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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.

In Court Today With Segantii

Although this note does not encapsulate a trade idea, the fallout from the Capital Management Limited’s (Segantii) insider dealing case has impacted certain event trades, as the fund winds down.
On the 2nd May, the SFC commenced criminal proceedings against Segantii, its founder/ director/CIO Simon Sadler, and former trader Daniel La Rocca.
In the Eastern Magistrates’ Court this morning, we heard the prosecution’s request to transfer the case to the District Court.

Helios Techno Holding (6927) TOB – Today Could Be The Day

Rs Technologies (3445 JP) announced a TOB on Helios Techno Holding (6927 JP) 12 days ago. At a 74% premium, but that was too cheap. I discussed it here.
Shares went limit up for two days then traded huge volume the first full day last Wednesday. The lowest trade so far in open trading is 3% through terms.
57% of Shares Out Ex-Treasury have traded in five days. Anyone who bought 5% on Day 1 has to file a Large Shareholder Report today.

Tatsuta Electric (5809 JP) Crunch Time = Bump Time?

ENEOS Holdings (5020 JP) announced a deal to buy out their affiliate Tatsuta Electric Wire & Cable (5809 JP) 18 months ago. The TOB was expected to start June 2023.
June 2023 came around and China’s SAMR still hadn’t approved. ENEOS provided quarterly updates in Sep and Dec and monthly updates since. The May update was different.
The May update cut the “re-update” schedule to mid-month June. There are reasons to look at what has changed since the Dec 2022 announcement.

Sciclone Pharmaceuticals (6600.HK) Privatization Update – Some “Unstable Factors” During Voting

Some shareholders have confirmed to be acting in concert at the Court Meeting, but long-term investors may vote against the privatization because they are not satisfied with the Cancellation Price.
The success rate of SciClone’s privatization is lower than that of China TCM and L’Occitane. If fails, there’s a high probability that the share price will fall back to HK$14/share.
The current share price cannot provide decent returns. Together with exchange rate risk, potential failure risks, etc., there’s no need for investors to take risks at this share price level.

ASX200 Index Adhoc Rebalance: Judo Capital to Replace CSR; Positioning Appears Light

CSR Ltd (CSR AU) is expected to stop trading on 19 June following the acquisition by Cie De Saint-Gobain (SGO FP).
Judo Capital (JDO AU) will be added to the S&P/ASX 200 (AS51 INDEX) at the close on 19 June to replace CSR Ltd (CSR AU).
There has been short covering in Judo Capital over the last 3 months and there does not appear to be enough positioning for the index inclusion yet.

Tatsuta Electric (5809 JP): Eneos Finally Secures SAMR Approval but Needs to Bump

18 months after announcing the offer, ENEOS Holdings (5020 JP) secured SAMR approval for the Tatsuta Electric Wire & Cable (5809 JP) tender offer at JPY720 per share.
The tender offer is expected to be launched on 21 June, subject to securing the recommendation from the special committee and the Board.
A bump is required due to the material market rerating since 21 December 2022. An offer of JPY828, a 15.1% premium to the current offer, implies a P/B of 1x.

A8 New Media (800 HK): A Scheme with a 162% Takeover Premium

A8 New Media (800 HK) disclosed a Cayman scheme privatisation offer from Mr Liu Xiaosong (Founder, Chairman, CEO) at HK$0.36 per share, a 162.8% premium to the last close price.
The massive premium is unsurprising, as A8’s EV has been negative since April 2023 due to headwinds from the weak Chinese leasing sector and uncertainty about cash use.
The high takeover premium, no shareholder holding a blocking stake, and low AGM minority participation rate point to a done deal. However, this is a small-cap illiquid stock.

Mao Geping Cosmetics Pre-IPO – Riding on the Founder’s Reputation

Mao Geping Cosmetics is looking to raise around US$300m in its upcoming Hong Kong IPO.
Mao Geping Cosmetics (MGC) operates in the premium beauty segment. Operating via its two brands, MAOGEPING and Love Keeps, MGC offers a wide range of color cosmetics and skincare products.
In this note, we look at the company’s past performance.

Proposed Merger Between Rebellions and Sapeon – To Challenge Nvidia

On 12 June, SK Telecom (017670 KS) confirmed that its affiliate Sapeon plans to merge with its competitor Rebellions by end of this year.
Sapeon and Rebellions’ largest global competitor is Nvidia. A key aim of the merger is to challenge Nvidia and try to take away its global dominance in AI chips.
If the combined Sapeon and Rebellion can take away just 1% market share resulting in 1% of Nvidia’s market cap, this would suggest valuation of US$31 billion.

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Jun 12

Most Read: LG Energy Solution, Sun Corp, Keisei Electric Railway Co, Jeisys Medical, CPMC Holdings, Korea Stock Exchange KOSPI 200, Medical Data Vision, Atour Lifestyle Holdings, Aozora Bank Ltd, Judo Capital and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Mandatory Block Deal Pre-Announcement Requirement in Korea Starting 24 July: Impact on Block Deals
Sun Corporation (6736 JP): True Wind’s Hostile Partial Offer
[JAPAN ACTIVISM] Palliser Gets ISS/GL Nods for Keisei AGM Proposals – How Will The Swing Vote Swing?
Jeisys Medical (287410 KS): Archimed’s Delisting Offer
CPMC Holdings (906.HK) – ORG Can’t Afford to Lose, But Baosteel Is a Step Ahead
Korea’s Finalized Short-Selling Rules Include Limiting 90-Day Short Position Extensions
Medical Data Vision (3902) – SBI Upping Their Stake AGAIN In The Market
Atour Lifestyle Holdings Placement – Well Flagged Deal, past Selldowns Have Done Well
Daiwa to Buy More Aozora (8304) Shares – Murakami-San Escapes
ASX200 Index Adhoc Rebalance: Judo Capital to Replace CSR; Positioning Appears Light

Mandatory Block Deal Pre-Announcement Requirement in Korea Starting 24 July: Impact on Block Deals

Starting 24 July, there will be a mandatory pre-announcement requirement for block deal sales in Korea.
In other words, the major shareholders of the Korean companies need to report publicly prior to their actual sales of their stakes in these companies through block deal sales.
The potential block deal sales candidates could continue to underperform on average the companies that are selling these stocks in potential block deal sales in the next several weeks.

Sun Corporation (6736 JP): True Wind’s Hostile Partial Offer

True Wind has launched a hostile partial tender offer for Sun Corp (6736 JP) for a minimum (3.8m) and maximum (4.2m) shares at JPY4,400, 19.2% premium to the undisturbed price.
The offer was prompted by frustration with the Board’s lack of urgency in closing the disparity between Sun Corp’s market cap and the value of its Cellebrite DI (CLBT US) stake.
The Board has three options: do nothing (low probability), find a white knight bidder (high probability), or commit to selling/distributing its Cellebrite stake (medium probability).

[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.

Jeisys Medical (287410 KS): Archimed’s Delisting Offer

Aesthetic laser maker Jeisys Medical (287410 KS) has announced French PE outfit Archimed SAS is seeking to delist the company.
Archimed intends to acquire 72% of Jeisys at ₩13,000, a 20.82% premium to undisturbed. Archimed has also inked agreements with founders/directors for 26.44%, taking its possible % acquisition to 98.44%.
A Korean medical device maker – not another Eoflow (294090 KS)?! Jeisys did face a patent infringement case from Syneron Medical (ELOS US) in 2018; but since resolved.

