In today’s briefing:
- MVIS Global Junior Gold Miners Index Rebalance: Big Flows & Impact
- Toyo Construction – YFO Standstill Against TC Hostility
- HSCEI Index Rebalance Preview: Four Sets of Changes from July to September
- LG Energy Solution: End of 6 Months Lock-Up Period & Valuation Sensitivity Analysis
- KOSPI200 Lockup Release Events: LG Energy Solution, HYBE, Lotte Chilsung, & Krafton
- Merger Arb Mondays (13 Jun) – China VAST, True/DTAC, Hwa Hong, Link Admin, Ramsay Health, Link Net
- Weekly Deals Digest (12 Jun): Thai Life, Link Admin, Ramsay, Link Net, China VAST, Suchuang Gas
- SK Telecom & KT LONG/SHORT Swing Trading for Mean Reversion
MVIS Global Junior Gold Miners Index Rebalance: Big Flows & Impact
- Kinross Gold Corp (KGC US), Fresnillo PLC (FRES LN), Kingsgate Consolidated (KCN AU), Dakota Gold are adds; Merdeka Copper Gold Tbk PT (MDKA IJ) and PGM Gold Mining are deletes.
- One way turnover is US$390m and there is a big impact on a lot of stocks due to addition, deletion and float changes. Implementation at the close on 17 June.
- Bumi Resources Minerals Tbk (BRMS IJ) was added to the GDXJ in March and rallied over 30% in 4 days since announcement. Buying this time will be even larger.
Toyo Construction – YFO Standstill Against TC Hostility
- Three weeks ago, Yamauchi No 10 Family Office (YFO) announced its intentions to launch a Tender Offer by end-June. Toyo Construction (1890 JP) got upset and called YFO names.
- TC announced a Poison Pill, they talked, TC accused YFO in the AGM Convocation of “extreme dishonesty.” They have since met again, and finally signed a long standstill agreement.
- But the Poison Pill will be put to shareholders (ISS recommends against), and shareholders have to decide from the public documents whether they believe Toyo Construction.
HSCEI Index Rebalance Preview: Four Sets of Changes from July to September
- Sunac China Holdings (1918 HK) is still suspended from trading and could be deleted from the index in July and replaced by SenseTime Group (20 HK) or PetroChina (857 HK).
- SenseTime (20 HK) or PetroChina (857 HK), Great Wall (2333 HK) and Zhongsheng (881 HK) could replace Haidilao (6862 HK), CPIC (2601 HK) and Alibaba Health (241 HK) in September.
- There will be buying on SenseTime Group (20 HK) from HSCEI INDEX and HSTECH INDEX trackers. But there is also a big lock-up expiry on 29 June.
LG Energy Solution: End of 6 Months Lock-Up Period & Valuation Sensitivity Analysis
- Our base case valuation LG Energy Solution is implied market cap of 75 trillion won or target price of 319,089 won, representing 25% below current share price.
- Currently, LGES is trading at a premium valuation multiple on a EV/EBITDA (2023E) versus CATL. We believe LGES should trade at a discount to CATL in the next 6-12 months.
- LGES’s 6 months lock-up ends on 27 July and there are 4.3% of outstanding shares that can be sold which is likely to put negative pressure on share price.
KOSPI200 Lockup Release Events: LG Energy Solution, HYBE, Lotte Chilsung, & Krafton
- HYBE and LG Energy have overhang risks. 2% of SO for HYBE and 3% for LG Energy will potentially hit the market. These are 4.46x and 19.89x ADTVs, respectively.
- LG Energy is awaiting FTSE inclusion (June 17) and Solactive ETF inclusion (end-October). Still, from a timing perspective, these passive inflows are unlikely to offset the July 27 lockup release.
- Their short interest is 1.63% (HYBE) and 0.46% (LG Energy), respectively. So, we need to consider a position buildup when their short interest shows significant upside movements.
Merger Arb Mondays (13 Jun) – China VAST, True/DTAC, Hwa Hong, Link Admin, Ramsay Health, Link Net
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- This week, the highest spreads are Sezzle Inc (SZL AU), 21Vianet Group (VNET US), Link Administration Holdings (LNK AU), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU).
- The lowest gross spreads are Virtus Health (VRT AU), Crown Resorts (CWN AU), Irongate Group (IAP AU), AKM Industrial (1639 HK), Beijing Enterprises Urban Resources (3718 HK).
Weekly Deals Digest (12 Jun): Thai Life, Link Admin, Ramsay, Link Net, China VAST, Suchuang Gas
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- On the ECM front, Thai Life Insurance (124744Z TB) is premarketing a US$1bn SET listing and GoGoX Holdings (GOGO HK) has won approval for a US$100-150m HKEx IPO.
- On the Event-Driven front, there were developments at China Vast Industrial Urban Development (6166 HK), Suchuang Gas Corp (1430 HK), Link Net (LINK IJ), Atlas Arteria (ALX AU), Ramsay, Crown.
SK Telecom & KT LONG/SHORT Swing Trading for Mean Reversion
- Price decoupling relative to KT started after SKT’s foreign room trend began to reverse on May 23. The monthly price yield difference between these two is over 7%p.
- From a short-term perspective, it seems that SKT seems to have entered somewhat oversold territory due to the FTSE outflow event.
- Additional selling by the FTSE event this week will likely provide a suitable entry timing for a LONG/SHORT pair setup with KT on a swing-term window for mean reversion.
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