Event-Driven

In May 2023, KDDI Corp (9433 JP) announced a ¥300bn buyback program, did nothing for two months, then announced a Tender Offer Buyback to buy shares from Toyota.
Toyota had increased its stake years before, then KDDI bought back shares from others, so Toyota was backing its ownership down. I discussed the relationships, history, etc, here.
This year, KDDI announced Friday with earnings that is buying back another large stake from Toyota.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June

We do not forecast any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June but there could be capping changes for 7 stocks.
Capping changes will result in a one-way turnover of 7.6% leading to a round-trip trade of US$2.4bn. 17 stocks will have over 0.5x ADV to trade from passive trackers.
Li Auto (2015 HK) will have the largest inflow while there will be big outflows from Meituan (3690 HK), Xiaomi Corp (1810 HK), JD.com (9618 HK) and Tencent (700 HK).

Great Eastern Holdings (GE SP): OCBC’s Offer Needs a Bump to Achieve Privatisation Ambitions

OCBC (OCBC SP) has announced a voluntary unconditional general offer for Great Eastern Holdings (GE SP) at S$25.60 per share, a 36.90% premium to the undisturbed price.
OCBC aims to privatise Great Eastern by delisting resolutions or exercising compulsory acquisition rights. The offer has not been declared final.
While the offer is reasonable, it is not a knockout bid which would comfortably allow OCBC to privatise through either option. A bump is highly likely.

Local Reports in Korea Regarding A Holdings Stake Sale Between Naver & Softbank

Naver doesn’t view the sale of its A Holdings stake unfavorably; insiders suggest it’s been planning this move since last year.
Market speculation suggests Naver was disappointed by Softbank’s rejection of CLOVA X in LINE, prompting plans to sell A Holdings stake for AI development. A sale agreement is expected soon.
The method through which Softbank secures funds for this acquisition is worth the attention from a short-term trading perspective.

Merger Arb Mondays (13 May) – GA Pack, HEC Pharma, L’Occitane, Alps Logistics, Great Eastern

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Alps Logistics (9055 JP), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Southern Cross Media (SXL AU).
Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Pact Group Holdings (PGH AU), Alumina Ltd (AWC AU).

EQD / NSE Volatility Update / 06-May-24 to 10-May-24

By Sankalp Singh

Election-Related volatility being reflected in options. India VIX has surged 70% over the past two weeks. Quarterly IVs have seen the largest rise as they capture election result date.
BankNifty IVs are finally responding as the market plays catch up to the bank regulator’s new-found aggressiveness
Elevated Vol-of-vol observed the past few weeks. Vol-regime Switching Model continues to point to “High & Down” state. Odds of switching to a “High & Up” state are increasing.

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May 12

Daily Brief Event-Driven: Greatview Aseptic (468 HK): Shandong Xinjufeng VGO Could Force Mengniu to Act and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Greatview Aseptic (468 HK): Shandong Xinjufeng VGO Could Force Mengniu to Act
HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder
Weekly Deals Digest (12 May) – China TCM, GA Pack, HEC CJ Pharma, CPMC, Alps Logistics, Infocom
(Mostly) Asia-Pac M&A: Namoi Cotton, Great Eastern, GAPack, Nihon, Chilled & Frozen, Shinko Electric
HK Connect SOUTHBOUND Flows (To 10 May 2024); Banks, Coal, and High-Div Energy/Materials Names
Cosmecca Korea Plans to Switch Listing from KOSDAQ to KOSPI
Last Week in Event SPACE: Alps Logistics, L’Occitane, Hanon Systems, Perpetual Ltd
Quiddity Leaderboard NIFTY Sep 24: Strong Flow Rationale for LONG Jio Financial – SHORT SBI Cards
Underexposed Flow Trading Opportunity: LONG Banks & SHORT LG Chem/Energy on June 14
Mainland Connect NORTHBOUND Flows (To 10 May 2024): So-So Volumes, As Did Not Play Catchup

Greatview Aseptic (468 HK): Shandong Xinjufeng VGO Could Force Mengniu to Act

Shandong Xinjufeng Technology Packaging (301296 CH) disclosed a pre-conditional voluntary offer for Greatview Aseptic Packaging (468 HK) at HK$2.65, a 26.2% premium to the undisturbed price.
The pre-condition relates to Chinese regulatory approvals and Shandong Xinjufeng shareholder approval. The offer is conditional on a 50% minimum acceptance condition.
Shandong Xinjufeng’s previous acquisition of Jardine Matheson’s 28.22% stake elicited a defensive move by China Mengniu Dairy Co (2319 HK). This development is likely to force a Mengniu competing VGO.

HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder

Yichang HEC Changjiang Pharma (1558 HK)‘s pre-conditional privatisation from Sunshine Lake Pharma comprises scrip (0.263614 new offeror H Share per HEC CJ Pharma share) and cash (special dividend of HK$1.5).
The pre-condition is regulatory approvals from NDRC, MOFCOM, and SAFE. The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection).
There is valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, with no shareholder close to a blocking stake, the deal should get up.

Weekly Deals Digest (12 May) – China TCM, GA Pack, HEC CJ Pharma, CPMC, Alps Logistics, Infocom

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: HD Hyundai Marine Solution (443060 KS) and ZEEKR (ZK US) have strong IPO debuts.
Event-Driven developments China Traditional Chinese Medicine (570 HK), Greatview Aseptic Packaging (468 HK), Yichang HEC Changjiang Pharma (1558 HK), CPMC Holdings (906 HK), Alps Logistics (9055 JP), Infocom Corp (4348 JP).

