Category

Event-Driven

May 05
0

Event-Driven: Jinko Solar, SK Telecom, JMT Network Services, Microstrategy Inc Cl A, Suchuang Gas Corp, Bausch Health Companies and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • STAR50 Index Rebalance Preview: 3 Changes or 5? It Depends…
  • Overlooked Aspect About MSCI’s SKT Foreign Room Calculation
  • SET50 Index Rebalance Preview: +JMT, JMART, BJC / -RATCH, STGT, IRPC
  • Microstrategy: More Losses For Bitcoin Spruiker
  • Suchuang Gas’ Scheme Meeting on 10 June Is a Welcome Exit from the Ongoing Share Suspension
  • SpinTalk: The Bausch Corporate Overhaul Is More Illusory Than Substantive At Least for Now

STAR50 Index Rebalance Preview: 3 Changes or 5? It Depends…

By Brian Freitas

Overlooked Aspect About MSCI’s SKT Foreign Room Calculation

By Sanghyun Park

  • The MSCI does not have a rule on how to treat DRs in the foreign room calculation. It only considers the proportion of shares AVAILABLE to foreign investors.
  • Unlike KT in 2019, SKT ADRs are not traded at a premium. It means that the MSCI may treat a portion of SKT ADRs as Still AVAILABLE Shares.
  • For this reason, it cannot be concluded that SKT will be deleted simply because it is below 3.75%.

SET50 Index Rebalance Preview: +JMT, JMART, BJC / -RATCH, STGT, IRPC

By Brian Freitas

Microstrategy: More Losses For Bitcoin Spruiker

By David Blennerhassett

  • Microstrategy Inc Cl A (MSTR US) reported a net loss of $155.6mn in the fourth quarter, compared to the net loss of $124.3mn in the 4Q21. 
  • MSTR took a non-cash digital asset impairment charge of $170.1mn in the first quarter, up from $146.6mn in the 4Q21. 
  • A bet on MSTR is a bet on bitcoin. Yet MSTR is down 37% YTD, compared to ~20% for bitcoin. 

Suchuang Gas’ Scheme Meeting on 10 June Is a Welcome Exit from the Ongoing Share Suspension

By Arun George

  • The scheme document is out with the Court meeting scheduled for 10 June. The IFA considers the offer to be fair and reasonable. Suchuang Gas Corp (1430 HK) remains suspended.
  • Key conditions are the headcount test and approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). 
  • Excluding the irrecovables, no shareholder holds a blocking stake. As the timeframe to fulfil the resumption guidance remains highly uncertain, the offer is a welcome exit opportunity. 

SpinTalk: The Bausch Corporate Overhaul Is More Illusory Than Substantive At Least for Now

By Robert Sassoon

  • Bausch Health Companies (BHC US)‘s share price reversal over the past year has eliminated the substantial  gains achieved after it announced plans for a major corporate overhaul in August 2020.
  • No substantive change to BHC’s current holding company structure and leverage ratio will result from the imminent execution of the Bausch & Lomb IPO which is less transformational than expected.
  • The potential for a more value-creating overhaul remains, but timing is uncertain. Until the relevant catalysts come into play, we expect the BHC share price to tread water at best.

Before it’s here, it’s on Smartkarma

Learn More
May 04
0

Event-Driven: Hitachi Transport System, AGL Energy Ltd, Virtus Health, SG Micro Corp, LG Energy Solution, Suchuang Gas Corp and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Hitachi Transport (9086 JP):  Trading Too Wide
  • MCB Goes Big To Thwart AGL Energy De-Merger
  • BGH Stonewalls As Virtus Rejects Offer
  • CSI300 Index Rebalance Preview: 30 Potential Changes as Sector Rotation Continues
  • LG Energy/LG Chem Flow Trading on Solactive Lithium Index Rebalancing
  • AGL Energy’s Demerger Vote in the Balance with Grok Ventures’ Move
  • Suchuang Gas (1430 HK): 10th June Court Meeting As Shares Remain Suspended

Hitachi Transport (9086 JP):  Trading Too Wide

By Travis Lundy

MCB Goes Big To Thwart AGL Energy De-Merger

By Travis Lundy

  • In mid-February, Brookfield and Mike Cannon-Brookes had teamed up to propose anA$7.50/share bid for AGL Energy Ltd (AGL AU).The bid was rejected by the Board, discussed here.
  • Weeks later, the pair came back nearly 10% higher, discussed in Second Brookfield-MCB Bid for AGL Energy Rejected. MCB’s big dreams of massive solar and massive customer base were thwarted.
  • Brookfield walked but MCB has come back now to buy 11.3% of AGL through a loan+collar transaction and a total return swap. He aims at scuppering the June demerger vote.

BGH Stonewalls As Virtus Rejects Offer

By David Blennerhassett

  • In its Target Statement, Virtus Health (VRT AU)‘s board unanimously determined BGH’s Offer is inferior to CapVest’s and recommends shareholders to not accept BGH’s Offer.
  • Separately, Virtus is seeking interim orders from the Takeovers Panel, such that BGH amends its bidder’s statement and also provides withdrawal rights. 
  • A Supreme Court of New South Wales hearing will be held on 4 May 2022 to convene the Scheme meeting in relation to the CapVest Transaction.

CSI300 Index Rebalance Preview: 30 Potential Changes as Sector Rotation Continues

By Brian Freitas

  • We expect the maximum permitted 30 changes at a single review to take place at the June rebalance. Most changes are high probability.
  • We estimate a one-way turnover of 4.25% at the rebalance leading to a one-way trade of CNY 10.677bn.
  • Industrials, Information Technology and Materials sectors are expected to have the most net inclusions, while Health Care and Financials are expected to have the most net deletions.

