In today’s briefing:
- AAG Energy (2686 HK): Scheme Doc Out. IFA Says Fair. It Is Not
- Clarifying Market’s Inaccurate Constituent Change Forecast in K200 Rebalancing with GICS Revision
- HSCEI Dividend Futures: Nearing the Pointy End of Results Season
- AAG Energy (2686 HK): Rushed Scheme Document Points to a Vote on a Knife Edge
- Alibaba: Business Unit Split Receives Positive Response, Overshadowing Lingering Regulatory Pressure
- Introducing Another Long Short Basket Trading Event with Semicon ETF Rebalancing in Korea
- Quiddity Leaderboard ES50 Sep 23: Eurozone’s Annual Big Impact Rebal Trades; US$1.1bn+ for ADDs
- Loh/Kloeckner & Co Se: Voluntary Takeover Offer
- Nucleus Clyde/Curtis Banks: Spread
AAG Energy (2686 HK): Scheme Doc Out. IFA Says Fair. It Is Not
- That was a quick turnaround. Two days after the pre-conditions were satisfied, the Scheme Document for Xinjiang Xintai (603393 CH)‘s privatisation of AAG Energy (2686 HK) has been dispatched.
- The EGM and Court Meeting will take place on the 27 April, with payment, assuming all resolutions get up, on (or before) the 1 June.
- The Independent Financial Adviser, Somerley, considers the terms of the Scheme “fair and reasonable.” However, their analysis clearly shows this is not the case.
Clarifying Market’s Inaccurate Constituent Change Forecast in K200 Rebalancing with GICS Revision
- DGB Financial Group’s market cap makes it virtually impossible to get deleted even with Kakao Pay’s GICS change in this June rebalancing.
- It’s unclear whether this has damaged the price impact of K200 inclusion. Nevertheless, the intensity of the pre-rebalancing flow wasn’t aggressive, possibly due to the combination of factors, including this.
- This suggests the possibility of an intense price impact resulting from a more concentrated flow right before the effective date, so we should prepare a setup that considers this.
HSCEI Dividend Futures: Nearing the Pointy End of Results Season
- The HSCEI 2023 dividend futures have dropped over the last week as results have trickled in and some of the larger dividend payers have cut their final dividends.
- Over 50% of the DIPS are confirmed now and that number will increase significantly over the next couple of days as the remaining companies announce their final dividends.
- From our estimates, just over 80% of the DIPS will be confirmed by tomorrow though over 66% of the total DIPS will have CNYHKD risk attached to it.
AAG Energy (2686 HK): Rushed Scheme Document Points to a Vote on a Knife Edge
- Aag Energy Holdings (2686 HK) scheme document is out with the court meeting scheduled for 27 April. The IFA considers the HK$1.85 offer to be fair and reasonable.
- The IFA’s conclusion is dubious as the contents of the report could easily have come to the opposite conclusion. The quick despatch of the scheme document is worrying.
- The weak IFA report will further annoy minorities and push more towards the NO camp. The vote is on a knife edge which is reflected in the current 13.5% spread.
Alibaba: Business Unit Split Receives Positive Response, Overshadowing Lingering Regulatory Pressure
- Yesterday, Alibaba (ADR) (BABA US) announced its intention to divide its business into six distinct units, each with its own CEO and independent board of directors.
- Tying this with Jack Ma’s rare public appearance in China since the beginning of the tech crackdown, people are speculating that the tech crackdown is over.
- However, if you look at this news more objectively, this split indicates nothing but the tightening of the regulatory framework.
Introducing Another Long Short Basket Trading Event with Semicon ETF Rebalancing in Korea
- Mirae Asset TIGER Fn Semiconductor TOP 10 ETF saw a rapid increase in AUM in a short period. Currently, AUM has reached 126 billion won.
- Compared to the flow size, the price movement magnitude was substantial. What is particularly important is that the correlation between weight change direction and price impact was quite significant.
- Considering Long Short basket trading based on the weight change direction on a day trading window seems worthwhile.
Quiddity Leaderboard ES50 Sep 23: Eurozone’s Annual Big Impact Rebal Trades; US$1.1bn+ for ADDs
- The EURO STX 50 Index is one of the most highly-tracked indices in mainland Europe and the annual index review takes place in September.
- Historically, these Rebalance events have had significant volume impact and they generally involve large cap names.
- In this insight, we take a look the names leading the race to become ADDs/DELs for the upcoming index review in September 2023.
Loh/Kloeckner & Co Se: Voluntary Takeover Offer
- Loh (29.97% stake) launches a voluntary offer at €9.75/share, 2.5% premium, but doesn’t really intend to increase much its shareholding, rather have the flexibility to do it in the future.
- With a favourable market environment, the EU steel sector has re-rated since Autumn. The shares trade 5.2% above the offer price (effectively a floor), so don’t expect many acceptances.
- Kloeckner currently trades on 6.3x EV/23e EBITDA (vs. a 6.5x 10-year average), and 0.52x P/BV. The median consensus price target (€9.73) is in line with the offer price.
Nucleus Clyde/Curtis Banks: Spread
- Founders (34.9% stake) of Curtis Banks are cashing in a recommended 350p offer (32% premium) launched when the stock had not yet fully recovered from the Covid crisis lows.
- The Scheme has been approved at both the Court Meeting and General Meeting. Pending green light from FCA, PRA, SRA, CMA (none of those should pose any problem) and Court sanction.
- Spread is 2.6%/10.9% (gross/annualised) assuming closing by 30 June (though it should happen earlier). Although the stock is not massively liquid, many usual arb investors are long. BUY.
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