Category

Event-Driven

Jun 25
0

Event-Driven: iShares MSCI South Korea Index Fund (ETF), Baozun, Korea Stock Exchange Kospi 200 Index, XPeng, NARI Technology Co Ltd A and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • MSCI Annual Market Classification Review: Korea Doesn’t Make It to the Watchlist
  • China E-Commerce Pair Trade: Long Bozun Short Huitongda
  • Korea May Continue to Fail MSCI DM Inclusion Unless Allowing for K200 Options Listing on SGX
  • Shanghai/​​​​​Shenzhen Southbound Connect: Weekly Moves (24 June 2022)
  • Shanghai/​​​​​Shenzhen Northbound Connect: Weekly Moves (24 June 2022)

MSCI Annual Market Classification Review: Korea Doesn’t Make It to the Watchlist

By Brian Freitas

  • MSCI had announced the results of the 2022 Global Market Accessibility Review earlier this month. Based on that, no changes were expected at the Market Classification Review.
  • Earlier this morning, MSCI announced the results of the Market Classification Review and there are no changes for Asia.
  • Korea has not been placed on the watchlist for an upgrade from Emerging to Developed Market. The earliest that Korea could be reclassified from EM to DM is now 2025.

China E-Commerce Pair Trade: Long Bozun Short Huitongda

By Oshadhi Kumarasiri

  • Chinese e-commerce is having a solid month with most names up 30% in June. Yet this seems more a dead-cat-bounce than a change in direction of the share price momentum.
  • While there’s plenty of additional downside to big e-commerce players in e-commerce, smaller ones such as Baozun Inc. (BZUN US) has limited down side with shares trading near 1.0x P/B multiple.   
  • Meanwhile Huitongda (9878 HK) is yet to experience the post IPO sell-off and trading at expensive multiples. This raises an opportunity for a Long Bozun Short Huitongda trade.

Korea May Continue to Fail MSCI DM Inclusion Unless Allowing for K200 Options Listing on SGX

By Sanghyun Park

  • The KRX and the MSCI have not agreed on the full right to use the KRX indexes’ price information. This should be the essential cause of Korea’s failed DM inclusion.
  • The MSCI wants to list the KOSPI 200 Options on the SGX, which the MSCI sees as a prerequisite for taking the lead in the Korean passive market.
  • Suppose the government takes a forward-looking approach to this issue. In that case, we may see the K200 Options SGX listing that has a bigger market impact before DM inclusion.

Shanghai/​​​​​Shenzhen Southbound Connect: Weekly Moves (24 June 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, net inflow over the past week was ~US$1.3bn, split US$0.4bn for Shanghai and US$0.9bn for Shenzhen.
  • The largest inflows were into XPeng (9868 HK) and HKEX (388 HK). The largest outflow was in Meituan (3690 HK) and Koolearn (1797 HK).

Shanghai/​​​​​Shenzhen Northbound Connect: Weekly Moves (24 June 2022)

By David Blennerhassett

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Jun 24
0

Event-Driven: Hutchison Telecommunications Hong Kong Holdings, Toyo Construction, Giordano International, Kakao Pay, Uniden Holdings, Rheinmetall AG, Doosan Enerbility, Qinetiq, Europcar Mobility Group and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Hutch Tel (215 HK): Something’s Brewing
  • Toyo Cancels Poison Pill At Last Minute – Range to the Upside
  • Giordano’s Conditional Offer at HK$1.88
  • Kakao Pay’s MSCI Float Should Be 55% at Aug QIR Based on the Case of Kakao Games
  • Uniden (6815) MBO – Cornwall Tests Market Norms By Launching a Low-Premium MBO
  • DAX/MDAX/SDAX Quiddity Leaderboard Sep 2022: Rheinmetall, HelloFresh, & Other Potential Changes
  • Giordano (709 HK): Cheng Family’s Underwhelming Offer
  • Launch of Kindex Nuclear Theme Deep Search ETF & Hanaro Nuclear ISelect ETF in Korea
  • STOXX Europe Quiddity Leaderboard Sep 2022: 10 ADDs/DELs & Some LONG-SHORT Ideas
  • VW Consortium Just Shy of 90% Threshold of Europcar

Hutch Tel (215 HK): Something’s Brewing

By David Blennerhassett

  • Hutchison Telecommunications (215 HK)‘s share price is up 33% month to date.
  • The average volume in June has been 11.9mn shares per day, compared to 3.8mn shares on average over the past year, and 3mn in the past six months. 
  • Of interest, Southbound buying has accelerated in the last two weeks, with a holding of 0.76% of shares out, up from 0.11% at the beginning of the month. 

Toyo Cancels Poison Pill At Last Minute – Range to the Upside

By Travis Lundy

  • On 24 May, Toyo Construction (1890 JP) (TC) came out fighting against Yamauchi No.10 Family Office (YFO), presenting a poison pill and accusing YFO of “extreme dishonesty” despite standstill agreement. 
  • YFO presented hundreds of pages of defence, TC continued to accuse the YFO co-CIO and others of wrongdoing. To me, TC was clearly acting in bad faith. 
  • After ISS and later Glass Lewis came out against TC’s proposal, YFO continued to ask for the PP to be pulled, TC has finally relented. Now we wait some more.

Giordano’s Conditional Offer at HK$1.88

By Arun George

  • Giordano International (709 HK) announced a voluntary conditional offer from the Cheng Yu Tung family at HK$1.88 per share, an 18.2% premium to the undisturbed price.  
  • The VGO is conditional on the offeror and concert parties holding more than 50% of the voting rights (currently own 24.57%). The VGO price is underwhelming.
  • David Webb’s (the retail activist investor) presence on the shareholder register likely deterred a privatisation bid. We think there is a 50% chance that the VGO becomes unconditional.  

