Event-Driven

The BHP Group index rebal on the S&P/ASX was bigger than most thought.
The BHP Group index rebal on the PLC line in the UK on the FTSE UK series, MSCI and FTSE Europe, and Stoxx indices was smaller than most expected.
But the funding and reverse funding excess volume tells a different story.

DTAC/TRUE Merger: Stocks Trading Near Their VTO Prices

Total Access Communication (DTAC TB) and True Corp Pcl (TRUE TB) have moved up over the last 8 trading session to trade at or closer to their VTO prices.
Trading at the VTO price, we recommend selling Total Access Communication (DTAC TB) rather than run the risk of deal break or waiting 3-5 months to be paid out.
A safer trade is to buy True Corp Pcl (TRUE TB) and sell Total Access Communication (DTAC TB). There will be index trades to do if the merger is approved.

MSCI Korea 10-Day Review Period Done: Screened Results

MSCI Korea’s February index review period ended last Friday because next Monday is Korea’s Lunar New Year holiday.
Meritz Financial Group and Meritz Fire stayed above the full MCs and float MCs without missing a single day during the 10-day review period.
Shinpoong‘s MC was below the lower buffer throughout the review period. Douzone stayed above the lower buffer, but the odds of its exclusion are high as we have two additions.

Link Net’s MTO from Axiata Investments and XL Axiata

By Arun George

Link Net (LINK IJ)’s two largest shareholders (66.03% of the outstanding shares) have signed a SPA to sell their stakes to Axiata Investments and XL Axiata (EXCL IJ) at IDR4,800.
Post-Completion, Axiata Investments and XL Axiata will then be required to launch a mandatory tender offer to acquire the remaining 33.97% Link Net shares at IDR4,800 per share
The tender offer is expected to be completed in 3Q2022. At the last close price of IDR4,430, the shares are trading at an 8.4% gross spread to the offer.

Korea Large-Cap Prefs: Pref-Ord YTD Yield Difference & 20-Day MA Sigma

Korean prefs have outperformed ords on a YTD basis, probably due to the LG Energy listing. Many of KOSPI’s large-cap stocks have seen an outflow to make room for LGES.
Samsung Electronics 1P and Mirae Asset 2PB have a negative pref-ord YTD yield difference and are currently below-1.0σ on a 20-day MA.
Mirae widened the pref-ord spread by announcing an ord-only share buyback. So it should be seen as an outlier. Then, virtually all that remains is the Samsung Electronics 1P.

(Mostly) Asia M&A: January 2022 Roundup

For the month of January, 6 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$9bn.
The average premium for the new deals announced (or first discussed) in January was ~18%.
This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

CPI/Immofinanz: Raised Offer

Immofinanz recommends shareholders neither accept S Immo’s €23/share partial offer, nor CPI’s €22.7/share for the whole share capital (both cum dividend). CPI controls (pending approvals) 35.5% of Immofinanz.
Crossed shareholdings and poor use of capital among Austrian real estate players put a lid on their stock market performance, nevertheless Immofinanz’s discount to NAV is steadily approaching pre-Covid levels.
The shares of Immofinanz look good value in my view, at 4.3% 22e FFO yield, 21% discount to EPRA NTA, with the potential upside from an improved CPI’s offer.

Before it’s here, it’s on Smartkarma

Jan 29

Event-Driven: LG Chem Ltd, Link Net, KakaoBank, Biotest AG, Samsung Electronics and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

LG Chem: Still Cheap After LG Energy’s Big Debut
Link Net (LINK IJ): Axiata’s MTO
End of Mandatory Lock-Up Periods for 44 Stocks in Korea in February 2022
Grifols/Biotest: Put Period
Will Samsung Get EV Envy from LG Energy Solution Listing?

LG Chem: Still Cheap After LG Energy’s Big Debut

Korean EV battery unit play LG Energy Solution (373220 KS) briefly doubled on its debut yesterday before closing 65.8% higher.
Following that gain, LG Energy is now the second-largest company in KOSPI after Samsung Electronics (005930 KS).
LG Chem Ltd (051910 KS) has given back all its gains from earlier this month, and currently trades at ~60% discount to NAV.

Link Net (LINK IJ): Axiata’s MTO

Axiata Group (AXIATA MK) has entered into conditional SPAs with Asia Link Dewa and PT First Media to acquire 1.82 billion shares, or 66.03% in Link Net (LINK IJ).
The purchase consideration is IDR4,800/share. Upon completion of the acquisition, Axiata will be obligated to make a mandatory tender offer (MTO).
Axiata expects to complete the proposal, which is subject to regulatory and shareholder approvals, by the third quarter of 2022.