CPMC Holdings (906.HK) – ORG Can’t Afford to Lose, But Baosteel Is a Step Ahead

Baosteel’s SOE background helps bring more advantages- This deal is a consolidation of assets under SASAC, which may involve some strategic intent at national level. Baosteel has an upper hand.
ORG cannot afford to fail considering the strategic significance of CMPC for ORG. Major shareholder of CPMC Zhang Wei has picked ORG side, making it maintain the hope of winning.
For arbitrageurs, the good news is CPMC would be acquired by either Changping Industrial or ORG, with high certainty.Baosteel is also worth watching since it could be a new leader.

Korea’s Finalized Short-Selling Rules Include Limiting 90-Day Short Position Extensions

The government will announce short selling improvements Thursday. A leaked detail includes limiting 90-day short position extensions.
Limiting the 90-day short position holding period may ease local investor concerns, but it could shrink the short selling market, potentially affecting overseas fund outflows.
Resuming short selling in early July may bring new flow patterns due to temporary distortions from mandatory repayment within 90 days and limitations on position extensions, increasing price impacts.

Medical Data Vision (3902) – SBI Upping Their Stake AGAIN In The Market

Today after the close, SBI Holdings (8473 JP) – which currently owns 32.4% of Medical Data Vision (3902 JP) – announced it would buy another 1.91mm shares over 7mos.
This market purchase would lift them to ~37.4% by year-end. Interestingly, they plan to go through the one-third level without a Tender Offer. But their buying history hasn’t been great.
SBI bought 20% in 2020. It fell by half. They bought another 5%. Then it dropped 50%, so they bought another 5%. Now -25% so they are buying another 5%.

Atour Lifestyle Holdings Placement – Well Flagged Deal, past Selldowns Have Done Well

Legend Capital (LC), one of the principal shareholders of Atour Lifestyle Holdings (ATAT US), is looking to raise around US$168m through a secondary selldown.
This will be the third selldown by Legend Capital in just over a year’s time. Hence, the deal is well flagged.
In this note, we will talk about the placement and run the deal through our ECM framework.

Daiwa to Buy More Aozora (8304) Shares – Murakami-San Escapes

In February, Aozora Bank Ltd (8304 JP) extended its writedowns and the shares fell sharply. By end-Feb, we found out Japanese activist Murakami-san had bought shares.
I didn’t see the endgame. The pump worked, but he didn’t dump. Then Aozora got Daiwa to be a lead investor through a 3rd party share allotment, diluting Murakami-san.
Last week we got news the FSA had approved the Daiwa transaction. Yesterday, we got news the Murakami Group would sell its whole stake to Daiwa.

ASX200 Index Adhoc Rebalance: Judo Capital to Replace CSR; Positioning Appears Light

CSR Ltd (CSR AU) is expected to stop trading on 19 June following the acquisition by Cie De Saint-Gobain (SGO FP).
Judo Capital (JDO AU) will be added to the S&P/ASX 200 (AS51 INDEX) at the close on 19 June to replace CSR Ltd (CSR AU).
There has been short covering in Judo Capital over the last 3 months and there does not appear to be enough positioning for the index inclusion yet.

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Jun 11

Most Read: SK Bioscience , Sun Corp, Nan Ya Printed Circuit Board, Asia Cement China, LG Energy Solution, Siemens Ltd, Jeisys Medical, Wisetech Global, Asia Vital Components and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Block Deal Prospects Arising from SK Group’s Corporate Reshuffle
Unsolicited Partial Offer for 19% of Sun Corp (6736 JP) – Play on Cellebrite from SPAC Sponsor
Yuanta/P-Shares Taiwan Div+ ETF Rebalance: One Surprise as Round-Trip Trade Hits US$2.3bn
Asia Cement China (743.HK) Privatization- There May Be “Surprises” Despite Disappointing Offer Price
Mandatory Block Deal Pre-Announcement Requirement in Korea Starting 24 July: Impact on Block Deals
Sun Corporation (6736 JP): True Wind’s Hostile Partial Offer
NIFTY200 Momentum30 Index Rebalance: 13 Changes, 42% Turnover, Momentum Recovers After Selloff
Tender Offer of Jeisys Medical by Archimed Group
S&P/ASX Index Rebalance (June 2024): Changes, Flows, Impact, Shorts & Positioning
Taiwan Top 50 ETF Rebalance: Asia Vital Components to Replace Chang Hwa Commercial Bank

Block Deal Prospects Arising from SK Group’s Corporate Reshuffle

The declining appeal of the separator business prompts SK to seek buyers for SKIET through block deals amid financial pressures. The first deal is anticipated despite recent stock price drops.
SK Ecoplant looks to sell its 37.6% stake in SK Oceanplant. Negotiations stall over the former major shareholder’s 20% stake, prompting consideration of a block deal.
SK Bioscience, under SK Discovery, faces possible sale amid SK’s bio company reshuffle. SK Chemicals may bring SK Biopharm under its wing to help SK Inc focus on semiconductors/batteries.

Unsolicited Partial Offer for 19% of Sun Corp (6736 JP) – Play on Cellebrite from SPAC Sponsor

Sun Corp (6736 JP) for years has been a play on its investment holding in Cellebrite DI (CLBT US), brought to market in a $2.4bn SPAC deal announced 30Aug2021.
The SPAC entity was an entity called TWC Tech Holdings II Corp (TWC = “True Wind Capital”). The next day, Cellebrite DI (CLBT US) was born, trading up to US$11.00+.
Sun Corp (6736 JP)‘s value realisation path had begun. Today, a True Winds entity announced a Partial Tender Offer – unsolicited, unannounced previously – on Sun Corp, for 19.0%.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance: One Surprise as Round-Trip Trade Hits US$2.3bn

There are 5 adds and 5 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June with implementation taking place from 21-27 June.
The constituent changes and capping changes result in an estimated one-way turnover of 12.8% and in a one-way trade of TWD 37.2bn (US$1.15bn).
The changes are in line with our forecasts with one exception. Uni President Enterprises (1216 TT) was not added and Yulon Finance (9941 TT) was added instead.

Asia Cement China (743.HK) Privatization- There May Be “Surprises” Despite Disappointing Offer Price

Since the China/Taiwan situation looks increasingly tense, Xu Xudong/Far Eastern Group may be eager to privatize ACC considering geopolitical conflicts and political risks. Its business is subject to strict regulation.
HK$3.22 Offer Price is disappointing, but the privatization isn’t completely impossible (The headcount does not apply now). A certain number of investors are still willing to accept the Offer Price.
For arbitrageurs, the return looks not bad. However, considering the high uncertainties/failure risks, we still advise investors to be cautious. HK$2.5/share is a price point worth participating in.

