In today’s briefing:
- SK Telecom: Clarifications over ADR Creation & Premium with Zero Foreign Room
- Nikkei 225 Methodology Change. Again. This Time Better But Still Not Good Enough
- Yancoal’s Unusual Low Bid from Yankuang Energy
- Yancoal (YAL AU, 3668 HK): Potential Offer From Parent In H-Share CBs
- Appen (APX AU): Telus’ Indicative Offer
- Telus Revokes It’s A$9.50 Bid for Appen
- NIFTY Indices: Quiddity Primer
- Sony – IR Day One and Kadokawa
- Siemens Energy/Siemens Gamesa: What Now?
- LG Energy Solution: Short-Term Flow Crunch & Block Deal Possibility
SK Telecom: Clarifications over ADR Creation & Premium with Zero Foreign Room
- The debating point is whether ADRs can be created from local underlying shares once the FOL is hit if the ADR issuance cap isn’t entirely burned.
- The answer is Yes. ADRs can still be created. That is one of the exceptions that the Korea FSS allows for exceeding the foreign ownership limit.
- This is why we saw a hefty premium on KT ADR when it reached and stayed at zero foreign room since 2015 AND an increase in ADRs through DR creation.
Nikkei 225 Methodology Change. Again. This Time Better But Still Not Good Enough
- The Nikkei Index Team has suggested a methodology change to the Nikkei 225 Average.
- It involves capping stocks, creating a method for re-weighting once capped then stocks fall, and they recommend changing to a semi-annual Periodic Review – twice a year rather than once.
- More interestingly, they also change the “High Liquidity” definition to be related to traded value not volume, which starts to favour higher-market cap stocks with more shares out.
Yancoal’s Unusual Low Bid from Yankuang Energy
- Yanzhou Coal Mining Company Limited H (1171 HK)/Yankuang, a 62.26% shareholder, aims to offer H Share convertible bonds for US$3.60 (HK$28.26 or A$5.07) per Yancoal Australia (YAL AU) share.
- Yankuang’s implied offer price is -16.6% and -14.5% below the last close price on the ASX and HKEx, respectively. At first glance, the offer seems to be a non-starter.
- Yankuang’s end game is likely to provide large shareholders with a liquidity event to hit the 90% compulsory acquisition threshold. This ploy could work subject to FIRB approval.
Yancoal (YAL AU, 3668 HK): Potential Offer From Parent In H-Share CBs
- Yankuang Energy Group Company (1171 HK) is considering an Offer for dual-listed coal-miner Yancoal Australia (YAL AU / 3668 HK) via the issuance of H-share convertible bonds.
- The potential consideration of US$3.60 (~A$5.07/~HK$28.26) per Yancoal share, in the form of H-Share CBs, compares to the last close A$6.08 and HK$33.05. Perhaps an attractive yield will be dangled.
- Yankuang Energy has 62.26%. Cinda, Glencore, and China Shandong collectively hold 27.7%. You need all three to support the Offer terms, and then some, to force compulsory acquisition.
Appen (APX AU): Telus’ Indicative Offer
- AI data service provider Appen (APX AU) has announced an unsolicited, conditional, and non-binding indicative proposal from Canada’s Telus International, by way of a Scheme of Arrangement, at A$9.50/share.
- That’s around a 48% premium. Appen’s board is seeking an improvement in terms through offering a limited course of due diligence.
- The Offer backs out an equity value of A$1.2bn, significantly down from Appen’s 2020 pandemic peak of A$5.4bn.
Telus Revokes It’s A$9.50 Bid for Appen
- In response to media reports, Appen Ltd (APX AU) disclosed a non-binding indicative proposal from Telus International (TIXT US) at A$9.50, a 48.4% premium to the undisturbed price of A$6.40.
- Appen also announced a weak trading update. The 1HFY22 EBITDA is expected to be materially lower than the comparable period due to the lower revenue and the ongoing investment.
- Subsequently, Appen noted that Telus revoked its indicative proposal. No reason was given for the decision. Nevertheless, Appen’s depressed share price will continue to attract suitors.
NIFTY Indices: Quiddity Primer
- The NIFTY Index Family has a series of broad equity indices that represents large, mid and small market capitalisation segments of the Indian public equity market.
- The review of broad market indices will be done on a semi-annual basis and the changes will be implemented at the end of March and September every year.
- In this insight, we take a look at the selection criteria and the historical price performance of past Rebalance Events.
Sony – IR Day One and Kadokawa
- Sony held the first of their two investor days yesterday presenting on the Game & Network Services, Music and Pictures segments.
- While there was nothing especially new for those paying attention to the broad flow of news conditions for the content businesses remain strong.
- What was interesting to us was the degree of collaboration with Kadokawa.
Siemens Energy/Siemens Gamesa: What Now?
- Siemens Energy seems to have the backing of both BlackRock and Norges, and could then count on 72.55% of the votes vs. 75% approval at EGM needed for delisting.
- The shares have seen high purchasing activity since the offer announcement (€158 million average turnover since Monday). Gross spread is 1.5%, 3.7% estimated annual return (assuming settlement on 24 October).
- One could sell part of the shares if the share price rises above the offer price and await a possible sweetening, and tender the rest during the acceptance period.
LG Energy Solution: Short-Term Flow Crunch & Block Deal Possibility
- LG Energy Solution’s real-world free-float rate should be around 5%, or 12.3M shares. We will see two additional passive inflows with the real-world float this tight.
- KOSPI 200 up-weight and FTSE June QIR New Entry’s combined inflow will be 0.6% of SO, enough for us to expect a short-term flow crunch.
- Then, there will likely be a share let-go event (block deals) by LG Chem to lessen the tight float situation, just like what KSOE had done for HHI.
Before it’s here, it’s on Smartkarma