(Mostly) Asia-Pac M&A: Namoi Cotton, Great Eastern, GAPack, Nihon, Chilled & Frozen, Shinko Electric

Tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Six(!) new deals was discussed on Smartkarma this week: Perpetual (PPT AU), Alps Logistics (9055 JP), Namoi Cotton (NAM AU)‘; Great Eastern (GE SP); Nihon Housing (4781 JP) and GAPack (468 HK)‘.
Key updates took place on: QANTM Intellectual Property (QIP AU), Adbri (ABC AU), L’Occitane (973 HK), Chilled & Frozen Logistics Holdings (9099 JP), and Shinko Electric Industries (6967 JP).

HK Connect SOUTHBOUND Flows (To 10 May 2024); Banks, Coal, and High-Div Energy/Materials Names

A-Shares only two days of the week and were up small Monday and Tuesday. H-shares took a breather Wednesday after trailing A-shares, then rallied hard on Thursday and Friday.
Net SOUTHBOUND buying was +HK11.3bn. Thursday saw a break of the SOUTHBOUND buying streak.
The big news in China markets this week was the idea that mainland investors through SOUTHBOUND would no longer be hit with a 20% w/h tax on dividends.

Cosmecca Korea Plans to Switch Listing from KOSDAQ to KOSPI

On 10 May, Cosmecca Korea (241710 KS) announced that it plans to switch its listing from KOSDAQ to KOSPI.
The company plans to convene an extraordinary general meeting of shareholders on 29 August to finalize on the switching of Cosmecca Korea listing from KOSDAQ to KOSPI.
Cosmecca Korea is one of the leading Korean ODM manufacturers of cosmetic products.

Last Week in Event SPACE: Alps Logistics, L’Occitane, Hanon Systems, Perpetual Ltd

KKR’s Offer for Alps Logistics (9055 JP) is a knock-out price. HUGE MINORITY WIN. This trades a little wide because the “gap risk” is so large, but it’s still safe.
It’s reasonable to expect the listing of various components of L’Occitane (973 HK) other than in HK, would (should) be hugely accretive; for those investors who can (or may) participate.
Hankook Tire & Technology (161390 KS) seeks a controlling stake in Hanon Systems (018880 KS).

Quiddity Leaderboard NIFTY Sep 24: Strong Flow Rationale for LONG Jio Financial – SHORT SBI Cards

NIFTY 50 represents the 50 largest stocks listed in the National Stock Exchange (NSE) of India and the NIFTY Next 50 index tracks the next 50 largest names.
In this insight, we take a look at the names leading the race to become ADDs/DELs during the September 2024 index rebal event.
More than 50% of the 6-month reference period is now complete. There are a couple of changes to the expected ADDs/DELs list since my last insight.

Underexposed Flow Trading Opportunity: LONG Banks & SHORT LG Chem/Energy on June 14

Despite time until screening, predictions likely hold due to market cap gaps; all candidates are banks, benefiting from recent momentum.
Historical patterns show profit-taking selling affecting price impact, particularly on additions with significant pre-inclusion price rises. Monitor banks’ pre-June 14th price appreciation to anticipate impact distortions.
Shorting LG Chem and LG Energy Solution based on high price cointegration, consider basket-trading them before the rebalancing, using the battery sector as a long hedge.

Mainland Connect NORTHBOUND Flows (To 10 May 2024): So-So Volumes, As Did Not Play Catchup

The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
Last week saw NORTHBOUND net BUY RMB 4.8bn of A-shares on high gross low net volume in the two days. NORTHBOUND bought Kweichow Moutai, banks, Haier Smarthome, etc.
HUGE week in H vs A (since the 30 April close). This may be colouring foreigner activity in As quite a bit.

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May 11

Daily Brief Event-Driven: Nissin (9066) – Super Big Buyback Race-Walks the Governance Walk – Super Cheap Logistics Biz and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Nissin (9066) – Super Big Buyback Race-Walks the Governance Walk – Super Cheap Logistics Biz
GAPack (468 HK): Mengniu & Bi Weigh Options On Shandong Xinjufeng’s VGO
Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer
Eoflow Announced that US Federal Court Has Decided to Suspend the Effect of 1st Injunction Decision
Nihon Housing (4781 JP) – A Very Tight Register Sees an MBO At All Time Highs
EQD | KOSPI 200 Ready to Pullback

Nissin (9066) – Super Big Buyback Race-Walks the Governance Walk – Super Cheap Logistics Biz

Yesterday after the close, Nissin Corp (9066 JP) announced earnings (down vs last year), guidance (back up partway to last year), and a sale of securities to raise ¥6+bn.
Nissin also announced an employee share incentive plan (¥900mm) and an adjustment to its MTMP from Apr24 to Mar27. Much lower revenues. Same OP. Higher net. Higher Div Payout ratio.
They also announced a really big buyback which should be done by the time people read this. It is really big.

GAPack (468 HK): Mengniu & Bi Weigh Options On Shandong Xinjufeng’s VGO

Back in September 2023, Jardine Matheson Holdings (JM SP) sold its 28.22% stake in Greatview Aseptic Packaging (468 HK) to Shandong Xinjufeng Technology Packaging (301296 CH) (XJF).
Then in November, XJF requisitioned an EGM to spill the board. At the EGM on the 26th January, not one of XJF’s five new proposed appointments were successful.
XJF has now made a pre-conditional (various PRC approvals) voluntary general Offer at $2.65/share (best & final), contingent on a 50% acceptance hurdle. Final/special dividends to be added.

Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer

OCBC (OCBC SP) has made a voluntary unconditional general Offer for the 11.56% in Great Eastern Holdings (GE SP) not held.
The S$25.60 cash Offer for the life/non-life insurer is a 36.9% premium to last close; and a 30% discount to its S$36.59/share embedded value (as at 31st Dec 2023).
The Offer is unconditional in all respects. This will trade tight. A delisting Offer is next on the cards.

Eoflow Announced that US Federal Court Has Decided to Suspend the Effect of 1st Injunction Decision

On 8 May, Eoflow announced that the U.S. federal court has decided to suspend the effect of the first injunction decision.
While the effect of the second preliminary injunction decision remains intact, Eoflow has requested a review of the suspension of the effect of the second revised injunction decision as well.
There has been a renewed optimism on Eoflow (294090 KS)’s share price in the past week which increased by 46% from 7 May to 10 May.

Nihon Housing (4781 JP) – A Very Tight Register Sees an MBO At All Time Highs

Nihon Housing (4781 JP) is a business which manages real estate for owners (office, apartment management, janitorial, cleaning, facilities management, security, agency, sub-leasing package systems, etc).
The company has operated in Tokyo for 60+yrs, and they are finally just going to take what has always been a tight register private. Foreigners own 0.05%. Index owns nothing.
This is basically a completely done deal. It will trade tight, and illiquidly.

EQD | KOSPI 200 Ready to Pullback

By Nico Rosti

This is an update to our previous insight published on April 22nd: “EQD | KOSPI 200 WEEKLY Bounce: Rally or Not?“.
The KOSPI 200 INDEX has performed a nearly +6% rally in the last 3 weeks, closing up 3 weeks in a row (CC=+3).
We have something to say about this pattern that was identified 3 weeks and ago and so we wanted to post this insight to explicit our view.

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May 10

Daily Brief Event-Driven: Infocom (4348 JP): Rumoured Tender Offer as Teijin Seeks to Exit and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Infocom (4348 JP): Rumoured Tender Offer as Teijin Seeks to Exit
Logisteed/KKR Bid BIGLY for Alps Logistics (9055). A Gobsmacking Price/Multiple
Alps Logistics (9055 JP): KKR’s Knockout Pre-Conditional Offer at JPY5,774
TOPIX Inclusions: Who Is Ready (May 2024)
HK CEO & Director Dealings (9 May 2024): Lawrence Adds More Melco; Ng Adds More Sino Land
Netmarble Plans to Sell 2.6% Stake in HYBE Through PRS (Price Return Swap).

Infocom (4348 JP): Rumoured Tender Offer as Teijin Seeks to Exit

Bloomberg reports that Teijin Ltd (3401 JP) wants to sell its 55% stake in Infocom Corp (4348 JP). The rumoured bidders are Sony Corp (6758 JP), Blackstone and KKR.
Based on precedents, the offer structure will likely be structured such that Teijin provides an irrevocable NOT to accept but vote in favour of share consolidation at the EGM.
Bloomberg suggests that Infocom could be valued at JPY200 billion. If this refers to market cap, the tender offer is JPY3,472, a 16.5% premium to the last close.

Logisteed/KKR Bid BIGLY for Alps Logistics (9055). A Gobsmacking Price/Multiple

In late February, a specialty media outlet noted Alps Logistics (9055 JP) was up for sale. I missed that. Yesterday pre-close, a headline crossed the wires. A deal was imminent.
Nikkei overnight said “¥150bn+ market cap”. I thought KKR might slightly overpay the Hitachi Transport System (9086 JP) multiple paid. That meant +13% today was full-ish. I was wrong.
KKR is paying ¥5,774 to minorities, and about ¥4,084-ish to the parent, who is reinvesting at ¥5,774. This is a total knock-out price paid. HUGE MINORITY WIN.

Alps Logistics (9055 JP): KKR’s Knockout Pre-Conditional Offer at JPY5,774

Alps Logistics (9055 JP) recommended a pre-conditional tender offer from a KKR & Co (KKR US) subsidiary at JPY5,774, 32.7% and 69.8% premium to the last close and undisturbed price, respectively.
The pre-condition is approvals under competition laws of Japan, China, the EU, South Korea and Vietnam. The tender offer is expected to start in mid-August.
The offer represents an all-time high and is a knockout bid. While the timing of regulatory approvals is a risk, the transaction is a done deal.

TOPIX Inclusions: Who Is Ready (May 2024)

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
Dozens of companies have been able to meet the key Section Transfer requirements on paper for several months but there have been no TOPIX Inclusions announcements in 2024 so far.
However, there are some pre-event candidates we believe are worth monitoring as they have previously confirmed their desire to move to the Prime Market.

HK CEO & Director Dealings (9 May 2024): Lawrence Adds More Melco; Ng Adds More Sino Land

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. Or pledging. However, such disclosures are by no means an absolute.
The key stocks mentioned in this regular insight include Melco International Development (200 HK), Sino Land Co (83 HK), and ZJLD Group (6979 HK).

Netmarble Plans to Sell 2.6% Stake in HYBE Through PRS (Price Return Swap).