Mandatory Block Deal Pre-Announcement Requirement in Korea Starting 24 July: Impact on Block Deals

Starting 24 July, there will be a mandatory pre-announcement requirement for block deal sales in Korea.
In other words, the major shareholders of the Korean companies need to report publicly prior to their actual sales of their stakes in these companies through block deal sales.
The potential block deal sales candidates could continue to underperform on average the companies that are selling these stocks in potential block deal sales in the next several weeks.

Sun Corporation (6736 JP): True Wind’s Hostile Partial Offer

True Wind has launched a hostile partial tender offer for Sun Corp (6736 JP) for a minimum (3.8m) and maximum (4.2m) shares at JPY4,400, 19.2% premium to the undisturbed price.
The offer was prompted by frustration with the Board’s lack of urgency in closing the disparity between Sun Corp’s market cap and the value of its Cellebrite DI (CLBT US) stake.
The Board has three options: do nothing (low probability), find a white knight bidder (high probability), or commit to selling/distributing its Cellebrite stake (medium probability).

NIFTY200 Momentum30 Index Rebalance: 13 Changes, 42% Turnover, Momentum Recovers After Selloff

There are 13 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 27 June.
Estimated one-way turnover is 42.3% resulting in a one-way trade of INR 32bn (US$384m). There are 13 stocks with over 0.5x ADV to trade, mostly on the deletes.
After steady outperformance over the last few months, there was a selloff in momentum names following the announcement of the election results. There has been a recovery since then.

Tender Offer of Jeisys Medical by Archimed Group

On 10 June, it was announced that France’s Archimed Group is conducting a tender offer of 55.72 million shares of Jeisys Medical (287410 KS) (72% of outstanding shares).
The tender offer period will run from 10 June to 22 July. The tender offer price is 13,000 won.
Archimed also signed a contract to purchase the entire stake (23.2%) held by Kang Don-Hwan (Chairman of Jeisys Medical) and (3.2%) held by a Director Myung-Hoon Lee.

S&P/ASX Index Rebalance (June 2024): Changes, Flows, Impact, Shorts & Positioning

There is 1 change for the S&P/ASX20 Index, 1 change for the S&P/ASX50 Index, 2 changes for the S&P/ASX100 Index, and no regular changes for the S&P/ASX200 INDEX in June.
The surprise inclusion of Wisetech Global (WTC AU) means that positioning is likely to be lower than the passive buying and there could be a move higher in the stock.
There will be one adhoc inclusion to the S&P/ASX 200 (AS51 INDEX) at the close on 19 June following Cie De Saint-Gobain (SGO FP)’s acquisition of CSR Ltd (CSR AU).

Taiwan Top 50 ETF Rebalance: Asia Vital Components to Replace Chang Hwa Commercial Bank

Asia Vital Components (3017 TT) will replace Chang Hwa Commercial Bank (2801 TT) in the Yuanta/P-Shares Taiwan Top 50 ETF at the close of trading on 21 June.
Asia Vital Components (3017 TT) was added to a global index at the end of May and the stock has dropped nearly 25% from its highs.
Asia Vital Components (3017) trades at a much higher forward PE compared to its peers while Chang Hwa Commercial Bank (2801) trades at a lower PB compared to its peers.

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Jun 10

Most Read: SK Square , KKR & Co, Yanolja, CPMC Holdings, Greatview Aseptic Packaging, Jeisys Medical, Genex Power Ltd, Far Eastern New Century, China Oilfield Services H and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Potential Merger Dynamics Involving SK Inc, SK Square, & SK Hynix
S&P500/400/600 Index Rebalance: Huge Size to Trade in a Few Stocks
Initial Thoughts on the Yanolja IPO
Game On As ORG Lobs Competing Offer For CPMC (906 HK)
Merger Arb Mondays (10 Jun) – GA Pack, Asia Cement, CPMC, Nagatanien, APM, Ansarada, Genex, Hollysys
Japan Weekly | JMDC, Sanrio, Lasertec, Hakuhodo
Breakdown of Archimed’s Massive Tender Offer for Jeisys Medical Shareholders
Genex Power (GNX AU): Scheme Vote on 16 July as Skip Remains Silent
Quiddity TDIV/50/100 Jun 24 Rebal: 15/18 Hits; Updated Flow Expectations and Trade Ideas
A/H Premium Tracker (To 7 Jun 2024): Hs Outperform Their As. Great Wall (2333) Suffers, Utes Win

Potential Merger Dynamics Involving SK Inc, SK Square, & SK Hynix

Regardless of the divorce proceedings, SK still urgently needs SK Inc’s stock price to rise for other reasons. That reason is to position SK Hynix directly under SK Inc.
SK Inc boosts stake in SK Square with SK Telecom shares, followed by a public tender offer to exchange SK Square shares for new SK Inc shares.
SK Inc’s involvement in the divorce lawsuit makes it a focus for traders seeking relative outperformance among the SK companies involved in this situation.

S&P500/400/600 Index Rebalance: Huge Size to Trade in a Few Stocks

There are 3 changes for the S&P 500 INDEX, 7 changes for the S&P Midcap400 Index and 13 changes for the S&P SmallCap600 Index at the June rebalance.
There is huge size to trade in KKR & Co (KKR US) and Crowdstrike Holdings (CRWD US) and both stocks were up big in the after-hours market.
There has been positioning in some stocks recently but stocks including KKR & Co, RB Global and Texas Pacific Land could see further positioning in the next week.

Initial Thoughts on the Yanolja IPO

Yanolja is getting ready to complete its IPO in the US in the next several months. Softbank invested about US$1.7 billion in Yanolja in 2021.
The valuation of Yanolja could be between US$7 billion to US$9 billion. The company could raise nearly US$400 million in this IPO.
Overall, we are concerned about the valuations of Yanolja if indeed the bankers push ahead with the IPO at the valuation range of US$7 billion to US$9 billion.

Game On As ORG Lobs Competing Offer For CPMC (906 HK)

After six months had elapsed, and CPMC Holdings (906 HK)‘s Offeror just needing SAMR/SAFE clearance before launching a firm bid, a competing Offer from ORG Technology (002701 CH) appeared unlikely.
Yet in a surprise move, ORG has made a pre-conditional (NDRC, SAFE, MoC, SAMR, and shareholder approval) Offer at HK$7.21/share, a 4.9% premium to the ongoing SASAC/NCSSF Offer.
ORG’s pre-con Offer also has a 50% acceptance condition. ORG and concert parties have 24.43%. And Zhang Wei (22.01%) has given has an irrevocable. Directors have 0.87%. Intriguing situation.

Merger Arb Mondays (10 Jun) – GA Pack, Asia Cement, CPMC, Nagatanien, APM, Ansarada, Genex, Hollysys

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), Ansarada Group Ltd (AND AU), Asia Cement China (743 HK), Greatview Aseptic Packaging (468 HK).
Lowest spreads: Alumina Ltd (AWC AU), Great Eastern Holdings (GE SP), Pact Group Holdings (PGH AU), Nagatanien Holdings (2899 JP), Mimasu Semiconductor Industry (8155 JP), QV Equities Ltd (QVE AU).

Japan Weekly | JMDC, Sanrio, Lasertec, Hakuhodo

By Mark Chadwick

Global markets retained their positive momentum as weak U.S. economic data renewed concerns about the growth outlook.
Next week is set to be eventful, with the FOMC and Bank of Japan meetings on the agenda. The FOMC, expected to maintain policy rates, might offer few surprises.
Oil prices, after a five-day decline, rebounded as OPEC+ extended production cuts through 2025.

