Category

Event-Driven

Apr 15
0

Event-Driven: Toyo Construction, Twitter Inc, Excelpoint Technology, Lawson Inc, Uniti Group Ltd, Suchuang Gas Corp and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • ToyoKen (1890) Mystery Bidder Is Yamauchi No. 10 Family Office – And That Changes Things
  • Elon Musk Bids for All of Twitter 🤯
  • WT Micro’s Offer For Excelpoint Tech
  • Lawson Considering IPO for Seijo Ishii
  • Excelpoint’s Privatisation Offer from WT
  • Uniti Enters SID With Morrison/Brookfield
  • Uniti Enters a SID with Morrison/Brookfield Consortium at A$5.00 Per Share
  • Suchuang Gas (1430 HK): Pledges, Results Delays, And Ongoing Suspension

ToyoKen (1890) Mystery Bidder Is Yamauchi No. 10 Family Office – And That Changes Things

By Travis Lundy

  • A Nikkei article this morning says the mystery bidder behind WK1/2/3 Limited is Nintendo founding family’s Yamauchi No.10 Family Office. This changes things more than just knowing their identity does.
  • To start, their website is the most fun investment management company website I have come across. It’s great.  https://y-n10.com/. It’s also well worth reading. It’s also worth noting their history.
  • Understanding the parameters here is key to understanding possible next steps.

Elon Musk Bids for All of Twitter 🤯

By Travis Lundy

  • Elon Musk has apparently sent a letter to Bret Taylor, Chairman of the Board of Twitter, saying he would make a bid for 100% of Twitter at US$54.20/share. 
  • Get it? Get it? Nudge nudge wink wink. That’s all part of the fun for him. 
  • The question is whether this bid, which creates problems of whether one should take it seriously vs literally, or vice versa, engenders more discussion about how the platform makes money.

WT Micro’s Offer For Excelpoint Tech

By David Blennerhassett

  • WT Microelectronics (3036 TT) has entered into an agreement to acquire electronic component distributor  Excelpoint Technology (EXLP SP) by way of a Scheme at a cash consideration of S$1.93/share.
  • This is an Offer premium 7.8% to last close but a 21.4% premium prior to the announcement Excelpoint was in discussions with a third party involving the company’s shares.
  • Albert Phuay (founder and CEO) will reinvest part of his cash consideration under the Scheme in 20% equity of the Acquiring Entity, with the balance 80% stake owned by WT. 

Lawson Considering IPO for Seijo Ishii

By Michael Causton

  • Lawson Inc (2651 JP) acquired the upmarket supermarket operator, Seijo Ishii, in 2014 for ¥55 billion.
  • It is now considering plans for an IPO for Seijo next year following a boom in the company’s fortunes during the pandemic.
  • Net profit rose 13% last year and the potential for growth remains strong given the expansion of the wealth market in Japan. 

Excelpoint’s Privatisation Offer from WT

By Arun George

  • WT Microelectronics (3036 TT) will offer S$1.93 in cash and a final FY2021 dividend (ex-div date: 28 April, payment date: 13 May) of S$0.088 for a total consideration of S$2.018.
  • The key scheme conditions are shareholder approval and Court approval. The scheme meeting will be held sometime in late June to early July.
  • The offer price represents a 10-year share price high. At the last close of S$1.96, the gross and annualised spread for a mid-Sep effective date is 3.0% and 7.1%, respectively.

Uniti Enters SID With Morrison/Brookfield

By David Blennerhassett

  • Uniti Group Ltd (UWL AU) has now entered into a Scheme Implementation Deed (SID) with the Morrison/Brookfield Consortium.
  • The Offer price remains at A$5.00/share, in line with the revised proposal on the 29 March. 
  • Uniti’s Board of Directors unanimously recommends that Uniti shareholders vote in favour of the Scheme in the absence of a Superior Proposal. 

Uniti Enters a SID with Morrison/Brookfield Consortium at A$5.00 Per Share

By Arun George

  • Uniti Group Ltd (UWL AU) has entered a SID with the Morrison/Brookfield consortium at A$5.00 cash per share less dividends declared or paid after today. 
  • The key scheme conditions are shareholder approval, FIRB approval and Court approval. The scheme meeting will be held in July.
  • We think that the offer is attractive. At the last close price of A$4.96, the gross and annualised spread to a July-end effective date is 0.8% and 2.8%, respectively.

Suchuang Gas (1430 HK): Pledges, Results Delays, And Ongoing Suspension

By David Blennerhassett

  • Shortly after piped natural gas operator Suchuang Gas Corp (1430 HK) announced a privatisation Offer from CR Gas (1193 HK) last August, shares were suspended. And remain suspended today.
  • That suspension pivoted off previously unreleased information that certain bank deposits of Suchuang Gas’ subsidiaries had been pledged. 
  • An investigation remains ongoing. A material portion of those pledges have defaulted. Financial results have been delayed. However, the Offer appears to still be moving forward. 

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Apr 14
0

Event-Driven: Suzuki Motor, Emperador Inc, SK Innovation, SK Shieldus, EML Payments Limited, Dongwon Industries, Merchants Trust and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Suzuki’s NAV Discount And Implied Stub Plumb New Lows. Again
  • Emperador Secondary Listing: Borderline STI Inclusion
  • WISE Theme Indexes Rebalancing Today: Flow Projections as of Close on April 12
  • SK Shieldus IPO: Index Inclusion Timeline
  • EML Payments Flirtation with Bain Likely Not the Last
  • Dongwon Industries Merger: KOSPI 200 Flow Trading & Shorting Prospects on Cancellation
  • FTSE UK Index Series: Leaderboard for June 2022

Suzuki’s NAV Discount And Implied Stub Plumb New Lows. Again

By David Blennerhassett

  • Suzuki Motor (7269 JP)‘s implied stub and simple ratio (Suzuki/ Maruti Suzuki India (MSIL IN)) are currently at all-time lows.
  • This bifurcation has become endemic in the relative value space, especially in Japan. 
  • Maruti is trading rich amid its ongoing support for hybrid vehicles. That scenario won’t play out well. 