End of Mandatory Lock-Up Periods for 44 Stocks in Korea in February 2022

By Douglas Kim

In this insight, we discuss the end of the mandatory lock-up periods for 44 stocks in Korea in February 2022.
Among these 44 stocks, 8 stocks are in KOSPI and 36 stocks are in KOSDAQ.
These 44 stocks could be subject to further selling pressures in February and could on average underperform relative to the market.

Grifols/Biotest: Put Period

The offer has been accepted by 96.2% of ordinary shares, 43.24% of the preferred shares and 69.7% of the total share capital. Acceptance for ordinary shares extended to 21 April.
Grifols is addressing its leverage, although may not distribute cash dividends until 2024. The discount of B shares has tightened to 33.1%. Long GRFS US/short GRF SM.
Short BIO3 GR, the shares should return to pre-bid levels (around €35/share), although borrow may be tight. Long BIO GR, and put the shares to Grifols (until 21 April).

Will Samsung Get EV Envy from LG Energy Solution Listing?

By Ken S. Kim

Samsung Electronics (005930 KS) was rather stingy with their capital returns after a stellar 2021
The longer term capital commitment plan of its 2 largest holdings gives a higher indication that M&A should be coming
LG Energy Solution (373220 KS) and Samsung Electronics (005930 KS) account for nearly 30% of KOSPI weight. Talk about big fish small puddle

Before it’s here, it’s on Smartkarma

Jan 28

Event-Driven: LG Energy Solution, Seek Ltd, Beijing Jingneng Clean Energy, Ausnutria Dairy Corp, HUYA Inc, SenseTime Group, Samsung SDI and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

LG Energy Solution (373220 KS) IPO: Index (Fast) Entry & Lock-Up Expiry Summary
S&P/ASX Indices: Quiddity Leaderboard for March 2022 Rebalance
Beijing Jingneng (579 HK): Trading Cheap As Possible Offer Reload Looms
Ausnutria (1717 HK): SPAs Done (Just Not Officially)
Huya – If Douyu Is Being Taken Private Huya Should Be Too
Hang Seng TECH Index Rebalance Preview (March 2022): SenseTime Could Be Added with HUGE Impact
KODEX Battery ETF Rebalancing Cycle Changed to Quarterly: Preview for March Rebalancing

LG Energy Solution (373220 KS) IPO: Index (Fast) Entry & Lock-Up Expiry Summary

LG Energy Solution (373220 KS) listed today and closed 68.3% above its IPO price to become the second largest stock in Korea with a full market cap of US$98.22bn.
The stock will be added to a bunch of indices via Fast and Regular entry over the next few months. There will be liquidity squeezes on a few of them.
LG Energy Solution (373220 KS) will become short sell eligible on 11 March after its inclusion in the Kospi 200 Index. That and lock-up expiry is something to watch for.

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

By Janaghan Jeyakumar, CFA

The S&P/ASX Index family is a widely-tracked group of indices and sub-indices which represent the performance of ASX-listed companies.
In March 2022, Index rebalance events will take place for the S&P/ASX capitalization-weighted indices including ASX 300, ASX 200, ASX 100, ASX 50, and ASX 20.
In this insight, we take a look at the leading candidates who could become Adds/Deletes during the March 2022 Rebalance and other potential intra-quarterly changes.

Beijing Jingneng (579 HK): Trading Cheap As Possible Offer Reload Looms

Beijing Jingneng Clean Energy (579 HK), whose privatisation unceremoniously failed last year, is inexpensive versus its peer basket.
The 12-month moratorium restricting Beijing Energy Holding from relaunching an Offer expires on the 1 March.
The key reason for privatisation remains. A new Offer should be structured such that no tendering condition is present.

Ausnutria (1717 HK): SPAs Done (Just Not Officially)

530.8mn shares of Ausnutria (1717 HK) crossed at the close yesterday at HK$10.06/share. That is the exact number of shares under the SPAs and the stated price under the agreements.
China’s NDRC approval, a condition to the SPAs, was obtained earlier this month, leaving MoC and SAFE approvals outstanding. They appear to have been received.
Expect confirmation shortly. The completion of the SPAs triggers an MGO, which is conditional on Inner Mongolia Yili Industrial Group (600887 CH) holding 50% of the voting rights.

