Category

Event-Driven

Jul 14
0

Daily Brief Event-Driven: FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: BIG Impact Changes and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: BIG Impact Changes
  • United Tractors (UNTR IJ) Buyback – Sure to Be Impactful
  • Offensively Cheap Homecoming For Glory Star New Media
  • A Thorough Guide to KOSPI 200 & KOSDAQ 150 Rebalancing Calculations
  • HFCAA, AHFCAA, China ADRs & FTSE Index Treatment: Speeding Up The Process & Implications
  • WISE Theme Indexes Rebalancing Today: Names in Basket Trade Setup

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: BIG Impact Changes

By Brian Freitas

  • The FTSE TWSE Taiwan Dividend+ Index is a funky one that weights stocks by dividend yield. Given dependency on dividends and stock prices, the potential adds/deletes can change often.
  • We currently see three changes to the index in December, with another stock very close to deletion zone. Given the difference in market cap and dividend yield, impacts are big.
  • There will be large flows on the current index names at the September rebalance due to capping.

United Tractors (UNTR IJ) Buyback – Sure to Be Impactful

By Travis Lundy

  • Yesterday, United Tractors (UNTR IJ) announced a large share buyback. It’s a big buyback but perhaps not as big as the headlines (which say “up to 20%”). 
  • The buyback is for 5 trillion rupiah which is about 5% of market cap, and will be conducted on-market over the next three months.
  • Looking at the early market reaction, my opinion is that the market does not seem to understand the consequences.

Offensively Cheap Homecoming For Glory Star New Media

By David Blennerhassett

  • Glory Star New Media Group H (GSMG US) (GSMG), a leading digital media platform and content-driven e-commerce company in China, has entered a definitive privatisation transaction with Cheers Inc.
  • Cheers is offering US$1.55/share, in cash, a 76% premium to GSMG’s undisturbed price, and a 22% premium to the US$1.27/share proposal from GSMG’s CEO Bing Zhang. 
  • The buyer consortium owns ~72.8% of shares out and this Offer requires a two-thirds vote from shareholders. This looks done with expected completion this year. But it’s a low-balled Offer.

A Thorough Guide to KOSPI 200 & KOSDAQ 150 Rebalancing Calculations

By Sanghyun Park

  • This post explains how the rebalancing of the KOSPI 200 and KOSDAQ 150 is calculated. So, please note that this post does not have any investment recommendations.
  • Both indices have the same calculation method. However, the thresholds are different. They screen stocks using the three metrics: Market Cap, ADTV, and Market Cap Ranking (buffer).
  • The concept itself of these three metrics is not difficult. However, ranking it cumulatively often confuses us.

HFCAA, AHFCAA, China ADRs & FTSE Index Treatment: Speeding Up The Process & Implications

By Brian Freitas

  • The Holding Foreign Companies Accountable Act (HFCAA) could result in China ADRs being delisted in 2024. The Accelerated HFCAA, if passed, will bring that date ahead to 2023.
  • FTSE has announced its implementation plan to migrate the China ADRs in its indices to the local listings using an accelerated schedule.
  • Expect a lot more secondary listings/ dual primary listing in Hong Kong over the next few months. The increase free float market cap could keep a lid on prices.

WISE Theme Indexes Rebalancing Today: Names in Basket Trade Setup

By Sanghyun Park

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Jul 13
0

Daily Brief Event-Driven: BYD (1211 HK): Is Buffett Bailing? and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • BYD (1211 HK): Is Buffett Bailing?
  • NIFTY100 & CPSE Index Rebalance: Some Big Changes in 3 Weeks
  • Reversion Trading on a Massive Price Diversion of LG Chem & LG Energy Solution
  • Topsports (6110 HK): Upsizing Undervalued Sporting Goods Play
  • BYD’s Shares Tumble Awaiting Berkshire’s Next Move
  • JAPAN PASSIVE: Who Owns What 2022?
  • Topsports International Holdings – Is Cheap Enough to Counter Some of the Risks
  • MFE/Mediaset España: Offer Results and Trade Ideas

BYD (1211 HK): Is Buffett Bailing?

By David Blennerhassett

  • Just days after BYD (1211 HK) surpassed Tesla Motors (TSLA US) as the world’s largest electric vehicle producer by sales, is Warren Buffet cashing in his chips?
  • 225mn shares of BYD  – 7.73% of the H shares – moved into CCASS yesterday. These are Berkshire Hathaway’s shares. 
  • For a shareholder who has kept his holding in share certificates for 13 years, this development suggests the possibility of a partial or full exit. 