LG Energy/LG Chem Flow Trading on Solactive Lithium Index Rebalancing

By Sanghyun Park

  • We cannot completely rule out the possibility that Solactive will announce a correction disclosure for the LG Energy Inclusion/LG Chem Exclusion 2 to 3 trading days before May 11th.
  • LG Energy can expect an inflow of 0.85x ADTV (0.16% of SO). On the other hand, LG Chem will face an outflow of -1.76x ADTV (0.52% of SO).
  • Considering the correction disclosure uncertainty and the passive flow size, we should approach this as a day trading event after watching the results by this Friday (or the following Monday).

AGL Energy’s Demerger Vote in the Balance with Grok Ventures’ Move

By Arun George

  • Mike Cannon-Brookes (Grok Ventures) has become the largest AGL Energy Ltd (AGL AU) shareholder, by acquiring an 11.28% interest through derivatives transactions. 
  • Mr Cannon-Brookes will vote against the demerger scheme (vote on 15 June) and has launched an online campaign to influence the retail heavy share register.
  • The rationale for the demerger remains unconvincing. Our SoTP points to upside absent a demerger. If the demerger fails, the long-term play could still be to revisit the privatisation plan.

Suchuang Gas (1430 HK): 10th June Court Meeting As Shares Remain Suspended

By David Blennerhassett

  • Suchuang Gas Corp (1430 HK)‘s Scheme Document is now out. The Scheme Meeting will be held on the 10th June with expected payment on or before the 21 June. 
  • The Independent Financial Advisor (Essence International) has concluded the offer by CR Gas (1193 HK) is fair and reasonable. 
  • The pain is almost over for shareholders. This is as good a deal one can expect under the circumstances. Shareholders should vote through the Offer resolutions and pocket the cash. 

Before it’s here, it’s on Smartkarma

Learn More
May 03
0

Event-Driven: SenseTime Group, China Huarong Asset Management, Shiga Bank, Schroders PLC, Chugoku Bank, Heineken Holding NV and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • SenseTime (20 HK): Lock-Up Expiry Will Bring BIG Passive Flow
  • HSCI Index Rebalance and Stock Connect: Potential Changes in June and September
  • JAPAN ACTIVISM:  Silchester Goes After Shiga Bank
  • Schroders: Dual Share Class Unification
  • JAPAN ACTIVISM: Silchester Goes After Chugoku Bank
  • Selected European Holdcos and DLCs: April ‘22 Report

SenseTime (20 HK): Lock-Up Expiry Will Bring BIG Passive Flow

By Brian Freitas

  • SenseTime Group (20 HK) currently has a float of 1.4%. That will increase to 46% at the end of June as pre-IPO and cornerstone investor lock-ups end.
  • The Hang Seng Tech Index FAF increase and potential inclusion in the Hang Seng China Enterprises Index will require passive trackers to buy 700m shares early September.
  • Economic stimulus in China, outlook for China tech, lock-up expiry, inclusion in Southbound Connect and flows from passive trackers will drive the stock for few months and provide trading opportunities.

HSCI Index Rebalance and Stock Connect: Potential Changes in June and September

By Brian Freitas

  • We see seven new listings as potential inclusions to the HSCI in June. One is already a part of Connect while five will be added to Southbound Stock Connect.
  • We see 19 potential changes to the HSCI in September. Seven of the deletions are on market cap, four on liquidity, and eight due to prolonged trading suspension.
  • Some of the potential deletions have large Southbound holdings and some of these could be trimmed over the next couple of months.

JAPAN ACTIVISM:  Silchester Goes After Shiga Bank

By Travis Lundy

  • In early February 2022, Silchester International Investors (according to its website) sent letters to four low-ROE-earning Japanese regional banks proposing a new dividend policy.
  • The management and boards of each bank rejected the policy proposal though two of the four had upped their proposed dividend or changed policy prior, and two upped it afterwards.
  • While Bank of Kyoto (8369 JP) is the biggie, Shiga Bank (8366 JP) is another one with significant equity holdings. 

Schroders: Dual Share Class Unification

By Jesus Rodriguez Aguilar

  • Schroders has announced the conversion of non-voting shares into voting shares. Holders of voting shares will receive a bonus issue of three additional ordinary shares for every 17 ordinary shares held.
  • Lo and behold, upon announcement and assuming the bonus shares, the value of the holdings of the Schroders family rose by £504 million to £3,933 million, a cool 15% increase.
  • The conversion is highly likely to proceed. The adjusted gross spread is 2%. Recommendation is long non-voting/short voting shares.

JAPAN ACTIVISM: Silchester Goes After Chugoku Bank

By Travis Lundy

  • In early February 2022, Silchester International Investors (according to its website) sent letters to four low-ROE-earning Japanese regional banks proposing a new dividend policy.
  • The management and boards of each bank rejected the policy proposal though two of the four had upped their proposed dividend or changed policy prior, and two upped it afterwards.
  • While Bank of Kyoto is the biggest equity portfolio, Chugoku Bank (8382 JP) is a relatively large, provincial, regional bank, with middling equity portfolio. Different shape. Different situation.

Selected European Holdcos and DLCs: April ‘22 Report

By Jesus Rodriguez Aguilar

  • Discounts to NAV of holdcos have generally widened during April: Alba, tightened to 37.4%; GBL widened to 31.8%; Heineken Holdings widened to 20%; Industrivärden C widened to 12.1%;
  • Investor B widened to 11.5%; Porsche Automobile Holding widened to 29.9%. There is just one DLC left in this report, Rio Tinto, which widened to 11.8%.
  • Recommended trades: GBL vs. listed assets, Industrivärden C vs. listed assets, Investor B vs. listed assets; Porsche vs. VW (long 1 PAH3 GR/short 0.5136 VOW GR), Rio Tinto (DLC).