Breakdown of Archimed’s Massive Tender Offer for Jeisys Medical Shareholders

Archimed aims to acquire 72% of Jeisys Medical’s shares, totaling 55,724,838 shares. The tender offer runs from the 10th of this month to the 22nd of the following month.
If tendered shares fall short of the 18,013,879 minimum, Archimed refrains from purchases. If exceeded, Archimed buys all, eliminating allocation risk.
With over 70% substantial volume and a large portion held by local retail investors, surpassing the 26% threshold seems feasible.

Genex Power (GNX AU): Scheme Vote on 16 July as Skip Remains Silent

The Genex Power Ltd (GNX AU) IE considers Electric Power Development C (9513 JP)’s scheme (A$0.275) and off-market takeover offer (A$0.270) fair and reasonable.
The offer is conditional on FIRB and shareholder approval. Skip Capital, which can block the scheme, has not declared its intention regarding J-Power’s offer or launched a competing offer.
Skip’s silence suggests a greater probability of accepting the scheme offer. If the scheme fails, the takeover offer, due to its structure and price, caps the downside.

Quiddity TDIV/50/100 Jun 24 Rebal: 15/18 Hits; Updated Flow Expectations and Trade Ideas

The index changes for the T50/100 index family and the TDIV index were confirmed after market close on Friday 7th June 2024.
While the T50 and T100 index changes were perfectly in line with our expectations there were some surprises among the TDIV index changes.
In this insight, we take a look at Quiddity’s final flow expectations for the June 2024 index rebal event and potential trade ideas based on the flow dynamics.

A/H Premium Tracker (To 7 Jun 2024): Hs Outperform Their As. Great Wall (2333) Suffers, Utes Win

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s renewed buy streak continued this past week; every day net positive. Strong net buying. NORTHBOUND saw small net buying on renewables, utilities, and semiconductors.
AH Premia rebounded off multi-year lows, on average, this past week as Hang Seng/other HK indices fell and A-shares did not do much. Liquid Hs underperformed As by 2%.

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Jun 09

Most Read: IDP Education, SK Square , CPMC Holdings, Altium Ltd, Yanolja, indie Semiconductor , Teijin Ltd, NIFTY Index and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MV Australia Equal Weight Index Rebalance Preview: Close Deletions in June
Potential Merger Dynamics Involving SK Inc, SK Square, & SK Hynix
Altium (ALU AU)’s 12th July Scheme Vote. Renesas’ Done Deal
CPMC Holdings (906 HK): ORG’s Competing Offer Kicks off an Auction
(Mostly) Asia-Pac M&A: CPMC, Nagatanien, APM Services, Altium, Austal, Shinko Elect, Hollysys
Initial Thoughts on the Yanolja IPO
Can indie Semiconductor Get Acquired? A Market-Defining Technology With High Differentiation & 3 Critical Factors Making It An Attractive Target! – Major Drivers
Weekly Deals Digest (09 Jun) – Teijin, Nagatanien, CF Logistics, Asia Cement, CPMC, MMG, Shift Up
EQD | The NIFTY Swung Big But the Rally Could Continue For +2 Weeks
Game On As ORG Lobs Competing Offer For CPMC (906 HK)

MV Australia Equal Weight Index Rebalance Preview: Close Deletions in June

With the review period complete, there are 3 stocks that are close to the deletion zone and could be removed from the index at the June rebalance.
Even if there are no constituent changes, capping changes will lead to one-way turnover of 3.6% and a one-way trade of A$83m.
There are 6 stocks with over A$5m to trade from passive trackers but the impact on the stocks is not very high.

Potential Merger Dynamics Involving SK Inc, SK Square, & SK Hynix

Regardless of the divorce proceedings, SK still urgently needs SK Inc’s stock price to rise for other reasons. That reason is to position SK Hynix directly under SK Inc.
SK Inc boosts stake in SK Square with SK Telecom shares, followed by a public tender offer to exchange SK Square shares for new SK Inc shares.
SK Inc’s involvement in the divorce lawsuit makes it a focus for traders seeking relative outperformance among the SK companies involved in this situation.

Altium (ALU AU)’s 12th July Scheme Vote. Renesas’ Done Deal

Back on the 15th Feb, Renesas Electronics (6723 JP), a supplier of advanced semiconductors, entered into a Scheme with Altium Ltd (ALU AU).
Altium shareholders are being offered A$68.50/share, in cash, a lifetime high.
The Scheme Booklet is now out, with a Scheme Meeting to be held on the 12th July. Expected implementation on the 1 August. The IE says fair & reasonable.

CPMC Holdings (906 HK): ORG’s Competing Offer Kicks off an Auction

CPMC Holdings (906 HK) disclosed a competing pre-conditional voluntary offer from ORG Technology Co., Ltd. A (002701 CH) at HK$7.21, a 4.9% premium to Changping Industrial’s HK$6.87 offer.
Like the Changping Industrial offer, ORG’s offer is pre-conditional on regulatory approvals and has a 50% minimum acceptance condition. Changping Industrial has secured all regulatory approvals except SAMR.
ORG’s skinny premium and precarious irrevocable from Mr Zhang Wei suggests Changping Industrial’s next move is to secure Mr Wei’s irrevocable with a revised higher offer.

(Mostly) Asia-Pac M&A: CPMC, Nagatanien, APM Services, Altium, Austal, Shinko Elect, Hollysys

I tally 47 – 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 on Smartkarma this week: Asia Cement China (743 HK)‘s rubbish Scheme; and the low-balled MBO for Nagatanien Holdings (2899 JP).
Key updates took place on: CPMC Holdings (906 HK), APM Human Services (APM AU), Altium (ALU AU), Austal (ASB AU),Shinko Electric Industries (6967 JP), and Hollysys Automation Technologies (HOLI US).

Initial Thoughts on the Yanolja IPO

Yanolja is getting ready to complete its IPO in the US in the next several months. Softbank invested about US$1.7 billion in Yanolja in 2021.
The valuation of Yanolja could be between US$7 billion to US$9 billion. The company could raise nearly US$400 million in this IPO.
Overall, we are concerned about the valuations of Yanolja if indeed the bankers push ahead with the IPO at the valuation range of US$7 billion to US$9 billion.

Can indie Semiconductor Get Acquired? A Market-Defining Technology With High Differentiation & 3 Critical Factors Making It An Attractive Target! – Major Drivers

By Baptista Research

Indie Semiconductor’s Q1 2024 financial results and strategic discussion provide both encouraging and cautionary insights.
During this period, the company reported a year-over-year revenue increase of 29% to $52.4 million, driven by strong performance in their Autotech market segment, albeit slightly below the provided guidance.
Gross profit stood at $26.4 million, reflecting a gross margin of 50.3%, which fell short of expectations due to unfavorable product mix adjustments.

