Event-Driven

In August, Janaghan Jeyakumar, CFA published his leaderboard and flow estimates for the FTSE Taiwan Dividend+ Rebalance which starts today and runs through next Thursday.
Late in August, I recommended a basket trade. Since then, the BUY basket has outperformed the SELL basket by 7.6%. Set & Forget it is up 7.2%.
I provided timing in the basket trade. Now it is time to swing the other way.

Hitachi Metals (5486) Gets SAMR Clearance, Finally. So Now We Can Sell.

Today before the open, China’s State Administration for Market Regulation (SAMR) finally announced the approval of the takeover of Hitachi Metals (5486 JP). This was what delayed things.
The approval had actually been issued on 7 September, and the collected approvals in the week to the 12th were announced today. Some media outlets had the info yesterday.
I expect it is likely that the Bain Tender Offer to buy Hitachi Metals will be announced today after the close, or at latest, early next week.

Shanghai/Shenzhen Southbound Connect: Weekly Moves (15 September 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$0.33bn, split (+US$0.16bn) for Shanghai and (+US$0.17bn) for Shenzhen.
The largest inflows were into Tencent (700 HK) and China Mobile (941 HK). The largest outflows were in Hang Seng H Share Index ETF (2828 HK) and Geely (175 HK).

IStyle’s @Cosme Gets a Boost from Amazon Investment

By Michael Causton

Japan’s cosmetics market is the focus of attention from many large international businesses thanks to strong sales and new growth businesses.
The latest is Amazon, which is to become the biggest shareholder in Istyle Inc (3660 JP), providing a major boost to the @Cosme operator.
IStyle, meanwhile, plans to offer cosmetics brands the chance to open popup stores within its retail chain for fixed monthly fees.

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

Since mid-August, spreads have shown a mixed performance across our liquid universe with a slight bias towards tightening (with the exception of German shares, which have generally widened).
Trade recommendations long ords / short prefs: Fuchs Petrolub, SSAB Svenska Stal.
Recommendations Long prefs / short ords: Sixt, VW, MFE-Media for Europe, Grifols, Atlas Copco.

Shanghai/Shenzhen Northbound Connect: Weekly Moves (15 September 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 inflow over the past week was ~US$1.9bn, split between Shanghai (+US$1.1bn) and Shenzhen (+US$0.8bn).
The largest inflows were into Kweichow Moutai (600519 CH) and S.F. Holding (002352 CH). The largest outflows were in China Merchants Bank A (600036 CH) and CATL (A) (300750 CH).

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Sep 16

Daily Brief Event-Driven: SBI (8473) Buys Back Into ARUHI (7198) In Partial Tender Offer and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

SBI (8473) Buys Back Into ARUHI (7198) In Partial Tender Offer
Genting Fancies A Flutter In Macau
SAIC’s Unconditional Offer For Dongzheng Now Open
KOSDAQ 150 Early Entry Candidates for December Rebalancing
S.M.Entertainment – Chairman Lee Soo Man to End Contract with Like Planning (A Big Catalyst!)
Dongzheng’s Unconditional MGO at HK$1.2430 Opens
EQD | HSI (HSI Index): Use Derivatives to Play Tactical Long and Relative Value Vol Trade Vs SPX
TIGER Battery ETF (WISE) Rebalancing in October

SBI (8473) Buys Back Into ARUHI (7198) In Partial Tender Offer

Yesterday, SBI Holdings (8473 JP) announced it would launch a tender offer to buy 33.4-51% of Aruhi Corp (7198 JP) at ¥1,500/share – a 48.5% premium to the close.
ARUHI – Japan’s largest “mortgage bank” – was listed in late 2017. Long ago, its predecessor was named SBI Mortgage. This is SBI buying back in.
Inside we look at valuations, shareholder structure, pro-ration. There are opportunities here.

Genting Fancies A Flutter In Macau

In a surprise move, Genting Bhd (GENT MK) – or Genting Malaysia (GENM MK) – has joined the six incumbents in bidding for new casino licences in Macau.
The bidding process follows Macau’s record low monthly gaming revenue in July after casinos were closed for 12 days in response to a Covid outbreak.
Casinos have re-opened, yet there is little to cheer about as business remains muted. The six winners are expected to be announced by the end of November or early December.

SAIC’s Unconditional Offer For Dongzheng Now Open

Back on the 19 May, SAIC (600104 CH) acquired China Zhengtong Auto Services (1728 HK)‘s 71.04% stake in Dongzheng Automotive Finance (2718 HK) at a judicial auction. This triggered the mandatory Offer.
SAIC confirmed a possible unconditional mandatory cash Offer for Dongzheng on the 26 May.
The Composite Doc has now been dispatched. The Offer is open for tendering and closes on the 16 October

KOSDAQ 150 Early Entry Candidates for December Rebalancing

HPSP (403870 KS) and Sungeel Hitech (365340 KS) are the candidates for Early Entry in the December rebalancing as they sit comfortably within the Early Entry zone.
Rsupport (131370 KS) and Kona I (052400 KS) are safe deletion bets. If they are not deleted through the rebalancing process, they will most likely be excluded by Early Entry.
HPSP and SungEel should see an inflow equivalent to 0.9x and 0.8x ADTVs, respectively. Rsupport and Kona I will likely suffer an outflow of 3.4x and 3.8x ADTVs, respectively.