Before it’s here, it’s on Smartkarma

Learn More
May 02
0

Event-Driven: SD Biosensor, Hitachi Ltd, Mapletree North Asia Commercial Trust, GOLFZON, Guodian Technology & Environment Group, 21Vianet Group, SPH REIT and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • KOSPI200 Index Rebalance Preview (June): Review Period Ends as Reversion Kicks In
  • Hitachi Results, Special Gain on Asset Sale, and Semi-Bigly Buyback
  • MNACT’s Scheme Meeting on 23 May, IFA Opinion
  • KOSDAQ150 Index Rebalance Preview: 14 Potential Changes in June
  • Guodian’s H Share Class Meeting on 20 May, IFA Opinion
  • Merger Arb Mondays (2 May) – Dongzheng AFC, Yashili, VNET, Sezzle, Link, Ramsay
  • (Mostly) Asia M&A: April 2022 Roundup

KOSPI200 Index Rebalance Preview (June): Review Period Ends as Reversion Kicks In

By Brian Freitas

  • The review period for the June rebalance ended on Friday. The changes will be announced in around 3 weeks and will be effective after the close on 9 June.
  • We see 7 changes for the index with most of them being high probability. The potential adds have outperformed the potential deletions, but have given up some gains in April.
  • Short interest on some of the potential deletions has risen sharply over the last month and now almost equals the estimated passive selling.

Hitachi Results, Special Gain on Asset Sale, and Semi-Bigly Buyback

By Travis Lundy

  • Hitachi Ltd (6501 JP) results were salutary but noisy and the year to March 2023 is forecast similar (salutary but noisy). Service integration and growth to external customers is key.
  • Forecast growth in main businesses ex- to-be-sold listed subs is decent, but could be better. 
  • A SEMI-Bigly buyback will help cushion any selling, but it has recently outrun Siemens on a like-for-like basis.

MNACT’s Scheme Meeting on 23 May, IFA Opinion

By Arun George

  • Mapletree Commercial Trust (MCT SP)’s EGM, Mapletree North Asia Commercial Trust (MAGIC SP)/MNACT’s EGM and trust scheme meeting will take place on 23 May. The effective date is 8 August.
  • The IFA considers the scheme consideration to be fair. We think that IFA’s valuation approach is broadly sound with some areas for improvement. 
  • For a 17 August payment, the gross and annualised spread of the cash-only consideration (including permitted clean-up DPU) is 1.6% and 5.6%, respectively. 

KOSDAQ150 Index Rebalance Preview: 14 Potential Changes in June

By Brian Freitas

  • The review period for the June rebalance of the KOSDAQ 150 Index ended on Friday. We see 14 potential changes to the index – most are high probability. 
  • The impact of passive trading is higher on the deletions than on the additions. Short interest on the potential adds is zero/negligible and a lot larger on the potential deletions.
  • Short interest on a couple of potential deletion exceeds the estimated passive selling, while there are others where short interest is three-quarters of the estimated passive selling.

Guodian’s H Share Class Meeting on 20 May, IFA Opinion

By Arun George

  • Guodian Technology & Environment Group (1296 HK)‘s composite document is out with the H Shareholders’ class meeting on 20 May. The IFA considers the offer to be fair and reasonable. 
  • The key condition for the privatisation is approval by at least 75% of independent H-shareholders (<10% of all independent H-shareholders rejection). There is no minimum acceptance condition. 
  • The H Shareholder with a blocking stake has provided an irrevocable. For a 9 June payment, the gross and annualised spread to the offer is 1.9% and 19.5%, respectively. 

Merger Arb Mondays (2 May) – Dongzheng AFC, Yashili, VNET, Sezzle, Link, Ramsay

By Arun George

(Mostly) Asia M&A: April 2022 Roundup

By David Blennerhassett

  • For the month of April, 10 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$22bn.
  • The average premium for the new deals announced (or first discussed) in April was ~36%.
  • This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

Before it’s here, it’s on Smartkarma

Learn More
May 01
0

Event-Driven: Keppel Corp, Kotak Mahindra Bank, Hitachi Transport System, SKC Co Ltd and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Last Week in Event SPACE: Sembcorp/Keppel, Razer, Hitachi Transport, Renesas, CNOOC
  • Index Rebalance & ETF Flow Recap: MSCI, S&P/ASX, STI, Sensex, Kotak Bank, SMM/KEP O&M, LIC
  • Asia-Pac Weekly Risk Arb Wrap: Hitachi Transport, SPH Reit, Toyo Construction, True/DTAC
  • SKC Co: Formation of an Intermediate Holding Company

Last Week in Event SPACE: Sembcorp/Keppel, Razer, Hitachi Transport, Renesas, CNOOC

By David Blennerhassett

Index Rebalance & ETF Flow Recap: MSCI, S&P/ASX, STI, Sensex, Kotak Bank, SMM/KEP O&M, LIC

By Brian Freitas

Asia-Pac Weekly Risk Arb Wrap: Hitachi Transport, SPH Reit, Toyo Construction, True/DTAC

By David Blennerhassett

SKC Co: Formation of an Intermediate Holding Company

By Douglas Kim

  • SKC Co Ltd (011790 KS) announced on 29 April that it plans to change into an intermediate holding company.
  • We believe that the formation of an intermediate holding company structure could have a negative impact on SKC’s share price. 
  • This is because some investors may be concerned that SKC may try to complete IPOs of some of its valuable subsidiaries including SKCFT Holdings without adequate protection for SKC shareholders.