Emperador Secondary Listing: Borderline STI Inclusion

By Brian Freitas

WISE Theme Indexes Rebalancing Today: Flow Projections as of Close on April 12

By Sanghyun Park

  • Three WISE theme indexes undergo quarterly rebalancing today at the close.
  • The flow projections shown below in the DETAIL are based on the closing prices of April 12.
  • We have 13 Long/Short tradable names based on these flow projections: an ADTV of at least ₩10B & a passive flow impact of 0.10x ADTV or more

SK Shieldus IPO: Index Inclusion Timeline

By Brian Freitas

  • SK Shieldus (ABFHIZ KS) is looking to raise up to US$860m selling a mix of primary and secondary shares. The stock is expected to in the second half of May.
  • The company will be valued at US$2.87bn at the top end of the IPO range and will not get Fast Entry to any of the major indices.
  • Entry to the KOSPI2 INDEX is unlikely, MSCI inclusion could take place at the November SAIR, while FTSE inclusion could take place at the December QIR.

EML Payments Flirtation with Bain Likely Not the Last

By Arun George

Dongwon Industries Merger: KOSPI 200 Flow Trading & Shorting Prospects on Cancellation

By Sanghyun Park

  • Dongwon Industries merger will welcome 44.88M new shares, bumping up the total issued shares by 2.5 times.
  • So, we will likely see a passive inflow of 0.39x ADTV at the close on October 20, a level certainly worth our attention for flow trading.
  • However, a short position approach to betting on this possibility is expected to face quite a tight journey.

FTSE UK Index Series: Leaderboard for June 2022

By Janaghan Jeyakumar, CFA

  • The FTSE UK Index Series is a widely tracked family of sub-indices representing the  performance of the public equity markets in the UK. 
  • These indices are reviewed on a quarterly basis in March, June, September, and December. 
  • In this insight, we take a look at the potential constituency changes for FTSE 100 and FTSE 250 that happen between now and the completion of the June 2022 review.

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Apr 13
0

Event-Driven: JD.com Inc., Cloud Village, Tri Stage Inc, SK Telecom, Toyo Construction, 21Vianet Group, Zardoya Otis SA and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • JD.com (9618 HK): CCASS Share Increase Driver & Potential Prosus Selldown
  • JD.com’s Musical Shares – Less Than You Think
  • HK Connect: March ’22 Inclusion Post-Event Analysis
  • Tri-Stage (2178 JP) MBO by Bain – Another Lowball Takeover Likely To Get Done
  • KT Corp & SK Telecom: Potential Changes Driven by Foreign Buying
  • Toyo Construction (1890) – Mystery Holders Now 17% (Or More)
  • Hina/IBC’s Non-Binding Proposal For VNET
  • Otis/Zardoya Otis: Squeeze-Out

JD.com (9618 HK): CCASS Share Increase Driver & Potential Prosus Selldown

By Brian Freitas

  • There has been an increase of 700m shares held in HK CCASS for JD.com Inc. (9618 HK) on 11 April.
  • The largest part of 421.5m shares is likely the conversion of Class B to Class A shares following Richard Liu stepping down as CEO of the company.
  • The rest is unknown at this point but could be Prosus (PRX NA) moving their shares to HK to sell-down and use the cash to buy back their own stock.

JD.com’s Musical Shares – Less Than You Think

By Travis Lundy

  • Today, CCASS data showed that 700,000,047 Class A Shares of JD.com Inc. (9618 HK) popped into existence in CCASS (from outside of CCASS the day before). Poof!
  • They showed up in Deutsche Bank’s CCASS Participant account. Just like the 600,000,000 Class A Shares which popped in on 15 December 2021. 
  • There’s a thing here, and there are things going on in the background, but the things in the foreground are not as menacing as they appear. I explore and explain.

HK Connect: March ’22 Inclusion Post-Event Analysis

By Ke Yan, CFA, FRM

  • After one month from the March batch of Hong Kong Connect inclusion, we provide an analysis on the stock inclusion for 19 stocks. 
  • We analysed the inclusion by performance post announcement, performance post inclusion, inflows and analyst coverage.
  • We observed outperformance post the HSCI announcement but not the actual inclusion despite the fact that southbound inflows has a significant impact on the trading volume. 

Tri-Stage (2178 JP) MBO by Bain – Another Lowball Takeover Likely To Get Done

By Travis Lundy

  • Bain is getting the major execs to tender, and rolling Sojitz Corp (2768 JP)‘s 23% into the post-Tender EGM vote. That gets them to 57+%. No majority of minority here. 
  • But the equity check appears to be about 0.06x revenue, 4-5x PER, and takeover price EV at 4+ish years of forecast EBITDA. It’s a good rollup for its ads business.
  • Too cheap, but not much you can do about it. Foreigners and financial holders own less than 0.5% of shares out. 

KT Corp & SK Telecom: Potential Changes Driven by Foreign Buying

By Brian Freitas

  • Foreign investors have continued to buy Korea telecom companies. The buying has pushed the foreign room lower. This will have implications for the stocks in MSCI and FTSE indices.
  • KT Corp (030200 KS)‘s foreign room has dropped below 15% and this could lead to the stock not being added to the MSCI Korea Index at the May SAIR. 
  • SK Telecom (017670 KS)‘s foreign room has dropped significantly and further buying over the next week could see the stock deleted from the MSCI Korea Index at the May SAIR. 

