa Property Services (982 HK): What’s Going on as Shares Trades Very Wide Ahead of the Vote?

The Huafa Property Services Group (982 HK) vote on Huafa Industrial Co., Ltd. Zhuhai (600325 CH)’ HK$0.29 offer is on 28 August. However, shares trade wide ahead of the vote.
Several readers have enquired about the unusually high spread ahead of the vote of a seemingly clean deal. The conversations raised several concerns.
The concerns are unwarranted, and this remains a clean deal. At the last close and for the 30 September payment, the gross/annualised spread was 5.5%/68.9%.

NIFTY NEXT50 Index Rebalance: 7 Changes on Expected Lines

There are 7 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) that will be implemented at the close on 27 September. Changes are on expected lines.
Estimated one-way turnover for the Nifty Next 50 Index (NIFTYJR INDEX) is 19.6% resulting in a one-way trade of INR 63.64bn (US$759m). Many stocks have over 1x ADV to trade.
The adds have outperformed the deletes this year but there has been big underperformance over the last month as stocks expected to benefit from rural spending have rallied.

Zomato: Index Inclusions & Passive Impact (Once Added to F&O)

Zomato (ZOMATO IN) has a market cap of over US$27bn but is not a member of the NIFTY Index and S&P BSE SENSEX Index since it is not an F&O member.
Once SEBI’s proposed and enhanced stock inclusion thresholds are implemented, Zomato (ZOMATO IN) should be added to the F&O segment of the market.
Passive NIFTY Index and S&P BSE SENSEX Index will have to buy a lot of Zomato stock at subsequent rebalances. The impact will be higher given the lower real float.

Merger Arb Mondays (26 Aug) – China TCM, Henlius, Canvest, GA Pack, Huafa, Tohokushinsha

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Malaysia Airports Holdings (MAHB MK), Capitol Health (CAJ AU).
Lowest spreads: Tohokushinsha Film (2329 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), Fancl Corp (4921 JP), C.I. TAKIRON Corporation (4215 JP).

Henlius (2696 HK): Was There Any Doubt?

Roughly six weeks ago, Shanghai Henlius Biotech (2696 HK) announced the scrip option condition was met. Just that Shanghai Fosun Pharmaceutical (2196 HK) (the Offeror) was weighing its options
This situation mirrored L’Occitane (973 HK)‘s (eventual) scrip option. And in place of Pleasant Lake in that transaction; Henlius has Loyal Valley Capital (5.8309% shareholder) behind the scenes.
Late Friday, Henlius updated the terms of Fosun’s Offer to now include the scrip option alternative. We expected nothing less. 1H24 results will also be out later today.

KRX Sector Indexes’ Rebalancing Event, Often off Traders’ Radar but with Significant Price Impacts