Before it’s here, it’s on Smartkarma

Learn More
Apr 30
0

Event-Driven: Mapletree Commercial Trust, Bank of Kyoto, KakaoBank, SK IE Technology, True Corp Pcl, Shin Keisei Electric Railway, Itausa-Investimentos Itau-Pr, Beijing Enterprises Urban Resources, Albioma SA, Kakao Pay and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • MNACT/MCT Circulars Out – Still Probably Heads I Win Tails I Win – But It’s Complicated
  • JAPAN ACTIVISM:  Silchester Goes After Bank of Kyoto
  • KOSPI 200 Constituents with a Float Rate Change: 11 Increases & 2 Reductions
  • FnGuide Secondary Battery Index (KODEX ETF) Rebalancing Preview
  • True/DTAC: Merger Delays As NBTC Board Revamped
  • Keisei-Shin Keisei: Merger Seems like a Done Deal
  • Itausa (ITSA4 BZ) – Too Narrow a NAV Discount, and the Dividend Yield Is No Longer Compelling
  • Beijing Enterprises Urban Resources’ MGO at HK$0.78. Is A Bump Possible?
  • KKR / Albioma: Agreed Offer, Est. Timetable
  • End of Mandatory Lock-Up Periods for 40 Companies in Korea in May 2022

MNACT/MCT Circulars Out – Still Probably Heads I Win Tails I Win – But It’s Complicated

By Travis Lundy

  • The Mapletree North Asia Commercial Trust (MAGIC SP) Scheme Doc and Mapletree Commercial Trust (MCT SP) Circular are both out this morning. 
  • The IFA deems the deal FAIR and REASONABLE. This is not surprising. It was already going to be so with just the scrip, but with the cash bump it’s easier.
  • But the situation is complicated. And the complications have complications. The trade is still to be long MCT, and long MCT vs MNACT is an interesting idea.

JAPAN ACTIVISM:  Silchester Goes After Bank of Kyoto

By Travis Lundy

  • Silchester International Investors has owned Bank of Kyoto (8369 JP) for 16 years and is now the largest shareholder in the bank.
  • They have been dissatisfied, become vocal behind the scenes with their dissatisfaction, and BoK management disagrees so they will go to the mattresses. Gently. 
  • This could get some investors excited, but it is unlikely to be a successful activist effort.

KOSPI 200 Constituents with a Float Rate Change: 11 Increases & 2 Reductions

By Sanghyun Park

FnGuide Secondary Battery Index (KODEX ETF) Rebalancing Preview

By Sanghyun Park

  • The FnGuide Secondary Battery Index currently holds an AUM of ₩1.35T, and the next rebalancing implementation period is from June 13th to 15th.
  • Since these are same-sector stocks with a high cointegration level, they are suitable for narrow-window basket trading based on passive flow differences.
  • So, I would consider basket trading by targeting the large-cap constituents with a relatively significant passive flow: SK Innovation (096770), SK IE Technology (361610), Ecopro BM (247540), & Ecopro (086520) 

True/DTAC: Merger Delays As NBTC Board Revamped

By David Blennerhassett

  • The newly appointed board of Thailand’s NBTC has set up four subcommittees to study the planned merger of True Corp Pcl (TRUE TB)and Total Access Communication (DTAC TB).
  • Previously NBTC was expected to conclude its vetting by the 15 May. That is now unlikely to occur. 
  • In letters to the NBTC, True insisted the DTAC merger must not be delayed from the expected mid-June completion timetable. NBTC is, appropriately, investigating the merger on its own terms.

Keisei-Shin Keisei: Merger Seems like a Done Deal

By Janaghan Jeyakumar, CFA

  • Japan-Based Railway Company Keisei Electric Railway Co (9009 JP) (“Keisei”) and its 44.64%-owned equity method affiliate Shin Keisei Electric Railway (9014 JP) (“Shin Keisei”) have signed a Share Exchange Agreement.
  • Shin Keisei Shareholders will receive 0.82 Keisei Shares per Shin Keisei Share. Following the completion of this Deal, Shin Keisei will become a wholly-owned subsidiary of Keisei.
  • Below is a closer look at the details of this Transaction and the likelihood of Deal Completion.

Itausa (ITSA4 BZ) – Too Narrow a NAV Discount, and the Dividend Yield Is No Longer Compelling

By Victor Galliano

  • Itausa is trading at an 19.6% discount to the HoldCo’s NAV, with the discount narrowing sharply over the last two months
  • In addition, after a big increase in the dividend per share announced due to 2021 results, we believe that it is unlikely to see another big increase going forward
  • Banco Itaú Unibanco, Itausa’s largest investment, is positively geared to the hiking interest rate cycle by the Brazil central bank; we prefer direct exposure to the bank versus the holdco

Beijing Enterprises Urban Resources’ MGO at HK$0.78. Is A Bump Possible?

By Arun George

  • Beijing Enterprises Water Group (371 HK)/(BEWG) will launch a conditional mandatory general offer (MGO) for Beijing Enterprises Urban Resources (3718 HK) at HK$0.78 as it crossed the 30%+ voting threshold. 
  • The MGO is conditional on the offeror and concert parties holding more than 50% of the voting rights (currently own 38.64%). The MGO price is unattractive, in our view.
  • BEWG’s justification for the offer and lack of a “no increase in offer price” wording suggests the possibility of a bump. The shares closed 2.6% above the MGO price.    

KKR / Albioma: Agreed Offer, Est. Timetable

By Jesus Rodriguez Aguilar

  • KKR has agreed with Albioma on a €50/share+€0.84 dividend offer, €1,583 million implied equity value, c. €2,543 million implied EV. The consideration represents 11.4x EV/Fwd EBITDA and 25.1x Fwd P/E.
  • The multiples are not as rich as in the Falck transaction, but most shareholders will be happy to tender at a 52% premium. 
  • Albioma closed at €50.7 (a 15.9% increase vs. the prior closing price). Gross spread is 0.28%, and the annual estimated return, assuming settlement by 5 August, is 1.03%, probably low.

End of Mandatory Lock-Up Periods for 40 Companies in Korea in May 2022

By Douglas Kim

  • In this insight, we discuss end of the mandatory lock-up periods for 40 stocks in Korea in May 2022, among which 4 are in KOSPI and 36 are in KOSDAQ.
  • These 40 stocks on average could be subject to further selling pressures in May and could underperform relative to the market. 
  • Among these 40 stocks, the following stocks such as Kakao Pay, Enchem, DearU, and 4by4 could face further selling pressures in the coming weeks.

