Category

Event-Driven

Jun 15
0

Event-Driven: Singtel, LG Energy Solution, Kansai Paint, Ramsay Health Care, Virtus Health, Dongyue Group, Samsung Electronics Pref Shares, Bank Jago Tbk PT, Resapp Health and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Bharti Singtel Possible Selldown/Holdco Trade – Singtel Appears to Be Ready for Cashing in US$1-2bn
  • FTSE GEIS Korea: Rebalancing Week Trades
  • Kansai Paint (4613) – Huge Buyback Launched
  • Ramsay Health’s Offer Spread Risk/Reward
  • FnGuide Top 10 (TIGER ETF) Rebalancing Review & Preview: LG Energy’s Potential Inclusion
  • Virtus Health: Offer From BGH Now Ostensibly Unconditional
  • Dongyue (189 HK): Fast-Growing FCEV Play… With Baggage
  • Samsung Electronics Yearend Special Dividend Projections
  • LQ45 Index Rebalance Preview (July 2022): Candidates for Change
  • ResApp Draws a Revised Binding Offer from Pfizer

Bharti Singtel Possible Selldown/Holdco Trade – Singtel Appears to Be Ready for Cashing in US$1-2bn

By Sumeet Singh

  • Various recent media reports have indicated that Singtel aims to sell 2-4% of its stake in Bharti Airtel. Singtel has officially dismissed the reports as media speculation.
  • There have been subsequent reports in the Indian media about the founder, Sunil Mittal, looking to raise around US$2bn in debt, to finance an increase in his stake in Airtel.
  • In this note, we talk about the possible deal and its implications.

FTSE GEIS Korea: Rebalancing Week Trades

By Sanghyun Park

  • We typically estimate the size of the FTSE All Cap tracking fund to be around $600B. However, empirically, one-third of this was witnessed in Korean stocks during the rebalancing week.
  • Estimating each passive flow based on this, we should expect LG Energy to receive the most significant flow at 1.16x ADTV from this point until the closing of this Friday. 
  • As for Kakao Pay, the FTSE announced an increase in the investability to 15.8% (due to Alipay’s block deals), offering a passive inflow of 0.36x ADTV.

Kansai Paint (4613) – Huge Buyback Launched

By Travis Lundy

  • Kansai Paint (4613 JP) today announced a very large buyback.
  • Given the shareholder structure, the 11.2% buyback may not have the direct market impact that one might think, but there are still ways to play this. 
  • Kansai Paint starts from a near 5-year low against three of four large competitors. And we have accretion and likely cross-holding unwinding. It’s not a bad story.

Ramsay Health’s Offer Spread Risk/Reward

By Arun George

  • Ramsay Health Care (RHC AU)‘s gross spread to KKR & Co Inc (KKR US)’s offer (less the interim dividend) of A$87.52 has widened touching an all-time high of 17.0% today.
  • Despite the longer-than-expected due diligence, rising rates and market volatility, the evidence suggests that KKR remains committed. The expectation is for a binding proposal by June end.
  • At the last close, the risk/reward profile is favourable as the downside due to a deal break (-10% estimated decline) is lower than the upside (+17%) from a binding offer. 

FnGuide Top 10 (TIGER ETF) Rebalancing Review & Preview: LG Energy’s Potential Inclusion

By Sanghyun Park

  • Among the local theme ETFs in Korea, the TIGER (FnGuide) Top 10 has the highest win rate on rebalancing flow trade.
  • LG Energy deserves the most attention at the next rebalancing event. If LG Chem disposes of some of its LG Energy shares, LG Energy can bypass those on the borderline.
  • In this case, Shinhan, the one on the borderline at this point, will face a passive flow of -0.65x ADTV, while LG Energy will receive +0.25x.

Virtus Health: Offer From BGH Now Ostensibly Unconditional

By David Blennerhassett

  • BGH now has >90% of the voting power in Virtus Health (VRT AU). In a somewhat friendly gesture, BGH has bumped the Offer by A$0.005/share. 
  • The increased Offer Price will apply to all shareholders who accept the Offer, including shareholders who have already accepted the Offer. The Offer has been extended to the 27 June.
  • A special fully-franked dividend of up to A$0.30/share should now kick in – an announcement is expected shortly. The Offer remains conditional.

Dongyue (189 HK): Fast-Growing FCEV Play… With Baggage

By David Blennerhassett

  • Dongyue Group (189 HK) is a leader in the manufacturing of fluorochemicals and organosilicons, and the largest player in second-generation refrigerants. 
  • FY21 profit was up 69% yoy. The company just announced profit in the first five months of 2022 recorded an increase of 170%+ compared to the corresponding period last year.
  • The trade pushback centers on corporate governance issues, both in Hong Kong and in the PRC.

Samsung Electronics Yearend Special Dividend Projections

By Sanghyun Park

  • This year’s consensus OCF is at least ₩75T, and CAPEX is ₩45T, less than last year. As a result, we will likely reach an FCF of ₩30T.
  • Then the yearend special DPS would be ₩764, which provides dividend yields of 2.97% (Ord) and 3.22% (Pref), respectively, even based on the conservative OCF estimates.
  • This is a sufficiently attractive dividend yield for Pref. Hence, unless the SEC’s price enters a sharp uptrend, the bullish Pref will likely continue. 

LQ45 Index Rebalance Preview (July 2022): Candidates for Change

By Brian Freitas

ResApp Draws a Revised Binding Offer from Pfizer

By Arun George

  • Pfizer Inc (PFE US)’s revised binding proposal will vary based on the results of the clinical validation study of Resapp Health (RAP AU)’s COVID Algorithm (expected around 20 June).
  • If the confirmatory data condition is satisfied, the offer is A$0.207 (130.0% premium to undisturbed price). If not satisfied, the offer is A$0.146 (62.2% premium to undisturbed price).
  • The offers are within the IE’s valuation range. At the last close, the risk/reward is favourable as the potential upside (A$0.207 offer: +25.5%) exceeds the downside (A$0.146 offer: -11.5%).

