Category

Event-Driven

Daily Brief Event-Driven: Pendal Group (PDL AU): Perpetual’s Bump Should Get the Deal Done and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Pendal Group (PDL AU): Perpetual’s Bump Should Get the Deal Done
  • Ramsay’s Overdue Update on the KKR Proposal
  • Pendal Enters Scheme With Perpetual
  • Pendal Gets a Binding Offer from Perpetual
  • I Squared/FirstGroup: Why Have the Negotiations Ended?
  • STOXX Europe Quiddity Leaderboard Sep 2022: 11 ADDs/DELs, Sandvik-Alleima, and More

Pendal Group (PDL AU): Perpetual’s Bump Should Get the Deal Done

By Brian Freitas

  • Pendal Group and Perpetual Ltd have entered into a SID where Pendal shareholders will receive 1 share of Perpetual for every 7.5 shares in Pendal, plus cash of A$1.976/share.
  • While this is a premium to the last close and undisturbed prices, it is a discount to longer term prices. The Pendal Board has unanimously recommended the offer though.
  • In the short-term expect short covering on Pendal Group (PDL AU) and increased shorts on Perpetual Ltd (PPT AU) as arbs step in to close the gap.

Ramsay’s Overdue Update on the KKR Proposal

By Arun George

  • Ramsay Health Care (RHC AU) notes that discussions with KKR are ongoing, but the indicative proposal is held up by due diligence access to Ramsay Generale de Sante (GDS FP).
  • KKR proposed an alternative proposal that the Board rejected as “meaningfully inferior.” KKR remains interested, and its shenanigans are likely a move to nudge down the price.
  • At the last close, the risk/reward profile is favourable as the downside due to a deal break (-3% estimated decline) is lower than the upside (+20%) to the indicative proposal.

Pendal Enters Scheme With Perpetual

By David Blennerhassett

  • On the 4 April, asset manager Pendal (PDL AU)‘s board unanimously determined the indicative cash/scrip Offer proposal from Perpetual (PPT AU) undervalued the current and future value of the company.
  • Pendal And Perpetual have now entered into a SID such that Pendal shareholders will receive 1 Perpetual share for every 7.5 Pendal shares plus $1.976 cash for each Pendal share.
  • The negotiation clincher was the increase in the cash component by A$0.306/share. Should the deal complete, Pendal will hold 47% in the enlarged entity.

Pendal Gets a Binding Offer from Perpetual

By Arun George

  • Pendal Group (PDL AU) entered a scheme implementation deed with Perpetual Ltd (PPT AU). The revised offer – scrip (1 Perpetual share for every 7.5 Pendal share) and cash (A$1.976).
  • The revised offer throws in an 18.3% higher cash component as a sweetener. The offer implies a healthy acquisition multiple compared to peers.
  • The offer is subject to shareholder and regulatory approvals. At the last close price, the gross spread to the current offer value of A$5.635 per share is 13.7%.

I Squared/FirstGroup: Why Have the Negotiations Ended?

By Jesus Rodriguez Aguilar

  • On 16 August, I Squared confirmed it did not intend to make an offer for FirstGroup thus will now be precluded from bidding for six months.
  • The 15 August offer implied almost no premium for the core business, significant value not reflected, and a difficult to grasp structure for most investors, in my view.
  • A SOTP approach gives a fair value of 183.4p. The board seems right in its refusal. Other bidders may appear or I Squared may return to the negotiating table. Long.

STOXX Europe Quiddity Leaderboard Sep 2022: 11 ADDs/DELs, Sandvik-Alleima, and More

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the names leading the race to become ADDs/DELs for the STOXX Europe 600 and EURO STOXX Indices for the September 2022 Rebalance.
  • Based on current rankings, there could be around 11 ADDs/DELs in the September 2022 Rebalance.
  • The completion of the Avast PLC (AVST LN) and Meggitt PLC (MGGT LN) deals could result in intra-review changes in September 2022.

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Daily Brief Event-Driven: StubWorld: Swire’s NAV Discount Further Narrows As Buyback Kicks Off and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • StubWorld: Swire’s NAV Discount Further Narrows As Buyback Kicks Off
  • FTSE TWSE Dividend+ Sep 22 Capping: Massive Negative Flows for Farglory, Greatek, & Elan
  • Intouch’s NAV Discount Not Supported By Higher Look-Through Payout
  • Intel’s $30 Billion JV with Brookfield Asset Mgmt: To Take Away Market Share from TSMC & Samsung?
  • KLCI Index Rebalance Preview: The Gloves Could Come Off
  • ESOP Lockup Releases: Iljin HySolus & Hyundai Heavy Industries
  • Hong Kong CEO & Director Dealings – 25th August 2022
  • APM Human Services IPO Lock-Up – PE with a US$620m Stake Comes Free

StubWorld: Swire’s NAV Discount Further Narrows As Buyback Kicks Off

By David Blennerhassett

  • Swire Pacific (19 HK) has bought back B/A shares in ratios of 63/37 and 72/28 over two days.  Listing Rules suggest the ratio has to be higher than 76.71/23.29. 
  • Preceding my comments on Swire are the current setup/unwind tables for Asia-Pacific Holdcos. 
  • These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

FTSE TWSE Dividend+ Sep 22 Capping: Massive Negative Flows for Farglory, Greatek, & Elan

By Janaghan Jeyakumar, CFA


Intouch’s NAV Discount Not Supported By Higher Look-Through Payout

By David Blennerhassett


Intel’s $30 Billion JV with Brookfield Asset Mgmt: To Take Away Market Share from TSMC & Samsung?

