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Event-Driven and Index Rebalance

May 05
0

Weekly Top Ten Event-Driven and Index Rebalance – May 5, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Tax-Loss Selling in Australia 2024 – Historical Analysis and A Trade Basket

By Travis Lundy, Quiddity Advisors

  • I am not a tax advisor and I do not play one on TV but it is a subject of interest in Australia, as an AFR article from June 2022 shows.
  • The general gist: retail investors in Australia will take gains on stocks which run up in price, or get taken over, then look for losses to offset.
  • Below I present a study using data from 2012-2023 and this year’s portfolio.

2. L’Occitane (973 HK): Geiger’s $34/Share Offer

By David Blennerhassett, Quiddity Advisors

  • After nearly six years of conjecture, rumour – plus the key shareholder (holding 72.63% of shares out) contemplating a takeover – we finally have an Offer for L’Occitane (973 HK).
  • The price? $34/share, a 30.77% premium to undisturbed, and a figure a shade below the  HK$35/share flagged by Reuters last August deemed “false and without basis“. The price is final. 
  • This takeover is a Voluntary General Offer. The key condition is securing 90% of disinterested shareholders holding 27.36%. 9.6% of that number have provided irrevocable undertakings or letters of support.  

3. India: Potential Free Float Changes & Passive Flows in May

By Brian Freitas, Periscope Analytics

  • Companies in India have disclosed their shareholding pattern as of end-March in April. There are companies with significant float changes from end-September and/or end-December.
  • The changes in free float could be reflected in domestic and global indices over the next few weeks and months resulting in action from passive trackers.
  • Depending on the date that the shareholding was published, there could be 14 stocks with passive inflows from global trackers while 7 could see passive outflows in May.

4. L’Occitane (973 HK): Conditional VGO at HK$34

By Arun George, Global Equity Research Ltd

  • L’Occitane (973 HK) disclosed a conditional voluntary offer from Reinold Geiger at HK$34.00, a 15.3% premium to the last close and a 30.8% premium to the undisturbed price (5 February).
  • The minimum acceptance condition is that the offeror holds at least 90% of the shares held by disinterested shareholders, which enables the offeror to exercise compulsory acquisition rights.
  • Irrevocable and letters of support to accept represent 37.96% of disinterested shares. An attractive offer (representing an all-time high) should facilitate the offer being declared unconditional.

5. Carlyle Reportedly To Buy KFC Japan (9873) From MitCorp (8058) – Deal Likely Imminent

By Travis Lundy, Quiddity Advisors

  • On 28 Feb, the Nikkei reported (an article I missed) Mitsubishi Corp (8058 JP) would seek to unload its 35% stake in Kfc Holdings Japan (9873 JP) 
  • The stock popped, then continued to rise further. After the close Friday, the Nikkei reported MitCorp was close to a deal with Carlyle. A deal is apparently expected imminently.
  • I expect this could be a “Split Price Deal” (like Hitachi Transport and Pasona).

6. ASX200 Index Rebalance Preview: Potential Changes Prior to the June Rebalance

By Brian Freitas, Periscope Analytics

7. Worley (WOR): Impact of Dar Group’s A$1.4bn Sale

By Brian Freitas, Periscope Analytics

  • Dar Al-Handasah has sold 19% of WorleyParsons Ltd (WOR AU) overnight at A$14.35/share, a 12% discount to the last close, to raise A$1.44bn (US$943m).
  • This reduces Dar’s stake in WorleyParsons Ltd (WOR AU) to 4.5% and will trigger upweights from index providers in the next few days.
  • The stake sale could also lead to a re-rating of the stock with a large blocking stake off the share register.

8. HD Hyundai Marine Solution (443060 KS) IPO: No Passive Buying Near-Term

By Brian Freitas, Periscope Analytics

  • HD Hyundai Marine Solution (443060 KS) is looking to raise KRW 742bn (US$540m) in its IPO, valuing the company at KRW 3,707bn (US$2.69bn). Listing is expected to be in early-May.
  • Competition for the shares has been fierce with institutional investors indicating demand for 201x the number of shares on offer at prices higher than the top end of the range.
  • Barring a doubling of the stock price, the earliest that the stock will be added to major indices is December 2024. So, no passive buying in the short-term.

9. SET50 Index Rebalance Preview: Market Consultation & More Changes in June

By Brian Freitas, Periscope Analytics

  • The SET has run a market consultation on relaxing liquidity thresholds for inclusion of stocks in the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) universe.
  • The consultation is the result of an increase in Average Daily Trading Values and lower turnover ratios, especially for large cap stocks.
  • Berli Jucker (BJC TB) is now a potential index inclusion in June and that could result in four constituent changes at the next rebalance.

10. KOSPI200 Index Rebalance Preview: 5-6 Changes Possible from Now to June

By Brian Freitas, Periscope Analytics

Apr 28
0

Weekly Top Ten Event-Driven and Index Rebalance – Apr 28, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. RMB Dual Counter Trading Is Coming – This Changes AH Relationships

By Travis Lundy, Quiddity Advisors

  • A week after the State Council issued “Several Opinions” (关于加强监管防范风险推动资本市场高质量发展的若干意见》), the CSRC announced Friday five capital market cooperation measures with HK Connect. The goals are to increase cross-border investor flows.
  • They include: a broader range of ETFs in Connect, including REITs in both directions, include RMB counters in Southbound, improve mutual recognition of funds, increasing China IPOs in Hong Kong.
  • RMB Dual Counters Southbound-eligible will take time. They have some homework, but it is on the “To Do” list “as soon as possible and smoothly.” Watch impact on H/A Pairs.

2. Significant Developments Emerged Today for Korea’s Value-Up

By Sanghyun Park, Clepsydra Capital

  • Deputy PM Choi Sang-mok commits to aggressively pursue separate taxation of dividend income, marking a shift towards concrete action for value-up policies.
  • Ever since the introduction of the Value-up policy earlier this year, the primary incentive championed by the local capital market has been the separate taxation of dividend income.
  • Hence, the government’s official commitment to this marks a crucial step in reshaping the Value-up momentum.