NIFTY100 & CPSE Index Rebalance: Some Big Changes in 3 Weeks

By Brian Freitas

Reversion Trading on a Massive Price Diversion of LG Chem & LG Energy Solution

By Sanghyun Park

  • The price diversion between LG Chem and LG Energy has deepened considerably over the past two days. The sigma is currently -2.35. It is virtually the most extreme level year-to-date.
  • LG Energy’s immediate-term overhang risk will likely offset the upcoming passive inflow event. In addition, the intensity of their price cointegration has not been weakened in recent months.
  • Therefore, we should consider setting up reversion trading from this point on, aimed at the lockup release on July 27.

Topsports (6110 HK): Upsizing Undervalued Sporting Goods Play

By David Blennerhassett

BYD’s Shares Tumble Awaiting Berkshire’s Next Move

By Arun George

  • The increase of 225.2 million CCASS shares deposited with Citibank matches Berkshire Hathaway Inc Cl B (BRK/B US)’s stake. BYD (1211 HK) closed -12% down on speculation of a selldown.   
  • The H Share recently touched all-time highs and trades at a significant premium to historical multiples. BYD has a recent history of a selldown by a substantial shareholder (Himalaya Capital).
  • Berkshire has made a 33x gain on its BYD investment, excluding dividends. Taking money off the table would align with Berkshire’s value investing mandate.

JAPAN PASSIVE: Who Owns What 2022?

By Travis Lundy

  • 2022 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. 
  • Even if you do not “play” index changes, understanding impact is important. Japan Exchange Group (8697 JP) entered Nikkei 225 in July 2020 after rising 30%. That was the top.
  • Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks. 

Topsports International Holdings – Is Cheap Enough to Counter Some of the Risks

By Sumeet Singh

  • Topsports International Holdings (TIH) is now trading close to its all time lows, after the shares corrected by 50% over the past year.
  • The company is one of the largest retailers for Nike (NKE US) and Adidas AG (ADS GR) in China.
  • Given then on/off lockdowns the near term outlook isn’t great, but the stock appears cheap for those willing to take a longer view.

MFE/Mediaset España: Offer Results and Trade Ideas

By Jesus Rodriguez Aguilar

  • MFE waived the minimum acceptance condition of the takeover bid for Mediaset España and acquired all of the shares that accepted the offer (27.23% of the share capital).
  • MFE will own 82.92% (thus not reaching squeeze-out threshold), the stock is much less liquid now. TV advertising looks increasingly grim in Spain. I would be short up to €2.8/share.
  • MFE A shares are trading at a 30% discount, which seems excessive. With more A shares coming in the market (and higher liquidity), I would be long MFEA/short MFEB.

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Jul 12
0

Daily Brief Event-Driven: TOPIX Rebalance: End-July Rebal Is $3.5bn One-Way – Some Big Sell Names and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • TOPIX Rebalance: End-July Rebal Is $3.5bn One-Way – Some Big Sell Names
  • Mercari (4385) – End-July TOPIX Inclusion Update
  • TOPIX July Rebalance: Mercari Inclusion, FFW Changes, US$6.5bn To Trade
  • Hong Kong CEO & Director Dealings – 11th July 2022
  • Link’s Board Shows Its Hand
  • Local Pensions’ Spot/Futures Arb on Samsung Electronics & 1P Discount Distortion
  • Pan Pacific (7532) To Up Stake in Kanemi (2669) Through Partial Tender
  • KOSDAQ150 Index Rebalance Preview (Dec 2022): Changes Galore Early in the Review Period

TOPIX Rebalance: End-July Rebal Is $3.5bn One-Way – Some Big Sell Names

By Travis Lundy

Mercari (4385) – End-July TOPIX Inclusion Update

By Travis Lundy

TOPIX July Rebalance: Mercari Inclusion, FFW Changes, US$6.5bn To Trade

By Brian Freitas

  • Mercari Inc (4385 JP) will be added to the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) at the close on 28 July.
  • There are a lot of FFW changes, mainly reductions. This leads to large funding inflows on the large index stocks.
  • We estimate the inclusion of Mercari and the FFW changes will lead to a one-way turnover of 0.56% leading to a one-way trade of JPY 442.23bn (US$3.25bn).

Hong Kong CEO & Director Dealings – 11th July 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. 
  • This insight also flags those companies where shares have been pledged, both recently and ongoing.

Link’s Board Shows Its Hand

By Arun George

  • The Link Administration (LNK AU) Board will not recommend Dye&Durham/DND’s revised lower offer of A$4.57 per share due to shareholder feedback, the underlying value and alternative options.
  • The slightly above guidance is designed to show that Link’s contribution to DND’s build a billion objective remains on track and there is little chance of triggering the MAC clause.
  • DND needs to secure a deal this week to use its attractive deal financing, according to AFR. This could be the cue for DND to give a little more.

