In today’s briefing:
- HDFC/HDFCB Merger in the Home Stretch: Potential Changes to NIFTY50, NIFTY100 & SENSEX Indices
- United Tractors – Buyback Extended – Maybe 50% To Go
- Ming Yuan Cloud (909 HK): Potential Multiple Index Deletions
- Fengxiang’s Judical Auction Successful, MGO Upcoming
- Tracing Back TIGER (WISE) Battery ETF Rebalancing on October 13
- Merger Arb Mondays (17 Oct) – EVOC, Fengxiang, Lifestyle, Genex, Pendal, DTAC/True, Eagle Cement
- Shorting Angle on Kakao Corp in the Wake of an Unprecedented Server Failure Incident
- Weekly Deals Digest (16 Oct) – Yashili, Kingston, Elmo, Pushpay, DTAC/True, Giant Biogene, Betagro
- EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
- Fengxiang (9977 HK): Unconditional MGO Imminent
HDFC/HDFCB Merger in the Home Stretch: Potential Changes to NIFTY50, NIFTY100 & SENSEX Indices
- The National Company Law Tribunal (NCLT) has ordered a meeting of HDFC Limited and HDFC Bank shareholders on 25 November to consider and approve the proposed Scheme of Amalgamation.
- Pidilite Industries (PIDI IN) is a high probability ad hoc inclusion to the NIFTY Index (NIFTY INDEX) with Tata Power (TPWR IN) a lower probability inclusion candidate.
- Tata Motors Ltd (TTMT IN) and Adani Enterprises (ADE IN) could be added to the SENSEX INDEX in December replacing HDFC Limited (HDFC IN) and Dr. Reddy’s Laboratories (DRRD IN).
United Tractors – Buyback Extended – Maybe 50% To Go
- On 12 July, cash-rich mining mini-conglomerate (mining, contracting, equipment, etc) United Tractors (UNTR IJ) announced a buyback discussed in United Tractors (UNTR IJ) Buyback – Sure to Be Impactful.
- The buyback was to go for three months but three months later, it was extended or another three months.
- Performance has been good. How much has been bought back. Tough to know, but we can make some pretty educated guesses.
Ming Yuan Cloud (909 HK): Potential Multiple Index Deletions
- Ming Yuan Cloud Group (909 HK) listed in September 2020 and was included in major indices (MSCI, FTSE, HSTECH) over the next few months.
- The stock price slide over the last few months could lead to the deletion of the stock from the MSCI China Index and Hang Seng Tech Index (HSTECH INDEX).
- Deletion and downward migration could result in an increase in the real float of the stock by 15% and add further downward pressure. Short interest has been increasing steadily.
Fengxiang’s Judical Auction Successful, MGO Upcoming
- A successful bidder (identity unknown at the time of writing) has emerged for Shandong Fengxiang (9977 HK) controlling shareholder’s 70.92% stake at the base bid price of RMB1,372.2 million.
- As the bidder will hold 30% or more of the voting rights, it will result in an MGO at RMB1.383 per share (HK$1.526 at the median BOC FX of 0.9056).
- The transfer of the sale shares is subject to completion procedures. Our best guess is the offer completes end-January 2023. At the last close, the gross spread is 15.6%.
Tracing Back TIGER (WISE) Battery ETF Rebalancing on October 13
- Long/Short basket trading on an equal weight using only six stocks for a 10% ceiling reversion with SungEel and Sebitchem would have delivered a daily yield of close to 2%.
- An outright position on SungEel and Sebitchem and the biggest mover, Ecopro BM, alone would have delivered a pretty juicy yield of 4.2%.
- The rebalancing of this ETF is an event that allows you to bet on highly predictable share price movements by forming a basket with a relatively small number of stocks.
Merger Arb Mondays (17 Oct) – EVOC, Fengxiang, Lifestyle, Genex, Pendal, DTAC/True, Eagle Cement
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), 111 Inc (YI US), Genex Power Ltd (GNX AU), Shandong Fengxiang (9977 HK), O2Micro International (OIIM US).
- Lowest spreads – Tyro Payments (TYR AU),OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), True Corp Pcl (TRUE TB), Cocoaland Holdings (COLA MK), China VAST.
Shorting Angle on Kakao Corp in the Wake of an Unprecedented Server Failure Incident
- In the wake of this incident, the presidential office suggested that Kakao Corp should be brought into the framework of regulation as a national infrastructure operator.
- This is likely to be the leading investment point that attracts the most attention from the market for Kakao.
- Regulatory risks will inevitably act as a structural and long-term discount factor for Kakao Corp, and we need to design a short position based on this angle.
Weekly Deals Digest (16 Oct) – Yashili, Kingston, Elmo, Pushpay, DTAC/True, Giant Biogene, Betagro
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments – Giant Biogene Holding (GBH HK) pre-marketing a US$500 million HKEx IPO. Betagro (BTG TB) closes its books early for its THB17.4 billion (US$462 million) IPO.
- Event-Driven developments – Kingston Financial (1031 HK), Yashili International Holdings (1230 HK), China Vast Industrial Urban Development (6166 HK), Elmo Software (ELO AU), Pushpay Holdings (PPH NZ), DTAC/True.
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
- Weekly summary of vol changes and moves across Global Markets
- Analysing ATM volatility and skew changes over the last 5 days
- We suggest a few trades to take advantage of the implied vol surfaces
Fengxiang (9977 HK): Unconditional MGO Imminent
- Shandong Fengxiang (9977 HK) is a company engaged in chicken breeding, slaughtering, and processing.
- Its controlling shareholder with 70.9% of shares out, via domestic shares, was unable to meet its debts, and had been forced into a judicial auction to sell its holding.
- The auction has completed. This forced stake sale should trigger an MGO, one that is likely to be unconditional. Expect an official announcement shortly.
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