Event-Driven

Following the TSE restructure on 4 April, FTSE will include stocks that trade on the Prime Market and Standard Market as part of the eligible universe for index inclusion.
We see 4 stocks meeting the requirements for inclusion in the FTSE All-World Index, and another 13 stocks meeting the requirements for inclusion in the FTSE All-Cap Index.
There are stocks that have over 4 days of ADV to buy from passive trackers. Given the inclusions will take place in March 2023, its wait and watch for now.

SRE Holdings (2980 JP) Offering – New Higher Growth at New Lower Multiple

SRE Holdings Corp (2980 JP) last week announced an offering of new shares and a secondary share sale by Z Holdings (4689 JP) of the bulk of its holdings.
The Z Holdings sale coincides with a “new business alliance” between SRE and Yahoo. At first glance, it appears as if both sides have decided to rejig what they do.
SRE has an interesting business model which is quite growthy. It is growthier than it planned and others expected, but the stock has fallen 70% in 3mos. It’s a buy.

Potential Additions & Deletions in MSCI Korea Rebalance in May 2022

In this insight, we discuss the potential inclusions and deletions in the upcoming MSCI rebalance in May 2022. The next MSCI Korea rebalance will be announced on 12 May 2022.
We believe that Hyundai Mipo, Hanwha Aerospace, and Daewoo Shipbuilding could increasingly be viewed as potential additions to MSCI Korea rebalance in May.
Green Cross Corp, Sk Chemicals Co, and Alteogen could increasingly be viewed as potential deletion candidates in the next MSCI Korea rebalance.

Second Brookfield-MCB Bid for AGL Energy Rejected

The duo of Brookfield and Atlassian/Australian billionaire Mike Cannon-Brookes has apparently lobbed a higher offer for AGL Energy Ltd (AGL AU) and AGL has apparently rejected it.
Confirmation from AGL is due tomorrow but given the previous bid was “ridiculously low”, “extremely undervalued” the company, and had “unserious” elements, expect the language to be similar.
Next steps probably mean waiting for the De-Merger Circular due April but possibly May. In the meantime, this probably trades in a range.

KOSPI Size Index Series Rebalancing: Official Results & Passive Impacts

KRX officially announced the rebalancing results of the KOSPI Size Index Series. The effective date is March 11.
Of these, new MidCap entrants are what matter the most. This rebalancing delivers a total of 26 new MidCap entrants.
The three stocks shown below have ADTV of over ₩5B and passive flow x ADTV of 1.0x or higher: CJ Logistics, GS Retail, and Lotte Rental.

Merger Arb Mondays – Razer, Sezzle, Irongate, 51job, Link, Guodian, Crown Resorts

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 Razer Inc (1337 HK), Sezzle Inc (SZL AU), Irongate Group (IAP AU), 51 Job Inc Adr (JOBS US), Link Administration Holdings (LNK AU)
The lowest gross spreads are China Logistics Property Holdings (1589 HK), Virtus Health (VRT AU), CIMIC Group Ltd (CIM AU), Singapore Press Holdings (SPH SP), Australian Pharmaceutical Industries (API AU)

BBL/KBANK: Time for a Bounce

Bangkok Bank Public has underperformed Kasikornbank PCL over the short-term and over the last year as well. The price ratio is now trading at the low end of the recent range.
The number of NVDRs issued on Bangkok Bank Public (BBL TB) have continued to decrease while increasing on Kasikornbank PCL (KBANK TB).
Bangkok Bank Public (BBL TB) trades cheaper than Kasikornbank PCL (KBANK TB) and there could outperform in the short-term.

Before it’s here, it’s on Smartkarma

Mar 06

Event-Driven: Nexon, Heiwa Real Estate, Singapore Press Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Last Week in Event SPACE: Russia/Indices, Prosus, Virtus, Crown, Nexon, Hitachi Metals
Index Rebalance & ETF Flow Recap: NKY, FTSE CH50/A50/TW50/EPRA, S&P/ASX, KRX New Deal, NIO, Russia
Asia-Pac Weekly Risk Arb Summary: Asia Pacific Telecom, Sezzle, Singapore Press, DTAC/True

Last Week in Event SPACE: Russia/Indices, Prosus, Virtus, Crown, Nexon, Hitachi Metals

Major global indices have relegated Russia to the “standalone” and “unclassified” market status. Talk of significant flows into major non-Russia EM markets such as China, Taiwan, Korea, etc is misguided.
Even if OLX and VK Group are written down to zero, the fall in Prosus (PRX NA)‘s implied stub has overshot the mark
The founder and former chairman and CEO of Nexon (3659 JP) has passed away. The estate may wish to sell Nexon shares, or its entire stake, at some point near-term.

Index Rebalance & ETF Flow Recap: NKY, FTSE CH50/A50/TW50/EPRA, S&P/ASX, KRX New Deal, NIO, Russia

Changes to the Nikkei 225 (NKY INDEX), FTSE China50/A50/Taiwan50/EPRA Nareit, KRX New Deal Indices and the S&P/ASX family of indices were announced this week.
The Hang Seng indexes rebalanced Friday and the coming week will have LG Energy Solution (373220 KS)‘s Fast Entry into the KOSPI2 INDEX and implementation of the STAR50 INDEX changes.
NIO Inc (9866 HK)/ NIO Inc (NIO US) is expected to start trading in Hong Kong on 10 March and there are index implication for the Secondary Listing.

