Most Read

There are 12 changes for the TIP Taiwan Technology Dividend Highlight Index in June/July. The Fuh Hwa Taiwan Technology Dividend Highlight ETF (00929 TW) has an AUM of US$7.16bn.
One-Way turnover is estimated at 35% and that will result in a round-trip trade of TWD 134.7bn (US$4.1bn). There are 8 stocks that could have over 5x ADV to trade.
The ETF started rebalancing their portfolio on Friday and will continue to trade the stock over the next 7 trading days.

Keisei Electric Investor Activism Update: The Vote Count Could Shake Keisei’s Board

By Oshadhi Kumarasiri

Palliser’s proposal failed to meet the challenging two-thirds threshold at the AGM. Given the ownership landscape, this outcome was anticipated.
Palliser nearing 50% approval at Keisei’s AGM could signify a triumph, potentially leading to significant pressure on management and a positive shift in share price performance.
Keisei Electric Railway Co (9009 JP)‘s valuation, now attractively low post a 33% drop and with a potential OP guidance hike, presents minimal downside at a 26.0x EV/OP multiple.

L’Occitane (973 HK): Conditional Offer Opens

The L’Occitane (973 HK) IFA opines that Reinold Geiger’s conditional voluntary cash (HK$34.00) or scrip offer (10 rollover shares for each share, subject to a cap) is fair and reasonable.
Irrevocable/Letters of support have nudged lower from 49.83% (17 June) to 47.66% of disinterested shares due to Southeastern Asset Management selling its shares.
Nevertheless, the scrip option, an attractive offer and no vocal opposition should facilitate achieving the minimum acceptance condition. At the last close, the gross spread was 2.4%.

(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio

For the month of June 2024, 8 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$6bn.
The average premium for the new transactions announced (or first discussed) in June was ~52%. The average premium YTD is ~47%.
This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

Shift Up IPO Book Building Results Analysis

Shift Up reported solid IPO book building results. Shift Up’s IPO price has been determined at 60,000 won won, which is at the high end of the IPO price range.
According to Hankyung Business Daily, the demand ratio was 223 to 1. Shift Up will start trading on 11 July.
Our base case valuation of Shift Up is market cap of 5.7 trillion won or target price of 95,510 won (59% higher than the IPO price of 60,000 won).

Aisin (7259) | Nine Months Ago

By Mark Chadwick

Nine months have passed since Aisin announced a transformative MTP. Investors remain sceptical that it will deliver higher returns.
Improving margins on hybrid transmissions, new products for BEVs and better capital allocation could deliver 70% upside for investors.
The key risk is the assumption that operating margins can rise above 8% versus the historical average of 5%.

Toenec (1946 JP) Offering – Nearly $50mm on SmallCap Utility Infra Co as Chubu EPCO Sells Down

Today, Toenec Corp (1946 JP) – an integrated facilities company 50+% owned by Chubu Electric Power Co (9502 JP) announced Chubu EPCO would sell down 7.7% to go to 43%+.
This is surprising. It suggests there are more selldowns to come. It’s also “big” at 88 days of ADV and about 26% of Max Real World Float (85% retail).
This is an odd sell-down. Chubu EPCO obviously doesn’t want to buy it in. That means overhang for years.

Hollysys (HOLI US): Ascendent Finally Obtains Regulatory Approvals

Six months after announcing a binding proposal, Ascendent has obtained all the Chinese regulatory approvals for its US$26.50 Hollysys Automation Technologies (HOLI US) offer.
The gross spread was wide due to the information vacuum, which has resulted in various conspiracy theories and rumours circulating.
The two remaining conditions required for close are the maximum dissenting cap (should be waived) and minimum net cash condition (satisfied). At the last close, the gross spread was 22.5%.

ECM Weekly (1st July 2024)-Aisin, Mitsui, Japan Hotel, Allied Blenders, Webtoon, Hyundai India

Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
On the IPO front, we looked at the upcoming mega-listing for Hyundai Motor India.
On the placement front, the week was dominated by the cross-shareholding unwinds in Aisin (7259 JP) and Mitsui & Co Ltd (8031 JP).

HSCEI Index Rebalance Preview: Two Changes Likely in September

SenseTime Group (20 HK) and JD Logistics (2618 HK) are potential deletions while PICC Property & Casualty (2328 HK) and New Oriental Education & Techn (9901 HK) are potential adds.
Estimated one-way turnover at the rebalance is 1.8% resulting in a one-way trade of HK$950m. Official capping will be based off the close of trading on 3 September.
There will be 1-2x ADV to buy on the adds and over 2x ADV to sell in JD Logistics. The impact on SenseTime is lower given the recent surge in volume.

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Jul 01

Most Read: Keisei Electric Railway Co, Telix Pharmaceuticals, Lunit , China Traditional Chinese Medicine, Taiwan Semiconductor (TSMC) – ADR, Vanguard Intl Semiconductor, Shanghai Henlius Biotech , Fancl Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Last Week in Event SPACE: Keisei Electric, China Merchants, Great Eastern, Jardine Matheson/JCNC
Quiddity Leaderboard ASX Sep 24 Rebal: Altium to Trigger Two Intra-Review Replacements in July
End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024
Weekly Deals Digest (30 Jun) – China TCM, Henlius, Midea RE, MMG, Aisin, Sanil, Shift Up
(Mostly) Asia-Pac M&A: TCM, Henlius Bio, Mideal Real Estate, Malaysia Airports, S Line, Best World
Taiwan Dual-Listings Monitor: TSMC Premium Rangebound; UMC Hits Upper End of Range
Ohayo Japan | First Half Done
TIP Taiwan Technology Dividend Highlight Index Rebalance: 12 Changes & US$4bn Round-Trip Trade
Merger Arb Mondays (01 Jul) – Henlius, China TCM, GA Pack, CPMC, Asia Cement, Great Eastern
(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio

Last Week in Event SPACE: Keisei Electric, China Merchants, Great Eastern, Jardine Matheson/JCNC

No surprise: Keisei Electric Railway (9009 JP) shareholders voted down Palliser’s proposal. If the vote was close, Palliser may ups its rhetorical game, and takes a harder stance.
Argyle failed to boot one CMCDI (133 HK) director. They’ll next target the management agreement renewal; and agitate the company buy back 20% of shares outstanding at 90% of NAV.
The Offeror now has 90.16% in Great Eastern Holdings (GE SP) – so this will get suspended at the close of the Offer.

Quiddity Leaderboard ASX Sep 24 Rebal: Altium to Trigger Two Intra-Review Replacements in July

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run-up to the September 2024 index rebal event.
In July 2024, a couple of important Australian M&A deals could close and one of them could trigger intra-review additions for ASX 100 and ASX 200.
Separately, we see one ASX 100 change and one ASX 200 change during the September 2024 rebalance. For ASX 300, there could be 13 ADDs and 6 DELs.

End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024

We discuss the end of the mandatory lock-up periods for 55 stocks in Korea in July 2024, among which 6 are in KOSPI and 49 are in KOSDAQ.
These 55 stocks on average could be subject to further selling pressures in July and could underperform relative to the market.
The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in July include Lunit, Mezzion Pharma, and DS Dansuk.