Weekly Deals Digest (09 Jun) – Teijin, Nagatanien, CF Logistics, Asia Cement, CPMC, MMG, 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) US$1.2 billion rights issue. Shift Up (462870 KS) seeks to raise up to US$320 million.
Event-Driven developments: Asia Cement China (743 HK), CPMC Holdings (906 HK), Chilled & Frozen Logistics Holdings (9099 JP), Nagatanien Holdings (2899 JP), Teijin Ltd (3401 JP), Altium Ltd (ALU AU).

EQD | The NIFTY Swung Big But the Rally Could Continue For +2 Weeks

By Nico Rosti

The NIFTY Index has been swinging wildly as of lately, but the odds look good for a continuation of the rally at the moment.
The index is in a pattern where it can rally for 1-2 more weeks.
Wait for prices in the 23500/23700 resistance area before considering a SHORT trade.

Game On As ORG Lobs Competing Offer For CPMC (906 HK)

After six months had elapsed, and CPMC Holdings (906 HK)‘s Offeror just needing SAMR/SAFE clearance before launching a firm bid, a competing Offer from ORG Technology (002701 CH) appeared unlikely.
Yet in a surprise move, ORG has made a pre-conditional (NDRC, SAFE, MoC, SAMR, and shareholder approval) Offer at HK$7.21/share, a 4.9% premium to the ongoing SASAC/NCSSF Offer.
ORG’s pre-con Offer also has a 50% acceptance condition. ORG and concert parties have 24.43%. And Zhang Wei (22.01%) has given has an irrevocable. Directors have 0.87%. Intriguing situation.

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Jun 08

Most Read: Deep Yellow Ltd, AU Optronics, JD.com , Toyota Industries, Softbank Group, Shift Up, CELSYS, IDP Education, Guzman Y Gomez, Altium Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P/ASX Index Rebalance Preview: Potential Changes from Now to June
Yuanta Taiwan Div+ ETF Rebalance Preview: 5 Changes as Names Move Around; US$2.35bn Round-Trip Trade
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)
Toyota Industries (6201) – TMC’s Sale of TI Shares Is Innocuous, TI’s Valuation Remains Uncompelling
Softbank (9984 JP): This Time, It’s Different
What Did FSS Point Out to Shift Up? & What Impact Would It Have on Bookbuilding Sentiment?
TOPIX Inclusions: Who Is Ready (June 2024)
MV Australia Equal Weight Index Rebalance Preview: Close Deletions in June
Guzman Y Gomez IPO – The Negatives – Lawsuits and Management Churn
Altium (ALU AU)’s 12th July Scheme Vote. Renesas’ Done Deal

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

With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.

Yuanta Taiwan Div+ ETF Rebalance Preview: 5 Changes as Names Move Around; US$2.35bn Round-Trip Trade

With the review period now complete, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
Price changes and changes to dividend estimates have led to names dropping off the list of potential adds and deletes over the last week.
Constituent changes, capping and funding flows will lead to a one-way turnover of 12.7% and a one-way trade of US$1.17bn. There are 12 stocks with over 4x ADV to trade.

HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)

The June rebalance of the HSI, HSCEI INDEX, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
The round-trip trade across all stocks across the four indices is estimated at HK$32bn (US$4.1bn).
Li Auto, Alibaba, NetEase, Zijin Mining, SenseTime and BYD Electronics are the largest buys while Tencent, Meituan, JD.com, Kuaishou Technology, Xiaomi and HSBC Holdings are the largest sells.

Toyota Industries (6201) – TMC’s Sale of TI Shares Is Innocuous, TI’s Valuation Remains Uncompelling

Last September, Toyota Motor (7203 JP) Group affiliate Aisin (7259 JP) said they would get rid of ALL their cross-holdings. That signalled a future sea change in Toyota intra-group relations.
It meant all Toyota group companies could do that. The big moves started with a multi-party offering of Denso Corp (6902 JP) shares – Toyota, Toyota Industries, and Aisin sold.
Then others. Then in March, Denso announced a 2.5yr selldown of ~¥460bn of Toyota Industries shares. That meant a TI buyback was likely. We got one. Now we have details.

Softbank (9984 JP): This Time, It’s Different

By Victor Galliano

Elliott Management has emerged as a 2%+ shareholder in SoftBank group and is driving for share buybacks of upto USD15bn; we see this as a game changer for minority shareholders
Recent moves to enhance corporate governance in Japan have taken root, yet we see Softbank group as a laggard on corporate governance which been targeted by an experienced activist
Softbank shares trade at a 54% discount to the estimated NAV; an activist like Elliott on board could meaningfully drive shareholder value creation and a narrowing of the NAV discount

What Did FSS Point Out to Shift Up? & What Impact Would It Have on Bookbuilding Sentiment?

FSS wants Nikke’s MAU data to address revenue concerns. They also seek April and May sales data for Stellar Blade to address valuation concerns despite its recent launch.
Shift Up updated the prospectus with Nikke’s increasing MAU data but didn’t include Stellar Blade sales data. FSS may request further revisions, possibly delaying the IPO again.
Nikke’s MAU has risen but plateaued versus the previous quarter, and uncertainty surrounds Stellar Blade’s April-May sales, potentially impacting IPO pricing.

TOPIX Inclusions: Who Is Ready (June 2024)

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
There have been no TOPIX Inclusions in 2024 so far although dozens of companies have been able to meet the key Section Transfer requirements on paper for several months.
However, there are some pre-event candidates we believe are worth monitoring as they have previously confirmed their desire to move to the Prime Market.

MV Australia Equal Weight Index Rebalance Preview: Close Deletions in June

With the review period complete, there are 3 stocks that are close to the deletion zone and could be removed from the index at the June rebalance.
Even if there are no constituent changes, capping changes will lead to one-way turnover of 3.6% and a one-way trade of A$83m.
There are 6 stocks with over A$5m to trade from passive trackers but the impact on the stocks is not very high.

Guzman Y Gomez IPO – The Negatives – Lawsuits and Management Churn

Guzman Y Gomez plans to raise around US$160m in its Australian IPO.
GYG is a quick service restaurant business with more than 200 restaurants globally. It mainly focuses on fresh, made-to-order, Mexican-inspired food.
In this note, we talk about the not-so-positive aspects of the deal.

Altium (ALU AU)’s 12th July Scheme Vote. Renesas’ Done Deal

Back on the 15th Feb, Renesas Electronics (6723 JP), a supplier of advanced semiconductors, entered into a Scheme with Altium Ltd (ALU AU).
Altium shareholders are being offered A$68.50/share, in cash, a lifetime high.
The Scheme Booklet is now out, with a Scheme Meeting to be held on the 12th July. Expected implementation on the 1 August. The IE says fair & reasonable.

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Jun 07

Most Read: Asia Cement China, Lasertec Corp, CK Asset Holdings, Softbank Group, Toyota Industries, Shift Up, Meituan, CELSYS and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Asia Cement (743 HK): $3.22/Share Offer – Really?
Lasertec (6920): Some of the Accusations Are Disgraceful, Some Not
CK Asset Holdings (1113 HK): First Down, Then Up?
Softbank (9984 JP): This Time, It’s Different
Toyota Industries (6201) – TMC’s Sale of TI Shares Is Innocuous, TI’s Valuation Remains Uncompelling
Lasertec. Colossal Fraud Or Multi-Award Winning Mask Inspection Supplier?
What Did FSS Point Out to Shift Up? & What Impact Would It Have on Bookbuilding Sentiment?
Meituan Is the Biggest Beneficiary of China’s Domestic Travel Recovery
MT/ Meituan (3690 HK): 1Q24, Total Revenue Up by 25% and Initiatives Loss Down by 45%
TOPIX Inclusions: Who Is Ready (June 2024)

Asia Cement (743 HK): $3.22/Share Offer – Really?