S.M.Entertainment – Chairman Lee Soo Man to End Contract with Like Planning (A Big Catalyst!)

By Douglas Kim

After the market close today, S.M.Entertainment announced that its Chairman Lee Soo Man will end the contract with Like Planning, a contents producing company owned by Lee Soo Man.
We estimate that S.M.Entertainment has paid more than 160 billion won to Like Planning in the past 10 years.
By ending the relationship between Chairman Lee Soo Man and Like Planning, this should have a major positive impact on S.M.Entertainment shares in the coming weeks.

Dongzheng’s Unconditional MGO at HK$1.2430 Opens

Dongzheng Automotive Finance (2718 HK)‘s composite document is out with the offer open from 15 September to 6 October. The IFA considers the offer to be fair and reasonable.
SAIC Motor (600104 CH), which acquired a 71.04% stake, has launched an unconditional MGO at HK$1.2430 per H Share. SAIC intends to maintain Dongzheng’s listing status.
At the last close and the 17 October payment, the gross and annualised spread to the MGO price is 1.1% and 13.3%, respectively.

EQD | HSI (HSI Index): Use Derivatives to Play Tactical Long and Relative Value Vol Trade Vs SPX

By Simon Harris

HSI INDEX is trading back down to recent lows and support levels. It looks oversold and there are potential catalysts for a bounce
Implied vols are low and options offer a great way to play a tactical long
We highlight a relative value vol trade vs the SPX

TIGER Battery ETF (WISE) Rebalancing in October

The rebalancing trading will be at the close on October 13. The AUM currently amounts to ₩1.32T with 28 constituents, implying that the passive impacts wouldn’t be insignificant.
It will likely show a similar pattern to the last rebalancing. With no constituent change, weight adjustment by 10% cap of top stocks leads to weight adjustment of the rest.
An important variable here is the entry of newly listed stocks. SungEel Hitech and Sebitchem, the two larger cap stocks, appear to have a reasonably high inclusion probability.

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Sep 15

Daily Brief Event-Driven: Atlas Arteria Placement – How to Lose Friends and Alienate Your Largest Shareholder and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Atlas Arteria Placement – How to Lose Friends and Alienate Your Largest Shareholder
SET50 Index Rebalance Preview: Three Potential Changes in December
Atlas Arteria (ALX AU): Acquisition, ANREO & ASX50 Inclusion
Ramsay’s Bait-And-Switch KKR Offer Heads for the Exit
VNET: Management’s Low-Balled Non-Binding Proposal
Moya Holding’s S$0.092 Delisting Offer
Moya Holdings: Anthoni Salim’s Exit Offer
Australia: S&P/ASX, FTSE, REMX, GDXJ Flows This Friday
NTT (9432) Buyback Has Come – But NTT Is Gonna Grind Out Better EPS So I’d Keep It
EQD | Volkswagen (VOW3 GY): Porsche IPO Could Unlock Value-We Look at the Best Derivative Trades

Atlas Arteria Placement – How to Lose Friends and Alienate Your Largest Shareholder

By Sumeet Singh

Atlas Arteria (ALX) aims to raise around US$2bn (A$3bn) via a non-renounceable entitlement offer to fund the purchase of its majority interest in Chicago Skyway.
Over the past few months, ALX has garnered interest from IFM which has increased its stake to 19.99%. IFM had publicly opposed this acquisition.
In this note, we will talk about the deal dynamic and run the deal through our ECM framework.

SET50 Index Rebalance Preview: Three Potential Changes in December

The market cap review period for the December rebalance of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) started on 1 September and will end 30 November.
We currently see one high probability change and two lower probability changes to the index at the upcoming rebalance.
There are a couple of lower probability adds/deletes that will have between 3-5 days of ADV to trade from passive funds and could be interesting from a trading angle.

Atlas Arteria (ALX AU): Acquisition, ANREO & ASX50 Inclusion

Atlas Arteria (ALX AU) is acquiring 66.67% in Skyway Concession Company LLC, the concessionaire of the Chicago Skyway for an equity value of US$2.013bn (A$3.098bn).
The acquisition will be funded by a fully underwritten 1:1.95 ANREO to raise A$3.098bn. The offer price of A$6.3/share is a 13.7% discount to TERP and 19.3% discount to last.
The increase in market cap could result in Atlas Arteria (ALX AU) being added to the S&P/ASX 50 Index at the December rebalance.

Ramsay’s Bait-And-Switch KKR Offer Heads for the Exit

KKR cannot improve the terms of its offer but left the door open by stating that a deal can be quickly closed if the Board is willing to reset expectations.
The transaction is stuck in an impasse as Ramsay Health Care (RHC AU) will not recommend KKR’s offer until it is improved, and KKR says it cannot improve terms.
The peers’ shares have been, on average, flat since the undisturbed date. The shares are trading slightly below the undisturbed price and are attractive on fundamentals.