After the market close on 9 May, Netmarble announced that it plans to sell 2.6% stake in HYBE for 219.9 billion won.
The transaction is based on PRS (price return swap) basis. Previous to this deal, Netmarble sold 2.5 million shares (about 6%) of HYBE shares in November 2023.
We continue to remain negative on HYBE including on this deal involving Netmarble’s plan to sell additional 2.6% stake in HYBE.

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May 09

Daily Brief Event-Driven: Perpetual (PPT AU): Shareholders Divided Over Carve Out and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Perpetual (PPT AU): Shareholders Divided Over Carve Out
KKR Deal for Alps Logistics (9055) Appears Imminent
China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks
Nippon Yusen (9101) – Another Big Buyback Announced, But Details Matter
Naver: Under Pressure from the Japanese Government To Sell Its Stake in LINE
HD Hyundai Marine Solution (443060 KS): Nearing KOSPI200 Index Inclusion in June
Qantm IP (QIP AU): IPH Enters the Fray with a Competing Offer
QANTM (QIP AU): IPH Wades In As Adamantem Tarries
Local Institutional Flows Towards Overweighting Samsung SDS in Samsung Group Context

Perpetual (PPT AU): Shareholders Divided Over Carve Out

Back in December last year, Aussie-listed equities manager Perpetual Ltd (PPT AU) rejected Washington H. Soul Pattinson (SOL AU)‘s $3bn all-scrip non-binding indicative proposal.
Yet Soul Patt’s proposal was in sync with Perpetual’s previously flagged intentions to explore a potential separation of its corporate trust and wealth management businesses, from its asset management business.
Perpetual has now entered a Scheme, to carve out the corporate trust and wealth management businesses to KKR for A$2.175bn. A lack of clarity on net proceeds saw shares rollover.

KKR Deal for Alps Logistics (9055) Appears Imminent

There was a news article I missed in late February saying Alps Alpine (6770 JP), parent of Alps Logistics (9055 JP) was in the process of selling the logistics unit.
A deal made sense for a strategic given the upcoming “2024 Problem”. Pre-close, headlines blared, the stock popped 12%, now we’re at double the end-February price.
Late in the evening,Alps Logistics said it had received a bid from Logisteed but nothing had been decided. This morning we have a few more details, but nothing concrete

China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks

On 21 February, China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
The wide gross spread (7.0%) reflects risks around the re-rating of peers, the slow pace of satisfying the pre-condition, the completion timetable and Ping An’s blocking stake.
The key risk is the deal close timing due to the slow pace of regulatory approvals, which increases the chance that the vote will held after the August interim.

Nippon Yusen (9101) – Another Big Buyback Announced, But Details Matter

Last May, Nippon Yusen Kk (9101 JP) announced buybacks of ¥200bn over 2 years. In August, they changed it to say ¥200bn in the next nine months.
That helped support the stock through early March. It was big, and a decent percentage of ADV. Today, they announced earnings and guidance and another ¥100bn buyback through April 2025.
Earnings were OK. Guidance is a little low vs the Street. The stock popped 5% from where it was trading. Lower impact vs 2023. More cross-holder overhang consideration.

Naver: Under Pressure from the Japanese Government To Sell Its Stake in LINE

On 8 May, it was mentioned in numerous local media that Naver is under pressure from the Japanese government to sell its stake in LINE.
One of the reasons behind Japanese government’s efforts to force Naver to sell its stake in LINE is due a major data breach incident in November 2023.
Based on our current understanding of this situation, the most likely scenario is for Naver to sell about 20-30% stake in A Holdings (the controlling shareholder of LINE) to SoftBank.

HD Hyundai Marine Solution (443060 KS): Nearing KOSPI200 Index Inclusion in June

After a 96.5% gain on listing day, HD Hyundai Marine Solution (443060 KS) is very close to levels needed for Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusion in June.
HD Hyundai Marine Solution needs to outperform the 50th ranked stock in the KOSPI2 INDEX by 11.4% on average over the next 15 trading days to be added to the index.
Retail investors sold 25% of their allocation on listing day while foreign investors sold 22% of their IPO allocation with local institutions mopping up the shares.

Qantm IP (QIP AU): IPH Enters the Fray with a Competing Offer

Qantm Intellectual Property (QIP AU)‘s non-binding proposal from IPH Ltd (IPH AU) is at A$0.11 cash + 0.291 IPH shares per QIP share, a 4.5% premium to Adamantem’s A$1.817 offer.
Since announcing the Adamantem non-binding proposal on 14 March, the IPH offer has been 4.3% higher than the Adamantem offer on average.
The IPH proposal also requires approval from the ACCC and NZCC. The presence of two bidders increases the probability of a binding proposal (with a bump).

QANTM (QIP AU): IPH Wades In As Adamantem Tarries

It always seemed like a question of when, not if, IPH (IPH AU) would make an Offer for QANTM (QIP AU). IPH previously approached QANTM in 2018, but was spurned.
Capitalising on ongoing extensions to Adamantem’s exclusivity, as it relates to its all-cash A$1.817/share Offer by way of a Scheme, IPH has now tabled an all-scrip, plus A$0.11/share dividend NBIO.
IPH’s implied Scheme value of A$1.90/share is a premium to Adamantem’s proposal. The catch: apart from terms being indicative, IPH’s Offer requires ACCC and NZCC clearance.