Local Pensions’ Spot/Futures Arb on Samsung Electronics & 1P Discount Distortion

By Sanghyun Park

  • The Samsung Electronics single-stock futures trading volume has increased significantly. In the most recent F 202207, the futures/cash TV ratio soared to 80%, considerably higher than the usual 40% level.
  • Local pension funds are doing spot/futures arbitrage quite aggressively on Samsung Electronics, resulting in unintended consequences, including the 1P discount distortion we witnessed on June 16.
  • This 1P discount distortion provides a higher spread than futures/spot arbitrage. So, we need to preemptively set up pref arbitrage while closely monitoring Samsung Electronics’ basis.

Pan Pacific (7532) To Up Stake in Kanemi (2669) Through Partial Tender

By Travis Lundy

  • Pan Pacific International Holdings (7532 JP) has announced a Tender Offer on Kanemi Co Ltd (2669 JP) to buy out the remaining shares of its one-time co-owner, Familymart. 
  • The Tender Offer is for 11.83% of shares (ex-Treasury) at a 3% discount to last. It will get PPIH to near 40%, but together with friendlies, they own ~70%.
  • There is a small but extraordinarily illiquid opportunity here. I’d avoid, but there is an interesting potential put option. 

KOSDAQ150 Index Rebalance Preview (Dec 2022): Changes Galore Early in the Review Period

By Brian Freitas

  • One third of the way through the review period for the June rebalance, we see 11 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX). 
  • One-Way turnover is estimated at 3.88% and the impact on the expected deletions is a lot higher than the impact on the expected inclusions.
  • The potential adds have outperformed the potential deletes over the last few months. With the potential adds not short sell eligible, there could be more to go here.

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Jul 11
0

Event-Driven: Giordano International, Hyundai Home Shopping Network, Valora Holding Ag and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Merger Arb Mondays (11 Jul) – Link Admin, Ramsay Health, Giordano, VNET, DTAC/True, Hwa Hong
  • KOSPI200 Dec Index Rebalance Preview: Stocks Nearing the Inclusion Zone
  • FEMSA/Valora Holding: Fair Offer and Possible Counterbid

Merger Arb Mondays (11 Jul) – Link Admin, Ramsay Health, Giordano, VNET, DTAC/True, Hwa Hong

By Arun George

KOSPI200 Dec Index Rebalance Preview: Stocks Nearing the Inclusion Zone

By Brian Freitas

FEMSA/Valora Holding: Fair Offer and Possible Counterbid

By Jesus Rodriguez Aguilar

  • Valora has agreed to a CHF 260/share cash offer (52% premium, 7.6x EV/Fwd EBITDA, 24.7x Fwd P/E) from FEMSA, which intends to use it as a platform for European expansion.
  • I consider the offer as fair (my DCF valuation of Valora is CHF 252.2/share, WACC 8.5%, 1.7% implied perpetuity growth rate).
  • Valora should benefit from FEMSA’s know-how and added scale. A counterbid could be possible from the likes of Migros and Coop.

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Jul 10
0

Event-Driven: Pylon Technologies Co Ltd, Bank Of Iwate, Rakuten Inc, SPH REIT and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Index Rebalance & ETF Flow Recap: MSCI STD, FTSE AW/AC, HSI, KBANK, MDKA
  • JAPAN ACTIVISM:  Silchester AGM Effort Fails But Bank of Iwate (8345) Is Cheap As Chips
  • Last Week in Event SPACE: Chugoku Bank, Link Admin, Rakuten, Tassal, Pipedo
  • Asia-Pac Weekly Risk Arb Wrap: Pipedo, Link Administration, Tassal, Giordano, Hwa Hong, SPH REIT

Index Rebalance & ETF Flow Recap: MSCI STD, FTSE AW/AC, HSI, KBANK, MDKA

By Brian Freitas

  • Most changes expected at the MSCI August QIR are in China. This will be the last QIR using the current methodology. The Feb 2023 QIR will use the comprehensive methodology.
  • There are a lot of changes expected to the FTSE All-World and All-Cap indices at the September SAIR and we list out potential inclusions and exclusions.
  • Inflows to the KraneShares CSI China Internet ETF (KWEB US) continue as sentiment around China stocks, especially tech, improves.

JAPAN ACTIVISM:  Silchester AGM Effort Fails But Bank of Iwate (8345) Is Cheap As Chips

By Travis Lundy

  • Silchester aimed at four mid-sized regional banks and one tiny one. All four efforts failed, but two of the four banks are probably worth looking at. 
  • Bank Of Iwate (8345 JP) is the small one (tiny) worth looking at. It is 0.17x book, <7x earnings, 1.2x market cap in equity holdings, and better-than-average NIM.
  • Over time, value will out. And while not multi-bagger compelling, the mechanical value arithmetic is interesting.

