In today’s briefing:
- KRX New Deal Index Rebalance Preview: Changes with Flow & Impact
- NIFTY50 Index Rebalance Preview: One Change, Maybe Two, Low Probability of Three
- KOSPI200 Index Rebalance Preview: Four Potential Changes in June
- KOSDAQ150 Index Rebalance Preview: Potential Adds Soaring; Short Sell Ban Not Helping
- Softbank (9984 JP): Big Fat NAV Discount, but Headwinds Outweigh Tailwinds Going Forward
- Asian Dividend Gems: Minsheng Education
- GUPPY’s (5127 JP): Medley (4480 JP) Tender Offer at JPY3,250
- Index Rebalance & ETF Flow Recap: ASX, KS200, KQ150, HSIII, STTF, L&F, Costa Group, Japan, Bud APAC
- (Mostly) Asia-Pac Weekly Risk Arb Wrap: Genetron, Guppy, Weiqiao Textile, Taisho Pharma, T&K Toka
- Genetron (GTH US): Wide Spread Ahead of the 21 February Vote
KRX New Deal Index Rebalance Preview: Changes with Flow & Impact
- The review period for the March rebalance ends on 31 January, the changes will be announced early March and implemented at the close of trading on 14 March.
- There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. There are two changes for the BBIG Index.
- There will be big flow on Ecopro BM (247540 KS) and Posco Future M (003670 KS) and big impact on Douzone Bizon (012510 KS) and DearU (376300 KS).
NIFTY50 Index Rebalance Preview: One Change, Maybe Two, Low Probability of Three
- Shriram Finance (SHFL IN) is a high probability add and UPL Ltd (UPLL IN) is a high probability delete at the NIFTY Index (NIFTY INDEX) rebalance in March.
- There is a lower probability of Bharat Electronics (BHE IN) or Trent Ltd (TRENT IN) replacing Bharat Petroleum Corp (BPCL IN) at the rebalance.
- Jio Financial Services (JIOFIN IN), Avenue Supermarts Ltd (DMART IN) and Zomato (ZOMATO IN) will enter the running once added to the F&O segment of the market.
KOSPI200 Index Rebalance Preview: Four Potential Changes in June
- Less than halfway through the review period, we see four changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance.
- The impact on the potential inclusion ranges from 0.14-6 days of ADV while the impact on the potential deletions varies from 3.6-12 days of ADV.
- There are small shorts on the potential inclusions while short interest on the potential deletions varies from 5-10 days of ADV and 1.7-8.2% of free float.
KOSDAQ150 Index Rebalance Preview: Potential Adds Soaring; Short Sell Ban Not Helping
- With over 40% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
- There could be two changes before that if L&F Co Ltd (066970 KS) and HLB Inc (028300 KS) complete their transfer from the KOSDAQ market to the KOSPI market.
- The adds have outperformed the deletes and the KOSDAQ 150 Index since the start of the review period. The ban on short selling could lead to another leg up.
Softbank (9984 JP): Big Fat NAV Discount, but Headwinds Outweigh Tailwinds Going Forward
- SoftBank group’s headline NAV discount is over 50%, factoring in the T-Mobile shares windfall at December-end
- SoftBank Corp is looking to IPO digital payments company PayPay, which should also be a positive driver for SoftBank Group shares going forward, but only a marginal one
- Arm shares have been defying gravity, but we see downside risk going forward, as well as questions over SVF1 and SVF2 private company valuations; and the threat of JPY appreciation
Asian Dividend Gems: Minsheng Education
- Minsheng Education (1569 HK) is a highly undervalued Chinese education stock with high dividend yields. Market cap of the company has declined by nearly 90% from Jun 2018 to today.
- Minsheng Education’s dividend yield averaged 5.1% from 2020 to 2022. Estimated dividend yield is 14.6% in 2023.
- Minsheng Education mainly provides educational services in China. The company is one of the leaders of China’s private higher education industry.
GUPPY’s (5127 JP): Medley (4480 JP) Tender Offer at JPY3,250
- GUPPY’s Inc (5127 JP) has recommended Medley (4480 JP)’s tender offer of JPY3,250 per share, an 81.0% premium to the undisturbed price (19 January).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 10.19% ownership ratio.
- Despite the premium, the offer is light vs the IFA DCF valuation. Based on the irrevocables, the minimum acceptance condition requires a 23.4% minority acceptance rate, which is achievable.
Index Rebalance & ETF Flow Recap: ASX, KS200, KQ150, HSIII, STTF, L&F, Costa Group, Japan, Bud APAC
- The review period for a global index commenced last week and will run through this week as well.
- The announcement of the changes for the LQ45 Index should be announced in the coming week and will be implemented at the close on 31 January.
- Huge inflows to CSI 300 Index trackers during the week while there was a big outflow from Tracker Fund of Hong Kong (2800 HK).
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Genetron, Guppy, Weiqiao Textile, Taisho Pharma, T&K Toka
- I tally 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
- Two new deals discussed this week on Smartkarma: Genetron Holdings Ltd (GTH US)‘s take-private transaction; andMedley (4480 JP)‘s buy out of GUPPY’s Inc (5127 JP).
- Key updates took place on: Orecorp (ORR AU), Weiqiao Textile (2698 HK), Benefit One (2412 JP), Taisho Pharmaceutical (4581 JP), T&K Toka (4636 JP), and Hollysys Automation Technologies (HOLI US).
Genetron (GTH US): Wide Spread Ahead of the 21 February Vote
- Genetron Holdings Ltd (GTH US) shareholders will vote on the consortium’s US$4.08 per ADS offer on 21 February. The offer is light in comparison to historical trading ranges.
- Completion is conditional on shareholder approval, dissenting shareholders representing less than 15% of outstanding shares and regulatory approvals (NDRC, MoC and SAFE).
- Despite the light offer, the completion conditions should be met. At the last close price and end of March completion, the gross and annualised spread is 7.7% and 45.5%, respectively.
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