In today’s briefing:
- KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade
- Weekly Deals Digest (29 Oct) – Eoflow, Haitong Intl, Hollysys, Azure, Symbio, EcoPro, Cainiao
- L&F (066970 KS): Index Implications of KOSDAQ to KOSPI Transfer
- Onewo (2602 HK) – Full Circulation & HSCI Inclusion
- EQD | If the Nikkei Begings to Rally, Where Will It Encounter Resistance?
- Merger Arb Mondays (30 Oct) – JSR, Eoflow, Azure Minerals, Symbio, Hollysys, Haitong Intl
- TPG/Intervest: Agreed Offer, Spread
- Quiddity HK Connect SOUTHBOUND (To 27-Oct-23); Meituan & Tech IN, High Div SOEs OUT, Financials MIA
- Mainland Connect NORTHBOUND Flows (To 27Oct23): Net Selling Small, Foxconn & Tianqi Bought
KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade
- The merger between Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) is done. Newco starts trading this week as KDX.
- The trade was fine until I wrote 9 days ago there was still room to run. It fell the next day, bounced 3%, then got CRUSHED into the index upweight.
- NEWREIT is now as cheap relative to its Pro-Forma Peer Group as it was at announcement.
Weekly Deals Digest (29 Oct) – Eoflow, Haitong Intl, Hollysys, Azure, Symbio, EcoPro, Cainiao
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments – EcoPro Materials (ECO123 KS), Cainiao Smart Logistics (1437124D HK), VNG (VinaGame) (VNG US) IPOs
- Event-Driven developments – Eoflow (294090 KS), Azure Minerals (AZS AU), Pact Group Holdings (PGH AU), Symbio Holdings (SYM AU), Haitong International Securities Group (665 HK), Hollysys Automation Technologies (HOLI US).
L&F (066970 KS): Index Implications of KOSDAQ to KOSPI Transfer
- L&F Co Ltd (066970 KS) has applied to the KRX for a transfer from the KOSDAQ market to the KOSPI market.
- Based on history, the approval for the transfer and the listing change could take place some time in December.
- L&F (066970 KS) will not be short-sell eligible for 6 months or longer. That means short covering prior to index deletion and a possible overshoot in the stock price.
Onewo (2602 HK) – Full Circulation & HSCI Inclusion
- Onewo (2602 HK) has announced the full conversion of 1.05bn Domestic Shares and Unlisted Foreign Shares to H-shares. The increased market cap will help in HSCI inclusion.
- Onewo (2602 HK) should be added to the HSCI in March and will be added to Southbound Stock Connect soon after index inclusion.
- Onewo (2602 HK) has drastically underperformed its peers since listing and the HSCI inclusion could mark a turning point for the stock.
EQD | If the Nikkei Begings to Rally, Where Will It Encounter Resistance?
- Last week, the Nikkei closed down at 30991.69 (CC=-2). The index’s sell-off could end in November, marking a temporary bottom from which a rally could start.
- MRM models say that if the Nikkei bounces this week, it could rise for 3 weeks and reach a price area between 31624 (Q3/CC=+1) and 32892 (Q3/Gen.Pattern Boxplot).
- The upcoming rally comes as a reaction to quite OVERSOLD conditions, as previously discussed, but could be followed by another pullback. This insight points to where the rally may end.
Merger Arb Mondays (30 Oct) – JSR, Eoflow, Azure Minerals, Symbio, Hollysys, Haitong Intl
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), Symbio Holdings (SYM AU), JSR Corp (4185 JP), Healius (HLS AU), Haitong International.
- Lowest spreads – Pact Group Holdings (PGH AU), Origin Energy (ORG AU), Chindata Group (CD US), Allkem Ltd (AKE AU), T&K Toka Co Ltd (4636 JP), Azure Minerals (AZS AU).
TPG/Intervest: Agreed Offer, Spread
- TPG will launch an agreed offer for turnaround-play Intervest Offices & Warehouses (INTO BB) at €21/share, 52% premium, with minimum acceptance condition of 50%+1 share. It has already secured 10.09% acceptances.
- At 6.7% discount to last reported EPRA NTA, 5.5% discount to pro forma EPRA NTA, and 14.3x P/FFO 2023e, the offer price seems good exit value for shareholders.
- Listed logistics European compas trade at c.11% premium EPRA NTA 2023e and 17x-18x P/FFO 2023e. Spread is 4.52%/16.04% (gross/annualised assuming settlement on 21 February). Risk/return looks interesting. Long.
Quiddity HK Connect SOUTHBOUND (To 27-Oct-23); Meituan & Tech IN, High Div SOEs OUT, Financials MIA
- This is the somewhat brand-spanking-new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
- Last week, China Mobile (941), SMIC (981) and CNOOC (883) all saw total SOUTHBOUND turnover top 75% of value traded on a gross basis, indicating huge participation.
- Meituan was again the top SOUTHBOUND inflow, now net inflow every day for more than a month. Total Net Inflows at HK$6.9bn now 14 weeks straight in the positive column.
Mainland Connect NORTHBOUND Flows (To 27Oct23): Net Selling Small, Foxconn & Tianqi Bought
- This is the somewhat-brand-spanking-new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
- The same five names continue at the top of the gross flows list – Kweichow Moutai, Contemporary Amperex, Wuliangye Yibin, Foxconn Industrial, and BYD. Nets are dropping.
- Overall net NORTHBOUND selling this week was small at RMB 445mm. Foxconn Industrial Internet (601138 CH) was net bought every day despite the investigation news the previous weekend.
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