Weekly Deals Digest (30 Jun) – China TCM, Henlius, Midea RE, MMG, Aisin, Sanil, Shift Up

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: MMG (1208 HK) rights issue, Aisin (7259 JP) placement, Sanil Electric (062040 KS) IPO, and Shift Up (462870 KS) IPO.
Event-Driven developments: China Traditional Chinese Medicine (570 HK), Shanghai Henlius Biotech (2696 HK), Midea Real Estate Holding (3990 HK), Best World International (BEST SP).

(Mostly) Asia-Pac M&A: TCM, Henlius Bio, Mideal Real Estate, Malaysia Airports, S Line, Best World

I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One. new deal was discussed this week: Shanghai Henlius Biotech (2696 HK)‘s cash/scrip Offer. Midea Real Estate Holding (3990 HK) also fielded a “Partial Scheme”.
Key updates took place on: China Traditional Chinese Medicine (570 HK), Malaysia Airports Holdings (MAHB MK), S Line Co Ltd (9078 JP), Best World International (BEST SP) .

Taiwan Dual-Listings Monitor: TSMC Premium Rangebound; UMC Hits Upper End of Range

By Vincent Fernando, CFA

TSMC: +16.7% Premium, Has Remained Rangebound; Watching for Over 20% or Under 15%
UMC: +2% Premium, Upper End of Trading Range, Can Consider Shorting
ASE: +9.9% Premium; Spread Could Have Further Room to Bounce Higher

Ohayo Japan | First Half Done

By Mark Chadwick

U.S. stocks dipped on Friday as investors processed economic data signaling slowing inflation. Nike down 20%.
Japan’s Ministry of Internal Affairs and Communications and KDDI will collaborate on developing generative AI
NTT DATA plans to launch multiple satellites by 2026 to create a space-based observation network, enhancing disaster monitoring and national security

TIP Taiwan Technology Dividend Highlight Index Rebalance: 12 Changes & US$4bn Round-Trip Trade

There are 12 changes for the TIP Taiwan Technology Dividend Highlight Index in June/July. The Fuh Hwa Taiwan Technology Dividend Highlight ETF (00929 TW) has an AUM of US$7.16bn.
One-Way turnover is estimated at 35% and that will result in a round-trip trade of TWD 134.7bn (US$4.1bn). There are 8 stocks that could have over 5x ADV to trade.
The ETF started rebalancing their portfolio on Friday and will continue to trade the stock over the next 7 trading days.

Merger Arb Mondays (01 Jul) – Henlius, China TCM, GA Pack, CPMC, Asia Cement, Great Eastern

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Asia Cement China (743 HK).
Lowest spreads: Fancl Corp (4921 JP), Great Eastern Holdings (GE SP), Tatsuta Electric Wire & Cable (5809 JP), Infocom Corp (4348 JP), Kfc Holdings Japan (9873 JP).

(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio

For the month of June 2024, 8 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$6bn.
The average premium for the new transactions announced (or first discussed) in June was ~52%. The average premium YTD is ~47%.
This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

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Jun 30

Most Read: Aisin , Nikkei 225, China Traditional Chinese Medicine, Lunit , Keisei Electric Railway Co, Sanil Electric, Polestar Automotive Holding UK, Tencent Music and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind
EQD | The Nikkei’s Rally May Be About To Restart
Weekly Deals Digest (30 Jun) – China TCM, Henlius, Midea RE, MMG, Aisin, Sanil, Shift Up
(Mostly) Asia-Pac M&A: TCM, Henlius Bio, Mideal Real Estate, Malaysia Airports, S Line, Best World
End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024
Japan Weekly | IHI, Sumi Pharma, Toho, Sawai, JEOL
Last Week in Event SPACE: Keisei Electric, China Merchants, Great Eastern, Jardine Matheson/JCNC
Sanil Electric IPO: The Bull Case
Polestar Automotive Holding UK: A Tale Of An Enhanced Product Mix and Margin Improvement Strategy! – Major Drivers
Tencent Music Entertainment Group: How Are They Enhancing User Engagement through Artificial Intelligence? – Major Drivers

Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind

Today (27 June 2024) after the close, Aisin (7259 JP) announced three Toyota Group companies (Toyota, Toyota Industries, and Denso) would sell shares in Aisin in a ¥180bn offering.
This is ALL of Denso’s holdings, 63% of Toyota Industries stake, and ~12% of Toyota’s stake. Separately, Aisin announced a 17mm share (6.3%) ¥100bn buyback and a 3:1 split Oct1.
The recent yuho shows us the progress of Aisin’s promised selldown of crossholdings. There are three large chunks left. One is easy. The climb to capital allocation credibility easier too.

EQD | The Nikkei’s Rally May Be About To Restart

By Nico Rosti

The Nikkei 225 Index rallied last week, and closed the week up.
Although slightly overbought, our models are not pointing to a SHORT opportunity here.
If the index pulls back this coming week, it may be a good idea to BUY, in order to take advantage of a possible reprise of the rally.

Weekly Deals Digest (30 Jun) – China TCM, Henlius, Midea RE, MMG, Aisin, Sanil, Shift Up

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: MMG (1208 HK) rights issue, Aisin (7259 JP) placement, Sanil Electric (062040 KS) IPO, and Shift Up (462870 KS) IPO.
Event-Driven developments: China Traditional Chinese Medicine (570 HK), Shanghai Henlius Biotech (2696 HK), Midea Real Estate Holding (3990 HK), Best World International (BEST SP).

(Mostly) Asia-Pac M&A: TCM, Henlius Bio, Mideal Real Estate, Malaysia Airports, S Line, Best World

I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One. new deal was discussed this week: Shanghai Henlius Biotech (2696 HK)‘s cash/scrip Offer. Midea Real Estate Holding (3990 HK) also fielded a “Partial Scheme”.
Key updates took place on: China Traditional Chinese Medicine (570 HK), Malaysia Airports Holdings (MAHB MK), S Line Co Ltd (9078 JP), Best World International (BEST SP) .

End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024

We discuss the end of the mandatory lock-up periods for 55 stocks in Korea in July 2024, among which 6 are in KOSPI and 49 are in KOSDAQ.
These 55 stocks on average could be subject to further selling pressures in July and could underperform relative to the market.
The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in July include Lunit, Mezzion Pharma, and DS Dansuk.

Japan Weekly | IHI, Sumi Pharma, Toho, Sawai, JEOL

By Mark Chadwick

U.S. economy: Mixed signals with Q1 GDP growth revised up to 1.4%, driven by business investment and trade, while jobless claims hit a high, raising unemployment concerns.
Japan’s Nikkei 225: Strong performance, up 986 yen for the week, fueled by major stock rebounds and IPO interest, despite dollar-yen depreciation to 161 yen.
Market outlook: Nikkei up 2.2% in June, nearing 40,000 yen; cautious sentiment prevails with U.S. markets closed on July 4th and UK elections ahead

Last Week in Event SPACE: Keisei Electric, China Merchants, Great Eastern, Jardine Matheson/JCNC

No surprise: Keisei Electric Railway (9009 JP) shareholders voted down Palliser’s proposal. If the vote was close, Palliser may ups its rhetorical game, and takes a harder stance.
Argyle failed to boot one CMCDI (133 HK) director. They’ll next target the management agreement renewal; and agitate the company buy back 20% of shares outstanding at 90% of NAV.
The Offeror now has 90.16% in Great Eastern Holdings (GE SP) – so this will get suspended at the close of the Offer.