Before it’s here, it’s on Smartkarma

Learn More
Jun 14
0

Event-Driven: Frasers Hospitality Trust, Whitehaven Coal, Microstrategy Inc Cl A, Kakao Pay and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Frasers Hospitality Trust Scheme Announced
  • Crown Resorts (CWN AU): Passive Sell Flow and Potential ASX100/200 Replacements
  • MicroStrategy (MSTR US): It’s Cratering Time
  • Fraser Hospitality Trust’s Privatisation Offer from Frasers Property Limited
  • S&P/​ASX June 2022 Rebal Final Look and Crown Resorts Replacements
  • Kakao Pay (377300 KS): Alipay Overhang and Potential MSCI Inclusion

Frasers Hospitality Trust Scheme Announced

By Travis Lundy

  • This morning, Frasers Hospitality Trust (FHT SP) announced a Scheme Implementation Deed was signed for the S-REIT’s privatisation by its current sponsors TCC Group Investments Limited and Frasers Property Limited.
  • The S$500mm borrowing mooted suggested S$0.69/unit; Scheme Consideration is S$0.70/unit in cash against the latest commissioned Adjusted NAV estimate of S$0.6519 (vs last NAV of S$0.6534/unit).
  • The deal comes at an all-time high price, slightly exceeding the end-2019 price on a dividend-adjusted basis.  This should be done, but it is worth thinking about how.

Crown Resorts (CWN AU): Passive Sell Flow and Potential ASX100/200 Replacements

By Brian Freitas

MicroStrategy (MSTR US): It’s Cratering Time

By David Blennerhassett

  • MicroStrategy Inc (MSTR US) is trading at a ~2% discount to NAV as the crypto rout moves into a higher gear.  
  • Bitcoin briefly dipped below US$25k in the last 24 hours, an 18-month low. If it falls another 18%, this will trigger a margin call on one of MicroStrategy’s loans.
  • All is not well elsewhere in cryptoland. Ethereum touched a 17-month low; the Luna/Terra ecosystem has crashed; and crypto lender Celsus capitulated ~60% this morning after freezing withdrawals. 

Fraser Hospitality Trust’s Privatisation Offer from Frasers Property Limited

By Arun George

  • Frasers Hospitality Trust (FHT SP) announced a privatisation proposal from Frasers Property Limited at S$0.70 cash per share + permitted distributions (estimated 1.2961 cents).  
  • The offer is the culmination of a strategic review announced on 8 April. The offer price is attractive in comparison to historical multiples, precedent transactions and historical unit prices.
  • At the last close and for the September end effective date, the gross and annualised spread to the total offer price of S$0.713 per unit is 3.3% and 11.1%, respectively. 

S&P/​ASX June 2022 Rebal Final Look and Crown Resorts Replacements

By Janaghan Jeyakumar, CFA

Kakao Pay (377300 KS): Alipay Overhang and Potential MSCI Inclusion

By Brian Freitas

  • Alipay’s sale of 5m shares in Kakao Pay (377300 KS) has caused the stock to slide below its IPO price. Foreign investors have sold while retail have bought last week.
  • Alipay still holds 34.7% of Kakao Pay (377300 KS) and this will be an overhang on the stock for some time.
  • Kakao Pay (377300 KS) will be added to the FTSE All-World Index at the close on Friday. MSCI inclusion will likely be at the May 2023 SAIR.

Before it’s here, it’s on Smartkarma

Learn More
Jun 13
0

Event-Driven: Bumi Resources Minerals Tbk, Toyo Construction, PetroChina, LG Energy Solution, Link Administration, Ramsay Health Care, SK Telecom and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • MVIS Global Junior Gold Miners Index Rebalance: Big Flows & Impact
  • Toyo Construction – YFO Standstill Against TC Hostility
  • HSCEI Index Rebalance Preview: Four Sets of Changes from July to September
  • LG Energy Solution: End of 6 Months Lock-Up Period & Valuation Sensitivity Analysis
  • KOSPI200 Lockup Release Events: LG Energy Solution, HYBE, Lotte Chilsung, & Krafton
  • Merger Arb Mondays (13 Jun) – China VAST, True/DTAC, Hwa Hong, Link Admin, Ramsay Health, Link Net
  • Weekly Deals Digest (12 Jun): Thai Life, Link Admin, Ramsay, Link Net, China VAST, Suchuang Gas
  • SK Telecom & KT LONG/SHORT Swing Trading for Mean Reversion

MVIS Global Junior Gold Miners Index Rebalance: Big Flows & Impact

By Brian Freitas

Toyo Construction – YFO Standstill Against TC Hostility

By Travis Lundy

  • Three weeks ago, Yamauchi No 10 Family Office (YFO) announced its intentions to launch a Tender Offer by end-June. Toyo Construction (1890 JP) got upset and called YFO names.
  • TC announced a Poison Pill, they talked, TC accused YFO in the AGM Convocation of “extreme dishonesty.” They have since met again, and finally signed a long standstill agreement. 
  • But the Poison Pill will be put to shareholders (ISS recommends against), and shareholders have to decide from the public documents whether they believe Toyo Construction. 