Local Institutional Flows Towards Overweighting Samsung SDS in Samsung Group Context

Local institutions, notably pension funds, are increasingly investing in Samsung SDS, coinciding with the company’s more active investor engagement. This has sparked speculation about Samsung’s strategic motives.
Timing-Wise, as AI infra demands rise in Samsung Group, conditions for boosting SDS’s performance improve. They monitor Samsung’s moves to drive SDS’s stock upward, considering its reliance on Samsung’s revenue.
Local pension funds actively adopting overweight positions in Samsung SDS underscore the importance of crafting strategies tailored to overweighting SDS within the broader Samsung Group context.

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May 08

Daily Brief Event-Driven: Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes
KLINE (9107) – More Profit, More Shareholder Return 3mo Buyback Inbound
Chilled & Frozen’s Target Opinion Statement; Chotto Matte (Four Counterbidders)
Namoi Cotton (NAM AU): Bloom Times As Louis Dreyfus & Olam Agri Tangle
Wuxi XDC Lock-Up – US$300m Lockup Expiry Could See Some Selling Owing to the Regulatory Overhang
Quiddity Leaderboard STAR 50 Jun 24: SHORTs Down 12% Vs Peers in 1 Month; Final Ranks & New Trade
Quiddity Leaderboard KOSPI 200 Jun 24: One Last-Minute Change to Rankings
ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Continues
Hostile or Not?

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.
Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.
Fast Retailing (9983 JP) will be capped to 10% of the index weight while Tokyo Electron (8035 JP) is also close to the 10% cap.

KLINE (9107) – More Profit, More Shareholder Return 3mo Buyback Inbound

Kawasaki Kisen Kaisha (9107 JP) today announced earnings. Ocean Network Express earnings were out earlier and beyond that, Consolidated Revs beat, OP faltered, but NP was spot on guidance.
Guidance for the year to March 2025 is well ahead of consensus on revenue, slightly ahead on OP, and just a wee bit ahead on NP.
But the company raised its 5yr MTMP Shareholder Return from ¥500bn to ¥700bn and set a new ¥100bn (5.5%) buyback to be executed in the next 3 months.

Chilled & Frozen’s Target Opinion Statement; Chotto Matte (Four Counterbidders)

Today, after the close, Chilled & Frozen Logistics Holdings (9099 JP) released a required (by the FIEA) Target Opinion Statement saying “Opinion Withheld.”
C&F notes that it had received 9 possible counter-proposals, offered due dili to a certain extent, and by May 1, had 4 binding offers.
There are interesting competitive dynamics at play here, but cross-holding concentration matters. The question is… How much is enough?

Namoi Cotton (NAM AU): Bloom Times As Louis Dreyfus & Olam Agri Tangle

Singapore’s Olam Agri and global commodity merchant Louis Dreyfus Company (LDC) are duking it out for Namoi Cotton Co Operative (NAM AU), Australia’s largest cotton producer.
After both initially lobbed competing Schemes, both have now tabled off-market Offers – A$0.67/share from LDC, A$0.66/share from Olam – each contingent on a 50.1% acceptance hurdle, FIRB, and ACCC.
LDC, currently holding 17%, announced it will reject Olam Agri’s Offer. Top shareholder Samuel Terry Asset Management, with 24.5%, is expected to support the winning (or superior) bid.

Wuxi XDC Lock-Up – US$300m Lockup Expiry Could See Some Selling Owing to the Regulatory Overhang

By Clarence Chu

WuXi XDC Cayman (2268 HK) was listed in Hong Kong on 17th Nov 2023 after raising US$470m. Its six-month lockup will expire on 16th May 2024.
WuXi XDC Cayman (WXDC) is a contract research, development, and manufacturing organization (CRDMO) focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
In this note, we will talk about the lock-up dynamics and updates since our last note.

Quiddity Leaderboard STAR 50 Jun 24: SHORTs Down 12% Vs Peers in 1 Month; Final Ranks & New Trade

STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
In my last insight (link), I discussed how the rankings had to be monitored closely before finalizing the index change expectations for the June 2024 index rebal event.
Now that the reference period is complete, I have discussed my final expectations for the June 2024 review. The official index changes will be announced later this month.

Quiddity Leaderboard KOSPI 200 Jun 24: One Last-Minute Change to Rankings

KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX).
The reference period for the June 2024 index rebal event ended recently. In this insight, we take a look at our final expected ADDs/DELs.
There has been one change to our list of expected ADDs presented in my last insight (link).

ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Continues

With the review period now complete, we forecast 7 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
There are 4 stocks that could be added to both indices while some stocks will also have same way flows from CSI Smallcap 500 Index (SH000905 INDEX) trackers.
The potential adds have outperformed the potential deletes over the last 6 months. There has been a big move higher in the potential adds over the last few weeks.

Hostile or Not?

By Jesus Rodriguez Aguilar

On 6 May, the Board of Sabadell rejected the merger proposal as “it significantly undervalues its growth prospects and is not aligned with the interests of its customers and shareholders”.
BBVA could take the offer directly to Sabadell shareholders, but a hostile offer seems extremely unlikely and there are no precedents in the Spanish banking sector.
I find it unlikely that both parties reach an agreement because the terms would likely be unfavourable for BBVA (premium 40%-50%). Market sentiment also suggests a low probability.