Sanil Electric IPO: The Bull Case

Sanil Electric (062040 KS), a Korean industrial transformer manufacturer, is seeking to raise up to US$165 million.
The IPO is a pure primary raise of 7.6 million shares at an IPO price range of KRW24,000-30,000. Book building will run from 9 to 15 July.
The bull case rests on US-led rapid revenue growth, high barriers to entry, good revenue visibility, improving margins, top-quartile margin performance and modest leverage.

Polestar Automotive Holding UK: A Tale Of An Enhanced Product Mix and Margin Improvement Strategy! – Major Drivers

By Baptista Research

Polestar presented a mixed but broadly positive financial picture in the third quarter of 2023.
The company, known for its focus on electric vehicles, reported record third-quarter deliveries of 13,976 units, marking a significant 51% increase from the previous year.
This robust performance can be attributed to a positive product and channel mix and the initial rollout of the Polestar 2’s model year ’24, illustrating a strong consumer demand for Polestar’s offerings.

Tencent Music Entertainment Group: How Are They Enhancing User Engagement through Artificial Intelligence? – Major Drivers

By Baptista Research

Tencent Music Entertainment Group, a leading player in China’s music streaming industry, started the year 2024 with some substantial financial and operational achievements, reflecting its continued emphasis on a dual-engine strategy of content richness and platform optimization.
However, not all indicators were uniformly positive, revealing certain challenges and strategic pivots.
On the upside, Tencent Music reported a marked increase in its subscriber base, adding a record 6.8 million net subscribers during the quarter, which pushes the total count to 113.5 million music-paying users.

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Jun 29

Most Read: China Traditional Chinese Medicine, MMG, Aisin , Brilliance China Automotive, LG Electronics, SK Networks, Emcure Pharmaceuticals, Bank Rakyat Indonesia and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait
TCM (570 HK): Where’s The Floor?
MMG (1208 HK) Rights Trading Dynamics
Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind
Aisin (7259 JP): A US$1.1 Billion Secondary Offering
Brilliance China (1114 HK): Reversing Out of Passive Portfolios
Initial Thoughts on LG Electronics India IPO
SK Square + SK Networks Merger Swap: A Guide to Pre-Merger Arb Spread Calculations
Emcure Pharmaceuticals Pre-IPO: IPO Price Band Set; Steep Valuation Offers Limited Upside Potential
Bank Rakyat Indonesia (BBRI IJ) – Special Mention on the Turn

China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait

The approval/filing process of China TCM’s privatization is complicated and would take some time, but there’re almost no cases of disapproval. It also depends on the adequacy of materials submitted.
Due to the extension of time for the despatch of Scheme Document, this process would be delayed for more months.But we should receive clear information by October at the latest.
For arbitrageurs, China TCM is an investment opportunity of high success rate, which becomes more attractive if HK stock market is depressed.It’s better suited to idle funds considering potential risks/returns.

TCM (570 HK): Where’s The Floor?

Just plain ugly. China Traditional Chinese Medicine (570 HK) (“TCM”) fell 11.7% yesterday. It’s down another 7.9%, on large volume, as I type. The stock is now ~35% below terms
Depending on who you talk to, the sudden move was triggered by a couple of event pods dumping stock; or the incoming CNPGC chairman is not supportive. Or perhaps both.
Since rumours surfaced early Feb as to an Offer, a basket of TCM’s peers are up 8% on average. The HSI is up 15%. TCM’s downside from here appears limited.

MMG (1208 HK) Rights Trading Dynamics

The MMG (1208 HK) rights, designed to raise US$1.15bn to pay off loans to the parent for the purchase of a large copper asset, start trading 24 June 2024.
There is some risk up for grabs, and it is likely to trade according to standard Hong Kong Rights Trading Dynamics. Shorts are down somewhat, but covering should be expected.
There is path-dependency to the Rights Trading, and while they trade for 7 trading days through Tuesday next, one should expect the volume to trade this week.

Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind

Today (27 June 2024) after the close, Aisin (7259 JP) announced three Toyota Group companies (Toyota, Toyota Industries, and Denso) would sell shares in Aisin in a ¥180bn offering.
This is ALL of Denso’s holdings, 63% of Toyota Industries stake, and ~12% of Toyota’s stake. Separately, Aisin announced a 17mm share (6.3%) ¥100bn buyback and a 3:1 split Oct1.
The recent yuho shows us the progress of Aisin’s promised selldown of crossholdings. There are three large chunks left. One is easy. The climb to capital allocation credibility easier too.

Aisin (7259 JP): A US$1.1 Billion Secondary Offering

Aisin (7259 JP) has announced a secondary offering of up to 38.9 million shares (including overallotment) and a buyback worth a maximum of JPY100 billion or 17 million shares.
Denso Corp (6902 JP), Toyota Industries (6201 JP), and Toyota Motor (7203 JP) are the selling shareholders. The offering aims to reconfigure the company’s shareholder mix and reduce cross-shareholdings.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 8 and 10 July (likely 8 July).

Brilliance China (1114 HK): Reversing Out of Passive Portfolios

Brilliance China Automotive (1114 HK) is up 220% on a total return basis since we first published our insight in August 2023.
The company paid a special dividend in April this year and will pay a large special dividend of HK$4.3/share going ex-div on 3 July.
The resultant drop in market cap will result in deletion of the stock from large global passive portfolios at the close on 3 July.

Initial Thoughts on LG Electronics India IPO

According to local media, LG Electronics is reviewing for a potential IPO of LG Electronics India. LG Electronics has approached JP Morgan and Morgan Stanley to be potential IPO underwriters.
If LG Electronics’ Indian subsidiary is listed, it is expected to be able to raise at least $500 million from the stock market.
Post IPO, the market value of LG Electronics India is estimated to be between $2.1 billion (3 trillion won) and $4.3 billion (6 trillion won).

SK Square + SK Networks Merger Swap: A Guide to Pre-Merger Arb Spread Calculations

SK Square’s market cap exceeds SK Networks’ by over 10 times, qualifying this merger as small-scale. Thus, only SK Networks needs shareholder approval and grants appraisal rights solely to shareholders.
The current arbitrage spread for SK Networks’ appraisal rights is 1.95%, and for the swap, it’s 4.16%. These are nominal values excluding trading costs and taxes.
Today’s SK Square and SK Networks prices reflect arbitrage spreads. Yesterday’s 8% spread widened, focusing on narrowing appraisal rights and swap spreads, essential before next week’s announcement.