VNET: Management’s Low-Balled Non-Binding Proposal

Back on the 11 April, Chinese internet data center services provider VNET (VNET US) announced a non-binding proposal from Hina Group and Shanghai’s Industrial Bank at an utterly underwhelming US$8.00/ADS.
Then crickets. A reported tilt from MBK Partners failed to materialise.
VNET has now announced a preliminary non-binding proposal from founder Josh Sheng Chen, at a similarly underwhelming price of US$8.20/ADS.

Moya Holding’s S$0.092 Delisting Offer

Moya Holdings Asia (MHAL SP) received a delisting proposal from Tamaris Infrastructure (a 72.84% shareholder) at S$0.092 per share, a 41.5% premium to the undisturbed price (8 September).
The key condition is shareholder approval. Gateway Partners, which holds a blocking stake, will likely use the offer as an opportunity to exit an underperforming investment.
The offer price is attractive. At the last close price, the gross and annualised spread for a year-end effective date is 3.4% and 11.5%, respectively.

Moya Holdings: Anthoni Salim’s Exit Offer

Indonesian water treatment play Moya Holdings Asia (MHAL SP) has announced an Exit Offer from Tamaris Infrastructure, an Anthoni Salim-controlled entity.
The Offer price is S$0.092/share, a 41.5% premium to last close. The Offer price will not be increased.
The Offer requires approval from 75% of disinterested shareholders. Tamaris and its concert parties hold 72.84%.

Australia: S&P/ASX, FTSE, REMX, GDXJ Flows This Friday

Changes to the S&P/ASX indices, FTSE All-World/All-Cap, VanEck Vectors Rare Earth/Strategic Metals (REMX US) and VanEck Vectors Junior Gold Miners (GDXJ US) will be implemented at the close on Friday.
There are quite a few stocks that have over 5 days of ADV to trade from passive trackers. Pre-positions will be built up on a lot of names.
Short interest has increased on a lot of additions/upweights and decreased on the deletions/downweights.

NTT (9432) Buyback Has Come – But NTT Is Gonna Grind Out Better EPS So I’d Keep It

NTT announced a buyback in May as discussed in NTT (9432) – Salutary Earnings Salutary Buyback, More to Go, via ToSTNeT-3 to buy a chunk of the govt’s stake.
That will be executed by ToSTNeT-3 buyback pre-open tomorrow, with a bid of 103.1725mm shares at ¥3,877. A separate report suggests the Ministry of Finance will sell 92mm shares.
It is like a mini tender offer so if you want to sell a large chunk of shares, you can. But I wouldn’t.

EQD | Volkswagen (VOW3 GY): Porsche IPO Could Unlock Value-We Look at the Best Derivative Trades

By Simon Harris

Volkswagen are planning to IPO Porsche in order to address company valuation and to raise funds to further expand into the EV market.
The stock looks attractive on a valuation basis and the company has the potential to transform and future proof the business and gain a more favourable P/E ratio.
We look at the Derivatives Market for the best risk reward strategies.

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Sep 14

Daily Brief Event-Driven: Link Admin/D&D Deal Appears Toast As The Woodford Shoe Drops and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Link Admin/D&D Deal Appears Toast As The Woodford Shoe Drops
Frasers Hospitality Trust Scheme Vote Fail – Minority Apathy Meets Vocal Minority. Units Drop Hard.
Giordano’s VGO Lapses
PCOMP Index Rebalance Preview Feb 23: Updated Methodology to Drive Changes
VNET’s Opportunistic US$8.20 Bid from the Founder
Canon Buyback Done, Ricoh’s Done Shortly, Back To Your Regularly Scheduled Program
Link’s Scheme on Life Support as the FCA Lands a Heavy Blow
Arb Carnage As Giordano’s Offer Also Fails
111 Inc’s Low-Balled Homecoming Is A Done Deal
Teniralc/Cary Group: Final Offer

Link Admin/D&D Deal Appears Toast As The Woodford Shoe Drops

The UK Financial Conduct Authority will approve Dye & Durham’s Offer for Link Administration (LNK AU) provided it backstops restitution and/or redress payments that the FCA may levy on …
… Link Fund Solutions Limited (LFSL) in relation to its management of the Woodford Fund. The amount? Up to a maximum ~A$523mn.
The FCA decision is not final. LFSL does not agree with its view. If D&D does not accept this commitment then a condition under the Scheme may not be satisfied.

Frasers Hospitality Trust Scheme Vote Fail – Minority Apathy Meets Vocal Minority. Units Drop Hard.

In a somewhat extraordinary turn of events, the Scheme Meeting for the Frasers Hospitality Trust (FHT SP) takeover did not garner enough votes to get to YES.
About 3% of units (about 8% of minorities) came out against. But only 18.8% of minorities actually voted. The deal has failed. The bidders can’t come back for a while.
The units are trading down nearly 25% today as a result. This is cheap against both hospitality and major S-REIT peers. Inside, I discuss Overhang and Divs.

Giordano’s VGO Lapses

The offeror and acceptances reached 46.04%, just short of the 50% minimum acceptance condition. The offeror has decided to let the Giordano International (709 HK) offer lapse.
The offer fell short of the 50% threshold as the Cheng family mistakenly assumed that shareholders behind Halycon’s stake were friendly shares, which would support the offer.
The downside will be muted as the shares are trading in line with the 1-year average forward P/E, minorities thought the offer was low, and David Webb is a buyer.