Asia-Pac Weekly Risk Arb Summary: Asia Pacific Telecom, Sezzle, Singapore Press, DTAC/True

There are currently 43 – mostly firm – transactions currently being discussed and analysed on Smartkarma.
Two new deals this week: Far Eastone Telecomm (4904 TT) merging with Asia Pacific Telecom (3682 TT); Zip Co Ltd (Z1P AU) merging with Sezzle Inc (SZL AU).
Key updates took place for: Singapore Press Holdings (SPH SP), Virtus Health (VRT AU), Crown Resorts (CWN AU), Total Access Communication (DTAC TB) / True Corp (TRUE TB)

Before it’s here, it’s on Smartkarma

Mar 05

Event-Driven: Samsung Electronics Pref Shares, Hitachi Transport System, Ausnutria Dairy Corp, Razer Inc, China Development Financial, AVZ Minerals, Nexon, Rio Tinto PLC and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Russian Impact on MSCI Korea: Total Inflow Size & Top 20 Inflow (X ADTV) Stocks
Hitachi Transport Is the Eventy Energizer Bunny
Ausnutria’s Offer Gets Up. But Only Just
Razer’s Offer Spread Risk/Reward – Takeaways from Logitech’s Investor Day
FTSE TWSE Taiwan 50 Index Rebalance: China Dev Fin (2883) Replaces Pegatron (4938)
S&P/ASX Indices: March 2022 Index Changes and Trading Strategy
Three Ways of Settling Nexon Inheritance Tax Payment: Each Way’s Ramifications
S&P/ASX Index Rebalance (March 2022): Changes & Surprises
Selected European Holdcos and DLCs: February ‘22 Report

Russian Impact on MSCI Korea: Total Inflow Size & Top 20 Inflow (X ADTV) Stocks

Korea’s local market estimates an inflow (resulting from the Russian departure) to Korea at ₩1T
Most of the preferred stocks in MSCI Korea top the list with the highest passive buying ratios to the 30-day average trading value.
Other than that, S1 Corp, Coway, Samsung SDS, C&T, and KT&G are the others that sit high on the list.

Hitachi Transport Is the Eventy Energizer Bunny

Hitachi Transport System (9086 JP) has been “virtually” for sale since October 2019 but it did not pop when others did then. But SG and HTS “consciously uncoupled” in 2020.
Mid-Year last year saw news HTS was entertaining offers, which didn’t go anywhere but newer news suggests Round 2 of a new course of bidding is done.
And the stock keeps on going up and up and up.

Ausnutria’s Offer Gets Up. But Only Just

52.7%. The only number that matters. That satisfied the acceptance condition to the mandatory conditional cash Offer. But it was a close-run thing.
The Offer is now unconditional and will remain open for acceptance until the 17 March.
Yili has no intention to privatise Ausnutria Dairy Corp (1717 HK) and intends to maintain its listing following the close of the Offer.

Razer’s Offer Spread Risk/Reward – Takeaways from Logitech’s Investor Day

Razer Inc (1337 HK)‘s scheme document will be released after the FY21 results, which are on 17 March. The headcount test is a key challenge.
Logitech International SA (LOGN SW)’s investor/analyst day on 3 March underscores Razer’s opportunity and adds to minorities’ grievances that the offer price is unattractive.
Current deal probability implies broadly a 50/50 chance of success with a gross spread of 19%. We would be buyers up to HK$2.5 per share (implies 65% deal probability).

FTSE TWSE Taiwan 50 Index Rebalance: China Dev Fin (2883) Replaces Pegatron (4938)

As expected, FTSE has announced that China Development Financial (2883 TT) will replace Pegatron Corp (4938 TT) in the FTSE TWSE Taiwan 50 index at the close on 18 March.
Passive trackers need to buy 1 days ADV on China Development Financial (2883 TT) while passive selling on Pegatron Corp (4938 TT) is larger at 2.5 days of ADV.
China Development Financial (2883 TT) trades expensive to its peers while Pegatron Corp (4938 TT) is cheaper than its peers. Traders can use the index flows to reposition.

S&P/ASX Indices: March 2022 Index Changes and Trading Strategy

The S&P/ASX Index family is a widely-tracked group of indices and sub-indices which represent the performance of ASX-listed companies.
The constituency changes for ASX 300, ASX 200, ASX 100, ASX 50, and ASX 20 were announced today.
Below is a discussion of the official results and potential trading strategies to generate market-neutral returns in the run up to the Inclusion Event.

Three Ways of Settling Nexon Inheritance Tax Payment: Each Way’s Ramifications

There are three ways families can settle inheritance tax: 1. payment in Kind, 2. direct sale of the NXC stake, and 3. NXC sells its stake in Nexon Japan.
They have different ramifications from an investment point of view, and the third option is probably the one that the market desires most.
If the family goes for the third option, they will likely sell all of NXC’s Nexon Japan stake (47.89%), which will lead to a TOB to Nexon Japan minority shareholders.

S&P/ASX Index Rebalance (March 2022): Changes & Surprises

There are two changes for the S&P/ASX20, one change for the S&P/ASX50, four changes to the S&P/ASX 200 (AS51 INDEX), while there are 14 adds/ 9 deletes to the S&P/ASX300.
While we had forecast nearly all the changes, there are a few surprises. The big one’s the inclusion of Santos Ltd in the ASX20 and the deletion of Block (SQ2 AU).
Following its huge rally over the last few months, AVZ Minerals (AVZ AU) is a double inclusion to the S&P/ASX 200 and the S&P/ASX300 Index. Plus there are FTSE inflows.

