In today’s briefing:
- KT Corp (030200 KS): Potential MSCI Inclusion in May
- Daiho Corp (1822) A GIANT Transaction Which Is Not What It Looks Like. Smells Bad.
- KOSPI 200 Index Rebalancing: Constituents Subject to Float Rate Increase
- Noodling MNACT Vs MCT Deal Risk… Even the Complications Have Complications.
- KOSDAQ150 Index Rebalance Preview (June): Potential Inclusions Starting to Outperform
- AKM Industrial’s Offer Spread Risk/Reward
- Merger Arb Mondays – Yashili, Razer, 51job, Sezzle, Link, Uniti, Guodian, Jin Jiang
KT Corp (030200 KS): Potential MSCI Inclusion in May
- NTT Docomo Inc (9437 JP) sold its entire holding of 14.26m shares in KT Corp (030200 KS) to Shinhan Group in January as part of a strategic alliance.
- That increased the foreign room in KT Corp (030200 KS) to above 15% which can result in the stock being included in the MSCI Korea Index at the May SAIR.
- SK Telecom (017670 KS), on the other hand, will see passive selling from FTSE All-World/All-Cap trackers in June due to its foreign room remaining below 10%.
Daiho Corp (1822) A GIANT Transaction Which Is Not What It Looks Like. Smells Bad.
- Daiho Corp (1822 JP) has announced a deal which is not quite what it looks like.
- And despite a buyback of more than 50% of shares outstanding, and an “accretive” sale to another party at a higher price, it is a governance disaster.
- And existing shareholders have an out, but it is complicated. If you own the stock, or you look at risk arb, or activism, this may be worth a read.
KOSPI 200 Index Rebalancing: Constituents Subject to Float Rate Increase
- Nine constituents will likely face an increase in the float rate: five stocks for the sale of the majority shareholder’s shares and four names for the IPO lockup release.
- Kakao Bank (6.35x), LG Corp (003550 KS) (2.62x), Krafton (2.09x), and Woori Financial Group (316140 KS) (1.74x) are expected to have the most significant impact.
- In general, float rate changes show price movement by passive flow similar to new changes (adds/deletes). So, we need to consider gradually building up positions two months before the rebalancing.
Noodling MNACT Vs MCT Deal Risk… Even the Complications Have Complications.
- The MNACT/MCT deal has weird parameters which make it complicated as a risk arb situation, and as a way to think about relative value of MCT and MNACT vs Peers
- Relative buying and selling pressure changes between the two names and their peer baskets depending on a) the May vote, b) index provider discretion, and c) MCT’s price in July.
- Then it may depend on relative price movement before then too. It’s complicated.
KOSDAQ150 Index Rebalance Preview (June): Potential Inclusions Starting to Outperform
- With over 80% of the averaging in the review period complete, we see 15 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
- 11 of the 15 changes are high/medium probability and it will take large moves over the rest of the review period for these stocks to drop out of the list.
- Four potential inclusions have more than 3 days of ADV to buy from passives, while nine potential deletions have more than 3 days of ADV to sell from passives.
AKM Industrial’s Offer Spread Risk/Reward
- 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 cents).
- Approval from the State Administration of Foreign Exchange is the remaining pre-condition. The Court hearing of the petition for the sanction of the scheme is set for 19 July.
- At last close and for a July end effective date, the gross and annualised spread to the total offer of HK$1.8345 is 3.6% and 11.2%, respectively.
Merger Arb Mondays – Yashili, Razer, 51job, Sezzle, Link, Uniti, Guodian, Jin Jiang
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore and the US (Chinese ADRs only).
- This week, the highest gross spreads are Yashili International Holdings (1230 HK), Razer Inc (1337 HK), 51 Job Inc Adr (JOBS US), Sezzle Inc (SZL AU)
- Lowest gross spreads CIMIC Group Ltd (CIM AU), Z Energy Ltd (ZEL NZ), China Logistics Property Holdings (1589 HK), Virtus Health (VRT AU), Mapletree North Asia Commercial Trust (MAGIC SP)
Before it’s here, it’s on Smartkarma