Emcure Pharmaceuticals Pre-IPO: IPO Price Band Set; Steep Valuation Offers Limited Upside Potential

By Tina Banerjee

Emcure Pharmaceuticals seeks to raise INR19.5B in upcoming IPO through a fresh issue of INR8B and an OFS of 11.4M shares. IPO price band has been set at INR960–1,008.
The issue will open for subscription on July 3 and close on July 5. Bidding for anchor investors will open on July 2. Lot size for bidding is 14 shares.
IPO proceeds will be used to repay debt. As at March 31, 2024, the company’s outstanding borrowings stood at INR21B against cash balance of INR2B.

Bank Rakyat Indonesia (BBRI IJ) – Special Mention on the Turn

By Angus Mackintosh

Bank Rakyat Indonesia (BBRI IJ) have seen a significant correction on the back of concerns over credit quality, as provisions increased in 1Q2024, the bank addressed its problem micro-loans
The bank is addressing these loans with some further provisions likely over the coming quarter but special mention loans should plateau in July signifying a turn.
Bank Rakyat Indonesia will slow micro-lending and grow corporate loans this year to address the cost of credit. Profits will likely be flat and dividend payout up. Valuations are attractive.

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Jun 28

Most Read: China Traditional Chinese Medicine, Core Lithium Ltd, Aisin , Brilliance China Automotive, LG Electronics, Timee Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait
China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What
TCM (570 HK): Where’s The Floor?
Tax-Loss Selling In Australia 2024 – Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)
Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind
Aisin Corp Placement – US$1.1bn Selldown by Toyota and DENSO
Aisin (7259 JP): A US$1.1 Billion Secondary Offering
Brilliance China (1114 HK): Reversing Out of Passive Portfolios
LG Electronics’ Indian Subsidiary Is Gearing up for an IPO on the Indian Stock Market
Timee Pre-IPO – The Negatives – Competition Could Stiffen

China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait

The approval/filing process of China TCM’s privatization is complicated and would take some time, but there’re almost no cases of disapproval. It also depends on the adequacy of materials submitted.
Due to the extension of time for the despatch of Scheme Document, this process would be delayed for more months.But we should receive clear information by October at the latest.
For arbitrageurs, China TCM is an investment opportunity of high success rate, which becomes more attractive if HK stock market is depressed.It’s better suited to idle funds considering potential risks/returns.

China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What

On no news, China Traditional Chinese Medicine (570 HK) shares declined 12% today. We spoke to several readers to gauge the likely reasons for the fall.
The speculation is that the fall could be due to forced liquidation, Sinopharm’s new Chairman pulling the offer, the consortium unravelling, SAMR issues and Ping An blocking the deal.
There is clearly news behind today’s fall, but none of the above rumours seem credible. The risk/reward is attractive as the upside (25% spread) outweighs the downside (18% to undisturbed).

TCM (570 HK): Where’s The Floor?

Just plain ugly. China Traditional Chinese Medicine (570 HK) (“TCM”) fell 11.7% yesterday. It’s down another 7.9%, on large volume, as I type. The stock is now ~35% below terms
Depending on who you talk to, the sudden move was triggered by a couple of event pods dumping stock; or the incoming CNPGC chairman is not supportive. Or perhaps both.
Since rumours surfaced early Feb as to an Offer, a basket of TCM’s peers are up 8% on average. The HSI is up 15%. TCM’s downside from here appears limited.

Tax-Loss Selling In Australia 2024 – Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)

The original trade was discussed at end-April in Tax-Loss Selling in Australia 2024 – Historical Analysis and A Trade Basket then updated here and here.
That has done OK. The LIQUID basket has delta neutral performance of +8.4% over 2mos; LIQUID+LESSLIQUID +7.2%; If one did a mixed basket (3x L+LL + 1x Illiquids) it’s +8.6%.
Now it is time to reverse the trade, buying the basket you were short, and running it against index for the next 6-8 weeks.

Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind

Today (27 June 2024) after the close, Aisin (7259 JP) announced three Toyota Group companies (Toyota, Toyota Industries, and Denso) would sell shares in Aisin in a ¥180bn offering.
This is ALL of Denso’s holdings, 63% of Toyota Industries stake, and ~12% of Toyota’s stake. Separately, Aisin announced a 17mm share (6.3%) ¥100bn buyback and a 3:1 split Oct1.
The recent yuho shows us the progress of Aisin’s promised selldown of crossholdings. There are three large chunks left. One is easy. The climb to capital allocation credibility easier too.

Aisin Corp Placement – US$1.1bn Selldown by Toyota and DENSO

Denso Corp (6902 JP), Toyota Motor (7203 JP) and Toyota Industries (6201 JP) are looking to raise US$1.1bn from selling some of their stakes in Aisin (7259 JP).
While the deal appears well-flagged, given that it is part of the cross-shareholding unwind theme in Japan, the timing of such a selldown isn’t always certain.
In this note, we will talk about the placement and run the deal through our ECM framework.

Aisin (7259 JP): A US$1.1 Billion Secondary Offering

Aisin (7259 JP) has announced a secondary offering of up to 38.9 million shares (including overallotment) and a buyback worth a maximum of JPY100 billion or 17 million shares.
Denso Corp (6902 JP), Toyota Industries (6201 JP), and Toyota Motor (7203 JP) are the selling shareholders. The offering aims to reconfigure the company’s shareholder mix and reduce cross-shareholdings.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 8 and 10 July (likely 8 July).

Brilliance China (1114 HK): Reversing Out of Passive Portfolios

Brilliance China Automotive (1114 HK) is up 220% on a total return basis since we first published our insight in August 2023.
The company paid a special dividend in April this year and will pay a large special dividend of HK$4.3/share going ex-div on 3 July.
The resultant drop in market cap will result in deletion of the stock from large global passive portfolios at the close on 3 July.

LG Electronics’ Indian Subsidiary Is Gearing up for an IPO on the Indian Stock Market

LG Electronics’ Indian subsidiary, fully owned, saw 2023 sales grow 17% to ₩3.3T and net profit rise 14% to ₩231.3B, driven by strong appliance demand.
LG Electronics aims for a ₩5T-₩6T valuation, planning to sell 15-20% of their Indian subsidiary to raise at least $500M.
LG Electronics plans to invest the $500M raised into their EV components business, moving quickly with the IPO due to urgent funding needs in the downturn-hit sector.

Timee Pre-IPO – The Negatives – Competition Could Stiffen

Timee Inc (215A JP) is looking to raise US$290m from its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
In this note, we will talk about the not so positive aspects of the deal.

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Jun 27

Most Read: China Traditional Chinese Medicine, Timee Inc, Malaysia Airports Holdings, Core Lithium Ltd, Sawai Group Holdings, Hyundai Motor India , Harmony Gold Mining Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

TCM (570 HK): Sinopharm’s $4.60/Share Offer
China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait
China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks
China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What
Timee Pre-IPO – The Positives – Exponential Growth Since Inception
Malaysia Airports (MAHB MK)’s Offer: Buckle Up!
Tax-Loss Selling In Australia 2024 – Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)
Sawai Group (4887) – BIGLY Buyback To “Drastically” Change Capital Structure
Hyundai Motor India Pre-IPO – The Negatives – Not All Hunky-Dory
Quiddity Leaderboard MV J-Gold Miners Sep 24: Mergers Mean Possible Up-And-Out DELETEs

TCM (570 HK): Sinopharm’s $4.60/Share Offer

$4.60/Share. That’s the number – by way of a Scheme – that only matters. Below the recently rumoured $6/share, and $5.10/share a little over three years ago. Terms are final.
As widely expected, the Offeror is SASAC-managed China National Pharmaceutical Group Corporation (CNPGC), indirectly owning 32.46% in China Traditional Chinese Medicine (570 HK) (TCM) via Sinopharm Group Hongkong,
Optically, the Offer price appears light. But this should still get up. TCM is trading rich to peers. No other competing bidder will emerge. Expect regulatory pre-cons to be fast-tracked.

