In today’s briefing:
- Rakuten Bank – Big TOPIX Inclusion Next Week
- KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
- Two of KS200/KQ150 Additions Are Prime-Targeted for Shorting Due to Their Inflated Float Shares
- KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline
- Quiddity Leaderboard SE600 Jun 23: Credit Suisse Deletion Imminent; Multiple Changes in June
- Silk Laser Australia (SLA AU): David Vs Goliath Bidding Battle
- Silk Laser: EC Healthcare’s Superior Counter
- Advent & CenterBridge/Aareal Bank AG: All Conditions Met
Rakuten Bank – Big TOPIX Inclusion Next Week
- Rakuten Bank priced its IPO low and then immediately bounced. Earnings came in as forecast, and the forecast next year did too. Highish PBR, high ROE, not-so-high-PER on low ROA.
- The stock fell on 16 May after Rakuten Bank announced its capital raising. That was probably a knee-jerk reaction, and had no reason.
- Next week sees the TOPIX inclusion. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.
KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
- Following the spin-off, Dongkuk Steel Mill (001230 KS) will be deleted from the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and replaced with Youlchon Chemical (008730 KS).
- Youlchon Chemical (008730 KS) just missed being added to the index at the June rebalance but will be added a couple of weeks after the regular rebalance.
- Shorts on Dongkuk Steel Mill (001230 KS) have increased over the last month but overall short interest is way below historical levels.
Two of KS200/KQ150 Additions Are Prime-Targeted for Shorting Due to Their Inflated Float Shares
- Lutronic Corp and Jeisys Medical have considerably lower DTV in comparison to their float shares. It is highly probable that they have artificially increased their float shares.
- Coincidentally, these two stocks are the ones that have experienced the most dramatic increase in borrow balance after the result announcement.
- These two stocks are being targeted for short-selling from a post-event perspective because the market believes they will exhibit abnormal passive (price) impact due to their inflated float shares.
KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline
- Applying the T+3 relisting date as the effective date will again lead to noteworthy changes to the timeline of rebalancing flow trading.
- It seems unnecessary to concentrate shorting on the trading halt day for Dongkuk Steel. We should aim for price corrections driven by passive flows on the T+2 period before effective.
- Despite the Dongkuk Steel shareholders’ approval on the 12th, Youlchon Chemical’s price experienced a significant decline. The ongoing risk of major shareholder stake sales appears to have overshadowed this event.
Quiddity Leaderboard SE600 Jun 23: Credit Suisse Deletion Imminent; Multiple Changes in June
- In this insight, we take a look at the names leading the race to become ADDs/DELs for the STX Europe 600 and EUROSTX Indices for the June 2023 Rebalance.
- I currently expect Credit Suisse (CSGN SW) and Mediclinic International (MDC LN) to be deleted in the next few trading days
- Separately, there could be five ADDs and DELs during the regular review in June 2023.
Silk Laser Australia (SLA AU): David Vs Goliath Bidding Battle
- Silk Laser Australia (SLA AU) disclosed a non-binding indicative offer from EC Healthcare (2138 HK) at A$3.35 per share, a 6.3% premium to Wesfarmers Ltd (WES AU)’s offer of A$3.15.
- The Board has concluded that EC Healthcare’s offer is superior. Wesfarmers has matching rights which expire on 30 May.
- Wesfarmers has the balance sheet and synergies to bump its offer. However, it is uncertain if EC Healthcare can engage in a bidding war due to a modest balance sheet.
Silk Laser: EC Healthcare’s Superior Counter
- Back on the 19 April, Silk Laser Australia (SLA AU), an operator of specialist clinic networks across Australia, announced a $3.15/share NBIO from Wesfarmers Ltd (WES AU).
- Wesfarmers was granted 30 business days to undertake due diligence on an exclusive basis. Ahead of that expiry, EC Healthcare (2138 HK) has crashed the party with a $3.35/share NBIO.
- Silk’s board considers ECH’s proposal to be superior. Wesfarmers has five business days to respond. I expect they will.
Advent & CenterBridge/Aareal Bank AG: All Conditions Met
- All conditions of the takeover offer have been fulfilled after the ECB approved the acquisition of a majority stake in Aareal. Settlement will take place by 7 June.
- The shares closed 3.33% higher vs. prior trading session, above the offer price(!). Aareal is trading at an undemanding 0.6x P/BV and 10.7x NTM Fwd P/E. No dividend is expected.
- The bidders specifically left open the possibility of a squeeze-out/delisting. If the 90% threshold is confirmed, I believe Atlantic will compulsorily acquire the remaining shares at €33/share.
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