Event-Driven

There are 17 adds and 8 deletes for the Asia Pacific region. Most of the changes were expected, but there are a few surprises.
China Resources Microelectronics-A (688396 CH), Grab (GRAB US) and Lufax Holdings (LU US) have been added, while Qinghai Salt Lake (000792 CH) and Pop Mart International (9992 HK) have not.
The last tranche of Sea‘s inclusion in the SIMSCI INDEX will take place at the QIR. With the inclusion of GRAB, there will be two foreign listings in the SIMSCI.

Toyota Industries Back To Covid Lows Vs. Toyota Motors

Toyota Industries (6201 JP)‘s implied stub and simple ratio with 8.5%-held Toyota Motor (7203 JP) has significantly bifurcated in the last 12 months.
Yet recent and forward earnings at the stub level indicate this dislocation is unjustified.
Toyota Industries is a set up at this current level.

Shimizu Corp Partial Offer for Nippon Road (1884 JP) May Get Interesting

Shimizu Corp (1803 JP) has held ~25% of Nippon Road (1884 JP) and has now announced a Partial Tender Offer to go to 50.1%. It’s a 20-year high, but…
… it’s the wrong price. And it has been. And a quasi-activist has built a 16% stake in recent years.
The question is whether this gets done. They only need to buy 25.25% out of the 75% they don’t own, but it’s a question.

LG Energy IN/LG Chem OUT: TIGER (WISE) Done on Feb 8 & KODEX (FnGuide) Under Progress Until Feb 22

For KODEX (FnGuide), the actual rebalancing trading must have begun yesterday, Feb 8, and runs until Feb 22, presumably at an equal daily weighting.
TIGER (WISE) announced that its implementation of LG Energy IN/LG Chem OUT was completed as of the end of yesterday.
As for the daily passive impact from KODEX until Feb 22, LG Energy is expected to receive an inflow of 0.03x DTV, whereas LG Chem’s outflow should be -0.10x ADTV.

KOSPI Size Index Series Rebalancing Screening Results

KOSPI Size Index Series rebalances twice a year in March and September. The base date is February 28. It is a three-month review, so, from December 1 to February 28.
In the KOSPI size index rebalancing, an increase in the buying volume of local institutions for stocks moving from LargeCap to MidCap is generally detected.
14 new MidCap entrants are expected to have a sizable passive impact.

I O Data Device (6916) MBO – Not as Clean And Nice As One Would Like

This MBO is designed to for the 77-year-old Founder to take the company private.
The evolution of the balance sheet the last 12-18 months has been a little strange, and may not be benign. It has certainly changed the fair value lower.
The question, as always, is whether someone will take this up.

MSCI Feb 2022 Index Rebalance: Float/Share Changes

MSCI announced the changes to the Standard Index pre market open in Asia today. There were changes to the number of shares and free floats for stocks too.
The increase in the IIF on Sea Ltd (SE US) was known, while the increase in FIF on SK Square (402340 KS) was expected.
There are quite a few stocks that have over US$10m to trade or over a days ADV to trade from passive funds. These could be interesting to watch.

MSCI Korea February 2022 Review: Sell the News

MSCI announced the additions and deletions to the MSCI Korea Index today. The two additions include Meritz Financial Group (138040 KS) and Meritz Fire & Marine Insurance (000060 KS).
The two deletions include Shinpoong Pharmaceutical (019170 KS) and Douzone Bizon (012510 KS).
These changes have been mostly expected by the market. As a result, sell the news (ie, sell Meritz Financial Group & Meritz F&M Insurance and Buy Douzone Bizon).

Kumho Petrochemical: Restart of the M&A Fight Between Uncle and Nephew

Kumho Petro Chem’s price rose by 9.3% to 164,000 won on 9 February due to a renewed potential M&A fight between Park Chul-Wan (nephew) and his uncle Park Chan-Koo (uncle).
It was announced that Park Chul Wan had sent a shareholder proposal ahead of next month’s AGM, recommending candidates to replace outside directors.
The sharp decline in share price of the company in the past 8 months is likely to encourage some minority shareholders to demand more changes in the company.

Advent & CenterBridge/Aareal Bank AG: Lapsed Offer

By considering both Advent’s valuation of Aareon and Aareon’s multiple implied valuation, the consortium was paying 0.43x P/BV for the banking business, well below comparables trading at 1.4x.
It is no surprise then that the offer lapsed. According to my SOTP, by conservatively applying 0.8x P/BV for the banking business, upside for the shares ranges from 52-62%.
Recommendation is long ARL GR. The shares represent good value and the catalyst is the future spin-off.

Before it’s here, it’s on Smartkarma

Feb 09

Event-Driven: Alibaba Group, LG Energy Solution, Hogy Medical, Toa Corp, Cineworld, SK Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Alibaba (9988 HK/BABA): Possible Softbank Sale and Passive Impact
Solactive Global Lithium Index (LIT): Earlier Implementation Expected for LG Energy & LG Chem
Huge Hogy Medical (3593) Buyback from the Founding Family
Toa Corp (1885 JP) – Another Big Buyback for a Murakami Company
FTSE UK Index Series: Leaderboard for March 2022 (2.0)
SK Inc: Significant Gains of Nearly 1.1 Trillion Won in Londian Wason Holdings

Alibaba (9988 HK/BABA): Possible Softbank Sale and Passive Impact

Alibaba Group (9988 HK) has filed a F-6EF Registration Statement to register an additional 1bn ADS. This will most likely be Softbank Group selling part (or all) of the stake.
There is a possibility that Softbank Group (9984 JP) is looking to use the stock as collateral for a financing trade and moving their holdings to a more liquid market.
If Softbank Group (9984 JP) sells some of their shares, there will be buying from MSCI and FTSE trackers. There will be minimal buying from HSI, HSCEI and HSTECH trackers.