3. Merger Arb Mondays (22 Apr) – Shinko, Inageya, C&F Logistics, Hollysys, Azure, Qantm IP, Tietto

By Arun George, Global Equity Research Ltd

4. IDX30/​​LQ45/IDX80 Index Rebalance: BIG Flows for Some Stocks

By Brian Freitas, Periscope Analytics

5. Activist Palliser Re-Engages on Keisei Electric (9009) But The Oppty Remains Unconvincing

By Travis Lundy, Quiddity Advisors

  • Last October, activist Palliser Capital launched a campaign (presentation) on well-known “stub trade” Keisei Electric Railway Co (9009 JP) with a stake of about 1.6%. 
  • The proposal? Monetise a decent stake in Oriental Land (4661 JP), repurchase shares, and invest for growth. Keisei responded 6-8 weeks ago with a buyback and 1% OLC stake sale.
  • I thought that was time to bail. That was it. But now, Palliser has re-engaged. Today a press release (Japanese/English) and a Letter to the Board.

6. Jardine Cycle & Carriage Is A Short

By David Blennerhassett, Quiddity Advisors

7. Japan – Increase in Shorts & Potential Passive Selling in May

By Brian Freitas, Periscope Analytics

  • There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in May.
  • The deletion from passive portfolios will lead to a liquidity event at the end of May where passive trackers will need to sell multiple days of ADV.
  • Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.

8. 18yrs Later, Shin-Etsu Chem Takes Out Sub Mimasu Semi (8155) – Cheap But Whatchagonnado?

By Travis Lundy, Quiddity Advisors

  • Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), has announced a Tender Offer to take out minorities in Mimasu. 
  • This is not surprising. They bought in 19 years ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. But it’s too cheap. 
  • Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 52%. Then they need a bit to get them to 67% but it should be straightforward.

9. HSCI Index Rebalance Preview: Robosense (2498 HK) Could Be Added in June

By Brian Freitas, Periscope Analytics

  • There were only 12 new listings on the Main Board of the HKEX (388 HK) in the first quarter of the year. More than half the listings were in March.
  • Of those stocks, we only see Robosense Technology (2498 HK) having a chance of being added to the HSCI in June and then into Southbound Stock Connect.
  • There is a big lock-up expiry for Robosense Technology (2498 HK) in July and that should keep the stock under pressure.

10. BHP/Anglo American: A Decarbonising Solution

By David Blennerhassett, Quiddity Advisors

  • BHP (BHP AU)‘s all-scrip unsolicited Offer for Anglo American (AAL LN), zeroes in on AAL’s copper assets as demand for the metal increases for use in EVs and renewable power.
  • The proposal has been labelled highly opportunistic by some shareholders and South African politicians. And that the value of AAL’s Chilian/Peruvian copper mines are obscured by its sprawling business interests.
  • The Offer remains conditional and non-binding. A transaction hinges off AAL spinning off its South African iron ore and platinum businesses. Expect AAL to reject terms, but remain engaged. 
Apr 21
0

Weekly Top Ten Event-Driven and Index Rebalance – Apr 21, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Pasona (2168 JP) Special Div – Too Small to Matter

By Travis Lundy, Quiddity Advisors

  • On Friday, Pasona Group (2168 JP) announced its expected use of funds into the May 2024 results, including a special dividend plan, investment for growth, and “strengthening the operating platform.”
  • The plan will disappoint. The stock may get hit hard. The truth is somewhere in the middle. This is where active stewardship matters. So get stewarding.
  • A special div paid over 5yrs should be paid one-shot, now. If the company has plans worth supporting, set KPIs now, ask for money later. Good plans get good money.

2. Shinko Electric (6967) – Break/Gap Risk Update

By Travis Lundy, Quiddity Advisors

  • 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. 
  • 12wks 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 5wks ago, reco’d trimming.
  • Shinko had outperformed Ibiden, and gross spreads had come in 5+% on JSR’s approval. Spreads are now 3% wider than their narrowest, but gap risk has widened as Shinko outperforms.

3. Kokusai Electric IPO Lock-Up – KKR Will Be Tempted by the US$2.7bn Release but Might Have to Wait

By Sumeet Singh, Aequitas Research

  • KKR raised around US$730m via selling some stake in Kokusai Electric (6525 JP) Japan IPO in Sep 2023. Its remaining stake will be released from its IPO linked lockup soon.
  • KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
  • In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

4. JSR (4185) – Deal Done, Now Back End Arbs Need To Be Card Counters

By Travis Lundy, Quiddity Advisors

  • Today after the close, the results of the JSR Corp (4185 JP) Tender Offer were announced. Bidco JICC-02 obtained 84.36% of the shares out in the Tender Offer. 
  • That means imminent index downweights, delayed index downweights, and theoretically another selldown on the last day of listed existence. 
  • News which came up since the start of the Tender Offer make this a little more difficult than it might have otherwise been. 

5. Idemitsu (5019): First SumiChem’s, Now JERA’s Stake in Fuji Oil (5017) To Go to 22%. It’s Coming…

By Travis Lundy, Quiddity Advisors

  • In the mid-late teens, four refinery groups merged to create two refinery groups – JX and Tonen General became JXTG under ENEOS Holdings (5020 JP) and Idemitsu took over ShowaShell.
  • When Idemitsu got ShowaShell, it got 50+% in Toa Oil Co Ltd (5008 JP), 6.58% of Fuji Oil Co Ltd (5017 JP). In 2020, they tried to buy in Toa.
  • That was delayed by an activist. Today, Idemitsu announced they had gone to 23% in Fuji Oil. That stake will go up before it goes down.

6. Hang Lung Group: Thoughts On HLP’s Scrip Dividend

By David Blennerhassett, Quiddity Advisors

  • And eagle-eyed reader spotted Hang Lung Properties (101 HK)‘s scrip dividend option for the FY23 final dividend. That’s the first time I’ve seen HLP provide this alternative. 
  • Over the years, the Chan family and Hang Lung (10 HK) have chipped away at HLG’s and HLP’s minorities. HLP and HLG are currently trading at all-time low P/Bs. 
  • This scrip dividend, which takes a page out of Jardine Matheson (JM SP)‘s playbook, would boost HLG’s stake in HLP to ~63% from 61.24% currently; if opting only for scrip.