Toyo Construction (1890) – Mystery Holders Now 17% (Or More)

By Travis Lundy

  • WK 1-3 Limited are now (as of a week ago) 17.34% of Toyo Construction’s share register. They bought 40+% of volume in the relevant period, as I suggested they might.
  • On a realtime basis, they could be 20+%, but because no single entity is there they would not become top shareholder as a triumvirate.
  • I offer consolidated thoughts and like the idea of buying the dip.

Hina/IBC’s Non-Binding Proposal For VNET

By David Blennerhassett

  • Chinese Internet data center services provider 21Vianet Group (VNET US) has recently received a non-binding proposal letter from the Hina Group and Shanghai’s Industrial Bank Co. 
  • The indicative Offer price is US$8.00/ADS, or ~US$1.3333 per ordinary share.
  • The Offer Price is utterly underwhelming. A successful outcome will more than likely find its way to the Cayman Court.

Otis/Zardoya Otis: Squeeze-Out

By Jesus Rodriguez Aguilar

  • Otis Worldwide Corp (OTIS US) increases its stake in Zardoya Otis SA (ZOT SM) to 95.51% after the takeover bid. The settlement date is 12 April.
  • Otis has decided to proceed with the squeeze-out. Next 3 May will be the date.
  • The outcome is in line with expectations and my recommendation to tender. Gross spread is 0.43%, and 6.31% is the estimated annualised return (assuming settlement on 6 May).

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Apr 12
0

Event-Driven: Greatview Aseptic Packaging, KT Corp, Japan Post Insurance, CNOOC Ltd, NTT (Nippon Telegraph & Telephone), Yangzijiang Shipbuilding, 21Vianet Group, Danal Co Ltd, Virtus Health, Kohnan Shoji and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Greatview (468 HK): A Packing Case Pick
  • MSCI Korea Rebalancing: Cautions with KT & Hyundai Heavy Industries
  • Topix FFW Transition – Insurance Sector a Big Net Sell
  • CNOOC RMB Share Prices at Small Premium (But CNOOC Still Cheap To Peers)
  • Strong Telecom Flows in TOPIX FFW Transition Months
  • Yangzijiang (YZJSGD SP) Spin-Off: Index Treatment
  • VNET’s Languishing Shares Draws an Opportunistic $8.00 Bid
  • KOSDAQ 150 Rebalancing in June: Safely Tradable Names for Position Buildups at This Point
  • The Panel Joins CapVest In Virtus’ Corner
  • Kohnan Shoji (7516) Buyback – Shareholder Return? Activist Defense? Future MBO? All of the Above?

Greatview (468 HK): A Packing Case Pick

By David Blennerhassett

  • Earlier this year, Jardine Matheson Holdings (JM SP) was understood to be exploring the sale of its 28% stake in Greatview Aseptic Packaging (468 HK).
  • GA Pack announced its full-year results late last month and for the first time since 2012, opted not to pay a final dividend.
  • Shares are down 20% since that non-dividend announcement. That’s convenient.

MSCI Korea Rebalancing: Cautions with KT & Hyundai Heavy Industries

By Sanghyun Park

  • KT’s inclusion possibility is still high, but if the foreign ownership continues to increase at the current rate until April end, there is a possibility that the inclusion will fail.
  • Suppose HHI faces a little over a 10% price correction. In that case, its market cap will fall below ₩10T, and it will stand on the screening borderline.
  • We need to consider closing our LONG positions for these two earlier.

Topix FFW Transition – Insurance Sector a Big Net Sell

By Travis Lundy

  • The TOPIX Insurance Sector sees the worst net flows as a percentage of index weight among the 33 sectors in the April-June FFW Transition.
  • On a net basis, rebalance flows favour Japan Post Insurance (7181 JP) vs T&D Holdings (8795 JP) (finishing a buyback) and Dai Ichi Life Insurance (8750 JP) (just finished).
  • JPI has underperformed both over the last three years despite growing BVPS by more. And earnings should be a blowout. 

CNOOC RMB Share Prices at Small Premium (But CNOOC Still Cheap To Peers)

By Travis Lundy

  • CNOOC’s RMB Issue of 2.6bn Shares (about US$5bn with over-allotment) was priced at a 14.2% premium to Friday’s close. Not Great Bob.
  • But 31 March indications of Q1 results, and the promises of an H-share buyback noted in the Annual Results a day earlier are worthwhile noting.
  • CNOOC continues to trail Global Peers in Price and Forward EBIT multiple since the Executive Order 13959 dampened share demand and booted it from global indices. It’s still cheap though.

Strong Telecom Flows in TOPIX FFW Transition Months

By Travis Lundy

  • The April-June TSE FFW Methodology Revision moves favour certain sectors over others. There is nearly ¥500bn of telecom stocks to buy with 60+% of that in four names.
  • Other factors may support some of the names as well. 
  • There is enough excess buying to warrant trading tilts and keeping fundamental positions even as forward earnings multiples have expanded to multi-year highs.

Yangzijiang (YZJSGD SP) Spin-Off: Index Treatment

By Brian Freitas

VNET’s Languishing Shares Draws an Opportunistic $8.00 Bid

By Arun George

  • VNET, formerly known as 21Vianet Group (VNET US), is a leading carrier and cloud-neutral data centre services provider in China. 
  • It has received a non-binding privatisation proposal from The Hina Group and Industrial Bank Co Ltd A (601166 CH) at $8.00 per ADS, a 48.1% premium to the undisturbed price. 
  • The Board has not made any decisions on the offer. Despite the juicy premium, the offer is unattractive in the context of historical multiples and share prices.    