Kakao Pay’s MSCI Float Should Be 55% at Aug QIR Based on the Case of Kakao Games

By Sanghyun Park

  • The MSCI immediately included 4.31% owned by Netmarble in Kakao Games’ float by applying one of the exception rules in Sections 3.2.4 or 3.2.5 of the MSCI GIMI Methodology Book.
  • The exception rule used here must have been this one: Re-estimating free float figures resulting from the reclassification of shareholders from strategic to non-strategic.
  • I can’t find a reason why this practice of the MSCI shouldn’t be equally applied to Alipay’s Kakao Pay stake.

Uniden (6815) MBO – Cornwall Tests Market Norms By Launching a Low-Premium MBO

By Travis Lundy

  • Uniden Holdings (6815 JP) is a ubiquitous manufacturer in its niche field of CBs, scanners, radar detectors, and marine radios. It used to be famous for cordless phones.
  • That was then. Manufacturing revenues dropped 90% in 20yrs, there were some weird related party transactions, an accounting scandal, and now the company is fixing itself.
  • And now value fund Cornwall Capital has launched an MBO at a [checks notes] 2.5% premium to last trade. This is going to be interesting. 

DAX/MDAX/SDAX Quiddity Leaderboard Sep 2022: Rheinmetall, HelloFresh, & Other Potential Changes

By Janaghan Jeyakumar, CFA

Giordano (709 HK): Cheng Family’s Underwhelming Offer

By David Blennerhassett

  • The Cheng family has made a voluntary conditional Offer of $1.88/share for Giordano International (709 HK). 
  • The Cheng’s (and concert parties) control 24.57%. The Offer is conditional on the family getting to more than 50% via tendering. 
  • The intention is to maintain Giordano’s listing. The Offer Price has not been declared final. 

Launch of Kindex Nuclear Theme Deep Search ETF & Hanaro Nuclear ISelect ETF in Korea

By Douglas Kim

  • Korea Investment Management will be launching a new nuclear power related ETF called Kindex Nuclear Theme Deep Search ETF on 28 June. 
  • NH-Amundi Asset Management will also be launching Hanaro Nuclear iSelect ETF on 28 June. Both ETFs are the first ones to focus on the nuclear power related stocks in Korea.
  • The launch of these ETFs should have a positive impact on the major nuclear power related stocks including Doosan Enerbility (034020 KS) and Kepco Plant Service & Engineering (051600 KS).

STOXX Europe Quiddity Leaderboard Sep 2022: 10 ADDs/DELs & Some LONG-SHORT Ideas

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 EuroSTOXX Indices for the September 2022 Rebalance.
  • Based on current rankings, I estimate there to be 10 ADDs/DELs for the STOXX Europe 600 Index including potential M&A-related deletions.
  • In addition, I have discussed some LONG-SHORT pairs with interesting potential index flow dynamics.

VW Consortium Just Shy of 90% Threshold of Europcar

By Jesus Rodriguez Aguilar

  • At the expiry of the initial offer period, a total of 87.38% of the share capital was tendered, just shy of 2.62% to implement a squeeze-out.
  • The market believes the 90% threshold will be reached, thus enabling the squeeze-out procedure. This means that the additional €0.01/share price supplement should be paid.
  • Gross spread is 0.24% (shares trade above the €0.5 offer price) and the estimated annual return is 4.82% (estimated settlement on 11 July). Recommendation is long and tender.

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Jun 23
0

Event-Driven: Toshiba Corp, West African Resources, Emperador Inc, Kepco Engineering & Construction, Sumber Alfaria Trijaya Tbk Pt, True Corp Pcl, SPH REIT, Link Net, Home Retail and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Oops, Price Leaks Early on Toshiba – Now We Have To Think About Probability
  • S&P/​​ASX Index Rebalance Preview (Sep): Plenty of High Impact Changes
  • Emperador (EMP PM): FTSE Inclusion Likely in September
  • Discussing How We Should Time the KEPCO E&C Block Deal
  • Sumber Alfaria Trijaya (AMRT IJ): LQ45 & MSCI Inclusion Done, FTSE Coming Up
  • True/​​DTAC: Merger Support After Court Ruling
  • SPH REIT Option Has 1 Week To Go – Look Elsewhere
  • Link Net MTO Set to Launch as Axiata Completes Stake Acquisition
  • FTSE UK Quiddity Leaderboard Sep 2022: Sanne Group Deletion Seems Likely in 3Q 2022

Oops, Price Leaks Early on Toshiba – Now We Have To Think About Probability

By Travis Lundy

  • An article this morning in the Yomiuri suggested JIC was bidding, even though they have not been in any “lists of 8 bidders” I have seen. The market yawned. 
  • An article this evening says bidders are offering “up to ¥7,000/share” but there is a range of pricing and conditions. Not surprising, but we know little. 
  • Shareholder structure matters. This has been event-y for a long time so I expect not many new buyers are ready to come in. This just shifts the range. And risk.

S&P/​​ASX Index Rebalance Preview (Sep): Plenty of High Impact Changes

By Brian Freitas

  • There could be one change to the S&P/ASX 200 (AS51 INDEX) in July following the privatisation of Uniti Group Ltd (UWL AU). 
  • Then there will be a whole bunch of changes to the S&P/ASX 100 Index, S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index in September as part of the regular rebalance. 
  • There is large short interest on a couple of the potential adds and a lot of the potential deletes. That will drive stock price moves closer to implementation.