Before it’s here, it’s on Smartkarma

Learn More
Apr 29
0

Event-Driven: Hitachi Transport System, Yangzijiang Financial Holding, CNOOC Ltd, Toyo Construction, Hang Seng China Enterprises Index, Western Areas, Beijing Enterprises Urban Resources, Softbank Corp, SPH REIT, WYSIWYG Studios and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Hitachi Transport System (9086) Shareholders Get the BIG Win in This VLBO
  • Straits Times Index (STI) Rebalance Preview: YZJFH Is the Delete
  • CNOOC (883 HK) Surprises with Special Div
  • ToyoKen (1890)- Infroneer Declines to Bid Up, YFO Now In Driver’s Seat – Now It’s A Range Trade
  • HSCEI Dividend Futures: CNOOC Special Drives 2022 Fair Value Higher, 22/23 Steepener Lower
  • Western Areas: 1st June Scheme Meeting.  BHP’s Competing Offer Looking Remote
  • Beijing Enterprises Urban (3718 HK)’s Curious And Underwhelming Offer
  • JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Apr 2022
  • SPH Scheme Elections In – SPH REIT Chain Offer Announced
  • KOSDAQ 150 Rebalancing: Changes & Passive Impacts

Hitachi Transport System (9086) Shareholders Get the BIG Win in This VLBO

By Travis Lundy

  • KKR and Hitachi Ltd (6501 JP) have a deal to get KKR to buy Hitachi Transport System (9086 JP) in a VLBO (Very Leveraged BuyOut). 
  • As somewhat expected, it is a “split price deal” where Hitachi will accept a lower price for its 40% stake than minorities will receive in a Tender Offer. 
  • This is a big win for Hitachi Transport shareholders, but the Tender Offer likely won’t start until late September.

Straits Times Index (STI) Rebalance Preview: YZJFH Is the Delete

By Brian Freitas

CNOOC (883 HK) Surprises with Special Div

By Travis Lundy

  • CNOOC Ltd (883 HK) released fantastic, above-consensus earnings for Q1, which were minimally impacted (positively) by non-recurring profits. 
  • The driver was higher gas production on much higher prices. At current price, the implied PER is 3.0x for 2022.
  • And the company also announced a Special Dividend of HK$1.18/share or 10.9% of yesterday’s share price. 

ToyoKen (1890)- Infroneer Declines to Bid Up, YFO Now In Driver’s Seat – Now It’s A Range Trade

By Travis Lundy

  • Toyo Construction (1890 JP) today released a change to its Target Opinion Statement for Infroneer’s takeover bid at ¥770/share. It supports the tender itself, but withdraws its recommendation investors tender.
  • Infroneer refused to raise their price, so this effectively kills their bid (though they will extend). TC will engage with Yamauchi Family Office which has separately offered to bid ¥1,000/share.
  • The dynamics have now changed. This is a range trade, and will likely take time unless Infroneer says “I’ll sell at ¥1,000/share.”

HSCEI Dividend Futures: CNOOC Special Drives 2022 Fair Value Higher, 22/23 Steepener Lower

By Brian Freitas

  • Last evening CNOOC Ltd (883 HK) announced a special div of HK$1.18/share – that is higher than market expectations. JD.com Inc. (9618 HK) could announce a special div next week.
  • Fair value for the HSCEI 2022 dividend futures moves higher to 250 DIPS off the back of CNOOC Ltd‘s special div and the estimated JD.com Inc. (9618 HK) special div.
  • The HSCEI 2022/23 steepener had dropped to -29 yesterday and should drop even lower today where we could see some covering.

Western Areas: 1st June Scheme Meeting.  BHP’s Competing Offer Looking Remote

By David Blennerhassett

  • Western Areas (WSA AU) has registered the Scheme Booklet with ASIC. The Scheme Meeting to vote on IGO Ltd (IGO AU)‘s Offer will be held on the 1 June.
  • On the 11 April,  IGO bumped its Offer Price (last and final) by 15.2% to A$3.87 from A$3.36. WSA’s board unanimously recommends shareholders vote in favour of the Revised Scheme.
  • The Independent Expert (IE) has concluded the Scheme is not fair but reasonable. Still no word from BHP Group Ltd (BHP AU). WSA trading tight to terms. 

Beijing Enterprises Urban (3718 HK)’s Curious And Underwhelming Offer

By David Blennerhassett

  • Beijing Enterprises Urban Resources (3718 HK) (BEUR) has announced a mandatory general cash offer from Beijing Enterprises Water Group (371 HK) (BEW). 
  • This Offer was triggered by BEW increasing its stake to 31.23% from 29.97%. The Offer price is HK$0.78/share, a zero premium to last close and 20% above the 30-day average. 
  • This is an underwhelming privatisation Offer. BEUR traded through terms as recent as last November. The Offer price has not been declared final.

JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Apr 2022

By Janaghan Jeyakumar, CFA

  • JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
  • A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
  • Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022 based on trading data as of end-April 2022.

SPH Scheme Elections In – SPH REIT Chain Offer Announced

By Travis Lundy

  • Singapore Press Holdings (SPH SP) 58% to 42% to take cash instead of cash + SPH REIT units. 
  • That was to be expected, but it means Cuscaden owns 47+% of SPH REIT and needs to conduct a Conditional Chain Offer on SPH REIT at S$0.9372/unit. 
  • That provides a put option under SPH REIT for holders/buyers as Singapore opens up.

