In today’s briefing:
- TOPIX April Rebalance – Two Days To Go
- Razer (1337 HK): Trading Wide Ahead Of Court Meeting
- Seven & I Investor Activism Update
- SK Telecom/KT Corp LONG SHORT on the MSCI SAIR Event
- Guodian Tech (1296 HK): Done Deal As Pre-Cons Fulfilled
- Chindata the Next Chinese ADR Privatisation Target?
- FnGuide Top 10 (TIGER ETF) Rebalancing Preview: Shinhan Financial IN & Celltrion OUT
- AKM Industrial’s Offer Risk/Reward – Pre-Condition Satisfied
- BBVA/Garanti: Looking to Secure Acceptances with a 23% Increase
- Banorte – Potential M&A Raises Questions on Dividend Prospects
TOPIX April Rebalance – Two Days To Go
- There are two days to go until the TOPIX April-end rebalance.
- On an average-weighted, sector-neutral basis, the “announcement to event” trade is -0.3% from 7 April to 25 April. The rest of the buy vs sell basket is doing worse.
- There should be ¥740bn-ish to buy and sell (each) on Wednesday at the close. If you have trades to execute in Japan, the attached spreadsheet shows where there is opportunity.
Razer (1337 HK): Trading Wide Ahead Of Court Meeting
- Razer Inc (1337 HK)‘s Court Meeting will be held tomorrow.
- The highly anticipated abolishment of the headcount test will not become law ahead of the shareholder vote.
- Trading at a gross spread of 8%, unchanged since the record date. That’s positive. Plus this Offer has proxy advisor support.
Seven & I Investor Activism Update
- Value Act’s investor activism campaign has already made more progress than any other investor activism campaign in the recent past.
- There are many similarities between ValueAct’s transformation plan and Seven & I Holdings (3382 JP)‘s letter to its shareholders, one might think the letter could be minutes from a meeting.
- Therefore, we see no reason to get frustrated over the lack of tangible developments, as the management is fully on board and things are moving on nicely behind the scenes.
SK Telecom/KT Corp LONG SHORT on the MSCI SAIR Event
- The MSCI has shown a pattern of determining the addition/deletion of Korean stocks based on the first or second trading day during the 10-day review period.
- SKT’s foreign room ratio exceeded 3.5% for these two trading days. On the other hand, KT’s foreign room was below 15% on the 18th and 19th.
- MSCI flow seems to be the only factor that will affect these two companies in the short term, and the probability that SKT will outperform KT this week is high.
Guodian Tech (1296 HK): Done Deal As Pre-Cons Fulfilled
- Guodian Technology & Environment Group (1296 HK)‘s (GTE) pre-cons are now fulfilled – bang in line with my timetable estimate.
- The Composite Document should be despatched to the shareholders on or before 29 April 2022.
- Assuming all goes to plan – and there is every indication it will – payment under the Offer is expected around mid-June.
Chindata the Next Chinese ADR Privatisation Target?
- A Bloomberg article claimed that Chindata Group (CD US) is attracting takeover interest from GDS Holdings (ADR) (GDS US), PAG and EdgeConneX. Shares rose 9.8% to close at $4.81.
- Potential privatisation will require the blessing of Bain Capital, the largest shareholder. Chindata’s track record of beating guidance, modest leverage and the beaten-down rating make it a target.
- A forward EV/EBITDA multiple of 8.9x, in line with 21Vianet Group (VNET US)’s proposed acquisition multiple, would imply $6.85 per ADS.
FnGuide Top 10 (TIGER ETF) Rebalancing Preview: Shinhan Financial IN & Celltrion OUT
- The FnGuide Top 10 (TIGER ETF) currently has an AUM of ₩1.18T, and the next rebalancing will be on June 13, and the rebalancing trading on June 10.
- If we perform the screening based on the current stock prices and the FnGuide-concluded index float rates, the possibility that Shinhan Financial will replace Celltrion is relatively high.
- If Shinhan replaces Celltrion, the passive flow size seems more significant than the previous rebalancing. Shinhan will face a passive inflow of 1.17x ADTV, while Celltrion will face -0.61x ADTV.
AKM Industrial’s Offer Risk/Reward – Pre-Condition Satisfied
- AKM Industrial (1639 HK)’s privatisation offer from Alpha Luck and AKM Meadville of HK$1.8345 consists of a base offer (HK$1.82) and a final dividend (HK1.45 cent).
- The pre-condition was fulfilled on 22 April. The latest date for the despatch of the scheme document has been extended to 10 June.
- Shareholders with blocking stakes have previously provided irrevocables. At last close and for an early-August effective date, the gross and annualised spread to the offer is 3.1% and 10.7%, respectively.
BBVA/Garanti: Looking to Secure Acceptances with a 23% Increase
- BBVA sweetness the offer price for Garanti by 23% due to very low acceptances so far (the share price of Garanti has increased by 64% over the last six months).
- The increased offer price should placate disgruntled shareholders, while at the same time saving BBVA €264 million (c. 12% less than originally forecasted) due to Turkish lira depreciation.
- Gross spread is 0.2%, and the annualized return is 3.05% (assuming settlement on 19 May). Long GARAN IT.
Banorte – Potential M&A Raises Questions on Dividend Prospects
- Banorte delivered solid 1Q22 results; management is dangling the carrot of a multi-year shareholder dividend pay-out in 2022, implying a potential dividend yield of c7%
- The potential catch is the real risk of Banorte acquiring the Citibanamex franchise, which could require capital and cash retention, thereby potentially curtailing the dividend prospects
- In the event of Banorte acquiring Citibanamex, we believe that our calculations imply the likely risk of an equity cash call, which drives us to turn cautious on Banorte again
Before it’s here, it’s on Smartkarma