Selected European Holdcos and DLCs: February ‘22 Report

By Jesus Rodriguez Aguilar

There is just one DLC left in this report, Rio Tinto, following the unification of BHP and Shell.
Discounts to NAV of holdcos have shown mixed performance: Alba, 38.9%; GBL, 29%; Heineken Holdings, 19%; Industrivärden, 10.1%; Investor B, 11.61%; Kinnevik B, 3.3%(premium); Porsche Automobile Holding, 27.7%.
Recommended trades: GBL vs. listed assets, Industrivärden vs. listed assets, Investor vs. listed assets, Porsche vs. VW (long 1 PAH3 GR/short 0.5136 VOW GR), Rio Tinto.

Before it’s here, it’s on Smartkarma

Mar 04

Event-Driven: Gazprom PJSC, VanEck Vectors Russia ETF, Taiwan Semiconductor Sp Adr, Prosus , Tullow Oil PLC, Hokuhoku Financial Group, China Infrastructure & Logistics Group and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Russia: Index Deletion & Impacts
Russia Gets the Boot from Major Indices – Minimal Impact But World’s Largest Small Sidepocket?
TSMC (TSM/2330 TT): Position for ADR Premium Expansion
StubWorld: Prosus’ Move On Russian Exposure Overdone
FTSE UK Index Series: March 2022 Index Changes and Trading Strategy
Hokuhoku Financial (8377 JP) – Buyback Dynamics For March… 👀
China Infrastructure & Logistics Group (1719 HK): Unconditional MGO Now Open

Russia: Index Deletion & Impacts

MSCI will move Russia to Standalone market status at the close on 9 March while FTSE will delete Russian securities from its indices at the close on 4 March.
There will be zero inflows to other markets in conjunction with Russia’s reclassification/ deletion since the fund managers cannot sell the Russian stock to raise cash.
Some delta one desks/ swap providers could make money on the deletion, while there are trades linked to the deletion from the indices.

Russia Gets the Boot from Major Indices – Minimal Impact But World’s Largest Small Sidepocket?

Major global indices have decided to relegate Russia to the “standalone” and “unclassified” market status due to sanctions and restrictions on transfer/payment/clearing.
Talk of significant flows into major non-Russia EM markets such as China, Taiwan, Korea, etc is misguided.
Russia was a non-negligible weight in global EM a few months ago, but GDRs have fallen dramatically and Russia-listed are effectively now portfolio pocket lint.

TSMC (TSM/2330 TT): Position for ADR Premium Expansion

The premium of Taiwan Semiconductor Sp Adr (TSM US) to TSMC (2330 TT) has dropped from 10% to nearly parity in slightly less than a month.
There is still no headroom available on the ADR and we expect the premium to move higher once the selling on the ADR is complete.
The SGX has recently launched single stock futures on Taiwan Semiconductor Sp Adr (TSM US). There could be market makers willing to provide liquidity which would make trade entry easier.

StubWorld: Prosus’ Move On Russian Exposure Overdone

Prosus (PRX NA) shares have nose-dived in light of its exposure to Russia via its classified ads business Avito, and social media operator, VK Group. This move appears overdone.
Preceding my comments on Prosus, 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%.

FTSE UK Index Series: March 2022 Index Changes and Trading Strategy

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. The quarterly index changes for March 2022 were announced yesterday.
Below is a discussion of the official results and potential trading strategies to generate market-neutral returns in the run up to the Inclusion Event.

Hokuhoku Financial (8377 JP) – Buyback Dynamics For March… 👀

Hokuhoku made a somewhat startling buyback announcement in late December and the shares jumped.
Then they bought back almost nothing in January, and bought back 17.4% of traded volume in February.
There is a lot left over and Hokuhoku remains one of the cheapest regional banks out there.

China Infrastructure & Logistics Group (1719 HK): Unconditional MGO Now Open

On the 10 January, China Infrastructure & Logistics Group (1719 HK) (“CILG”) has announced a possible MGO from Hubei Ports. The Composite Doc is now out. The Offer is open.
This transaction is an unconditional mandatory cash offer at HK$1.45/share.
The first – and likely, last close – is the 25 March. The Offeror intends to maintain CILG’s listing.

Before it’s here, it’s on Smartkarma

Mar 03

Event-Driven: Postal Savings Bank Of Chi-A, LG Energy Solution, Hitachi Metals, Vital Healthcare Property Trust, XPeng, Kadokawa Dwango, 51 Job Inc Adr, Crown Resorts, LG Chem Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE China A50 Index Rebalance: One Set of Surprises & Large Turnover
KRX New Deal Index Rebalance: No Surprises as LG Chem Not Deleted from Battery Index
Hitachi Metals (5486) – Where IS Undisturbed?
FTSE EPRA Nareit Index Rebalance: Four Inclusions for Asia; Some High Impact Names
FTSE China 50 Index Rebalance: Three Changes as Index Turnover Soars
Kadokawa – Rather Than Waste Time Considering a Sony Buyout of Square Enix Look at This Instead
51job (JOB US)’s Offer Price Back Up To $61
Crown Resorts: AUSTRAC And Prescribed Occurrences
51job’s Improved $61 Offer Gets the Board Onside
MSCI Announces It Will Exclude Russia from MSCI EM Indices

FTSE China A50 Index Rebalance: One Set of Surprises & Large Turnover

There are three sets of changes for the FTSE China A50 index at the March rebalance with implementation on 18 March. Two changes were expected while one is a surprise.
The March rebalance will also see the Foreign Ownership Limits applied to the stocks. Estimated one-way index turnover is 17.39% and will result in a one-way trade of CNY 9,360m.
As the surprises, we’d keep an eye on China State Construction A (601668 CH) and China Life Insurance (601628 CH) over the next few days.