Huya – If Douyu Is Being Taken Private Huya Should Be Too

By Mio Kato

Tencent is reportedly considering taking Douyu private, potentially in partnership with a PE fund.
Given weak earnings and reports of strategic confusion within management this is not entirely surprising.
While the news is positive for Douyu we would prefer to look one connection away at the implications for the less troubled Huya.

Hang Seng TECH Index Rebalance Preview (March 2022): SenseTime Could Be Added with HUGE Impact

SenseTime Group (20 HK) listed just prior to review cutoff and will be eligible for inclusion in the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
We expect SenseTime Group (20 HK) to be added to the index and replace Autohome (2518 HK) at the close of trading on 4 March.
The real float of SenseTime Group is much lower than what HSIL is likely to use. Expect a BIG squeeze if the stock is added at a higher float.

KODEX Battery ETF Rebalancing Cycle Changed to Quarterly: Preview for March Rebalancing

The rebalancing cycle of the KODEX Secondary Battery ETF was changed from semi-annual to quarterly. Also, the rebalancing trading takes place for three trading days instead of one trading day.
This passive impact will be different from the previous rebalancing. LG Energy and SK Innovation will likely experience a significant passive outflow. Then, most small-cap constituents will receive an inflow.
Among the top weighting stocks, Samsung SDI and SKIET deserve attention. Sangsin Energy, E&D, and TSI will face exclusion, while C&I, Sang-A Frontec, and Enchem will likely join the ETF.

Before it’s here, it’s on Smartkarma

Jan 27

Event-Driven: Alligator Energy, BHP Group, Accell Group, Netflix Inc, Aareal Bank AG and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Solactive Global Uranium & Nuclear Components Index Rebalance: Most Adds in Oz
S&P/ASX Indices: Quiddity Primer
KKR/Accell NV: Recommended Cash Offer
What’s Working on the Short Side?
Advent & CenterBridge/Aareal Bank AG: “Best and Final” Offer

Solactive Global Uranium & Nuclear Components Index Rebalance: Most Adds in Oz

Solactive has announced the constituent changes for the Global Uranium & Nuclear Components Index. There are 8 adds and 1 delete with implementation at the close on 4 February.
Prior to the rebalance, BHP Billiton (BLT LN) will be deleted at the close on 28 January following Unification with BHP Group (BHP AU).
The flows on the stocks are small, but there is a big impact on the inclusions in Australia. Global X Uranium ETF (URA US) will buy around 5.5% of float.

S&P/ASX Indices: Quiddity Primer

By Janaghan Jeyakumar, CFA

The S&P/ASX Index family is a widely-tracked group of indices and sub-indices which represent the performance of ASX-listed companies.
In this insight, we take a brief look at the constituent selection methodology for the capitalization-weighted indices which include ASX 300, ASX 200, ASX 100, ASX 50, and ASX 20.
There is also a discussion on the historical price performance of Index Rebalance Events in the run up to the Inclusion Event and in the Post-Inclusion Phase.

KKR/Accell NV: Recommended Cash Offer

The 25% premium, €58/share offer implies an equity value of €1,556.5mn and EV of €1,712mn, which represents 12.4x EV/Fwd EBITDA (vs. 12.2x EV/LTM EBITDA comparable transactions) and 18.3x Fwd P/E.
Minimum acceptance level of at least 95%, automatically adjusted to 80% in case GM approves it. The offeror intends to squeeze-out/delist as soon as practicable.
Median implied share price across multiples is €56.37/share. On this basis, the offer price seems full. Gross spread is 0.34%, a bit tight. The market does not expect any counteroffer.

What’s Working on the Short Side?

By Eric Fernandez, CFA

We normally write a “What’s Working in Equities” report at the end of every month.
Today, we publish a “What’s not working” a/k/a “What’s working on the short side.”
In one line, what’s working on the short side are expensive, smaller cap, unprofitable, growth stocks.

Advent & CenterBridge/Aareal Bank AG: “Best and Final” Offer

On 26 January, the consortium offered a “best and final” offer of €31/share, a 6.9% increase vs. the initial one. Minimum acceptance threshold is 60%. Offer extended till 2 February.
Petrus and Teleios (together hold c.21% stake) consider the new offer to be a lousy deal for shareholders, mainly because of diverging views over the value of Software unit Aareon.
A 11.5% gross spread, among the highest in the European space, reflects uncertainty about the final outcome. The 2022e dividend yield is 5.2% (Capital IQ consensus). Speculative buy.