Solactive Global Lithium Index (LIT): Earlier Implementation Expected for LG Energy & LG Chem

As for LG Energy’s inclusion timing, Solactive made a rule change, presumably designed for LG Energy’s earlier entry on April 29.
Since LG Chem also has a battery-related business, LG Chem may remain in this index. However, the possibility should be low because its battery business is small in total sales.
LG Chem will experience an outflow of ₩250B (1.0x ADTV). And assuming that LG Energy receives 4.75%, a passive impact of 0.31x at a DTV of 1.5M shares is expected.

Huge Hogy Medical (3593) Buyback from the Founding Family

Hogy Medical’s founder passed and there was a re-arranging of deckchairs among the Hoki family ownership in 2021.
Earnings are not growing yet, but the mix is improving on a forward basis and consensus is decidedly more bullish than trend would suggest.
Now the company is buying back a LOT of stock from the Hoki family. This changes things.

Toa Corp (1885 JP) – Another Big Buyback for a Murakami Company

Toa Corp (1885) is a niche infrastructure construction play with a decent growing business and a recent change in shareholder return policy.
They bought back back 6% of shares in 2019. Then launched another 6% buyback in 2021. And now have announced another 6% buyback for 2022.
The shareholder structure and the return profile bear closer investigation.

FTSE UK Index Series: Leaderboard for March 2022 (2.0)

The FTSE UK Index Series is a widely tracked family of sub-indices representing the performance of the public equity market 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 that can happen in the March 2022 Rebalance for the FTSE 100 and FTSE 250 Indices.

SK Inc: Significant Gains of Nearly 1.1 Trillion Won in Londian Wason Holdings

It has been confirmed that Londian Wason Holdings Co, a Chinese copper foil material producer, is pushing for a listing on the Hong Kong Stock Exchange in 2022.
Londian Wason Holdings’ value could reach nearly 5 trillion won. SK Inc’s 30% stake could be valued at about 1.5 trillion won.
Our updated SoTP valuation of SK Inc suggests implied price of 294,591 won per share, representing a 34% upside from current levels.

Before it’s here, it’s on Smartkarma

Feb 08

Event-Driven: Toshiba Corp, Bapcor Ltd, China Mobile, Meitetsu Transport, Daimler Truck Holding, ADVA Optical Networking SE, Mitsubishi Estate Logistics, Senex Energy and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Toshiba – 16 Millionth New Plan Unlocks New Value! No Just Kidding It Didn’t
Bapcor (BAP AU): Potential Suitors Kicking Tyres
China Mobile (941 HK) Buyback Period Starts
Meitetsu Transport (9077) Takeover – Parent “Stealing” Logistics Assets at 0.55x Book
DAX Index: Quiddity Leaderboard for March 2022 (2.0)
ADTRAN/ADVA Optical Networking: Additional Acceptance Period
Mitsubishi Estate Logistics (3481 JP): Offering Could Trigger Outperformance Vs Peers
Senex Energy: Scheme Booklet Out. Meeting On The 15 March

Toshiba – 16 Millionth New Plan Unlocks New Value! No Just Kidding It Didn’t

By Mio Kato

Another quarter, another Toshiba Medium Term Plan as activist investors keep sending management back to the drawing board until they come back with a privatisation.
Except there is still no sign of any significant appetite among buyers and no sign that they would be allowed to go through with it even if there was.
So Toshiba management shuffled a few deck chairs and the market yawned.

Bapcor (BAP AU): Potential Suitors Kicking Tyres

Automotive aftermarket parts provider Bapcor Ltd (BAP AU) has reportedly recently received two buyout proposals.
This follows the sudden departure of former CEO Darryl Abotomey in December.
Confirmation of these approaches may be clarified when 1H22 results are released on the 9 February.

China Mobile (941 HK) Buyback Period Starts

China Mobile (941 HK) announced an H-share buyback program which had as its upper limit the purchase of 37% of the H-share CCASS position.
After that, the SOE parent announced a plan to buy RMB shares in Shanghai.
The virtuous cycle of shareholder return starts today. Today is the first day China Mobile can start buying its H-shares.

Meitetsu Transport (9077) Takeover – Parent “Stealing” Logistics Assets at 0.55x Book

This should come as no surprise. Nagoya Railroad (9048 JP) is buying out minorities in logistics unit Meitetsu Transport (9077 JP).
Given the shareholder structure, this can be done and squeezed out with not a single share tendered, but it’s ugly.
Logistics REITs trade at 1.3-1.5x book. This is being done at 0.55x book where just 1.0x book for the warehouse assets would be more than the EV at Takeover Price.

DAX Index: Quiddity Leaderboard for March 2022 (2.0)

DAX is a German blue-chip index that currently 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 March 2022 review.

ADTRAN/ADVA Optical Networking: Additional Acceptance Period

Adtran lowered the minimum acceptance threshold from 70% to 60%; the condition was thus fulfilled by the end of the initial acceptance period. Additional acceptance period runs until 14 February.
The consummation of the offer continues to be subject to closing conditions not yet fulfilled, especially foreign direct investment approval in Germany.
A 15% increase in the ADVA share price since the threshold condition was fulfilled has caused the spread to become negative (-3.4%). If you were already long, recommendation is tender.