Emperador (EMP PM): FTSE Inclusion Likely in September

By Brian Freitas

  • Emperador Inc (EMP PM) passes the FTSE Median Liquidity test and the inclusion thresholds for full market cap and investable market cap and could be added in the FTSE GEIS.
  • The inclusion should take place at the September SAIR and that would require passive funds to buy over 84m shares. That is over 35 days of ADV.
  • A potential secondary listing in Singapore has moved the stock in the past and that could be another trigger for the stock to move higher.

Discussing How We Should Time the KEPCO E&C Block Deal

By Sanghyun Park

  • Since KEPCO announced the sale of its stake in KEPCO E&C, this will happen. But the question is when, and the market was betting that it would not happen immediately.
  • But these bets collapsed yesterday. It is because Choo Kyung-ho, Deputy Prime Minister of Economy, publicly made remarks yesterday that seemed to pressure KEPCO to make additional self-rescue efforts.
  • KEPCO may aim at the level of ₩60,000 by applying a 5-7% discount rate from the mid-₩60,000 price. With this price in mind, we need to time this block deal.

Sumber Alfaria Trijaya (AMRT IJ): LQ45 & MSCI Inclusion Done, FTSE Coming Up

By Brian Freitas

True/​​DTAC: Merger Support After Court Ruling

By David Blennerhassett

  • According to local media, Thailand’s Central Administrative Court has dismissed a petition seeking to overturn a 2018 NBTC regulation that allowed mergers to take place without requiring the regulator’s approval.
  • Reportedly the Court ruled earlier this month that the enforcement of this regulation was lawful; and that the DTAC/True merger would not cause unrecoverable damage to the telecom sector.
  • Both DTAC and True gained on the news. A merger now appears increasingly more likely; although conditions may still be imposed to protect consumers. 

SPH REIT Option Has 1 Week To Go – Look Elsewhere

By Travis Lundy

  • The SPH REIT (SPHREIT SP) “option” has performed admirably so far, up 4.2% in a month, and now it is time to look elsewhere. 
  • SPH REIT has outperformed its Retail S-REIT peers and is now near the top of its undisturbed 3-year range. 
  • And there are potential large flow events on the horizon which would benefit the Peers more than SPH REIT.

Link Net MTO Set to Launch as Axiata Completes Stake Acquisition

By Arun George

  • Axiata Group (AXIATA MK) and XL Axiata (EXCL IJ) completed the acquisition of a combined 66.03% interest in Link Net (LINK IJ) at IDR4,800 per share. 
  • Axiata will disclose the details of the MTO in due course. We think that the MTO opens on 7 July with the earliest possible close of 11 August. 
  • At the last close, the gross and annualised spread of a 19 August payment is 3.7% and 23.7%, respectively.

FTSE UK Quiddity Leaderboard Sep 2022: Sanne Group Deletion Seems Likely in 3Q 2022

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the potential index changes for the FTSE 100 Index and the FTSE 250 Index in the September 2022 Rebalance.
  • In addition to the Regular Rebalance changes, Sanne Group PLC (SNN LN) could get deleted during the quarter, leaving room for one intra-quarterly ADD for FTSE 250. 
  • There are more M&A events that could close in the next few months and trigger irregular index changes for both FTSE 100 and FTSE 250.

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Jun 22
0

Event-Driven: Huitongda, Toshiba Corp, Resapp Health, Shinko Shoji, Meritz Securities, Piedmont Lithium, Kepco Engineering & Construction, SenseTime Group, Total Access Communication and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • HSCI Index Rebalance and Stock Connect: Potential Changes in September
  • Toshiba (6502) Strong Vs Peers on No News Means Susceptible to Risk On Underperformance
  • ResApp (RAP AU): Low-End Pfizer Offer As Cough Trial Fails
  • Shinko Shoji (8141) Buyback – Possibly An Interesting Development
  • Meritz Securities: Another Major Treasury Shares Cancellation
  • S&P/​​​​​ASX Quiddity Leaderboard Sep 2022: Uniti Deletion & Many Other Changes for ASX 200 & 300
  • Block Deal Sale of KEPCO Engineering & Construction Likely in 2H 2022
  • SenseTime Lock-Up -Investment Blacklist Will Further Pressurize the Upcoming US$18bn Lock-Up Release
  • DTAC/True Merger: Administrative Court Ruling a Positive
  • ResApp’s Confirmatory Study Fails, Resulting in Pfizer’s Lower A$0.146 Offer

HSCI Index Rebalance and Stock Connect: Potential Changes in September

By Brian Freitas

  • We see 28 potential inclusions to the HSCI in September, plus another 9 stocks that are close to the inclusion cutoff. Some stocks are already a part of Stock Connect.
  • There could be 22 deletions from the index on market cap, liquidity and prolonged suspension. Most of the deletions would be moved to the ‘sell-only’ Southbound Stock Connect list.
  • Some of the stocks that remain in the HSCI could move to the ‘sell-only’ Southbound Stock Connect list since their average market cap drops below HKD 5bn.

Toshiba (6502) Strong Vs Peers on No News Means Susceptible to Risk On Underperformance

By Travis Lundy

  • Toshiba Corp (6502 JP) sees its AGM next week with new directors and a possible privatisation process ongoing. But the AGM is a done deal and privatisation is not.
  • The event-i-ness of Toshiba keeps it “supported” while its better-valued and higher-growth peers fall harder in the face of recent overall market weakness. 
  • Toshiba promised transparency on its privatisation process, and so far, it has delivered everything it promised. The next “transparency” likely comes in November. 