HSCEI Index Rebalance Preview: Four Sets of Changes from July to September

By Brian Freitas

LG Energy Solution: End of 6 Months Lock-Up Period & Valuation Sensitivity Analysis

By Douglas Kim

  • Our base case valuation LG Energy Solution is implied market cap of 75 trillion won or target price of 319,089 won, representing 25% below current share price.
  • Currently, LGES is trading at a premium valuation multiple on a EV/EBITDA (2023E) versus CATL. We believe LGES should trade at a discount to CATL in the next 6-12 months. 
  • LGES’s 6 months lock-up ends on 27 July and there are 4.3% of outstanding shares that can be sold which is likely to put negative pressure on share price.

KOSPI200 Lockup Release Events: LG Energy Solution, HYBE, Lotte Chilsung, & Krafton

By Sanghyun Park

  • HYBE and LG Energy have overhang risks. 2% of SO for HYBE and 3% for LG Energy will potentially hit the market. These are 4.46x and 19.89x ADTVs, respectively.
  • LG Energy is awaiting FTSE inclusion (June 17) and Solactive ETF inclusion (end-October). Still, from a timing perspective, these passive inflows are unlikely to offset the July 27 lockup release.
  • Their short interest is 1.63% (HYBE) and 0.46% (LG Energy), respectively. So, we need to consider a position buildup when their short interest shows significant upside movements.

Merger Arb Mondays (13 Jun) – China VAST, True/DTAC, Hwa Hong, Link Admin, Ramsay Health, Link Net

By Arun George

Weekly Deals Digest (12 Jun): Thai Life, Link Admin, Ramsay, Link Net, China VAST, Suchuang Gas

By Arun George

SK Telecom & KT LONG/SHORT Swing Trading for Mean Reversion

By Sanghyun Park

  • Price decoupling relative to KT started after SKT’s foreign room trend began to reverse on May 23. The monthly price yield difference between these two is over 7%p.
  • From a short-term perspective, it seems that SKT seems to have entered somewhat oversold territory due to the FTSE outflow event.
  • Additional selling by the FTSE event this week will likely provide a suitable entry timing for a LONG/SHORT pair setup with KT on a swing-term window for mean reversion.

Before it’s here, it’s on Smartkarma

Learn More
Jun 12
0

Event-Driven: Lake Resources Nl, Kito Corporation, Vingroup Jsc, Frasers Hospitality Trust, China Vast Industrial Urban Development, Capricorn Energy, Orient Overseas International, Giordano International and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • MVIS Global Rare Earth/Strategic Metals Index Rebalance: CXO & LKE Added; AVZ Out
  • Kito (6409) – Shareholder Register Quirks Evolving – Becoming More Arb-Y Less Friendly
  • MVIS Vietnam Index Rebalance: Two Adds, One Delete, Capping & Float Changes
  • Last Week in Event SPACE: Atlas Arteria, Frasers Hospitality, DTAC/True, Crown Resorts, Saratoga
  • China VAST (6166 HK): Jinmao’s Pre-Conditional Offer
  • Tullow Oil/Capricorn Energy: Lowering Leverage
  • Index Rebalance & ETF Flow Recap: STAR50, S&P500, REMX, MVIS Vietnam, Atlas Arteria, OOIL
  • Asia-Pac Weekly Risk Arb Wrap: Tunas Ridean, Hwa Hong, China VAST, Mapletree, Giordano

MVIS Global Rare Earth/Strategic Metals Index Rebalance: CXO & LKE Added; AVZ Out

By Brian Freitas

Kito (6409) – Shareholder Register Quirks Evolving – Becoming More Arb-Y Less Friendly

By Travis Lundy

  • The Kito Corporation (6409 JP) take-private by KKR which is in process started with an interesting register. It has become interestinger.
  • One possibly-strategic “pure investment” holder has gone 10+%. A “friendly activist” has gone below. Another large friendly holder sold 4%. Volume since it achieved near-deal-price has been 24.7% of votes. 
  • The register has likely become more arb-y and possibly strategic, and less friendly to Kito, but it is up to the holders to follow up. And there is a warning.

MVIS Vietnam Index Rebalance: Two Adds, One Delete, Capping & Float Changes

By Brian Freitas

Last Week in Event SPACE: Atlas Arteria, Frasers Hospitality, DTAC/True, Crown Resorts, Saratoga

By David Blennerhassett

  • It’s not clear why it would be better for Frasers Hospitality (FHT SP)‘s assets to be unlisted rather than listed, so this is purely financial not strategic given the ownership. 
  • Atlas Arteria (ALX AU) boasts low risk, stable yielding, toll road assets.  That’s an attractive proposition for cash-up IFM, which now has a 15% economic interest. 
  • If DTAC TB / TRUE TB‘s merger goes through, the top two players control ~96% of the market. Even the generally complicit Thai regulator might be reluctant to grant approval. 

China VAST (6166 HK): Jinmao’s Pre-Conditional Offer

By David Blennerhassett

Tullow Oil/Capricorn Energy: Lowering Leverage

By Jesus Rodriguez Aguilar

  • Tullow offers 3.8068 shares per Capricorn share in a transaction meant to repair Tullow’s balance sheet and develop both Tullow’s and Capricorn’s assets in a supportive crude price environment.
  • Although Tullow’s share price has declined by 95% over the last ten years, the company has managed to remain as a going-concern due to a successful restructuring in 2021.
  • It is not completely clear that Capricorn’s shareholders will vote the scheme. Their shares are worth 6% more than the shares to be received under the exchange equation.

Index Rebalance & ETF Flow Recap: STAR50, S&P500, REMX, MVIS Vietnam, Atlas Arteria, OOIL

By Brian Freitas

  • Last week saw the rebalance implementation of the KOSPI2 INDEX, KOSDAQ 150, HSI INDEX, HSCEI INDEX, HSTECH INDEX, CSI 300 Index, STAR50 INDEX and the SSE family of indices.
  • The coming week has the rebalance implementation of the FTSE All-World/All-Cap, EPRA Nareit, FTSE China 50, FTSE China A50, FTSE TWSE Taiwan 50 and S&P/ASX indices.
  • Big inflows to the Yuanta/P-shares Taiwan Top 50 ETF (0050 TT) as we enter dividend season. The trade looks bigger than usual this year.

