In today’s briefing:
- Post KOSPI 200 Rebalancing Shorting Event: Watch Iljin Hysolus, F&F, & K Car
- Beijing Enterprises Urban Resources’ MGO Open, First Closing Date 17 June
- Still Bearish, But On Watch for Bear Market Rally; Buying Toshiba 6502-JP, Defensive Sectors
- Korean Air & Asiana Airlines: Current Status of CB Conversion Event
- BEURG (3718 HK) Now Open For Acceptances. IFA Says Fair
- LG Corp: First Major Buyback in 22 Years + Improvement in Dividend Policy
Post KOSPI 200 Rebalancing Shorting Event: Watch Iljin Hysolus, F&F, & K Car
- We should pay attention to the following three stocks: F&F, Iljin Hysolus, and K Car. They all have recently seen a drastic increase in the loan balance.
- Their passive flow sizes relative to ADTVs are the lowest among the additions. It seems that those with relatively little passive impact are targeted.
- Also, their projected earnings are highly volatile, and they all face overvaluation issues, whereas the other four names have more clear projections for earnings.
Beijing Enterprises Urban Resources’ MGO Open, First Closing Date 17 June
- Beijing Enterprises Urban Resources (3718 HK) composite document is out with the MGO’s first closing date of 17 June. The IFA considers Beijing Enterprises Water Group (371 HK)‘s offer fair.
- The MGO is conditional on the offeror and concert parties holding more than 50% of the voting rights. With the offeror currently at 44.16%, the MGO should become unconditional.
- At last close and for a 28 June payment, the gross and annualised spread to the MGO price (including final dividend) of HK$0.81 per share is 2.5% and 31.5%, respectively.
Still Bearish, But On Watch for Bear Market Rally; Buying Toshiba 6502-JP, Defensive Sectors
- The DAX and Hang Seng are reversing their downtrends while MSCI China (MCHI-US) and China Internet (KWEB-US) are currently testing their respective multi-month downtrends.
- Reversals of these downtrends would signal a bear market rally in progress.
- We will need to see more basing, followed by base breakouts, in order to get bullish — a process that would likely take weeks or months.
Korean Air & Asiana Airlines: Current Status of CB Conversion Event
- Korean Air might have already notified the creditors of its early repayment decision. Asiana will likely follow suit, immediately triggering the creditors to exercise the conversion rights.
- So, both Korean Air and Asiana’s conversion should be a foregone conclusion. There is only uncertainty about how many conversions we will actually see for Asiana from the KDB.
- Instead of preemptive position setup at this point, I would consider starting the position build-up within the 2-3 day window from the repayment filing to CB conversion.
BEURG (3718 HK) Now Open For Acceptances. IFA Says Fair
- The Composite Doc for Beijing Enterprises Water Group (371 HK)‘s (BEURG) mandatory general cash for Beijing Enterprises Urban Resources (3718 HK) (BEW) has been despatched.
- The first close is the 17 June but can be open until the 26 July. BEW has 44.16% in the bag and this requires a 50% hurdle to turn unconditional.
- It’s an underwhelming Offer yet the IFA considers the terms to be fair and reasonable. But there’s probably enough here for the Offer to get up.
LG Corp: First Major Buyback in 22 Years + Improvement in Dividend Policy
- LG Corp announced a share buyback worth 500 billion won, representing 4.3% of market cap. This is the company’s first major buyback in 22 years.
- LG Corp will also remove the “limit” on dividend income, in order to secure the flexibility of the dividend income such as when one of its affiliated stakes are sold.
- A sizeable buyback, improved dividend policy, and a significant discount to its NAV are likely to lead to continued outperformance of LG Corp relative to KOSPI.
Before it’s here, it’s on Smartkarma