ResApp (RAP AU): Low-End Pfizer Offer As Cough Trial Fails

By David Blennerhassett

  • Disappointingly, the sensitivity and specificity of ResApp Health (RAP AU)‘s cough trial were significantly lower than its March pilot study.
  • As such, the Scheme Consideration from Pfizer Inc (PFE US) will be A$0.146/share, which is still a 62.2% premium to the undisturbed price.
  • Trading super wide to terms after short-term punters kicked out. 

Shinko Shoji (8141) Buyback – Possibly An Interesting Development

By Travis Lundy

  • Smallcap semiconductor/component/design/assembly service trading house Shinko Shoji (8141 JP) has been buying back stock. It cancelled 20% of shares out last year. Today it buys back nearly 7%. 
  • The question is, who sells. What one might want to do may depend on who sells. And we will know that in 1-5 days. 
  • The stock itself trades at less than net current assets. The entire market cap and indeed equity is its funding of inventory and net receivables. It’s cheap. 

Meritz Securities: Another Major Treasury Shares Cancellation

By Douglas Kim

  • In this insight, we discuss another 100 billion won worth of treasury shares cancellation just announced by Meritz Securities (008560 KS). 
  • This share cancellation could potentially offset the recent controversies surrounding the FSS investigating the Meritz Asset Management CEO John Lee.
  • After the market close today, Meritz Securities announced that it plans to cancel 20.08 million treasury shares worth 100 billion won, representing 3% of outstanding shares. 

S&P/​​​​​ASX Quiddity Leaderboard Sep 2022: Uniti Deletion & Many Other Changes for ASX 200 & 300

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the potential index changes for S&P ASX 300, 200, 100, 50, and 20 in the September 2022 Rebalance.
  • In addition to the Regular Rebalance changes, M&A events involving Uniti Group Ltd (UWL AU) and Link Administration (LNK AU)could also cause index changes during this quarter.
  • The historical price and volume performance of high conviction ADDs/DELs and potential LONG-SHORT trade ideas involving these names are also discussed in this insight.

Block Deal Sale of KEPCO Engineering & Construction Likely in 2H 2022

By Douglas Kim

  • There has been increased speculation about a potential block deal sale of Kepco Engineering & Construction (052690 KS), driving its share price lower in the past several days.
  • KEPCO owns a 65.77% stake in Kepco Engineering & Construction (052690 KS). 
  • We believe that there could be a further 10-20% downside risk for KEPCO E&C in the coming weeks.

SenseTime Lock-Up -Investment Blacklist Will Further Pressurize the Upcoming US$18bn Lock-Up Release

By Sumeet Singh

  • SenseTime Group (STG) raised US$741m in its Hong Kong IPO in Dec 21. The IPO barely made it through and was priced at the bottom of its IPO price range.
  • STG is a leading AI software company. STG was the largest AI software company in Asia in terms of 2020 revenue, as per Frost & Sullivan (F&S).
  • In this note, we will talk about the lock-up dynamics and updates since our last note.

DTAC/True Merger: Administrative Court Ruling a Positive

By Arun George

  • Press reports (here and here) suggest that Administrative Court has ruled out the request to suspend the DTAC/True merger and that the regulation which repeals NBTC’s veto rights is lawful.
  • This development suggests that the NBTC will apply remedial conditions rather than block the merger. The timeline for the satisfaction of VTO conditions is from late June to early August. 
  • With the Court ruling increasing the probability of a successful merger, it is attractive to buy the current share price ratio of 9.698x vs the implied swap ratio of 10.221x.

ResApp’s Confirmatory Study Fails, Resulting in Pfizer’s Lower A$0.146 Offer

By Arun George

  • Disappointingly, Resapp Health (RAP AU)‘s confirmatory data readout condition was not satisfied, resulting in Pfizer Inc (PFE US)’s lower unconfirmed data offer price of A$0.146 per share.
  • The revised SID provides no obvious way for Pfizer to pull its offer. The still material premium to undisturbed price and open shareholder register suggests that the scheme will pass. 
  • The scheme meeting will be held in early to mid-August. At the last close of A$0.125, the gross spread to the unconfirmed data offer price of A$0.146 is 16.8%. 

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Jun 21
0

Event-Driven: SK Telecom, WH Group, Com7 PCL, Policybazaar, Infomedia Ltd, Asiana Airlines and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • A Detailed Guide About Korea’s FOL Stocks & MSCI Treatments
  • WH Group (288 HK) – Stronger, But Still WAY Cheap to Peers
  • SET50 Index Rebalance: BLA, JMT, JMART Added; COM7, RATCH, STGT Out
  • India: AMFI Stock Reclassification Preview
  • Infomedia Draws in Vista Equity Partners to Start a Three-Way Auction
  • HMM-Like Dilution Event: Korean Air Is Nearly Done, But Asiana Airlines Gearing Up

A Detailed Guide About Korea’s FOL Stocks & MSCI Treatments

By Sanghyun Park

  • Korea has a total of 33 FOL stocks. The Korean government restricts foreign ownership in major national infrastructure operators such as broadcasting companies, airlines, and telecommunication companies. 
  • They each have a different FOL % in the range of 0-49.99%, and five are currently included in the MSCI Standard: SKT, LG Uplus, CJ ENM, KEPCO, & KAL.
  • Those located on the borderline that will trigger a meaningful event in the MSCI Standard Index are the three telecom companies: SKT, KT, & LG Uplus.

WH Group (288 HK) – Stronger, But Still WAY Cheap to Peers

By Travis Lundy

  • WH Group has sharply outperformed both global peers and HK/China-listed peers since the last bullish insight pounded the table in mid-March 2022.
  • Since then, the Pork/Feed ratio has been climbing in China and flat to down in the US, and pork prices in China are particularly robust recently. 
  • WH Group (288 HK) remains cheap as chips. And despite gains, still Cheapest in Yonks relatively speaking. 