PCOMP Index Rebalance Preview Feb 23: Updated Methodology to Drive Changes

From December 2022, the minimum free float requirement to be a part of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) increases from 15% to 20%.
This could result in three deletions from the index which will result in three stocks being added to the index. Passive trackers selling the deletes will push the stocks lower.
The three current constituents could remain in the index if they sell stock to increase the free float. That would in turn put downward pressure on the stocks.

VNET’s Opportunistic US$8.20 Bid from the Founder

21Vianet Group (VNET US) disclosed a privatisation proposal from the founder at US$8.20 per ADS, a 2.5% premium to The Hina Group/Industrial Bank’s offer of US$8.00 (disclosed on 11 April).
The data centre industry continues to be a hotbed for M&A. Bloomberg reported on 27 July that MBK Partners is mulling an offer for VNET.
The offer is unattractive, and Mr Cheng, with 28.79% of voting rights, will need the support of other substantial shareholders. This latest offer underlines the current mispricing of the shares

Canon Buyback Done, Ricoh’s Done Shortly, Back To Your Regularly Scheduled Program

Canon Inc (7751 JP) has announced two buyback programs this year of ¥50bn each. Ricoh Company Ltd (7752 JP) announced one in May for ¥30bn.
The result is 2.9% bought back vs 4.4%. The accretion nod goes to Ricoh. But so does the overhang nod going forward. Effissimo+Crossholders is 40% for Ricoh. Mid20s for Canon.
Buyback impact-related trade timing has worked for Canon. Ricoh’s buyback ends imminently. There may be a trade to do here.

Link’s Scheme on Life Support as the FCA Lands a Heavy Blow

FCA approval, a condition precedent, will be granted subject to a condition that Link Administration (LNK AU) makes funds available to cover any redress payments related to the Woodford matters.
The FCA’s maximum redress payment is £306 million. The timeline and amount of the final FCA fine remain unknown. Dye&Durham/DND and Link will struggle to find a resolution.
With a 30 September end date, the deal is teetering on collapse. The share price may prove attractive for long-term value investors as it reflects a sizeable FCA fine.

Arb Carnage As Giordano’s Offer Also Fails

Utter carnage in arb-world this week, as Frasers Hospitality Trust (FHT SP) fails, Link Administration (LNK AU) and Ramsay Health (RHC AU) are potentially next, and now Giordano (709 HK).
46.04%. That’s the only number that matters, which represents the total shares owned by the Cheng family plus shares tendered.
The Chengs are restricted from launching another Offer for 12 months. Giordano will be sold off today, however, this is a buy if it retraces to around the undisturbed levels.

111 Inc’s Low-Balled Homecoming Is A Done Deal

111 Inc (YI US), an online healthcare platform operator in China, announced an unsolicited preliminary non-binding proposal from Gang Yu and Junling Liu – both co-founders and co-chairmans.
Yu and Liu are offering US$3.66/ADS, a 20% premium to the undisturbed price.
Yu and Liu control 92.1% of the votes. There is no shareholder vote on this transaction should a firm Offer unfold.

Teniralc/Cary Group: Final Offer

In light of low acceptances and a cold statement from the independent bid committee, Teniralc increased the offer by 7.7% to SEK 70/share (same as IPO, 17.2x EV/EBITDA).
The increased offer is final, represents a 72% premium and has been unanimously recommended. The acceptance period now runs until 22 September.
As of 12 September closing share price, gross spread is 4.2%, an interesting level, in my view, considering settlement will take place “on or about 30 September”. Reiterate Long CARY SS.

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Sep 13

Daily Brief Event-Driven: Frasers Hospitality Trust’s Scheme Votes Unexpectedly Falls Short and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Frasers Hospitality Trust’s Scheme Votes Unexpectedly Falls Short
India: AMFI Stock Reclassification Preview (Dec 2022)
SHiDAX Board-Oisix-Shida Family Scrap
STAR50 Index Rebalance Preview: Four or Five Changes in December
Tencent : A Long but Use Options to Mitigate Any Broader Market Risks
MVIS Vietnam Index Rebalance: One Add, Two Deletes
KODEX Battery ETF Rebalancing: Target Weight & Qty in CU of Each Constituent
Tullow/Capricorn: Unsuitable on Current Terms
United Tractors (UNTR IJ) Buyback – One Month To Go
PropertyGuru SPAC Lock-Up – Two PE’s with a US$450m Stake Are Stuck with a Liquidity Conundrum

Frasers Hospitality Trust’s Scheme Votes Unexpectedly Falls Short

Frasers Hospitality Trust (FHT SP)’s scheme just fell shy of clearing the value test as 74.88% of the total votes cast approved the scheme resolution vs the 75% requirement.
The shares were trading tight to terms as Frasers Property Ltd (FPL SP)’s offer of S$0.714 comprising of S$0.70 cash per share + permitted distributions (estimated 1.356 cents) was attractive.
We estimate that the surprising deal break will likely lead to a 15-20% share price fall. The last close price is around 24% higher than the undisturbed price (S$0.57).