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May 07

Daily Brief Event-Driven: L’Occitane (973 HK): The Rollover Option and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

L’Occitane (973 HK): The Rollover Option, And Alternate Listing Valuations
Sigma Healthcare (SIG AU): ASX200 Inclusion Now, MUCH More Squeezy Fun Later. Maybe…
SSE50 Index Rebalance Preview: Financials Continue to Outperform
L’Occitane (973.HK) Privatization – The Offer Price Is Good Enough
CPMC Holdings (906 HK): ORG Nearing the Cut-Off Point for Its Competing Offer
Adbri (ABC AU): Scheme Vote on 12 June
Hankook Tire & Technology to Become the Controlling Shareholder of Hanon Systems
ASMedia GDR Early Look – Momentum Has Been Strong, and Raising Would Grow Its Cash Base Almost 6x
STAR50 Index Rebalance Preview: Adds Steamroll Deletes
Quiddity Leaderboard SSE50/180 Jun 24: US$2bn One-Way; LONGs up +9.8% Vs SHORTs in ~2 Months

L’Occitane (973 HK): The Rollover Option, And Alternate Listing Valuations

Concurrent with its HK$34/share VGO, L’Occitane (973 HK)‘s disinterested shareholders may be entitled to a share scrip alternative. IF afforded, up to 5% of shares out can participate.
The big unknown is whether you receive shares of the levered-up Bidco, at some as yet undetermined scrip ratio; or keep shares of L’Occitane as-is.
To trigger the rollover option, 10% of disinterested shareholders need to express interest by the 15th May (a Hong Kong holiday btw). A deadline without details.

Sigma Healthcare (SIG AU): ASX200 Inclusion Now, MUCH More Squeezy Fun Later. Maybe…

In early December, pharmacy distributor Sigma Healthcare (SIG AU) arranged a “transformational merger” with mega chain Chemist Warehouse (CWG). Effectively a reverse takeover designed to get CWG listed.
SIG issued shares, raising cash, enabling it so NEWCO had high enough minimum float upon merging. Financial engineering for the win. SIG popped – a kind of IPO premium trade.
But plenty of people are against the deal, and ACCC hasn’t yet opined (13 June is the provisional date), but on Thursday, S&P announced SIG would join ASX200 despite risks.

SSE50 Index Rebalance Preview: Financials Continue to Outperform

With the review period nearing completion, 6 stocks are in inclusion zone and 9 are in deletion zone. However, there can be a maximum of 5 changes at a review.
We estimate a one-way turnover of 7.1% at the June rebalance leading to a one-way trade of CNY 9.9bn (US$1.37bn). Index arb balances should increase the impact on the stocks.
The potential inclusions (of which four are Financials) have continued to outperform the mixed bag of potential deletions. With pretty big impact on the deletes, expect further divergence.

L’Occitane (973.HK) Privatization – The Offer Price Is Good Enough

By Xinyao (Criss) Wang

The HK$34/share offer price is final, which exceeds all-time high closing price of HK$33.60/share since IPO in 2010. EUR6 billion is equivalent to a PE of 52.17x, higher than peers.
Deploying China’s sinking market is “a good story full of imagination”. However, it may fail to bring expected profits considering increasing competition/potential price war, leading to uncertain future performance growth.
For minority shareholders, this privatization provides an attractive opportunity to monetise their investments at a premium over market price. We don’t think the current “technical bull market” to be lasting.

CPMC Holdings (906 HK): ORG Nearing the Cut-Off Point for Its Competing Offer

CPMC Holdings (906 HK) has a pre-conditional voluntary offer from Changping Industrial at HK$6.87 and potentially a competing offer from ORG Technology Co., Ltd. A (002701 CH).
Five months after announcing its offer, Changping Industrial obtained regulatory approvals from all except SAMR, SAFE, and the Vietnam Competition Commission.
An ORG offer seems unlikely due to a lack of progress in May and timing risk, as the Changping Industrial offer could be unconditional before the ORG obtains regulatory approvals.

Adbri (ABC AU): Scheme Vote on 12 June

The Adbri (ABC AU) IE considers CRH (CRH US) and Barro’s A$3.20 offer fair and reasonable as it is within its A$ A$3.09-3.53 per share valuation range.
The scheme is conditional on FIRB approval, which should be forthcoming as CRH, the offeror, is a Fortune 500 company headquartered in Ireland.
The offer is attractive, and this is a done deal. At the last close and for the 1 July payment, the gross/annualised spread was 1.3%/8.4%.

Hankook Tire & Technology to Become the Controlling Shareholder of Hanon Systems

On 3 May, it was reported that Hankook Tire & Technology agreed to purchase a 25% in Hanon Systems for 1.37 trillion won from Hahn & Co private equity firm.
After this deal, Hankook Tire & Technology will own a controlling 50.5% stake in Hanon Systems.
We have a negative view on Hankook Tire & Technology’s additional purchase of Hanon Systems, which has experienced a declining profit margins in the past several years.

ASMedia GDR Early Look – Momentum Has Been Strong, and Raising Would Grow Its Cash Base Almost 6x

By Clarence Chu

Asmedia Technology (5269 TT) is looking to raise up to US$333m in its upcoming global depository receipts (GDRs) offering.
ASMedia recently announced its board’s resolution to offer between 4.3-5.3m shares in the form of GDRs, with the proceeds geared towards purchasing raw materials and machinery, R&D and working capital.
Similar to previous GDR listings, the deal is a long drawn out process with the firm required to jump through a number of board/shareholder/regulatory approval loops.