SET50 Index Rebalance: BLA, JMT, JMART Added; COM7, RATCH, STGT Out

By Brian Freitas

India: AMFI Stock Reclassification Preview

By Brian Freitas

  • Nearing the end of the review period, we see 5 stocks moving from MidCap to LargeCap, 2 new listings added to LargeCap and 7 stocks moving from LargeCap to MidCap.
  • We see 7 stocks moving from SmallCap to MidCap, 3 new listings added to MidCap, and 12 stocks moving from MidCap to SmallCap.
  • Stock migrating upward have, on average, outperformed stocks that are downward migrations. Stocks moving from MidCap to LargeCap have performed the best.

Infomedia Draws in Vista Equity Partners to Start a Three-Way Auction

By Arun George

  • Infomedia Ltd (IFM AU) disclosed an indicative non-binding proposal from Vista Equity Partners at A$1.70 a share. The Board has provided due diligence to all three bidders
  • Curiously, Vista’s offer is in line with TA/Viburnum but below the Battery Ventures’ offer of A$1.75. This suggests that Vista requires due diligence to firm up a higher bid.   
  • With the market downturn starting to blow up M&A deals, the three-way auction for Infomedia lowers its risk profile. At last close, the gross spread to the offers is 6.3-9.4%.

HMM-Like Dilution Event: Korean Air Is Nearly Done, But Asiana Airlines Gearing Up

By Sanghyun Park

  • The KAL event is almost over. But we still have Asiana Airlines. The KDB’s Asiana CB conversion should also be considered a foregone conclusion.
  • Applying the case of KAL, the KDB will likely file conversion when 30 days have elapsed since receiving the repayment notice. For this, the prevailing local consensus is June 10.
  • Conversion filing on July 8 and listing on July 29 with the 15-day delay rule applied is a likely scenario. Hence, our entry point should be from July 4.

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Jun 20
0

Event-Driven: SK Telecom, Infomedia Ltd, Frasers Hospitality Trust, Ping An Insurance (H), Hana Tour Service, Ecopro BM Co Ltd, Feng Tay Enterprise, HYBE, SinoPac Holdings and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • SK Telecom / KT Corp: Foreign Room, Passive Flow & Trade Update
  • Merger Arb Mondays (20 Jun) – Link Admin, Infomedia, ResApp, Ramsay Health, Frasers Hospitality
  • Weekly Deals Digest (19 Jun): Frasers Hospitality, Link Admin, Link Net, Thai Life, GOGOX, ResApp
  • Ping An A/H: Position for Premium Contraction
  • TIGER Theme ETF “Tour Leisure” Rebalancing Projections: Hanatour, Asiana, Kangwon Land, & T’way Air
  • TIGER Theme ETF “Secondary Cell” Rebalancing Projections: SKIET, Ecopro BM, SKI, SKC, & Ecopro
  • FTSE TWSE Taiwan Indices: Quiddity Primer
  • WISE Theme Index “Media Contents” Rebalancing Projections: HYBE, CJ ENM, & Studio Dragon
  • FTSE TWSE Quiddity Leaderboard Sep 2022: Sinopac Financial and Pegatron Leading the Race
  • Infomedia (IFM AU): Now A Three-Way Hunt

SK Telecom / KT Corp: Foreign Room, Passive Flow & Trade Update

By Brian Freitas

Merger Arb Mondays (20 Jun) – Link Admin, Infomedia, ResApp, Ramsay Health, Frasers Hospitality

By Arun George

Weekly Deals Digest (19 Jun): Frasers Hospitality, Link Admin, Link Net, Thai Life, GOGOX, ResApp

By Arun George

Ping An A/H: Position for Premium Contraction

By Brian Freitas

  • The Ping An AH premium has traded around 10% over the last few days – this is near its historical highs and close to where reversals take place from.
  • The AH premium of the broader market is below its highs, while the AH premium on large cap financials has been trending lower over the last few months.
  • 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 few months.

TIGER Theme ETF “Tour Leisure” Rebalancing Projections: Hanatour, Asiana, Kangwon Land, & T’way Air

By Sanghyun Park

  • This ETF’s AUM has decreased by 17% over the past three months to ₩200B. It has 18 constituents, and it is unlikely that there will be any addition/deletion.
  • The first thing to note is Hana Tour because the increase in the number of shares through an offering will be reflected its the market cap right before the rebalancing.
  • Among the top stocks by market cap, Asiana Airlines (020560 KS) (+0,.20x ADTV) and Kangwon Land (035250 KS) (-0.21x ADTV) will likely have a significant passive impact.

TIGER Theme ETF “Secondary Cell” Rebalancing Projections: SKIET, Ecopro BM, SKI, SKC, & Ecopro

By Sanghyun Park

  • This ETF’s AUM has stayed flat over the past three months, sitting at ₩1.3T. It has 28 constituents, and it is unlikely that there will be any addition/deletion.
  • SKIET is expected to have the most inflow relative to ADTV. Then, we have Ecopro BM, which will increase the number of shares through a rights offering.
  • On the other hand, among the top-tier stocks, SK Innovation, SKC, and Ecopro Co Ltd deserve our attention for shorting.

FTSE TWSE Taiwan Indices: Quiddity Primer

By Janaghan Jeyakumar, CFA

  • The FTSE TWSE Index family covers the 150 largest stocks listed in the Taiwan Stock Exchange Corporation (TWSE). 
  • In this index family, Quiddity will primarily focus on the FTSE TWSE Taiwan 50 Index and FTSE TWSE Taiwan Mid-Cap 100 index.
  • In this insight, we will have a look at the selection criteria and the historical price performance of past Rebalance Events.