Mitsubishi Estate Logistics (3481 JP): Offering Could Trigger Outperformance Vs Peers

After the close on 7th February 2022, logistics JREIT Mitsubishi Estate Logistics (3481 JP) (“MEL”) announced a follow-on equity offering to fund part of their recently announced property acquisition.
The primary offer quantity is 56,000 units. In addition, there will also be an over-allotment quantity of 2,800 units. The total size of this offering could be roughly ¥24.5bn (~US$213mn).
Below is a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

Senex Energy: Scheme Booklet Out. Meeting On The 15 March

Senex Energy (SXY AU)‘s Scheme Booklet is now out. The Scheme Meeting will be held on the 15 March.
The Independent Expert has concluded this US$600mn Offer is fair and reasonable and in the best interest of Senex shareholders.
The Offer price is full. And trading tight to terms.

Before it’s here, it’s on Smartkarma

Feb 07

Event-Driven: Mapletree Commercial Trust, Singapore Press Holdings, Ping An Insurance Group Co Of China, Shinsei Bank, Seibu Holdings, Huchems Fine Chemical, Shanghai Medicilon Inc, LG Energy Solution, Seven & I Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Mapletree Commercial Trust – Heads I Win Tails I Win?
SPH Shareholders – A Good Deal For Waiting (After a Good Deal of Waiting)
Ping An A/H: At Parity Now; Position for Premium Expansion
2022 High Conviction – Shinsei Bank Update
Seibu Holdings – Asset Heavy To Asset Lighter if Not Fully Asset Light
Short Selling Full Resumption Schedule & Immediate Candidates Filtering
STAR50 Index Rebalance Preview (March 2022): Falling Knives
LG Energy & LG Chem Passive Flow In/Out Estimations & Trading Considerations on February 9
Seven & I: Selling Sogo Seibu Is Just the Start

Mapletree Commercial Trust – Heads I Win Tails I Win?

Then-Underperforming Mapletree Commercial Trust (MCT SP) and Mapletree North Asia Commercial Trust (MAGIC SP) announced a merger on the last day of 2021. Then it underperformed some more.
The price uplift for MAGIC unitholders was lost. FYQ3 Earnings announced in late January were good for both (better for MNACT), but MCT is still underperforming the sector.
That seems to set MCT buyers up for a Heads I Win Tails I Win scenario.

SPH Shareholders – A Good Deal For Waiting (After a Good Deal of Waiting)

The Combination Cuscaden – Keppel Scheme Offer Meetings for Singapore Press Holdings (SPH SP) shareholders should come imminently.
Time has passed and that should be worth something. Astute shareholders have likely already made their feelings known. Everyone should.
In the meantime, there is a good spread, with a put option on a portion of it, and the possibility of a little upside.

Ping An A/H: At Parity Now; Position for Premium Expansion

After trading at a 12% premium as recently as a month ago, Ping An Insurance Group Of China (601318 CH) is trading at parity to Ping An Insurance (2318 HK).
There is still some room left to reach the lower target on the A-share buyback. Once done, there could be more buying to reach the upper end of the target.
Northbound Stock Connect holdings on the A-shares have been increasing over the last few months, though there will be outflows from FTSE China A50 Index (XIN9I INDEX) trackers in March.

2022 High Conviction – Shinsei Bank Update

Shinsei Bank (8303 JP) is/was my High Conviction call for 2022.
SBI went to 47.77% in the Tender and is higher as Shinsei has bought back stock. Shinsei has more to go and could get funkier to buy back more.
8 February is the EGM to approve a new board and explicit SBI control. Delisting expectations will rise after that, but practically it will take time.

Seibu Holdings – Asset Heavy To Asset Lighter if Not Fully Asset Light

Seibu Holdings created a new Medium Term Management Plan in May 2021 including what it called Big, Hairy, Audacious Goals, or BHAGs.
That goal was to move a longtime asset-heavy business to an asset-light model by selling hotel and leisure assets, securitising others, and undergoing a Whole Business Restructuring.
Seibu Construction was sold in January and now it looks like 30 out of 40-odd Japan hotel and leisure facilities are nearly a done deal with a sale to GIC.

Short Selling Full Resumption Schedule & Immediate Candidates Filtering

The local regulators will likely announce a full resumption of short selling within this month, and it will likely be implemented either next month or at the latest within April.
Immediate candidates filtering on KOSPI (outside KOSPI 200): Huchems Fine Chemical, Hana Tour, Samyang Foods, and Douzone Bizon.
Immediate candidates filtering on KOSDAQ (outside KOSDAQ 150): UniTest and Kolon Life Science.

STAR50 Index Rebalance Preview (March 2022): Falling Knives

The review period ended last week. There will either be 4 or 5 changes to the SSE STAR50 (STAR50 INDEX) depending on the minimum listing history period used.
Shanghai Medicilon Inc (688202 CH) is a high probability inclusion while there are 4 high probability deletions, irrespective of the minimum listing history period used.
The potential inclusions have continued to drop and have underperformed the potential deletions. The next couple of weeks could see a reversal in that trend.