KOSDAQ 150 Rebalancing: Changes & Passive Impacts

By Sanghyun Park

Before it’s here, it’s on Smartkarma

Learn More
Apr 28
0

Event-Driven: Sembcorp Marine, Keppel Corp, Renesas Electronics, Hyundai Heavy Industries, Hitachi Metals, Hyundai Motor Co, Pushpay Holdings, KT Corp and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Sembcorp Marine and the Keppel O&M Business Combination – Brighter Light at the End of the Tunnel
  • The Keppel Restructuring – Forward Sum Of The Parts Makes KEP Look Cheap. And It Is… But…
  • Renesas (6723 JP) – Salutary Q1, Strong Q2 Forecast, and a BIG Buyback
  • Keppel: A Massive Winner from Keppel O&M and Sembcorp Marine’s Combination
  • Investigating Each Scenario of MSCI Korea Rebalancing Outcome
  • Hitachi Metals – Steel Price Recovery Probably Limits Downside Even in the Event of a Break
  • Noteworthy Flow Trend: Korea NPS Overweighting Local Equity
  • Sembcorp Marine & Keppel O&M Combination: Details & Index Implications
  • Expressions Of Interest Resurrect Pushpay
  • KT Considering a Partial Sale of Its Cloud Business & Concerns About Tariff Rate Cut for 5G Services

Sembcorp Marine and the Keppel O&M Business Combination – Brighter Light at the End of the Tunnel

By Travis Lundy

  • Keppel Corp and Sembcorp Marine have announced the O&M business combination and it is a little more interesting than expected. It is a Very Big Desirable Order Book.
  • Separately, there is the potential for more index inclusion flow based on the conclusion of the combination in Q4.
  • The light at the end of the tunnel used to be far away, and one was never sure if it wasn’t an oncoming train. It’s closer and clearer now.

The Keppel Restructuring – Forward Sum Of The Parts Makes KEP Look Cheap. And It Is… But…

By Travis Lundy

  • The Keppel O&M / SMM Combination and Keppel Rig Asset Restructure were announced today and the arithmetic is both tough and interesting. There’s a little magic here.
  • KEP shareholders receive SMM shares worth ~1/3 of today’s share price, and the rest is currently valued at well under Net Tangible Assets post-Restructuring/Transaction.
  • That suggests Keppel has upside, but one must think carefully about the exposures.

Renesas (6723 JP) – Salutary Q1, Strong Q2 Forecast, and a BIG Buyback

By Travis Lundy

  • About 9 days I ago I wrote Renesas (6723 JP) – On Top of Peer-Beating Growth, and Valuation… Watch for Buybacks. Today with Q1 earnings, they announced a ¥200bn buyback. 
  • What appears to be a quite strong Q1 in automotive in both revenues and margins, and decent incremental margins, sees a stronger Q2 forecast (but less good incremental margins).
  • The Street is well behind guidance, and a buyback at the high end of potential guidance and coming earlier than expected is all to the good. 

Keppel: A Massive Winner from Keppel O&M and Sembcorp Marine’s Combination

By Arun George

  • The terms for the proposed combination of Keppel O&M and Sembcorp Marine (SMM SP) were announced. The agreed equity value exchange ratio between Keppel O&M and Sembcorp Marine is 56%:44%. 
  • The proposed combination will require Keppel Corp (KEP SP) and Sembcorp Marine shareholder approvals at separate EGMs and is expected to close in 4Q2022.
  • The transaction is a big win for Keppel shareholders as the proposed combination creates S$9.4 billion of value, which is around 80% of Keppel’s market cap at the last close.

Investigating Each Scenario of MSCI Korea Rebalancing Outcome

By Sanghyun Park

  • We have one sure addition, Hyundai Heavy Industries. So, we have one guaranteed deletion, and we may have another delete depending on the outcome for the Segment Number of Companies.
  • It is safe to say that Seegene‘s exclusion is almost confirmed. The one with the next smallest market cap is Green Cross.
  • But if SK Telecom is excluded due to a low foreign room, Green Cross will survive, and even Seegene may remain in the Standard Index.

Hitachi Metals – Steel Price Recovery Probably Limits Downside Even in the Event of a Break

By Mio Kato

  • Hitachi Metals started drifting noticeably below terms from early Nov last year and fell as low as 14% below the ¥2,181 offer price in early March. 
  • Along with relatively strong guidance yesterday the company reaffirmed the commitment of the Bain consortium to the offer despite some delays. 
  • We have no special insight into the actual likelihood of a break here but we do believe downside may be limited even if one occurs.

Noteworthy Flow Trend: Korea NPS Overweighting Local Equity

By Sanghyun Park

  • A noteworthy flow trend in the Korean stock market is the National Pension Service’s local equity purchase. For this, they tend to overweight those previously underweighted blue-chip stocks. 
  • All of the top 10 most net-bought stocks by local pensions on April 18-26 are KOSPI 200 constituents. And most of them all have a relatively small NPS-owned stake.
  • Most of them have significantly outperformed the KOSPI 200 (-0.90%) during this period.

Sembcorp Marine & Keppel O&M Combination: Details & Index Implications

By Brian Freitas

Expressions Of Interest Resurrect Pushpay

By David Blennerhassett

  • Church donor management tech play Pushpay Holdings (PPH NZ) said it “recently received unsolicited, non-binding and conditional expressions of interest or approaches from third parties“.
  • No price was mentioned. Shares promptly gained 24% on the news. 
  • Separately, Pushpay reaffirmed its EBITDA guidance for FY22. Those results will be announced on the 11 May.

KT Considering a Partial Sale of Its Cloud Business & Concerns About Tariff Rate Cut for 5G Services

By Douglas Kim

  • On 27 April, Bloomberg reported that KT Corp is considering a partial sale of its newly created cloud business unit.
  • It is estimated that a sale of about 20% stake in KT Cloud could raise approximately $400 million, which would value KT Cloud business at $2 billion.
  • A key reason why the major telcos’ share prices were down today was because of reports that the incoming Yoon Seok-Yeol administration is pressuring telcos to lower 5G tariff rates.