By Douglas Kim

  • On 23 August, Intel announced that it will partner with Canada’s Brookfield Asset Management to jointly fund up to $30 billion to make advanced semiconductor chips in Arizona. 
  • Despite Intel’s aggressive plans to expand the semiconductor chip production, we are more concerned about the overall downturn in the semiconductor sector which lead to further decline in sales. 
  • Despite our negative view of Intel’s shares in the near term, Intel could gain market share versus Samsung and TSMC in the semiconductor sector in the next three years.

KLCI Index Rebalance Preview: The Gloves Could Come Off

By Brian Freitas


ESOP Lockup Releases: Iljin HySolus & Hyundai Heavy Industries

By Sanghyun Park

  • Iljin HySolus and Hyundai Heavy Industries will release the ESOP volumes, 0.82% and 3.93% of SO, on September 1st and 17th. They have risen 2.3% and 145.8% from the listings.
  • Despite the small profit, it seems more probable that the Iljin HySolus ESOP will attempt to dispose of its shares immediately after the release, potentially leading to another price correction.
  • On the other hand, I would seek a hedge for the HHI ESOP lockup release. I would look at KSOE as a hedge for my short position on HHI.

Hong Kong CEO & Director Dealings – 25th August 2022

By David Blennerhassett

  • 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 also flag those companies where shares have been pledged, both recently and ongoing.

APM Human Services IPO Lock-Up – PE with a US$620m Stake Comes Free

By Sumeet Singh

  • APM Human Services (APM) raised about US$730m by selling a mix of primary and secondary shares in Nov 21. Its IPO linked lockup is set to expire later this month.
  • APM is an international human services provider, it runs 800 sites spanning 10 countries with its largest market being Australia.
  • In this note, we will talk about the lock-up dynamics and updates since our last note.

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Daily Brief Event-Driven: FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: HUGE Turnover as Review Period Ends and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: HUGE Turnover as Review Period Ends
  • 10 Tradable Names for KOSPI Size Index Migration & Hyundai Mipo in Conjunction with MSCI Nov IR
  • FTSE TWSE Taiwan 50 Index Rebalance Preview: PSMC (6770) Deletion Could Offset Some All-World Flow
  • FTSE China A50 Index Rebalance Preview: PetroChina & EVE Energy Are Potential Adds
  • Samsung Electronics: Local Market’s Bet on a Buyback
  • Link’s Scheme Approved but Time Running Out for Satisfying Conditions Precedent
  • PTB Group Enters Scheme With PAG
  • Nearmap Enters a SID with Thoma Bravo at A$2.10
  • FTSE China 50 Index Rebalance Preview: Yankuang Energy (1171) Could Replace Shenzhou Intl (2313)
  • KB Kookmin Bank Invests 200 Billion Won in SK Square’s TMap Mobility

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: HUGE Turnover as Review Period Ends

By Brian Freitas

  • We do not forecast any deletions from the FTSE TWSE Taiwan Dividend+ Index in September. There will be a lot of flow from dividend yield changes and capping changes.
  • Based on the closing prices from 22 August, we estimate one-way turnover of 13.6% at the September rebalance resulting in a one-way trade of TWD 19,664m (US$653m).
  • Passive inflows will be focused (for the most part) on stocks that have underperformed and outflows will mainly be on recent outperformers.

10 Tradable Names for KOSPI Size Index Migration & Hyundai Mipo in Conjunction with MSCI Nov IR

By Sanghyun Park

  • Ten names, five each for each direction, are almost guaranteed to migrate between MID and LARGE. From the last time we checked, Hyundai Marine and Hanmi Science are newly added.
  • The rebalancing trading day is September 8, and both directions of MID⇔LARGE cause significant passive impact. So, Long/Short basket trading is a practical approach, starting about 20 days before effective.
  • We should consider approaching this event in conjunction with the MSCI IR. This is because of Hyundai Mipo Dockyard, the only candidate likely to join the MSCI Standard this November.

FTSE TWSE Taiwan 50 Index Rebalance Preview: PSMC (6770) Deletion Could Offset Some All-World Flow

By Brian Freitas


FTSE China A50 Index Rebalance Preview: PetroChina & EVE Energy Are Potential Adds

By Brian Freitas


Samsung Electronics: Local Market’s Bet on a Buyback

By Sanghyun Park

  • The local market is betting that Samsung Electronics will announce an additional shareholder return measure. Special dividends or buyback? They lean towards a buyback.
  • It is unlikely that it will be another pref-skewed buyback. The Lee family needs cash now, so preventing the dilution of voting shares becomes the top priority. 
  • Hence, we should not have high expectations for a further decline in the pref discount. Instead, we should consider designing a short position aimed at block sales.

Link’s Scheme Approved but Time Running Out for Satisfying Conditions Precedent

By Arun George

  • Shareholders approved the scheme at the scheme meeting. However, Link Administration (LNK AU) shares declined due to the slow progress in satisfaction of conditions precedent.
  • Key conditions precedent is ACCC, FIRB, UK’s FCA and Central Bank of Ireland approvals. The wording in the Chairman’s address on the conditions precedent is incrementally negative.
  • The downside to a deal break remains low. At the last close, the potential upside to the offer (10.1%) outweighs the downside (-3.8% to our A$4.21 price target).