Before it’s here, it’s on Smartkarma

Jan 25

Event-Driven: SenseTime Group, G J Steel Pcl, Guodian Technology & Environment Group, HashiCorp, Lagardere SCA and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HSCI Index Rebalance and Stock Connect: Plenty of New Listings Should Be Included
Nippon Steel’s Mandatory Offers For Thailand’s GJ Steel and G Steel
Guodian Tech’s Privatisation Offer
Liquidity Risk Short Candidates: HashiCorp, Fluence Energy, Rivian Auto, Domo Inc.
Vivendi/Lagardère: A Good Deal for Bolloré

HSCI Index Rebalance and Stock Connect: Plenty of New Listings Should Be Included

The review period for the March review of the HSCI ended on 31 December. There are a lot of new listings that should be included in the index.
SenseTime is a high probability inclusion to the index, though it will only be added to Stock Connect in July once it completes 6 months and 20 trading days.
Xpeng and Li Auto will be added to Stock Connect in Feb/March if they pass the velocity test. We see Li Auto as failing the test, while Xpeng is close.

Nippon Steel’s Mandatory Offers For Thailand’s GJ Steel and G Steel

Nippon Steel Corporation (5401 JP) has announced it will acquire stakes in G J Steel Pcl (GJS TB) and G Steel Pcl (GSTEL TB).
Nippon Steel has signed share and purchase agreements with the alternative investment unit of Ares Management Corp (ARES US), the major shareholder of both Thai electric-furnace steelmakers.
Completion of the agreements will trigger Mandatory Tender Offers for both companies. These Offers will be unconditional.

Guodian Tech’s Privatisation Offer

By Arun George

Guodian Technology & Environment Group (1296 HK) announced a pre-conditional privatisation offer from China Energy at HK$1.08 per H share, a 47.59% premium to the last close.
The key conditions for the delisting will be approval by at least 75% independent H-shareholders (<10% of all independent H-shareholders rejection). There is no minimum acceptance condition.
The offer is attractive in comparison to long-term historical share prices and multiples. We think that the privatisation proposal will likely succeed.

Liquidity Risk Short Candidates: HashiCorp, Fluence Energy, Rivian Auto, Domo Inc.

By Eric Fernandez, CFA

Liquidity shorts can be great short candidates. The key characteristic is that the company may not be viable, economically, given their cash flows and cash requirements.
Liquidity shorts have built-in catalysts, have moderate to higher betas, and can have strong down moves if a crisis develops. They can go bankrupt, pushing the stock price near zero.
HashiCorp Inc (HCP), Fluence Energy (FLNC), Rivian Auto (RIVN), Domo Inc (DOMO)

Vivendi/Lagardère: A Good Deal for Bolloré

In February 2022, Vivendi will file a public tender offer for all Lagardère shares at €24.10/share, identical to the price per share paid to Amber Capital.
Assuming some recovery in travel retail, the implied multiple of the publishing division would be 5.5x EV/22e EBITDA, which is cheap in my view. Comparables are trading at 6.6x.
The share price has gone below the offer price for the first time since 9 December. The 0.2% gross spread is still tight, but worth monitoring in case it widens.

Before it’s here, it’s on Smartkarma

Jan 24

Event-Driven: BHP Group, Bank Of Ningbo Co Ltd A, China Mobile, alstria office reit-ag, ARA LOGOS and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

BHP Unification A Done Deal – Now for the BIG FLOWS
BHP Unification: Index Changes and Flows
FTSE China A50 Index Rebalance Preview (March 2022): Adds, Deletes & FOL Changes
China Mobile Parent Ups The Ante – Announces Share Increase Plan
Brookfield/Alstria Office REIT: Additional Acceptance Period
ARA Logos (ALLT SP): ESR Bumps. Scheme Meeting Delayed

BHP Unification A Done Deal – Now for the BIG FLOWS

The various Shareholder and Scheme Meetings overwhelmingly supported unification of BHP Group and Limited on Thursday. The deal is done. Now for the BIG FLOWS.
There should be US$40bn (two way) of index-related flows on Friday across the major indices, half in funding/reverse-funding flows. Replacements are mostly decided.
This insight looks at the expected breakdown of flows per index, the replacements, and provides a spreadsheet for all the flows.

BHP Unification: Index Changes and Flows

BHP Billiton (BLT LN) will stop trading at the close on 28 January. MSCI, FTSE and S&P will delete BLT and increase the index shares for BHP Group (BHP AU).
Passive MSCI Standard and FTSE AW/AC trackers will need to sell BHP Billiton (BLT LN) and buy BHP Group (BHP AU) and do a sell GBP/ buy AUD trade.
There will be a big funding trade on the S&P/ASX 200, while Airtel Africa PLC (AAF LN) is likely to replace BHP Billiton (BLT LN) in the UKX Index.