After Chinese cement play Asia Cement China (743 HK) (ACC) was suspended on the 28th May, a punchy Offer from its parent Asia Cement (1102 TT) was expected.
Not to be. Asia Cement is offering $3.22/share, best & final. A 3.01% discount to last close, ~ 45% premium to undisturbed, and a whopping 37% discount to net cash.
Asia Cement plus concert parties hold 73.38%, so a blocking stake at the Court Meeting is 2.662%. One (possible) aspect in Asia Cement’s favour is that ACC is not shortable.

Lasertec (6920): Some of the Accusations Are Disgraceful, Some Not

By Michael Allen

Lasertec shares dropped nearly 8% following a scathing 53-page report by Scorpion Capital, accusing management of “colossal fraud.”
The SC report is shrill, in our view, and therefore, we think we add value by contributing a second opinion.
In our view, Lasertec is due for a correction even if SC’s report is inundated by hyperbole.

CK Asset Holdings (1113 HK): First Down, Then Up?

CK Asset Holdings (1113 HK) has traded lower recently and shorts have exploded in the stock in the last few months.
CK Asset Holdings (1113 HK) has underperformed its peers in the last 6 months and trades cheaper on forward PE and price to book.
There will be passive selling in the stock in just over two weeks. There will be positioning, but not enough to meet passive supply. Expect a further move lower.

Softbank (9984 JP): This Time, It’s Different

By Victor Galliano

Elliott Management has emerged as a 2%+ shareholder in SoftBank group and is driving for share buybacks of upto USD15bn; we see this as a game changer for minority shareholders
Recent moves to enhance corporate governance in Japan have taken root, yet we see Softbank group as a laggard on corporate governance which been targeted by an experienced activist
Softbank shares trade at a 54% discount to the estimated NAV; an activist like Elliott on board could meaningfully drive shareholder value creation and a narrowing of the NAV discount

Toyota Industries (6201) – TMC’s Sale of TI Shares Is Innocuous, TI’s Valuation Remains Uncompelling

Last September, Toyota Motor (7203 JP) Group affiliate Aisin (7259 JP) said they would get rid of ALL their cross-holdings. That signalled a future sea change in Toyota intra-group relations.
It meant all Toyota group companies could do that. The big moves started with a multi-party offering of Denso Corp (6902 JP) shares – Toyota, Toyota Industries, and Aisin sold.
Then others. Then in March, Denso announced a 2.5yr selldown of ~¥460bn of Toyota Industries shares. That meant a TI buyback was likely. We got one. Now we have details.

Lasertec. Colossal Fraud Or Multi-Award Winning Mask Inspection Supplier?

By William Keating

Activist short seller Scorpion alleges Lasertec is a “colossal fraud” and “ticking time bomb”
Most of their allegations relate to problems with Lasertec’s EUV mask inspection tools
Lasertec achieved Intel’s distinguished supplier ward for the past six years and last December landed an award from TSMC for “Distinguished EUV Mask Inspection and Metrology Collaboration”. What gives?

What Did FSS Point Out to Shift Up? & What Impact Would It Have on Bookbuilding Sentiment?

FSS wants Nikke’s MAU data to address revenue concerns. They also seek April and May sales data for Stellar Blade to address valuation concerns despite its recent launch.
Shift Up updated the prospectus with Nikke’s increasing MAU data but didn’t include Stellar Blade sales data. FSS may request further revisions, possibly delaying the IPO again.
Nikke’s MAU has risen but plateaued versus the previous quarter, and uncertainty surrounds Stellar Blade’s April-May sales, potentially impacting IPO pricing.

Meituan Is the Biggest Beneficiary of China’s Domestic Travel Recovery

By Andy Fu

During the upcoming Dragon Boat Festival, both flight and railway traffic seems sluggish, indicating a cooled-down enthusiasm for long-distance trips due to budget constraints.
Data points to booming short-distance travel with self-driving as the major means, helped by lower price;
Benefiting from hotel booking and catering, Meituan is the biggest beneficiary of such consumption downgrade.

MT/ Meituan (3690 HK): 1Q24, Total Revenue Up by 25% and Initiatives Loss Down by 45%

By Ming Lu

Total revenue increased by 25% YoY and all business lines grew strongly.
In 1Q24, the operating losses from new initiatives decreased by 45% YoY, but new initiatives revenue still grow.
We conclude that the price target can be double of the market price.

TOPIX Inclusions: Who Is Ready (June 2024)

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
There have been no TOPIX Inclusions in 2024 so far although dozens of companies have been able to meet the key Section Transfer requirements on paper for several months.
However, there are some pre-event candidates we believe are worth monitoring as they have previously confirmed their desire to move to the Prime Market.

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Jun 06

Most Read: Shinko Electric Industries, China Traditional Chinese Medicine, JD.com , Sumitomo Mitsui Financial Group, Asia Cement China, Shift Up, Sakura internet, Hyundai Motor, CK Asset Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Shinko Electric (6967) – Break/Gap Risk Early June 2024 Update
China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)
SMFG Cross-Shareholding – At Least US$17bn of Cross-Shareholding to Sell, Planning to Speed It Up
Asia Cement China (743 HK): A Low-Balled Offer Set up to Fail
Shift Up Delays the IPO and Stellar Blade Tops Number One Game in the US in April
Sakura Internet Placement – Beneficiary of the AI-Wave Looking to Double Down
Value-Up Tax Support Revealed by End of June: Local Market Eyes Corporate Tax Cut Beneficiaries
CK Asset Holdings (1113 HK): First Down, Then Up?
Asia Cement (743 HK): $3.22/Share Offer – Really?

Shinko Electric (6967) – Break/Gap Risk Early June 2024 Update

When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
Nearly 5mos ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 12wks ago, recommended taking profits.
Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Spreads are now 2.6% wider than at narrowest. In May, gap risk narrowed as Shinko underperformed Ibiden.

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.

HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)

The June rebalance of the HSI, HSCEI INDEX, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
The round-trip trade across all stocks across the four indices is estimated at HK$32bn (US$4.1bn).
Li Auto, Alibaba, NetEase, Zijin Mining, SenseTime and BYD Electronics are the largest buys while Tencent, Meituan, JD.com, Kuaishou Technology, Xiaomi and HSBC Holdings are the largest sells.

SMFG Cross-Shareholding – At Least US$17bn of Cross-Shareholding to Sell, Planning to Speed It Up

Following up on our earlier cross-shareholding notes, in this note we look at Sumitomo Mitsui Financial Group (8316 JP) cross-shareholding.
SMFG had a stake over US$100m in at least 47 listed Japanese stocks, amounting to a total of around US$17bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

Asia Cement China (743 HK): A Low-Balled Offer Set up to Fail

Asia Cement China (743 HK) disclosed a Cayman scheme privatisation offer from Asia Cement (1102 TT) at HK$3.22. Including the dividend, the total offer is HK$3.26, 1.7% below the last close.
The offer, which is final, is unattractive as it is materially below net cash and historical trading ranges. The disparity cannot be justified by the potential cash burn this year.
While no shareholder holds the 10% blocking stake, the high AGM minority participation rates and emerging retail opposition suggest a high chance of a deal break.