KOSDAQ 150 Rebalancing in June: Safely Tradable Names for Position Buildups at This Point

By Sanghyun Park

  • Here are the tradable stocks for Long/Short position buildups for the KOSDAQ 150 rebalancing in June.
  • LONG (Additions): Dear U (376300 KS), Vidente (121800 KS), GOLFZON (215000 KS), Hana Micron (067310 KS), Danal (064260 KS), & Intellian Technologies (189300 KS)
  • SHORT (Deletions): Daea Ti (045390 KS), Advanced Process Systems (265520 KS), Unison (018000 KS), Danawa (119860 KS), OE Solutions (138080 KS), & Toptec (108230 KS)

The Panel Joins CapVest In Virtus’ Corner

By David Blennerhassett

  • CapVest has bumped its Scheme Offer for Virtus Health (VRT AU) to A$8.15/share. More importantly, it has increased the Takeover Offer price to A$8.10/share.
  • Separately, the Takeovers Panel has made interim orders prohibiting BGH from acquiring on market any Virtus shares above its Bid Price.
  • Virtus’s Board has unanimously determined that CapVest’s revised Offer is superior to BGH’s Bid. 

Kohnan Shoji (7516) Buyback – Shareholder Return? Activist Defense? Future MBO? All of the Above?

By Travis Lundy

  • Yesterday after the close, 500+ store home centre operator Kohnan Shoji (7516 JP) announced full-year earnings (revs -0.2%, OP -16.6%, NP -16.4%yoy) and a buyback. 
  • The buyback is for up to 1.2mm shares and up to ¥4bn to spend from here to end Sep 2022.
  • The shareholder register is interesting, diverse, and makes one wonder whether the buyback is to soften the blow of lower income, defence against an activist, or something else.

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Apr 11
0

Event-Driven: NTT (Nippon Telegraph & Telephone), GoTo, Emtek, Tabcorp Ltd, Razer Inc and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • TOPIX FFW Transition – Big Flows from April to June
  • GoTo Gojek Tokopedia IPO: Potential LQ45, IDX30, IDX80 Index Fast Entry & Impact
  • MSCI May 2022 Index Rebalance Preview: Last Week Before the Start of the Review Period
  • Tabcorp’s Valuation Discovery into the Demerger
  • Merger Arb Mondays – Yashili, Pendal, Sezzle, Razer, Link Admin, Uniti, AKM, Guodian, Crown Resorts

TOPIX FFW Transition – Big Flows from April to June

By Brian Freitas

  • On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.
  • From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.
  • Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.

GoTo Gojek Tokopedia IPO: Potential LQ45, IDX30, IDX80 Index Fast Entry & Impact

By Brian Freitas

  • GoTo (GOTO IJ) lists on the IDX tomorrow. The IDX has GoTo (GOTO IJ)‘s free float at 66% which would mean IDX30, LQ45 and IDX80 Fast Entry index inclusion. 
  • If included in the indices at a free float of 66%, GoTo (GOTO IJ) will have a weight of 13.55% in the IDX30 Index and 12.12% in the LQ45 Index.
  • Passive trackers will then need to buy 13.2% of the real float on the stock. Active funds will also buy the stock as it would appear in their benchmarks.

MSCI May 2022 Index Rebalance Preview: Last Week Before the Start of the Review Period

By Brian Freitas

Tabcorp’s Valuation Discovery into the Demerger

By Arun George

  • Tabcorp Ltd (TAH AU)’s demerger will create two standalone companies listed on the ASX – The Lottery Corporation and New Tabcorp
  • The scheme meeting to approve the demerger will be held on 12 May at 10.00 am. The Lottery Corporation will trade on a normal settlement basis on 2 June.
  • This transaction aims to unlock value. Our SoTP valuation is A$6.13 per share, which is a 14% upside to the last close price of A$5.39 per share.

Merger Arb Mondays – Yashili, Pendal, Sezzle, Razer, Link Admin, Uniti, AKM, Guodian, Crown Resorts

By Arun George

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Apr 10
0

Event-Driven: NTT (Nippon Telegraph & Telephone), Tencent, Toshiba Corp, HDFC Limited and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • The BIGLY TOPIX April 2022 Rebalance – $20bn One-Way Split Over 3 Months
  • Index Rebalance & ETF Flow Recap: HSI, HSCEI, HSTECH, MSCI, ASX200, CSI300, HDFC/HDFCB, PPT/PDL
  • Last Week in Event SPACE: Toshiba, Pendal, HDFC Bank, YZJ Shipbuilding, BHP, Virtus
  • Asia-Pac Weekly Risk Arb Wrap: HDFC Bank/Limited Merger, Pendal, Jin Jiang Capital, Western Areas

The BIGLY TOPIX April 2022 Rebalance – $20bn One-Way Split Over 3 Months

By Travis Lundy

  • The TSE launched its new cash equity market structure earlier this week. The TOPIX Index changes include a one-off FFW Methodology Review, where results were announced today. 
  • The changes announced today go part-way to fixing float issues, but there will be follow-on changes in October, and one should expect companies to react with share cancellations.
  • The big gainer in this TOPIX rebal is NTT (Nippon Telegraph & Telephone) (9432 JP). There are a fair number of “losers.” The 3-month total trade is about ¥2.3trln one-way.