Before it’s here, it’s on Smartkarma

Learn More
Apr 27
0

Event-Driven: Air New Zealand, Hitachi Transport System, Kotak Mahindra Bank, Razer Inc, Hana Tour Service, AKM Industrial, LG Energy Solution, Kakao Pay, Beijing Enterprises Urban Resources and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • NZ AIR Rights Almost Done – Discounted Vs Regional “Shut-In” Peers
  • Hitachi Transport (9086 JP) – Deciphering Takeover Price by Newspaper Article Language
  • Kotak Mahindra Bank (KMB IN): Foreign Room Increases; FTSE Inclusion in Sep Possible
  • Razer’s Scheme: And that Is a Pass
  • Razer Inc (1337 HK): Storm In A Tea Cup
  • KOSPI 200 June Rebalancing: Nearly Finalized Results with 7 Adds/Deletes
  • AKM (1639 HK): Pre-Cons Fulfilled; Possible Early August Payment
  • LG Energy Fails Inclusion in LIT’s April Rebalancing & Faces 3M Lockup Release (3.7x ADTV) Today
  • Kakao Pay IPO Lock-Up – IPO Was Great, Performance Since Then Has Been Tepid
  • Beijing Enterprises Urban Resources (3718 HK): Potential Offer

NZ AIR Rights Almost Done – Discounted Vs Regional “Shut-In” Peers

By Travis Lundy

  • The NZ Air Rights Trade is nearly done. Last day of trading is today. 
  • The Rights were super cheap. They ran as NZ AIR ran a bit. 
  • Now it is the time to trade NZ AIR Shares vs Peers.

Hitachi Transport (9086 JP) – Deciphering Takeover Price by Newspaper Article Language

By Travis Lundy

  • Hitachi has been in the process of selling Hitachi Transport System (9086 JP). An article in the Nikkei Thursday last suggested a deal was imminent (both companies report 28 April). 
  • Bloomberg carried an article this morning with more numbers and implied arithmetic. Then they revised the language in the article. 
  • There is STILL room for different interpretations of likely deal price if one tries to parse all the info provided and match it with history. But we may be there.

Kotak Mahindra Bank (KMB IN): Foreign Room Increases; FTSE Inclusion in Sep Possible

By Brian Freitas

  • Kotak Mahindra Bank (KMB IN) is not a part of the FTSE All-World Index since the foreign room was less 20% over the last couple of years.
  • Foreign room is 19.8% as of end March and small foreign selling is needed for Kotak Mahindra Bank to be added to the FTSE All-World Index at the September SAIR.
  • If added to the FTSE All-World Index, passive trackers will need to buy 38.2m shares (US$861m; 11.1 days ADV; 22 days delivery volume) of Kotak Mahindra Bank (KMB IN).

Razer’s Scheme: And that Is a Pass

By Arun George

  • Razer Inc (1337 HK)’s scheme was approved at today’s court meeting. The value test passed with 94.74% of the total disinterested shareholders voting in favour of the scheme.
  • Despite our reservations about the headcount test, the scheme comfortably passed the headcount test with 465 for and just 16 against the scheme. 
  • At the last close and for the 20 May payment date, the gross and annualised spread to the offer is 3.7% and 56.1%, respectively.

Razer Inc (1337 HK): Storm In A Tea Cup

By David Blennerhassett

  • Razer Inc (1337 HK)‘s Scheme was comfortably voted through by shareholders.  
  • The overarching risk to the transaction, that it may fail the headcount test, largely turned out to be a storm in a tea cup. 
  • Tomorrow is the last day of trading with payment under the Scheme on or before the 20 May. Index sell flows come at the close. 

KOSPI 200 June Rebalancing: Nearly Finalized Results with 7 Adds/Deletes

By Sanghyun Park

AKM (1639 HK): Pre-Cons Fulfilled; Possible Early August Payment

By David Blennerhassett

  • Flexible printed board player AKM Industrial (1639 HK) has announced the pre-conditions attached to the Scheme have now been fulfilled.
  • The despatch of the Scheme Document has been delayed until the 10 June. 
  • Trading at a gross/annualised spread of 2.5/9.6%, including the FY21 final dividend, and payment in early August.

LG Energy Fails Inclusion in LIT’s April Rebalancing & Faces 3M Lockup Release (3.7x ADTV) Today

By Sanghyun Park

  • Solactive Global X Lithium (LIT) made an ordinary rebalancing announcement. LG Energy fails to join the Index this time. The inclusion seems to have been pushed back to October.
  • LG Energy’s short-term flow is likely to receive downward pressure from the 3M IPO lockups to be released today as it cannot expect additional passive inflows in the short term.
  • These are 1.87M shares (3.7x ADTV). As the share price is still up more than 40% from the IPO price, their profit realization incentives are expected to be quite strong.

Kakao Pay IPO Lock-Up – IPO Was Great, Performance Since Then Has Been Tepid

By Sumeet Singh

  • Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, raised US$1.3bn in its South Korean IPO in Nov 21. Its 6 month lock-up will expire soon.
  • The stock more than doubled on listing, providing one of the best first day returns in 2021. However, its performance since then hasn’t been all that great.
  • In this note, we will talk about the lock-up dynamics and updates since our last note.

