In today’s briefing:
- Tata Motors ADS Delisting – Here We Go Again – Lots of Fun To Be Had!
- MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises
- Tata Motors (TTM) To Delist ADSs: Details & Potential Trades
- OZ Minerals (OZL) – Copper and Comps Have Caught Up
- Golden Energy (GER SP): Widjaja Family’s Low-Balled Offer
- Origin Energy’s (ORG AU) Indicative Offer of A$9.00 from Brookfield/EIG
- Golden Agri-Resources (GGR SP) – FTSE Selling in December
- Assessing LG Energy Solution’s Flow Imbalance Situation
- EQD | Tencent (700 HK): Buy Calendar Spreads into Earnings
- Perpetual (PPT AU) Rejects a Revised A$33 Offer; Pendal (PDL AU) Deal Looks Toast
Tata Motors ADS Delisting – Here We Go Again – Lots of Fun To Be Had!
- Yesterday, with earnings, Tata Motors Ltd (TTMT IN) announced that it would delist its ADS, making an application on or around 13 January.
- This sounds relatively benign because since 2004 when the ADS was listed, local funding capacity has increased substantially. It may no longer be needed.
- But it is MUCH more interesting than that. There is lots of fun to be had here.
MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises
- MSCI announced the changes as part of the November SAIR. For Asia Pacific, there are 48 adds and 55 deletes (including one nationality change).
- The deletion of Wharf Holdings (4 HK) is the biggest surprise. The stock should trade weak given the large flow and days of ADV to sell.
- There are listing changes for BeiGene (BGNE US), Li Auto (LI US), Xpeng (XPEV US) and Hutchison China MediTech Ltd (HCM US) to their Hong Kong listed lines.
Tata Motors (TTM) To Delist ADSs: Details & Potential Trades
- Post market close yesterday, Tata Motors Ltd (TTMT IN) announced that it intended to delist Tata Motors ADR (TTM US) and terminate its ADS program.
- The easiest option for most ADS holders will be to sell the ADS. That could take the ADS lower and to trade at a discount to the underlying shares.
- Sell Tata Motors ADR (TTM US) outright or sell the ADS/buy Tata Motors Ltd (TTMT IN) for an arb trade.
OZ Minerals (OZL) – Copper and Comps Have Caught Up
- In August, BHP Group Ltd (BHP AU) launched a $25/share bid – a price it saw as attractive and what target OZ Minerals Ltd (OZL AU) saw as opportunistic.
- Copper had fallen, and peer stock prices had fallen too. Since then, copper has rebounded and peers have too so what was a 25-30% premium no longer exists.
- This means the price of OZL should “enjoy” different dynamics going forward.
Golden Energy (GER SP): Widjaja Family’s Low-Balled Offer
- Golden Energy & Resources (GER SP) has proposed in-specie-ing its holding in Golden Energy Mines (GEMS IJ), subsequent to which the Widjaja family will undertake an Exit Offer.
- Ex-GEMS, the family is Offering S$0.16/share. That’s insulting. And the Offer was announced after GEAR’s share price had fallen 26%. The Exit Offer has been declared final.
- GEAR’s jewel is the stake in GEMS, and shareholders are afforded future exposure. However, the stub ops are worth considerably more than S$0.16/share.
Origin Energy’s (ORG AU) Indicative Offer of A$9.00 from Brookfield/EIG
- Origin Energy (ORG AU) received a conditional, non-binding indicative proposal from Brookfield and EIG at A$9.00 per share, a 54.9% premium to the undisturbed price (9 November).
- The Board will grant eight weeks of due diligence access and intends to unanimously recommend a binding offer at A$9.00 per share. The offer is attractive.
- Regulatory approvals are an overhang and would likely require price concessions. At the last close, the gross spread to the offer is 14.9%.
Golden Agri-Resources (GGR SP) – FTSE Selling in December
- FTSE has announced that it will be changing Golden Agri Resources (GGR SP)‘s nationality from Singapore to Ineligible at the close on 16 December.
- This means the stock will be deleted from the FTSE All-World Index at the close on 16 December. We estimate passive trackers will need to sell multiple days ADV.
- Golden Agri Resources (GGR SP) trades cheaper than a lot of its peers but has outperformed them over the last year. There could be a short-term reversal.
Assessing LG Energy Solution’s Flow Imbalance Situation
- LG Energy’s virtually locked-up shares rise to nearly 95%. This should at least partially explain why its price has substantially outperformed the KOSPI in recent months, showing strong downward rigidity.
- Additional long-term money equivalent to 2-3% of SO can come in for 5% float shares. There is no precedent for a float crunch of this magnitude among top-cap local stocks.
- It seems necessary to reconsider taking a shorting position for LG Energy even after the 9th of next month when the short-term passives inflow situation is completed.
EQD | Tencent (700 HK): Buy Calendar Spreads into Earnings
- Tencent are due to report earnings next week on Nov 16th
- Implied vols are bid up into the event causing an inverted term structure
- We see an opportunity to buy long calendar spreads to play a reversion in vol surface
Perpetual (PPT AU) Rejects a Revised A$33 Offer; Pendal (PDL AU) Deal Looks Toast
- Perpetual Ltd (PPT AU) has rejected a revised non-binding indicative proposal from Regal/BPEA EQT at A$33.00 per share, a 10% premium to the previously rejected offer of A$30.00 per share.
- While the Regal Partners (RPL AU)/BPEA EQT revised offer is not quite a knockout bid, it is good enough to warrant the requested short due diligence period.
- The PPT/Pendal Group (PDL AU) deal is seemingly dead. The A$23 million break fee is more than compensated by the A$172 million value uplift between Regal/BPEA EQT’s two proposals.
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