Index Rebalance & ETF Flow Recap: HSI, HSCEI, HSTECH, MSCI, ASX200, CSI300, HDFC/HDFCB, PPT/PDL

By Brian Freitas

Last Week in Event SPACE: Toshiba, Pendal, HDFC Bank, YZJ Shipbuilding, BHP, Virtus

By David Blennerhassett

  • #2 shareholder and erstwhile activist 3D Investment Partners writes a letter to Toshiba Corp (6502 JP)‘s Board demanding 3 measures before the AGM. 
  • Pendal Group (PDL AU) is assessing Perpetual’s cash/scrip Offer provides an indicative price of $6.23/share; however, the wording in the announcement suggests the bid is opportunistic and will be rejected. 
  • Because of rising regulatory requirements for NBFCs, a HDFC Bank (HDFCB IN) /HDFC Limited (HDFC IN) was to be expected at some point.

Asia-Pac Weekly Risk Arb Wrap: HDFC Bank/Limited Merger, Pendal, Jin Jiang Capital, Western Areas

By David Blennerhassett

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Apr 09
0

Event-Driven: F&F, Bewith, Woodside Petroleum, Ecopro BM Co Ltd, KT Corp, Banco BPM SpA, Atlantia SpA and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • KOSPI 200 Rebalancing D-60: Names for Position Buildups
  • TOPIX Inclusion: Bewith (9216 JP)
  • Woodside / BHP Petroleum Merger On Tap; Index Impact Minimal but Flowback May Not Be
  • Ecopro BM Offering: Deal Summary & Trading Dynamics
  • MSCI Korea: Potential Inclusions & Exclusions in May 2022 Highlighted by Locals
  • Banco BPM: Credit Agricole Makes Its Move
  • Atlantia in Play?

KOSPI 200 Rebalancing D-60: Names for Position Buildups

By Sanghyun Park

  • Since we are currently at a point of two months toward the KOSPI 200 rebalancing, we should start building up positions on stocks with a higher probability among the candidates.
  • Six additions for position buildups: F&F (383220 KS), Meritz Fire (000060 KS), SD Biosensor (137310 KS), Iljin Hysolus (271940 KS), Hanil Cement (300720 KS), & K Car (381970 KS)
  • Six deletions for position buildups: Nexen Tire (002350 KS), Cuckoo Holdings (192400 KS), S&T Motiv (064960 KS), Sk Discovery (006120 KS), Bukwang Pharmaceutical (003000 KS), & Poongsan Corp (103140 KS)

TOPIX Inclusion: Bewith (9216 JP)

By Janaghan Jeyakumar, CFA

  • Japan-Based BPO company Bewith (9216 JP) was listed in the First Section (now known as the “Prime” Market) of the Tokyo Stock Exchange (TSE) on 2nd March 2022.
  • When a company gets listed in the TSE First Section, it subsequently gets included in the TOPIX Index requiring TOPIX-tracking funds to purchase the stock during an Inclusion Event.
  • Usually, this presents interesting trading opportunities to generate sharp market-neutral returns in the space of few trading days. Below is a look at the details for Bewith’s Inclusion Event.

Woodside / BHP Petroleum Merger On Tap; Index Impact Minimal but Flowback May Not Be

By Travis Lundy

Ecopro BM Offering: Deal Summary & Trading Dynamics

By Sanghyun Park

  • Ecopro BM announced a ₩0.5T rights offer: 1.6M new ordinary shares at a preliminary offering price of ₩310,300. In addition, there will also be a 1-to-3 bonus share issuance.
  • In outright Long trading aiming for a 20% discount, one thing to keep in mind is bonus issues. Post-bonus issue price correction will likely be more substantial this time.
  • We should aim at outright shorting as moving into the bonus issue ex-rights date while watching Ecopro’s share price upward trend and volatility during this event.

MSCI Korea: Potential Inclusions & Exclusions in May 2022 Highlighted by Locals

By Douglas Kim

  • Hyundai Heavy Industries and KT Corp are two stocks in Korea that are most heavily emphasized as potential inclusion candidates in the MSCI rebalance in May by the local media. 
  • Greater volatility on these names is likely as we get closer to the MSCI rebalance and there could be reduced outperformance on these names as we approach 13 May. 
  • Stocks that are expected to be excluded in the MSCI Korea index including Green Cross Corp, Alteogen, and SK Chemicals have experienced sharp decline in their prices in recent months.

Banco BPM: Credit Agricole Makes Its Move

By Victor Galliano

  • Credit Agricole has acquired a 9.18% stake in Banco BPM, sparking takeover bid speculation; Italy is Credit Agricole’s biggest banking market ex-France, where it has been very active on M&A
  • For Credit Agricole, in our view, Banco BPM’s strong Northern Italian footprint, its cleaner and stronger balance sheet and its asset management arm are all big attractions for this asset
  • We remain positive on Banco BPM, one of our 2022 High Conviction Ideas; not only a modestly valued potential M&A target, but its valuations are also underpinned by improving fundamentals

Atlantia in Play?

By Jesus Rodriguez Aguilar

  • GIP/Brookfield/ACS weigh launching a €15 billion unsolicited offer for Atlantia. Blackstone may partner with the Benettons to acquire Atlantia at €24/share (26% premium ). Italian Government’s role will be key.
  • Atlantia trades at higher multiples than ACS (EV/22e EBITDA: 12.8x vs 3.2x, Capital IQ consensus). A hypothetical ACS/Abertis would become a world leader in infrastructure, but leverage is key. 
  • The opposition of Edizione makes the operation difficult/more expensive. A joint-bid Edizione/Blackstone, would force the GIP-led group to present an improved offer. Nearly 50% of Atlantia’s NAV is cash.