7. ChiNext/​​​ChiNext50 Index Rebalance Preview: Plenty of Overlap Between the Indices

By Brian Freitas, Periscope Analytics

  • Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
  • There are overlapping names for the two indices and some of the stocks will also have flows from the CSI Smallcap 500 Index – Shang (SH000905 INDEX) trackers.
  • The potential adds have outperformed the potential deletes between 9-10% for both indices over the last month with the deletes dropping a lot more than the adds.

8. Hollysys (HOLI US): Keep Calm as Closing Date Slips

By Arun George, Global Equity Research Ltd

  • On 15 April, Hollysys Automation Technologies (HOLI US) issued a 6-K filing stating that Ascendent remains in the process of obtaining regulatory approvals. 
  • The gross spread has widened to 8% as the closing date has slipped from the end of March guidance, and an updated timeline is lacking. 
  • A delay in securing regulatory approvals is not uncommon. However, regulatory approvals should be forthcoming as the transaction involves Chinese entities (including a SASAC entity) acquiring a Chinese-focused company. 

9. Shinko Electric (6967 JP): Widening Spread Is an Opportunity

By Arun George, Global Equity Research Ltd

  • Shinko Electric Industries (6967 JP)‘s pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The gross spread widened from a low of 3.1% on 14 March to 7.0%. 
  • The widening spread can be attributed to China SAMR approval timing, earnings risk, Ibiden Co Ltd (4062 JP)’s material underperformance lowering the break price and a large fund liquidating positions. 
  • The deal break risks remain low with the timing remaining the key risk. The current 7.0% spread is an attractive opportunity to add. 

10. J&T Global Express IPO Lock-Up Expiry – Tiny Float with 87%+ Stake Lockup Release Worth >US$8.8bn

By Sumeet Singh, Aequitas Research

  • J&T Global Express, a global logistics provider, raised about US$500m in its Hong Kong IPO in Oct 2023. Its pre-IPO investors will be released from its IPO linked lockup soon.
  • As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 25.4% market share as per 2023 parcel volume.
  • In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.
Apr 14
0

Weekly Top Ten Event-Driven and Index Rebalance – Apr 14, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is

By Travis Lundy, Quiddity Advisors

2. Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51%

By Travis Lundy, Quiddity Advisors

  • Today, cram school operator Riso Kyoiku (4714 JP) and 20% owner real estate developer Hulic Co Ltd (3003 JP) amended their Capital and Business Alliance agreement. 
  • Hulic will buy 25.5% of shares out in a Partial Offer at +43.5% vs last. Then post-tender, they will buy shares at last from the company to go to 51.%
  • The founder will sell his 10%. The rest is interesting. It’s a high ROE high div stock. Some own it from higher. Pro-ration is tough to estimate. But we try.

3. JAPAN ACTIVISM:  Mitsui Fudosan (8801) Responds to Elliott with Buyback, Amended Long-Term Plan

By Travis Lundy, Quiddity Advisors

  • 9 weeks ago, the FT reported Elliott Management had a stake in Mitsui Fudosan (8801 JP) and had asked them to sell cross-holdings and do a ¥1trln buyback. 
  • The stock popped 7% the next day to ¥1302, on the highest volume since the covid crash, hesitated a day, then powered almost 20% higher through the end of March. 
  • Today, Mitsui Fudosan responded with an Amendment to their Plan out to 2030. It has a higher dividend, a share buyback, higher EPS target growth, and higher ROE target. But…

4. The TOPIX Big April Basket Flows:  ¥200bn a Side Including Many Multi-ADV Flows

By Travis Lundy, Quiddity Advisors

  • Every year in April there is an interesting phenomenon with TOPIX. It is what Janaghan Jeyakumar, CFA calls “The Big April Basket.” The TSE re-assesses Liquidity Factor Coefficients.
  • It also does a FFW change, and this year it has Phased Weight Reductions for those slowly leaving TOPIX and PWR re-inclusions for those identified last October as going back.
  • Janaghan had 18 “High Conviction” LF removals. All were hits. They are upweights. Then there are 34 changes to FFW coefficients.

5. Riso Kyoiku (4714 JP): Hulic (3003 JP)’s Partial Tender Offer

By Arun George, Global Equity Research Ltd

  • Riso Kyoiku (4714 JP) announced a partial tender offer and third-party allotment with Hulic Co Ltd (3003 JP), the largest shareholder. Hulic aims to make Riso Kyoiku a consolidated subsidiary.  
  • The offer is for a maximum of 39.4 million shares (23.15% post-allotment ownership ratio) at JPY320 per share, a 46.8% premium to the undisturbed price (5 April).
  • Irrevocable (from the founder and Chairman) represents a 9.26% post-allotment ownership ratio. The offer is light, but there is no minimum acceptance condition. 

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

By Brian Freitas, Periscope Analytics

  • 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.

7. HSCEI Index Rebalance Preview: One Change or Two in June?

By Brian Freitas, Periscope Analytics

  • SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
  • For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
  • Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.

8. China TCM (570.HK) – Latest Updates on Privatization and the Potential Merger with Taiji Group

By Xinyao (Criss) Wang

  • Since “no dividend was proposed for the year ended 31 December 2023”, the privatization is highly likely to succeed. It may not be wise for investors to bet against privatization.
  • The recent high-level personnel changes in Taiji is “thought-provoking”, which seems to be preparing for the next step of integrating with China TCM. Spin-offs and integrations are expected within Taiji.
  • We analyzed possible playbook. In this way, CNPGC is able to solve the problem of horizontal competition. China TCM could also relist in A-share to gain higher valuations/better liquidity.

9. KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High

By Brian Freitas, Periscope Analytics

10. KOSDAQ150 Index Rebalance Preview: Potential Adds Still Outperforming

By Brian Freitas, Periscope Analytics

  • With nearly 85% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
  • Prior to the June rebalance, C&C International (352480 KS) will replace CanariaBio (016790 KS) in the index following CanariaBio being listed as an Administrative Issue and an Investment Attention Issue.
  • The potential adds have outperformed the potential deletes and the KOSDAQ 150 Index since the start of the review period. Lighten positions ahead of the end of the review period.
Apr 07
0

Weekly Top Ten Event-Driven and Index Rebalance – Apr 7, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. JSR (4185 JP) – Activist Murakami-San Goes to 5+%! Bumpitrage? Appraisal Rights? A Technicality?

By Travis Lundy, Quiddity Advisors

2. HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June

By Brian Freitas, Periscope Analytics

  • With no stocks in outright inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June.
  • Capping changes will result in a one-way turnover of 5.3% leading to a round-trip trade of US$1.51bn.
  • Li Auto (2015 HK) is expected to be the largest buy in June following the stock being the largest sell at the March rebalance (also due to capping).

3. If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated

By Travis Lundy, Quiddity Advisors

  • A couple of years ago, Rakuten (4755 JP) – burning through cash to start its mobile business – announced it would its Bank and Securities units. Bank listed. Securities didn’t.
  • Mizuho ended up buying 49% of Securities. Today, it was announced there would be discussions to put Bank, Securities, Card, and Insurance in a new listed Holdco.
  • How this works will end up being complicated. More complicated than it should be. But the complexity would make this more of a win-win for everyone. 

4. TOPIX Inclusions: Who Is Ready (Apr 2024)

By Janaghan Jeyakumar, CFA, Quiddity Advisors

  • 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 were no Section Transfers announced in the last 3 months so currently there are no live TOPIX Inclusion events at present.
  • There are currently 79 names capable of satisfying all the key section transfer requirements. Our long-term pre-event candidate CELSYS (3663 JP) is one of them.

5. SciClone Pharma (6600 HK): Privatisation At IPO Price

By David Blennerhassett, Quiddity Advisors

6. JSR Corporation (4185 JP): Murakami Becomes a Substantial Shareholder

By Arun George, Global Equity Research Ltd

  • Murakami’s City Index Eleventh entity reported a 5.11% position in JSR Corp (4185 JP). The share purchases started on 19 March, the day of the tender start.
  • Murakami’s average buy-in price of JPY4,346.22 per share is broadly in line with the JPY4,350 tender offer. 
  • Murakami’s disclosure suggests two possibilities: starting an activist campaign for a bump or pursuing the appraisal process to determine a fair value. We think the latter is likely. 

7. Langham Hospitality Investments (1270 HK): Great Eagle (41 HK)’s Possible Scheme Privatisation

By Arun George, Global Equity Research Ltd

  • Langham Hospitality Inv Ss (1270 HK) received a notice from Great Eagle Holdings (41 HK), the largest unitholder, that it intends to present a detailed proposal for scheme privatisation.
  • The privatisation interest is unsurprising, as the unit price has declined by 43% over the last twelve months. A tough 2023 did not help the declining sentiment.
  • Our methodology for triangulating the potential offer price results in a range of HK$0.63-1.76. Our best guess is an offer of around HK$0.85, a 47% premium to the last close.

8. KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents

By Sanghyun Park, Clepsydra Capital

  • KRX limits individual stock weight to 20% in ETFs with few constituents. KRX confirms working on it, with an official announcement expected soon.
  • Excludes index ETFs like KOSPI 200. KRX hasn’t finalized criteria for constituent number but expected to involve fewer than 30 stocks.
  • This could open new passive trading opportunities. Sector ETF cap at 30%, large AUM ones offer noteworthy trading potential.

9. Estimating Participation Rate for Hyundai HS Tender Offer, Currently at a 5% Spread

By Sanghyun Park, Clepsydra Capital

  • It is somewhat unusual that there is still a spread of over 5%. This likely reflects concerns about the relatively high intensity of allocation risk.
  • Retail: 30%, Institutions: 16% of float shares (46%). Retailers may contribute 20%, institutions 10-15%. Total tender rate: 30-35%.
  • In that case, it means that roughly 70% of our holdings could be tendered. And at this level, it seems reasonable enough to target the current spread of 5%.

10. Updated Tool (31Mar24) & “Diff File Generator” For TSE “Mgmt Conscious of Capital Cost/Stock Price”

By Travis Lundy, Quiddity Advisors

  • In mid-January, the TSE announced a “name-and-shame” list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】. But they did not actually shame.
  • The list shows which companies have disclosed a policy/consideration. But no data/links. We have the links, and we are weeks ahead of the TSE. Working to get months ahead.
  • We created a tool to name everyone, show their reports, provide links, and now a new tool. Put in a name, see the difference between the Old/New Reports.
Mar 31
0

Weekly Top Ten Event-Driven and Index Rebalance – Mar 31, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Mar24 Nikkei 225 Rebal: Zozo (3092) And Other ADDs Update

By Travis Lundy, Quiddity Advisors

  • ZOZO Inc (3092 JP) is +10% since the close after the Nikkei 225 inclusion announcement vs Nikkei225 +2%. Fellow upweight Nitori is up too. Disco and Socionext are up less.
  • All three inclusions and one upweight see considerable inclusion demand when compared to active holdings. Some more than others. 
  • Some trades here are more interesting than others, still. Cumulative excess volumes are one guide. Fundamentals, and flow dynamics are another.

2. KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap

By Travis Lundy, Quiddity Advisors

  • KDDI has announced the launch tomorrow of its Tender Offer to buy out the minorities in Lawson Inc (2651 JP). 
  • It’s still too cheap. It is still a somewhat non-transparent and unfair process as far as I can tell. And it does not adhere to the METI Fair M&A Guidelines. 
  • There SHOULD BE some activist interest to get KDDI to bump but it is not clear that will show up. 

3. Samsonite (1910 HK): Dual-Listing Musings

By David Blennerhassett, Quiddity Advisors

  • It seems like every week, Bloomberg reports a HK-listed company weighing privatisation options. HKBN (1310 HK), ESR (1821 HK), and Samsonite (1910 HK) have all been rumoured of late.
  • Last Friday, Samsonite announced it was focused on pursuing the listing of its shares on a second exchange.
  • No preferred exchange was mentioned. Nor whether the goal is to secure a dual primary listing, or a secondary listing. A buyout, for now, appears to be on the backburner.