WISE Theme Index “Media Contents” Rebalancing Projections: HYBE, CJ ENM, & Studio Dragon

By Sanghyun Park

  • This ETF’s AUM has decreased by 20% over the past three months, remaining at ₩120B. It has 22 constituents, and there won’t be any addition/deletion at the upcoming rebalancing.
  • As HYBE’s recent share price plunged, we can expect a fairly interesting passive impact from this rebalancing, because its 10% cap reversion is certain to occur despite the price plunge.
  • CJ ENM (-0.19x ADTV) and Studio Dragon (+0.25x ADTV) are also expected to have a significant passive impact.

FTSE TWSE Quiddity Leaderboard Sep 2022: Sinopac Financial and Pegatron Leading the Race

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the names leading the race to become ADDs/DELs for the Taiwan 50 and Taiwan Mid-Cap 100 Indices for the September 2022 Rebalance.
  • Currently, there are no names satisfying the requirement to be ADDs/DELs for the Taiwan 50 Index. SinoPac Holdings (2890 TT) and Pegatron Corp (4938 TT) are the highest ranked non-constituents.
  • For the Taiwan Mid-Cap 100 Index, there could be one ADD and one DEL in September 2022 based on current standings.

Infomedia (IFM AU): Now A Three-Way Hunt

By David Blennerhassett

  • Online auto parts and service provider Infomedia Ltd (IFM AU) has received a third non-binding proposal; this time from U.S.-based software company Solera Holdings. 
  • The Offer price is A$1.70/share, in line with TA Associates-led consortium’s bid, but below Battery Ventures’ A$1.75/share offer.
  • As with TA and Battery, Solera has been granted limited due diligence. TA holds a 19.4% stake.

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Jun 19
0

Event-Driven: Sk Chemicals Co Ltd/New, Frasers Hospitality Trust, Link Administration, SenseTime Group and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • MSCI Korea August QIR Preview
  • Last Week in Event SPACE: Frasers Hospitality, Toyo Construction, Link Admin, Kito Corporation
  • Asia-Pac Weekly Risk Arb Wrap: ResApp Health, Kto Corp, Link Admin, Toyo, Fraser Hospitality
  • Index Rebalance & ETF Flow Recap: HSCEI, LQ45, Kakao Pay, Thai Life

MSCI Korea August QIR Preview

By Sanghyun Park

  • Small Caps → Standard migrations do not seem to happen at all in this QIR. Similarly, there will likely be no deletion of the existing constituents.
  • Among the Outside IMIs, Kakao Pay is the only one that has the possibility of inclusion. However, it also has uncertainty about the float rate in this QIR.
  • For FOL stocks, the telcos are on the event-triggering borderline. In particular, SKT deserves attention. But its foreign room is now above 3%, so its deletion possibility is getting slimmer.

Last Week in Event SPACE: Frasers Hospitality, Toyo Construction, Link Admin, Kito Corporation

By David Blennerhassett

  • Frasers Hospitality (FHT SP)‘s Offer comes at an all-time high price, exceeding the end-2019 price on a dividend-adjusted basis.  This should be done, but it is worth thinking about how.
  • There is clearly an intentional miscommunication and bad faith posturing by Toyo Construction (1890 JP). 
  • Link Admin (LNK AU) has to exit PEXA to appease ACCC. But how badly do D&D want PEXA? Will they walk? Time to look at Link fundamentally.

Asia-Pac Weekly Risk Arb Wrap: ResApp Health, Kto Corp, Link Admin, Toyo, Fraser Hospitality

By David Blennerhassett

Index Rebalance & ETF Flow Recap: HSCEI, LQ45, Kakao Pay, Thai Life

By Brian Freitas

  • It was a busy Friday with multiple implementations of the June rebalance – FTSE All-World/All-Cap, FTSE China 50/A50/TW50, S&P/ASX, REMX and GDXJ among others.
  • We highlight potential upcoming changes to the HSCEI INDEX and LQ45 Index, when Kakao Pay (377300 KS) could be added in MSCI Korea & the Thai Life IPO index inclusion.
  • There were large inflows to China and Korea focused ETFs during the week.

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Jun 18
0

Event-Driven: Viva China Holdings, Grupo Financiero Banorte, Koolearn, Pharmaron Beijing Co., Ltd. (A) and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Viva China: Perennially Inexpensive Li Ning Exposure
  • CitiBanamex Legacy Operations – Revisiting Banorte’s Potential M&A Challenge and Opportunity
  • Shanghai/​​​​Shenzhen Southbound Connect: Weekly Moves (17 June 2022)
  • Shanghai/​​​​Shenzhen Northbound Connect: Weekly Moves (17 June 2022)

Viva China: Perennially Inexpensive Li Ning Exposure

By David Blennerhassett

  • Viva China (8032 HK) trades at a large discount to its 10.6% holding in Li Ning (2331 HK). 
  • Apart from its Li Ning exposure, Viva has a controlling stake in Bossini International Holdings (592 HK), a sports experience segment, and net cash.
  • The current NAV discount of ~46% is unlikely to meaningfully narrow near term given management’s reluctance to pay out a large dividend or undertake a corporate restructuring. 