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Apr 08
0

Event-Driven: Tencent, HomeCo Daily Needs REIT, Yangzijiang Shipbuilding, Nikon Corp, Virtus Health, Mirae Asset Tiger Tour Leisure ETF, Mirae Asset TIGER Secondary Cell ETF, Mirae Asset Tiger Media Contents ETF, Dongwon Industries and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • MSCI May Index Rebalance Preview: Potential FIF Changes & Impact
  • ASX200 Index Rebalance: HomeCo Daily Needs REIT (HDN) Replaces CIMIC; More Changes in May & June
  • Yangzijiang: Proposed Spin-Off of YZJFH to Unlock Value
  • BIG Nikon (7731) Buyback – OK But Should Do Better
  • Virtus: BGH’s Less Than Friendly Offer
  • WISE Tour Leisure Rebalancing (TIGER ETF): Long/Short Tradable Names
  • WISE Secondary Cell Rebalancing (TIGER ETF): Long/Short Tradable Names
  • WISE Media Contents Rebalancing (TIGER ETF): Long/Short Tradable Names
  • HomeCo Daily Needs Moves to ASX200 (CIMIC Out)
  • Merger of Dongwon Industries & Dongwon Enterprise

MSCI May Index Rebalance Preview: Potential FIF Changes & Impact

By Brian Freitas

  • MSCI comprehensively evaluates the free float for stocks at the May SAIR. The changes will be announced on 12 May and implemented at the close on 31 May.
  • We expect an increase in the FIF for some stocks. Largest inflows are expected on Tencent (700 HK), Kuaishou Technology (1024 HK), JD Health (6618 HK) and KakaoBank (323410 KS). 
  • There is reasonably large short interest on some of the stocks and there could be some short covering on stocks where there could be large passive inflows.

ASX200 Index Rebalance: HomeCo Daily Needs REIT (HDN) Replaces CIMIC; More Changes in May & June

By Brian Freitas

  • HomeCo Daily Needs REIT (HDN AU) will replace CIMIC Group Ltd (CIM AU) in the S&P/ASX 200 (AS51 INDEX) at the close of trading on 11 April.
  • The change has come earlier than expected as Hochtief hold nearly 90% of CIMIC. Positioning on HDN could be light- the stock could rally over the next couple of days.
  • There could be another ad hoc change prior to the June rebalance and then there will be more changes at the regular rebalance in June.

Yangzijiang: Proposed Spin-Off of YZJFH to Unlock Value

By Arun George

  • Yangzijiang Shipbuilding (YZJSGD SP) aims to spin off Yangzijiang Financial Holdings (YZJFH) through a dividend-in-specie of all the issued YZJFH shares to shareholders on a one-on-one basis.
  • YZJFH shares will be listed on the SGX-ST by way of an introduction. The EGM to approve the spin-off will be held on 18 April at 4 pm.
  • This transaction will unlock value. Our SoTP valuation is S$1.94 per share, which is a 22% upside to the last close price of S$1.59 per share.

BIG Nikon (7731) Buyback – OK But Should Do Better

By Travis Lundy

  • Nikon Corp (7731 JP) today announced a Very Large Buyback. This is the third buyback it has announced since spring 2019. The first was short. The next two big.
  • The company also announced a new Medium-Term Management Plan for FY2022-2025 today in which they reiterated their existing Shareholder Return Policy of 40+% payout of stable dividends and opportunistic buybacks. 
  • It’s a decent div, and the buyback is for 6-7% of shares out, but it could do better. The company is hugely cash- and securities holdings-rich. It should do better.

Virtus: BGH’s Less Than Friendly Offer

By David Blennerhassett

  • Fertility specialist Virtus Health (VRT AU) has received a revised unconditional Offer from local Aussie PE outfit BGH which just eclipses CapVest’s Offer.
  • BGH’s $8.00/share Offer is A$0.02/share above CapVest’s takeover A$7.98/share offer – the one with a minimum acceptance condition of 50% – now the A$0.12/share dividend has gone ex.
  • CapVest still has the superior A$8.13/share Scheme Offer on the table, yet BGH’s 20% stake suggests the outcome for such an Offer is no certainty. CapVest does have matching rights. 

WISE Tour Leisure Rebalancing (TIGER ETF): Long/Short Tradable Names

By Sanghyun Park

  • Next Thursday, the rebalancing trading of the WISE Secondary Cell Index will occur. The current AUM is ₩0.24T, and the AUM has slightly increased in the last two weeks.
  • Five names (2 Longs & 3 Shorts) are screened: Hana Tour Service, Lotte Tour Development, Asiana Airlines, Paradise Co Ltd, & Hanjin KAL Corp.
  • All the short targets are available for short-selling. The Long targets have also not seen much volatility recently, so it looks fine to put them all in a Long/Short basket.

WISE Secondary Cell Rebalancing (TIGER ETF): Long/Short Tradable Names

By Sanghyun Park

  • Next Thursday, the rebalancing trading of the WISE Secondary Cell Index will occur. The current AUM is ₩1.26T, and the AUM has slightly increased in the last two weeks.
  • Six names (2 Longs & 4 Shorts) are screened: SK Innovation, LG Energy Solution, Posco Chemical, SKC Co Ltd, Iljin Materials, & Solus Advanced Materials. 
  • Considering the 20-day price returns, long/short basket trading seems valid as the long targets have relatively outperformed. However, since Solus Advanced Materials is short-restricted, we need to exclude it.

WISE Media Contents Rebalancing (TIGER ETF): Long/Short Tradable Names

By Sanghyun Park

  • Next Thursday, the rebalancing trading of the WISE Secondary Cell Index will occur. The current AUM is ₩0.15T, and the AUM has increased a bit in the last two weeks.
  • Four names (2 Longs & 2 Shorts) are screened as follows: CJ ENM, Dear U, JYP Entertainment, & Jcontentree Corp.
  • We should consider putting only JYP Ent in the Short basket. On the other hand, it seems okay to put CJ ENM and Dear U together in the Long basket.