Asia-Pac Weekly Risk Arb Wrap: Tunas Ridean, Hwa Hong, China VAST, Mapletree, Giordano

By David Blennerhassett

Before it’s here, it’s on Smartkarma

Learn More
Jun 11
0

Event-Driven: HKEX, China Vast Industrial Urban Development, Sk Discovery, Korea Electric Power, LONGi Green Energy Technology, Iljin Hysolus and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Shanghai/​​​Shenzhen Southbound Connect: Weekly Moves (9 June 2022)
  • China VAST’s Underwhelming Privatisation Bid from China Jinmao
  • Short-Covering Trend of KOSPI 200 Deletions by Month-End
  • NPS Plans to Increase Its Stake in KEPCO from 6.4% to Up to 10.0%
  • Shanghai/​​​Shenzhen Northbound Connect: Weekly Moves (9 June 2022)
  • Shorting Trend Projections on KOSPI 200 Additions

Shanghai/​​​Shenzhen Southbound Connect: Weekly Moves (9 June 2022)

By David Blennerhassett

China VAST’s Underwhelming Privatisation Bid from China Jinmao

By Arun George

  • China Vast Industrial Urban Development (6166 HK) announced a pre-conditional privatisation offer from China Jinmao Holdings (817 HK) at HK$2.40 per share, a 30.4% premium to the undisturbed price.
  • Key conditions include approval by at least 75% disinterested shareholders (<10% of disinterested shareholders rejection). Shareholders with blocking stakes will be supportive.
  • The headcount test (if still applicable) is a key challenge as minorities are likely to be unimpressed. We would be buyers up to HK$2.26 per share (implies 75% deal probability).

Short-Covering Trend of KOSPI 200 Deletions by Month-End

By Sanghyun Park

  • As expected, most of the KOSPI 200 deletions, except for Bukwang Pharm, significantly outperformed the KOSPI index today.
  • Those that fit the pattern shown in the last rebalancing are CJ CGV and Bukwang. The problem, however, is that they have potential events triggering their price to fall.
  • So, I suggest paying attention to Yungjin Pharm and SK Discovery, which also have a sizable level of short interest and are expected to have stable short-coverings by end-June.

NPS Plans to Increase Its Stake in KEPCO from 6.4% to Up to 10.0%

By Douglas Kim

  • After the market close today, KEPCO announced that NPS plans to increase its ownership of the company from 6.43% to as high as 10% by 2025.
  • This announcement is likely to have a positive impact on KEPCO’s shares both in the near term as well as over the next three years.
  • If NPS has a greater stake in KEPCO, this could encourage the government to raise electricity prices since the government wants the investments made by the NPS to perform well. 

Shanghai/​​​Shenzhen Northbound Connect: Weekly Moves (9 June 2022)

By David Blennerhassett

Shorting Trend Projections on KOSPI 200 Additions

By Sanghyun Park

  • All of these additions experienced significant levels of short trading yesterday. In particular, those newly listed stocks saw harsher shorting attacks, similar to what we witnessed at the last rebalancing.
  • A certain level of short selling trend for newly listed stocks will likely work the same this time, and the applicable period is expected to be 3-4 trading days.
  • That is, we need to target the newly listed stocks again for this rebalancing: Iljin Hysolus (271940 KS), K Car (381970 KS), and SD Biosensor (137310 KS).

Before it’s here, it’s on Smartkarma

Learn More
Jun 09
0

Event-Driven: Mapletree North Asia Commercial Trust, Giordano International, Alibaba Group, Atlas Arteria, HS Holdings, Lotte Chilsung Beverage Co, Uniti Group Ltd, ACM Research Shanghai Inc, Kakao Pay and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Last Minute MNACT Arb and Index Selling
  • Giordano (709 HK): Cheng Family Offer Or Cashing Out?
  • Kakao Pay Block Sale: It Seems Alibaba Is Liquidating Investments to Fund Loss Making Ventures
  • Atlas Arteria (ALX AU): IFM Investors Comes Knocking
  • HS Holdings (8699 JP): Khan Bank IPO Delayed but Path Clear
  • Lotte Chilsung Beverage: Block Deal Sale by Hotel Lotte
  • Uniti Group: 15th July To Vote On Morrison/​Brookfield’s Scheme
  • STAR50 Index Rebalance Preview (Sep): Change Is the Only Constant
  • Uniti’s Scheme Meeting on 15 July, IE’s Opinion
  • Kakao Pay: Comp Valuation Analysis Suggests Additional 40% Downside Risk

Last Minute MNACT Arb and Index Selling

By Travis Lundy

  • Today is the last day of trading for Mapletree North Asia Commercial Trust (MAGIC SP) also known as MNACT.
  • That means today is index deletion day for any number of global indices, even though MNACT is not in many of the major ones. 
  • Payment will be S$1.949/unit plus a Clean-Up Distribution. There may be opportunities at the close. Strategy below.

Giordano (709 HK): Cheng Family Offer Or Cashing Out?

By David Blennerhassett

  • Giordano International (709 HK) was suspended this morning pursuant to Hong Kong’s Takeovers Code. 
  • The Cheng Yu Tung family is the largest shareholder with 24.37%, as it has been since December 2015. A possible Offer ahead of a (potentially) improving retail outlook? 
  • And just for some (possible) added excitement, David Webb holds 5.1%. 

