In today’s briefing:
- Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week
- Golden Energy (GER SP): Revised Offer Is Still Not Good Enough
- Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8
- Merger Arb Mondays (20 Mar) – Toshiba, AAG Energy, Tyro, Newcrest, InvoCare, Pushpay, Golden Energy
- Meritz Financial Group: A Large Share Buyback Amid Global Financials Uncertainties
- Korean Government Reviews Rules to Ease Foreign Ownership Limits
- SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month
- Golden Energy: Offer Bumped. Still Insulting
- ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Recent Outperformance
Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week
- In early 2022, Tencent (700 HK) made clear it was on a divestment path – disposing of investments able to support themselves – possibly “obliged” after 2021’s China internet mess.
- In August, Reuters suggested Meituan (3690 HK) was next. Tencent denied it, but in November with Q3 earnings, announced a January 2023 distribution with March 2023 settlement.
- US$16bn of Meituan shares get delivered on 24 March 2023 – this Friday. That’s a lot. But this time is different than last time.
Golden Energy (GER SP): Revised Offer Is Still Not Good Enough
- Golden Energy & Resources (GER SP)‘s revised proposal from the Widjaja family – distribution proposal (1.3936 GEMS share per share or IDR6,500 per GEMS share) and the delisting proposal (S$0.181).
- The revised offer addresses the issue around the previous offer’s unattractive distribution cash alternative and unfavourable FX. However, the revised offer remains light but is not declared final.
- The revised offer fails to address the issue concerning the decline in Golden Energy Mines (GEMS IJ) share price and the value of Stanmore Coal (SMR AU) stake.
Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8
- Kakao Pay’s GICS sector movement from IT to FINANCIALS creates flow trading opportunities due to the subsequent transfer between KOSPI 200’s sector sub-indices.
- An outflow of ₩24.6B or 410K shares will occur. This is 0.6x ADTV. Given that the recent trading volume has further decreased, the actual impact will likely exceed 1.0x DTV.
- It will be a concentrated flow in a single trading day by a single ETF, which gives us plenty of reasons for preemptively designing a short position targeting this.
Merger Arb Mondays (20 Mar) – Toshiba, AAG Energy, Tyro, Newcrest, InvoCare, Pushpay, Golden Energy
- 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 – 21Vianet Group (VNET US), 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Genesis Minerals (GMD AU), Newcrest Mining (NCM AU), Aag Energy Holdings (2686 HK).
- Lowest spreads – Nitro Software Ltd (NTO AU),Norwest Energy NL (NWE AU), GK Goh Holdings (GKG SP), Boustead Projects (BOCJ SP), Nippon Steel Trading Corporation (9810 JP), Nissin Electric.
Meritz Financial Group: A Large Share Buyback Amid Global Financials Uncertainties
- On 17 March (after market close), Meritz Financial Group (138040 KS) announced a share buyback program worth 400 billion won, which represents 5.4% of its market cap.
- Given the relative large size of this deal, it should have a positive impact on its share price, especially on a relative basis against its competitors.
- The collapse of SVB Financial and uncertain investors’ reactions on the purchase of Credit Suisse by UBS will likely add to the global investors’ negative sentiment on the financial sector.
Korean Government Reviews Rules to Ease Foreign Ownership Limits
- In recent days, the Korean government announced that it is reviewing foreign ownership limit rules.
- The main reasons are to align South Korea’s financial policies in line with the global standards and improve the chances of South Korea becoming included in MSCI Developed country status.
- Key companies that could benefit from potential raise of foreign ownership limit include SK Telecom, KT Corp, and SBS.
SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month
- Nearly 90% through the review period, we see 6 potential adds and 5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
- We estimate a one-way turnover of 5.07% at the June rebalance leading to a one-way trade of CNY 3.97bn. Index arb activity could add to the impact on the stocks.
- The potential adds have outperformed the potential deletes by 17% over the last month and by 21% over the last two months.
Golden Energy: Offer Bumped. Still Insulting
- The Widjaja family has responded to criticism from various quarters over its low-balled Offer for Golden Energy & Resources (GER SP) and revised terms.
- The all-cash payout for the 62.5% stake in Golden Energy Mines (GEMS IJ) is now 15.5% higher at S$0.792/share. The exit offer is 13% higher at S$0.18.1.
- No matter how you slice it, the bump is petty. GEAR’s “rump” is currently worth at least S$0.63/share.
ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Recent Outperformance
- Three quarters of the way through the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
- Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. On average, the impact on the potential deletions is higher.
- The potential adds have outperformed the potential deletes over the last six months, and there has been a sharp widening of the gap over the last few weeks.
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