Event-Driven

A Nikkei article overnight displays the first buds of “spring” around Toshiba management’s tilt towards trying to get shareholders what they want after the Separation Plan failed at the EGM.
The article doesn’t say much, but it is a sign the Toshiba Board are not “lying flat.”
However it doesn’t mean a deal is coming much less anywhere near doable. This is a long road. But it encourages more proactive portfolio resconstruction.

AKM (1639 HK): Timeline Clarified As Pre-Conditions Nearly Fulfilled

Flexible printed board player AKM Industrial (1639 HK) has announced the approvals for the pre-conditions attached to the Scheme are in the final stages.
Separately, the Court date for sanctioning the Scheme has been listed for the 19 July.
Trading at a gross spread to terms of 3.6%, including the final dividend.

Olam Unlocks Value Through the Sale of 35.4% of Olam Agri to SALIC

By Oshadhi Kumarasiri

Olam Group (OLG SP) issued an update regarding its reorganization process today to announce the sale of a 35.4% stake in Olam Agri to the Saudi Agricultural and Livestock Investment Company.
The transaction assigns a valuation (equity) of S$4.7bn for the Olam Agri-Business, which is around 69% of Olam Group’s current market cap.
This is almost 2.0x the implied equity value of the Olam Agri-Business at the current share price of Olam Group, and suggests an upside of 33.8%.

KOSPI/KOSDAQ Buybacks in Progress: Those with High Daily Flow Screened

I screened those local buybacks in Korea with a market cap of +₩300B. I further selected those whose buyback volume exceeds 0.5% of SO and buyback completion is below 50%.
I then narrowed them down to those whose buybacks will likely be completed within 30 trading days with a daily buyback x ADTV of 0.15x or higher.
As a result, I obtained nine names: Hwasung Industrial, SK Chemicals, Meritz Securities, Huons Global, Daishin Securities, E-Mart, Meritz Financial Group, Meritz Fire, & Hwaseung Industries

Valmet/Neles: Merger Completion

Consideration: 0.3277 VALMT FH x 1 NELES FH plus a €2/share before the merger (record date 24 March). Upon announcement: 11.9x EV/Fwd EBITDA, 19.3x Fwd P/E.
All conditions have been cleared and approvals obtained. Completion is expected to take place on 1 April. Valmet seems to be the big winner in this merger.
Gross spread is currently -0.4%, so I would recommend monitoring the spread in case it turns positive.

LG Energy Solution: End of the 3 Months Lock Up Period, Higher Short Selling, & JV with Stellantis

We discuss the end of the three months lock-up period, higher short selling of LG Energy Solution as well as the recent JV formation with Stellantis.
At the current price of 439,000 won, we believe there is a 15% downside risk to LG Energy Solution shares over the next 3-6 months.
LGES’s share price has rallied by 8% since the news about the JV with Stellantis have been announced but we believe this rally is likely to be short-lived.

Before it’s here, it’s on Smartkarma

Mar 25

Event-Driven: Toshiba Corp, JD.com Inc., Hanil Cement Co Ltd/New, KT Corp, Uniti Group Ltd, Yamaha Motor, Crown Resorts and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba Coin Toss Is Neither Heads Nor Tails as Both Proposals Fail
JD.com (9618 HK): Overhang a Bigger Worry than Immediate Selling
KOSPI200 June Index Rebalance Preview: 7 Changes as Adds Outperform Deletes
KT (030200): MSCI Re-Inclusion Possibility with a Sharp Rise in Foreign Room
Toshiba – Both Proposals Voted Down
Uniti (UWL): Competitive Bidding Situation As Macquarie/PSP Proposal Emerges
Uniti’s Indicative Bid from Connect Consortium to Set off a Bidding War?
Yamaha Motors Buyback (7272) – Medium-Bigly Buyback Complicated by TOPIX FFW and Cross-Holdings
No Surprise As Perth Royal Commission Finds Crown Resorts Unsuitable for WA Licence

Toshiba Coin Toss Is Neither Heads Nor Tails as Both Proposals Fail

Toshiba EGM fails to provide a positive result as both Toshiba’s own Separation Plan and 3D Investment’s proposal to enhance privatisation bidder engagement and transparency fail.
Activists are stuck. Management is too. 3+ years since the last big buyback and 3 new CEOs and we are back to the drawing board for both management and activists.
But both have a head start. The Shareholder Return Plan, eventual disposition of Kioxia, and non-core asset sales would be a start. And Raymond Zage’s letter is worth a re-read.

JD.com (9618 HK): Overhang a Bigger Worry than Immediate Selling

We do not expect there will be huge selling in JD.com Inc. (9618 HK) immediately. However, there will be an overhang on the stock in the near to medium term.
JD.com could drop in the next few days as the ADR allotment is sold in the market. Shorts that have been built up could soak up some of the flow.
The big worry is the US$4bn of JD.com stock that Prosus will receive. It is likely they will look to sell and use the cash to buy back their own stock.

KOSPI200 June Index Rebalance Preview: 7 Changes as Adds Outperform Deletes

Over 3/4th of the way through the review period for the June rebalance, we see 7 potential changes to the KOSPI200 Index. Most are high probability changes.
Potential inclusions: F&F (383220 KS), SD Biosensor (137310 KS), Meritz Fire & Marine (000060 KS), Iljin Hysolus (271940 KS), K Car (381970 KS), Hanil Cement (300720 KS), Hana Tour (039130).
Potential deletions: Cuckoo Holdings (192400 KS), S&T Motiv (064960 KS), Nexen Tire (002350 KS), Hyundai Home Shopping (057050 KS), Cuckoo Homesys (284740 KS), Sk Discovery (006120), Grand Korea Leisure (114090).