Kakao Pay Block Sale: It Seems Alibaba Is Liquidating Investments to Fund Loss Making Ventures

By Oshadhi Kumarasiri

  • Ant Financial Services Group (6688 HK) is declaring a dividend at a time when regulators have forced the company to increase its capital base.
  • Moreover, Ant’s financial performance doesn’t support a dividend payment of RMB 11.8bn in the short term.
  • We think the sale of 5.0m Kakao Pay (377300 KS) shares today was forced upon Ant through the lack of usual funding sources at Alibaba Group (9988 HK)’s disposal.

Atlas Arteria (ALX AU): IFM Investors Comes Knocking

By David Blennerhassett

  • Fresh from successfully taking out Sydney Airport (SYD AU) earlier this year, IFM is reportedly on the cusp of submitting a non-binding indicative proposal for Atlas Arteria (ALX AU) 
  • A proposal is contingent on being granted limited due diligence. Meanwhile, IFM has accumulated an economic interest in ALX of 15%. 
  • ALX said they have not received any information on a proposal. Expect that to occur shortly. 

HS Holdings (8699 JP): Khan Bank IPO Delayed but Path Clear

By Travis Lundy

  • The saga that has been the Sawada now HS Holdings (8699 JP) effective control change and change in Mongolian Banking Law has been interesting but the end game is clear.
  • Last week, the Mongolian parliament extended the listing deadline for the top 5 Mongolian banks from June 2022 to June 2023. The IPO has been pushed back. Which is good.
  • The stock is not what people think it is, and the implied PBR and PER of Khan Bank exposure on a cash-adjusted basis is VERY low. 

Lotte Chilsung Beverage: Block Deal Sale by Hotel Lotte

By Douglas Kim

  • After the market close today, Lotte Chilsung Beverage Co announced that there will be a block deal sale of the company (200,000 shares), representing 2.15% of total outstanding shares.
  • The discount rate range is 185,250 won to 189,150 won, which are 3% to 5% discount from the closing price today (195,000 won). 
  • We have a Positive view on Lotte Chilsung Beverage and we would take this deal. 

Uniti Group: 15th July To Vote On Morrison/​Brookfield’s Scheme

By David Blennerhassett

  • The Scheme Booklet for Morrison/​Brookfield/CSC’s Offer for Uniti Group Ltd (UWL AU) has now been despatched. The Scheme Meeting will be held on the 15th July. 
  • The Independent Expert considers the terms to be fair and reasonable with a fair value range between A$4.65-A$5.20 compared to the Offer price of $5.00/share.
  • Trading tight to terms, as it has done since parties entered into the Scheme Implementation Deed. 

STAR50 Index Rebalance Preview (Sep): Change Is the Only Constant

By Brian Freitas

  • With only one change expected in September using a 12 month minimum listing history, we expect the index committee to continue using a 6 month minimum listing history.
  • That will see the maximum of 5 changes that are permitted at a single rebalance resulting in a one-way turnover just shy of 5%.
  • Over the last few rebalances, the adds have outperformed the deletes post the end of the review period. That’s expected given passive trackers need to buy/sell a lot of stock.

Uniti’s Scheme Meeting on 15 July, IE’s Opinion

By Arun George

  • Unsurprisingly, the independent expert (IE) considers the consortium’s offer of A$5.00 per share to be fair and reasonable. We think that IE’s valuation approach is sound.  
  • The key condition is approval from Uniti Group Ltd (UWL AU) shareholders and regulatory authorities (FIRB). The scheme meeting is scheduled for 9:30 am on 15 July. 
  • We continue to think that offer is attractive. At the last close price and for the 4 August implementation date, the gross and annualised spread is 0.8% and 5.1%, respectively.

Kakao Pay: Comp Valuation Analysis Suggests Additional 40% Downside Risk

By Douglas Kim

  • Our base case valuation of Kakao Pay is market cap of 7.1 trillion won or 53,767 won per share, which represents an additional 40% downside risk from current levels.
  • Our base case valuation is based on 5x EV/Sales multiple and applying this to the consensus estimated sales of 898 billion won in 2023. 
  • The fact that the share price ended 15.6% lower (much bigger than block deal discount range of 8.5% to 11.8%) suggests a lower probability of an MSCI Korea index inclusion. 

Before it’s here, it’s on Smartkarma

Learn More
Jun 08
0

Event-Driven: HKEX, JD.com Inc., Kakao Pay, Yancoal Australia, Hwa Hong Corp, Perenti Global, Gongniu Group Co Ltd and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • ETFs in Stock Connect: Criteria & Potential Southbound Inclusions
  • HSI, HSCEI, HSTECH: June Rebalance Flows Post Capping
  • Kakao Pay: Block Deal Sale by Alipay (Big Overhang on Future Sales)
  • Alipay’s Kakao Pay Exit: Common Prosperity Policy or Partnership Starting to Crack?
  • Yancoal, Not Surprisingly, Rejects Yankuang’s Proposal
  • Kakao Pay’s MSCI August QIR Inclusion: Screening/Passive Flow Calculations
  • Hwa Hong’s Revised Voluntary Conditional Offer at S$0.40
  • Perenti Recycling Cash with Big (Impactful) Buyback
  • Yankuang’s Response Suggests that It Rather Wait than Improve Its Offer for Yancoal
  • Stock Connect Changes & MSCI/FTSE Deletions on Friday

ETFs in Stock Connect: Criteria & Potential Southbound Inclusions

By Brian Freitas

  • On 27 May, the SFC and CSRC announced that they had agreed in principle to the inclusion of Exchange Traded Funds by mainland and Hong Kong exchanges in Stock Connect.
  • We currently see 6 ETF being eligible for inclusion in Southbound Connect and another couple that could be included at a subsequent review.
  • Increased mainland participation in the ETF market could lead to sustained premium/discount on the ETFs and this will be transmitted to index futures and affect pricing of short-term/long-term repo.