PTB Group Enters Scheme With PAG

By David Blennerhassett

  • Late last week aviation engine repair play PTB Group Ltd (PTB AU) entered into a Scheme Implementation Deed (SID) with PAG Holding Corp.
  • PAG is offering $1.595/share, a 40.5% premium to last close.
  • Apart from PTB shareholder approval, PAG’s Offer requires FIRB. This looks done. PTB’s board unanimously recommends the Scheme.

Nearmap Enters a SID with Thoma Bravo at A$2.10

By Arun George

  • Nearmap Ltd (NEA AU) entered a scheme implementation deed (SID) with Thoma Bravo at A$2.10 per share, a 39.1% premium to the undisturbed price.
  • The offer price is attractive. The key conditions are shareholders and regulatory (FIRB & US antitrust) approvals. The scheme meeting is in November. 
  • At last close and for the end of November payment, the gross and annualised spread to the offer is 1.4% and 5.2%, respectively.

FTSE China 50 Index Rebalance Preview: Yankuang Energy (1171) Could Replace Shenzhou Intl (2313)

By Brian Freitas


KB Kookmin Bank Invests 200 Billion Won in SK Square’s TMap Mobility

By Douglas Kim

  • On 22 August, it was announced that KB Kookmin Bank invested 200 billion won worth of TMap Mobility, valuing the company at 2.2 trillion won ($1.7 billion).
  • At the end of 2021, SK Square owned a 66.3% stake in TMap Mobility. After this investment, KB Kookmin Bank will own an 8.2% stake in TMap Mobility.
  • TMap Mobility generated sales of 74.5 billion won,  operating loss of 67.8 billion won, and net loss of 5.3 billion won in 2021.

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Daily Brief Event-Driven: FTSE All-World/​​All-Cap Index Rebalance: Changes and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • FTSE All-World/​​All-Cap Index Rebalance: Changes, Switches, Hits & Misses
  • Hang Seng Index Rebalance – FOUR Names IN, None Out (The March to 80 Continues)
  • Hang Seng Tech Rebalance – No Name Changes But Lots of Flow
  • HSCEI Rebalance – One In, One Out, 3.1% One-Way Flow
  • Merger Arb Mondays (22 Aug) – Link, Alliance, Nearmap, Genex, Ramsay, Lifestyle, EVOC, Giordano
  • Overheated Short Selling Designation in Korea: Precise Definitions for the Confusing Terms
  • Weekly Deals Digest (21 Aug) – CTGDF, Frasers Hospitality, Nearmap, Alliance, Tassal, Yashili

FTSE All-World/​​All-Cap Index Rebalance: Changes, Switches, Hits & Misses

By Brian Freitas


Hang Seng Index Rebalance – FOUR Names IN, None Out (The March to 80 Continues)

By Travis Lundy


Hang Seng Tech Rebalance – No Name Changes But Lots of Flow

By Travis Lundy

  • The Hang Seng Index Team announced the index review for the Hang Seng Tech Index Friday after the close. There were no additions or deletions.
  • However, there is a 4.9% one-way turnover on reasonably heavy FAF and capping changes. Sensetime sees a huge FAF increase. Tencent, Meituan, and Kuaishou get re-capped higher. Xiaomi lower.
  • There is a fair bit of flow, but the obvious big name – SenseTime Group (20 HK) – has potential overhang. Watch Haier Smart Home Co Ltd (6690 HK)

HSCEI Rebalance – One In, One Out, 3.1% One-Way Flow

By Travis Lundy



Overheated Short Selling Designation in Korea: Precise Definitions for the Confusing Terms

By Sanghyun Park

  • The definitions of the terms used in this designation rule have not been clearly disclosed. Even the words used in the original Korean text make interpreting quite tricky.
  • What confuses investors the most is the Short Selling Proportion, basically the ratio of a stock’s short-selling to the market.
  • Amount Increase in Short Selling Transactions is also quite confusing. It is the ratio of a stock’s short selling to its 40-day average daily short selling volume.

Weekly Deals Digest (21 Aug) – CTGDF, Frasers Hospitality, Nearmap, Alliance, Tassal, Yashili

By Arun George


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Daily Brief Event-Driven: HSCI Index Rebalance: 24 Adds and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • HSCI Index Rebalance: 24 Adds, 14 Deletes & Changes to Stock Connect
  • Hang Seng TECH Index Rebalance: No Changes BUT Big Turnover
  • Last Week in Event SPACE: Tencent/Meituan, Jardine Matheson, Giordano, Nearmap, Fraser Hospitality
  • Fraser Hospitality Trust’s Scheme Meeting on 12 September
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Fraser Hospitality, Nearmap, Net Marketing, Tassal, Genex
  • Index Rebalance & ETF Flow Recap: S&P/ASX, CSI300, SSE50, HSI, HSCEI, HSTECH, HSCI, CTG IPO, KQ150
  • TOPIX Inclusions Pre-Event: Artspark Holdings (3663 JP)

HSCI Index Rebalance: 24 Adds, 14 Deletes & Changes to Stock Connect

By Brian Freitas

  • There are 24 adds and 14 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 518.
  • 19 of the 24 HSCI inclusions will be added to Southbound Stock Connect, while 12 of the 14 HSCI deletions will be removed from Southbound Stock Connect.
  • Five of the HSCI constituents could be removed from Southbound Stock Connect only since the average market cap over the last year is less than HK$5bn.

