In today’s briefing:
- Another Play to Consider: Spread Trading Korea Zinc Single-Stock Futures
- Korea Zinc Raises Share Buyback and Tender Offer Price to 890,000 Won
- Hillhouse To Buy Out Minorities In Samty Holdings (187A) – Small Premium, High Leverage, Hmmm
- EQD | The HSI Rally: Go LONG Now or Wait?
- Esseco/Ercros: Green Light from Government
Another Play to Consider: Spread Trading Korea Zinc Single-Stock Futures
- Another play is spread trading Korea Zinc single-stock futures: go long on the front-month and short on the farther-out contract to profit from price convergence.
- The key is when longer-dated futures’ volume will rise and if the basis difference with front-month futures will create arbitrage opportunities. November’s volume seems more for hedging than arbitrage.
- MBK is likely to launch a second tender offer, potentially extending the spread trading timeline and giving us more chances to hit sweet spots.
Korea Zinc Raises Share Buyback and Tender Offer Price to 890,000 Won
- Korea Zinc raised the share buyback and tender offer price from 830,000 won to 890,000 won. Korea Zinc’s share price closed up by only 0.6% today to 794,000 won.
- As a result, the amount of capital involved in this share buyback and tender offer would increase from 2.7 trillion won to 3.2 trillion won.
- Despite higher share buyback/tender offer of Korea Zinc by Choi family, we believe that this fight for the control of Korea Zinc is increasingly in favor of MBK/Jang family.
Hillhouse To Buy Out Minorities In Samty Holdings (187A) – Small Premium, High Leverage, Hmmm
- Today, Hillhouse announced it would buy the 63% of SAMTY HOLDINGS Co Ltd (187A JP) not owned by Daiwa Securities Group (8601 JP) at an 18% premium.
- It’s a highly-levered real estate company. Huge inventory. Decent margins on sale so embedded profit sitting in inventory. Not a very big premium, but an all-time high.
- Retail including some large former insiders and passive own the vast bulk of the float here. The former get this done. Or not.
EQD | The HSI Rally: Go LONG Now or Wait?
- In our previous insight about the Hang Seng Index‘s we theorized a probable continuation of the rally in October, after some resistance, but the index just shoot up straight.
- Resistance appeared last week, from an area considered a tail by our SHORT model, so it was not possible to make a forecast from there.
- The question now is: can the index re-start to rally from here? Or will it pull back more this coming week?
Esseco/Ercros: Green Light from Government
- The Spanish government has approved Esseco’s bid for Ercros, after previously approving Bondalti’s offer in June, signaling a significant step in the ongoing takeover battle for the chemical company.
- The next step lies with the CNMV, Spain’s stock market regulator, which must first approve Bondalti’s bid before considering Esseco’s. However, both bids have opposition from shareholders holding 27%.
- Ercros is trading in line with comparables, but there’s potential for bidders to improve their offers, which is likely. Gross spread to Esseco’s offer is 2%. Reiterate long.
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