HSI, HSCEI, HSTECH: June Rebalance Flows Post Capping

By Brian Freitas

Kakao Pay: Block Deal Sale by Alipay (Big Overhang on Future Sales)

By Douglas Kim

  • After the market close today, Kakao Pay (377300 KS) announced that there will be a block deal sale of the company’s shares (5 million) by Alipay Singapore Holdings.
  • Alipay is the second largest shareholder of Kakao Pay with a 38.52% stake. After the block deal sale, there will be continued overhang on the remaining shares held by Alipay.
  • We continue to have a NEGATIVE view on Kakao Pay and we also have a negative view on this block deal sale as well. 

Alipay’s Kakao Pay Exit: Common Prosperity Policy or Partnership Starting to Crack?

By Sanghyun Park

  • Alipay’s return on investment is 10x, so it may be natural to realize a profit for some stakes. But the local market believes that the strategic partnership is cracking.
  • Starting with this stake sale, it is highly likely that Alipay will go through a multi-phased stake sale process similar to that of Temasek/JPM’s Celltrion stake sales.
  • Meanwhile, we should also pay attention to the possibility that this block deal by Alipay will likely lead to the inclusion of Kakao Pay in the MSCI August IR.

Yancoal, Not Surprisingly, Rejects Yankuang’s Proposal

By David Blennerhassett

  • The rejection of Yankuang Energy (1171 HK)‘s proposal by Yancoal Australia (3668 HK) independent board was always on the cards.
  • Yet the bigger question remains – why was this unorthodox structure, involving the issuance of H-Share convertible bonds, tabled in the first place?
  • Back in Yankuang’s court. Revise terms? Walk away? To note, Yancoal has not, to date, received any formal offer or proposal from Yankuang.

Kakao Pay’s MSCI August QIR Inclusion: Screening/Passive Flow Calculations

By Sanghyun Park

  • Alipay’s stake sale raises another critical issue: Kakao Pay’s MSCI inclusion. Kakao Pay comfortably satisfies the full MC threshold but tightly exceeds the float MC hurdle.
  • As for the passive flow, we should see an inflow of 6.11x ADTV, equivalent to 1.48% of SO. It represents nearly 2M shares, close to ₩210B.
  • If we build up a position betting on Kakao Pay’s downward trend due to Alipay’s block deal risk, we should consider temporarily switching the position when this event is triggered.

Hwa Hong’s Revised Voluntary Conditional Offer at S$0.40

By Arun George

  • Sanjuro United has increased its voluntary conditional cash offer for Hwa Hong Corp (HWAH SP) by 8.1% to S$0.40 per share. The offer may be revised in a competitive situation.
  • The offer which closes on 28 June continues to be subject to a 50%+ minimum acceptance condition. The offeror including valid acceptances represents 24.70% of outstanding shares.
  • The shares are trading in line with the revised offer price. The brewing family feud for the control of Hwa Hong suggests a possibility of a counterbid. 

Perenti Recycling Cash with Big (Impactful) Buyback

By Travis Lundy

  • Global mining services business Perenti Global (PRN AU) was formed through the merger of Barminco and Ausdrill in late 2018.
  • Revenues to Dec 2021 are up 156% vs the year to June 2018. Gross profits are up 156% too. OP is up much less because D&A are up dramatically.
  • But the company today announced capital management and rationalisation activities had delivered A$134.7mm. They’ve launched a buyback to repurchase 10% of shares. It’s worth a look.

Yankuang’s Response Suggests that It Rather Wait than Improve Its Offer for Yancoal

By Arun George

  • Yancoal Australia (YAL AU)’s independent board committee unanimously concluded that Yankuang Energy Group (1171 HK)’s H-Share CBs offer is not in the best interests of Yancoal’s minority shareholders. 
  • Yankuang is open to continuing its discussions with Yancoal Australia (3668 HK) but maintains that the offer was based on long-term factors including expectations of future coal prices.
  • Overall, the wording of Yankuang’s response suggests that it is more inclined to bide its time rather than return with a better offer. Required FIRB approval remains an overhang.

Stock Connect Changes & MSCI/FTSE Deletions on Friday

By Brian Freitas

  • Changes to the Northbound Stock Connect Buy and Sell list were announced yesterday with 35 SSE-listed stocks becoming sell-only, and 32 SZSE-listed stocks becoming sell-only.
  • This will result in the deletion of 45 stocks from the FTSE All-World, All-Cap and Micro-cap indices, while there will be 9 deletions from the MSCI Standard Index.
  • There are a few stocks with over 1 day of ADV to sell from passive trackers and these stocks could trade weaker than the market over the next few days.

Before it’s here, it’s on Smartkarma

Learn More
Jun 07
0

Event-Driven: Kyokuto Kaihatsu Kogyo Co, Jardine Cycle & Carriage, Toshiba Corp, Lanzhou Zhuangyuan Pasture, KakaoBank, Renesas Electronics, SK Innovation and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Kyokuto Kaihatsu (7226 JP) Buyback – It’s Kinda Big, But There May Be More Behind
  • Tunas Ridean (TURI IJ): JCNC & Tunas Andolan’s Quasi Delisting Proposal
  • Toshiba – Surprise, Surprise, More Drama
  • Zhuangyuan Pasture (1533 HK): 29th June EGM For H-Share Offer
  • KOSPI200 Index Rebalance: Float Changes, Flows & Trades
  • KOSPI 200 Rebalancing Minimal Flow at the Close on June 9 For Day Basket-Trading
  • A Modest Proposal to the Nikkei Index Committee for Nikkei 225 Methodology Change
  • SK Inc & SK Innovation Plan to Buy Stake in Bill Gates’ TerraPower + SKC Sells PET Film Business

Kyokuto Kaihatsu (7226 JP) Buyback – It’s Kinda Big, But There May Be More Behind

By Travis Lundy

  • Kyokuto Kaihatsu Kogyo Co (7226 JP) has always been cash-rich. Recently there are better noises. Sold real estate. New Mid-Term Plan. Raised the payout ratio to 50%. Slowly selling crossholdings.
  • But it isn’t fast enough, and activist Strategic Capital this spring announced a flurry of AGM agenda items to extract value for shareholders. 
  • The company today announced a buyback – additive, but there is a lot to look at here. Shareholder structure is key. And forward cash-flows tell you more buybacks could come.