KT (030200): MSCI Re-Inclusion Possibility with a Sharp Rise in Foreign Room

Based on yesterday’s closing price, KT’s foreign room fell to 17.6%. MSCI’s foreign room threshold for non-constituents subject to foreign ownership limit (FOLs) is 15%.
If KT’s foreign room stays above 15% by March 31, it will be re-included with an adjustment factor of 0.5 in May SAIR. Its float is 25%, 0.5x FOL (49%).
Passive flow is estimated at 6.17x ADTV, assuming a 25% float. This could provide momentum to outperform the sector peers, making us consider a sector long/short setup aimed at this.

Toshiba – Both Proposals Voted Down

Votes at Toshiba’s EGM ended up being cast in the most likely fashion with both management’s and 3D’s proposals being voted down.
There was nevertheless considerable uncertainty and it will be interesting to see what the voting breakdowns were.
For now, however, this just pushes out the prospect of any true resolution and we view that as negative.

Uniti (UWL): Competitive Bidding Situation As Macquarie/PSP Proposal Emerges

Buying 13.5% below Morrison & Co’s Offer terms last week for Aussie broadband player Uniti Group Ltd (UWL AU) was the right call as a new (indicative, non-binding) proposal emerges.
Macquarie Asset Management’s Real Assets division and Public Sector Pension Investment Board are offering to acquire Uniti for $5.00/share, via a Scheme of Arrangement, an 11% premium to Morrison’s tilt.
The Board of Uniti is currently considering the new proposal. Morrison’s four-week exclusivity period kicked off last Friday.

Uniti’s Indicative Bid from Connect Consortium to Set off a Bidding War?

The Connect consortium will offer A$5.00 cash per share, an 11.1% premium to the Morrison & Co indicative offer of A$4.50.
Brookfield has joined Morrison & Co as joint bidders. This development suggests another round of bids for Uniti Group Ltd (UWL AU).
The A$5m fee to break the Morrison/Brookfield exclusivity pales in comparison to Connect consortium’s A$340m premium to the Morrison/Brookfield offer. Expect Connect consortium to secure due diligence access.

Yamaha Motors Buyback (7272) – Medium-Bigly Buyback Complicated by TOPIX FFW and Cross-Holdings

Yamaha Motor (7272 JP) announced a short-term buyback. 3 months, 3%. It isn’t huge but it helps with the TOPIX FFW changes to come in two weeks.
It also helps with the extra overhang from last year’s selldown and the significant cross-holding overhang which exists.
But the shares are very inexpensive vs peers when one looks at consensus forward earnings and EBIT, and better growth is expected too.

No Surprise As Perth Royal Commission Finds Crown Resorts Unsuitable for WA Licence

The Perth Casino Royal Commission has found Crown Resorts (CWN AU)‘s casino in Perth, Western Australia, is “not suitable” to hold a gaming licence.
This follows the findings in New South Wales and Victoria that two of Crown Resort’s other subsidiaries were either not suitable to be granted a casino license or not suitable.
As with the recently announced AUSTRAC proceedings, Blackstone would have been well prepared for this latest development.

Before it’s here, it’s on Smartkarma

Mar 24

Event-Driven: Uniti Group Ltd, Samsung Electronics, Henderson Land Development, Kadokawa Dwango, Doosan Corp, Hana Tour Service, Lotte Confectionery, Metrovacesa SA and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Uniti Group (UWL): New Bidder in the Fray?
Samsung Family’s Inheritance Tax Situation & Future Block Deals
StubWorld: Buoyant Henderson As Hong Kong Eases Covid Rules
Kadokawa – 12m Unit Sales and the Prospect of Live Service
Doosan Corp: Block Deal Sale of Former Chairman Park & His Sons’ Stakes
WISE Tour Leisure (TIGER ETF) Rebalancing Preview
A Merger Between Lotte Confectionery and Lotte Food: An Alpha Generating Event
FCC/Metrovacesa: Opportunistic Voluntary Partial Offer

Uniti Group (UWL): New Bidder in the Fray?

A week ago, HRL Morrison made a non-binding, preliminary and highly conditional offer for Uniti Group Ltd (UWL AU) at A$4.5/share in cash, subject to due diligence and other conditions.
Uniti Group Ltd (UWL AU) traded up 10.7% today to A$4.67/share on high volumes and trading was halted an hour before market close.
News reports indicate that Macquarie Asset Management and PSP Investments are likely to make an offer at A$5/share. Expect an announcement in the next 24 hours.

Samsung Family’s Inheritance Tax Situation & Future Block Deals

The family is done with selling stakes in Samsung Life Insurance and Samsung SDS. What remains now is the sale of a 0.33% stake in Samsung Electronics by Hong Ra-hee.
Hong Ra-hee’s 0.33% stake in Samsung Electronics is highly likely to appear soon. The deadline is April 25th. It will likely cause an impact of 1.5x ADTV.
Additional stake sales are likely. SDS for sure, and probably more Life. But more SamE? This remains unclear due to the substantially lower controlling stake percentage.