Hang Seng TECH Index Rebalance: No Changes BUT Big Turnover

By Brian Freitas

  • There are no changes to the index names, but FAF and capping changes will lead to a one-way turnover of 4.5% and one-way flow of HK$3,287m.
  • An increase in the FAF from 3% to 40% will result in passive inflows of HK$1.18bn for SenseTime Group (20 HK) – that is over 5 days of ADV.
  • There are large shorts on some of the stocks that will have passive outflows and some of these positions could be covered on implementation day.

Last Week in Event SPACE: Tencent/Meituan, Jardine Matheson, Giordano, Nearmap, Fraser Hospitality

By David Blennerhassett

  • Chinese food delivery giant Meituan (3690 HK) shed 9% after Tencent (700 HK) reportedly planned to divest its $24bn stake. But it may just be a misunderstanding. Maybe.
  • Given Jardine Matheson Holdings (JM SP)‘s strong underlying operating performance, the 40% discount to NAV – one in which there are discounts of discounts – JMH appears attractive here. 
  • Expect a firm Offer for Nearmap Ltd (NEA AU) shortly. Thoma Bravo’s due diligence is already at an advanced stage. And why Nearmap entered into the break fee. 

Fraser Hospitality Trust’s Scheme Meeting on 12 September

By Arun George

  • Frasers Hospitality Trust (FHT SP)’s EGM and trust scheme meeting will take place on 12 September. The effective date is 12 October with a payment date of 19 October.
  • The offer comprises S$0.70 cash per share + permitted distributions (estimated 1.356 cents). The IFA considers the scheme consideration to be fair and reasonable.  
  • This is a done deal. For a 19 October payment, the gross and annualised spread of the offer (inc. permitted DPU) S$0.714 per unit is 1.9% and 12.1%, respectively. 

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Fraser Hospitality, Nearmap, Net Marketing, Tassal, Genex

By David Blennerhassett


Index Rebalance & ETF Flow Recap: S&P/ASX, CSI300, SSE50, HSI, HSCEI, HSTECH, HSCI, CTG IPO, KQ150

By Brian Freitas

  • A busy Friday with the end of the S&P/ASX review period and announcement of changes to the Hang Seng family of indices and FTSE AW/AC at the September rebalance.
  • Monday is the review cutoff for the FTSE TWSE Taiwan 50, STI, FTSE China 50 and A50 indices, among others. STAR50 Sep changes announcement expected post market close on Friday.
  • There were some big inflows into Asia focused ETFs during the week, while the outflows from KraneShares CSI China Internet ETF (KWEB US) continued for yet another week.

TOPIX Inclusions Pre-Event: Artspark Holdings (3663 JP)

By Janaghan Jeyakumar, CFA

  • After market close on Friday, Japan-based UI/UX software solutions company Artspark Holdings (3663 JP) announced (link) they will be working towards a Segment transfer from Standard market to Prime market.
  • If a TSE-listed name moves from the Standard Market to the Prime Market, a TOPIX Inclusion event will be triggered.
  • In this insight, we take a look at the ability of Artspark Holdings (3663 JP) to meet the Prime Market Segment Transfer Requirements and the TOPIX Inclusion Implications.

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Daily Brief Event-Driven: Frasers Hospitality Trust – Scheme Doc Out and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Frasers Hospitality Trust – Scheme Doc Out
  • Canon (7751) – Buyback Progress Update
  • Discussing Kakao Bank Block Deal Trading Dynamics
  • HSI Index Rebalance: Another Small Step Towards 80 Members, But BIG Impact
  • PTB Group’s Binding Offer from PAG
  • A Block Deal Sale of 3.1% of Kakao Bank by KB Kookmin Bank
  • HSCEI Index Rebalance: SenseTime (20 HK) Added As FAF Increases Dramatically

Frasers Hospitality Trust – Scheme Doc Out

By Travis Lundy

  • A little long in the tooth but the Scheme Doc for Frasers Hospitality Trust (FHT SP) was released this morning. 
  • It is the standard multi-hundred page document (in this case 502 pages). And it does little other than tell the same weak story as the announcement did.
  • But the price is unchanged and the Scheme Meeting is 10 September 2022. This looks like it will be a done deal. 

Canon (7751) – Buyback Progress Update

By Travis Lundy

  • Canon Inc (7751 JP) announced a buyback on 5 August. That was its 17th ¥50bn buyback in 15 years. And its first “second buyback within a single year” since 2014.
  • History suggests outperformance of Peers until the end of the buyback (and it has done well here), then underperformance post-buyback.
  • Consensus forward EPS and EBIT ratios vs Peers suggest Canon shares have more to catch up, but some of that would involve reclaiming historical “quality premium.”

Discussing Kakao Bank Block Deal Trading Dynamics

By Sanghyun Park

  • It seems clear that Kakao Bank’s situation is not good as the block deal risk exposure has increased. Additional disposable volume is 15% owned by the non-strategic institutional shareholders.
  • The factor that will reverse this, flow-wise, is MSCI’s float adjustment. But chances are low. So, we’d better maintain a short position betting on Kakao Bank’s further correction.
  • Nevertheless, if that happens, Kakao Bank will welcome additional passive flows equal to the amount of passive money currently parked, which is a major event causing a significant passive impact.

HSI Index Rebalance: Another Small Step Towards 80 Members, But BIG Impact

By Brian Freitas


PTB Group’s Binding Offer from PAG

By Arun George

  • Ptb Group Ltd (PTB AU) entered a scheme implementation deed (SID) with Precision Aviation Group (PAG). The offer comprises A$1.595 + dividend up to A$0.03 per share (total of A$1.625).
  • The offer price is attractive. The key conditions are shareholder approvals and FIRB approval. The scheme meeting is on 16 November. 
  • This is a done deal. At last close and for the 2 December payment, the gross and annualised spread to the offer + div is 3.8% and 13.5%, respectively.