Last Week in Event SPACE: Chugoku Bank, Link Admin, Rakuten, Tassal, Pipedo

By David Blennerhassett

  • Silchester’s effort to raise awareness in Chugoku Bank (8382 JP) failed. Still, if you had a basket of regional bank longs and shorts, Chugoku would be in the short basket. 
  • Dye & Durham reloads a higher Offer after Link Administration (LNK AU)‘s rejection. This probably still needs a (small) bump in terms to get up. 
  • Rakuten Inc (4755 JP)is trading at a significant discount to its SOTP. A part of its Fintech segment (Rakuten Bank) could be worth ~50% of total market cap.

Asia-Pac Weekly Risk Arb Wrap: Pipedo, Link Administration, Tassal, Giordano, Hwa Hong, SPH REIT

By David Blennerhassett

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Jul 09
0

Event-Driven: Noah Holdings, Shiga Bank, Jiangxi Ganfeng Lithium, Li Auto and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Noah Holdings: A Solid Takeout Candidate as the Largest Independent Wealth Mgmt Provider in China
  • JAPAN ACTIVISM:  Silchester Target Shiga Bank Dings the Div Proposal Badly
  • Shanghai/​​​​​​​Shenzhen Northbound Connect: Weekly Moves (8 July 2022)
  • Shanghai/​​​​​​​Shenzhen Southbound Connect: Weekly Moves (8 July 2022)

Noah Holdings: A Solid Takeout Candidate as the Largest Independent Wealth Mgmt Provider in China

By Douglas Kim

  • In our view, Noah Holdings is a solid acquisition candidate as the largest independent wealth management services provider in China. 
  • The Chinese regulators made a change to the ETF market to overseas investors via Hong Kong called ETF Connect and this is likely to benefit companies such as Noah. 
  • As China’s financial markets become larger and more liberalized, there will be a premium on companies such as Noah Holdings with leading market share in China’s wealth management services. 

JAPAN ACTIVISM:  Silchester Target Shiga Bank Dings the Div Proposal Badly

By Travis Lundy

  • In April, Silchester went after Shiga Bank (8366 JP)(JAPAN ACTIVISM:  Silchester Goes After Shiga Bank), with an open letter decrying destruction of shareholder value, asking for a special dividend. 
  • They said Shiga Bank had excess cross-holdings and perennially low ROE (it does). Silchester asked for a minimal special div as a signal. Shareholders dinged their request at the AGM. 
  • Shiga Bank had a decent runup in the last several months – far outstripping its peers. Now it is rich. Time to take the trade off.

Shanghai/​​​​​​​Shenzhen Northbound Connect: Weekly Moves (8 July 2022)

By David Blennerhassett

Shanghai/​​​​​​​Shenzhen Southbound Connect: Weekly Moves (8 July 2022)

By David Blennerhassett

  • 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$1.3bn, split US$0.7bn for Shanghai and US$0.6bn for Shenzhen.
  • The largest inflows were into Tencent (700 HK) and Li Auto (2015 HK). The largest outflow was in Meituan (3690 HK) and Great Wall Motor (2333 HK).

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Jul 08
0

Event-Driven: Asmedia Technology, Giordano International, Link Administration, Lotte Confectionery, Electricite De France Sa, Chugoku Bank and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • FTSE TWSE Taiwan Dividend+ Index: A Rare Gem for Index Rebal Trades
  • Giordano’s Retail Recovery Will Force the Cheng Family into a Rethink
  • Link Admin Mulls Dye & Durham’s Upped Bid
  • KOSPI 200 December Rebelancing: Names Currently Close To & Out of Buffer Zone
  • Link Narrows the Price Gap as DND Bumps Its Lowered Offer
  • République Française/EDF: Possible Offer for Minorities
  • JAPAN ACTIVISM:  Silchester’s Chugoku Bank AGM Ploy Fails – Won’t Be an Activism Target
  • Giordano (709 HK): Cheng Family’s Offer (Even) Less Viable After Positive Profit Alert

FTSE TWSE Taiwan Dividend+ Index: A Rare Gem for Index Rebal Trades

By Janaghan Jeyakumar, CFA

  • The FTSE TWSE Taiwan Dividend+ Index is an index of stocks with the highest dividend yields in the universe of the FTSE TWSE Taiwan 50 and Mid-Cap 100 Indices.
  • According to our estimates, the historical average return for index rebalance trades seems to be extremely attractive and the potential volume impact can be significant too.
  • We feel this is one of the most interesting esoteric indices in the Asia-Pacific region for index rebalance trades.