StubWorld: Buoyant Henderson As Hong Kong Eases Covid Rules

Henderson Land Development (12 HK)‘s shares bounced late last week after the Hong Kong government indicated it would ease strict Covid measures. FY21 results were also released yesterday.
Preceding my comments on Henderson, are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Kadokawa – 12m Unit Sales and the Prospect of Live Service

As widely expected From Software’s Elden Ring title has proved a smash success selling 12m units within its first 17 days.
That puts the game in rare territory and establishes the Kadokawa subsidiary as one of the premier global developers.
There is also some potential for live services here which could add to the appeal for Sony.

Doosan Corp: Block Deal Sale of Former Chairman Park & His Sons’ Stakes

The former Doosan Group Chairman Park Yong-Man and his sons will sell 1.296 million shares of Doosan Corp (000150 KS) in a block deal, representing 7.85% of outstanding shares.
We have a positive view of this block deal sale and we would take the deal.
Our NAV analysis of Doosan Corp suggests NAV per share of 188,511 won per share, representing a 61% upside from current levels.

WISE Tour Leisure (TIGER ETF) Rebalancing Preview

WISE Tour is another fast-growing theme index in Korea with an AUM of ₩0.23T. The next rebalancing will be on April 15. So, the rebalancing trading is on April 14.
Although the flow size of this ETF rebalancing is not substantial, it seems clear that the flow/price (direction) correlation is at a level we should pay attention to.
Those expected to receive a meaningful flow impact at this point are: (LONG) Hana Tour, GKL, & Yong Pyong Resort / (SHORT) Hanjin KAL, Ananti, & SK Rent A Car

A Merger Between Lotte Confectionery and Lotte Food: An Alpha Generating Event

On 23 March, it was announced that Lotte Confectionery (280360 KS) (market cap of 744 billion won) will merge with Lotte Food (002270 KS) (market cap of 395 billion won).
We believe this merger will have a positive impact on the shares of Lotte Confectionery and Lotte Food.
Lotte Confectionery and Lotte Food are not currently included in the KOSPI200. There will be a growing likelihood that the combined entity could be included in the KOSPI200 index.

FCC/Metrovacesa: Opportunistic Voluntary Partial Offer

Fomento De Construcciones Y Co (FCC SM) launches an offer to buy 24% of Metrovacesa SA (MVC SM) for €284 million, €7.8/share, cum dividend, in cash (implied EV €1,271.7 million).
The offer represents 19.4 EV/22e EBITDA, and a whopping c. 50% discount to NAV. Reference shareholders (Santander and BBVA) own 70.21% of Metrovacesa. Gross spread is 3.5%.
Considering recent underperformance of the shares, most free float shareholders will tender, in my view. Closing of the offer should happen in less than six months. Long and tender.

Before it’s here, it’s on Smartkarma

Mar 23

Event-Driven: Toyo Construction, Singapore Press Holdings, Kuaishou Technology, Mapletree North Asia Commercial Trust, Monex Group Inc, True Corp Pcl, Bluerock Residential Growth and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Infroneer (5076 JP) Tender Offer for Toyo Construction (1890 JP) Could Get Funky
SPH Shareholders Agree to SPH EGM & DIS – Deal Done So Now It’s Arb+Option
Potential MSCI Upweights in May: Kuaishou, JD Health, Akeso
MCT and MNACT’s New Cash-Only Scheme Option Gets Quarz Onside
Monex – Coincheck SPAC Unlocks Value
True/DTAC Merger: Shareholder Meetings, IFA Opinion, & Expected Timetable
SpinTalk: Why The Blackstone/Bluerock Merger Deal Remains Compelling…And It’s Not The Merger

Infroneer (5076 JP) Tender Offer for Toyo Construction (1890 JP) Could Get Funky

INFRONEER Holdings (5076 JP) is the new name of the holding company which was comprised of Maeda Corporation, Maeda Road Construction, and Maeda Seisakusho.
Infroneer owns a 20% stake in smaller construction company Toyo Construction (1890 JP) through subsidiary Maeda Construction. It has launched a Tender Offer for the rest at a 28.5% premium.
This could get complicated. If you own, I would not sell at terms.

SPH Shareholders Agree to SPH EGM & DIS – Deal Done So Now It’s Arb+Option

Topday, Singapore Press Holdings (SPH SP) shareholders met in an EGM and a Scheme Meeting to approve the takeover of SPH and distribution of SPH REIT (SPHREIT SP) units.
Shareholders passed resolutions at both meetings, meaning the Cuscaden Peak Pte acquisition is approved.
This means we move to next steps, which is choosing the Consideration, and possible MGO Chain Offer on SPH REIT (SPHREIT SP).

Potential MSCI Upweights in May: Kuaishou, JD Health, Akeso

We see a potential increase in the FIF for Kuaishou Technology (1024 HK), JD Health (6618 HK) and Akeso Biopharma Inc (9926 HK) at the MSCI May SAIR.
The increase in FIF will require passive funds to buy 79.45m shares of Kuaishou (1024 HK), 57.35m shares of JD Health (6618 HK) and 15.32m shares of Akeso (9926 HK).
Short interest has started to inch higher on Kuaishou, while short interest is rising sharply on JD Health and Akeso.

MCT and MNACT’s New Cash-Only Scheme Option Gets Quarz Onside

Mapletree Commercial Trust (MCT SP) has introduced a new cash-only consideration of S$1.1949 per MNACT unit. The scheme meeting is at the end-May with an effective date of end-August.
Mapletree North Asia Commercial Trust (MAGIC SP)/MNACT will continue to be able to pay permitted distributions – consensus 2HFY21/22 DPU of 3.57 cents to be paid in June.
Quarz Capital now supports the merger. Including potential permitted 2H MNACT DPU and at last close, the gross spread to the cash-only consideration is 0.9%.