Tunas Ridean (TURI IJ): JCNC & Tunas Andolan’s Quasi Delisting Proposal

By David Blennerhassett

  • Tunas Ridean (TURI IJ) announced a plan to change its status from an open company to a closed company. 
  • In effect, TURI will undertake a buyback of its shares at Rp1,700/share, a lifetime high. Those who do not tender will be left holding unlisted scrip. 
  • Jardine Cycle & Carriage (JCNC SP) and Tunas Andalan both hold 46.24%, leaving 7.52% in public hands. The proposal requires a shareholder vote. It appears no shareholder needs to abstain. 

Toshiba – Surprise, Surprise, More Drama

By Mio Kato

  • The days since Toshiba’s last briefing session have been eventful with METI expressing concern about foreign investor control and a split emerging in the board over director nominations. 
  • These developments create significant risk of activist-friendly director candidates being vetoed in our view. 
  • Toshiba stock has been trading in line with Hitachi’s strong performance of late despite being more expensive and thus risk has increased.

Zhuangyuan Pasture (1533 HK): 29th June EGM For H-Share Offer

By David Blennerhassett

  • Back on the 25 April, PRC dairy farmer Lanzhou Zhuangyuan Pasture (1533 HK) announced a Conditional Cash Offer for all its H-shares at $10.89/share. The Offer Doc is now out.
  • This two-step voluntary cash offer involves a Scheme-like vote and a 90% tendering condition. The EGM will be held on the 29 June. 
  • This transaction could potentially be wrapped up late-July. The FY21 dividend should also be added to the Offer terms.

KOSPI200 Index Rebalance: Float Changes, Flows & Trades

By Brian Freitas

  • There are 7 adds and 7 deletes for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) rebalance to be implemented at the close on 9 June.
  • There are also a bunch of stocks that will have changes applied to their free float. There were announced last week and are much less tracked.
  • The flows and impact on some of the float change names are significant and pre-positioning and passive flows could move the stocks over the next few days.

KOSPI 200 Rebalancing Minimal Flow at the Close on June 9 For Day Basket-Trading

By Sanghyun Park

  • Flows from the ETFs/index funds serve as a minimal flow for rebalancing trading at the close on June 9. The total AUM is ₩18.9T: ETFs ₩15.0T and index funds ₩3.9T.
  • There are only three trading days left until the rebalancing trading. At this point, a setup aimed at the NPS/Insurance’s preemptive trading seems a bit off, timing-wise.
  • It seems more appropriate at this point to design a day basket-trading based on the minimal flow size on the day of rebalancing trading, June 9.

A Modest Proposal to the Nikkei Index Committee for Nikkei 225 Methodology Change

By Travis Lundy

  • The Nikkei Index team proposed several changes to the Nikkei 225 Average methodology last week. They include capping, a semi-annual (vs annual) review, and a change in “liquidity” measure.
  • It helps move membership away from the low price low weight names which populate the bottom of the index. Slowly. 6 names a year. That’s not enough.
  • And it doesn’t fix the historical anomalies rendering the index unsuitable as benchmark (and BOJ tool). I propose more changes below. You can submit this or yours in the consultation.

SK Inc & SK Innovation Plan to Buy Stake in Bill Gates’ TerraPower + SKC Sells PET Film Business

By Douglas Kim

  • SK Group has been the the most active M&A player among the major chaebols in Korea in the past decade. SK Group is once again making some big M&A moves.
  • In this insight, we discuss SK Inc and SK Innovation’s plans to purchase a minority stake in Bill Gates’ TerraPower nuclear SMR technology company.
  • We also discuss the recent sale of the PET film business by SKC for 1.6 trillion won and how SKC may try to acquire the controlling interests of Iljin Materials.

Before it’s here, it’s on Smartkarma

Learn More
Jun 06
0

Event-Driven: Keurig Dr Pepper Inc, Link Administration Holdings, Kakao Pay, Xiamen International Port H, Hensoldt AG and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • S&P500 Index Rebalance: One-Way Trade of US$30bn
  • Weekly Deals Digest (5 Jun): Link Admin, Cocoaland, Xiamen Port, Link Net, WM Motor, GOGOX, Yancoal
  • Kakao Pay Shorting Entry Point: June 9 KOSPI 200 or June 17 FTSE?
  • Merger Arb Mondays (6 Jun) – Xiamen Port, Link Admin, Cocoaland, Link Net, Australian Unity Office
  • DAX, MDAX, SDAX, TecDAX June 2022 Rebalance: Encavis & Hensoldt Top Positives; Hypoport Top Negative

S&P500 Index Rebalance: One-Way Trade of US$30bn

By Brian Freitas

Weekly Deals Digest (5 Jun): Link Admin, Cocoaland, Xiamen Port, Link Net, WM Motor, GOGOX, Yancoal

By Arun George

Kakao Pay Shorting Entry Point: June 9 KOSPI 200 or June 17 FTSE?