Giordano’s Retail Recovery Will Force the Cheng Family into a Rethink

By Arun George

  • Giordano International (709 HK)’s 1H22 net profit is expected to be in the range of HK$91-101 million, which represents YoY growth of 52-68%. Interims will be out in early August.
  • The clear sign of a retail recovery diminishes the prospect of the Cheng family’s low-ball offer of HK$1.88 per share hitting the 50%+ minimum acceptance threshold.
  • The offer price has not been declared final suggesting that the Cheng family retains some room to test shareholder appetite with an improved offer.   

Link Admin Mulls Dye & Durham’s Upped Bid

By David Blennerhassett

  • Dye & Durham (D&D) has bumped its offer for Link Administration (LNK AU) to $4.57/share after its prior revised $4.30/share bid was rejected. 
  • Link shareholders may also receive an additional A$0.13 from the sale of the Banking and Credit Management (BCM) business under the latest offer.
  • Link said it will consider the proposal and continue to engage with D&D.

KOSPI 200 December Rebelancing: Names Currently Close To & Out of Buffer Zone

By Sanghyun Park

  • At this point, Lotte Confectionery and Miwon Specialty Chemical are currently within less than a 5% increase in market cap to beat the buffer rule.
  • Three constituents are out of the buffer zone: Cheil Worldwide, HDC Hyundai Development, and Boryung Pharmaceutical. Hanall Biopharma, Samyang Holdings, and Hyundai Home Shopping sit on the buffer zone borderline.
  • We should target Samyang Holdings and Hyundai Home Shopping for a short position against Lotte Confectionery and Miwon Specialty Chemical.

Link Narrows the Price Gap as DND Bumps Its Lowered Offer

By Arun George

  • Dye & Durham/DND has bumped its lowered offer by 6.3% to A$4.57 per share. The Link Administration (LNK AU) Board has postponed the 13 July scheme meeting to facilitate discussions. 
  • DND’s “sweetened” A$4.57 base consideration plus the potential BCM consideration of A$0.13 totals exactly A$4.70 per share. This suggests that Board is aiming for a A$4.70 base consideration.  
  • DND is clearly interested in Link. Bridging the 2.8% price gap between the buyer’s and seller’s price aspirations is not onerous and suggests a deal can get done.

République Française/EDF: Possible Offer for Minorities

By Jesus Rodriguez Aguilar

  • The French Government works on the complete nationalisation of Electricite De France Sa (EDF FP). The Government currently owns 81%. The listing has not been a happy story for shareholders.
  • As private equity usually puts it, a “private” setting would be more convenient for EDF, considering the massive debt issuance required to build 14 nuclear plants.
  • A 40% premium (pre-PM speech) would still mean acquiring minorities at a lower multiple than that of Endesa (a close comparable) and would translate in an offer at €10.98/share.

JAPAN ACTIVISM:  Silchester’s Chugoku Bank AGM Ploy Fails – Won’t Be an Activism Target

By Travis Lundy

  • Silchester International Investors targeted the AGMs of four Japanese regional banks in which it had held shares for 12-17yrs writing open letters, and asking each for a small special dividend.
  • One was heavily over-capitalised and significant cross-holding owning Chugoku Bank (8382 JP) 
  • Their Shareholder Proposal flopped badly. The shareholder structure isn’t there to support it, now or in future, and among regional banks, this is on the “less attractive” side valuation-wise.

Giordano (709 HK): Cheng Family’s Offer (Even) Less Viable After Positive Profit Alert

By David Blennerhassett

  • After the close of trading yesterday, Giordano International (709 HK)  announced a positive  profit alert
  • Giordano expects an interim net profit of HK$91mn-HK$101mn, a 52%-68% increase over the corresponding period.
  • The Cheng family’s HK$1.88/share Offer was low-balled from the onset. Substantial shareholder David Webb agrees. This deal is dead without a bump.

