In today’s briefing:
- TOPIX Index Upweights: Final Predictions for The “The Big April Basket” 2023
- HKBN (1310 HK): Trading Halt, HGC’s Rumoured Takeover Offer
- Long Short Setup on Douzone Bizon & KMW with K-New Deal Rebalancing on March 9
- End of Mandatory Lock-Up Periods for 35 Companies in Korea in March 2023
- G. K. Goh Holdings (GKG SP): Conditional VGO at S$1.26
- KRX New Deal Index Rebalance Preview: Potential Flows as Announcement Looms
- FEMSA/Heineken Holding Chain: Stake Sales and Share Price Spread
- (Mostly) Asia M&A, Feb 2023: Newcrest Mining, S.M Entertainment, Kanematsu, Nissin Electric
- Dr. Reddy’s Laboratories (DRRD IN): New Acquisition to Bolster US Generic Product Portfolio
- MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: One Add, One Delete Possible
TOPIX Index Upweights: Final Predictions for The “The Big April Basket” 2023
- Some low liquidity stocks in the TOPIX Index carry a liquidity factor of 0.75x resulting in their actual index weights being smaller than their default weights.
- These names are reviewed every April and if the liquidity factor of a stock gets removed, the stock will enjoy buying flows from passive trackers of TOPIX.
- In this insight, we take a look at Quiddity’s final predictions for the names that are likely to see their Liquidity Factors removed in April 2023.
HKBN (1310 HK): Trading Halt, HGC’s Rumoured Takeover Offer
- Bloomberg reportedHKBN Ltd (1310 HK) has received a takeover offer from HGC Global Communications at a valuation of more than US$1 billion (implies around HK$6 per share).
- The shares rose 11.6% to HK$5.59 before entering a trading halt. The rumoured price is underwhelming compared to historical multiples and share prices.
- HKBN has a relatively concentrated shareholder register which suggests that the rumoured takeover premium of around 20% is not going to cut it.
Long Short Setup on Douzone Bizon & KMW with K-New Deal Rebalancing on March 9
- Another valuable long-short opportunity has arisen this time with K-New Deal rebalancing. The pair consists of Douzone Bizon and KMW, which have switched places in the Internet Index’s top three.
- Due to their relatively low trading volume, the passive flow size (x ADTV) that this pair will face at the closing price on March 9th is expected to be significant.
- This creates sufficient opportunities for a Long-Short setup in terms of day or swing trading. As KMW is a constituent of the KOSDAQ 150, it is possible to short KMW.
End of Mandatory Lock-Up Periods for 35 Companies in Korea in March 2023
- We discuss end of the mandatory lock-up periods for 35 stocks in Korea in March 2023, among which 8 are in KOSPI and 27 are in KOSDAQ.
- These 35 stocks on average could be subject to further selling pressures in March and could underperform relative to the market.
- Among these 35 stocks, the top 5 market cap stocks include Nh Investment & Securities, WCP, Bionote, Jeio, and Dreamtech.
G. K. Goh Holdings (GKG SP): Conditional VGO at S$1.26
- GK Goh Holdings (GKG SP) has disclosed a voluntary conditional offer from management at S$1.26 per share, a 38.5% premium to the undisturbed price (24 February).
- The offer price is final barring a competitive situation. The VGO has a 90%+ minimum acceptance condition which can be waived or lowered. Irrevocables represent 62.89% of outstanding shares.
- The offer price is attractive in comparison to historical trading ranges. The offer will remain open for at least 28 days which points to the earliest of 11 April close.
KRX New Deal Index Rebalance Preview: Potential Flows as Announcement Looms
- The review period for the March rebalance ended on 31 January, changes will be announced in the next few days and implemented at the close of trading on 9 March.
- We forecast one add/delete for the Secondary Battery Index and Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
- The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).
FEMSA/Heineken Holding Chain: Stake Sales and Share Price Spread
- Following an accelerated bookbuild, Femsa’s interest in Heineken decreased to 5.1% and in Heineken Holding to 6.3%. Overall the economic participation in Heineken Group decreased from 14.76% to 8.13%.
- At current market prices, Heineken could afford buying half of the remaining holdings of FEMSA (both Heineken and Heineken Holding), and still be within 2.5x leverage target (2023e consensus estimates).
- The discount has been tightening since Q3 2022, so far to 16.3%, still above the 10.4% average of the last ten years, and rather large considering such a simple structure.
(Mostly) Asia M&A, Feb 2023: Newcrest Mining, S.M Entertainment, Kanematsu, Nissin Electric
- For the month of February, 14 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$23bn.
- The average premium for the new deals announced (or first discussed) in February was 34%.
- This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.
Dr. Reddy’s Laboratories (DRRD IN): New Acquisition to Bolster US Generic Product Portfolio
- Dr. Reddy’s Laboratories (DRRD IN) entered into a definitive agreement to acquire the U.S. retail generic prescription product portfolio of Mayne Pharma (MYX AU) for $105M.
- The deal will add approximately 85 approved generic products and four pipeline products. For the fiscal year ending June 30, 2022, this portfolio generated revenue of $111M.
- Considering the revenue potential, the acquisition price seems to be reasonable. Being a high margin and limited competition portfolio, the acquisition will be earnings accretive for Dr. Reddy’s.
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: One Add, One Delete Possible
- The review period for the March rebalance ended yesterday. Announcement of the changes will be made on 10 March and will be implemented at the close on 17 March.
- Mineral Resources (MIN AU) is a potential index inclusion if it is added to the index universe with lithium revenues nearing the 50% threshold.
- ioneer Ltd (INR AU) is very close to the 98% deletion threshold and could be removed from the index at the March rebalance.
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