In today’s briefing:
- PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
- Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come
- Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC
- JAPAN ACTIVISM: Silchester and Bank of Kyoto (8369) Redux
- Last Week in Event SPACE: China Mobile, Fast Retailing, Yuexiu Property, Vinda, Tokyo Gas
- A Noteworthy Long Short Setup: Ecopro BM & Posco Future M
- Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash
- Weekly Deals Digest (30 Apr) – AAG, HKBN, Blackmores, Lian Beng, Horizon Construction, Mankind
- Merger Arb Mondays (01 May) – HKBN, AAG Energy, United Malt, Blackmores, Origin, Metro Pacific
- (Mostly) Asia M&A, April 2023: Arcland Service, Lian Beng, Silk Laser, Breaker Resources, Blackmores
PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
- Based on data to the close on 27 April, we do not expect any changes to the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the August rebalance.
- However, the Metro Pacific Investments Co (MPI PM) tender offer and voluntary delisting will open up an index spot that will need to be filled.
- At the current time, Bloomberry Resorts (BLOOM PM) is the highest ranked non-index constituent and is the most likely replacement.
Kansai Paint (4613) Announces Large Sale of Cross-Holdings – Buyback Here We Come
- Today after the close, Kansai Paint (4613 JP) announced it would sell 3 investment securities in the current quarter and would book a gain of “around ¥30bn.”
- As discussed in Kansai Paint (4613 JP) Secondary Offering & Buyback and All the Subsequent Flows, Toyota’s sale of KP shares meant KP could sell Toyota shares. Now they will.
- This is a set-up to another buyback, eventually to unwind more in-bound cross-holdings and to raise ROE.
Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC
- Friday marked the end of the review cutoff for the MSCI, CSI300, CSI500, STAR50, SSE50, ChiNext and a bunch of other indices for the upcoming rebalances in May and June.
- There are no major index events coming up this week as a lot of markets are shut on different days.
- There were big inflows to mainland China ETFs during the week, while there was a big redemption from the iShares MSCI ACWI ETF (ACWI US).
JAPAN ACTIVISM: Silchester and Bank of Kyoto (8369) Redux
- Last year, Silchester International Investors wrote a series of letters to Bank of Kyoto management and then asked to put items on the AGM agenda. It lost.
- A Bloomberg article last week suggests Silchester will ask for a ¥62 special div and a ¥5bn buyback this year. The Silchester letter is “due” by 30 April.
- The Bank has already delivered most of the ask this year (¥3bn in upped div, and ¥5bn in buybacks). Silchester will lose. Expect no Conversion on the Road to Kasumigaseki.
Last Week in Event SPACE: China Mobile, Fast Retailing, Yuexiu Property, Vinda, Tokyo Gas
- It is relatively low-hanging fruit to “further propel the renmimbi’s internationalisation” and for HKEX, it will “cement HK’s position as the premier offshore renmimbi financing center.”
- The Conundrum: the more active investors decide they like Fast Retailing (9983 JP), the more there is to sell. That creates interesting opportunities.
- Short Yuexiu Property (123 HK) now, or soon. The dynamics of this is that there WILL be selling when the rights come out.
A Noteworthy Long Short Setup: Ecopro BM & Posco Future M
- Currently, the market cap of Ecopro BM surpassed Posco Future M. As a result, Ecopro BM is in a position to replace Posco Future M in the K-New Deal rebalancing.
- They are direct peers with a high price cointegration. We should consider using the rebalancing event of this index as an inflection point from a Long Short pair trading perspective.
- The likelihood of Ecopro BM being included in the Solactive Lithium Index in October could potentially increase the expected return of taking this Long Short position more preemptively.
Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash
- Key insiders at Seoul City Gas (017390 KS) and Daou Data Corp (032190 KS) sold their shares before the recent crash.
- On 28 April, it was reported that Kim Young-Min (Seoul City Gas Chairman) sold 2% of Seoul City Gas on 20 April, resulting in net sales of 45.7 billion won.
- These Korean companies are two of the eight stocks related to the CFD derivatives sell-down that have been crashing in the past week.
Weekly Deals Digest (30 Apr) – AAG, HKBN, Blackmores, Lian Beng, Horizon Construction, Mankind
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments – Yuexiu Property (123 HK) rights issue and ADICON Holdings Limited (ADI HK), Horizon Construction Development (1887128D HK), Mankind Pharma (6596876Z IN) IPOs.
- Event-Driven developments – Blackmores Ltd (BKL AU), United Malt Group Ltd (UMG AU), Aag Energy Holdings (2686 HK), HKBN Ltd (1310 HK), Metro Pacific Investments Co (MPI PM), Lian Beng.
Merger Arb Mondays (01 May) – HKBN, AAG Energy, United Malt, Blackmores, Origin, Metro Pacific
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Estia Health (EHE AU), United Malt Group Ltd (UMG AU), Aag Energy Holdings (2686 HK), HKBN Ltd (1310 HK), Origin Energy (ORG AU).
- Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Lian Beng (LBG SP), Mincor Resources NL (MCR AU), Pushpay Holdings (PPH NZ), Blackmores Ltd (BKL AU).
(Mostly) Asia M&A, April 2023: Arcland Service, Lian Beng, Silk Laser, Breaker Resources, Blackmores
- For the month of April, 6 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$3bn.
- The average premium for the new deals announced (or first discussed) in April was 23%.
- This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.
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