LG Energy & LG Chem Passive Flow In/Out Estimations & Trading Considerations on February 9

There is recently a growing view that the ETF operators (KODEX and TIGER) will conduct most of the rebalancing trading on February 9 to avoid excessive tracking errors.
LG Chem will face an outflow of ₩0.38T (0.8% of SO and 1.37x ADTV). LG Energy would be 0.36x ADTV and 0.31% of SO, assuming a DTV of 2M shares.
This is definitely a clear long/short setup opportunity: LG Energy LONG/LG Chem SHORT position. Alternatively, we can also consider approaching this event with Battery ETFs LONG/LG Chem Short setup.

Seven & I: Selling Sogo Seibu Is Just the Start

By Michael Causton

Numerous reports indicate that Seven & I is preparing its Sogo Seibu department store subsidiary for sale.
This follows years of calls from major investors to dispose of underperforming assets at Japan’s second largest retail conglomerate.
Seven & I still has many problems to solve in its domestic business. Ito-Yokado remains the biggest problem but perhaps won’t be disposed of while the company’s 98-year old founder lives.

Before it’s here, it’s on Smartkarma

Feb 06

Event-Driven: Goo Chemical, BHP Group, LG Energy Solution, Sydney Airport and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Goo Chemical (4962 JP) MBO – Super Illiquid Kyoto-Based Specialty Chems Maker – A Done Deal
Last Week in Event SPACE: BHP, Bank Of East Asia, Sydney Airport, Boral
Index Rebalance & ETF Flow Recap: MSCI, HSI, NIFTY 50/100/BANK, ASX200, PCOMP, KRX New Deal
Asia-Pac Weekly Risk Arb Summary: Irongate, Virtus, ICar Asia, Aventus, Sydney Airport, CLPH

Goo Chemical (4962 JP) MBO – Super Illiquid Kyoto-Based Specialty Chems Maker – A Done Deal

This is a PE Fund-sponsored MBO of a small Kyoto-based specialty chemicals manufacturer.
It is far less liquid than the market cap would suggest, which tells you something about the very un-transparent shareholder register.
This is theoretically an “independent” deal with a majority-of-minority but it will get done at a slightly too low price because of huge friendly shareholder base.

Last Week in Event SPACE: BHP, Bank Of East Asia, Sydney Airport, Boral

If BHP Group (BHP AU) announces an off-market buyback, there will be demand to replace the shares bought back, re-based higher.
Bank of East Asia (23 HK)is trading cheap as Elliott throws in the towel.
The Sydney Airport (SYD AU) selldown could be larger than people expect, and it is a decent chance to put on the arb trade.

Index Rebalance & ETF Flow Recap: MSCI, HSI, NIFTY 50/100/BANK, ASX200, PCOMP, KRX New Deal

The big event in the coming week is the MSCI Feb QIR announcement. Sydney Airport (SYD AU) will be deleted from indices after the close of trading on 9 February.
There are quite a few changes expected across the NIFTY Index (NIFTY INDEX), Nifty Bank Index (NSEBANK INDEX) and NIFTY100 Indices. The PCOMP INDEX rebalances on 11 February.
There were large inflows to Australia focused ETFs during the week, while Japan saw some pretty chunky outflows from a few ETFs.

Asia-Pac Weekly Risk Arb Summary: Irongate, Virtus, ICar Asia, Aventus, Sydney Airport, CLPH

There are currently 46 – mostly firm – transactions currently being discussed and analysed on Smartkarma.
Three new deals were discussed this week: Charter Hall (CHC AU) for Irongate (IAP AU); Daifuku (6383 JP) for Contec Co (6639 JP); Hinode for At Group Co (8293 JP).
Keys updates took place for: Virtus Health (VRT AU), iCar Asia (ICQ AU), Aventus Group (AVN AU),Sydney Airport (SYD AU), and China Logistics Property Holdings (1589 HK)

Before it’s here, it’s on Smartkarma

Feb 05

Event-Driven: Monde Nissin Corp, Time Interconnect Technology, China Logistics Property Holdings, At Group Co Ltd, Seven & I Holdings, Contec Co Ltd, IMMOFINANZ AG and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

PCOMP Index Rebalance: EMP, MONDE Could Pop; BLOOM, RRHI Could Drop
Time Interconnect (1729 HK): Possible Offer
CLPH (1589 HK): Composite Doc Out. Offer Now Open
AT Group (8293 JP) MBO – Looks Fully Priced But A Closer Look Is Warranted
Seven & I’s Response: Dispels Accusations But Gives in to ValueAct’s Demands
Daifuku (6383) To Take Out Minorities in Subsidiary Contec (6639)
CPI/Immofinanz: CPI Matches S Immo’s Offer and Secures Another Stake

PCOMP Index Rebalance: EMP, MONDE Could Pop; BLOOM, RRHI Could Drop

Emperador Inc (EMP PM) and Monde Nissin Corp (MONDE PM) will replace Bloomberry Resorts (BLOOM PM) and Robinsons Retail Holdings (RRHI PM) in the Philippines Stock Exchange PSEi Index (PCOMP).
There will be a lot to trade from passive funds. Implementation will take place at the close on 11 February – there are only 5 days to go.
Emperador Inc (EMP PM) has rallied over the last month while the deletions have traded lower. As re-opening plays, the passive selling could provide an opportunity to buy the deletes.

Time Interconnect (1729 HK): Possible Offer

Time Interconnect Technology (1729 HK) is currently suspended “pursuant to The Hong Kong Code on Takeovers and Mergers“.
Paul Lo, the chairman, recently increased his stake to ~75% of shares out. A large parcel of shares moved into CCASS late last month.
Paul Lo, if he is the Offeror, is unlikely to table an Offer price significantly higher than the last close, given the recent price increase. A take under is possible.