A Block Deal Sale of 3.1% of Kakao Bank by KB Kookmin Bank

By Douglas Kim

  • On 19 August, KB Kookmin Bank sold a 3.1% stake (14.76 million shares) in KakaoBank (323410 KS). 
  • The block deal sale price was 28,704 won, which was 8% discount to the previous day’s closing price.
  • We continue to have a Negative view of Kakao Bank, due to further overhang on more share sales, concerns about partial ban of simple remittance, and unattractive valuations.

HSCEI Index Rebalance: SenseTime (20 HK) Added As FAF Increases Dramatically

By Brian Freitas

  • SenseTime Group (20 HK)‘s Free-Float Adjustment Factor (FAF) increases from 3% to 40% following lock-up expiry and the stock will replace China Pacific Insurance (2601 HK) in the HSCEI INDEX
  • Using prices from the close on 19 August, estimated one-way turnover is 3.82% and will result in a one-way trade of HK$2,751m at the close on 2 September.
  • Increase in the FAF on a couple of stocks saves them from index deletion in September but is probably not enough to save them from index deletion in December.

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Daily Brief Event-Driven: LX Semicon (108320 KS) – Section Change and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • LX Semicon (108320 KS) – Section Change, Index Flow and KOSDAQ150 Replacement
  • Giordano (709 HK): Interim Divy – But Perhaps Not If You Tender
  • Ping An A/H Premium: Near The High End
  • Japan Excellent REIT (8987) – Possible Sustained Flow Event
  • MACA (MLD AU): NRW’s Offer Rejected
  • Giordano’s Improving Outlook and Surprising Dividend Provide Deal-Break Support
  • Alliance Aviation – Selloff Provides Optionality on ACCC Approval
  • Genex Opens Its Books After Farquhar Bumps
  • PTT (PTT TB): Asset Sales And Solid Results
  • Liquid Universe of European Ordinary and Preferred Shares: August ‘22 Report

LX Semicon (108320 KS) – Section Change, Index Flow and KOSDAQ150 Replacement

By Brian Freitas


Giordano (709 HK): Interim Divy – But Perhaps Not If You Tender

By David Blennerhassett

  • Giordano International (709 HK) has announced 1H22 net profit of HK$97mn compared to  HK$60mn in 1H21.
  • Of interest is the declaration of an interim dividend of HK$0.085/share.
  • The ex-dividend date is the 20 September. Whether you get the dividend plus the Offer Price depends when the Offer closes (or is extended), and/or whether the Offer turns Unconditional.

Ping An A/H Premium: Near The High End

By Brian Freitas

  • The Ping An AH premium has moved from 1-2% to near 10% over the last month while the HSAHP Index has stayed around the same level.
  • The Ping AH premium is now nearing the level from where reversals take place. Interim results on 23 August could be a trigger for a reversal.
  • Northbound Stock Connect holdings on the A-shares have been decreasing, while Southbound Stock Connect holdings on the H-shares have been increasing over the last month.

Japan Excellent REIT (8987) – Possible Sustained Flow Event

By Travis Lundy

  • Japan Excellent (8987 JP) has been the worst-performing Office J-REIT amongst the existing crop since the end of 2019.
  • Today, we got news of a possible flow event – a buyer.
  • There is room here for Japan Excellent to outperform over the next several months.

MACA (MLD AU): NRW’s Offer Rejected

By David Blennerhassett

  • MACA Ltd (MLD AU) has indicated that NRW Holdings (NWH AU)‘s A$1.085/share Offer is inferior to Thiess’ conditional A$1.025/share takeover offer.
  • The reasons for the rejection are expected to be fleshed out at MACA’s full years results briefing.
  • NRW’s Offer is higher, has a lower shareholder approval, and provides MACA shareholders the option of cash, scrip or a combination of both. But is subject to scaling.

Giordano’s Improving Outlook and Surprising Dividend Provide Deal-Break Support

By Arun George

  • Giordano International (709 HK)’s 1H22 net profit of HK$97 million was within the HK$91-101 million positive profit range. The IFA noted that interims do not change its advice.
  • The Board surprisingly declared an interim dividend of HK$0.085 per share. As the ex-div falls after the final closing date, shareholders who accept the offer will not receive the dividend. 
  • The incrementally positive outlook and dividend highlight Giordano’s value. The results have pushed our deal break/intrinsic value to align with the VGO price. 

Alliance Aviation – Selloff Provides Optionality on ACCC Approval

By Arun George

  • The ACCC has raised concerns about Qantas Airways (QAN AU) proposed acquisition of Alliance Aviation Services (AQZ AU). The ACCC’s final decision is on 17 November.
  • Qantas knew a lengthy ACCC approval process was highly likely and committed to an additional special dividend in the SID to reflect this risk. 
  • Qantas has its work cut out to address the ACCC concerns. Nevertheless, due to the selloff, the current price offers almost a free option on Qantas securing ACCC approval.

Genex Opens Its Books After Farquhar Bumps

By David Blennerhassett

  • On the 25 July, renewable energy play Genex Power Ltd (GNX AU)  announced a non-binding indicative proposal from Atlassian’s Scott Farquhar and Stonepeak, by way of a Scheme, at A$0.23/share.  
  • Genex subsequently rejected the proposal less than a week later on the grounds the Offer undervalued the company.  
  • Farquhar, via Skip Essential Infrastructure Fund, and Stonepeak have increased their non-binding proposal to A$0.25/share. Genex has now provided confirmatory due diligence.