CitiBanamex Legacy Operations – Revisiting Banorte’s Potential M&A Challenge and Opportunity

By Victor Galliano

  • Citibanamex legacy operations represent a series of challenges for the acquirer, which include its high cost base, bloated branch network and higher credit risk exposure to consumers and SMEs
  • The opportunity for an acquirer is access to a rich and stable deposit base with a relatively low loan-to-deposit ratio and Banamex’s fee generating AFORE pension administrator
  • Banamex is attracting much interest, which puts pressure on bidders to pay up, especially Banorte; we revisit our potential capital absorption calculations, but still see risk to Banorte’s dividend prospects

Shanghai/​​​​Shenzhen Southbound Connect: Weekly Moves (17 June 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, net inflow was ~US$1.9bn, split US$0.7bn for Shanghai and US$1.2bn for Shenzhen.
  • The largest inflows were into CNOOC Ltd (883 HK)and Meituan (3690 HK). The largest outflow was in ICBC (H) (1398 HK).

Shanghai/​​​​Shenzhen Northbound Connect: Weekly Moves (17 June 2022)

By David Blennerhassett

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Jun 17
0

Event-Driven: Link Administration, Nexon, Kakao Pay, Viva China Holdings, Go-Ahead, Thai Life Insurance, Iljin Hysolus, Sixt SE and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Link Admin: Dye & Durham’s Deal All But Dead
  • ACCC’s Concerns Likely to End in a Link-DND Deal Bust
  • Nexon Buyback May Signal End To Near-Term Relative Outperformance
  • Finding Alpha with the End of Mandatory Lock-Up Periods Data from Korea Securities Depository
  • Viva China: M&A of Global Footwear Brands at Discount & Its Stake in Li Ning Is More than Market Cap
  • Kinetic & Globalvia/Go-Ahead: Recommended Offer
  • Thai Life Insurance: Offering Details & Index Entry Timeline
  • KRX Autos (KODEX ETF) Rebalancing: Watch Iljin HySolus, Halla Holdings, & DTR Automotive
  • Liquid Universe of European Ordinary and Preferred Shares: June ‘22 Report

Link Admin: Dye & Durham’s Deal All But Dead

By David Blennerhassett

  • This transaction is looking increasingly toast. The ACCC has outlined significant preliminary competition concerns with Dye & Durham’s (D&D) proposed acquisition of Link Administration (LNK AU).
  • Separately, Link’s subsidiary, Link Fund Solutions Limited, has been notified that an application for a “Group Litigation Order” has been filed in the English High Court. 
  • Link has to exit PEXA for this transaction to proceed. But how badly do D&D want PEXA? Will they walk? Time to look at Link fundamentally, separate from D&D’s Offer.

ACCC’s Concerns Likely to End in a Link-DND Deal Bust

By Arun George

  • The ACCC’s Statement of Issues noted “significant preliminary competition concerns” in relation to Dye & Durham/DND’s acquisition of Link Administration (LNK AU). The findings will be announced on 8 September.
  • There is no easy fix. We think that satisfying the ACCC requires a PEXA Group (PXA AU) stake disposal which could trigger a material adverse clause.
  • Link aims to proceed with the 13 July scheme meeting but this is a broken deal. While our SoTP suggests upside, there are no short-term positive catalysts.

Nexon Buyback May Signal End To Near-Term Relative Outperformance

By Travis Lundy

  • Nexon (3659 JP) founder Kim Jung Ju tried to sell his holdco in 2019, didn’t, now shares are higher, but he passed suddenly in Q1. The stock popped.
  • Inheritance tax issues for the estate are complicated, but the buyback just executed might signal a “pause” for a while. 
  • In the meantime, recent underperformance in terms of Peer-relative earnings forecasts suggests the stock could drift.

Finding Alpha with the End of Mandatory Lock-Up Periods Data from Korea Securities Depository

By Douglas Kim

  • We discuss ways of finding alpha with the end of mandatory lock-up periods data from Korea Securities Depository (KSD) which comes out at the end of each month.
  • Key companies that are highlighted in this monthly data have been typically underperforming the market much more than the market overall this year.
  • Among these stocks, some of the big underperformers this year include Kakao Pay (377300 KS), HYBE (352820 KS), WYSIWYG Studios (299900 KS), and DearU (376300 KS).

Viva China: M&A of Global Footwear Brands at Discount & Its Stake in Li Ning Is More than Market Cap

By Douglas Kim

  • Viva China Holdings is a deep value stock with several key catalysts. Viva China Holdings’10.36% stake in Li Ning (2331 HK) alone is worth 152% of its market cap.
  • In addition, Viva China Holdings is making solid acquisitions in the global footwear/apparel sector such as Clarks, which is one of the most well known footwear brands in the U.K.
  • A major ongoing risk factor is the recent major lockdowns in Shanghai and other cities in China, which is intent on pursing a zero COVID policy.

Kinetic & Globalvia/Go-Ahead: Recommended Offer

By Jesus Rodriguez Aguilar

  • Although Gerrard Bidco offers a 1500p package (likely settlement on 2 September), the shares are trading c. 6% above in the expectation of a counteroffer.
  • At 7.7x EV/Fwd EBIT, consideration is below the 8.6x EV/Fwd EBIT offered by DWS for struggling rival Stagecoach. FirstGroup is trading at 11.9x EV/Fwd EBIT after rebuffing I Squared Capital Advisors’ approach.
  • I do not believe shareholders will accept the current offer. Kelsian could counterbid up to 1715p (Stagecoach takeout multiple), 14% above current offer (c. 7.3% spread, 42% estimated annual return).