By Sanghyun Park

  • As for the FTSE rebalancing, when basket trading was not feasible, the individual trading setup of large-cap additions had a significantly lower win rate.
  • Local tutes use the FTSE rebalancing as a selling opportunity. And this trading pattern of local tutes was particularly prominent in large-cap additions.
  • I suggest avoiding flow trading for the additions this time. Kakao Pay? We should aim at the June 9 KOSPI 200 instead of the June 17 FTSE for shorting entry.

Merger Arb Mondays (6 Jun) – Xiamen Port, Link Admin, Cocoaland, Link Net, Australian Unity Office

By Arun George

DAX, MDAX, SDAX, TecDAX June 2022 Rebalance: Encavis & Hensoldt Top Positives; Hypoport Top Negative

By Janaghan Jeyakumar, CFA

  • The index changes for DAX, MDAX, SDAX, and TecDAX were announced yesterday.
  • Beiersdorf AG (BEI GR) will move from MDAX to DAX while Delivery Hero SE (DHER GR) will move from DAX to MDAX.
  • Below is a closer look at the excess volume expectations and historical price and volume performance of the names involved in this Rebalance Event.

Before it’s here, it’s on Smartkarma

Learn More
Jun 05
0

Event-Driven: Block, VICI Properties Inc, Cocoaland Holdings, Celltrion Inc, Toshiba Corp, New World Development, SPH REIT and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • S&P/​​ASX Index Rebalance (June 2022): Mostly Expected, Some Surprises & Short Interest Spikes
  • S&P500, S&PMid400, and S&PSmall600 Index Changes for June 2022 – More Interesting Than Usual
  • Cocoaland (COLA MK): F&N Scheme At RM1.50/Share
  • FnGuide Top 10 Rebalancing: How We Trade Shinhan IN/Celltrion OUT
  • Cocoaland’s RM1.50 Per Share Privatisation Offer from Fraser & Neave
  • Last Week in Event SPACE: Toshiba, Woodside, Genting Berhad, SPH REIT, Virtus Health, Xiamen Port
  • Index Rebalance & ETF Flow Recap: NKY, CSI300, SSE, REMX, ASX, SET50, CH50/A50, EPRA, Mercari, GOTO
  • Asia-Pac Weekly Risk Arb Wrap: Australian Unity Office, Nissui Pharma, Virtus, SPH REIT, Cocoaland

S&P/​​ASX Index Rebalance (June 2022): Mostly Expected, Some Surprises & Short Interest Spikes

By Brian Freitas

  • There is one set of changes to the S&P/ASX 50, one deletion for the S&P/ASX 100, and four adds/ five deletes for the S&P/ASX 200 (AS51 INDEX). 
  • Passive trackers will need to trade between 2-6 days of ADV on nearly all stocks. Short interest spikes in a few names indicate pre-positioning for the passive flow.
  • Core Lithium Ltd (CXO AU) is a potential inclusion to the MVIS Global Rare Earth/Strategic Metals Index in June and that could add to the passive inflows on the stock.

S&P500, S&PMid400, and S&PSmall600 Index Changes for June 2022 – More Interesting Than Usual

By Travis Lundy

  • On 3 June 2022, the S&P DJI Global Index team announced changes to the S&P500, S&P Midcap 400, and S&P SmallCap 600 indices (and a number of other smaller indices).
  • VICI Properties (VICI) will replace Cerner (CERN) in S&P500 at close of 7 June. Keurig DrPepper and ON Semiconductor will replace UnderArmour and IPG Photonics at close 17 June.
  • This set of rebalances is particularly interesting in terms of non-offsetting flows, unlike many rebals which are just a game of musical shares between the three top indices.

Cocoaland (COLA MK): F&N Scheme At RM1.50/Share

By David Blennerhassett

  • Fraser & Neave Holdings (FNH MK) is proposing to privatise 27.66%-held Cocoaland Holdings (COLA MK) at RM1.50/share by way of a Scheme. 
  • The Offer price is a 26.1% premium to last close. Leverage Success, the largest shareholder with 40.65% stake has given an irrevocable undertaking to vote for the Scheme. 
  • The board of Cocoaland has until the 17 June to respond.

FnGuide Top 10 Rebalancing: How We Trade Shinhan IN/Celltrion OUT

By Sanghyun Park

  • With the screening period over (May 3-31), Shinhan IN/Celltrion OUT is virtually a foregone conclusion.
  • We should consider an individually-hedged approach, instead of a plain long/short, with a tightly moving-together peer, preferably on a single-day trading window.
  • I suggest using KB Financial and Celltrion Healthcare as hedges of LONG & SHORT for Shinhan and Celltrion, respectively.

Cocoaland’s RM1.50 Per Share Privatisation Offer from Fraser & Neave

By Arun George

  • Cocoaland Holdings (COLA MK) announced a privatisation offer from Fraser & Neave Holdings (FNH MK) at RM1.50 per share, a 26.1% premium to the undisturbed price.
  • The key conditions are the headcount test and <10% rejection from all disinterested shareholders. The shareholder (Leverage Success) with a blocking stake has provided an irrevocable.
  • The offer is attractive in comparison to long-term historical share prices and multiples. The Board must respond by no later than 5 pm on 17 June.

Last Week in Event SPACE: Toshiba, Woodside, Genting Berhad, SPH REIT, Virtus Health, Xiamen Port

By David Blennerhassett

Index Rebalance & ETF Flow Recap: NKY, CSI300, SSE, REMX, ASX, SET50, CH50/A50, EPRA, Mercari, GOTO

By Brian Freitas

Asia-Pac Weekly Risk Arb Wrap: Australian Unity Office, Nissui Pharma, Virtus, SPH REIT, Cocoaland

By David Blennerhassett

Before it’s here, it’s on Smartkarma

Learn More