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Jul 07
0

Event-Driven: Rakuten Inc, Hwa Hong Corp, Bank of Kyoto, SK IE Technology, LG Energy Solution, Baidu, TPG Telecom Ltd and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Rakuten’s Fortunes Could Change With The Rakuten Bank IPO
  • Hwa Hong (HWAH SP): MGO Triggered, Offeror Now Controls 38.2%
  • JAPAN ACTIVISM:  Silchester’s Bank of Kyoto AGM Results – Activism Still Failing
  • SKIET Block Deal: Passive Impact on TIGER (WISE) Secondary Cell ETF Rebalancing
  • LG Energy Solution: Potential Sellers Post Lock-Up End, Mkt Share Losses, & LG Chem’s Capital Needs
  • HSI Index Rebalance Preview: Finding the Balance
  • TPG Telecom Possible Selldown – Founder Could Look to Raise up to US$1bn with a Clean Exit

Rakuten’s Fortunes Could Change With The Rakuten Bank IPO

By Oshadhi Kumarasiri

  • One of Japan’s largest internet companies, Rakuten Inc (4755 JP) applied to list its consolidated subsidiary, Rakuten Bank (EBANKZ JP) on the Tokyo Stock Exchange on the 4th of July.
  • With steady customer account growth mostly assured through leveraging Rakuten’s eco-system with more than 36.0m monthly active users, Rakuten Bank is likely to be valued at over ¥500bn.
  • Thus, we think the Rakuten Bank IPO could change Rakuten’s fortunes and help the share price bounce back from a 10-year low level.

Hwa Hong (HWAH SP): MGO Triggered, Offeror Now Controls 38.2%

By David Blennerhassett

  • As a result of market acquisitions, the Offeror for Hwa Hong Corp (HWAH SP) now holds 30.0%, triggering a mandatory general offer (MGO). 
  • Including shares tendered, the Offeror controls 38.24%. The Offer remains subject to a 50% acceptance condition. HWAH directors holding 29.26% of shares still do not intend to accept the Offer. 
  • The S$0.40/share Offer price has been declared final. The final closing date is 1 August. This transaction will go down to the wire.

JAPAN ACTIVISM:  Silchester’s Bank of Kyoto AGM Results – Activism Still Failing

By Travis Lundy

  • Silchester, after holding Bank of Kyoto (8369 JP) shares 16 years, becoming the largest investor, FINALLY publicly asked the bank to make a gesture to pay out a tiny special div. 
  • The bank rejected them, but they took it to to the AGM. And there Silchester got rejected by the shareholders. Soundly. Hostile activism is not going to be easy here. 
  • But all is not lost. Since December, the bank has raised its payout ratio to 50% and has promised to cut a piece of its cross-holdings in the MTMP.

SKIET Block Deal: Passive Impact on TIGER (WISE) Secondary Cell ETF Rebalancing

By Sanghyun Park

  • This block deal won’t lead to a float increase event. Nevertheless, it will substantially impact the rebalancing of the TIGER (WISE) Secondary Cell ETF next week.
  • A passive net inflow of up to ₩10B occurs, equivalent to 0.5x ADTV. Indeed, this level provides a significant day trade setup.
  • With today’s price correction, SKIET’s index weight will drop to the high 4% range. Applying the 36% float to today’s price will increase the weight to 5.5% at the rebalancing. 

LG Energy Solution: Potential Sellers Post Lock-Up End, Mkt Share Losses, & LG Chem’s Capital Needs

By Douglas Kim

  • Although LG Chem may not sell additional stake in LGES this year, over the next 2-3 years, there is a high probability of LG Chem selling some stake in LGES.
  • On 27 July 2022, 86% stake of LG Energy Solution could be sold, of which 81.8% is owned by LG Chem and the remaining 4.2% is owned by institutional investors/others.
  • LGES’s market share in the global rechargeable battery usage declined significantly from May 2021 to May 2022, due to recent EV disruption at Tesla’s Shanghai plant and rise of BYD.

HSI Index Rebalance Preview: Finding the Balance

By Brian Freitas

  • Currently at 69 constituents, it is unlikely that we reach 80 member by year end. Hang Seng Indexes is finding it tough to reach the target by excluding unprofitable companies.
  • We list 11 stocks that could be added to the index in September – with one-way turnover just over 5%, the actual number of inclusions will be lower.
  • There are a few potential inclusions where short interest is over 5% of the free float. These stocks could see short covering ahead of announcement of the changes.

TPG Telecom Possible Selldown – Founder Could Look to Raise up to US$1bn with a Clean Exit

By Sumeet Singh

  • TPG Telecom was formed by a merger of Vodafone and TPG in Jul 2020. The merger resulted in the shares owned by Vodafone, Hutchison and DavidTeoh, being put in escrow.
  • The lockup on those shares will expire this month. David Teoh, TPG’s founder, has sold some stock before in Dec 21 and could look to exit his remaining shareholding.
  • In this note, we talk about the upcoming lock-up release and its dynamics.