HomeCo Daily Needs Moves to ASX200 (CIMIC Out)

By Travis Lundy

Merger of Dongwon Industries & Dongwon Enterprise

By Douglas Kim

  • Dongwon Industries (006040 KS) plans to merge with Dongwon Enterprise, paving the way for the latter company to complete a back door public listing.
  • We believe this merger between Dongwon Industries and Dongwon Enterprise will have a positive impact on Dongwon Industries.
  • Once the merger is completed, there could be less pressure “to keep the share price of Dongwon Industries intentionally low” in order have more beneficial merger ratio with Dongwon Enteprise. 

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Apr 07
0

Event-Driven: Air New Zealand, Toshiba Corp, Orient Overseas International, Yangzijiang Shipbuilding, First Pacific Co, Virtus Health, Aareal Bank AG, Siemens Energy AG and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Air New Zealand’s Rights Offering – Take Advantage Of the Arb
  • Toshiba (6502) – 3D Writes Another Letter
  • HSI Index Rebalance Preview: Will The Pace of Inclusions Pick Up?
  • Yangzijiang Shipbuilding: Get Involved
  • Toshiba – 3D At It Again
  • First Pac (142 HK): Perennially Inexpensive
  • BGH Returns with an A$8.00 Off-Market Takeover Bid for Virtus
  • Advent & CenterBridge/​Aareal: Getting the Holdouts on Board
  • DAX Index: Quiddity Leaderboard for June 2022

Air New Zealand’s Rights Offering – Take Advantage Of the Arb

By Travis Lundy

  • Air New Zealand (AIR NZ) is the latest airline do a Covid Recapitalisation with a “heavy rights issue” where 
  • The dynamics will likely play out somewhat similarly to the way Singapore Air’s did. The initial squeeze and first leg down have. 
  • But that means LOTS of opportunity here for long only, passive, and arbitrageurs alike.

Toshiba (6502) – 3D Writes Another Letter

By Travis Lundy

  • On 24 March, the EGM defeated both company and 3D Investment proposals. That night, a leak in the Nikkei said the company would pursue privatisation measures. Supply side interest. Check. 
  • That same day, Bain signed a “Confirmation Agreement” with lead Toshiba shareholder Effissimo would tender into a Bain Tender Offer. Demand Side interest confirmed. Check. 
  • Now we have a 3D public letter to the Board demanding 3 measures before the AGM. 

HSI Index Rebalance Preview: Will The Pace of Inclusions Pick Up?

By Brian Freitas

  • Current at 66 constituents, we expect to reach 80 HSI INDEX constituents by the end of the year before moving higher towards 100 index members in 2023.
  • We list 10 stocks that could be added to the index in June – with one-way turnover close to 6%, the actual number of inclusions will be lower.
  • We also list out another 8 stocks that could possibly be added in June, though the probability of a September/ December inclusion is higher.

Yangzijiang Shipbuilding: Get Involved

By David Blennerhassett

  • Yangzijiang Shipbuilding (YZJSGD SP)‘s EGM will be held on 18 April to vote on the proposed spin-off and listing of the company’s investment segment, YZJ Financial Holdings Ltd (YZJFH).
  • This spin-off involves an in-specie distribution of YSJFH, with a possible listing by month-end.
  • YZJ’s shares have had a solid run since the initial restructuring announcement last November. There looks to be still more juice left in the trade. 

Toshiba – 3D At It Again

By Mio Kato

  • 3D Investment Partners has sent another open letter to Toshiba’s Board of Directors once again pushing for privatisation options. 
  • Once again, the fund’s claims and demands come across as rather shrill and potentially desperate. 
  • 3D’s behaviour is a stark contrast with other activists who have been quieter and more skilful and could be the biggest risk to Toshiba in our view.

First Pac (142 HK): Perennially Inexpensive

By David Blennerhassett

  • Last week First Pacific Co (142 HK) announced a 33% increase in recurring profit to a record high.
  • The full-year distribution up to 19.0 HK cents/share backs out a yield of 6.3%.
  • The current discount to NAV of 56% compares with a 12-month average of 59%, and a long-term average of 50%.

BGH Returns with an A$8.00 Off-Market Takeover Bid for Virtus

By Arun George

  • BGH announced an unconditional off-market takeover offer at A$8.00 cash per share along with intention for on-market purchases equal to, below, or higher than the offer price.
  • CapVest’s scheme transaction while superior has virtually no chance of getting up. CapVest’s off-market transaction is less appealing due to the uncertain outcome of the ATO ruling.
  • The last close price of A$8.15 is higher than both BGH and CapVest’s off-market offers which suggest both would need to raise their bid.  

Advent & CenterBridge/​Aareal: Getting the Holdouts on Board

By Jesus Rodriguez Aguilar

  • The consortium sees value in Aareal, as it intends to come back with a renewed €33/share offer, while getting the main holdouts on board after securing 37% of voting rights. 
  • Aareal’s Board will nod again, and BaFin should green light the new offer (6.5% increase). Acceptances needed would be 36.5% of the float. The offer would more palatable.
  • My SOTP valuation ranges from €36.8 – €39.67share. Gross spread (5 April) is 1.58%, 5.14% annualised assuming settlement by 30 July (it could be earlier). Long ARL GR.

DAX Index: Quiddity Leaderboard for June 2022

By Janaghan Jeyakumar, CFA

  • DAX is a German blue-chip index that tracks the 40 largest companies listed on the Regulated Market of the Frankfurt Stock Exchange. 
  • The DAX Index is reviewed on a quarterly basis in March, June, September, and December. 
  • In this insight, we take a look at the potential constituency changes that can happen in the June 2022 review.