KRX New Deal Index Rebalance: No Surprises as LG Chem Not Deleted from Battery Index

The announced changes are exactly in line with our forecasts with one change each for the Secondary Battery, Bio and Game Index. There are three changes to the Internet Index.
There are two changes to the BBIG Index with LG Energy Solution (373220 KS) replacing LG Chem Ltd (051910 KS) and AfreecaTV (067160 KS) replacing Douzone Bizon (012510 KS).
The largest buying impact will be on AfreecaTV (067160 KS) while the largest selling impact will be on Douzone Bizon (012510 KS), Soulbrain (357780) and LG Chem Ltd (051910 KS).

Hitachi Metals (5486) – Where IS Undisturbed?

Hitachi Metals (5486 JP) is currently awaiting regulatory approval for its takeover by a consortium led by Bain Capital, announced in late April 2021.
The deal was originally expected to see a Tender Offer launched in November 2021, but that was delayed because the bidders lacked some necessary regulatory approvals.
Since then, the stock has sold off. Today it sold off a LOT. Deal break? Market ructions? Someone getting a tap on the shoulder? How far down is the gap?

FTSE EPRA Nareit Index Rebalance: Four Inclusions for Asia; Some High Impact Names

There will be four inclusions for Developed Asia in the FTSE EPRA Nareit – One REIT, Takara Leben Real Estate Investment, Vital Healthcare Property Trust and ESR Kendall Square REIT.
There will be around US$77m to buy from passive funds across all inclusions. The largest impacts will be on Vital Healthcare Property Trust (VHP) and ESR Kendall Square REIT (365550).
The Japan inclusions are a result of the companies publishing reports in English with an independent auditor signing off on them.

FTSE China 50 Index Rebalance: Three Changes as Index Turnover Soars

As expected, Nongfu Spring (9633), China Overseas Land & Investment (688) and XPeng (9868) will replace Geely Auto (175), China Tower (788) and JD Health (6618) in the index.
The adds, deletes and capping changes will result in one-way turnover estimated at 9.14% and will result in a one-way trade of HK$4,576m.
Shorts in Nongfu Spring (9633 HK), JD Health (6618 HK) and China Tower (788 HK) have over 10 days of ADV to cover.

Kadokawa – Rather Than Waste Time Considering a Sony Buyout of Square Enix Look at This Instead

By Mio Kato

Over the past few quarters Square Enix has repeatedly been the subject of M&A speculation related to both Microsoft and Sony.
We consider such speculation to be nonsense and have repeatedly said so.
However, there is a far more intriguing M&A prospect in Kadokawa and it has not gotten much press…

51job (JOB US)’s Offer Price Back Up To $61

Back on the 12 January this year, 51 Job Inc (JOBS US) announced the Offeror had proposed reducing the merger consideration from US$79.05 in cash per common share to US$57.25.
Yesterday 51job said it has entered into a revised merger agreement at US$61.00/share, a 6.55% bump in terms, but still 22.8% down the initial terms.
Presumably, the amended proposal still requires no PRC regulatory filing. This transaction appears to be done this time, with completion in the 2Q22.

Crown Resorts: AUSTRAC And Prescribed Occurrences

AUSTRAC has commenced civil penalty proceedings against Crown Resorts (CWN AU) for alleged serious and systemic non-compliance with Australia’s anti-money laundering and counter-terrorism financing laws.
The statement of claim does not include any quantification of the penalty sought. For Blackstone to walk away from the Crown deal, the fine needs to be at least $750mn.
A prescribed occurrence appears to have been triggered. But technically, that is not accurate.

51job’s Improved $61 Offer Gets the Board Onside

The consortium has improved the offer price by 6.6% to $61.00 in cash per ADS. The consortium represents 54.9% of the voting rights.
The Board intends to recommend shareholders vote in favour of the transaction. The transaction is expected to close during the first half of 2022.
The combination of the improved offer price and the tech shares sell-off improves the chance of meeting the two-thirds shareholder approval threshold. At last close, the gross spread is 7.0%.

MSCI Announces It Will Exclude Russia from MSCI EM Indices

MSCI announced this morning (3 March) that it will exclude Russia from MSCI EM indices as of 9 March.
As a result of this decision, this will further devastate the Russian stock market but it should benefit other MSCI EM included countries including China, Korea, Taiwan, India, and Brazil.
Some of the Korean stocks which could benefit from the greater passive index capital flowing in include Samsung Electronics Pref, LG Chem Pref, and Hyundai Motor Pref.

Before it’s here, it’s on Smartkarma

Mar 02

Event-Driven: Li Auto, Toshiba Corp, Orix Corp, Nexon, Total Access Communication, Lucid Group, Hyundai Heavy Industries, Solus Advanced Materials and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HSI, HSCEI, HSTECH: March Rebalance Flows Post Capping
Toshiba – Privatisation Rebuttal and Then a Change in CEO…
Nikkei 225 Change – Shinsei (8303) OUT, ORIX (8591) IN
Nikkei 225 Index Rebalance: ORIX (8591) Replaces Shinsei Bank (8303)
Nexon – Founder Kim Jung-Ju Passes, Raises Question if Nexon Deal Is Back In Play
NBTC To Decide On True/DTAC Merger
Lucid (LCID) – Is This a Lucid Investment Opportunity?
FTSE All Cap Korea Rebalancing: VEA (Developed Ex-US All Cap)-Triggered Flow Estimations
The Passing of Nexon Founder KJJ & Controlling Stake Sale Event 2.0
Solus Advanced Materials: Announces Rights Offering Worth 240 Billion Won

HSI, HSCEI, HSTECH: March Rebalance Flows Post Capping

The March rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
The largest inflows will be on Alibaba Group (9988 HK), JD.com Inc. (9618 HK), Meituan (3690 HK), Nongfu Spring (9633 HK), Li Auto (2015 HK) and Lenovo (992 HK).
The largest outflows will be on HSBC Holdings (5 HK), Kuaishou Technology (1024 HK), China Construction Bank H (939 HK) and Tongcheng-Elong Holdings Ltd (780 HK).

