In today’s briefing:
- Two Days Left Til Nikkei 225 Juggled Review Starts
- Bain Launches Hitachi Metals (5486) Tender Offer
- CALB (3931 HK) IPO: Earliest Passive Flows & Stock Connect Inclusion in 2023
- StubWorld: Swire/Cathay And Hong Kong’s “Opening”
- S&P/ASX Index Rebalance Preview: A Few High Impact Adds
- FTSE UK Quiddity Leaderboard Dec 22: Several High-Impact Intra-Review Changes Could Happen in 4Q22
- EQD | Volatility Update: A Look at Global Indices – What Trades Make Sense?
- Intouch: AIS’ Expanding Broadband And Expected Mobile Duopoly
- A Detailed Summary of Hanwha’s DSME Acquisition Deal
- Tetra Tech Outbids WSP
Two Days Left Til Nikkei 225 Juggled Review Starts
- The Nikkei announced its Annual Nikkei 225 Average Review on 5 September. It was 3 OUT 3 IN as expected. Then they added Shizuoka Bank (8355 JP) to the mix.
- ShizuGin will form a holding company, so out it goes on Wednesday. NIDEC (6594) goes in. Then SMC (6273) and (7741) replace Unitika (3103) and Oki Electric (6703) Friday.
- Then ShizuGin goes back in Monday, and Maruha Nichiro (1333) is deleted. The “big trade” here? The ¥550bn+ funding trade. But the change in ADDs’ Real World Float is Real.
Bain Launches Hitachi Metals (5486) Tender Offer
- We had the heads up days (or a week plus) ago, and now it is official. Bain launches its Tender Offer for Hitachi Metals (5486 JP) tomorrow at ¥2,181/share.
- The company’s trade name will be changed to PROTERIALS (i.e. losing “Hitachi”) which should be fine. It was non-core anyway.
- This is still a large-ish deal – up to ¥434bn. MktCap is ¥930bn. But minimum is only 56.8mm shares because they get the parent vote anyway. Done deal.
CALB (3931 HK) IPO: Earliest Passive Flows & Stock Connect Inclusion in 2023
- CALB (3931 HK) is looking to raise between US$1.29bn-US$1.73bn by selling 265.85m shares at a price range of HK$38-51/share.
- CALB (3931 HK) will not get Fast Entry to any indices but should be added to the HSCI and Stock Connect in March and to the FTSE All-World in June.
- Peer performance has been fairly mixed in the recent past. Stock trading weak post listing could provide buying opportunities ahead of the passive inflows.
StubWorld: Swire/Cathay And Hong Kong’s “Opening”
- After Hong Kong announced abandoning hotel quarantine for inbound travellers, Cathay Pacific (293 HK) gained 2.6% last Friday, but finished up just 1%. That probably sums up the situation.
- Preceding my comments on Cathay and Swire Pacific (19 HK) are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
S&P/ASX Index Rebalance Preview: A Few High Impact Adds
- At the December rebalance, we expect changes to the S&P/ASX 50 Index and S&P/ASX 200 (AS51 INDEX). Announcement is on 2 December with implementation on 16 December.
- If added to the S&P/ASX 200 (AS51 INDEX), passive trackers will need to buy over 9 days of ADV on Monadelphous (MND AU) and ioneer Ltd (INR AU).
- Shorts have dropped on nearly all potential adds and deletes over the last couple of months. With shorts at low levels, short covering will have limited impact at the rebalance.
FTSE UK Quiddity Leaderboard Dec 22: Several High-Impact Intra-Review Changes Could Happen in 4Q22
- In this insight, we take a look at the potential index changes for FTSE 100 and FTSE 250 in the run up to the December 2022 Rebalance.
- There are multiple FTSE 100 and FTSE 250 members involved in M&A situations and there could be many intra-review changes during 4Q 2022.
- Most interestingly, the names leading the race to become intra-review ADDs seem to have decent volume impact.
EQD | Volatility Update: A Look at Global Indices – What Trades Make Sense?
- Weekly summary of vol changes and moves across Global Markets
- Analysing ATM volatility and skew changes over the last 5 days
- We suggest a few trades to take advantage of the implied vol surfaces
Intouch: AIS’ Expanding Broadband And Expected Mobile Duopoly
- Jasmine International PCL (JAS TB)‘s shareholders approved Advanced Info Service (ADVANC TB) acquiring its subsidiary Triple T Broadband, and to buy 19% of Jasmine Broadband (JASIF TB).
- The deal, involving a total outlay of Bt32.4bn, remains subject to approval from JASIF unitholders and NBTC. AIS’ current market cap is Bt574bn.
- Separately, the DTAC / True merger looks set to become a reality as it, ironically, does not require NBTC approval. A merger would create a duopoly and ultimately benefit AIS.
A Detailed Summary of Hanwha’s DSME Acquisition Deal
- The acquisition will be carried out through a third-party allocation rights offering. DSME will issue 104M new shares, solely allocated to Hanwha’s six affiliates, which will own a combined 49.3%
- This DSME acquisition will likely raise Hanwha’s holding ratio, potentially to more than 50%. What preemptive measures Hanwha will take will likely become a noteworthy subject from an investment perspective.
- Hanwha Aerospace and Hanwha Systems will likely proceed with a capital increase. As their current cash capacity is quite limited, liquidity concerns will likely be raised in the market.
Tetra Tech Outbids WSP
- On 24 September, Tetra Tech outbid WSP with a recommended 222p/share cash offer, a 7.8% increase vs. WSP’s and 110% premium to the start of the offer period.
- The new offer represents 19.1x EV/Fwd EBIT and 25.7x Fwd P/E, and seems dilutive for Tetra Tech. Irrevocables and letters of intent amount to 27.53%.
- Expect the shares to quickly close the spread at the beginning of the 26 September trading session and the market to possibly await a counterbid.
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