Monex – Coincheck SPAC Unlocks Value

Coincheck and Thunder Bridge Capital Partners IV announced today that an SPAC deal would occur to list Coincheck on the NASDAQ.
With a pre-money valuation of $1.25bn the deal values Coincheck noticeably more modestly than Monex’s prior SOTP presentation.
Nevertheless, in combination with the announced TradeStation SPAC it starts to make the extent of Monex’s holdco discount apparent.

True/DTAC Merger: Shareholder Meetings, IFA Opinion, & Expected Timetable

The Information Memorandum is out regarding the True Corp Pcl (TRUE TB) / Total Access Communication (DTAC TB) merger.
The shareholder meetings for both companies will be held on the 4 April, with a tentative listing date of the NewCo late September.
The IFAs for both companies are of the opinion that shareholders should approve the Amalgamation.

SpinTalk: Why The Blackstone/Bluerock Merger Deal Remains Compelling…And It’s Not The Merger

By Robert Sassoon

Notwithstanding the 70% plus Bluerock Residential Growth (BRG US) share price rise since deal announcement, there’s more juice to be squeezed out of this trade for arbs and fundamental investors
The attractive spin-off element of the transaction is all but ignored in the prevailing Bluerock Residential Growth (BRG US) share price
Potential for at least 140% gain for fundamental investors and additional 40% plus IRR for arbs

Before it’s here, it’s on Smartkarma

Mar 22

Event-Driven: Mapletree North Asia Commercial Trust, Toshiba Corp, Razer Inc, Qube Holdings, CJ ENM, Link Administration Holdings, Celltrion Inc, Samsung Sds, KakaoBank and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Mapletree Merger: All-Cash Option; Current Prices Mean No Passive Flows
Toshiba – The New CEO And The Company Culture
Caymans To Decapitate The Headcount
Qube Holdings BIG (7+%?) Off-Market Buyback
WISE Media Contents (TIGER ETF) Rebalancing Preview
Link Admin (LNK AU): Scheme On Track as Proposal Emerges For RSS Business
Block Deal Sale of Celltrion & Celltrion Healthcare by ION Investment
Link’s Privatisation by DND on Track to Complete in June/July
Block Deal Sale of Samsung SDS by the Lee Family to Pay for Inheritance Taxes
Krafton & KakaoBank: Potential MSCI Upweights in May

Mapletree Merger: All-Cash Option; Current Prices Mean No Passive Flows

Mapletree Commercial Trust (MCT SP) have added a cash-only option for Mapletree North Asia Commercial Trust (MAGIC SP) unitholders in addition to the scrip-only and cash-and-scrip options.
At current prices, Mapletree North Asia Commercial Trust (MAGIC SP) unitholders will take the cash-only option. That means no passive flows following the implementation of the scheme.
At current prices, the entire preferential offering is likely to be taken up by MIPL. The increase in shares will be offset by a lower FIF/investability weight – no inflows.

Toshiba – The New CEO And The Company Culture

The Nikkei had an interesting article today on Toshiba’s new CEO and the company’s underlying culture.
It addresses some inconsistencies we have seen in terms of demonstrated competence at lower levels vs. a certain lack thereof at the top.
Ultimately though we suspect that what it reveals points to a lower chance of a privatisation

Caymans To Decapitate The Headcount

The Cayman Islands is seeking to eliminate the “headcount test” for Schemes of Arrangement.
Such an amendment will provide greater certainty for Hong Kong Schemes, wherein 59% of all listed companies are Cayman Islands incorporated.
This development arrives a tad late for Razer Inc (1337 HK), which is trading wide to terms, exactly on account of the fact it could potentially fail the headcount test.

Qube Holdings BIG (7+%?) Off-Market Buyback

Qube Holdings (QUB AU) saw a near 5% block sold Friday after the close at a small discount – likely the long-awaited CPPIB cleanup trade.
This morning, the company announced a A$400mm off-market buyback, with record date 29 March, giving appropriate investors time to build a position.
This should be something like 7.2-7.8% buyback, leading to 7.5-8.5% EPS accretion for 2023.

WISE Media Contents (TIGER ETF) Rebalancing Preview

WISE Media Contents rebalances every quarter in January, April, July, and October. The effective date for the upcoming rebalancing is April 15.
The gap between the rebalancing weight change estimations based on the float-adjusted market caps and the actual implementation of the ETF operator (TIGER) is not significant.
Following stocks are worth paying attention: (Short) Jyp Entertainment, S.M.Entertainment, Studio Dragon, Jcontentree, and SBS Contents Hub / (Long) CJ ENM, DearU, D&C Media, Genie Music, and IHQ

Link Admin (LNK AU): Scheme On Track as Proposal Emerges For RSS Business

Link Administration Holdings (LNK AU) announced that all applications for regulatory approvals have been submitted. The Scheme explanatory booklet will be submitted to ASIC this week.
Separately, discussions with LCFH have not resulted in an agreement for the sale of Link’s BCM business. Additionally, a proposal from FNZ Group for the RSS business was rejected.
The ACCC and FCA approvals are the key risks to the deal completing.

