In today’s briefing:
- FTSE All-World/All-Cap Sep Index Rebalance Preview: Asia Ex Japan Ex China
- JAPAN PASSIVE – The GPIF in FY2021
- Critical Flaws in the MSCI Methodology for SK Telecom’s Foreign Room Calculation
- Link Admin Rejects Dye & Durham’s Revised Offer
- Tassal Group (TGR AU): Cooke Scales Up
- Link’s Statement Hints at a Willingness to Meet in the Middle
- PipeDo Holdings (3919) MBO – Advantest Again, This Time It’s a Stitch-Up
- An Early Look at Potential Deletions and Additions to KOSPI200
- Kasikornbank (KBANK TB): Potential MSCI Inclusion
- Teniralc/Cary Group: Agreed Opportunistic Cash Offer
FTSE All-World/All-Cap Sep Index Rebalance Preview: Asia Ex Japan Ex China
- The price review period for the FTSE All-World/All-Cap September 2022 SAIR ended on 30 June. The changes are expected to be announced on 19 August and implemented on 16 September.
- For Asia ex-Japan ex-China, we see 7 inclusions to All-World, 58 inclusions to All-Cap, 9 migrations from All-Cap to All-World, 5 migrations from All-World to All-Cap, and 20 deletions.
- There are quite a few names in Australia that could have same way flows from the S&P/ASX 200 and S&P/ASX 300 Index trackers on the same day as the FTSE trackers.
JAPAN PASSIVE – The GPIF in FY2021
- The GPIF reported its annual investment results for the FY to March 2022 last Friday. The investment report makes for interesting reading.
- The GPIF made 5.42% but alpha was negative 6bp vs time-weighted and money-weighted benchmarks.
- The re-allocations amongst asset classes now means more money tracks TOPIX, and it means active managers have their work cut out for them going forward.
Critical Flaws in the MSCI Methodology for SK Telecom’s Foreign Room Calculation
- MSCI does not have any explicitly-defined foreign room calculation method for Korean FOL stocks with DRs.
- 58M shares can still be converted into ADRs, close to 27% of SO. There are still ample foreign rooms for SKT, making its situation quite different from KT’s in 2019.
- MSCI, which places the most importance on actual investability, won’t delete SKT, which has a substantial real-world foreign room simply because the nominal value has fallen below the threshold.
Link Admin Rejects Dye & Durham’s Revised Offer
- Citing the Australian Competition and Consumer Commission’s concerns and challenging markets, Dye & Durham (D&D) reduced its Offer price for Link Administration (LNK AU) to $4.30/share, down from $5.50/share.
- Link has now announced it “does not believe it is able to recommend” the revised Offer.
- That tentative rejection, and the fact it remains in discussion with D&D, suggest a board-backed price is probably somewhere between the original bid price and the reduced Offer terms.
Tassal Group (TGR AU): Cooke Scales Up
- Back on the 28 June, Tasmanian salmon producer Tassal (TGR AU) rejected Cooke Inc’s $4.85/share offer – its third proposal – and a 42.2% premium to the undisturbed price.
- At the time, Cooke had amassed a 5.4% position. They have now increased that stake to 7.599%, paying up to A$4.85/share.
- A material shareholding and FIRB already in the bag – Cooke is playing for keeps. But it probably needs to bump the terms to get this transaction over the line.
Link’s Statement Hints at a Willingness to Meet in the Middle
- The Link Administration (LNK AU) Board will not recommend Dye & Durham/DND’s proposed lower offer of A$4.30 per share due to shareholder feedback, the underlying value and alternative options.
- The statement suggests that the Board is willing to consider a lower but improved offer. Acquiring Link at a lower valuation through its attractive financing package continues to motivate DND.
- A price of A$4.70, which is the middle of the buyer’s and seller’s valuations will get a deal done. Downside risk is low as shares trade close to low-end valuation.
PipeDo Holdings (3919) MBO – Advantest Again, This Time It’s a Stitch-Up
- Last autumn, Advantage Partners launched an MBO on Pipedo HD Inc (3919 JP) where an activist/y presence threatened to be able to block it. Partway through, shares popped.
- The MBO was unsuccessful. Now they are back, at the same price, and now they have arranged a side deal with the activist-y holder. So now it is stitched up.
- There could easily be people unhappy with the structure of this deal, especially as book value is up 16%, and projected cashflows 8-10% higher than last time.
An Early Look at Potential Deletions and Additions to KOSPI200
- In this insight, we provide an early look at the potential deletions and additions to KOSPI200 rebalance.
- We provide the top 10 potential deletions including Cosmax Inc (192820 KS), Hyundai Home Shopping Network (057050 KS), and Samyang Holdings (000070 KS) to KOSPI200 (announcement in November 2022).
- Our trading strategy for the KOSPI200 index would be to go short on a basket of the potential deletions and to go long on a basket of the potential additions.
Kasikornbank (KBANK TB): Potential MSCI Inclusion
- Kasikornbank PCL (KBANK-R TB) was deleted from the MSCI Thailand Index in June 2021 following the issuance of NVDR’s approaching its permitted limit of 25% of issued shares.
- With 12 months since deletion complete and meeting market cap, liquidity and foreign room thresholds, Kasikornbank PCL (KBANK TB) could be added to the MSCI Thailand Index in August.
- If added to the MSCI Thailand Index, we estimate passive trackers will need to buy 47.39m shares (US$199m; 3.9 days of ADV) of Kasikornbank PCL (KBANK TB) on 31 August.
Teniralc/Cary Group: Agreed Opportunistic Cash Offer
- CVC and Nordic Capital announced an agreed takeover offer for the 70% they don’t own in Cary Group. The SEK 65/share offer price represents 14.8x EV/Fwd EBITDA and 25.6x Fwd P/E.
- The shares had dropped 60% YTD. Cary’s tenure in the stock market will be short-lived (listed 09/2021). It’s a difficult target for activists, the top ten shareholders own c.84%.
- It’s difficult to reject a 60% premium; I believe folks should be happy to cut losses. Gross spread is 1.85% (12.7% estimated annual return assuming settlement on 30 August). Long.
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