FTSE China A50 Index Rebalance Preview (March 2022): Adds, Deletes & FOL Changes

We see three potential changes at the March rebalance. One is a high probability change while the other two are close to the cutoff ranks.
Then there will be changes to the investability weight of the stocks following the Ground Rule change that will cap stocks at their Foreign Ownership Limits.
The combined impact of all changes at the rebalance will result in a one-way turnover estimated at 17.55% and will result in a one-way trade of CNY 9,744m.

China Mobile Parent Ups The Ante – Announces Share Increase Plan

The parent company of China Mobile (941 HK) has announced a plan to increase its holding. This is not surprising given the contents of the RMB Share Issue Circular.
If they spend the midpoint of the RMB 3.0-5.0bn plan at a 20+% premium to current price, it is 8% of the RMB Share float.
The H-share buyback program is eligible to start after 8 Feb deadline for RMB Share greenshoe allocation. The stock is HK$51. Anything under HK$70/share is accretive vs the IPO.

Brookfield/Alstria Office REIT: Additional Acceptance Period

The offer price has been reopened following the results of the offer period: Brookfield has received acceptances over 50.5% of the voting rights and now controls 71% of alstria.
Depending on the results, Brookfield may initiate procedures to initiate a delisting, but will not squeeze-out for at least three years. Liquidity of the shares will be much lower.
Brookfield may lower the dividend payout. The shares are trading at 3.4% FFO yield and 2.6% dividend yield, meaning that there are better opportunities elsewhere. Recommendation is tender.

ARA Logos (ALLT SP): ESR Bumps. Scheme Meeting Delayed

With a little under a week to the Scheme Meeting, ESR-REIT (EREIT SP) revised terms to S$0.097 cash plus 1.7729 new EREIT Units for each ARA LOGOS (ALLT SP) unit.
The revised terms provide an indicative Offer price of S$0.933, a 5.3% increase over the original Scheme consideration.
The Scheme Meeting for ARA Logos – and ESR’s EGM – have been deferred. No definite timetable was provided for its rescheduling although late February is probably a reasonable estimate.

Before it’s here, it’s on Smartkarma

Jan 22

Event-Driven: LG Energy Solution, Jardine Matheson Holdings, Dragon Crown Group, Sony Corp, GlaxoSmithKline PLC and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

LG Energy Solution (373220 KS) IPO: Allocations and Lock-Ups
Jardine Matheson (JM SP): Fast Food Junked
Dragon Crown (935 HK): Offeror’s IFA Report
TOPIX-Nikkei Skew Trade Hit by Sony and Fast Retailing but Outperforming Nikkei
Unilever/GSK Heathcare: Ballsy, but Doable

LG Energy Solution (373220 KS) IPO: Allocations and Lock-Ups

ESOP marginally undersubscribed, retail investors were allocated 25.8% of the IPO while institutions got 55%. Post IPO, LG Chem Ltd (051910 KS) owns 81.84% of LG Energy Solution (373220 KS).
Around 58% of the institutional allocation is subject to voluntary lockups. For Fast Entry, MSCI will use a FIF of 9%, while FTSE will use an investability weight of 4.16%.
LG Energy Solution (373220 KS) needs to rally 84% by the close on 27 January to get FTSE Fast Entry. MSCI Standard and KOSPI200 index inclusions are a near certainty.

Jardine Matheson (JM SP): Fast Food Junked

Reportedly Jardine Matheson Holdings (JM SP) is negotiating the sale of Jardine Restaurant Group, a wholly-owned subsidiary that operates KFC and Pizza Hut franchises.
Additionally, JMH is exploring the sale of its 28% stake in Greatview Aseptic Packaging (468 HK).
JMH is in the market every day buying its own shares, but on a less aggressive basis compared to the pace seen shortly after reloading its buyback program last month.

Dragon Crown (935 HK): Offeror’s IFA Report

Liquid chemical storage and handling outfit Dragon Crown Group (935 HK) (DCG) announced on the 8 October a pre-conditional Offer from Guangdong Great River Smarter Logistics (002930 CH) at HK$1.28/share.
GGRS has now released its own independent financial advisor’s report, which concluded the Offer was fair and reasonable.
Trading at a gross spread of 6.7% with possible payment early April.

TOPIX-Nikkei Skew Trade Hit by Sony and Fast Retailing but Outperforming Nikkei

By Mio Kato

A positive earnings surprise for Fast Retailing and Microsoft’s acquisition of Activision Blizzard hitting Sony have hurt the performance of our skew trade.
Despite this, the dramatic fall in the Nikkei means it is now outperforming the Nikkei since we first suggested the trade.
Looking forward we expect recent volatility to be absorbed over time and we retain conviction on our picks.