China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait

The approval/filing process of China TCM’s privatization is complicated and would take some time, but there’re almost no cases of disapproval. It also depends on the adequacy of materials submitted.
Due to the extension of time for the despatch of Scheme Document, this process would be delayed for more months.But we should receive clear information by October at the latest.
For arbitrageurs, China TCM is an investment opportunity of high success rate, which becomes more attractive if HK stock market is depressed.It’s better suited to idle funds considering potential risks/returns.

China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks

On 21 February, China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
The wide gross spread (7.0%) reflects risks around the re-rating of peers, the slow pace of satisfying the pre-condition, the completion timetable and Ping An’s blocking stake.
The key risk is the deal close timing due to the slow pace of regulatory approvals, which increases the chance that the vote will held after the August interim.

China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What

On no news, China Traditional Chinese Medicine (570 HK) shares declined 12% today. We spoke to several readers to gauge the likely reasons for the fall.
The speculation is that the fall could be due to forced liquidation, Sinopharm’s new Chairman pulling the offer, the consortium unravelling, SAMR issues and Ping An blocking the deal.
There is clearly news behind today’s fall, but none of the above rumours seem credible. The risk/reward is attractive as the upside (25% spread) outweighs the downside (18% to undisturbed).

Timee Pre-IPO – The Positives – Exponential Growth Since Inception

Timee Inc (215A JP) is looking to raise US$290m from its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
In this note, we will talk about the positive aspects of the deal.

Malaysia Airports (MAHB MK)’s Offer: Buckle Up!

Back on the 15th May, Khazanah Nasional, the EPF, the Abu Dhabi Investment Authority, and GIP, offered to buy shares not already owned in Malaysia Airports (MAHB MK) at RM11.00/share.
The premium to undisturbed appears reasonable. The price is a life-time high. The 90% acceptance hurdle was not insurmountable, and the consortium had the flexibility to lower the %.
But the Offer is now facing unexpected political pushback, amid protests against the Israel-linked bid.

Tax-Loss Selling In Australia 2024 – Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)

The original trade was discussed at end-April in Tax-Loss Selling in Australia 2024 – Historical Analysis and A Trade Basket then updated here and here.
That has done OK. The LIQUID basket has delta neutral performance of +8.4% over 2mos; LIQUID+LESSLIQUID +7.2%; If one did a mixed basket (3x L+LL + 1x Illiquids) it’s +8.6%.
Now it is time to reverse the trade, buying the basket you were short, and running it against index for the next 6-8 weeks.

Sawai Group (4887) – BIGLY Buyback To “Drastically” Change Capital Structure

Two years ago, generic pharmaceuticals co Sawai Group Holdings (4887 JP) traded at 10x PER, 6% ROE, and far below book. 10mos ago the price got back to 1x PBR.
By then, their US sub had partly been put into “Current Assets AFS” as it was for sale. By Dec23, it was completely there. In Jan, a “business review” announcement.
The US business sale led to a loss, but growth this year, and a new MTMP in early June. Monday, we got a HUGE buyback announcement. Today, an 8+% pop.

Hyundai Motor India Pre-IPO – The Negatives – Not All Hunky-Dory

Hyundai Motor (005385 KS) is looking to raise around US$3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
In this note, we talk about the not-so-positive aspects of the deal.

Quiddity Leaderboard MV J-Gold Miners Sep 24: Mergers Mean Possible Up-And-Out DELETEs

The MV J-Gold Miners index represents the performance small-cap gold and silver mining companies listed around the world.
This index is reviewed semi-annually in March and September. During these reviews, names can be added or deleted from the index.
In this insight, we take a look at the potential ADDs and DELs and our flow expectations for the index rebal event in September 2024.

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Jun 26

Most Read: Keisei Electric Railway Co, Chinese Estates Holdings, T Gaia Corp, Lotte Non Life Insurance Co, Shanghai Henlius Biotech , Midea Real Estate Holding , Hyundai Motor India , Prosus NV and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

[JAPAN ACTIVISM] Palliser Gets ISS/GL Nods for Keisei AGM Proposals – How Will The Swing Vote Swing?
Chinese Estates (127 HK): Understanding The Scheme Voting
T-Gaia (3738 JP) – Possible Premium Takeout Story
Chronic Insider Trading in the Korean Tender Offer Market & Time Positions for Short-Term Targets
Henlius (2696 HK): Fosun Pharma’s HK$24.60 Offer at Around Half the IPO Price
Henlius Biotech (2696 HK): Fosun Pharma’s “Fair” Offer
Midea Real Estate (3990 HK): An In-Specie Distribution to Unlock Value
Hyundai Motor India Pre-IPO – The Positives – Quasi-Local, Riding the SUV Wave
NPN X PRX FY24 Results: Initial Market Reaction Positive & JSE June Auction Analytics
Shanghai Henlius Biotech Privatization (2696.HK) – The Offer Price Is Disappointing

[JAPAN ACTIVISM] Palliser Gets ISS/GL Nods for Keisei AGM Proposals – How Will The Swing Vote Swing?

In Oct2023, activist Palliser Capital launched a campaign on well-known “stub trade” Keisei Electric Railway Co (9009 JP) (1.6% stake). The proposal? Monetise OLC, invest for growth, be shareholder friendly.
Keisei responded 3+mos ago: buyback and 1% OLC stake sale but said OLC would remain an equity affiliate. Palliser re-engaged in late April (Japanese/English and two AGM agenda items). Keisei objected.
Palliser made their case, Glass Lewis and ISS support Palliser. Palliser likely cannot win. The goal here isn’t to win though. It is to get enough to raise management consciousness.

Chinese Estates (127 HK): Understanding The Scheme Voting

Chinese Estates (127 HK)‘s Scheme was always going to be a tricky affair, given Hong Kong’s 2021 M&A bloodbath – e.g. Soho China (410 HK) & Golden Throat (6896 HK).
95.95% of Disinterested Shareholders voted for the Scheme. However, the Scheme failed the “headcount test”, as it was not approved by a majority in number of Scheme Shareholders.
Hong Kong abolished the headcount test in March 2014. Cayman and Bermuda-incorporated companies should follow suit.