Shift Up Delays the IPO and Stellar Blade Tops Number One Game in the US in April

On 5 June, Shift Up announced that it will be postponing its IPO to July. The original book building period for the institutional investors was from 3 to 13 June.
The final book building date has been postponed to 27 June. The subsequent public offering subscription for general investors was also postponed to 2 to 3 July.
A major investment positive of Shift Up is enormous initial success of Stellar Blade which was the best selling game in the U.S. and numerous other countries in April 2024.

Sakura Internet Placement – Beneficiary of the AI-Wave Looking to Double Down

By Clarence Chu

Sakura internet (3778 JP) is looking to raise US$127m from its primary follow-on. Proceeds will be used towards purchasing GPU servers, and constructing new data center facilities.
While 11% of total shares outstanding are offered here, the deal would be easily digested by the market, representing just 0.8 days of its three month ADV.
In this note, we run the deal through our ECM framework and comment on deal dynamics.

Value-Up Tax Support Revealed by End of June: Local Market Eyes Corporate Tax Cut Beneficiaries

A high-ranking official from the local financial regulatory authority has confirmed to several local media outlets that the tax benefits for the value-up program will be unveiled this month.
Corporate tax cuts and separate taxation on dividend income will be included. The short-term impact at the time of the announcement will likely be more significant for corporate tax cuts.
Local market is focused on screening large companies within the KOSPI 200 that have substantial pre-tax profits in anticipation of the corporate tax cut momentum to be announced this month.

CK Asset Holdings (1113 HK): First Down, Then Up?

CK Asset Holdings (1113 HK) has traded lower recently and shorts have exploded in the stock in the last few months.
CK Asset Holdings (1113 HK) has underperformed its peers in the last 6 months and trades cheaper on forward PE and price to book.
There will be passive selling in the stock in just over two weeks. There will be positioning, but not enough to meet passive supply. Expect a further move lower.

Asia Cement (743 HK): $3.22/Share Offer – Really?

After Chinese cement play Asia Cement China (743 HK) (ACC) was suspended on the 28th May, a punchy Offer from its parent Asia Cement (1102 TT) was expected.
Not to be. Asia Cement is offering $3.22/share, best & final. A 3.01% discount to last close, ~ 45% premium to undisturbed, and a whopping 37% discount to net cash.
Asia Cement plus concert parties hold 73.38%, so a blocking stake at the Court Meeting is 2.662%. One (possible) aspect in Asia Cement’s favour is that ACC is not shortable.

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Jun 05

Most Read: Mmg Ltd, SK Inc, Shinko Electric Industries, Kakaopay , JD.com , Great Eagle Holdings, Tencent, BYD Electronics, Northern Mining and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MMG (1208 HK) – $1.1bn+ Rights Offering – Expect Regular Rights Trading Dynamics
Impact on SK Inc Post Record Divorce Ruling for SK Group Chairman Chey Tae-Won
Shinko Electric (6967) – Break/Gap Risk Early June 2024 Update
Kakao Pay Lockup Expiry – US$1bn Overhang from Alipay
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)
StubWorld: What Now With Langham (1270 HK)?
MSC May Rebalance: SA & China Net Sells, NPN, PRX & Tencent Sold Down on Buybacks
HSI/HSCEI/HSTECH June 2024 Rebal Final Re-Capping (Or Re-Re-Capping) Flows
MMG (1208 HK): US$1.2bn Highly Dilutive Rights Issue
Northern Minerals (NMI AU): Chinese Investors Forced To Exit

MMG (1208 HK) – $1.1bn+ Rights Offering – Expect Regular Rights Trading Dynamics

Mmg Ltd (1208 HK) today announced a 2:5 Rights Offering to raise US$1.15bn at HK$2.62/share in order to pay down debt from their recent Botswanan copper mine acquisition.
It was a sizeable acquisition, and the near-term EV/EBITDA of the acquisition is 10x or above. The longer-term EV/EBITDA is in the 3s based on expansion later this decade.
The Rights Offering is underwritten, supported by its 67.5% owner. SOUTHBOUND holds 10+%. There are short dynamics, arb dynamics, “don’t wanna spend more” dynamics. There’s a path here.

Impact on SK Inc Post Record Divorce Ruling for SK Group Chairman Chey Tae-Won

We discuss the outlook for the likely impact on SK Inc post record divorce ruling for the SK Group Chairman Chey Tae-Won and his estranged wife Roh So-Young.
Last week, a South Korean appellate court ordered Chairman Chey to pay 1.38 trillion won to Roh. Chey is appealing this case and the Supreme Court’s ruling is still pending.
It is in the best interest of SK Inc to raise the overall value of the company since the payment of the divorce is mostly based in cash.

Shinko Electric (6967) – Break/Gap Risk Early June 2024 Update

When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
Nearly 5mos ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 12wks ago, recommended taking profits.
Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Spreads are now 2.6% wider than at narrowest. In May, gap risk narrowed as Shinko underperformed Ibiden.

Kakao Pay Lockup Expiry – US$1bn Overhang from Alipay

Alipay will come out of its placement linked lockup for its remaining stake in Kakaopay (377300 KS) today.
Alipay (i.e. Alibaba Group (9988 HK)) had earlier sold some of its stake in Jun 2022 and Mar 2024. It still has over US$1bn worth of shares left to sell.
In this note, we talk about the deal dynamics and run the deal through our ECM framework.

HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)

The June rebalance of the HSI, HSCEI INDEX, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
The round-trip trade across all stocks across the four indices is estimated at HK$32bn (US$4.1bn).
Li Auto, Alibaba, NetEase, Zijin Mining, SenseTime and BYD Electronics are the largest buys while Tencent, Meituan, JD.com, Kuaishou Technology, Xiaomi and HSBC Holdings are the largest sells.

StubWorld: What Now With Langham (1270 HK)?

Unexpectantly, Great Eagle Holdings (41 HK) said it would not proceed with an Offer; and Hong Kong hotel-play Langham Hospitality (1270 HK) promptly cratered. But why the flip flop?
Preceding my comments on GE, Langham and Champion REIT (2778 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%.

MSC May Rebalance: SA & China Net Sells, NPN, PRX & Tencent Sold Down on Buybacks

By Charlotte van Tiddens, CFA

MSC indices were rebalanced in the closing auction on Friday. Turnover for the day on the JSE was R41.9bn, R25bn traded in the closing auction (60%).
Turnover at the February rebalance was R25.6bn. Most SA constituents were pushed lower in the closing auction and for the day, consistent with the downweighting of SA Inc.
China was downweighted in the ACWI and EM indices for a second straight quarter, reducing the country weight in ACWI by 6bps to 2.69%.