Unilever/GSK Heathcare: Ballsy, but Doable

GSK has rejected Unilever’s approaches (last at £50 billion) but leaked it would be ready to accept an offer around £60 billion (a whopping c. 65% of Unilever’s market capitalisation).
The deal would be transformational and Unilever’s management see it as the way forward to revive the company’s performance and the share price.
Ballsy, but doable, with a positive impact on results from FY2024, but negative impact on leverage at 4.9x. I believe that Unilever may make a further approach.

Before it’s here, it’s on Smartkarma

Jan 21

Event-Driven: Hitachi Transport System, KakaoBank, Roxy Pacific Holdings, LG Energy Solution, Virtus Health, Swire Pacific (A) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hitachi Transport System (9086) – Not a Clear Outcome But Interesting Possibilities
KOSPI Overhang Stocks: Krafton, Kakao Bank, SKIET, Samsung Elec, & Samsung SDS
Roxy-Pacific (ROXY SP): Circular Out. IFA Says Not Fair But Reasonable
MSCI Korea: Potential Inclusions & Exclusions in February 2022 Highlighted by Locals
Virtus Health (VRT AU): CapVest’s Bid Edges BGH Capital
StubWorld: Cathay Pacific – Still Grounded
Virtus Receives a Competing Offer from CapVest

Hitachi Transport System (9086) – Not a Clear Outcome But Interesting Possibilities

Hitachi is, as the media fuss suggests, in the last stages of its re-formation after ridding itself of nearly two-dozen listed subs over the last decade-plus.
Hitachi Transport System (9086) is the last major sub/affiliate without a new home. Hitachi owns just under 40%. SG Holdings (9143 JP) owns just under 10%. Both want to sell.
It is not clear HTS wants to be taken private, but there could be an interesting financial engineering solution to suit the sellers.

KOSPI Overhang Stocks: Krafton, Kakao Bank, SKIET, Samsung Elec, & Samsung SDS

For Kakao Bank, the 6M IPO lockup (2.79%) will hit the market. Also, the possibility that the 4.48% stake held by Anchor/TPG will hit the market should be left open.
In Krafton’s case, Tencent is the most notable player, owning 13.56%. It recently suggested a reduction in overseas holdings. So, some of this 13.56% stake should appear in the market.
The 4.84% stake held by Premier Superior is available after February 14. Samsung Electronics and Samsung SDS shares by the Samsung family are also likely to take place in February.

Roxy-Pacific (ROXY SP): Circular Out. IFA Says Not Fair But Reasonable

An Offeror consortium, led by Teo Hong Lim, founder of Roxy Pacific (ROXY SP), is offering S$0.485/share, a 19.8% premium to last close. The Offer Price will NOT be increased.
The Circular was dispatched yesterday (the Offer Doc was issued on the 5 January), in which the IFA considered the terms not fair but reasonable).
Trading to terms. The first close is the 3 February.

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

By Douglas Kim

We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (10 February) that are being highlighted by the locals.
The potential candidates for inclusion in the MSCI Korea Index emphasized by locals in February 2022 include Meritz Financial Group, Meritz Fire & Marine Insurance, HHI, and LG Energy Solution.
In our view, if MSCI decides to include LG Energy Solution in the MSCI Korea index in February, this will likely be an extra boost to this stock in February.

Virtus Health (VRT AU): CapVest’s Bid Edges BGH Capital

UK-Based CapVest Partners is offering A$7.60/share, in cash, for Virtus Health (VRT AU), compared to BGH Capital’s bid last month of A$7.10/share. Virtus has granted exclusive due diligence.
CapVest’s Offer is non-binding. No doubt due to BGH holding 20% of shares out, CapVest will concurrently run an alternate off-market bid with a 50.1% acceptance condition at A$7.50/share.
At a ~5% spread to the indicative Scheme terms, I would look to get involved.

StubWorld: Cathay Pacific – Still Grounded

Cathay Pacific Airways (293 HK) dangles bonuses for pilots and first officers amid Hong Kong’s stringent crew quarantine requirements.
Preceding my comments on Cathay – and Swire Pacific (A) (19 HK)– 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%.