Beijing Enterprises Urban Resources (3718 HK): Potential Offer

By David Blennerhassett

Before it’s here, it’s on Smartkarma

Learn More
Apr 26
0

Event-Driven: Japan Post Insurance, Razer Inc, Seven & I Holdings, SK Telecom, Guodian Technology & Environment Group, Chindata Group, Shinhan Financial, AKM Industrial, Turkiye Garanti Bankasi As, Grupo Financiero Banorte and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • TOPIX April Rebalance – Two Days To Go
  • Razer (1337 HK): Trading Wide Ahead Of Court Meeting
  • Seven & I Investor Activism Update
  • SK Telecom/KT Corp LONG SHORT on the MSCI SAIR Event
  • Guodian Tech (1296 HK): Done Deal As Pre-Cons Fulfilled
  • Chindata the Next Chinese ADR Privatisation Target?
  • FnGuide Top 10 (TIGER ETF) Rebalancing Preview: Shinhan Financial IN & Celltrion OUT
  • AKM Industrial’s Offer Risk/Reward – Pre-Condition Satisfied
  • BBVA/Garanti: Looking to Secure Acceptances with a 23% Increase
  • Banorte – Potential M&A Raises Questions on Dividend Prospects

TOPIX April Rebalance – Two Days To Go

By Travis Lundy

  • There are two days to go until the TOPIX April-end rebalance. 
  • On an average-weighted, sector-neutral basis, the “announcement to event” trade is -0.3% from 7 April to 25 April. The rest of the buy vs sell basket is doing worse.
  • There should be ¥740bn-ish to buy and sell (each) on Wednesday at the close. If you have trades to execute in Japan, the attached spreadsheet shows where there is opportunity.

Razer (1337 HK): Trading Wide Ahead Of Court Meeting

By David Blennerhassett

  • Razer Inc (1337 HK)‘s Court Meeting will be held tomorrow.
  • The highly anticipated abolishment of the headcount test will not become law ahead of the shareholder vote.
  • Trading at a gross spread of 8%, unchanged since the record date. That’s positive. Plus this Offer has proxy advisor support.

Seven & I Investor Activism Update

By Oshadhi Kumarasiri

  • Value Act’s investor activism campaign has already made more progress than any other investor activism campaign in the recent past.
  • There are many similarities between ValueAct’s transformation plan and Seven & I Holdings (3382 JP)‘s letter to its shareholders, one might think the letter could be minutes from a meeting.
  • Therefore, we see no reason to get frustrated over the lack of tangible developments, as the management is fully on board and things are moving on nicely behind the scenes.

SK Telecom/KT Corp LONG SHORT on the MSCI SAIR Event

By Sanghyun Park

  • The MSCI has shown a pattern of determining the addition/deletion of Korean stocks based on the first or second trading day during the 10-day review period.
  • SKT’s foreign room ratio exceeded 3.5% for these two trading days. On the other hand, KT’s foreign room was below 15% on the 18th and 19th.
  • MSCI flow seems to be the only factor that will affect these two companies in the short term, and the probability that SKT will outperform KT this week is high.

Guodian Tech (1296 HK): Done Deal As Pre-Cons Fulfilled

By David Blennerhassett

  • Guodian Technology & Environment Group (1296 HK)‘s (GTE) pre-cons are now fulfilled – bang in line with my timetable estimate.
  • The Composite Document should be despatched to the shareholders on or before 29 April 2022. 
  • Assuming all goes to plan – and there is every indication it will – payment under the Offer is expected around mid-June.

Chindata the Next Chinese ADR Privatisation Target?

By Arun George

  • A Bloomberg article claimed that Chindata Group (CD US) is attracting takeover interest from GDS Holdings (ADR) (GDS US), PAG and EdgeConneX. Shares rose 9.8% to close at $4.81.
  • Potential privatisation will require the blessing of Bain Capital, the largest shareholder. Chindata’s track record of beating guidance, modest leverage and the beaten-down rating make it a target. 
  • A forward EV/EBITDA multiple of 8.9x, in line with 21Vianet Group (VNET US)’s proposed acquisition multiple, would imply $6.85 per ADS. 

FnGuide Top 10 (TIGER ETF) Rebalancing Preview: Shinhan Financial IN & Celltrion OUT

By Sanghyun Park

  • The FnGuide Top 10 (TIGER ETF) currently has an AUM of ₩1.18T, and the next rebalancing will be on June 13, and the rebalancing trading on June 10.
  • If we perform the screening based on the current stock prices and the FnGuide-concluded index float rates, the possibility that Shinhan Financial will replace Celltrion is relatively high.
  • If Shinhan replaces Celltrion, the passive flow size seems more significant than the previous rebalancing. Shinhan will face a passive inflow of 1.17x ADTV, while Celltrion will face -0.61x ADTV.

AKM Industrial’s Offer Risk/Reward – Pre-Condition Satisfied

By Arun George

  • AKM Industrial (1639 HK)’s privatisation offer from Alpha Luck and AKM Meadville of HK$1.8345 consists of a base offer (HK$1.82) and a final dividend (HK1.45 cent).
  • The pre-condition was fulfilled on 22 April. The latest date for the despatch of the scheme document has been extended to 10 June. 
  • Shareholders with blocking stakes have previously provided irrevocables. At last close and for an early-August effective date, the gross and annualised spread to the offer is 3.1% and 10.7%, respectively.

BBVA/Garanti: Looking to Secure Acceptances with a 23% Increase

By Jesus Rodriguez Aguilar

  • BBVA sweetness the offer price for Garanti by 23% due to very low acceptances so far (the share price of Garanti has increased by 64% over the last six months).
  • The increased offer price should placate disgruntled shareholders, while at the same time saving BBVA €264 million (c. 12% less than originally forecasted) due to Turkish lira depreciation.
  • Gross spread is 0.2%, and the annualized return is 3.05% (assuming settlement on 19 May). Long GARAN IT.

Banorte – Potential M&A Raises Questions on Dividend Prospects

By Victor Galliano

  • Banorte delivered solid 1Q22 results; management is dangling the carrot of a multi-year shareholder dividend pay-out in 2022, implying a potential dividend yield of c7%
  • The potential catch is the real risk of Banorte acquiring the Citibanamex franchise, which could require capital and cash retention, thereby potentially curtailing the dividend prospects
  • In the event of Banorte acquiring Citibanamex, we believe that our calculations imply the likely risk of an equity cash call, which drives us to turn cautious on Banorte again

Before it’s here, it’s on Smartkarma

Learn More