STAR50 Index Rebalance Preview: Adds Steamroll Deletes

With the review period complete, we forecast 3 changes for the SSE STAR50 (STAR50 INDEX) in June. All changes are migrations from/to the STAR 100 Index.
One way turnover is estimated at 3.4% resulting in a one-way trade of CNY 4.5bn (US$630m). There is a lot to trade from passive trackers, especially on the inclusions.
The potential adds have outperformed the potential deletions by ~18% over the last month with Hangzhou EZVIZ Network (688475 CH) and APT Medical (688617 CH) moving higher.

Quiddity Leaderboard SSE50/180 Jun 24: US$2bn One-Way; LONGs up +9.8% Vs SHORTs in ~2 Months

SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
The 12-month reference period used for the June 2024 review is now complete. The SSE 180 expected ADDs/DELs list has changed slightly since I published my last insight (link).
In this insight, we take a look at our final expectations for index changes during the June 2024 index rebal event.

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May 06

Daily Brief Event-Driven: Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update
CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived
Merger Arb Mondays (06 May) – China TCM, L’Occitane, Hollysys, Shinko, QV Equities, Qantm IP, Adbri
Addressing Areas of Confusion Surrounding the KOSPI 200 June Rebalancing
HK Connect SOUTHBOUND Flows (To 30-Apr/3-May 2024); Banks/SOEs Bought, Meituan, Tencent, Mobile Sold
HSCEI Dividend Futures: Sell the 2024/25 Steepener
Hollysys (HOLI US): Further Thoughts on the Widening Spread
CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes
China TCM (570.HK) Update – Despite Doubts, This Privatization Seems “Mandatory”
A/H Premium Tracker (To 3 May 2024): Minimal Moves in 2-Day Week

Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update

When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
15wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 8wks ago, recommended taking profits.
Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Spreads are now 3.6% wider than at narrowest, but gap risk has widened as Shinko outperforms, Ibiden.

CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived

The review period for the June rebalance is complete and we expect 11 changes to the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX).
We estimate one-way turnover of 1.4% at the rebalance leading to a one-way trade of CNY 8.82bn (US$1.22bn). There are a lot of stocks with multiple days ADV to trade.
The potential deletes have bounced off their lows as the market has recovered. But the potential passive selling could see them underperform over the next month.

Merger Arb Mondays (06 May) – China TCM, L’Occitane, Hollysys, Shinko, QV Equities, Qantm IP, Adbri

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU), Southern Cross Media (SXL AU), Qantm Intellectual Property (QIP AU), Probiotec Ltd (PBP AU), China TCM.
Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Roland DG Corp (6789 JP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU), Jastec Co Ltd (9717 JP).

Addressing Areas of Confusion Surrounding the KOSPI 200 June Rebalancing

Ssangyong C&E will be excluded in June pre-delisting due to the float rate rule. Replacement will be chosen from the highest market cap existing constituents excluded in the June review.
Likely owing to the recent expansion of macro variables in the local market, a clear correlation between results and price impact is not observed even at the screening period’s conclusion.
There’s a chance of price impact closer to the effective date, suggesting potentially more effective basket trading. However, short instrument absence necessitates using market indices as hedges.

HK Connect SOUTHBOUND Flows (To 30-Apr/3-May 2024); Banks/SOEs Bought, Meituan, Tencent, Mobile Sold

A-Shares only two days of the week and were up small Monday and Tuesday. H-shares took a breather Wednesday after trailing A-shares, then rallied hard on Thursday and Friday.
Net SOUTHBOUND buying was +HK6.0bn. Net buys every day and now 22 days straight, but buying still appears foreign-led price-taking action.
The only big news this week in China/HK was probably the Politburo’s new stance of trying to do more for the mainland property market, concentrating on unsold homes.

HSCEI Dividend Futures: Sell the 2024/25 Steepener

The HSCEI 2024 dividend futures have moved higher following mainland China banks announcing that they will pay out interim dividends starting this year.
The HSCEI 2025 dividend futures have moved higher too, though they have lagged the HSCEI 2024 dividend futures.
Even though the HSCEI 2024/25 dividend steepener has dropped by around 10 points in the last few weeks, we see further downside in the near-term.

Hollysys (HOLI US): Further Thoughts on the Widening Spread

I have received several questions from readers on Ascendent’s binding proposal for Hollysys Automation Technologies (HOLI US) in the context of the current gross spread of 12.1%.
The questions primarily concerned the Capital Forum article, NSR approvals, timelines, auditor resignation and deal break risks.
Most of the questions concerned regulatory approval risk. The delay in closing is mainly procedural (government red tape) rather than an indication that regulators will block the deal.

CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes

With the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index – Shang (SH000905 INDEX) at the close on 14 June.
We estimate a one-way turnover of 9.3% at the rebalance resulting in a one-way trade of CNY10.88bn (US$1.5bn). The Industrials and Information Technology sectors gain at the expense of Materials.
The potential adds have outperformed the potential deletes by 8% over the last 3 months. There could be further outperformance over the next few weeks.

China TCM (570.HK) Update – Despite Doubts, This Privatization Seems “Mandatory”

By Xinyao (Criss) Wang

Some investors have concerns that the privatization may fail. We also noticed that Morgan Stanley raised China TCM’s target price to HK$5.4. However, the privatization of China TCM seems “mandatory”.
At this stage, some background information is worth the attention, which will help investors better understand the logic behind this privatization and thus resolve the “confusion”.
According to regulatory requirements, it’s expected that both CNPGC and Taiji will integrate resources in pharmaceutical manufacturing and distribution sectors, so as to solve horizontal competition issue between the two.