4. Roland DG (6789 JP): Taiyo Hoping for the Best as Brother Plays the Waiting Game

By Arun George, Global Equity Research Ltd

  • In response to Roland DG Corp (6789 JP) request, on 22 March, Taiyo said it was considering a revised offer. However, Taiyo has since remained silent. 
  • Despite discussions with Brother Industries (6448 JP), the Board have not been able to eliminate dis-synergies concerns. The Board has left the decision to accept the Taiyo offer to shareholders.
  • While the Board is trying to dissuade Brother, Brother will take its offer directly to shareholders if the Taiyo offer fails. Taiyo’s behaviour suggests a reluctance to bump. 

5. Quiddity Leaderboard TDIV Jun 24: 5 Changes; US$1.2bn One-Way

By Janaghan Jeyakumar, CFA, Quiddity Advisors

  • In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the June 2024 index rebal event.
  • I currently see 5 ADDs and 5 DELs but there are several names close to the border and expectations could change before the base date as prices move around.
  • The estimate for one-way flow in June 2024 is US$1.22bn.

6. MMA Offshore: A$2.60/Share Cash Offer From Seraya Partners

By David Blennerhassett, Quiddity Advisors

  • Marine and subsea services provider MMA Offshore (MRM AU) has entered into a Scheme with Singapore’s Cyan Renewables. 
  • Cyan, wholly-owned by Seraya Partners, is offering A$2.60/share in cash, a 11% premium to last close and a 31% premium to the 90-day VWAP. 
  • MMA shareholder approval and FIRB are the key conditions. This Offer will tentatively complete mid-late July. 

7. Koito Mfg (7276) – New Medium Term Plan, BIG Buyback, Even Bigger Shareholder Returns Planned

By Travis Lundy, Quiddity Advisors

  • Koito Manufacturing (7276 JP) is a $4bn marketcap (~$6bn sales) Toyota Group auto parts manufacturer specialising in lighting parts, famous for being a T.Boone Pickens target in the 1980s.
  • As Toyota Group’s leaders restructure their cross-holdings and try to get to 1.0x PBR and a high enough ROE to sustain it, capital efficiency is on the block. 
  • Koito today announced a revised Mid-Term Management Plan, a change in KPIs (higher), a large shareholder return plan, and a large buyback. As always, the fun is in the details.

8. Alteogen: Block Deal Sale of About 3% of Shares

By Douglas Kim

  • On 27 March, Alteogen announced that Jeong Hye-shin, former Alteogen Chief Strategy Officer (CSO), sold 1.6 million shares of Alteogen stock in after-hours trading in block deal sale. 
  • The block deal sale price was 197,770 won. Alteogen’s share price declined by 10.9% today to 195,600 won. Block deal sale amount was about 316 billion won. 
  • This block deal sale combined with the sharp recent, share price increase are likely to result in a near-term consolidation of its share price in the next several months.

9. Merger Arb Mondays (25 Mar) – APM, Genex, C&F Logistics, Roland DG, IntelliCentrics, China TCM

By Arun George, Global Equity Research Ltd

10. SillaJen Rights Offering Worth 34% of Outstanding Shares

By Douglas Kim

  • On 22 March, SillaJen Inc (215600 KS) announced that it will conduct a rights offering worth about 129 billion won for R&D and financials improvement.  
  • The rights offering size is 34.5 million shares, representing 34% of total outstanding shares. The expected rights offering price is 3,750 won which is 26% lower than current price. 
  • We would not subscribe to this rights offering and we remain negative on the company.
Mar 24
0

Weekly Top Ten Event-Driven and Index Rebalance – Mar 24, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. The Bigly March 2024 “Wednesday-Friday Trade” (Surprising Flows)

By Travis Lundy, Quiddity Advisors

  • Every year it’s the same trade. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
  • But there may be ¥1.0-1.2trln+ to buy on one day into the close later this month, then ad hoc buys of ¥630bn and index sells of ~¥600bn  2 days later.
  • Over the past ten years, the two day return on the March trade is great. This year the Nikkei funding trade makes things more complicated. 

2. Fast Retailing (9983) – Now At Double Downweight Levels

By Travis Lundy, Quiddity Advisors

  • Fast Retailing (9983 JP) is the largest weight in the Nikkei 225. On Friday, it closed at 11.36% of the Nikkei 225, putting it well above the 10% cap level.
  • If the stock is above 10% on a pro-forma basis on the base date of 31 July 2024, it will get a capping coefficient. 8.4mm shares (US$2.5bn) to sell.
  • At Friday’s close, we were borderline above a double-downweight trigger. At Monday’s open, just below. 30mins later? Back well above. Lots of interesting issues and nuances here for a short.

3. JSR (4185 JP) – Launch of The Official Tender Offer (And the Double Arb)

By Travis Lundy, Quiddity Advisors

  • The Tender Offer is finally here. JIC announced the official launch after the close today.
  • JIC appears to be taking on the SUNY RF risk as-is. The Tender Offer details vs the original expectations in the late June 2023 document are unchanged. 
  • Once started, unless a US court approves an injunction causing regulatory delay, this is done. But there are path events. And of course there is a double arb here.

4. Tokio Marine Cross-Shareholding – At Least US$18bn of Cross-Shareholding to Sell

By Sumeet Singh, Aequitas Research

  • The Japanese Financial Services Agency has asked the general insurers to reduce/eliminate their cross-shareholdings.
  • Tokio Marine Holdings (8766 JP) had a stake over US$100m in at least 33 listed Japanese stocks, amounting to a total of US$16.5bn.
  • In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

5. Quiddity Leaderboard S&P 500 Jun 24 Rebal: Many Intra-Review Changes Possible Due to M&A, Spin-Offs

By Travis Lundy, Quiddity Advisors

  • The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
  • The index is reviewed quarterly. The next review will be in June 2024 and the evaluation date for the rankings for the constituent selection process is 6th June 2024.
  • In this insight, we take a look at the Potential ADDs and Potential DELs for the June 2024 index rebal event and the intra-review ADDs/DELETEs.