India: AMFI Stock Reclassification Preview (Dec 2022)

Less than halfway through the review period, we see 6 stocks moving from MidCap to LargeCap and vice versa, and 7 stocks moving from SmallCap to MidCap and vice versa.
There are a bunch of stocks that are close to the cutoff ranks and there will be more change as we move deeper into the review period.
Over the last 6months, stocks expected to migrate upward have outperformed stocks that are expected to migrate downward. Given the large divergence, there will be a pullback at some point.

SHiDAX Board-Oisix-Shida Family Scrap

Shidax Corp (4837 JP) is under offer for a partial tender by Oisix ra daichi (3182 JP). Unison Capital is expected to tender their shares.
Unison may not want to go against the board but a direct transfer (i.e. not tender offer) is still possible.
Some Independent Board Members have suggested the company buy Unison’s shares back. This might work BUT the end game is still the same.

STAR50 Index Rebalance Preview: Four or Five Changes in December

Nearly 90% of the way through the review period, we see 4 changes using a 12 month minimum listing history, and 5 changes using a 6 month minimum listing history.
There are overlaps in the inclusions using 6/12 month minimum listing history, so there is less risk if the index committee switches from 6 to 12 months at the review.
Using a 6 month minimum listing history, one-way turnover is estimated at 5.07% and will result in a one-way trade of CNY 2,795m.

Tencent : A Long but Use Options to Mitigate Any Broader Market Risks

By Simon Harris

Derivative trade ideas to maintain upside/protect downside in Tencent. Stock is cheap but risks remain
Take advantage of a retracement in implied vols and depressed skew levels to improve payoffs and protect against broader market risk
We look at 3 alternative trades depending on your position and outlook

MVIS Vietnam Index Rebalance: One Add, Two Deletes

Hagl Jsc (HAG VN) is an inclusion while An Phat Holdings (APH VN) and CEO Group (CEO VN) are deletes from the MVIS Vietnam Index at the September rebalance.
There are a lot of float and capping changes that will result in one-way turnover of 12% and a one-way trade of US$45m.
There are a lot of stocks that have over 1 day of ADV to trade and there could be opportunities to enter/exit positions on a move in the stocks.

KODEX Battery ETF Rebalancing: Target Weight & Qty in CU of Each Constituent

KODEX Battery ETF rebalancing began on September 8 and runs until this Tuesday, the 14th. Its AUM is 1.3 trillion won, and the number of constituents is only 25.
The quantity change in one CU for the 13th was confirmed. Tomorrow’s are estimates based on equal daily weights. With still two-thirds to go, the flow/price impact looks still juicy.
SK Innovation, L&F, LG Energy, and Ecopro will show a significant size in weight change and passive flow, so they are safe names for a LONG SHORT basket trading.

Tullow/Capricorn: Unsuitable on Current Terms

On 9 September, Capricorn’s closing share price was at a c. 29% premium vs. merger terms (186.46p); scheme approval seems tricky. Capricorn has signaled it is open to explore other transactions.
To rebalance the exchange equation, Tullow should offer at least 4.904043 TLW LN x 1 CNE LN, which would change the balance of power (Capricorn 51.8%, Tullow 48.2%).
Cash makes up to 72% of Capricorn’s shares, whose latest price movements could either anticipate some statement from Tullow or other “potential outcomes”. I’d be long Capricorn, rather than the spread.

United Tractors (UNTR IJ) Buyback – One Month To Go

In mid-July, United Tractors (UNTR IJ) announced a buyback of up to 5 trillion rupiah, buying back “up to 20% of shares out.”
In United Tractors (UNTR IJ) Buyback – Sure to Be Impactful I said the buyback would be smaller than the headlines, but still likely quite impactful.
On Day 1, shares rose 5% to IDR 28,275. Since then the stock is up an additional 22%. Now we have a month left. There may be more juice still.

PropertyGuru SPAC Lock-Up – Two PE’s with a US$450m Stake Are Stuck with a Liquidity Conundrum

By Sumeet Singh

PropertyGuru (PG) tried to raise around US$300m when it undertook a merger with Bridgetown 2 SPAC in Mar 2022.
The transaction valued PropertyGuru at an EV of US$1.35bn and equity value of US$1.78bn. It is now trading at less than half that valuation and with very limited liquidity.
In this note, we will talk about the lock-up dynamics and updates since our last note.

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Sep 12

Daily Brief Event-Driven: 111’s Opportunistic US$3.66 Bid from the Co-Founders and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

111’s Opportunistic US$3.66 Bid from the Co-Founders
Backtesting Implications: Korea Sector ETFs Rebalancing on the 8th
Merger Arb Mondays (12 Sep) – DTAC/True, Link Admin, Ramsay, Genex, Tyro, EVOC, Giordano, 111
Repsol: Sale of 25% of E&P Division

111’s Opportunistic US$3.66 Bid from the Co-Founders

111 Inc (YI US), the largest virtual pharmacy network in China, disclosed a privatisation proposal from a co-founder-led consortium at US$3.66 per ADS, a 20.0% premium to the undisturbed price.
For privatisation to succeed, shareholders representing two-thirds of shares present and voting need to approve the deal. The co-founders represent 92.04% of the total voting power.
The offer price is unattractive but this is a done deal. At the last close, the gross and annualised spread for a January 2023 completion is 11.6% and 33.4%, respectively.