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Jul 06
0

Event-Driven: SPH REIT, Merdeka Copper Gold Tbk PT, Tianqi Lithium, Advanced Info Service, SK IE Technology, Mapletree Commercial Trust, Rio Tinto PLC and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • SPH REIT Float Drops – Index Impacts To Come (Today and Beyond)
  • Merdeka Copper (MDKA IJ): Listing Board Change and FTSE Inclusion
  • MSCI August 2022 Index Rebalance Preview: The Last QIR?
  • Jasmine Acquisition To Expand Advanced’s Broadband Footprint
  • Block Deal Sale of SK IE Technology by Premier Partners: Trying to Dump Shares on a Dead Cat Bounce
  • MCT SP as MPACT Creeping Ever Higher Vs Peers
  • Selected European Holdcos and DLCs: June ‘22 Report

SPH REIT Float Drops – Index Impacts To Come (Today and Beyond)

By Travis Lundy

Merdeka Copper (MDKA IJ): Listing Board Change and FTSE Inclusion

By Brian Freitas

MSCI August 2022 Index Rebalance Preview: The Last QIR?

By Brian Freitas

Jasmine Acquisition To Expand Advanced’s Broadband Footprint

By David Blennerhassett

Block Deal Sale of SK IE Technology by Premier Partners: Trying to Dump Shares on a Dead Cat Bounce

By Douglas Kim

  • Premier Partners private equity firm plans to sell a total of 3.46 million shares (4.84% stake) of SK IE Technology (361610 KS) in a block deal sale.
  • Premier Partners is trying to dump its shares right after a dead cat bounce in SK IET’s share price rise on 5 July.  
  • Despite the large block deal discount range, we remain negative on the SK IE Technology shares and we would avoid this block deal. Valuations remain expensive.

MCT SP as MPACT Creeping Ever Higher Vs Peers

By Travis Lundy

  • Mapletree Commercial Trust (MCT SP) has crept higher vs the Peer Baskets, especially in the last 4-6 weeks as Other S-REITs have weakened. 
  • This sets the stage for a potentially large flowback into S-REITs as a class coming in a few weeks.
  • It may be time to reconsider positioning, looking at where MPACT has been and will be.

Selected European Holdcos and DLCs: June ‘22 Report

By Jesus Rodriguez Aguilar

  • Discounts to NAV of covered holdcos have either remained within same levels or widened during June: Alba, 40.3%; GBL, 34.7%; Heineken Holdings to 20.9%; Industrivärden C, 13.8%; Investor B, 15.6%; 
  • Porsche Automobile Holding to 35.3%. Rio Tinto DLC widened to 23.4%.  Spreads tend to widen in bear markets but short term recoveries provide opportunities to bet on tightening discounts.
  • Recommended trades: Industrivärden C vs. listed assets, Rio Tinto (DLC).

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Jul 05
0

Event-Driven: Powerchip Semiconductor Manufacturing Corp, Tokyo Stock Exchange Tokyo Price Index Topix, SK Telecom, Link Administration, Tassal, Pipedo HD Inc, Cuckoo Homesys, Kasikornbank PCL, Cary Group AB and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • FTSE All-World/​​​All-Cap Sep Index Rebalance Preview: Asia Ex Japan Ex China
  • JAPAN PASSIVE – The GPIF in FY2021
  • Critical Flaws in the MSCI Methodology for SK Telecom’s Foreign Room Calculation
  • Link Admin Rejects Dye & Durham’s Revised Offer
  • Tassal Group (TGR AU): Cooke Scales Up
  • Link’s Statement Hints at a Willingness to Meet in the Middle
  • PipeDo Holdings (3919) MBO – Advantest Again, This Time It’s a Stitch-Up
  • An Early Look at Potential Deletions and Additions to KOSPI200
  • Kasikornbank (KBANK TB): Potential MSCI Inclusion
  • Teniralc/Cary Group: Agreed Opportunistic Cash Offer

FTSE All-World/​​​All-Cap Sep Index Rebalance Preview: Asia Ex Japan Ex China

By Brian Freitas

  • The price review period for the FTSE All-World/All-Cap September 2022 SAIR ended on 30 June. The changes are expected to be announced on 19 August and implemented on 16 September.
  • For Asia ex-Japan ex-China, we see 7 inclusions to All-World, 58 inclusions to All-Cap, 9 migrations from All-Cap to All-World, 5 migrations from All-World to All-Cap, and 20 deletions.
  • There are quite a few names in Australia that could have same way flows from the S&P/ASX 200 and S&P/ASX 300 Index trackers on the same day as the FTSE trackers.

JAPAN PASSIVE – The GPIF in FY2021

By Travis Lundy

  • The GPIF reported its annual investment results for the FY to March 2022 last Friday. The investment report makes for interesting reading.
  • The GPIF made 5.42% but alpha was negative 6bp vs time-weighted and money-weighted benchmarks.
  • The re-allocations amongst asset classes now means more money tracks TOPIX, and it means active managers have their work cut out for them going forward.