6. Shinko Electric (6967 JP): Tender State of Play

By Arun George, Global Equity Research Ltd

  • Shinko Electric Industries (6967 JP) pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The gross spread has narrowed from a high of 10.4% to the current 4.2%. 
  • The narrowing spread can be attributed to the JSR Corp (4185 JP) tender launch, which suggests likely China SAMR approval, and Ibiden Co Ltd (4062 JP) giving up recent gains. 
  • Like JSR, we expect China SAMR to allow JIC to withdraw its Shinko merger control filing. There is a good chance the tender launches before the guided late August start.

7. Giordano (709 HK): A Closer Look At The Shareholder Register Ahead Of The SGM

By David Blennerhassett, Quiddity Advisors

  • Last month, a Cheng family vehicle with 24.06% of Giordano (709 HK), requisitioned an SGM to remove CEO Peter Lau, and install Colin Currie as CEO, plus three other NEDs/INEDs.
  • That SGM will be held on the 3rd April. The director resolutions – both the removal and appointments – are “ordinary”, requiring a simple majority vote. 
  • The outcome will likely pivot off how the shareholders under Halcyon Securities will vote. So I dug a little deeper as to who these shareholders are, with some surprising results.  

8. Chilled & Frozen Logistics (9099) – Hostile Takeover Launched by AZ-Com Maruwa (9090)

By Travis Lundy, Quiddity Advisors

  • Chilled & Frozen Logistics Holdings (9099 JP) last week announced its “Action to Implement Management That is Conscious of Cost of Capital and Stock Price”.
  • Today it announced AZ-Com Maruwa Holdings (9090 JP) had announced its intention to launch a Tender Offer on C&F Logistics without having contacted C&F first. A HOSTILE deal. Yum.
  • The deal is proposed at a 50% premium, with the goal of getting to a minimum of 50.00%. This will be interesting.

9. IntelliCentrics (6819 HK): Delisting and Special Dividend

By Arun George, Global Equity Research Ltd

  • On 9 February, IntelliCentrics Global Holding (6819 HK) announced the disposal of most of its assets to symplr software. On 19 March, the antitrust condition was satisfied.
  • The consideration will be distributed to shareholders as a special dividend. The minimum and maximum special interim dividends are US$0.52 (HK$4.08) and US$0.55 (HK$4.30) per share.
  • The key condition is EGM shareholder approval. Due to the irrevocables from key shareholders, the EGM vote should comfortably pass. This is a done deal.

10. Quiddity Leaderboard KOSPI 200 Jun 24: Up to Five Changes Possible

By Travis Lundy, Quiddity Advisors

  • KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX).
  • In this insight, we take a look at the names leading the race to become ADDs and DELs during the upcoming semiannual review in June 2024.
  • There could be up to five changes in the KOSPI 200 index during the June 2024 index rebal event.
Mar 17
0

Weekly Top Ten Event-Driven and Index Rebalance – Mar 17, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Keisei Electric (9009) Share Buyback – Interesting Dynamics & Opportunity

By Travis Lundy, Quiddity Advisors

  • In late February, Keisei Electric Railway Co (9009 JP) announced a 5.0mm share (2.96%) ¥33bn buyback, to be executed in the following 3 months. That meant likely ToSTNeT-3.
  • I thought that mildly bullish. Shares rose 0.05% the next day. Then we got an OLC offering announcement. I thought that bearish. The stock popped early but fell hard.
  • Today the announcement. It IS a ToSTNeT-3. tomorrow. At ¥6,320/share. But it is an Accelerated Share Repurchase. Which changes things. Or it doesn’t. But it bears watching closely, maybe acting.

2. MV Global Junior Gold Miners Index Rebalance: Over US$500m to Trade

By Brian Freitas, Periscope Analytics

  • Emerald Resources Nl (EMR AU) will be added to the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in March while there are 3 deletions for the index.
  • The constituent changes along with float and capping changes result in an estimated one-way turnover of 6.4% and a one-way trade of US$263m.
  • There are 9 stocks with more than US$10m to trade and 9 stocks with over 2x ADV to trade.

3. Dai-Nippon Printing (7912) – Whoomp There It Is! Part Deux

By Travis Lundy, Quiddity Advisors

  • At end-January 2023 it became clear activist Elliott Management had set its sights on Dai Nippon Printing (7912 JP). The stock popped and people got bullish.
  • I warned about the “complicated” nature of gains going forward here. Three weeks later they announced details of including ¥100bn of buybacks per year for 3yrs. That’s discussed here.
  • I rarely write bearishly about a huge buyback program but from next day open, over 1yr, total return has been 4.9%. Stage 2 starts 11 March with ¥50bn through end-Sep24. 

4. WisdomTree Indexes Special Rebalance: ESG Considerations Dropped

By Brian Freitas, Periscope Analytics

  • WisdomTree has dropped ESG considerations while selecting stocks for the EMXSOE, CHXSOE and WTEMXC indices.
  • That results in a lot of inclusions and fewer deletions across indices that will be implemented at the close on 15 March.
  • The round-trip trade across the indices will exceed US$500m with Tencent (700 HK) as the largest buy.

5. Outsourcing (2427) – The OTHER Arb – That One Neat Trick And Its Weird Risks

By Travis Lundy, Quiddity Advisors

  • Outsourcing Inc (2427 JP) has been an “interesting” risk arb situation. It was launched as a Cheeky, Opportunistic, Low-Priced MBO. Some bumps after launch turned out to be BAU.
  • The stock has not traded above terms since early on in the trade. I expect people are happy to get out. But there is ANOTHER ARB to do here.
  • The OTHER ARB is something quite particular to high float, low activism risk arb trades. In some ways better than the traditional arb, but it has some risks.