CLPH (1589 HK): Composite Doc Out. Offer Now Open

China Logistics Property Holdings (1589 HK)‘s Composite Document has now been despatched. The Offer is open for acceptance with a first close on the 25 February.
The Offer from JD.com is conditional on 50% acceptances, with 66.4% in the bag.
Done deal and trading through terms. The IFA considers the Offer is fair and reasonable.

AT Group (8293 JP) MBO – Looks Fully Priced But A Closer Look Is Warranted

The CEO and family leader Yamaguchi-san is launching an MBO to take out one of the largest Toyota dealers out there.
Optically, it looks fully-priced, with significant net debt and a 74% takeover premium. A closer look is, however, warranted.
This is large enough (despite illiquidity) to be interesting, and it could get interestinger.

Seven & I’s Response: Dispels Accusations But Gives in to ValueAct’s Demands

By Oshadhi Kumarasiri

Seven & I Holdings (3382 JP) is down 2.71% today following the company’s response to ValueAct’s public letter.
We think this share price move is unwarranted and driven by a false interpretation that Seven & I’s response is a rebuttal.
Therefore, we would be using this as an opportunity to add more Seven & I shares.

Daifuku (6383) To Take Out Minorities in Subsidiary Contec (6639)

Daifuku Co Ltd (6383 JP) today (4 Feb) announced it would take out TSE-2 industrial computing/IoT subsidiary Contec Co Ltd (6639 JP) in a tender offer at 55% premium.
That looks nice, and should have been expected at some point. But it is only half-generous.
The shareholder structure tells you how this is likely to end up.

CPI/Immofinanz: CPI Matches S Immo’s Offer and Secures Another Stake

CPI advances in its takeover and already owns 19.25% of the share capital of Immofinanz, with 28.92% conditionally contracted (at €23/share), thus a combined stake of 48.18% of Immofinanz.
The raised offer price also represents 19.7x EV/Fwd EBIT, 18.4x Fwd P/E, 22.9x deal value/Est. FFO and 76.7% deal value/consensus NAV (source Capital IQ), still not recommended by Immofinanz’s Board.
Immofinanz trades at at 4.3% 22e FFO yield and 3.4% 22e dividend yield. My TP, economic profit based is €25.86/share, 12.2% discount to EPRA NTA. Recommendation is long IIA AV.

Before it’s here, it’s on Smartkarma

Feb 04

Event-Driven: Nongfu Spring, Telix Pharmaceuticals, Sony Corp, Microstrategy Inc Cl A, LG Energy Solution, Virtus Health and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HSI Index Rebalance Preview (March 2022): The Slow Crawl Continues
ASX200 Index Rebalance: Telix Pharma to Replace Sydney Airport
TOPIX-Nikkei Skew Trade Starting to Work Nicely
S&P/ASX200: Sydney Airport OUT Telix Pharma IN, and Lots of SYD For Sale
Microstrategy’s Unsurprising Bitcoin Loss
KOSPI 200 Rebalancing Screening: Prediction Likelihood, Special Issues, & Passive Impacts
BGH Lodges Application With The Takeovers Panel Over CapVest’s Bid for Virtus
FnGuide TIGER Top 10 Rebalancing: LG Energy IN & Celltrion OUT

HSI Index Rebalance Preview (March 2022): The Slow Crawl Continues

The March rebalance should see the slow crawl toward 80 index members continue. We should get up to 68-70 members in March. Reaching 80 by June is unlikely.
High probability inclusions are Kuaishou Technology (1024 HK), Smoore International (6969 HK), Nongfu Spring (9633 HK), JD Health (6618 HK) and JD Logistics (2618 HK).
Currently, index turnover due to capping/float changes is low which will allow more stocks to be added to the index. Increase in the turnover will result in fewer changes.

ASX200 Index Rebalance: Telix Pharma to Replace Sydney Airport

Sydney Airport (SYD AU) will be deleted from the S&P/ASX 200 (AS51 INDEX) after the close of trading on 9 February and Telix Pharmaceuticals (TLX AU) will be included.
There will be selling on Sydney Airport (SYD AU) from MSCI, FTSE and S&P/ASX trackers and there could be opportunities for arbs to buy below the offer price and tender.
The recent institutional placement, share purchase plan and promoter selldown could put a lid on Telix Pharmaceuticals (TLX AU)‘s stock price heading into the index inclusion.

TOPIX-Nikkei Skew Trade Starting to Work Nicely

By Mio Kato

After initially grinding up slowly but underperforming the Nikkei our suggested skew trade gave up ground during the new year sell off.
It did so slowly, however and was outperforming Nikkei when last we checked despite being down slightly.
Thankfully, a lot of the idiosyncratic volatility hurting the skew trade has reversed now and it is positive and outperforming Nikkei consistently.

S&P/ASX200: Sydney Airport OUT Telix Pharma IN, and Lots of SYD For Sale

The Sydney Airport ASX200 exclusion sets up with Telix Pharma replacing it, and two more likely changes – one each in ASX50 and ASX100.
Telix as an inclusion is a known known. The others are too.
Sydney Airport will end up seeing a LOT of stock for sale on 9 Feb at the close.