PTT (PTT TB): Asset Sales And Solid Results

By David Blennerhassett

  • Thailand’s state-owned energy firm PTT (PTT TB) recently announced a ~67% and ~13% increase yoy in 1H22 revenue and net profit, buoyed by higher average selling prices and sales volume.
  • Earlier this month PTT also announced the divestment of its Indonesian coal mining business as the company transitions towards clean energy.
  • PTT’s goal is to make Thailand a liquified natural gas hub in Asia. The market appears to be fully pricing in this ambitious roadmap.

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

By Jesus Rodriguez Aguilar

  • Since mid-July, spreads have generally tightened across our liquid universe, including those flagged in July (Investor AB, Roche and Volkswagen).
  • Trade recommendations long ords / short prefs: Fuchs Petrolub, SSAB Svenska Stal.
  • Recommendations Long prefs / short ords: Sixt, VW, MFE-Media for Europe, Telecom Italia, Ericsson.

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Daily Brief Event-Driven: Update on the S-REIT Re-Allocation Trade and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Update on the S-REIT Re-Allocation Trade
  • Appier Group (4180 JP): Now TOPIX-Ready!
  • KOSDAQ150 Ad Hoc Index Rebalance: Hancom (030520) To Replace Vidente (121800)
  • MSCI Korea Flow Trading for August 31st
  • Net Marketing Japan (6175) “MBO” Tender Offer – Done Deal
  • SSE50 Index Rebalance Preview: Sector Rotation To Continue
  • Genex Gets an Improved A$0.25 Offer, Headcount Test a Risk, Board Hoping for an Auction
  • LX Semicon KOSDAQ→KOSPI Migration Event: Index Rebalance Trading
  • A Full Walkthrough of What Happens to Vidente & Hancom: KOSDAQ 150 Special Change
  • Judo Capital IPO Lock-Up – Gearing up for a A$650m Lock-Up Release

Update on the S-REIT Re-Allocation Trade

By Travis Lundy

  • In June-July I warned of a reinvestment trade into S-REITs due to the S$2.0-3.0bn cash-out by investors in Mapletree North Asia Commercial Trust and sellers into the SPHREIT Chain Offer.
  • Many investors who would need to re-allocate. The trade was to buy major S-REITs. From my last insight, a basket is up 5.3%. MCT has already topped out vs peers.
  • The question is…. is there still a trade left to run?

Appier Group (4180 JP): Now TOPIX-Ready!

By Janaghan Jeyakumar, CFA


KOSDAQ150 Ad Hoc Index Rebalance: Hancom (030520) To Replace Vidente (121800)

By Brian Freitas


MSCI Korea Flow Trading for August 31st

By Sanghyun Park

  • MSCI Korea’s August QIR features one deletion: SK Telecom. But Woori Financial, HYBE, and LG Energy will also present a notable impact as they face float rate changes.
  • We should consider executing flow trading on these names, even SKT, towards the effective date as much as possible, as the flow magnitude wouldn’t be enough to act proactively.
  • It’s been witnessed that SK Telecom’s recall and liquidation of short positions have been made preemptively this time, minimizing the risk of price distortion on the effective date.

Net Marketing Japan (6175) “MBO” Tender Offer – Done Deal

By Travis Lundy

  • Bain Capital Private Equity launched a deal for Net Marketing (6175 JP) at a 63% premium. 
  • That should be enough to get it done on its own, despite coming below the IPO price of 5yrs ago. 
  • In any case, Shareholder Structure makes this a completely done deal.

SSE50 Index Rebalance Preview: Sector Rotation To Continue

By Brian Freitas

  • Over 80% of the way through the review period for the December rebalance, we see 7 stocks in inclusion/exclusion zone. However, there can be a maximum of 5 changes.
  • We estimate a one-way turnover of 3.9% at the December rebalance leading to a one-way trade of CNY 2.85bn.
  • The potential adds have outperformed the potential deletes and the SSE50 Index (SSE50 INDEX) by a wide margin over the last few months.

Genex Gets an Improved A$0.25 Offer, Headcount Test a Risk, Board Hoping for an Auction

By Arun George

  • Genex Power Ltd (GNX AU) received an improved non-binding offer from Skip Capital/Stonepeak at A$0.25 per share, an 8.7% bump from the previously rejected A$0.23 offer.
  • The headcount test is emerging as a key risk as retail shareholders are voicing their displeasure. The offer is underwhelming based on precedent transactions and average sell-side price targets. 
  • The Board hopes that granting non-exclusive due diligence and stating an intention to recommend a binding A$0.25 offer will force rival bidders to kickstart an auction.    

LX Semicon KOSDAQ→KOSPI Migration Event: Index Rebalance Trading

By Sanghyun Park

  • LX Semicon announced that its board approved KOSPI migration on August 17. This migration requires shareholder approval, and a shareholder meeting will be scheduled for September 23.
  • The outflow of KOSDAQ 150 is estimated to be -1.37x ADTV. A passive impact of this magnitude should cause a price movement of at least 3%p.
  • But LX Semicon’s GICS sector won’t change after the KOSPI migration. We should refrain from trading with expectations for the possibility of KOSPI 200 inclusion at this point.