Toshiba – Privatisation Rebuttal and Then a Change in CEO…

By Mio Kato

Yesterday Bloomberg published an interview with Toshiba CEO Satoshi Tsunakawa where he effectively said a privatisation was not going to happen.
Today, Toshiba announced that Tsunakawa and his deputy, Mamoru Hatazawa would be resigning effective immediately.
What an interesting coincidence… one which could make shorting Toshiba quite attractive.

Nikkei 225 Change – Shinsei (8303) OUT, ORIX (8591) IN

The Nikkei Index team announced changes to the Nikkei 225 Average today after the close.
Shinsei Bank (8303) is OUT and ORIX (8591) is IN based on the new rule changes effective with the new market structure in place at the TSE on 4 April.
There is a special sit on Shinsei, and ORIX has several days to buy. It could be interesting.

Nikkei 225 Index Rebalance: ORIX (8591) Replaces Shinsei Bank (8303)

Orix Corp (8591) replaces Shinsei Bank (8303) in the Nikkei 225 at the close of trading on 1 April due to Shinsei Bank not trading on the Prime Market.
We estimate there will be passive buying of 27.5m shares on Orix Corp (8591 JP) while there will be selling of 2.75m shares on Shinsei Bank (8303 JP)
There appears to be some pre-positioning on Orix Corp (8591 JP) – the stock could outperform heading into index inclusion.

Nexon – Founder Kim Jung-Ju Passes, Raises Question if Nexon Deal Is Back In Play

The founder and former chairman and CEO of Nexon (3659 JP) passed away according to both Nexon and his holding company NXC. Both announced it late afternoon 1 March.
NXC – the near-parent (47+% stake) of Nexon tried to sell Nexon/NXC in H1 2019 to no avail. Since then, profits have rebounded somewhat, and investments have multiplied.
The estate may wish to sell Nexon shares, or its entire stake, at some point near-term.

NBTC To Decide On True/DTAC Merger

Thailand’s Trade Competition Commission said that only the National Broadcasting and Telecommunications Commission has the authority to block the True Corp (TRUE TB) / Total Access Communication (DTAC TB) merger.
At issue, the government appears to be stonewalling the transition of the NBTC board, potentially abetting the merger.
Both True and DTAC are trading through their VTO terms, ignoring dividends.

Lucid (LCID) – Is This a Lucid Investment Opportunity?

By Robert C Prather Jr

Big valuation and multiples despite on delivering its first care in 4Q21 (no revenues and burning free cash flow)
Lofty delivery goals provided for 2022 and 2023….already disappointing investors
Optimistic market share and ASP assumptions have been made by management

FTSE All Cap Korea Rebalancing: VEA (Developed Ex-US All Cap)-Triggered Flow Estimations

The ETF that directly impacts the flow of Korean stocks within the FTSE indices is the Vanguard Developed Markets ETF (VEA), which tracks the FTSE Developed All Cap ex-US.
The FTSE rebalancing impact on Korean stocks has shown a pattern of bringing additional flow in the same direction as the VEA-triggered flow.
So, we may want to consider basket trading of those stocks with a more substantial level of passive impact x ADTV towards March 18.

The Passing of Nexon Founder KJJ & Controlling Stake Sale Event 2.0

We should pay the most attention to what choices and decisions the bereaved family will make concerning the stakes and management rights of the deceased in NXC.
This opens the possibility that the KJJ’s stake sale event in 2019 will happen again in the foreseeable future.
Under these circumstances, there is a possibility that short-term momentum trading aimed at tender offers to minority shareholders following the sale of Nexon’s major shareholder stake will surge.

Solus Advanced Materials: Announces Rights Offering Worth 240 Billion Won

Solus Advanced Materials announced that it will conduct a rights offering worth 240 billion won, representing 12.5% of its market cap.
We have a positive view on the rights offering mainly due to more attractive discount relative to current share price (22%) and reasonable valuations.
The company plans to increase its production capacity of battery copper foil from 24,000 tons by the end of 2021 to 132,000 tons by 2026.

Before it’s here, it’s on Smartkarma

Mar 01

Event-Driven: Money Forward, NIO Inc, Virtus Health, Hohsui Corp, Morinaga Milk Industry Co, Singapore Press Holdings, Activision Blizzard, Sezzle Inc, Zip Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

TOPIX Index Upweights: The Big April Basket 2022 (Pre-Event)
NIO Secondary Listing (9866 HK): Index Entry & Flow; HSCEI 22/23 Div Steepener Catalyst
BGH Ups The Ante For Control Of Virtus
Chuo Gyorui to Take Out Hohsui – Done Deal Easy Peasy.
Morinaga (2201) Mostly Exits Morinaga Milk (2264) – Big Buyback
Singapore Press Holdings – Aiyoh, Cuscaden Scheme No Chiong Finish. Sian. Money in May Agak Agak!
MergerTalk: Microsoft/Activision Blizzard-Why We Think This Transaction May Not Be Such A Gamble
Zip To Merge With BNPL Rival Sezzle
Zip Finally Lobs an Offer for Sezzle
BGH’s Revised Higher Offer for Virtus

TOPIX Index Upweights: The Big April Basket 2022 (Pre-Event)

The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation.
For companies with “low liquidity” the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation.
Every April, the application of this liquidity factor is reviewed by the TSE for all TSE1 constituents. This situation opens up interesting opportunities for a basket trade.