Critical Flaws in the MSCI Methodology for SK Telecom’s Foreign Room Calculation

By Sanghyun Park

  • MSCI does not have any explicitly-defined foreign room calculation method for Korean FOL stocks with DRs.
  • 58M shares can still be converted into ADRs, close to 27% of SO. There are still ample foreign rooms for SKT, making its situation quite different from KT’s in 2019.
  • MSCI, which places the most importance on actual investability, won’t delete SKT, which has a substantial real-world foreign room simply because the nominal value has fallen below the threshold.

Link Admin Rejects Dye & Durham’s Revised Offer

By David Blennerhassett

  • Citing the Australian Competition and Consumer Commission’s concerns and challenging markets,  Dye & Durham (D&D) reduced its Offer price for Link Administration (LNK AU) to $4.30/share, down from $5.50/share.
  • Link has now announced it “does not believe it is able to recommend” the revised Offer.
  • That tentative rejection, and the fact it remains in discussion with D&D, suggest a board-backed price is probably somewhere between the original bid price and the reduced Offer terms. 

Tassal Group (TGR AU): Cooke Scales Up

By David Blennerhassett

  • Back on the 28 June, Tasmanian salmon producer Tassal (TGR AU) rejected Cooke Inc’s $4.85/share offer – its third proposal – and a 42.2% premium to the undisturbed price.
  • At the time, Cooke had amassed a 5.4% position. They have now increased that stake to 7.599%, paying up to A$4.85/share. 
  • A material shareholding and FIRB already in the bag – Cooke is playing for keeps. But it probably needs to bump the terms to get this transaction over the line. 

Link’s Statement Hints at a Willingness to Meet in the Middle

By Arun George

  • The Link Administration (LNK AU) Board will not recommend Dye & Durham/DND’s proposed lower offer of A$4.30 per share due to shareholder feedback, the underlying value and alternative options.
  • The statement suggests that the Board is willing to consider a lower but improved offer. Acquiring Link at a lower valuation through its attractive financing package continues to motivate DND.
  • A price of A$4.70, which is the middle of the buyer’s and seller’s valuations will get a deal done. Downside risk is low as shares trade close to low-end valuation.   

PipeDo Holdings (3919) MBO – Advantest Again, This Time It’s a Stitch-Up

By Travis Lundy

  • Last autumn, Advantage Partners launched an MBO on Pipedo HD Inc (3919 JP) where an activist/y presence threatened to be able to block it. Partway through, shares popped.
  • The MBO was unsuccessful. Now they are back, at the same price, and now they have arranged a side deal with the activist-y holder. So now it is stitched up. 
  • There could easily be people unhappy with the structure of this deal, especially as book value is up 16%, and projected cashflows 8-10% higher than last time. 

An Early Look at Potential Deletions and Additions to KOSPI200

By Douglas Kim

  • In this insight, we provide an early look at the potential deletions and additions to KOSPI200 rebalance. 
  • We provide the top 10 potential deletions including Cosmax Inc (192820 KS), Hyundai Home Shopping Network (057050 KS), and Samyang Holdings (000070 KS) to KOSPI200 (announcement in November 2022).
  • Our trading strategy for the KOSPI200 index would be to go short on a basket of the potential deletions and to go long on a basket of the potential additions.

Kasikornbank (KBANK TB): Potential MSCI Inclusion

By Brian Freitas

  • Kasikornbank PCL (KBANK-R TB) was deleted from the MSCI Thailand Index in June 2021 following the issuance of NVDR’s approaching its permitted limit of 25% of issued shares.
  • With 12 months since deletion complete and meeting market cap, liquidity and foreign room thresholds, Kasikornbank PCL (KBANK TB) could be added to the MSCI Thailand Index in August.
  • If added to the MSCI Thailand Index, we estimate passive trackers will need to buy 47.39m shares (US$199m; 3.9 days of ADV) of Kasikornbank PCL (KBANK TB) on 31 August.

Teniralc/Cary Group: Agreed Opportunistic Cash Offer

By Jesus Rodriguez Aguilar

  • CVC and Nordic Capital announced an agreed takeover offer for the 70% they don’t own in Cary Group. The SEK 65/share offer price represents 14.8x EV/Fwd EBITDA and 25.6x Fwd P/E.
  • The shares had dropped 60% YTD. Cary’s tenure in the stock market will be short-lived (listed 09/2021). It’s a difficult target for activists, the top ten shareholders own c.84%.
  • It’s difficult to reject a 60% premium; I believe folks should be happy to cut losses. Gross spread is 1.85% (12.7% estimated annual return assuming settlement on 30 August). Long.

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