A Full Walkthrough of What Happens to Vidente & Hancom: KOSDAQ 150 Special Change

By Sanghyun Park

  • Vidente is a KOSDAQ 150 constituent. If designated as an administrative issue, it will be removed on the third trading day after the effective date of designation.
  • Hancom gets to replace Vidente, and rebalancing trading occurs at the close of August 19th. Hancom’s passive inflow should be 4.70x ADTV.
  • It seems that proactive long positions have already been built up significantly from today. So, we should consider getting out of the position earlier than usual towards Friday’s close.

Judo Capital IPO Lock-Up – Gearing up for a A$650m Lock-Up Release

By Sumeet Singh

  • Judo Capital raised about US$483m by selling a mix of primary and secondary shares in Nov 21. Its IPO linked lockup is set to expire later this month.
  • Judo Capital (JC) focuses on lending to small and medium-sized enterprises (SMEs) in Australia. It also offers a range of personal term deposit products to consumers.
  • In this note, we will talk about the lock-up dynamics and updates since our last note.

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Daily Brief Event-Driven: Jardine Matheson (JM SP): MSCI Blues and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Jardine Matheson (JM SP): MSCI Blues
  • HLB Capital Increase: Offering Terms & Trading Dynamics
  • 2022 JPX Nikkei 400 Rebal Update – Going the Right Way
  • S&P/​​​​ASX Index Rebalance Preview: Adds Outperform Deletes As Review Period End Nears
  • Nearmap’s A$2.10 Per Share Indicative Offer from Thoma Bravo
  • Giordano’s Conditional Offer Open, Price Declared Final, Unlikely to Meet 50%+ Voting Threshold
  • Nikkiso (6376 JP) BIG Asset Sale Leads to Biggish Buyback
  • POSCO International + POSCO Energy = A Value Enhancing M&A Deal
  • ANZ Renounceable Entitlement Offer – Could Be a Relatively Large (A$550-750m) Retail Shortfall
  • Nearmap: Thoma Bravo’s Bird’s Eye View

Jardine Matheson (JM SP): MSCI Blues

By David Blennerhassett

  • Jardine Matheson Holdings (JM SP) (JMH) has shed ~8% since MSCI said it was cutting the conglomerate’s weighing in two indices.
  • The reweighting follows the cancellation of the 59% shareholding in JMH held by Jardine Strategic Holdings (JS SP), which was privatised last year.
  • I see the discount to NAV at ~40%, right at the 12-month -2 STD level. JMH bought back ~149mn shares in the 1Q22, paying ~US$59/share, 17% above the current price.

HLB Capital Increase: Offering Terms & Trading Dynamics

By Sanghyun Park

  • This offering is a 100% stockholder allocation with forfeited shares going to the public. There will be 9.56M new shares at a capital increase of nearly 9%.
  • We should note that the largest shareholder may again do the same trick. He may block-deal a 1% stake and use the proceeds to participate in this offering.
  • A massive release volume and a 25% discount rate may cause a severe pricing distortion, leading to arb trading openings.

2022 JPX Nikkei 400 Rebal Update – Going the Right Way

By Travis Lundy

  • As designed, the JPX-Nikkei400 Index is something of a disaster. It aims to be slightly ‘smart’ vs other cap-weighted indices like TOPIX, but tracking error vs TOPIX is de minimus.
  • This year, in week 1, the ADD vs DELETE performance is positive. If we sector-hedge the ADDs vs DELETEs, it’s doing even better.
  • This is probably due to relatively low pre-positioning, and cares. Momentum suggests one could be long ADDs vs DELETEs. And there is the perennial trade to watch out for.

S&P/​​​​ASX Index Rebalance Preview: Adds Outperform Deletes As Review Period End Nears

By Brian Freitas

  • There are 4 trading days to go in the review period for the September rebalance of the S&P/ASX indices. Announcement is on 2 September with implementation on 16 September.
  • There could be 6 changes to the S&P/ASX 200 (AS51 INDEX), increasing to 8 if AVZ Minerals (AVZ AU) continues to be halted and if Link Administration (LNK) is privatised.
  • The potential adds have outperformed the potential deletes over the last month. Short interest has increased on a few potential deletes. There will be pre-positions built up.

Nearmap’s A$2.10 Per Share Indicative Offer from Thoma Bravo

By Arun George

  • Nearmap Ltd (NEA AU) disclosed a non-binding indicative offer of A$2.10 per share from Thoma Bravo. The offer price represents a 39.1% premium to the last trading day price.
  • Thoma Bravo has secured a 7-day exclusivity to firm up an offer. Thoma Bravo is a credible bidder and agreed to acquire Ping Identity Holding Corp (PING US) last week. 
  • Nearmap also revealed other non-binding expressions of interest. The exclusivity could flush out other bids. We think that offer is reasonable. At the last close, the gross spread is 11.4%.

Giordano’s Conditional Offer Open, Price Declared Final, Unlikely to Meet 50%+ Voting Threshold

By Arun George

  • Giordano International (709 HK)’s voluntary conditional from the Cheng Yu Tung family (24.57% of outstanding shares) at HK$1.88 per share is open with a first closing date of 5 September.
  • Crucially, the offeror will not increase the offer price. In combination with an ongoing retail recovery, the low-ball offer has little chance of meeting the 50%+ minimum acceptance threshold.
  • While the IFA says the offer is fair and reasonable, key directors will not accept the offer. A deal break implies, at most, another 10% downside to the last close.

