In today’s briefing:
- NTT Data’s ¥1,940/Share Deal For Jastec (9717) – Not Enough But Probably Enough
- HSCEI Index Rebalance Preview: One Change or Two in June?
- Observations on Post-Election Flows of Value-Up Stocks, Based on Recent Local Institutional Trades
- Merger Arb Mondays (08 Apr) – JSR, Jastec, Shinko, Azure, Genex, Best World, Isetan
- SENSEX Index Rebalance Preview: Wipro Deletion to Bring Sector Balance into Play
- KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High
- STAR50 Index Rebalance Preview: APT Medical Moving Higher
- EQD / NSE Volatility Update / 01-Apr-24 to 05-Apr-24
- APM (APM AU): Madison Dearborn’s “Disappointing” NBIO
- Payment Companies – Potential IPOs, Select Companies Being Taken Private and Sector Overview
NTT Data’s ¥1,940/Share Deal For Jastec (9717) – Not Enough But Probably Enough
- NTT Data Corp (9613 JP) on Friday announced a Tender Offer to take over small custom software developer and system integrator Jastec Co Ltd (9717 JP).
- It’s at a premium. But for a growing company ahead of “The 2025 Problem” where synergies are expected, you’d want to get a premium vs where comps trade. You don’t.
- But this gets to near 50% just from friendlies. Someone who wanted to interfere would have to be publicly noisy. I expect this gets done.
HSCEI Index Rebalance Preview: One Change or Two in June?
- SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
- For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
- Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.
Observations on Post-Election Flows of Value-Up Stocks, Based on Recent Local Institutional Trades
- Opposition’s probable win in the election sparks concerns about Value-up initiative’s momentum. However, market sentiment doesn’t universally echo these worries.
- Value-Up stocks’ recent corrections likely stem from Q4 dividend arbitrage liquidation, rather than election result concerns.
- Post-Election, even if the opposition wins, the left-leaning Value-up program might continue, limiting the opposition’s influence, as seen in recent National Pension Service flows.
Merger Arb Mondays (08 Apr) – JSR, Jastec, Shinko, Azure, Genex, Best World, Isetan
- 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: Jastec Co Ltd (9717 JP), Qantm Intellectual Property (QIP AU), Southern Cross Media (SXL AU), Genex Power Ltd (GNX AU), QV Equities Ltd (QVE AU), China TCM.
- Lowest spreads: Roland DG Corp (6789 JP), Tietto Minerals Ltd (TIE AU), Newmark Property REIT (NPR AU), Mma Offshore (MRM AU), CPMC Holdings (906 HK), Pact Group Holdings (PGH AU).
SENSEX Index Rebalance Preview: Wipro Deletion to Bring Sector Balance into Play
- Nearly 90% of the way through the review period of the June rebalance, we see one potential index change with Wipro Ltd (WPRO IN) in deletion zone.
- Oil & Natural Gas Corp (ONGC IN), Coal India Ltd (COAL IN) and Adani Enterprises (ADE IN) are potential replacements with sector balance likely to come into play.
- Passive trackers will need to trade over 13 days of delivery volume on the potential index changes.
KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High
- Around 85% of the way through the review period, we see four changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance.
- The impact on the potential inclusions ranges from 0.4-8 days of ADV while the impact on the potential deletions varies from 1-13 days of ADV.
- Hanmi Semiconductor (042700 KS) is up 72% in the last two months following its appearance on the list of potential Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusions in June.
STAR50 Index Rebalance Preview: APT Medical Moving Higher
- The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
- We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.
- With a big jump in tracking AUM over the last few months, passives will need to trade a lot of stock on implementation date.
EQD / NSE Volatility Update / 01-Apr-24 to 05-Apr-24
- Equities shrug off hawkish RBI rhetoric – eye on $3 Billion inflows from MSCI rejig & June Elections results
- Short dated IVs trade lower. Quarterly-expiry IVs continue to hold at >13.0% levels as they capture multiple event risks
- Short vega positions recommended as “High & Down” vol state persists. Use current scenario to buy tail hedges as protection for long Equity positions.
APM (APM AU): Madison Dearborn’s “Disappointing” NBIO
- On the 28th Feb, PE-outfit CVC Asia Pacific bumped its NBIO to A$2.00/share, and was granted exclusive due diligence. On the 27th Mar, CVC said they were “unable to proceed“.
- Today, the 8th April, Madison Dearborn Partners, holding ~29%, has pitched an non-indicative, non-binding Offer at A$1.40/share, in cash, by way of a Scheme. An unlisted scrip option is available.
- A key condition is APM Human Services (APM AU)‘s executive-chair Megan Wynne, founding related parties, and key management, electing scrip. The Independent Board Committee reckons the Offer Price is disappointing.
Payment Companies – Potential IPOs, Select Companies Being Taken Private and Sector Overview
- We explore Klarna’s and Stripe’s IPO prospects and valuations based on recent share transactions; Nuvei and Cielo are close to being taken private, with Worldpay now controlled by private equity
- Nuvei and Worldpay both grew by acquisition but failed to deliver on the market’s expected returns, in our view, ending up under PE ownership; is Nexi a potential PE target?
- We retain Visa as a core holding and also keep PagSeguro and PayPal as buys, replacing Cielo with new peer group addition Shift4; we keep our sell rating on Affirm
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