T-Gaia (3738 JP) – Possible Premium Takeout Story

I kind of hate this, but I also can’t ignore it. Apparently, an expensive media service Reporting on Deals or about the Market for Mergers, had an article today.
Bloomberg carried a small blurb saying there was “speculation on a tender offer…. according to traders”. The stock is untraded, limit up.
The most informative comment comes from Japanese stock market portal ‘kabutan‘ which suggests “overseas media” thinks Sumitomo Corp will sell its shares. I look at the possibilities below.

Chronic Insider Trading in the Korean Tender Offer Market & Time Positions for Short-Term Targets

There is a high likelihood of information leaking through the lead securities firm when the tender offer prospectus is provided to branches about three days before the disclosure.
With the FSS’s stricter stance, tender offer candidates may act swiftly before new regulations, prompting attention to potential surges in tender offers.
Our approach is clear: identify short-term tender offer candidates, monitor trading volumes for spikes, and use the three-day pre-disclosure surge to time our positions effectively.

Henlius (2696 HK): Fosun Pharma’s HK$24.60 Offer at Around Half the IPO Price

Shanghai Henlius Biotech (2696 HK) disclosed a pre-conditional privatisation offer by Shanghai Fosun Pharmaceutical (Group) (2196 HK) at HK$24.60, a 36.7% premium to the undisturbed price. The offer price is final.
The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There is no minimum acceptance condition.
Long term investors will be unimpressed as the offer is half the HK$49.60 IPO price. However, shareholders with blocking stakes should be supportive partly because of the share alternative option.

Henlius Biotech (2696 HK): Fosun Pharma’s “Fair” Offer

Shanghai Fosun Pharmaceutical (2196 HK) has made a HK$24.60/share Offer (best & final), in cash, for H-shares not held in Shanghai Henlius Biotech (2696 HK). A scrip alternative may be afforded.
As Henlius is PRC-incorporated, this Offer is structured as a Merger by Absorption, involving a Scheme-like vote for independent H-shareholders. There is no tendering condition.
Pre-Conditions include NDRC, MoC, and SAFE. The Long Stop date to secure these conditions is 30th April 2025. That’s way too conservative. This should be wrapped up around mid 4Q24.

Midea Real Estate (3990 HK): An In-Specie Distribution to Unlock Value

On 25 June, Midea Real Estate Holding (3990 HK) disclosed an in-specie distribution of its PD&S business through a scrip or cash (HK$5.90 per share, 57.33% premium to undisturbed price).
The key condition will be approval of the distribution by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection).
Midea RE will remain listed with an asset-light retained business, which is estimated to be worth HK$1.93. The Group’s estimated value is HK$7.83, a 17.6% upside to the last close.

Hyundai Motor India Pre-IPO – The Positives – Quasi-Local, Riding the SUV Wave

Hyundai Motor (005387 KS) is looking to raise around US$3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
In this note, we talk about the positive aspects of the deal.

NPN X PRX FY24 Results: Initial Market Reaction Positive & JSE June Auction Analytics

By Charlotte van Tiddens, CFA

Naspers and Prosus released results for FY24 yesterday morning. The initial market reaction was positive, both discounts closed narrower for the day.
Since the appointment of Fabricio Bloisi was announced in May, both discounts have widened.
JSE indices were rebalanced in the closing auction on Friday. Turnover for the day on the JSE was R58bn, R38bn traded in the closing auction (66%).

Shanghai Henlius Biotech Privatization (2696.HK) – The Offer Price Is Disappointing

The Cancellation Price of HK$24.60 per share is about 50% lower than the IPO price of HK$49.6 per share in 2019. So, those long-term investors would suffer big losses.
Henlius’ share price has outperformed the index. If it remains listed, it’s able to continue to grow and provide long-term returns for shareholders. Reasonable Cancellation Price should be above HK$30/share.
As usual, Fosun doesn’t consider the interests of long-term investors and shareholders. There would be some investors/shareholders vote against the privatization, but the returns for arbitrageurs is not bad.

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Jun 25

Most Read: Mitsui & Co Ltd, Swire Properties, MMG, Sanil Electric, Sun Corp, T Gaia Corp, Lotte Non Life Insurance Co, Shanghai Henlius Biotech , Japan Hotel Reit Investment and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Mitsui & Co (8031) – ¥100bn Overnight Equity Offering
Swire Properties (1972 HK): Potential Passive Selling & Trade Ideas
MMG (1208 HK) Rights Trading Dynamics
Sanil Electric IPO Preview
StubWorld: Sun Corp (6736 JP) Running Out Of Puff?
Mitsui & Co Placement – Another Cross-Shareholding Unwind, This Is a Small One to Digest
T-Gaia (3738 JP) – Possible Premium Takeout Story
Chronic Insider Trading in the Korean Tender Offer Market & Time Positions for Short-Term Targets
Henlius (2696 HK): Fosun Pharma’s HK$24.60 Offer at Around Half the IPO Price
Japan Hotel REIT Placement – Relatively Large Deal but It Is Accretive

Mitsui & Co (8031) – ¥100bn Overnight Equity Offering

Today after the close, Mitsui & Co Ltd (8031 JP) announced that MS&AD Insurance (8725 JP) and Sumitomo Mitsui Financial Group (8316 JP) would sell 14.9mm shares in an offering.
This will get priced today or tomorrow, sold to institutional investors. This is ¥107bn, 4 days of ADV and 1% of shares out. It is not dilutive.
Mitsui & Co has a buyback program with ¥123bn left til end-Sep, when presumably it will reload. Looks easy today, but measuring Mitsui & Co vs Peers is less flattering.

Swire Properties (1972 HK): Potential Passive Selling & Trade Ideas

The steady selloff in Swire Properties (1972 HK) could result in the stock being deleted from global passive portfolios in the next couple of months.
Swire Properties (1972 HK) trades marginally cheaper than its similar sized peers on forward PE and price to book value.
Swire Pacific (A) (19 HK) owns 82% of Swire Properties (1972 HK) and a big drop in the stock price could see them step in.

MMG (1208 HK) Rights Trading Dynamics

The MMG (1208 HK) rights, designed to raise US$1.15bn to pay off loans to the parent for the purchase of a large copper asset, start trading 24 June 2024.
There is some risk up for grabs, and it is likely to trade according to standard Hong Kong Rights Trading Dynamics. Shorts are down somewhat, but covering should be expected.
There is path-dependency to the Rights Trading, and while they trade for 7 trading days through Tuesday next, one should expect the volume to trade this week.

Sanil Electric IPO Preview

Sanil Electric is getting ready to complete its IPO in late July in KOSPI. The IPO price range is from 24,000 won to 30,000 won per share.
The company is planning is raise between 182.4 billion won and 228 billion won in this IPO. The book building for the institutional investors lasts from 9 to 15 July.
Sanil Electric is best known for making special transformers used for special purposes in environments with severe weather changes, such as offshore wind power, solar power, and offshore plants.

StubWorld: Sun Corp (6736 JP) Running Out Of Puff?

Trading comfortably through the Partial Offer terms, Sun Corp (6736 JP) may still do nothing with its Cellebrite DI (CLBT US) holding towards narrowing the NAV discount.
Preceding my comments on Sun Corp 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%.