Nikkiso (6376 JP) BIG Asset Sale Leads to Biggish Buyback

By Travis Lundy

  • Nikkiso Co Ltd (6376 JP) announced an unusual buyback today. It is worth paying attention. 
  • In March, Nikkiso announced the sale of a subsidiary to Atlas Copco AB (ATCOA SS), noting the sale proceeds would used to pay down debt (Debt/EBITDA in high single digits).
  • The company today announced Q2 earnings, and a large buyback, which should be taken as a positive surprise given the debt load. 

POSCO International + POSCO Energy = A Value Enhancing M&A Deal

By Douglas Kim

  • On 12 August, Posco International stated that it plans to merge with one of POSCO Holdings’ energy affiliate called POSCO Energy which is a major LNG provider in Korea.
  • We believe the merger between POSCO International and POSCO Energy is  value enhancing. The shareholders of POSCO International are getting a sweet deal in POSCO Energy at attractive valuations.
  • This M&A deal is likely to boost the market cap of the combined companies and raise the rank of POSCO International in important indices such as KOSPI200. 

ANZ Renounceable Entitlement Offer – Could Be a Relatively Large (A$550-750m) Retail Shortfall

By Sumeet Singh

  • ANZ announced a US$2.4bn (A$3.5bn) raising via a renounceable entitlement offer to part fund the purchase of Suncorp Bank in Jul 2022.
  • The institutional part of the entitlement offer saw a strong take up and the shares have held up well since the deal was announced.
  • In this note, we will talk about the upcoming retail shortfall bookbuild and other updates since our last note.

Nearmap: Thoma Bravo’s Bird’s Eye View

By David Blennerhassett

  • Mapping technology outfit Nearmap Ltd (NEA AU) has fielded a non-binding indicative offer from San Francisco-based PE firm Thoma Bravo.
  • Thoma Bravo is offering A$2.10/share, a 39% premium to last close, and an 83% premium to when Nearmap was first approached in early July. 
  • Due diligence is at an advanced stage. Curiously, Nearmap has agreed to pay Thoma Bravo up to US$3mn if a transaction agreement does not result.

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Daily Brief Event-Driven: Impact of Potential Changes to India F&O Eligibility Criteria and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Impact of Potential Changes to India F&O Eligibility Criteria
  • China Tourism Group Duty Free (1880 HK) IPO: Offer Details, Index Inclusion, AH Premium
  • S&P/​​​​​​​ASX Quiddity Leaderboard Sep 2022: Potential Last Minute Surprises
  • Giordano (709 HK): Offer Doc Out. Terms Declared Final
  • Merger Arb Mondays (15 Aug) – Lifestyle Intl, EVOC, Giordano, Yashili, Alliance Aviation, ResApp
  • Hyundai Mobis: Plans to Spin Off Parts & Module Units

Impact of Potential Changes to India F&O Eligibility Criteria

By Brian Freitas

  • A news report has indicated that SEBI is looking to tighten criteria used for inclusion and continued availability of stocks in the Futures & Options (F&O) segment of the market.
  • Our analysis shows 30 stocks could be deleted from the F&O segment while another 12 are close to deletion zone. If applied objectively, 22 stocks could be added to F&O.
  • Deletion from the F&O segment could see two stocks dropped from the Nifty Next 50 Index while inclusion in F&O could see two stocks added to the NIFTY Index.

China Tourism Group Duty Free (1880 HK) IPO: Offer Details, Index Inclusion, AH Premium

By Brian Freitas

  • CTG Duty Free (1880 HK) is looking to sell up to 118.176m shares to raise up to US$2.5bn. Pricing at HK$143.5-165.5/share is a 38.6%-29.2% discount to CTG Duty Free (601888).
  • Between 32-37% of the total offer size is being taken by 9 cornerstone investors and they are locked in for 6 months from listing date (expected 25 August).
  • CTG Duty Free (1880 HK) could be added to MSCI China in November, FTSE All-World and FTSE China 50 in March. Southbound Stock Connect could come online on 19 September.

S&P/​​​​​​​ASX Quiddity Leaderboard Sep 2022: Potential Last Minute Surprises

By Janaghan Jeyakumar, CFA

  • With the Reference Period for the September 2022 Rebalance nearing its end, we take a final look at the potential index changes for ASX 300, 200, 100, 50, and 20.
  • AVZ Minerals (AVZ AU) and Firefinch Ltd (FFX AU) are both members of the ASX Index family and are currently suspended from trading. There could be index consequences here.
  • Based on current data, I expect 7 ADDs/DELs for the ASX 200 Index and 22 ADDs and 18 DELs for the ASX 300 Index.

Giordano (709 HK): Offer Doc Out. Terms Declared Final

By David Blennerhassett

  • On the 23 June, the Cheng family made an underwhelming voluntary conditional Offer of $1.88/share for Giordano International (709 HK)
  • The Offer is conditional on the family getting to more than 50% via tendering, and the Cheng’s (and concert parties) control 24.57%.  
  • The Composite Document is now out with a first close on the 5 September.  The Offer Price has now been declared final. That’s a surprise.


Hyundai Mobis: Plans to Spin Off Parts & Module Units

By Douglas Kim

  • On 12 August, it was reported in numerous local media that Hyundai Mobis (012330 KS) plans to spin off its auto parts and module business units into two separate entities. 
  • Hyundai Mobis has not formally announced these spin offs although local media mentioned that these spin off plans have recently been finalized. 
  • These spin-offs by Hyundai Mobis also are likely to be preludes to the Hyundai Mobis/Hyundai Motor Group reorganization. We remain positive on Hyundai Mobis. 

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