NIO Secondary Listing (9866 HK): Index Entry & Flow; HSCEI 22/23 Div Steepener Catalyst

NIO Inc (NIO US) has applied to list in Hong Kong by way of Introduction. No new shares will be issued or sold in connection with the Secondary Listing.
NIO Inc (9866 HK) will not get Fast Entry to the HSCEI INDEX and is unlikely to get Fast Entry to the Hang Seng Tech Index (HSTECH INDEX) either.
NIO Inc (9866 HK) should be included in the HSTECH INDEX in June, while inclusion in the HSCEI INDEX in September will require the stock to trade higher.

BGH Ups The Ante For Control Of Virtus

Fertility specialist Virtus Health (VRT AU) has received a revised non-binding takeover bid from BGH Capital of $7.65/share, less any dividends declared by Virtus. It had previously offered $7.10/share.
BGH also said it would vote its 19.99% stake against CapVest Partners’ cash offer of $7.60/share.
Back in CapVest’s court. A $0.05/share higher bid is unlikely to see the UK-based player fold its tent.

Chuo Gyorui to Take Out Hohsui – Done Deal Easy Peasy.

This is an agreement between one fish merchant Chuo Gyorui (8030 JP) and another fish merchant Nissui (1332 JP) to take over a third fish merchant, Hohsui Corp (1352 JP).
And the takeover PER and forecast PCFR are low. But there really is nothing fishy here. Hohsui has a lot of debt.
This is a done deal and there is nothing anyone can do about it.

Morinaga (2201) Mostly Exits Morinaga Milk (2264) – Big Buyback

Morinaga & Co is selling down a near-10% stake in Morinaga Milk in a ToSTNeT-3 buyback on 1 March.
Morinaga Milk will see an EPS and ROE uplift. Eventually, there are a lot more cross-holdings to buy back.
Near-, medium-, and longer-term there are different flow patterns worth understanding if you have a position or are looking for one. If you want to sell lots, you can tomorrow.

Singapore Press Holdings – Aiyoh, Cuscaden Scheme No Chiong Finish. Sian. Money in May Agak Agak!

The Cuscaden Scheme Composite Document is out. Finally. No points for the own time own target completion to the own time own target restructuring.
With the electronic despatch and an approximate timetable, last traded price gives 7.7% annualised agak agak.
At S$2.33, shareholders can lepak this to the close pretty easily.

MergerTalk: Microsoft/Activision Blizzard-Why We Think This Transaction May Not Be Such A Gamble

By Robert Sassoon

Microsoft’s all cash acquisition of video game publisher Activision Blizzard is the biggest in the former’s history and the largest ever transaction in the video gaming sector.
While intense regulatory scrutiny of the deal is expected, the arguments favoring high odds for eventual deal approval are reasonable.
We believe the 17% merger spread offers the prospect of double-digits annualized return over the next 12 to 18 months.

Zip To Merge With BNPL Rival Sezzle

Zip (Z1P AU) is offering 0.98 Zip shares for every Sezzle (SZL AU) share, a 22% premium to last close. Zip is raising $148.7mn to fund the deal.
Sezzle is incorporated in Delaware, therefore the merger is subject to those takeover rules, not ASX rules.
Zip reported a $214.3mn today. As Quinlan Associates put it, the Asia Pacific BNPL industry is more like “Buy Now, Pray Later”.

Zip Finally Lobs an Offer for Sezzle

Zip Co Ltd (Z1P AU) will offer a fixed exchange ratio of 0.98 Zip shares per Sezzle Inc (SZL AU) share, implying a 22% premium to Sezzle’s last close price.
The completion conditions include Zip and Sezzle shareholder approval along with regulatory approval. The exchange ratio is fair compared to historical ranges, in our view.
Considering the weak investor sentiment of the BNPL sector and ongoing sector consolidation, the proposed merger is a good solution for both sets of shareholders.

BGH’s Revised Higher Offer for Virtus

BGH’s revised scheme offer will pay $7.65 per Virtus Health (VRT AU) share, which is 0.7% and 2.0% higher than CapVest’s rival scheme (A$7.60) and off-market takeover offer (A$7.50), respectively.
BGH (19.99% stake) will vote against the CapVest scheme and will not accept any takeover offer from CapVest. Consequently, CapVest’s best option is an improved off-market takeover bid.
As CapVest’s offer is marginally below BGH’s revised offer, CapVest retains the potential to lob an improved offer, in our view.

Before it’s here, it’s on Smartkarma

Feb 28

Event-Driven: Nippo Corp, Douzone Bizon, ARA LOGOS, Enchem, Asia Pacific Telecom, Zip Co Ltd, Porsche Automobil Holding Se, CJ ENM and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Feb 2022
KRX K-New Deal Rebalancing: Latest Weight/Flow Update & LG Chem’s Complete Deletion
ARA LOGOS/ESR-REIT Scheme Meeting on 21 March, IFA Opinion
KOSDAQ 150 Rebalancing Screening & Passive Impacts: 10 Likely Changes
Asia Pacific Telecom in Taiwan Takeunder by Far EasTone – Sector Remake Needs FTC+NCC Approval
Zip to Acquire Sezzle: Buy Now, Pray Later?
PAR3/VOW3/Potential Porsche IPO
Tving: Value Surges by Nearly 6x to 2 Trillion Won in 7 Months – Impact on CJ ENM

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

JPX-Nikkei 400 is composed of common stocks listed in 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.
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-February 2022.