Virtus Receives a Competing Offer from CapVest

By Arun George

Virtus Health (VRT AU) announced an offer from CapVest comprising of A$7.60 per share via a scheme (a 7.0% premium to BGH’s A$7.10 offer) or A$7.50 via an off-market takeover.
CapVest’s offer is contingent on exclusivity and cost recovery protections. The Board will recommend a binding offer of at least A$7.60 via a scheme or A$7.50 via an off-market takeover.
Due to the healthy premium to historical multiples and share prices implied by the CapVest offer, it is likely that BGH will be hesitant to start a bidding war.

Before it’s here, it’s on Smartkarma

Jan 20

Event-Driven: One REIT, HomeCo Daily Needs REIT, Itochu Corp, Bancolombia SA and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE EPRA Nareit Developed Asia Preview: A Few More Inclusions
HDN/AVN Merger & Potential ASX200 Inclusion in March (Or Earlier)
Short-Term Itochu Buyback – A Cushion, But Style Bias Matters More
Grupo Gilinski Ups the Ante on Grupo Suramericana with Enhanced Bids

FTSE EPRA Nareit Developed Asia Preview: A Few More Inclusions

The next FTSE EPRA Nareit Index review will use data from 21 February. The changes will be announced on 2 March and implemented at the close on 18 March.
Potential inclusions at the review include Heiwa Real Estate, One REIT and ESR Kendall Square REIT while there is a possibility of Digital Core REIT (DCREIT SP) being included.
Digital Core REIT (DCREIT SP) could be included if it publishes audited financial statements in the next week. Else inclusion could take place at the June rebalance.

HDN/AVN Merger & Potential ASX200 Inclusion in March (Or Earlier)

Aventus Group (AVN AU) securityholders vote on the proposed merger with HomeCo Daily Needs REIT (HDN AU)/ Home Consortium Ltd (HMC AU) on 25 January.
If approved, Aventus Group (AVN AU) will stop trading after the close on 3 February and the shares in issue for HomeCo Daily Needs REIT (HDN AU) will increase substantially.
That will make HDN AU the highest ranked non-ASX200 constituent and a high probability add for March. There could be an earlier inclusion to replace SYD AU in the index.

Short-Term Itochu Buyback – A Cushion, But Style Bias Matters More

Itochu today announced a buyback program to buy US$500mm+ in the next 10 weeks.
Net income growth, a rising dividend, and balanced risk book help it perform with low beta and medium correlation to peers.
The low volatility-relative multiple is supportive, and the buyback helps, but style bias vs Peers matters more.

Grupo Gilinski Ups the Ante on Grupo Suramericana with Enhanced Bids

By Victor Galliano

Gilinski’s higher price incremental share bids for both Grupo Suramericana and Nutresa are intended to make Gilinski the largest shareholder in Suramericana and the majority shareholder in Nutresa
We maintain that this strategy is the next step in Gilinski’s plan to gain control of BanColombia indirectly, and also gain control of Suramericana’s interests in asset management and pensions
We see further upside potential for Grupo Suramericana shares, as well as BanColombia shares; the latter are attractively valued versus LatAm peers

Before it’s here, it’s on Smartkarma

Jan 19

Event-Driven: HKEX, Meritz Fire & Marine Insurance, Citic Securities (H), Hongkong & Shanghai Hotels, Vedanta Ltd, Porsche Automobil Holding Se, Activision Blizzard, Netmarble Corporation, Yorkey Optical International Cayman, Banco del Bajio SA and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

CCASS: Why Large Moves Still Mattered in 2021
MSCI Korea IR: Rise of Meritz Fire, Wemade Gone, Kakao Pay Still Tricky, & SK Square Certainty
The Citic Securities Rights Offering – Dilution Against Timing
HK&S Hotels (45 HK): Kadoories Mop Up Someone Else’s Mess
Vedanta ADR Clean-Up Offering
Porsche Automobil Holding SE: Double Discount
Microsoft Got Game! Plans to Buy Activision Blizzard for $95/Share or $68.7 Billion
Microsoft to Buy Activision Blizzard for $69 Billion: Impact on NCsoft, Krafton, & Netmarble
Yorkey Optical (2788 HK): Court Meeting On 22 Feb. IFA Says Fair
Citi’s Mexican Exit; Our Thoughts on “new Banamex”

CCASS: Why Large Moves Still Mattered in 2021

In this latest installment in a series dating back to March 2018, I’ve analysed 4,400 moves over three years inside CCASS, targeting >5% of shares outstanding of individual stocks.
The data continues to bear out the overall underperformance of stocks that exhibit large CCASS moves.
But it also serves to illustrate that when a certain % move takes place in tandem with a certain market capitalisation, there is a tendency for outperformance.

