In today’s briefing:
- MV Global Junior Gold Miners Index Rebalance: Over US$500m to Trade
- Outsourcing (2427) – The OTHER Arb – That One Neat Trick And Its Weird Risks
- Roland DG (6789) – Brother (6448) Launches Hostile Overbid to Taiyo MBO – You Love To See It
- JSR Corporation (4185 JP): SUNY RF Responds as JIC Tender Rumoured for a 19 Mar Start
- EQD | NIFTY Down: Where to BUY WEEKLY
- Another Brewing Fight for the Controlling Shareholding of Hanjin Kal?
- Astera Labs IPO Valuation Analysis
- HK CEO & Director Dealings (15 Mar 2024): Sino Land, Hysan, FE Consortium, Champion REIT, Dongyue
- NPN X PRX: Discounts Continue to Come Under Pressure
- JSE March Rebalance Day: Top Sells AGL, MNP & INP
MV Global Junior Gold Miners Index Rebalance: Over US$500m to Trade
- Emerald Resources Nl (EMR AU) will be added to the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in March while there are 3 deletions for the index.
- The constituent changes along with float and capping changes result in an estimated one-way turnover of 6.4% and a one-way trade of US$263m.
- There are 9 stocks with more than US$10m to trade and 9 stocks with over 2x ADV to trade.
Outsourcing (2427) – The OTHER Arb – That One Neat Trick And Its Weird Risks
- Outsourcing Inc (2427 JP) has been an “interesting” risk arb situation. It was launched as a Cheeky, Opportunistic, Low-Priced MBO. Some bumps after launch turned out to be BAU.
- The stock has not traded above terms since early on in the trade. I expect people are happy to get out. But there is ANOTHER ARB to do here.
- The OTHER ARB is something quite particular to high float, low activism risk arb trades. In some ways better than the traditional arb, but it has some risks.
Roland DG (6789) – Brother (6448) Launches Hostile Overbid to Taiyo MBO – You Love To See It
- A month ago, Engagement Investor Taiyo Pacific Partners launched an MBO on Roland DG Corp (6789 JP) after having done a takeover of their former sub years ago.
- I said it was too cheap. Machinery company Brother Industries (6448 JP) has decided the same, and has announced a hostile/unsolicited overbid 3.3% higher. Tender to start in May. Fun!!!
- This will almost certainly get bid even higher as people would expect the MBO bidders won’t simply give up. More below.
JSR Corporation (4185 JP): SUNY RF Responds as JIC Tender Rumoured for a 19 Mar Start
- Bloomberg reports that JIC will start the JSR Corp (4185 JP) tender as early as 19 March. Separately, SUNY RF filed a response to Inpria/JSR’s 6 March filing last night.
- My reading of JSR and SUNY RF’s filings suggests that the Court is unlikely to conclude that SUNY RF’s lawsuit will be harmed if JIC proceeds with the tender offer.
- JIC seems comfortable taking on the litigation risk (if required). The key risk remains timing. For a late April payment, gross/annualised spread is 0.6%/4.0%.
EQD | NIFTY Down: Where to BUY WEEKLY
- The NIFTY Index this week suddenly stopped its rally and started to correct.
- This week should close down and the next week may be also down, but if it is the odds are great for a LONG trade.
- Re-Enter the rally at prices between 21800 and 21150, this week or the next.
Another Brewing Fight for the Controlling Shareholding of Hanjin Kal?
- On 14 March, NPS announced that it has decided to vote against the re-appointment of the CEO Cho Won-tae as the executive director of Korean Air Lines.
- It was also announced on 14 March that GS Retail purchased a 1% stake in Hanjin Kal. In addition, Korean Air Lines also purchased a 1.2% stake in GS Retail.
- One of the growing probabilities of the changing shareholding structures is that KDB may be interested in selling its 10.6% stake in Hanjin Kal.
Astera Labs IPO Valuation Analysis
- Our base case valuation is market cap of US$5.4 billion or target price of US$35.9 per share, which is 20% higher than high end of the IPO price range (US$30).
- We estimate Astera Labs (ALAB US) to generate revenue of $221.3 million (up 91.1% YoY) in 2024 and $304.5 million (up 37.5% YoY) in 2025.
- Many investors are willing to take extra risk to invest in companies such as Astera Labs that could generate strong sales growth amid rush to aggressively expand AI capabilities.
HK CEO & Director Dealings (15 Mar 2024): Sino Land, Hysan, FE Consortium, Champion REIT, Dongyue
- The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
- Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
- The key stocks mentioned in this regular insight are Sino Land (83 HK), Hysan (14 HK), Far East Consortium (35 HK), Dongyue (189 HK) & Great Eagle Holdings (41 HK)/Champion REIT (2778 HK).
NPN X PRX: Discounts Continue to Come Under Pressure
- Naspers and Prosus continue to come under pressure relative to their underlying holdings.
- Since our last update on the 1st of March, Naspers’ look through discount has widened by 1.6 percentage points to 42%.
- Naspers’ discount to Prosus’ market value has widened notably by 2.1 percentage points to 11.3%. Prosus’ discount is only 30bps wider and is trading at 35.4%.
JSE March Rebalance Day: Top Sells AGL, MNP & INP
- We expect to see large volumes of AGL, MNP and INP to trade in the closing auction due to the index harmonisation.
- Passive trackers and hedgers with exposure to vanilla indices will need to sell down their holdings to transition to the SWIX methodology.
- The top buys include: NPN, FSR, SBK, GFI, CPI and PRX.
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