Microstrategy’s Unsurprising Bitcoin Loss

Microstrategy Inc(MSTR US) reported a net loss of $90mn or $8.43/share in the fourth quarter, missing consensus estimates for a profit of US$0.89/share.
The loss is predominantly due to the inclusion of impairment losses of US$146.6mn on its Bitcoin holdings, negating the $110.5mn in gross profit from the software ops.
MicroStrategy remains a bet on Bitcoin. Yet almost any alternate cryptocurrency security appears a better bet, if that is your bent.

KOSPI 200 Rebalancing Screening: Prediction Likelihood, Special Issues, & Passive Impacts

The screening results based on the average market cap for the screening period until the last closing price have seven additions/deletions.
LG Energy will make Fast Entry. The one to make room for LG Energy should be Dongwon F&B, an additional deletion to the seven deletions through the preliminary filtering.
F&F Holdings may fail to meet the minimum float rate. If it doesn’t make KOSPI 200 this time, Hyundai Marine & Fire Insurance will get to stay in the Index.

BGH Lodges Application With The Takeovers Panel Over CapVest’s Bid for Virtus

BGH has filed an application with the Takeover Panel over, inter alia, Virtus Health (VRT AU) granting exclusivity to CapVest.
This application is similar in nature to the one filed by APA Group (APA AU) last year after AusNet Services (AST AU) granted Brookfield exclusivity in a competitive bidding stoush.
Virtus is currently trading at a gross spread of ~5.0% to the Scheme price, 3.6% to the Alternative Offer, and 1.8% above BGH’s terms.

FnGuide TIGER Top 10 Rebalancing: LG Energy IN & Celltrion OUT

The screening period for the upcoming rebalancing is May 3-31. LG Energy satisfies the 3-month minimum listing requirement, so it becomes eligible to join the Index in this rebalancing.
LG Energy will likely receive an inflow of ₩44.6B, 0.04% of SO. Considering its tight real-world float (less than 6%), it would still be something we don’t want to overlook.
What is critical is an estimated outflow size of Celltrion. It would be about the same amount, but relative to its ADTV, it will be -0.26x.

Before it’s here, it’s on Smartkarma

Feb 03

Event-Driven: LG Energy Solution, Askul Corp, Astellas Pharma, Bank Of Baroda, Myer Holdings, Porsche Automobil Holding Se, CJ ENM and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

KRX New Deal Index Rebalance Preview (March): More Flow for LG Energy
ASKUL (2678) – Large, Accretive, Not Enough for Prime So Look For More
Astellas Pharma (4503) Buyback – Short-Term Pressure Catalyst
NIFTY Bank Index Rebalance Preview: BOB Should Replace RBL Bank
Timing Ideal Exit Points on MSCI & KOSPI200 Inclusion for 16 Biggest Korean IPOs in 2020 & 2021
Premier Closes In On Myer (MYR AU)
Selected European Holdcos and DLCs: January ‘22 Report
CJ ENM: Potential Block Sale of Its Stake In Netmarble & Concerns About Corporate Reorganization

KRX New Deal Index Rebalance Preview (March): More Flow for LG Energy

The review period for the KRX New Deal indices ended on 31 January. The changes will be announced toward the end of February and implemented on 10 March.
We expect LG Energy Solution (373220 KS) to be included in the Battery and BBIG indices, while Kakao Pay (377300 KS) should be added to the Internet Index.
The largest selling is expected to be on Douzone Bizon (012510 KS) due to a potential downweight in the Internet index and a deletion from the BBIG index.

ASKUL (2678) – Large, Accretive, Not Enough for Prime So Look For More

Askul Corp (2678 JP) today announced a 4.9% buyback, likely via ToSTNeT-3, designed to lower the holding of parent Z Holdings (4689 JP), to meet TSE Prime Tradable Share criteria.
While 5.1% earnings accretive, it will not be enough, and the structure suggests despite significant excess cash, the next tranche won’t come immediately.
There is short-term strategy, and there is longer-term positioning. Both may work in this case.

Astellas Pharma (4503) Buyback – Short-Term Pressure Catalyst

Large Japanese low-multiple pharma company Astellas Pharma (4503 JP) yesterday announced earnings and this morning announced a buyback.
The buyback is small-ish, but the details are definitely worth knowing.
A play against peers for the period and afterwards may have some merit. If you have an execution axe, definitely worth a look.

NIFTY Bank Index Rebalance Preview: BOB Should Replace RBL Bank

The review period for the NSEBANK INDEX ended on 31 Jan. The rebalance will be effective after the close on 30 March and the announcement will come end February.
Based on the index methodology, we see Bank Of Baroda (BOB IN) replacing RBL Bank Ltd (RBK IN) in the index.
Passive trackers will need to buy 11 days of delivery volume on Bank Of Baroda (BOB IN) while selling 5 days of delivery volume on RBL Bank Ltd (RBK IN).

Timing Ideal Exit Points on MSCI & KOSPI200 Inclusion for 16 Biggest Korean IPOs in 2020 & 2021

We delve in detail the ideal exit points for the biggest 16 IPOs in Korea in 2020 and 2021, with emphasis on the announcement of the MSCI and KOSPI200 inclusions.
Typically, the announcement dates of the MSCI index inclusion (+/- two to three trading days) are the optimal period for taking profits.
Overall, the MSCI index inclusion had a bigger impact in terms of signaling changes in the direction of these new, large IPOs in Korea.