Block Deal Sale of Celltrion & Celltrion Healthcare by ION Investment

After the market close today, it was announced that ION Investment will partially sell its stakes in Celltrion and Celltrion Healthcare for about 560 billion won in a block deal.
The block deal price ranges are at 6 to 9 percent discount to current prices of Celltrion and Celltrion Healthcare.
We would take this take this deal due to settling of the accounting issue, more reasonable valuations, and sizeable block deal discount range.

Link’s Privatisation by DND on Track to Complete in June/July

Link Administration Holdings (LNK AU) notes that the Dye & Durham (DND) privatisation scheme remains on track for a June/July completion. Scheme document will be submitted to the ASIC shortly.
Link also noted that it was unable to reach a binding agreement with LC Financial Holding for the sale of the BCM business.
Key hurdles are ACCC clearance and the Woodford investigation. We would be buyers up to A$5.2 per share (implies 70% deal probability).

Block Deal Sale of Samsung SDS by the Lee Family to Pay for Inheritance Taxes

The Samsung Group owner Lee family wants to partially sell their stake in Samsung Sds worth 390 billion won in a block deal.
The block deal sale involves 3.02 million shares of Samsung SDS or 3.9% of outstanding shares.
We would avoid this block deal as the company may face continued overhang sale issue in the next 1-2 years.

Krafton & KakaoBank: Potential MSCI Upweights in May

KakaoBank (323410 KS) is currently included in the MSCI Korea Index at a FIF of 20%. That could increase to 35% at the May SAIR.
Krafton Inc (259960 KS) is currently included in the MSCI Korea Index at a FIF of 45%. That could increase to 55% at the May SAIR.
We estimate passive MSCI trackers will need to buy US$222m of KakaoBank (323410 KS) and US$83m of Krafton Inc (259960 KS) at the close on 31 May.

Before it’s here, it’s on Smartkarma

Mar 21

Event-Driven: Poly Real Estate Group Co.,, Core Lithium Ltd, Yashili International Holdings, Loadstar Capital, Samsung SDI, Lotte Rental, LG Energy Solution, Mapletree Commercial Trust, Hanon Systems and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE China A50 Index: FOL Changes Done; 100 Index Members Next?
S&P/ASX Index Rebalance Preview (June): Potential Changes from Now to June
Merger Arb Mondays – Yashili, Razer, 51Job, Uniti, Link, Sezzle, Guodian
TOPIX Inclusion: Loadstar Capital (3482 JP)
KOSPI 200 IT (TIGER ETF) Rebalancing Preview
KOSPI 200 Rebalance in June 2022 Amid Portfolio Changes Post Outbreak of War in Ukraine
WISE Secondary Cell (TIGER ETF) Rebalancing Preview
Mapletree Revise Scheme – Give MNACT Holders Cash for NAV and a Free Option
KRX Auto (KODEX ETF) Rebalancing Preview

FTSE China A50 Index: FOL Changes Done; 100 Index Members Next?

With the FOL changes implemented at the March rebalance, the next step could be an increase in the number of FTSE China A50 Index (XIN9I) constituents from 50 to 100.
The June rebalance will also see a change in the index universe from the FTSE China A All Cap Free Index to the FTSE China A All Cap Index.
If the 50 to 100 stock increase is implemented on one-step, one-way turnover will be around 27.6% and result in a one-way trade of over CNY 13bn.

S&P/ASX Index Rebalance Preview (June): Potential Changes from Now to June

The privatisation of Crown Resorts and CIMIC Group could lead to one change to the S&P/ASX100 and two changes to the S&P/ASX 200 (AS51 INDEX) prior to the regular rebalance.
There will be more changes at the regular rebalance – one close change in the S&P/ASX50, one close change in the S&P/ASX100 and a few for the S&P/ASX 200.
The potential inclusions have outperformed the potential deletions by a wide margin. Couple of the potential inclusions were added to the S&P/ASX300 and FTSE All-Cap indices on 18 March.

Merger Arb Mondays – Yashili, Razer, 51Job, Uniti, Link, Sezzle, Guodian

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore and the US (Chinese ADRs only).
This week, the highest gross spreads are Yashili International Holdings (1230 HK), Razer Inc (1337 HK), 51 Job Inc Adr (JOBS US), Uniti Group Ltd (UWL AU)
The lowest gross spreads are CIMIC Group Ltd (CIM AU), Virtus Health (VRT AU), China Logistics Property Holdings (1589 HK), Z Energy Ltd (ZEL NZ), Singapore Press Holdings (SPH SP)

TOPIX Inclusion: Loadstar Capital (3482 JP)

By Janaghan Jeyakumar, CFA

On 11th March 2022, Japan-based real estate investment business Loadstar Capital (3482 JP) announced they had received approval to move from TSE’s Mothers Section to the First Section.
Today, they completed this move. This will trigger inclusion into the TOPIX Index at the end of April 2022.
In this insight, we take a look at the Index Inclusion Parameters to evaluate the upside potential of the TOPIX Inclusion Event.

KOSPI 200 IT (TIGER ETF) Rebalancing Preview

KOSPI 200 IT sector index rebalances twice a year in June and December. The effective date for the upcoming rebalancing is June 10.
The IT sector has a high degree of price cointegration of the stocks within the sector. Therefore, the impact/price correlation is robust despite a smaller impact size.
At this point, the following three stocks deserve our attention: Samsung SDI, Kakao Pay, and LG Corp. We can expect a passive inflow of +0.15x for these highly liquid names.

