In today’s briefing:
- TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher
- Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix
- Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue
- KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation
- Chindata: China Merchants Potentially In The Mix
- Sapphire Foods IPO – Smallish Stock with Big (US$550m) Multiple PE Lockup Expiry
- Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase
- S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec
- Nitro (NTO AU)’s Binding Offer from Alludo to Force Potentia’s Hand?
- HYBE Shorting Opportunity with a Lockup Release from Dunamu
TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher
- Overnight, Berkshire Hathaway Inc Cl B (BRK/B US) announced that it held 60.06m shares (US$4.43bn) of Taiwan Semiconductor (TSMC) – ADR (TSM US) as of 30 September.
- That caused the ADR to spike after-hours and the local shares have rallied 8% today to close the gap with the ADR.
- The ADR premium is trading near the lows and with Berkshire buying up a substantial chunk, Taiwan Semiconductor (TSMC) – ADR should trade at a bigger premium to Taiwan Semiconductor (2330).
Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix
- This insight will discuss the impact of Buffett’s investment in Taiwan Semiconductor (TSMC) – ADR (TSM US) on Samsung Electronics (005930 KS) and SK Hynix (000660 KS).
- We believe that Buffett’s sizeable investment in TSMC is likely to have a positive impact on Samsung Electronics and SK Hynix.
- This would be similar to how Buffett’s investment in the Japanese trading companies which has had a positive impact on the major Korean trading companies.
Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue
- In February 2021 Nabtesco Corp (6268 JP) announced it would sell half of its stake in Harmonic Drive Systems (6324 JP) to concentrate on its own products and growth.
- It was a not-very-well-held secret Nabtesco had invested wanting to own HDS. HDS didn’t want to be owned. Eventually Nabtesco gave up. So they sold over time into low float.
- Now they are letting go of the other half. Sale structure means ongoing pressure.
KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation
- Given SunEel’s market cap and the level of relevance to the rechargeable battery business, KODEX will likely include it this time around.
- If you are looking for a short-selling opportunity, I recommend adjusting the timing after this KODEX ETF passive event.
- If you are long targeting the KOSDAQ 150 inclusion, I recommend taking a slightly longer holding window to additionally target the passive inflow of the KODEX ETF.
Chindata: China Merchants Potentially In The Mix
- Bain Capital-backed Chindata Group (CD US) is on the move after Bloomberg flagged – again – interest from industry players.
- This time, SOE-backed China Merchants Group is understood to be mulling a takeover of Chindata. Shares are up 23% since that article earlier this month.
- Back in April, Bloomberg mentioned GDS Holdings (ADR) (GDS US), PE outfit PAG, and EQT AB (EQT SS)-backed EdgeConneX were rumoured to be interested in merging with Chindata.
Sapphire Foods IPO – Smallish Stock with Big (US$550m) Multiple PE Lockup Expiry
- In Nov 2021, Sapphire Foods Limited (SFL), one of Yum Brand’s franchisees in the Indian subcontinent, raised around US$280m in its Indian IPO.
- The lock-up on its shareholders will expire soon, with a number of PE funds on its register
- In this note, we will talk about the upcoming lockup expiry.
Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase
- Chindata Group (CD US) is the leading carrier-neutral hyperscale data center solutions provider in Asia Pacific emerging markets.
- At the beginning of the month, Bloomberg reported a takeover offer for Chindata from China Merchants Group, which is a state-owned company.
- Several state-owned companies have shown interest towards acquiring data centers and data center companies, which is likely to be in line with China’s strategy of digitization.
S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec
- Volatile stock prices could mean one change for the S&P/ASX 50 Index and one change for the S&P/ASX 200 (AS51 INDEX) at the December rebalance.
- Atlas Arteria (ALX AU) could replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) could replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
- Short interest on St Barbara Ltd (SBM AU) has spiked in the last few weeks and there could be short covering ahead of implementation of the changes.
Nitro (NTO AU)’s Binding Offer from Alludo to Force Potentia’s Hand?
- Nitro Software Ltd (NTO AU) has entered into a binding agreement with Alludo at A$2.00 per share via a scheme or an off-market takeover, with a 50.1% minimum acceptance condition.
- This is a good move by the Board to force Potentia to improve its off-market takeover bid of A$1.80 per share. Alludo can leverage synergies to support a higher bid.
- The shares are trading through Alludo’s terms as there is an expectation of Potentia returning with improved terms. The break fee implies that Potentia needs to offer at least A$2.02.
HYBE Shorting Opportunity with a Lockup Release from Dunamu
- Dunamu may not be in a financial situation that will allow it to hold HYBE shares. With FTX’s liquidity crisis, Upbit’s liquidity management risk will inevitably rise to the surface.
- Doubts about whether the size of Upbit’s assets is sufficiently absorbing the shock of a bank run are still strongly raised in the local market.
- These concerns are likely to affect HYBE’s share price as the December 9 release approaches, and yes, we need to design short position setups aimed at this.
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