Thai Life Insurance: Offering Details & Index Entry Timeline

By Brian Freitas

  • Thai Life Insurance (124744Z TB) is looking to raise US$1bn in its IPO by selling up to 2.207bn shares. This will value the company at around US$5.18bn.
  • Inclusion in the SET50 INDEX will depend on the float exceeding 20% and a rally that leads to its market cap exceeding 1% of the SET INDEX market cap.
  • Fast Entry to the MSCI Thailand and FTSE All-World indices is not likely. MSCI inclusion could take place at the November SAIR and FTSE inclusion at the December QIR.

KRX Autos (KODEX ETF) Rebalancing: Watch Iljin HySolus, Halla Holdings, & DTR Automotive

By Sanghyun Park

  • The ETF operator’s room to play around in index weighting is relatively minimal. Rebalancing is completed in one trading day. So, the actual passive impact was more intense and substantial.
  • The rebalancing result based on the average float-adjusted MC from May 2 to yesterday: Additions Iljin Hysolus, Halla Holdings, & DTR Automotive / Deletions Nexen Tire, Kumho HT, & Seoyon
  • Their estimated passive impact is more significant than that of the previous rebalancing. It is substantial enough to consider a preemptive position build-up for them.

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

By Jesus Rodriguez Aguilar

  • Discounts have generally widened across our liquid universe, in line with the recent market losses. 
  • Recommendations long ords / short prefs: BMW, Fuchs Petrolub, Investor AB, SSAB.
  • Recommendations long prefs / short ords: Sixt, VW, Danieli, MFE, Grifols, Atlas Copco, Ericsson Handelsbanken, Roche, Schroders.

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Jun 16
0

Event-Driven: Kito Corporation, Resapp Health, Coronado Global Resources Inc, Hwa Hong Corp, Baidu, Kakao Pay, HYBE and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Kito (6409) – Now Sitting Pretty
  • ResApp (RAP AU): Pfizer Coughs Up
  • Australia: S&P/ASX, FTSE, REMX, GDXJ Flows on Friday
  • Hwa Hong (HWAH SP): Directors Recommend Offer. But Not Really …
  • Baidu to Sell Its Stake in IQiyi
  • Kakao Pay MSCI Inclusion: 2022 August QIR or 2023 May SAIR?
  • HYBE: Significant Reduction in MSCI Korea Index Weight Likely in 2022

Kito (6409) – Now Sitting Pretty

By Travis Lundy

  • Kito Corporation (6409 JP) is under offer by KKR unit Crosby, which announced a takeover in mid-May.
  • Anti-Trust and foreign review will take a few months, and so we wait. In the meantime, the shareholder register has changed significantly. This remains an interesting option.
  • And now, global market ructions offer arbitrageurs a meaningful opportunity.

ResApp (RAP AU): Pfizer Coughs Up

By David Blennerhassett

  • Pfizer Inc (PFE US) is Offering ResApp Health (RAP AU) shareholders up to A$0.207/share by way of a Scheme. ResApp’s Board unanimously recommends the Offer.
  • ResApp is currently trialing a cough-based Covid detection tool. If the study proves satisfactory, Pfizer will outlay A$0.207/share. If not, shareholders get A$0.146/share. Pfizer initially pitched A$0.115/share. 
  • The results of the study are due out on the 20 June. 

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

By Brian Freitas

  • 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 tomorrow.
  • The stocks with passive inflows have outperformed the stocks with passive outflows over the last couple of months and post-announcement. There will be pre-positions on a lot of names.
  • Short interest has increased on nearly all the deletes from the S&P/ASX indices, while short interest movement on the stocks with passive inflows has been mixed.

Hwa Hong (HWAH SP): Directors Recommend Offer. But Not Really …

By David Blennerhassett

  • The Circular, containing the IFA opinion and the directors’ recommendation, was despatched after close yesterday. The IFA says fair and the directors recommend shareholders accept the Offer.
  • However … directors holding 29.26% of shares out do not intend to accept the Offer. The intention of an additional 10.9% held by Ong family members is not known.
  • No word on Hong Leong Investment as to their 5.1% stake. The IFA notes the revised Offer terms are a 20.8% discount to the revalued NAV of S$0.5052/share

Baidu to Sell Its Stake in IQiyi

By Shifara Samsudeen, ACMA, CGMA

  • Reuters and several other news media outlets reported that Baidu (BIDU US) is planning to sell its stake in iQIYI Inc (IQ US) .
  • Baidu has supposedly valued iQiyi at US$7bn, implying US$8.2 per ADR which is at a 78% premium to iQiyi’s last close of US$4.6 per ADR.
  • IQiyi reported first-ever operating profit in 1Q2022 driven by huge cost cutting. However, it is yet to be seen if the company could continue to maintain margins without compromising growth.

Kakao Pay MSCI Inclusion: 2022 August QIR or 2023 May SAIR?

By Sanghyun Park

  • When discussing Kakao Pay’s MSCI inclusion, the critical debating point SHOULD BE whether the MSCI will change Alipay’s classification from strategic to non-strategic in the wake of this block deal.
  • Suppose the MSCI judges Alipay’s block sales as an investment recovery and anticipates further block sales. In that case, Alipay’s classification may change from strategic to non-strategic.
  • The circumstantial probability that the MSCI will make such a decision is relatively high in light of recent examples. In this case, the inclusion will occur at this August QIR.

HYBE: Significant Reduction in MSCI Korea Index Weight Likely in 2022

By Douglas Kim

  • As a result of a drastic decline in the share price of HYBE, it is increasingly likely that HYBE’s weight in MSCI Korea Index will be reduced significantly in 2022. 
  • According to our valuation sensitivity analysis, our base case valuation is 4.8 trillion won.
  • As of 1 March 2022, HYBE’s weight in the MSCI Korea Index was 0.430064%, which was the 38th largest stock in this index (out of 111 stocks in total). 

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