Premier Closes In On Myer (MYR AU)

Premier Investments (PMV AU) has added a further 3.9% in Myer Holdings (MYR AU) taking its stake to just short of 20%.
There is no love lost between the boards of Premier and Myer since Premier took a 10.8% stake in March 2017.
Premier has attempted to spill the board in the past. That scene looks set to repeat itself. That or a takeover.

Selected European Holdcos and DLCs: January ‘22 Report

There is just one DLC in this report, Rio Tinto, following the unification of BHP and Shell.
Discounts to NAV of holdcos have shown mixed performance: Alba, 41.3%; GBL, 26.9%; Heineken Holdings, 18.2%; Industrivärden, 12.1%; Investor AB, 11.6%; Kinnevik B, 8.8%(premium); Porsche Automobile Holding, 39.2%.
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.

CJ ENM: Potential Block Sale of Its Stake In Netmarble & Concerns About Corporate Reorganization

According to a local media outlet called ETNews, CJ ENM is considering on selling about half of its stake in Netmarble to potentially acquire the controlling stake in S.M. Entertainment.
Although CJ ENM is the lead candidate to acquire SM Entertainment, other contenders including Kakao Corp and Naver are not totally out of the M&A race.
Overall, we would wait on buying CJ ENM at current levels. We think that the market is still concerned about CJ ENM overpaying for SM Entertainment.

Before it’s here, it’s on Smartkarma

Feb 02

Event-Driven: Boral Ltd, Allied Telesis Holdings Kk, Arena Reit, SRF Ltd, Seven & I Holdings, Mineral Resources, HS Holdings, AfreecaTV, Jalux Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Boral’s 45% Capital Return – Resetting Forward Expectations
Allied Telesis (6835) – Small Cap Windfall
ASX200 Index Rebalance: Arena REIT to Replace Ausnet
S&P/ASX200 – Ausnet OUT, Arena REIT IN
NIFTY100/NIFTY NEXT50 Index Rebalance Preview: Five Potential Changes in March
Seven & I to Sell The Loss Making Department Store Business Amidst Pressure From Investors
MSCI Feb 2022 Index Rebalance Preview: And That’s A Wrap
Sawada/HS (8699) – A NON-Salutary Development
KRX K-New Deal Index Screening Period Ended: Rebalancing Changes & Passive Impacts Update
JALUX (2729 JP) Tender Offer Commences – Open & Shut Case With Weirdness

Boral’s 45% Capital Return – Resetting Forward Expectations

Boral Ltd (BLD AU) today announced a special dividend and return of capital totalling $2.72/share. That is 46% of yesterday’s closing price.
This was not unexpected. Management had promised, media articles had proposed as much. Now it is coming through.
Despite an 11% jump in the forward ex-div price today, the stock is cheap on a FY23 basis.

Allied Telesis (6835) – Small Cap Windfall

Allied Telesis is a Japan-listed business with a long US history making networking equipment and solutions for corporate customers.
The company received a legal settlement today which is worth a fair bit to them.
The company had already had the best 12 months earnings history in years, while the stock is trading at long-time lows. This could get exciting.

ASX200 Index Rebalance: Arena REIT to Replace Ausnet

Ausnet Services (AST AU) will be deleted from the S&P/ASX 200 (AS51 INDEX) after the close of trading on 4 February and Arena Reit (ARF AU) will be included.
With this change announced, Telix Pharmaceuticals (TLX AU) is a high probability inclusion to the S&P/ASX 200 (AS51 INDEX) next week when Sydney Airport (SYD AU) will be deleted.
Arena Reit (ARF AU) has outperformed its peers over the last year and now trades at higher valuations. We would use price spikes on inclusion to rotate into its peers.

S&P/ASX200 – Ausnet OUT, Arena REIT IN

The S&P DJI Index team announced the replacement for Ausnet Services (AST AU) when it is deleted from the S&P/ASX200 Friday at the close: Arena Reit (ARF AU)
There are other changes to sub-indices which are not publicly announced but which should align with previous analysis
This insight provides estimates for the index events Friday and ways to play them.

NIFTY100/NIFTY NEXT50 Index Rebalance Preview: Five Potential Changes in March

The review period for the NIFTY 100 Index ended on 31 Jan. The rebalance will be effective after the close on 30 March and the announcement will come end February.
Potential inclusions are Zomato (ZOMATO IN), Mindtree Ltd (MTCL IN), SRF Ltd (SRF IN), Indian Railway Catering and Tourism (IRCTC IN) and Tata Power (TPWR IN).
Potential deletions are Yes Bank (YES IN), Indraprastha Gas (IGL IN), Jindal Steel & Power (JSP IN), Aurobindo Pharma (ARBP IN) and Hindustan Petroleum (HPCL IN).

Seven & I to Sell The Loss Making Department Store Business Amidst Pressure From Investors

By Oshadhi Kumarasiri

Nikkei reported yesterday that Seven & I Holdings (3382 JP) is in final negotiations to sell its underperforming department store business Sogo Seibu, amidst pressure from several of its investors.
The company has indirectly confirmed the news by saying that they are considering changes to Seven & I’s business portfolio including the sale of the Sogo & Seibu business.
The disposal of underperforming department stores could increase the efficiency of capital usage and generate upside to shareholders returns and enable the company to focus on growth through geographic expansion.

MSCI Feb 2022 Index Rebalance Preview: And That’s A Wrap

Post the end of the review period, there are 19 potential adds for Asia and 9 potential deletes. High probability names include 16 adds and 8 deletes.
There are stocks that will have same way flow from the FTSE AW/AC trackers in March, while others could have same way flows from KOSPI200 or CSI300 trackers in June.
Potential additions that got beaten down over the last few weeks have started to recover and could remain supported going into announcement date on 10 February (Asia time).