MSCI Korea IR: Rise of Meritz Fire, Wemade Gone, Kakao Pay Still Tricky, & SK Square Certainty

Additions: Meritz Financial Group and Meritz Fire (with a YTD price gain of over 40%) are very likely, and Kakao Pay is still the trickiest one.
Deletions: Shinpoong Pharm is the most likely one, but the others remain a slim possibility.
Float rate changes: SK Square is a certainty with the most significant impact, and SKIET and HMM deserve our attention.

The Citic Securities Rights Offering – Dilution Against Timing

Citic Securities has launched a Rights Offering for H Shares and A Shares. The price is basically the same, which means a very big discount for A holders.
The timing is different, and the H share Rights Issue process is drawn out past Chinese New Year. This may affect takeup rates and bullishness.
The difference in capital approach between Dual H/A-share listed SOEs like Citic Securities and like China Mobile is stark. The dichotomy may expand.

HK&S Hotels (45 HK): Kadoories Mop Up Someone Else’s Mess

The Kadoorie family, Hongkong & Shanghai Hotels (45 HK)‘s major shareholder, is paying HK$2.63bn to increase its holding to 72.43% from 59.98%.
The price under the SPA is $12.80/share, a 92.5% premium to the undisturbed price. Shares promptly gained 19.5% yesterday. No Offer was triggered.
What is conveniently left out of the announcement, and in media articles, is the original owner of these shares – Tai United Holdings (718 HK).

Vedanta ADR Clean-Up Offering

Vedanta Limited decided to delist its ADRs last autumn. They were delisted but the process of unwinding them comes down to selling the unconverted ADR underlying shares.
Citi is conducting an offering to sell those underlying shares. This will aid in setting the unwind price for existing but unsettled listed ADR derivatives (yay).
The offering itself is just over 1% of shares out, 4% of float, and 12% of foreign portfolio investor holdings. Not huge, but the trend vs peers gives one pause.

Porsche Automobil Holding SE: Double Discount

Porsche Automobil Holding Se (PAH3 GR) is a listed holding company whose main asset is a 53.3% stake of Volkswagen ordinary shares (worth c. €43,243 million).
The combination of holding chain and dual-class structure allows the Porsche-Piëch families to control Volkswagen with just a 15.7% economic interest. The discount of Porsche SE is a massive 38.2%.
The discount is above the 9-year average, 30.2%. I recommend long 1 PAH3 GR/short 0.5136 VOW GR.

Microsoft Got Game! Plans to Buy Activision Blizzard for $95/Share or $68.7 Billion

By John DeMasi

Microsoft’s largest-ever acquisition provides boost for cloud gaming and metaverse ambitions.
Deal comes as Activision Blizzard’s been mired in gender pay disparity and sexual harassment storm.
Controversial CEO Bobby Kotick to continue in his role as head of Activision Blizzard, though WSJ says otherwise.

Microsoft to Buy Activision Blizzard for $69 Billion: Impact on NCsoft, Krafton, & Netmarble

By Douglas Kim

On 18 January, Microsoft Corp (MSFT US) announced that it will acquire Activision Blizzard (ATVI US) for $68.7 billion all-cash deal.
The acquisition of Activision Blizzard by Microsoft is likely to have a positive impact on the entire global game sector including in Korea.
This major acquisition of Activision Blizzard by Microsoft could rejuvenate the entire global game sector as it could signal greater M&A interest in high-quality game companies.

Yorkey Optical (2788 HK): Court Meeting On 22 Feb. IFA Says Fair

Yorkey Optical International Cayman (2788 HK)‘s Scheme Document is now out, with the Court Meeting to be held on the 22 February.
Asia Optical (3019 TT) is offering HK$0.999/share, a 75.3% premium to the undisturbed close. David Webb has given an irrevocable undertaking to vote his shares in favour of the Scheme
This transaction is all stitched up. The Independent Financial Advisor considers the terms to be fair and reasonable.

Citi’s Mexican Exit; Our Thoughts on “new Banamex”

By Victor Galliano

Citi is to sell its Mexican retail and SME banking operations, which we call new Banamex; it is an attractive banking franchise that needs investment and a focus on costs
Based on peer group valuations, and on new Banamex’s disclosed parameters, we estimate that the disposal entity’s valuation range could range from USD7bn to USD10bn, and we identify potential bidders
We believe that our new Banamex valuation range emphasizes BanBajio’s attractive valuations, we stick with our positive view on mid-cap BanBajio; we believe that Banorte is fully valued

Before it’s here, it’s on Smartkarma