KOSPI 200 Rebalance in June 2022 Amid Portfolio Changes Post Outbreak of War in Ukraine

We discuss the potential additions and deletions in the upcoming June 2022 KOSPI200 rebalance. The outbreak of war in Ukraine has impacted the potential additions/deletion candidates.
These top 10 potential inclusions are up on average 10.8% YTD, outperforming KOSPI which is down 9.1% YTD.
Among the potential inclusions, Ildong Pharm, Meritz F&M Insurance, Hana Tour, Dongwon Systems, and Lotte Rental have been materially outperforming the market in the past three months.

WISE Secondary Cell (TIGER ETF) Rebalancing Preview

WISE Secondary Cell rebalances every quarter in January, April, July, and October. The effective date for the upcoming rebalancing is April 15.
The flow impact/price correlation of small/mid-caps is shown to be at a meaningful level. Therefore, we may need to design long/short basket trading setups focusing on these small/mid-caps.
The following five stocks are expected to have a significant level of flow impact at this point: SKC, Soulbrain, Youlchon Chemical, Posco Chemical, and LG Energy Solution.

Mapletree Revise Scheme – Give MNACT Holders Cash for NAV and a Free Option

Quarz and MNACT holders “win” to get a Cash-Only Consideration bump to 1.0x Price/Sep2021 NAV at S$1.1949/unit. This gets them out at NAV.
However there is a catch they want to stay invested in the assets, they have to buy MCT in the market or accept that the scrip ratio was correct.
To fund the Cash-Only Consideration option, there will be a Preferential Offering at S$2.0039/unit, and MIPL has offered to underwrite the entire deal. MNACT holders get a free option now.

KRX Auto (KODEX ETF) Rebalancing Preview

KRX Autos rebalances once a year in September. The effective date of the upcoming rebalancing is September 9.
The market cap difference between the top three stocks and the rest of the stocks is significant. So, the passive impact of the non-capped constituents is substantial.
Accordingly, this index rebalancing is well worth a preemptive position build-up. At this point, notable stocks from a flow perspective are Hanon Systems, Kumho Tire, and Halla Holdings.

Before it’s here, it’s on Smartkarma

Mar 20

Event-Driven: Mapletree Commercial Trust, Orient Overseas International, Singapore Press Holdings, JD.com Inc., Mapletree North Asia Commercial Trust and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Quarz Capital Again Objects to the MNACT/MCT Deal – This Time to MAS
Index Rebalance & ETF Flow Recap: MSCI May, FTSE June, HFCAA/China ADRs, GoTo
Last Week in Event SPACE: Singapore Press, Yashili, WH Group, Uniti Group, Toshiba, China Conch
Tencent’s BIG In-Specie Dividend of JD.com Shares – The Likely Flows & Timing
Asia-Pac Weekly Risk Arb Summary: Mapletree, Singapore Press, Uniti Group, Yashili, Z Energy, Virtus

Quarz Capital Again Objects to the MNACT/MCT Deal – This Time to MAS

Quarz Capital objects to the proposed Mapletree Commercial Trust (MCT SP) / Mapletree North Asia Commercial Trust (MAGIC SP) as they claim it is damaging to MNACT unitholder interests.
Now they have written a letter to the Monetary Authority of Singapore asking them to Do Something to force MNACT directors to Do Something Different.
I doubt it comes to anything, but activist-ish letter commentary is my bag so…

Index Rebalance & ETF Flow Recap: MSCI May, FTSE June, HFCAA/China ADRs, GoTo

It was a busy Friday with a whole lot of rebalance implementations – FTSE AW/AC, EPRA Nareit, China 50, China A50, Taiwan 50, S&P/ASX. This week is quieter.
We take an early look at potential changes to the MSCI Standard Index in May, to the FTSE AW/AC in June, China ADRs that could list in Hong Kong.
There were some big inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and Hang Seng H Share Index ETF (2828 HK) during the week.

Last Week in Event SPACE: Singapore Press, Yashili, WH Group, Uniti Group, Toshiba, China Conch

Singapore Press Holdings (SPH SP)‘s comments and answers about the SPH REIT Chain Offer may be misleading.
China Mengniu (2319 HK) is in discussions regarding its holdings in Yashili (1230 HK) which may result in a number of “Potential Transactions”, and may include a pre-conditional privatisation offer.
WH Group (288 HK) is two businesses – a US pork processor and a Chinese one – and both businesses are suffering lower margins than they’d like.

Tencent’s BIG In-Specie Dividend of JD.com Shares – The Likely Flows & Timing

Tencent (700 HK) will deliver shares of JD.com Inc. (9618 HK) this week in its in-specie distribution of 14.7% of the shares out of JD.com.
Some people will NEED to hold. Some will NEED to sell. On a net basis, it is a short-term sell and a longer-term overhang.
The timing and execution are going to be quite interesting. There will be short-term opportunity.

Asia-Pac Weekly Risk Arb Summary: Mapletree, Singapore Press, Uniti Group, Yashili, Z Energy, Virtus

There are currently 44 – mostly firm – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal this week: Morrison & Co’s indicative Offer for Uniti Group (UWL AU); and China Mengniu Dairy (2319 HK)‘s pre-conditional privatisation offer for Yashili International Holdings (1230 HK).
Key updates took place for: Singapore Press Holdings (SPH SP), Z Energy Ltd (ZEL NZ), Mapletree Commercial Trust (MCT SP), Virtus Health (VRT AU), and Western Areas (WSA AU).