KRX K-New Deal Rebalancing: Latest Weight/Flow Update & LG Chem’s Complete Deletion

The biggest story should be LG Chem’s complete deletion from the entire indexes. It’s been said locally that KRX finally decided to remove LG Chem from the battery index.
AfreecaTV and Douzone Bizon will have the largest passive impacts, +1.72x and -3.89x ADTVs. The Chunbo and SoulBrain combo also seems in a sweet spot for a quick long/short setup.
LG Energy’s inflow should be at least 0.33x ADTV. Yes, LG Chem’s outflow deserves special attention. The combined impact is 0.6x ADTV, enough to make a splash on the price.

ARA LOGOS/ESR-REIT Scheme Meeting on 21 March, IFA Opinion

Under the revised scheme consideration, each ARA LOGOS (ALLT SP) unitholder will receive S$0.097 in cash and 1.7729 new ESR-REIT (EREIT SP) units at an issue price of S$0.4924.
The IFA considers the revised scheme consideration to be fair. We think that IFA’s valuation approach is broadly sound with some areas for improvement.
We think that the revised offer is reasonable. For a 28 April payment date, the gross and annualised spread is 2.9% and 18.2%, respectively.

KOSDAQ 150 Rebalancing Screening & Passive Impacts: 10 Likely Changes

We have ten likely changes based on the average market cap from November 1 last year to the previous close.
Among the additions, the passive impacts of NKMax (182400), Golfzon (215000), and Intellian Technologies (189300) are estimated to be relatively large.
Amond the deletions, the passive impacts of JNTC (204270), Optoelectronics Solutions (138080), Wonik Holdings (030530), Unison (018000), and Toptec (108230) are expected to be relatively substantial at the current DTV.

Asia Pacific Telecom in Taiwan Takeunder by Far EasTone – Sector Remake Needs FTC+NCC Approval

On Friday, Far Eastone Telecomm (4904 TT) announced in a Taiwan Stock Exchange filing that it would merge with long-suffering Asia Pacific Telecom (3682 TT) in a scrip merger.
The ratio chosen is a takeunder vs Friday’s closing price terms. An 18.8% hit for APT shareholders.
Shareholder structure suggests it gets done IF the FTC and NCC approve the deal, which would go against their approval last August of the FET capital injection into APT.

Zip to Acquire Sezzle: Buy Now, Pray Later?

Zip Co Ltd (Z1P AU) has agreed to acquire Sezzle Inc (SZL AU) in an all-scrip deal where Sezzle shareholders will receive 0.98 shares of Z1P per shares of SZL.
At last closing prices, the deal values Sezzle Inc (SZL AU) at A$2.1658/share, a 21.7% premium to the last close and a 31.7% premium to 30 day VWAP.
Zip Co Ltd (Z1P AU) has also announced a A$148.7m fully underwritten institutional placement and a A$50m non-underwritten share placement plan to strengthen its balance sheet.

PAR3/VOW3/Potential Porsche IPO

By Jesus Rodriguez Aguilar

I would value Porsche on 18.9x €5.3 billion 22eEBIT, i.e. €100bn; Ferrari, which has moderately higher EBIT margins (25% vs. 16%), trades on 31.2x EV/22e EBIT (Capital IQ consensus).
The current discount of VW prefs to ords is 23.2%. A Porsche IPO without major changes on VW share structure, would be positive for the preference shares. Long prefs/short ords.
An IPO of Porsche would be beneficial for the Porsche SE shares and the current discount to NAV should tighten even more, in my view. Long 1 PAH3 GR/short 0.5136 VOW GR.

Tving: Value Surges by Nearly 6x to 2 Trillion Won in 7 Months – Impact on CJ ENM

In the past week, it was announced that Tving, a leading local OTT service provider in Korea, received 250 billion won in investment, valuing it at about 2 trillion won.
Previous to this investment, Tving was last valued at 350 billion won in July 2021. In other words, Tving’s value surged by nearly 6x in the past seven months.
Our NAV per share of CJ ENM suggests a target price of 185,824 won, representing a 43% upside from current levels.

Before it’s here, it’s on Smartkarma

Feb 27

Event-Driven: SenseTime Group, E Mart Inc, Japan Lifeline, CIMIC Group Ltd, Daiwa Office Investment, Razer Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Index Rebalance & ETF Flow Recap: FTSE AW/AC, FTSE CH50/A50/TW50, KS200, NIFTY, STAR50, Russia
Emart Announces A Major Share Buyback Program
Japan Lifeline (7575 JP) Throws a Lifeline to Its Share Price
Last Week in Event SPACE: CIMIC, SK Square, AGL Energy, Mapletree, Z Energy, VW/Porsche
Daiwa Office REIT (8976) Buyback – It Looks Better Than It Probably Is
Asia-Pac Weekly Risk Arb Summary: CIMIC, AGL, Razer, Z Energy, G J Steel, Mapletree North Asia

Index Rebalance & ETF Flow Recap: FTSE AW/AC, FTSE CH50/A50/TW50, KS200, NIFTY, STAR50, Russia

Changes to the FTSE All-World/All-Cap were announced over the previous weekend, NIFTY was announced Thursday and STAR50 on Friday. LG Energy’s inclusion to the KOSPI200 was also announced.
21 February was the review cutoff for the March rebalance of the FTSE China 50, FTSE China A50, STI, FTSE TWSE Taiwan 50 and the FTSE EPRA Nareit.
On Friday, FTSE announced that two of the previously announced inclusions would not be added, while there would be 10 new additions to the All-World/All-Cap indices.