6. Li Ning (2331 HK): Value Trap Play?

By David Blennerhassett, Quiddity Advisors

7. MV Australia Equal Weight Index Rebalance: Float & Capping Changes to Drive Flow

By Brian Freitas, Periscope Analytics

  • There are no constituent changes for the MVIS Australia Equal Weight Index at the March rebalance. 
  • Float and capping changes will result in a one-way turnover of 4.4% and in a round-trip trade of A$195m.
  • We had Lendlease Group (LLC AU), IDP Education (IEL AU) and nib holdings (NHF AU) as close deletes and they will now have inflows due to capping.

8. Nippon Express (9147 JP) – Buying the Overhang

By Travis Lundy, Quiddity Advisors

  • The Offering priced today at ¥7,338/share vs ¥8,039/share traded at the close on the day of the announcement. That’s an 8.7% discount for no dilution. 
  • Compared to a broad basket of Peer Baskets (yes, a basket of baskets), the stock has underperformed by 4.2%, and the 3% discount today puts it at 7+% move.
  • Given the relative cheapness, one should be comfortable putting this on if it gets sold off. This is not different to my initial opinion.

9. New Information on Korea Value-Up Index Scoring System & Constituent Weighting

By Sanghyun Park, Clepsydra Capital

  • KRX considers a comprehensive change to the Value-up Index scoring system. Weightings emphasize ROE, PER, and FCF while reducing PBR weight.
  • KRX considers adopting scoring-based constituent weighting to prevent JPX Prime 150’s issues, but NPS opposes. Float market cap weighting like JPX Prime 150 is contemplated to address concerns.
  • Momentum trading in the Value-up initiative will favor low PER and high ROE stocks over low PBR. The semiconductor sector is anticipated to benefit significantly from float market cap-based weighting.

10. Roland DG (6789) – Brother (6448) Launches Hostile Overbid to Taiyo MBO – You Love To See It

By Travis Lundy, Quiddity Advisors

  • A month ago, Engagement Investor Taiyo Pacific Partners launched an MBO on Roland DG Corp (6789 JP) after having done a takeover of their former sub years ago.
  • I said it was too cheap. Machinery company Brother Industries (6448 JP) has decided the same, and has announced a hostile/unsolicited overbid 3.3% higher. Tender to start in May. Fun!!!
  • This will almost certainly get bid even higher as people would expect the MBO bidders won’t simply give up. More below.
Mar 10
0

Weekly Top Ten Event-Driven and Index Rebalance – Mar 10, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Oriental Land (4661) Placement by Keisei Rail (9009) Says “That’s the Door”

By Travis Lundy, Quiddity Advisors

  • Over two decades, Keisei Electric Railway Co (9009 JP) has been the subject of softer and harder activist efforts to have Keisei monetise its stake in affiliate Oriental Land (4661).
  • The most recent efforts were by Palliser last fall, briefly discussed here two weeks ago when Keisei announced a buyback. 
  • Today, Keisei announced (Japanese only) an Accelerated Block Offering of 1% of Oriental Land shares. The accompanying announcement is worth reading. It’s pretty clear.

2. Mar24 Nikkei 225 Rebal – Socionext, Disco, Zozo IN; US$4bn One-Way; More Impactful Than It Looks

By Travis Lundy, Quiddity Advisors

  • The changes to the Nikkei 225 Average for the March 2024 Review were announced today after the close. A little earlier than I expected. 
  • Socionext, Disco, Zozo IN; Takara Hldgs, Sumi Osaka Cement, Pacific Metals OUT. Nitori PAF increase. US$4bn+ to trade one way on 29Mar close. One interesting surprise. 
  • Overall more impactful than it looks. And it changes the front-end arithmetic on Fast Retailing (9983 JP). There may be fun on the DELETEs.

3. Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out

By Brian Freitas, Periscope Analytics

4. S&P/​​​​ASX Index Rebalance (Mar 2024): Changes, Flows, Impact, Shorts & Positioning

By Brian Freitas, Periscope Analytics

  • There is 1 change for the S&P/ASX20 Index, 2 changes for the S&P/ASX100 Index, 4 changes for the S&P/ASX200 INDEX and 14 adds/10 deletes for the S&P/ASX300 Index in March.
  • The largest impact is expected on the changes to the S&P/ASX 200 (AS51 INDEX) while flows are large among changes to the S&P/ASX 20 Index and S&P/ASX 100 Index too.
  • There has been a steady increase in cumulative excess volume for most stocks but there are a few where there has been a spike recently.

5. S&P 500/400/600 Index Rebal – It’s Not The Trade You Think

By Travis Lundy, Quiddity Advisors

6. Sep24 Nikkei 225 Rebal – 2 ADDs, 2 DELETEs Maybe, but Rebals Tougher, and Fastie+TEL Are the FUN

By Travis Lundy, Quiddity Advisors

  • Now that the March 2024 Nikkei 225 Rebalance is decided, we have a model for the Sep 2024 Review. As previously discussed on Smartkarma, actual name changes get tough now. 
  • As of now, there should be two ADDs and two DELETEs. They might not occur. But there are two other situations which create interesting dynamics around big names. 
  • The dynamics of Fast Retailing and Tokyo Electron promise more fun than the actual name changes in September 2024. It impacts how you trade Nikkei vs TOPIX and tech internals.

7. JSR Corporation (4185 JP): Something Is Brewing, but Nobody Knows Quite What

By Arun George, Global Equity Research Ltd

  • JSR Corp (4185 JP)’s shares rose 4.8% due to a Nikkan Kogyo article that states that JIC will start the tender within the month due to concluding negotiations with SAMR. 
  • Caution is warranted as JSR has not provided a customary timeline update, no confirmatory disclosure from SAMR and JSR’s response to SUNY RF’s claims are yet to be filed.
  • Based on current information, there are five possible tender scenarios. In the worst case, the downside risk on a deal break should be muted due to the market re-rating. 

8. Korea Value-Up Index: Probable Constituents & Impact of NPS’ US$8.2bn Allocation

By Brian Freitas, Periscope Analytics

  • Media reports indicate that the National Pension Service (NPS) could invest up to KRW 11tn (US$8.2bn) in a new index tracking stocks with low Price to Book ratios.
  • Filtering stocks with market cap higher than US$500m, ADTV of atleast US$1m, div yield of atleast 1.5% and Price to Book less than 1 throws up 94 potential index candidates.
  • Choosing an index of 50 stocks will require managers to buy between 1.7-3.4% of the float on the stocks. Increasing the number of constituents will reduce the impact.