Before it’s here, it’s on Smartkarma

Mar 19

Event-Driven: China Conch Venture Holdings, Boskalis Westminster and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

China Conch Venture (586 HK): Last Day Of Entitlement
HAL Holding/Royal Boskalis Westminster: Over the 50% Threshold

China Conch Venture (586 HK): Last Day Of Entitlement

Today (18 March) is the last day of dealing in China Conch Venture Holdings (586 HK) shares on a cum-entitlement basis for the Conch Environment Protection (CEEP) spin-off.
CEEP is expected to commence trading on the 30 March. The Listing Document is expected to be issued on or around the 22 March.
Separately, I see CCV trading at a 14% premium to its NAV, around its most extreme-ever level.

HAL Holding/Royal Boskalis Westminster: Over the 50% Threshold

After some purchases in the market (at offer price), HAL Holding and concert parties have a 50.5% stake. HAL will not use the additional 4.3% voting rights before offer clearance.
If acceptances are below the squeeze-out threshold (95%), the target will usually co-operate so that the offeror will take full control and delist. Possible measures involve diluting the holdouts.
There are grounds for a sweetening of the offer. The market thinks so and the shares are trading 0.3% above the offer price, but HAL has a strong hand.

Before it’s here, it’s on Smartkarma

Mar 18

Event-Driven: Toshiba Corp, Yashili International Holdings, Razer Inc, Mapletree Commercial Trust, Schroders PLC and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba Board Ructions as Independent Director Goes Rogue
Yashili (1230 HK): Possible Mengniu Offer Amid Exchange Rights And Phantom Shares
Razer’s Offer Spread Risk/Reward – FY21 Results
Mapletree Commercial Vs the World (Or at Least S-REIT World). Still Heads I Win Tails I Win
Toshiba – Zage News
Liquid Universe of European Ordinary and Preferred Shares: March ’22 Report

Toshiba Board Ructions as Independent Director Goes Rogue

There is a Toshiba Corp (6502 JP) EGM next week for shareholders to vote on the company’s Separation Plan, with a shareholder proposal to re-engage take-private buyers.
Four+ weeks ago, the Board unanimously supported the first, and unanimously opposed the second, and shareholders and major proxy advisors came out against the first.
Now Independent Director Raymond Zage, originally from one of the dissenting shareholders, has written a letter stating he has voted FOR the shareholder proposal the board rejected. OOPS! 🤭

Yashili (1230 HK): Possible Mengniu Offer Amid Exchange Rights And Phantom Shares

China Mengniu (2319 HK) is in discussions regarding its holdings in Yashili (1230 HK) which may result in a number of Potential Transactions, and may include a pre-conditional privatisation offer.
The Potential Offer would involve a cancellation price of HK$1.20/share, a 31.9% premium to last close, and a 161% premium to the undisturbed price.
The recent privatisation of key peer Ausnutria Dairy Corp (1717 HK) provides a guideline to the timeline from here.

Razer’s Offer Spread Risk/Reward – FY21 Results

Razer Inc (1337 HK)‘s FY21 results beat consensus revenue by 8% but came below consensus EBIT by 3%, based on CapitalIQ data.
The management did their best to dampen sentiment by pointing out slowing growth momentum and margin compression due to significant growth investments in 2022.
We think that the results/outlook do little to increase the attractiveness of the offer. We would be buyers up to HK$2.5 per share (implies 65% deal probability).

Mapletree Commercial Vs the World (Or at Least S-REIT World). Still Heads I Win Tails I Win

In the waning hours of 2021, Mapletree Commercial Trust (MCT SP) and Mapletree North Asia Commercial Trust (MAGIC SP) proposed to merge to make a top 10 Asian REIT.
MCT shareholders and “The Market” did not like it and sent MCT units lower. MNACT holder Quarz didn’t like it and complained. I wrote about all this.
But 6+ weeks after looking at new MCT trades as Heads I Win, Tails I Win, I revisit and see no reason to change my mind.

Toshiba – Zage News

The announcement from Raymond Zage that he would vote for 3D’s proposal at next week’s EGM is a curious development.
It suggests that pressure on Toshiba’s directors could be ramping up significantly.
Whether that is a good thing or not is a serious question though.

Liquid Universe of European Ordinary and Preferred Shares: March ’22 Report

Spreads have generally widened across our liquid universe in line with the recent market turmoil.
Recommendations Long ords / short prefs: Fuchs Petrolub, Henkel, Handelsbanken.
Recommendations Long prefs / short ords: Atalas Copco, Grifols, Investor AB, SSAB, Telecom Italia (takeover interest), Volkswagen, is Schroders near the bottom?

Before it’s here, it’s on Smartkarma

Mar 17

Event-Driven: Tencent, SPH REIT, SK Square, GoTo, Uniti Group Ltd, Hollysys Automation Technologies, Yashili International Holdings, Vantage Towers, Fuji Kosan Company, Hanmi Science and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hong Kong: Where Have Shorts Increased & Decreased?
SPH Releases EGM/Scheme “Substantial & Relevant Questions” – Beware Chain Offer Comments
Korea Holding Companies: Stub Tradable Names
GoTo Gojek Tokopedia IPO: Offering Details & Index Inclusion
Uniti Group (UWL AU) And Morrison & Co Enter Into “Exclusive Discussions”
Hollysys (HOLI US): Potential Suitors Didn’t Get The Memo
Yashili’s Potential Pre-Conditional Privatisation Offer from Mengniu
STOXX Europe Indices: March 2022 Rebalance Trade So Far So Good. What Next?
Aslead To Exit Fuji Kosan, Leaving Would-Be Activist Shigeta-San
A Long-Term M&A Battle Brewing Among the 3 Heirs of Hanmi Pharm Group?