Emart Announces A Major Share Buyback Program

On 25 February, E Mart Inc (139480 KS) announced that it will buy back 1 million shares, representing 3.6% of its outstanding shares. Currently, Emart has 87,464 treasury shares.
We believe Emart’s share price is well positioned to continue to outperform the market in the next several months, driven by the large buyback program.
Emart is currently trading at 0.4x P/B (38% lower than the historical valuation multiples). One could argue that Emart is valued at an excessive discount to the historical valuations.

Japan Lifeline (7575 JP) Throws a Lifeline to Its Share Price

Japan Lifeline announced a buyback on Friday after the close.
The stock saw a huge growth spurt in the first half of the last decade but slowed down post 2018. So the stock has significantly underperformed the sector.
The buyback parameters and the stock’s trading history suggest that with the stock near a 5-year low, it is worth looking a little deeper.

Last Week in Event SPACE: CIMIC, SK Square, AGL Energy, Mapletree, Z Energy, VW/Porsche

Hochtief AG (HOT GR) has finally launched an unconditional offer for the rest of CIMIC Group Ltd (CIM AU) (where it already owns 78.58%).
SK Square (402340 KS) was inexpensive after its November listing. Now it’s even cheaper.
Canada-Based asset manager Brookfield Asset Management (BAM US) and Australian billionaire Mike Cannon-Brookes have combined to purchase all of AGL Energy Ltd (AGL AU) at A$7.50/share

Daiwa Office REIT (8976) Buyback – It Looks Better Than It Probably Is

Daiwa Office Investment (8976 JP) announced on Thursday an extraordinary but minor income amount from a legal settlement, and a buyback.
This buyback resembles those conducted from February to May 2018 and 2021.
A look at the pattern of buyback execution vs parameters and of Daiwa Office performance vs the sub-sector within prior buybacks is worthwhile.

Asia-Pac Weekly Risk Arb Summary: CIMIC, AGL, Razer, Z Energy, G J Steel, Mapletree North Asia

There are currently 42 – mostly firm – transactions currently being discussed and analysed on Smartkarma.
Two new deals this week: Hochtief AG (HOT GR) for CIMIC Group Ltd (CIM AU); Brookfield Asset Management (BAM US) for AGL Energy Ltd (AGL AU).
Key updates took place for: Razer (1337 HK), Apollo Tourism (ATL AU), Aventus (AVN AU), Z Energy (ZEL NZ), G J Steel (GJS TB), and Mapletree North Asia Commercial (MAGIC SP).

Before it’s here, it’s on Smartkarma

Feb 26

Event-Driven: Toshiba Corp, Shanghai Medicilon Inc, Z Energy Ltd, Avast PLC, Samsung SDI and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba – Why Renesas Might Be a Better Option for the Devices Business than an IPO
STAR50 Index Rebalance: Index Committees Just Wanna Have Fun
Z Energy (ZEL NZ): Scheme Booklet Out. Meeting On The 25 March
NortonLifeLock/Avast: Deal Progress & Spreads
FnGuide Samsung Group Index Rebalancing Preview

Toshiba – Why Renesas Might Be a Better Option for the Devices Business than an IPO

By Mio Kato

We have made no secret of the fact that we consider Toshiba’s restructuring plans to be unspectacular.
Initially we saw no reason to separate the infrastructure business and saleable assets but with that issue addressed it is the position of the devices business which concerns us.
This is because we feel it is rather undersized to stand on its own two feet… but we increasingly feel that Renesas could be the ideal home for the unit.

STAR50 Index Rebalance: Index Committees Just Wanna Have Fun

In keeping with tradition, the SSE and CSI have continued to use a 6 month minimum listing history. No one remembers how or why it started, but it carries on.
There are only 10 trading days to implementation and passive funds will need to trade multiple days of ADV on the inclusions and exclusions.
The adds, deletes and the SSE STAR50 (STAR50 INDEX) have moved in lockstep since November. The CSI500 Index has outperformed over the period opening up a trading opportunity.

Z Energy (ZEL NZ): Scheme Booklet Out. Meeting On The 25 March

Z Energy Ltd (ZEL NZ)‘s Scheme Booklet is now out. The Scheme Meeting will be held on the 25 March.
The Independent Advisor has concluded the Offer from Ampol (ALD AU) is fair and reasonable and in the best interest of ZEL shareholders.
The spread to terms is attractive here assuming implementation in the second quarter of 2022.

NortonLifeLock/Avast: Deal Progress & Spreads

By Jesus Rodriguez Aguilar

On 24 February, the Spanish antitrust regulator, the National Markets and Competition Commission (CNMC) approved the proposed merger.
All Regulatory Conditions have now been satisfied, other than approval by the UK’s CMA. The deal advances to completion but the Effective Date has been pushed to 4 April 2022.
As of now, the majority cash option ($7.61 + 0.0302 NortonLifeLock shares/Avast share) should be preferred vs. the majority stock option. The spread on the majority cash option is 1.4%.

FnGuide Samsung Group Index Rebalancing Preview

FnGuide Samsung Group has the most AUM among locally themed indexes. As of last Friday’s closing price, AUM is ₩1.52T.
The share price movements of Samsung Group affiliates basically show high cointegration. Therefore, a small differential impact on the flow significantly affects the short-term price direction of these stocks.
So, we should consider a long/short setup on a swing trading window. Particularly, we need to focus on the first two trading days, when the rebalancing impact is relatively significant.

Before it’s here, it’s on Smartkarma