9. STTF Index Rebalance: The Widening Emperador Spread

By Brian Freitas, Periscope Analytics

10. CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows

By Brian Freitas, Periscope Analytics

  • With 85% of the review period complete, we see 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in June.
  • We estimate one-way turnover of 1.2% at the rebalance leading to a one-way trade of CNY 7.3bn (US$1bn). There are a lot of stocks with multiple days ADV to trade.
  • The potential adds have outperformed the potential deletes despite large flows from the National Team into ETFs tracking the CSI 300 Index. That support for the potential deletes will reverse.
Mar 03
0

Weekly Top Ten Event-Driven and Index Rebalance – Mar 3, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger?

By Travis Lundy, Quiddity Advisors

  • Over the weekend there was an article in the Nikkei saying that Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) were considering a merger. Other media outlets followed.
  • This has been a possible outcome. Aeon Co Ltd (8267 JP) owns 51% of Welcia, 13.6% in Tsuruha, and is negotiating to buy another 13% in Tsuruha from Oasis.
  • This would create a behemoth. ¥2.2trln in revenues vs ¥1trln for MatsukiyoCocokara (3088 JP). It would be 25% of the market. Questions will be asked about concentration. 

2. Keisei Electric Rail (9009) – A BUYBACK! But It’s Likely To Be Crossholders Selling in ToSTNeT-3

By Travis Lundy, Quiddity Advisors

  • Keisei Electric Railway Co (9009 JP) has long been the target of activist-ish-y holders who seek to have the company monetise its 20+% stake in Oriental Land (4661 JP). 
  • Last autumn (17-Oct-2023), Keisei was the subject of a presentation by activist-ish-y fund Palliser Capital who called the stock 43% undervalued. They want Keisei to sell some OLC shares.
  • Palliser wanted Keisei to use resulting monies for growth capex+shareholder return, improve IR/governance, shrink board, adopt KPIs, etc. Thursday we got an announcement of a 2.9% stock buyback. 

3. JAPAN ACTIVISM:  Is Murakami-San Going To Do A PacMetals Rug Pull on Aozora? Or Is This For Real?

By Travis Lundy, Quiddity Advisors

  • Yesterday after the close, well-known Japanese activist Murakami-san’s preferred entity City Index Eleventh filed a Large Shareholder Report. 
  • The blast across Bloomberg was “*AOZORA 5.4% STAKE REPORTED BY CITY INDEX ELEVENTH.” Sounds exciting after the shares dropped 34% in two days earlier this month after reporting big writedowns. 
  • But there has to be a question here. Why? And Why this way? And what kind of activism would be possible? 

4. Hyosung Corp (004800 KS): Spin-Off & KOSPI200 Index Implications

By Brian Freitas, Periscope Analytics

  • Hyosung Corporation (004800 KS) has announced that it is spinning off part of its business holdings to Hyosung New Holding Corporation in a 0.818:0.182 ratio.
  • The stock will remain suspended from late June to late July. We expect Hyosung Corporation (004800 KS) to maintain its index membership while the New Entity will not be added.
  • The dynamics between listed ETFs and non-listed passive trackers differ and we take a look at the potential index flows.

5. Hong Kong To Scrap All “Spicy Measures” (Property Cooling Measures)

By Travis Lundy, Quiddity Advisors

  • RTHK just reporting that HK Finance Secretary Paul Chan has said in his budget speech that HK will remove all property cooling measures in place, with immediate effect. 
  • That would be That is Special Stamp Duty, Buyer’s Stamp Duty, New Residential Stamp Duty. “Measures no longer necessary given the current economic and market conditions.”
  • This should cause people to get excited short-term about property developers.

6. Details of Korea Value-Up Initiatives & Index, Announced This Morning

By Sanghyun Park, Clepsydra Capital

  • The rollout of the Korea Value-Up Index has encountered a minor delay. Completion of the index is slated for 3Q, with ETFs scheduled for release in 4Q.
  • The government will encourage the National Pension Service to utilize it as a benchmark.
  • Dividend payout ratio, dividend yield, PER, and cash flow will be included as screening factors for this index, in addition to the already known factors of PBR and ROE.

7. ESR Group (1821 HK): Evaluating a Potential Privatisation

By Arun George, Global Equity Research Ltd

  • On 21 February, Bloomberg reported that due to the steep share price declines, major ESR Group (1821 HK) shareholders are considering options for their stakes, including ESR’s privatisation.
  • The reports also noted buyer interest in ESR’s significant assets. Past share dealings suggest that Warburg Pincus and the co-founders are the likely consortium to lead a potential privatisation. 
  • The offer probability is low as a scheme would likely require a HK$16.00 offer, posing a funding challenge. Nevertheless, the upside remains as ESR trades at an undemanding valuation. 

8. Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger! [Redux]

By Travis Lundy, Quiddity Advisors

  • The first piece had a question mark in the title. This one has an exclamation point. The exclamation point has value for one investor. Other people? Not so much.
  • Today post-close we got the deal. I was a little surprised it came this fast, but it’s now mostly done it appears – largely as predicted in the last piece.
  • There are things one can probably read into the details. It is probably worth thinking about those, and how those details affect the industry. 

9. Ecopro BM (247540 KS): Index Impact of KOSDAQ to KOSPI Transfer

By Brian Freitas, Periscope Analytics

  • Ecopro BM (247540 KS)‘s Board has approved the delisting of the stock from the KOSDAQ market and to list on the KOSPI market. The shareholder meeting is on 26 March. 
  • Historically, the KRX has taken an average of 64 days from application to approve the listing to transfer from the KOSDAQ market to the KOSPI market.
  • Ecopro BM (247540 KS) will be deleted from the KOSDAQ 150 Index on its last trading day and inclusion in the KOSPI 200 Index could take place in September.

10. HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Mar 2024)

By Brian Freitas, Periscope Analytics