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Apr 06
0

Event-Driven: Money Forward, Hyundai Heavy Industries, Cosmo Energy Holdings, Whitehaven Coal, Baidu, Yanzhou Coal Mining, DGO Gold Ltd, Beenos Inc, Hibernia Reit and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • The TOPIX Liquidity Factor Adjustment – Still a Trade To Do
  • MSCI Korea May SAIR Screening Status: 2 Certain Adds, 3 Delete Candidates, & 1 Tricky
  • Activist Murakami-San Goes Substantial on Cosmo Oil (5021)
  • S&P/​​​ASX Indices: Quiddity Leaderboard for June 2022 Rebalance
  • MSCI May Index Rebalance Preview: Potential Listing Switches & Implications
  • CSI300 Index Rebalance Preview (June): Maxing Out the 30 Changes
  • DGO Recommends Gold Road’s Firm Offer
  • GoTo May Not Be So Expensive, If You Own It Through Beenos
  • Brookfield/Hibernia REIT: Agreed Fair Offer

The TOPIX Liquidity Factor Adjustment – Still a Trade To Do

By Travis Lundy

  • Every year in April there are two TOPIX rebalance changes – the FFW review for July-September FY-end companies, and the annual liquidity factor adjustments.
  • This year, the former is replaced by the TOPIX FFW Methodology Change for the new Market Structure. This is a big change, but it will not necessarily overwhelm the latter.
  • Janaghan Jeyakumar, CFA‘s piece of 5 weeks ago discussing the Liquidity Factor basket has seen generally good performance. There are two days to go. 

MSCI Korea May SAIR Screening Status: 2 Certain Adds, 3 Delete Candidates, & 1 Tricky

By Sanghyun Park

  • Although this is a semi-annual IR, the number of additions won’t be large. At this point, only Hyundai Heavy Industries (329180 KS) and KT Corp (030200 KS) are screened.
  • None of the exclusion candidates are below the lower buffer at this point. So, those with the lowest market caps during the review period will be excluded from the Index.
  • Based on the current share prices, the following three existing constituents have the smallest market cap: Green Cross (006280 KS), Alteogen Inc (196170 KS), and SK Chemicals Co (285130 KS).

Activist Murakami-San Goes Substantial on Cosmo Oil (5021)

By Travis Lundy

  • Four weeks ago, the sovereign wealth fund of the UAE sold out of a 15% position in Cosmo Energy Holdings (5021 JP) they’d held for 15yrs. 
  • Today we see noted Japanese activist Murakami Yoshiaki and affiliates have purchased 5+% of the company, including a large chunk the day after the block trade.
  • Oftentimes he buys stakes in industries where consolidation is overdue and/or natural. Construction has been one such sector. Refiners probably need consolidation too, but it’s not clear it’s easy here.

S&P/​​​ASX Indices: Quiddity Leaderboard for June 2022 Rebalance

By Janaghan Jeyakumar, CFA

  • The S&P/ASX Index family is a widely-tracked group of indices and sub-indices which represent the performance of ASX-listed companies. 
  • In June 2022, Index rebalance events will take place for the S&P/ASX capitalization-weighted indices including ASX 200, ASX 100, ASX 50, and ASX 20.
  • In this insight, we take a look at the leading candidates who could become Adds/Deletes during the June 2022 Rebalance and other potential irregular changes.

MSCI May Index Rebalance Preview: Potential Listing Switches & Implications

By Brian Freitas

CSI300 Index Rebalance Preview (June): Maxing Out the 30 Changes

By Brian Freitas

  • With a few weeks to the end of the review period, we see 30 potential changes (the maximum allowed at a review) to the index in June.
  • Most of the changes are high probability ones. We estimate a one-way turnover of 4.48% at the June rebalance leading to a one-way trade of CNY 7.86bn.
  • The potential inclusions have outperformed the potential deletions over the last couple of months. There could be more to go here as positions are built in the next few weeks.

DGO Recommends Gold Road’s Firm Offer

By David Blennerhassett

  • DGO Gold Ltd (DGO AU)‘s board has recommended Gold Road Resources (GOR AU)‘s all-scrip off-market Offer.
  • The indicative Ofer price is a 28% premium to last close. A key condition is  80% minimum acceptance by DGO shareholders. 
  • A successful Offer would give the Gruyere gold mine owner a foothold in De Grey Mining (DEG AU)‘s world-class Hemi Gold Discovery.

GoTo May Not Be So Expensive, If You Own It Through Beenos

By Oshadhi Kumarasiri

  • Beenos Inc (3328 JP) is a relatively small cross-border e-commerce and internet company from Japan with a consolidated GMV of ¥64.7bn last year.
  • The company also runs an incubator platform to create new businesses and invest in start-ups mainly in emerging regions such as India and South-East Asia.
  • Down below, we analyse the impact on Beenos’ valuation following GOTO’s impending IPO of which Beenos owns 0.5%.

Brookfield/Hibernia REIT: Agreed Fair Offer

By Jesus Rodriguez Aguilar

  • Brookfield has agreed to acquire (scheme of arrangement) underperforming Hibernia REIT at €1.60 + €0.034 dividend, a 35.6% premium and 5.7% discount to EPRA NTA (above other recent deals in the sector).
  • Hibernia’s shares are trading at 0.92x BVPS; the offer represents a premium to peers both on trailing and forward 12-month EV/revenue. Capital IQ consensus expects little improvement in EPS growth.
  • Consideration looks fair and terms are final (except in case of competing offers). Gross spread is 1.22%, 6.54% annualised (assuming settlement on 15 June). Long HBRN ID.

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