In today’s briefing:
- Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing
- JFE Holdings (5411) – Volume Patterns Indicate Possible Squeeziness
- MVIS Global Junior Gold Miners Index Rebalance: One Add, One Delete, Float, Capping = Big Impact
- Merger Arb Mondays (11 Sep) – Eoflow, Mason, Liontown, Newcrest, United Malt, OreCorp, MPI
- KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated
- CSI500 Index Rebalance Preview: ETF Inflows Lead to Performance Skew
- KOSPI Size Indices – Changes in September & Implications
- Innovent Biologics Placement – Has Ample Cash but the Discount Is Enticing
- I-Ne (4933) Offering Priced, Now to a TOPIX Inclusion
- Poly Culture (3636 HK): Pre-Condition Fulfilled
Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing
- In February 2022, Noritsu Koki (7744 JP) sold a chunk of JMDC (4483 JP) to Omron Corp (6645 JP) for nearly US$1bn. 7mos later, Omron supported a primary offering.
- Now Omron is going to 50+%, as Noritsu Koki is getting out. Other investors have to participate for this to succeed.
- The question of pro-ration may be a question of Elmer vs Mr Partridge. But Elmer has a point here.
JFE Holdings (5411) – Volume Patterns Indicate Possible Squeeziness
- On 5 September, JFE Holdings (5411 JP) saw an article out of a capital raising. It was confirmed later in the day. Huge volumes traded. The stock fell sharply.
- The offering supply/demand dynamics are…. complicated. The offering is to foreign instos. The net demand is probably mostly retail and index, and positioning is… also complicated.
- The EPS dilution is already accounted for. The fall against Nippon Steel pretty much does it after considering the discount expected.
MVIS Global Junior Gold Miners Index Rebalance: One Add, One Delete, Float, Capping = Big Impact
- There is one add, one delete, one listing change, plus float and capping changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in September.
- Estimated one-way turnover is 6.1% and that results in a one-way trade of US$240m. There are 31 stocks with over 1 day of ADV to trade from passive trackers.
- There will be some same way and some opposite flows between the VanEck Vectors Junior Gold Miners ETF (GDXJ) and S&P/ASX 200 (AS51) trackers at the close on 15 September.
Merger Arb Mondays (11 Sep) – Eoflow, Mason, Liontown, Newcrest, United Malt, OreCorp, MPI
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Costa Group Holdings (CGC AU), Eoflow (294090 KS), Symbio Holdings (SYM AU), Mason Group Holdings (273 HK), Origin Energy (ORG AU).
- Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Liontown Resources (LTR AU), T&K Toka Co Ltd (4636 JP), Itochu Techno Solutions (4739 JP).
KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated
- The most noteworthy developments include Samsung Electronics being newly added to the Semicon sector, while SK Square has been removed.
- We must be mindful of the potential concentration of shorting flow on SK Square as most names expected to experience negative flows do not fall under the KS200/KQ150 membership.
- Our strategic approach can take three directions: 1. aim at only those receiving positive flows, 2. heavy shorting SK Square, and 3. long-short the four with the most flow size.
CSI500 Index Rebalance Preview: ETF Inflows Lead to Performance Skew
- Over 85% of the way through the review period for the December rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
- There is a big sector skew in the potential changes. We estimate a one-way turnover of 9.4% at the December rebalance resulting in a one-way trade of CNY 7.22bn.
- With the market being stabilised through the ETF route, the index constituents have outperformed the non-index constituents over the last 6-7 weeks. That could reverse over the near term.
KOSPI Size Indices – Changes in September & Implications
- There are 8 migrations from MidCap to LargeCap, 7 LargeCap to MidCap, 8 new additions to MidCap, 17 SmallCap to MidCap, 23 MidCap to SmallCap, 5 new additions to SmallCap.
- The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.
- Given the huge outperformance and looking at how the migrations have performed historically, we’d expect the stocks migrating to MidCap to underperform post implementation of the changes.
Innovent Biologics Placement – Has Ample Cash but the Discount Is Enticing
- Innovent Biologics Inc (1801 HK) (IB) aims to raise around US$313m for R&D and marketing.
- The company has undertaken a number of deals in the past, with the overall results being mixed.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
I-Ne (4933) Offering Priced, Now to a TOPIX Inclusion
- Skincare/Cosmetics company I-NE (4933 JP) on 31 August (¥2947) announced it would move to TSE Prime on 19 September, and announced a Secondary Offering by CEO Onishi-san to get there.
- There was no greenshoe provided. The stock popped. Then drifted back to ¥3025 and the Offering priced today at ¥2,934/share.
- 75% went to Asian/European (non-US) offshore investors, and the rest to onshore institutions, which is unusual. But now we look to the TOPIX inclusion.
Poly Culture (3636 HK): Pre-Condition Fulfilled
- The pre-condition relating to Poly Culture Group Corp H (3636 HK)’s privatisation offer from Poly Group at HK$8.88 per H Share has been fulfilled.
- The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). No independent H Shareholder holds a blocking stake.
- The offer’s 77.6% premium to the undisturbed price and no minimum acceptance condition will help completion. At the last close and for 1 November completion, the gross/annualised spread is 7.1%/64.3%.
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