A/H Premium Tracker (To 3 May 2024): Minimal Moves in 2-Day Week

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. 20 days straight net buying. NORTHBOUND saw big inflows Friday. A record day I believe.
HK stocks bounced VERY hard. Seemed like big allocation trade. HSCEI +8.7% vs CSI300 +1.2%. In H/A Pairs, liquid pairs saw Hs outperform their A by 4+% on average.

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May 05

Daily Brief Event-Driven: Weekly Deals Digest (05 May) – L’Occitane and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Weekly Deals Digest (05 May) – L’Occitane, C&F Logistics, KFC Japan, Austal, Hyundai Marine, ZEEKR
(Mostly) Asia-Pac M&A: L’Occitane, KFC Holdings Japan, CSR, Azure Minerals, CIMC, Chilled & Frozen
Quiddity Leaderboard CSI 300/500 Jun 24: Final Expectations; US$3.4bn One-Way; New Trade Idea
S&P500 Index Rebalance: Bitcoin Miner Is a SPCY Add
Adbri (ABC AU): 12th June Shareholder Vote
Last Week in Event SPACE: Aussie Tax-Loss Selling, Austal, West Japan Railway, PICC/PICC P&C

Weekly Deals Digest (05 May) – L’Occitane, C&F Logistics, KFC Japan, Austal, Hyundai Marine, ZEEKR

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: HD Hyundai Marine Solution (443060 KS) and ZEEKR (ZK US) IPOs.
Event-Driven developments: L’Occitane (973 HK), Chilled & Frozen Logistics Holdings (9099 JP), Kfc Holdings Japan (9873 JP), Mimasu Semiconductor Industry (8155 JP), Austal Ltd (ASB AU).

(Mostly) Asia-Pac M&A: L’Occitane, KFC Holdings Japan, CSR, Azure Minerals, CIMC, Chilled & Frozen

Tally 47 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deals was discussed on Smartkarma this week: L’Occitane (973 HK)‘s VGO from major shareholder, Reinold Geiger. A deal for KFC Holdings Japan (9873 JP) is apparently imminent.
Key updates took place on: CSR Ltd (CSR AU), Azure Minerals (AZS AU), CIMC Vehicle Group Co Ltd (1839 HK), and Chilled & Frozen Logistics Holdings (9099 JP).

Quiddity Leaderboard CSI 300/500 Jun 24: Final Expectations; US$3.4bn One-Way; New Trade Idea

CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.
The reference period for the June 2024 review is now complete. There are some changes to the expected ADDs/DELs list since I published my last insight (link) ~3 weeks ago.
In this insight, we take a look at our final expectations for index changes in June 2024.

S&P500 Index Rebalance: Bitcoin Miner Is a SPCY Add

Following Exxon Mobil (XOM US)‘s acquisition of Pioneer Natural Resources (PXD), Vistra (VST US) will be added to the S&P 500 INDEX (SPX INDEX) at the close on 7 May.
Marathon Digital Holdings (MARA US) is an add to the S&P SmallCap 600 Index and the stock could move higher till implementation.
Marathon Digital Holdings (MARA US) stock has underperformed its close peers this year and the ratio of Marathon Digital Holdings stock price to Bitcoin (XBTUSD CURNCY) is near the lows.

Adbri (ABC AU): 12th June Shareholder Vote

On the 27 Feb 2024, construction play Adbri (ABC AU) entered into a Scheme Implementation Deed with CRH (CRH US) and 42.7%-shareholder Raymond Barro (Chairman) at $5.20/share.
Conditions include Adbri’s shareholder approval and FIRB signing off. Optically, it doesn’t appear to be a knockout price. However, Adbri’s share price has laboured since the onset of Covid.
The Scheme Booklet is now out, with a Scheme Meeting to be held on the 12th June. Expected implementation on the 1 July. IE says fair & reasonable.

Last Week in Event SPACE: Aussie Tax-Loss Selling, Austal, West Japan Railway, PICC/PICC P&C

Tax-Loss Selling‘s a subject of interest in Australia. Retail investors will take gains on stocks which run up in price, or get taken over, then look for losses to offset.
Investors are caught out as the Aussie government “approves” Hanwha Ocean (042660 KS) buyng Austal Ltd (ASB AU). There is evidently a lot more going on in the background.
West Japan Railway Co (9021 JP) announces a biggish buyback. One could buy dips, but one should probably not chase. For that, suggest this acts as a range trade.

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May 04

Daily Brief Event-Driven: Updated Tool (30Apr24) & “Diff File Generator” For TSE “Mgmt Conscious of Capital Cost/Stock Price” and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Updated Tool (30Apr24) & “Diff File Generator” For TSE “Mgmt Conscious of Capital Cost/Stock Price”
Local Institutions’ Value-Up Momentum Moves: Watch the July Tax Reform Bill
EQD | The NIFTY May Be About to Start A Come Down

Updated Tool (30Apr24) & “Diff File Generator” For TSE “Mgmt Conscious of Capital Cost/Stock Price”

In mid-January, the TSE announced a “name-and-shame” list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】. But they did not actually shame.
The list shows which companies have disclosed a policy/consideration. But no data/links. We are weeks ahead of the TSE and we have all the links.
We created a tool to name everyone, show their reports, provide links to every document, and now a new tool. Put in a name, see the difference between the Old/New Reports.

Local Institutions’ Value-Up Momentum Moves: Watch the July Tax Reform Bill