Backtesting Implications: Korea Sector ETFs Rebalancing on the 8th

Compared to the tightly crowded KOSPI 200, the sector ETFs’ rebalancing flow trading appears relatively less crowded, which led to a significantly higher flow/price correlation on the rebalancing day.
The KRX now delivers the rebalancing results of the KRX Sector & K-New Deal Indexes only to paying customers. This can increase the profit effect of acquiring prior information.
So, safe play, which builds up a position from the time this information is acquired, rather than an aggressive preemptive position build-up, can still obtain a sufficient level of juice.

Merger Arb Mondays (12 Sep) – DTAC/True, Link Admin, Ramsay, Genex, Tyro, EVOC, Giordano, 111

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Genex Power Ltd (GNX AU), Infomedia Ltd (IFM AU), 111 Inc (YI US).
Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), MyDeal.com.au Ltd (MYD AU), MACA Ltd (MLD AU).

Repsol: Sale of 25% of E&P Division

The $19bn EV operation (vs. Repsol’s market cap of €19bn) allows Repsol to maintain the majority in a strategic area, crystallizes value (market assigns a higher valuation to the E&P division separately).
The implied valuation by the market is on average $3 billion lower. As usual with a minority stake sale, the market rarely values it at 100%.
I estimate a moderate positive impact (the deal is similar to what was announced in July), value unlocking could theoretically reach €2.5-€3 per share, but I’d take a neutral stance.

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Sep 11

Daily Brief Event-Driven: MVIS Global Junior Gold Miners Index Rebalance: One Delete & Plenty of Float Changes and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MVIS Global Junior Gold Miners Index Rebalance: One Delete & Plenty of Float Changes
MVIS Global Rare Earth/Strategic Metals Index Rebalance: Three Adds, Two Deletes
Korea ETF Market Size Breakdown from a Flow Trading Perspective
Last Week in Event SPACE: SOHO China, Nikkei 225 Review, SK Chemicals, SingTel, Porsche, Tyro
Weekly Deals Digest (11 Sep) – Giordano, DTAC/True, Link Admin, Nitro, Tyro, Ramsay, CALB, Onewo
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Tyro, Shidax, Link Admin, Giordano, Hitachi Transport
Index Rebalance & ETF Flow Recap: NKY, HSCEI, REMX, GDXJ, Link Admin

MVIS Global Junior Gold Miners Index Rebalance: One Delete & Plenty of Float Changes

Great Panther (GPL US) is a deletion from the VanEck Vectors Junior Gold Miners ETF (GDXJ US). There are a lot of float changes that will result in passive flows.
One way turnover is estimated at 3.4% and will result in a one-way trade of US$106m at the September rebalance.
Most index constituents have traded poorly over the last few months and the stocks with passive inflows could outperform their peers in the short-term.

MVIS Global Rare Earth/Strategic Metals Index Rebalance: Three Adds, Two Deletes

Sayona Mining (SYA AU), Sigma Lithium (SGML US) and Tianqi Lithium (9696 HK) will replace Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) in the index.
Sayona Mining (SYA AU) is also an inclusion to the FTSE All-Cap and S&P/ASX 200 on the same day as the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX US) addition.
We had Sayona Mining (SYA AU) and Tianqi Lithium (9696 HK) as potential adds while Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) were high probability deletes.

Korea ETF Market Size Breakdown from a Flow Trading Perspective

There are 611 ETFs with a combined AUM of ₩76T. Korea is in the global top 7. ₩32T worth of ETFs belongs to local equity, half of which are index-trackers.
The market began to pay attention to the less crowded areas. The result is the rise of sector ETFs. Sector-type has also grown significantly, now with an AUM of ₩8.4T.
Lower predictability causes their rebalancings to be relatively less crowded. That is, the profit effect of acquiring prior information is much more dramatic on the day of rebalancing trading.

Last Week in Event SPACE: SOHO China, Nikkei 225 Review, SK Chemicals, SingTel, Porsche, Tyro

Soho China (410 HK)‘s Pan Shiyi is resigning to focus on “philanthropic pursuits”. That sounds like “donations”, which can be sourced from the Pans selling their stake in SOHO.
In the Nikkei 225 Annual Review, Nidec (6594 JP), SMC (6273 JP), Hoya (7741 JP) are IN. Unitika (3103 JP), Maruha (1333 JP), and Oki Electric (6703 JP) are OUT.
Volkswagen (VOW GR) confirms its intention to float a portion of its Porsche sports-car brand within weeks, in what is expected to be one of Germany’s largest-ever public debuts.

Weekly Deals Digest (11 Sep) – Giordano, DTAC/True, Link Admin, Nitro, Tyro, Ramsay, CALB, Onewo

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 – Leapmotor (2007699D HK), Onewo Space-Tech (ONEWO HK) and CALB (CALBLZ CH) are pre-marketing a US$1.5 billion, US$2.0 billion and US$2.0 billion HKEx IPOs, respectively.
Event-Driven developments – DTAC/True, Giordano International (709 HK), Link Administration (LNK AU), MyDeal.com.au Ltd (MYD AU), Nitro Software Ltd (NTO AU), Resapp Health (RAP AU), Tyro Payments (TYR AU).