Mitsui & Co Placement – Another Cross-Shareholding Unwind, This Is a Small One to Digest

MS&AD Insurance (8725 JP) and Sumitomo Mitsui Financial Group (8316 JP) are looking to raise US$691m from trimming their respective stakes in Mitsui & Co Ltd (8031 JP).
While this appears to be another cross-shareholding unwind in Japan, we would argue that the selldown isn’t outright well-flagged given the uncertainty of timing the selldown.
In this note, we will talk about the placement and run the deal through our ECM framework.

T-Gaia (3738 JP) – Possible Premium Takeout Story

I kind of hate this, but I also can’t ignore it. Apparently, an expensive media service Reporting on Deals or about the Market for Mergers, had an article today.
Bloomberg carried a small blurb saying there was “speculation on a tender offer…. according to traders”. The stock is untraded, limit up.
The most informative comment comes from Japanese stock market portal ‘kabutan‘ which suggests “overseas media” thinks Sumitomo Corp will sell its shares. I look at the possibilities below.

Chronic Insider Trading in the Korean Tender Offer Market & Time Positions for Short-Term Targets

There is a high likelihood of information leaking through the lead securities firm when the tender offer prospectus is provided to branches about three days before the disclosure.
With the FSS’s stricter stance, tender offer candidates may act swiftly before new regulations, prompting attention to potential surges in tender offers.
Our approach is clear: identify short-term tender offer candidates, monitor trading volumes for spikes, and use the three-day pre-disclosure surge to time our positions effectively.

Henlius (2696 HK): Fosun Pharma’s HK$24.60 Offer at Around Half the IPO Price

Shanghai Henlius Biotech (2696 HK) disclosed a pre-conditional privatisation offer by Shanghai Fosun Pharmaceutical (Group) (2196 HK) at HK$24.60, a 36.7% premium to the undisturbed price. The offer price is final.
The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There is no minimum acceptance condition.
Long term investors will be unimpressed as the offer is half the HK$49.60 IPO price. However, shareholders with blocking stakes should be supportive partly because of the share alternative option.

Japan Hotel REIT Placement – Relatively Large Deal but It Is Accretive

Japan Hotel Reit Investment (8985 JP) aims to raise around US$214m to partly fund the acquisition of four hotel assets.
The company has undertaken a number of deals in the past, most of which have managed to perform well.
In this note, we will talk about the placement and run the deal through our ECM framework.

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Jun 24

Most Read: Ryohin Keikaku, Infocom Corp, MMG, Exedy Corp, L’Occitane, Swire Properties, Taiwan Semiconductor (TSMC) – ADR, Malaysia Airports Holdings, LS Electric and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close
(Mostly) Asia-Pac M&A: Infocom, Capitol Health, MMA Offshore, Mimasu, Tatsuta Elect., Great Eastern
MMG (1208 HK) Rights Trading Dynamics
Last Week in Event SPACE: Exedy Corp, EOFlow, L’Occitane, Jardine Cycle & Carriage
MMG (1208 HK): Rights Trade Playbook
Weekly Deals Digest (23 Jun) – L’Occitane, Exedy, Infocom, Mimasu, Tatsuta, MMA Offshore, Webtoon
Swire Properties (1972 HK): Potential Passive Selling & Trade Ideas
Taiwan Dual-Listings Monitor: TSMC & ASE Premiums Drop Sharply; ChipMOS Extreme Discount
Merger Arb Mondays (24 Jun) – Malaysia Airports, GA Pack, Infocom, Mimasu, Tatsuta, Capitol, MMA
Sanil Electric IPO Preview

Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close

The Sep 2024 Nikkei 225 Review base date is six weeks away. One can no extrapolate results quite accurately. It still gives us one ADD, one DELETE, and capping fun.
Recently, Yanai-san sold more Fast Retailing (9983 JP). More active holders own more stock (which may mean less interest to buy later), and only 1% to go to avoid capping.
There should be one DELETE, one ADD. There is a low-probability Dark Horse ADD but I expect Kokusai Electric (6525) to be added in March 2025.

(Mostly) Asia-Pac M&A: Infocom, Capitol Health, MMA Offshore, Mimasu, Tatsuta Elect., Great Eastern

I tally 48 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals discussed this week: the Capitol Health (CAJ AU) / Integral Diagnostics (IDX AU) merger; and Infocom Corp (4348 JP)‘s Tender Offer.
Key updates took place on: MMA Offshore (MRM AU), L’Occitane (973 HK), Mimasu Semiconductor Industry (8155 JP), Tatsuta Electric Wire & Cable (5809 JP), and Great Eastern Holdings (GE SP).

MMG (1208 HK) Rights Trading Dynamics

The MMG (1208 HK) rights, designed to raise US$1.15bn to pay off loans to the parent for the purchase of a large copper asset, start trading 24 June 2024.
There is some risk up for grabs, and it is likely to trade according to standard Hong Kong Rights Trading Dynamics. Shorts are down somewhat, but covering should be expected.
There is path-dependency to the Rights Trading, and while they trade for 7 trading days through Tuesday next, one should expect the volume to trade this week.

Last Week in Event SPACE: Exedy Corp, EOFlow, L’Occitane, Jardine Cycle & Carriage

Murakami Group now owns 10.13% of Exedy Corp (7278 JP). Interestingly, NOMURA Aya sold 6.79% off-market to Minami Aoyama Fudosan. Has the Murakami Group made a “mistake” in its planning?
A big win for EOFlow (294090 KS) as the U.S. Federal Appeals Court issued its decision on overturning Insulet Corp (PODD US)‘s provisional injunction
L’Occitane (973 HK) finally announces the share alternative. And Pleasant Lake (3.25% of shares out) will accept the share offer (either cash or scrip). This is a done deal

MMG (1208 HK): Rights Trade Playbook

On 4 June, MMG (1208 HK) announced plans to raise HK$9.1bn (US$1.2bn) through 2 rights shares for every five existing shares rights offering, with a rights price of HK$2.62.
Since the rights issue announcement, MMG shares have declined by 16.2% to the undisturbed price and by 8.0% compared to the TERP of HK$3.48 per share.
MMG’s trading pattern has diverged from Link REIT/Yuexiu’s rights trading due to the statement on 18 May that the Peruvian mine is not liable for a 30% withholding tax.

Weekly Deals Digest (23 Jun) – L’Occitane, Exedy, Infocom, Mimasu, Tatsuta, MMA Offshore, Webtoon

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: MMG (1208 HK) US$1.2 billion rights issue. Shift Up (462870 KS) and Webtoon Entertainment (WBTN US) IPOs.
Event-Driven developments: L’Occitane (973 HK), Exedy Corp (7278 JP), Infocom Corp (4348 JP), Mimasu Semiconductor Industry (8155 JP), Tatsuta Electric Wire & Cable (5809 JP), Mma Offshore (MRM AU).

Swire Properties (1972 HK): Potential Passive Selling & Trade Ideas

The steady selloff in Swire Properties (1972 HK) could result in the stock being deleted from global passive portfolios in the next couple of months.
Swire Properties (1972 HK) trades marginally cheaper than its similar sized peers on forward PE and price to book value.
Swire Pacific (A) (19 HK) owns 82% of Swire Properties (1972 HK) and a big drop in the stock price could see them step in.

