In today’s briefing:
- Dai Nippon Printing (7912) – Activism Results Going Forward Are Complicated
- Kakao Pay (377300 KS): MSCI Inclusion (Finally!)
- HYBE’s Tender Offer of SM Entertainment: Closing the Price Gap
- MSCI Korea: Names to Trade for Feb IR & Names to Watch for May IR
- Merger Arb Mondays (13 Feb) – Newcrest, Nitro, Norwest, Boustead, Toyo, Ihara, Iwasaki Electric
Dai Nippon Printing (7912) – Activism Results Going Forward Are Complicated
- A little over two weeks ago, western media outlets reported “sources familiar with the matter” said Elliott Management had built a “significant” stake in Dai Nippon Printing (7912 JP).
- DNP has been a “value name” for years. And years. Lots of cash, lots of real estate, and lots of cross-holdings. DNP had a plan to sell crossholdings, slowly.
- DNP had planned a March 9 presentation of its new MTMP. Elliott, reportedly with a little less than 5%, wanted faster. A few weeks later, DNP has responded with faster.
Kakao Pay (377300 KS): MSCI Inclusion (Finally!)
- MSCI will add Kakao Pay (377300 KS) to the MSCI Korea Index at the February QCIR. There are 7 trading days to implementation on 28 February.
- Local institutions and foreign investors have been sellers in the last couple of weeks and retail investors have been buying to mop up the selling.
- Cumulative excess volume indicates a fair amount of pre-positioning and we’d look to sell ahead of the passive MSCI buying.
HYBE’s Tender Offer of SM Entertainment: Closing the Price Gap
- We believe that there is a very high probability of a successful tender offer of 25% stake in SM Entertainment by HYBE.
- There is a 4.6% gap between the tender offer price and current price. There is a strong probability of this gap being closed in the next several weeks.
- There could also be an on-going interest by Kakao to try to take over the controlling interest in SM Entertainment but HYBE is not likely to give up control easily.
MSCI Korea: Names to Trade for Feb IR & Names to Watch for May IR
- POSCO Holdings and Kumho Petro Chemical are expected to experience a level of passive outflow worthy of our attention in Feb QCIR.
- Newly emerging ones for May OCIR are Ecopro Co Ltd and Amorepacific Group. Ecopro’s inclusion is almost certain, and AmoreG isn’t too far off the borderline.
- Hanwha Aerospace also settled in the inclusion zone, whereas Posco International has moved somewhat away from the borderline. Lastly, there is S.M. Entertainment, which also deserves our attention.
Merger Arb Mondays (13 Feb) – Newcrest, Nitro, Norwest, Boustead, Toyo, Ihara, Iwasaki Electric
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), Origin Energy (ORG AU), 111 Inc (YI US), Golden Energy & Resources (GER SP), Toyo Construction (1890 JP).
- Lowest spreads – Tyro Payments (TYR AU), Boustead Projects (BOCJ SP), Essential Metals (ESS AU), Nitro Software Ltd (NTO AU), Ihara Science (5999 JP), Nissin Electric (6641 JP).
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