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Tyro, Shidax, Link Admin, Giordano, Hitachi Transport

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.
Two new deals were discussed this week: Potentia’s rejected proposal forTyro Payments (TYR AU) and Oisix ra daichi (3182 JP)‘s tilt for Shidax Corp (4837 JP).
Key updates took place for Link Administration (LNK AU), Giordano International (709 HK), and Hitachi Transport System (9086 JP).

Index Rebalance & ETF Flow Recap: NKY, HSCEI, REMX, GDXJ, Link Admin

The last week had the announcement of the Nikkei 225 (NKY INDEX) September changes and the implementation of the SSE STAR50 (STAR50 INDEX) rebalance.
The coming week will have the implementation of the FTSE AW/AC, FTSE China 50/A50, Taiwan 50/Div+, STI, EPRA Nareit, S&P/ASX, REMX and GDXJ rebalances.
There were large outflows from iShares MSCI ACWI ETF (ACWI US) and iShares MSCI Emerging Markets (EEM US) during the week.

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Sep 10

Daily Brief Event-Driven: Tyro Payments Rejects Potentia’s Proposal. MCB Accepts and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Tyro Payments Rejects Potentia’s Proposal. MCB Accepts
Poongsan Corp: Spin-Off of Defense Business Is Negative for Existing Minority Shareholders

Tyro Payments Rejects Potentia’s Proposal. MCB Accepts

Tyro Payments (TYR AU) has rejected a proposal from a Potentia-led consortium at A$1.27/share, by way of a Scheme.
Mike Cannon-Brookes’ Grok Ventures, holding 12.5% and Tyro’s largest shareholder, has backed the Offer.
Tyro’s board considered the proposal to be materially below Tyro’s fundamental value and highly opportunistic. Tyro’s share price was down 66% ytd prior to Potentia’s approach.

Poongsan Corp: Spin-Off of Defense Business Is Negative for Existing Minority Shareholders

By Douglas Kim

On 7 September, Poongsan Corp announced a physical division spin-off of its defense business unit. This is likely to have a negative impact on the existing shareholders of Poongsan Corp.
Its proposal to spin off the defense business comes at a bad time when investors are very cautious about companies trying to spin off valuable businesses into a separate entity.
Poongsan’s spin-off is excluded from the need to include stock purchase rights.

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Sep 09

Daily Brief Event-Driven: Link Admin (LNK AU): ACCC Approval & Index Changes and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Link Admin (LNK AU): ACCC Approval & Index Changes
Link Admin Gets ACCC Nod. Woodford Condition Outstanding
Link’s Scheme in the Home Stretch by Securing ACCC and CBI Approval
Oisix-Shida Stoush with SHiDAX Suggests Strong but Subtle Strategy
Tyro in Play as It Rejects Potentia’s A$1.27 Offer

Link Admin (LNK AU): ACCC Approval & Index Changes

The ACCC will not oppose the proposed acquisition of Link Administration (LNK AU) by Dye & Durham removing a major hurdle. Other regulatory approvals are still pending.
If regulatory clearances are received in the next week and the Court approves the Scheme, Link Administration (LNK AU) will stop trading at the close on 15 September.
We estimate passive trackers across all indices will need to sell 35.53m shares (A$153m; 18 days of ADV) of Link Administration (LNK AU) at the close on 15 September.

Link Admin Gets ACCC Nod. Woodford Condition Outstanding

Link Administration (LNK AU) has announced the Australian Competition and Consumer Commission will not oppose Dye & Durham’s proposed acquisition.
The next step is the rescheduled second court hearing on the 15 September.
The key outstanding condition concerns the “Woodford Matters”, and whether D&D potentially waives this condition, or digs in its heels.

Link’s Scheme in the Home Stretch by Securing ACCC and CBI Approval

Dye & Durham/DND’s proposed acquisition of Link Administration (LNK AU) at A$4.81 per share has received approvals from the ACCC and the Central Bank of Ireland.
Key conditions precedent remaining are FIRB, UK FCA and Luxembourg approvals. The second court hearing date has been adjourned to 15 September.
The transaction is in the home stretch and will likely complete. At the last close, the gross and annualised spread for a 27 September payment is 4.8% and 151%, respectively.

Oisix-Shida Stoush with SHiDAX Suggests Strong but Subtle Strategy

Shidax Corp (4837 JP) is a food service business in the midst of a so-far reasonably successful restructuring. The family had a partner in Unison and hoped to extend.
The founding family and Unison now have ~60% together, and they vote together. Unison wants out. The family wants Oisix ra daichi (3182 JP) in. So Oisix has tendered.
But SHiDAX sees the conflict and minorities getting hosed. So they object. The “easy” solution is a full MBO with Oisix support.

Tyro in Play as It Rejects Potentia’s A$1.27 Offer

Tyro Payments (TYR AU) rejected an indicative proposal from the Potentia consortium at A$1.27 per share as it was highly conditional and materially undervalued the business.
Grok, the largest shareholder will vote for a Potentia scheme unless there is a rival scheme which is A$0.25 per share higher than the value of the Potentia proposal.
Potentia’s move puts Tyro in play, and Grok’s involvement will force the Board to get an improved offer and/or flush out a competing bidder. There is another round to go.

