In today’s briefing:
- TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next
- Kotak Mahindra Bank (KMB IN): Potential MSCI Upweight in May to Bring Close to US$1bn Passive Buying
- Target May 15th for LONG Youlchon Chemical with Dongkuk Steel’s Split Approval
- Caverion Switches to Triton’s Offer
- New Unconditional Date
TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next
- The TOPIX liquidity factor removal names (upweights) for April 2023 were announced after the close on Friday 7th April 2023 as expected.
- According to the announcement, 22 names will see their Liquidity Factors removed and experience index inflows later this month.
- Today was the first day of trading post-announcement and the 22 names gained +1.1% (+0.47% vs the TOPIX Index). I feel there could be more upside for some names.
Kotak Mahindra Bank (KMB IN): Potential MSCI Upweight in May to Bring Close to US$1bn Passive Buying
- Kotak Mahindra Bank (KMB IN) was added to the MSCI India Index at the November 2020 SAIR. However, a LIF of 0.5 was applied due to the low foreign room.
- The latest shareholding pattern as of end-March shows a foreign room higher than 25%. That should result in a removal of the LIF at the May QCIR.
- The increase in foreign room is a result of FPIs selling the stock despite the inclusion of Kotak Mahindra Bank (KMB IN) in a global index in March.
Target May 15th for LONG Youlchon Chemical with Dongkuk Steel’s Split Approval
- Through the regular rebalancing, Kum Yang and Cosmo Chemical will be included in KOSPI 200, and Youlchon Chemical will be included as an ad-hoc change due to Dongkuk Steel’s deletion.
- We should prepare for an aggressive long position on Youlchon Chemical from a day trading perspective, targeting May 15th, the day after Dongkuk Steel’s general meeting.
- If the meeting is scheduled for the morning, we should consider entering the position in the afternoon of the 12th.
Caverion Switches to Triton’s Offer
- Triton’s consortium reduced the acceptance threshold to 2/3rds of all shares, and, as expected, the board of Caverion changed its recommendation in favour of the Triton consortium’s proposal.
- Nearly a third of the shares supporting the offer are held by each party. Bain’s consortium hasn’t improved Triton’s offer and expects the latter will encounter antitrust hurdles.
- Triton would make a cumulative IRR of about 20% if it sold the business for 7.5x EBITDA by year 7. Long and tender to Triton’s offer (spread is 2.63%/3.75% gross/annualised).
New Unconditional Date
- On 6 April, Bidco and Dignity confirmed that the FCA Change in Control Condition had been satisfied on 5 April. The new Unconditional Date is 4 May 2023.
- Bidco has so far irrevocables and letters of intent in respect of 39.12%. The end of the life of Dignity as a listed company is nigh.
- Spread to cash offer is 3.6%/42% (gross/annualised, assuming settlement on 18 May). Long/tender to the cash offer. The Alternative Offers are either Valderrama D shares (unlisted) or Castelnau shares (illiquid).
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