Taiwan Dual-Listings Monitor: TSMC & ASE Premiums Drop Sharply; ChipMOS Extreme Discount

By Vincent Fernando, CFA

TSMC: +16.1% Premium, After Sharp Drop, Will Be Interesting to See If Spread Will Remain Within the Recent ~15-25% Range
ASE: +7.4% Premium; Can Consider Going Long the Spread Given Recent Trading Range
ChipMOS: -2.4% Discount Repesents Extreme Low of End of Range; Can Consider Going Long the Spread

Merger Arb Mondays (24 Jun) – Malaysia Airports, GA Pack, Infocom, Mimasu, Tatsuta, Capitol, MMA

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), Asia Cement China (743 HK), A8 New Media (800 HK), Malaysia Airports Holdings (MAHB MK).
Lowest spreads: Fancl Corp (4921 JP), Tatsuta Electric Wire & Cable (5809 JP), Great Eastern Holdings (GE SP), Nagatanien Holdings (2899 JP), Chilled & Frozen Logistics Holdings (9099 JP).

Sanil Electric IPO Preview

Sanil Electric is getting ready to complete its IPO in late July in KOSPI. The IPO price range is from 24,000 won to 30,000 won per share.
The company is planning is raise between 182.4 billion won and 228 billion won in this IPO. The book building for the institutional investors lasts from 9 to 15 July.
Sanil Electric is best known for making special transformers used for special purposes in environments with severe weather changes, such as offshore wind power, solar power, and offshore plants.

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Jun 23

Most Read: Ryohin Keikaku, Barito Renewables Energy, Infocom Corp, Korea Stock Exchange KOSPI 200, Silergy Corp, Exedy Corp, Webtoon Entertainment, L’Occitane, United Microelectronics Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

[JAPAN ACTIVISM] – Murakami Group Goes Activisting on Exedy (7278) – Room To Run
Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close
Barito Renewables Energy (BREN IJ): Back to Normal Trading & Index Implications
(Mostly) Asia-Pac M&A: Infocom, Capitol Health, MMA Offshore, Mimasu, Tatsuta Elect., Great Eastern
EQD | The KOSPI 200 Is Ready to Pullback (Again)
Silergy (6147.TT): The Wafer Demand Is Projected to Increase by 30-40% QoQ from 2Q24 Onwards.
Last Week in Event SPACE: Exedy Corp, EOFlow, L’Occitane, Jardine Cycle & Carriage
Webtoon Entertainment IPO: Favorable Risk/Reward IPO Valuation and Limited Downside Potential
Weekly Deals Digest (23 Jun) – L’Occitane, Exedy, Infocom, Mimasu, Tatsuta, MMA Offshore, Webtoon
UMC (2303.TT; UMC.US): The Outlook for 3Q24 Has Reached a Slightly Upside QoQ.

[JAPAN ACTIVISM] – Murakami Group Goes Activisting on Exedy (7278) – Room To Run

Late May, Aisin (7259 JP) announced a sell-down of its 34% stake in Exedy Corp (7278 JP) – a big non-dilutive offering, pricing 11% below undisturbed. Exedy announced a buyback.
Announced on the 27th of May, shares fell sharply the next day, it priced on the 3rd, and offering shares traded on the 10th. Then the price started climbing back.
My first and second pieces argued that buyback accretion, index impact, and change in register shape all meant it was a buy. Activist Murakami agreed, now he has 6.5%.

Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close

The Sep 2024 Nikkei 225 Review base date is six weeks away. One can no extrapolate results quite accurately. It still gives us one ADD, one DELETE, and capping fun.
Recently, Yanai-san sold more Fast Retailing (9983 JP). More active holders own more stock (which may mean less interest to buy later), and only 1% to go to avoid capping.
There should be one DELETE, one ADD. There is a low-probability Dark Horse ADD but I expect Kokusai Electric (6525) to be added in March 2025.

Barito Renewables Energy (BREN IJ): Back to Normal Trading & Index Implications

Barito Renewables Energy (BREN IJ) listed on the IDX in October 2023 and inclusion in global indices was expected in June and August.
The IDX threw a spanner in the works by placing Barito Renewables Energy (BREN IJ) onto its Watchlist under criteria 10. That resulted in cancellation of index inclusion in June.
Barito Renewables Energy (BREN IJ) will come off the Watchlist today and that could see a renewed move higher in the stock over the next few weeks.

(Mostly) Asia-Pac M&A: Infocom, Capitol Health, MMA Offshore, Mimasu, Tatsuta Elect., Great Eastern

I tally 48 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals discussed this week: the Capitol Health (CAJ AU) / Integral Diagnostics (IDX AU) merger; and Infocom Corp (4348 JP)‘s Tender Offer.
Key updates took place on: MMA Offshore (MRM AU), L’Occitane (973 HK), Mimasu Semiconductor Industry (8155 JP), Tatsuta Electric Wire & Cable (5809 JP), and Great Eastern Holdings (GE SP).

EQD | The KOSPI 200 Is Ready to Pullback (Again)

By Nico Rosti

After 3 weeks up in a row the KOSPI 200 is ripe for a pullback.
The reversal is probably going to begin this coming week.
If the index goes higher, look at 391 resistance targets to initiate SHORT trades or to cover your LONGs.

Silergy (6147.TT): The Wafer Demand Is Projected to Increase by 30-40% QoQ from 2Q24 Onwards.

By Patrick Liao

We presume Silergy is likely to see demand recovery or inventory rebuilding starting from 2Q24.
Silergy’s wafer demand is projected to increase by 30-40% QoQ from 2Q24 onwards.
Silergy’s primary focus remains on China, Taiwan, and Korea, but the US market is promising for potential growth.

Last Week in Event SPACE: Exedy Corp, EOFlow, L’Occitane, Jardine Cycle & Carriage

Murakami Group now owns 10.13% of Exedy Corp (7278 JP). Interestingly, NOMURA Aya sold 6.79% off-market to Minami Aoyama Fudosan. Has the Murakami Group made a “mistake” in its planning?
A big win for EOFlow (294090 KS) as the U.S. Federal Appeals Court issued its decision on overturning Insulet Corp (PODD US)‘s provisional injunction
L’Occitane (973 HK) finally announces the share alternative. And Pleasant Lake (3.25% of shares out) will accept the share offer (either cash or scrip). This is a done deal

Webtoon Entertainment IPO: Favorable Risk/Reward IPO Valuation and Limited Downside Potential

By Andrei Zakharov

Webtoon Entertainment, a South Korean global storytelling platform and the world’s largest digital comics platform, filed for an IPO in the United States.
The company offers 15M shares at a price range between $18.00 and $21.00, implying a market cap of roughly $2.5B at the midpoint based on 129.3M outstanding shares.
I have a positive view of the upcoming Webtoon Entertainment IPO and I think risk/reward is more favorable for IPO investors given the company’s improving profitability and strong cash position.

Weekly Deals Digest (23 Jun) – L’Occitane, Exedy, Infocom, Mimasu, Tatsuta, MMA Offshore, Webtoon