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Sep 08

Daily Brief Event-Driven: HSCEI Index Rebalance Preview: Could Be A BIG One and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HSCEI Index Rebalance Preview: Could Be A BIG One
SOHO China (410 HK): Blackstone Deal Potentially Back On As Pan Shiyi Goes “Altruistic”
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Couple of Potential Deletes
Hitachi Transport (9086 JP) – Tender Launch Likely Soon But Watch for Flow
KRX New Deal Index Rebalance: All Forecasts Right as KMW Soars and AfreecaTV Drops
KRX K-New Deal Rebalancing: Official Results & Passive Flows
DTAC/True Merger: NBTC Likely to Set Measures to Approve Merger
Major Stock Swap Between Hyundai Motor Group and KT Corp
Hong Kong CEO & Director Dealings – 1st Sept 2022: A8 New Media, China Fordoo
Intention to Float Porsche AG: A Good Deal for Porsche Automobile Holding SE

HSCEI Index Rebalance Preview: Could Be A BIG One

There could be up to 6 changes to the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, mainly driven by the deletions.
If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.
There is large short interest on quite a lot of stocks and will play an important role in the rebalance.

SOHO China (410 HK): Blackstone Deal Potentially Back On As Pan Shiyi Goes “Altruistic”

Pan Shiyi and Pan Zhangxin – Chairman and CEO respectively of SOHO China (410 HK) – have tendered their resignations, with immediate effect.
Both are resigning “to focus on supporting the arts and philanthropic pursuits“.
That sounds like a “donation” is on the cards. And the Pans selling their stake in SOHO China would nicely fund that donation.

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Couple of Potential Deletes

Sierra Rutile Holdings (SRX AU) is a high probability delete from the index, while Australian Strategic Materials (ASM AU) is close to the deletion threshold.
Sayona Mining (SYA AU) is the highest ranked non-constituent while Tianqi Lithium (9696 HK) only makes inclusion at the entire IPO raise.
Deletion from the index will require passive trackers to sell over 5 days of ADV on Australian Strategic Materials (ASM AU).

Hitachi Transport (9086 JP) – Tender Launch Likely Soon But Watch for Flow

Hitachi Transport System (9086 JP) has had a “long” wait to get its approvals, but EC and China are in, any remaining should be in shortly.
Yesterday, as a footnote on the SG Holdings offering document, there was a comment about SG Holdings selling shares. This was likely more good corporate governance hygiene than warning.
Shares are down this morning. I’d expect final approvals and launch quite soon. I would therefore look to buy the dip on flow – block or not.

KRX New Deal Index Rebalance: All Forecasts Right as KMW Soars and AfreecaTV Drops

The KRX announced the changes to the KRX New Deal indices post market close on Friday. But the changes were not made public and are only available to subscribers.
Intellian Technologies (189300) and Seojin System (178320) replace Danal (064260) and Kcp (060250) in the Internet Index, while KMW Co Ltd (032500 KS) replaces AfreecaTV (067160 KS) in BBIG.
Since we published our last forecast on 21 July, KMW Co Ltd (032500 KS) is up 12% while AfreecaTV (067160 KS) has dropped 17%.

KRX K-New Deal Rebalancing: Official Results & Passive Flows

KMW replaces AfreecaTV in BBIG. There is no constituent change for Battery and Bio. Seojin and Intellion replace NHN KCP and Danal in Internet. Nexon Games replaces Devsisters in Game.
The effective date has been postponed to the 13th, and the ETF operators will conduct the rebalancing trading at the close tomorrow, the 8th.
Regarding relative passive impact, KMW and AfreecaTV should receive the most attention, and this pattern is already appearing today.

DTAC/True Merger: NBTC Likely to Set Measures to Approve Merger

The Bangkok Post reports that the Thai regulator (NBTC) will propose ten remedial measures to approve the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger.
The NBTC board is not expected to issue a final decision as it waits for an interpretation by the Council of State if it can approve or reject the merger.
The current share price ratio is 9.511x vs the swap ratio of 10.221x. At last close, DTAC and True’s gross spread to the VTO price is 9.2% and 10.7%, respectively.

Major Stock Swap Between Hyundai Motor Group and KT Corp

By Douglas Kim

On 7 September, Hyundai Motor (005380 KS) announced a major stock swap with KT Corp (030200 KS).
KT will exchange about 750 billion won (7.7%) of KT’s treasury stock for 445.6 billion won (1.04%) of Hyundai Motor shares and 300.3 billion won (1.46%) of Hyundai Mobis shares.
This stock swap is likely to have a bigger positive impact on KT versus Hyundai Motor and Hyundai Mobis.

Hong Kong CEO & Director Dealings – 1st Sept 2022: A8 New Media, China Fordoo

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 also flag those companies where shares have been pledged, both recently and ongoing. Stocks mentioned include A8 New Media (800 HK) and China Fordoo Holdings (2399 HK).

Intention to Float Porsche AG: A Good Deal for Porsche Automobile Holding SE