Sawada/HS (8699) – A NON-Salutary Development

Sawada/HS Holdings (8699 JP) gets the bulk of its earnings from Khan Bank (even more so post-exit from gaitame).
Khan Bank just had a fantastic year with earnings up 77%.
But Sawada has just done a deal with should give one pause.

KRX K-New Deal Index Screening Period Ended: Rebalancing Changes & Passive Impacts Update

For this March rebalancing, the screening base date is January 28, which is the last trading day of January. So, the 3-month rebalancing review period is now done.
Other than LG Energy (+₩146,2B), we should pay the most attention to AfreecaTV (+1.70x), Chunbo (+0.36x), Douzone Bizon (-4.82x), and SoulBrain (-0.99x).
In addition, large-cap stocks such as SKIET (+0.25x), Ecopro BM (+0.10x), LG Chem (-0.62x), and Posco Chemical (-0.30x) will likely draw much attention.

JALUX (2729 JP) Tender Offer Commences – Open & Shut Case With Weirdness

Sojitz and JAL have announced the start of their tender offer for Jalux Inc (2729 JP). There was no surprise in November. And no change in the interim.
While not outrageously generous, it is not particularly egregious to minority shareholders and the shareholder structure suggests it gets done easily.
The lack of Japan FTC approval prior to launch is a little odd, but there should be minimal risk, and practically speaking, zero incremental risk vs waiting to start.

Before it’s here, it’s on Smartkarma

Feb 01

Event-Driven: LG Energy Solution, Recruit Holdings, Irongate Group, Playtech Plc, Samsung Biologics Co., and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Clearing up Misunderstandings About LG Energy K200 Fast Entry & Likely Deletion Stock
Recruit (6098) Buyback – Big, But Meh…
Charter Hall (CHC AU)’s Offer for Irongate Group (IAP AU)
JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Jan 2022
Irongate: Charter Hall Stakes Its Claim
Aristocrat/Playtech: Deal Uncertainty but the Shares Are Inexpensive
Samsung Biologics: Rights Offering of 3 Trillion Won to Acquire Remaining Stake in Samsung Bioepsis

Clearing up Misunderstandings About LG Energy K200 Fast Entry & Likely Deletion Stock

LG Energy has the second-largest market cap on KOSPI. For Fast Entry to fail, the price must lose 90% of its current value. So, Fast Entry is a foregone conclusion.
The review period ends on February 21. The implementation date is March 11, and the announcement will likely be made public around February 24-25.
The stock with the lowest market cap from May to October last year will leave the Index. The victim is Dongwon F&B, beating Nexen Tire by a very narrow margin.

Recruit (6098) Buyback – Big, But Meh…

Recruit announced a buyback of up to 34 million shares in an own share tender offer to take place at a price below the current market price.
This kind of tender offer is almost always meant for Japanese corporate holders as it rarely makes sense for others to participate.
This is mildly EPS accretive, BVPS decretive, quite ROE accretive, but Recruit can’t really use this method for the rest of its cross-holdings.

Charter Hall (CHC AU)’s Offer for Irongate Group (IAP AU)

Charter Hall (CHC AU) has come over the top to bid A$1.9/stapled security for Irongate Group (IAP AU). That’s 10.5% higher than the last bid from 360 Capital (TGP AU).
Charter Hall (CHC AU) have also signed an MOU with 360 Capital (TGP AU) that takes 360 Capital out of any bidding war.
At a 23.4% premium to pro forma NTA, we think the Irongate Group (IAP AU) Board will give the partnership due diligence access and the deal should complete.

JPX-Nikkei 400 Rebalance 2022: Leaderboard End-Jan 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-January 2022.

Irongate: Charter Hall Stakes Its Claim

Irongate (IAP AU) has announced a non-binding proposal from Charter Hall (CHC AU) and Dutch pension fund PGGM at $1.90/security, by way of a Scheme, plus a possible $0.0467/security distribution.
Importantly, the proposal contains a call option over 360 Capital’s 19.9% security holding in IAP.
IAP is considering the Offer. Expect the board to grant due diligence. This proposal is a 10.5% premium to 360 Capital’s Offer, before taking into account the distribution.

Aristocrat/Playtech: Deal Uncertainty but the Shares Are Inexpensive

Court and EGM meetings are scheduled 2 February. Aristocrat is the only suitor remaining. Some investors in Playtech who anticipated a bidding war aren’t too keen to support the deal.
The Board threatens with a break-up and auction of both Snaitech and the B2B white label software division. Analysts believe that the business is worth more than the current offer.
Reiterate long PTEC LN, TP 680/share (Aristocrat offer), with the potential upside risk of a sweetened offer to placate some investors, or a break-up.

Samsung Biologics: Rights Offering of 3 Trillion Won to Acquire Remaining Stake in Samsung Bioepsis

We have a Negative view on this nearly 3 trillion won rights offering by Samsung Biologics.
The expected price of the rights offering is 599,000 won which is 18.9% below current share price and would represent about 7% shares dilution.
Despite the long-term positive prospects of consolidating results from Samsung Bioepsis, we believe the acquisition price was a bit too high at more than 100% higher than Biogen’s valuation multiples.

Before it’s here, it’s on Smartkarma