HSI/HSCEI/HSTECH June 2024 Rebal Final Re-Capping (Or Re-Re-Capping) Flows

The HSI added BYD Electronics (285 HK) and deleted Country Garden Services (6098 HK). HSCEI added Zijin Mining Group Co Ltd H (2899 HK) deleted Xinyi Solar Holdings (968 HK)
HSTECH had no changes, but lots of flow. The index team sets capping levels, then resets them a three days before the actual rebalancing. There were some capping/recapping changes.
Below we offer tables showing all the changes and flows across the indices for each stock, ranked by Flows, ADV, and Ticker. And a spreadsheet with all the relevant data.

MMG (1208 HK): US$1.2bn Highly Dilutive Rights Issue

Mmg Ltd (1208 HK) will raise HK$9.1bn (US$1.2bn) through 2 rights shares for every 5 existing shares rights offering. The rights price is HK$2.62, a 24.7% discount to the TERP.
The rights proceeds will be used to repay existing debt, which will allow it to use other funds to better support the ongoing development of the operating mines.
MMG shares should continue to decline heading into the ex-rights date. The shares go ex-rights on 11 June, and the rights start trading from 24 June to 2 July (inclusive).

Northern Minerals (NMI AU): Chinese Investors Forced To Exit

Back in February last year, the Aussie Treasurer prohibited Yuxiao Fund from buying an additional 9.92% in Northern Minerals (NTU AU) which would have increased its stake to 19.9%.
On the 20th November 2023, Yuxiao sought the removal of Nicholas Curtis as director of the rare-metal play at an EGM; however Curtis resigned his post and the EGM cancelled.
The Aussie Treasurer has now made orders requiring Yuxiao and four (deemed) associated investors to sell their holdings (~10.4% all-in) within 60 days.

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Jun 04

Most Read: Vanguard Intl Semiconductor, United Nova Technology , Yunnan Aluminium Co Ltd A, Biwin Storage Technology Lt, Guosen Securities , Victory Giant Technology -A, Yankuang Energy Group, Webtoon Entertainment, Nagatanien Holdings, Beijing Strong Biotechnolo-A and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

TIP Customized Taiwan Select High Dividend Index Rebalance: 13 Changes & US$5.2bn Round-Trip Trade
STAR50/STAR100 Index Rebalance: Index Committee Flip-Flops on Profitability
CSI300/CSI500 Index Rebalance: Big Flows and US$5bn Round-Trip Trade
CSI All Share Semiconductor Index Rebalance: Lots of Changes in June
CSI All Share IB & Brokerage Index Rebalance: Couple of Large Flow & Impact Names
ChiNext/ChiNext 50 Index Rebalance: US$1bn Round-Trip Trade
Yankuang Energy Placement – Doesn’t Appear Well Flagged Although Deal Size Is Large
Webtoon Entertainment IPO Preview
Nagatanien Holdings (2899 JP): Marunouchi Capital-Sponsored MBO at JPY3,100
CSI Esoteric Index Rebals Jun 24: All Share Brokerage, China Internet, Medical, Defense, & Livestock

TIP Customized Taiwan Select High Dividend Index Rebalance: 13 Changes & US$5.2bn Round-Trip Trade

There are 13 changes for the TIP Customized Taiwan Select High Dividend Index in June. The TIP Taiwan Select High Dividend ETF (00919 TW) has an AUM of US$6.4bn.
One-Way turnover is estimated at 41% and that will result in a round-trip trade of TWD 168.8bn (US$5.2bn). There are 16 stocks that could have over 4x ADV to trade.
The rebalance will be implemented over 8 trading days and the ETF has started trading the stocks last week.

STAR50/STAR100 Index Rebalance: Index Committee Flip-Flops on Profitability

There are 3 changes for the SSE STAR50 (STAR50 INDEX) and 9 changes for the STAR100 Index. Implementation will take place at the close on 14 June.
United Nova Technology (688469 CH) and Biwin Storage Technology (688525 CH) were not added at the March rebalance since they were consistently loss-making. But they have been added this time.
United Nova Technology (688469 CH) had been trading poorly and then the stock dropped further after non-inclusion in March. That could change now with inclusion confirmed.

CSI300/CSI500 Index Rebalance: Big Flows and US$5bn Round-Trip Trade

There are 12 changes for the CSI 300 Index (SHSZ300 INDEX) and 50 changes for the CSI Smallcap 500 Index (SH000905 INDEX) in June. Most changes were expected.
There are a lot of stocks with over 1 day of ADV to trade. The round-trip trade in June is estimated to be US$5bn.
The adds have outperformed the deletes for both indices but the return profile of a long adds/ short deletes trade for the CSI500 Index is a lot smoother.

CSI All Share Semiconductor Index Rebalance: Lots of Changes in June

The changes to the CSI All Share Semiconductors & Semiconductor Equipment Index were announced after market close on 31 May and will be implemented at the close on 14 June.
There are 17 adds and 5 deletes for the index.
The adds and deletes have underperformed the index over the last 6 months but the adds have outperformed the deletes over the last 3 months.

CSI All Share IB & Brokerage Index Rebalance: Couple of Large Flow & Impact Names

The changes to the CSI All Share Investment Banking & Brokerage Index were announced after market close on 31 May and will be implemented at the close on 14 June.
Guosen Securities (002736 CH) will be added to the index while Northeast Securities (000686 CH) will be deleted from the index.
There is a lot of flow and impact for both stocks and the stocks could outperform/underperform their peers over the next couple of weeks.

ChiNext/ChiNext 50 Index Rebalance: US$1bn Round-Trip Trade

There are 7 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index at the June rebalance.
We correctly forecast 5/7 and 7/7 for the Chinext Index adds/deletes and were 3/5 and 5/5 for the Chinext50 Index adds/deletes.
Based on the estimated passive tracking AUM, the one-way trade across both indices is estimated to be CNY 3.69bn (US$508m).

Yankuang Energy Placement – Doesn’t Appear Well Flagged Although Deal Size Is Large

By Ethan Aw

Yankuang Energy Group (1171 HK) is looking to raise up to US$608m through a primary follow-on, via selling 270m H-shares.
The deal is a somewhat large one to digest, at 10.6 days of three month ADV and 2.7% of current mcap.
In this note, we will talk about the placement and run the deal through our ECM framework.

Webtoon Entertainment IPO Preview

Webtoon Entertainment is getting ready to complete its IPO on the NASDAQ exchange in 2H 2024. Webtoon Entertainment is a subsidiary of Naver Corp (035420 KS).
Webtoon is seeking to raise as much of US$500 million at a valuation of US$3 billion to US$4 billion.
Webtoon Entertainment is one of the largest Korean company related IPOs in 2024.

Nagatanien Holdings (2899 JP): Marunouchi Capital-Sponsored MBO at JPY3,100

Nagatanien Holdings (2899 JP) recommended a Marunouchi Capital-sponsored MBO at JPY3,100, a 38.4% premium to the undisturbed price.
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The offer period is from 4 June to 16 July.
While not a knockout bid, the offer represents a five-year high and requires a 58% minority acceptance rate. This is a done deal with payment commencing from 23 July.

CSI Esoteric Index Rebals Jun 24: All Share Brokerage, China Internet, Medical, Defense, & Livestock