Hong Kong: Where Have Shorts Increased & Decreased?

Short notional in Hong Kong is HK$488bn and has been falling mainly as a result of a falling market. Short interest has increased substantially from end January.
From 31 January to 4 March, the largest shorts have been built on Tencent, China Merchants Bank, AIA Group Ltd, Alibaba, JD.com, Meituan, Xiaomi, JD Health and Xinyi Solar.
Over the same period, shorts have covered on COSCO Shipping Holdings, HKEX, Longfor Properties, China Construction Bank, Ping An Insurance, Yanzhou Coal Mining Company and HSBC Holdings.

SPH Releases EGM/Scheme “Substantial & Relevant Questions” – Beware Chain Offer Comments

Singapore Press Holdings (SPH SP) has released a set of Q&A for holders as we approach the 22 March EGM/Scheme Meeting.
Approval of both resolutions/votes is necessary to effect the Cuscaden Peak deal.
The comments and answer about the SPH REIT Chain Offer may be misleading. Take care of the details!

Korea Holding Companies: Stub Tradable Names

Korea has a total of 68 holding companies listed on KOSPI and KOSDAQ. We then have 14 holdcos with a high level of price cointegration with their respective listed subsidiaries.
Three holding companies have sigma below zero on a 20D MA. Hanwha Corp is considered stub tradable as its share price relative to its subsidiaries was relatively flat.
Four holdcos, including SK Square are over 70% NAV discount. Among them, SK Square is of the most interest as the price correlation with SK Hynix has been improving lately.

GoTo Gojek Tokopedia IPO: Offering Details & Index Inclusion

GoTo (1379371D IJ) is offering 52bn shares in its IPO (plus a greenshoe of 7.8bn shares). The issue is being targeted at domestic investors and should list on 4 April.
GoTo (1379371D IJ) will also look to list on an international exchange within the next two years by selling just over 8% of the company to those investors.
Inclusion in domestic indices could take place in July, while inclusion in the MSCI and FTSE indices is expected in 2023 at the earliest.

Uniti Group (UWL AU) And Morrison & Co Enter Into “Exclusive Discussions”

South Australian telecommunications company Uniti Group Ltd (UWL AU) has announced it has entered into “exclusive discussions” with infrastructure investor HRL Morrison & Co for a potential acquisition.
Morrison & Co’s non-binding proposal has an indicative price of $4.50/share, valuing Uniti at A$3.1 billion.
The proposal has an exclusivity period up to 22 April.

Hollysys (HOLI US): Potential Suitors Didn’t Get The Memo

Hollysys Automation (HOLI US) said in January it would suspend further evaluation of all unsolicited buyout proposals. Two proposals have reportedly since emerged.
According to Bloomberg, the latest tilt is from Beijing Infrastructure, the state-owned operator of Beijing’s railway and subway.
Separately, Hollysys reported FY21 net income of US$44.3mn, a decrease of 14.6% to FY20.

Yashili’s Potential Pre-Conditional Privatisation Offer from Mengniu

Yashili International Holdings (1230 HK) announced its controlling shareholder, China Mengniu Dairy Co (2319 HK), is in discussions regarding its holdings in Yashili and several potential transactions.
If the transactions proceed, the potential privatisation offer is HK$1.20 per Yashili share, a 31.9% premium to the last close price of HK$0.91 (prior to the trading halt).
The potential transactions are subject to a number of pre-conditions and conditions. We think the potential offer is attractive.

STOXX Europe Indices: March 2022 Rebalance Trade So Far So Good. What Next?

By Janaghan Jeyakumar, CFA

The March 2022 constituent changes for the STOXX Europe 600 and the EURO STOXX Indices were announced on 1st March 2022.
The Index Changes will be implemented (Inclusion Event) at the close of 18th March 2022 (Friday) and the changes will be effective from 21st March 2022 (Monday).
So far, the LONG-SHORT baskets suggested by Quiddity have done extremely well. Below are my thoughts for the remainder of the timeline.

Aslead To Exit Fuji Kosan, Leaving Would-Be Activist Shigeta-San

Last year, Aslead Capital tried a hostile partial tender offer on Fuji Kosan, perhaps to get in, or perhaps to try to trigger an overbid to exit.
Fuji Kosan Company (5009 JP) made life difficult for them, and Aslead backed down. Now the stock has fallen 25% from where they made their Tender Offer.
And now they are selling. That will leave ENEOS and SHIGETA Mitsutoki as the two largest shareholders…. 👀

A Long-Term M&A Battle Brewing Among the 3 Heirs of Hanmi Pharm Group?

There is an interesting situation brewing at the Hanmi Pharm Group, which is one of the largest pharmaceutical companies in Korea.
On 16 March, it was reported that Hanmi Pharm decided not to raise the agenda for re-appointment of CEO Lim Jong Yoon as an inside director at the Hanmi Science.
In terms of trading, there appears to be more upside in Hanmi Science (008930 KS) as compared to Hanmi Pharm (128940 KS) in the next several months.

Before it’s here, it’s on Smartkarma