In today’s briefing:
- July TOPIX FFW Rebal – Update With 2 Days To Go on $3bn a Side
- Tata Motors (TTMT IN) – Goodbye to the DVR Arb
- Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed, But Toshiba Fatigue Is Strong
- SK Telecom – Major Share Buyback & Cancellation
- Interpretation of China’s Politburo – The A-Share Bull Market Is Coming?
- Nomura Real Estate To Buy Nomura RE Master Fund Units
- KRX Autos Sept Rebalancing: Less Known, Still Juicy Trading Event with 4 Constituent Changes
- EOFLOW/Medtronic Tender: Assessing the Wide Spread
- A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback
- GQG Mulls Offer As Pacific Current Balks At Regal’s NBIO
July TOPIX FFW Rebal – Update With 2 Days To Go on $3bn a Side
- In the two weeks since the announcement, Large ADDs (>2d ADV, >$5mm) have outperformed Large DELs by 1.3%. Smaller ADDs vs DELs (>2d, >$2<$5mm) have outperformed by 1.3%.
- Using only >$20mm >2d DELs vs Top 5 $amt >2d ADDs, that’s a bit better than 1%. And the really obvious large ones? Not so obvious.
- There is still a large reverse funding trade, with some large sells.
Tata Motors (TTMT IN) – Goodbye to the DVR Arb
- Tata Motors Ltd (TTMT IN) has announced a Scheme of Arrangement where all the Tata Motors DVR (TTMT/A IN) shares will be cancelled.
- For every 10 shares of Tata Motors DVR (TTMT/A IN) held, shareholders will receive 7 shares of Tata Motors Ltd (TTMT IN).
- The process is expected to take 12-15 months to complete and there will be passive buying in Tata Motors Ltd (TTMT IN) at the end of it.
Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed, But Toshiba Fatigue Is Strong
- It has been four months since JIP officially announced their intention to launch a Tender Offer for Toshiba Corp (6502 JP) by end-July. 7 weeks since Toshiba’s Board supported it.
- There’s been no material public griping. Peers are sharply higher. There have been news stories suggesting a Western Digital/Kioxia deal is close. That’s now extended. The Toshiba deal possibly too.
- But huge outperformance by peers, and possible clarity from Kioxia deal terms are unlikely to move the Toshiba Board to demand more.
SK Telecom – Major Share Buyback & Cancellation
- On 27 July, SK Telecom announced a sizeable share buyback worth 300 billion won (including shares cancellation of 200 billion won) and quarterly dividend of 181 billion won.
- SK Telecom will pay a quarterly DPS of 830 won, which represents 1.8% of its current price of 45,900 won.
- SK Telecom is trying to boost its share price which has been negatively impacted by the regulators’ pressure to cut telecom tariff rates and also increase competition.
Interpretation of China’s Politburo – The A-Share Bull Market Is Coming?
- On China’s Politburo, we did see some rare expressions and highlights worthy of attention. Perhaps, avoiding short-term risks is so important that China needs to temporarily put aside long-term transformation.
- Attitude change doesn’t mean returning to old model.Since “expanding domestic demand” is placed in a prominent position, we have reason to be optimistic about the prospects of private economy/A-share market.
- The real A-share bull market may not come immediately, but we are optimistic about the performance of A-shares in 23Q4 and 2024. We recommend investors to get prepared in advance.
Nomura Real Estate To Buy Nomura RE Master Fund Units
- Today, Nomura Real Estate Master Fund, (3462 JP) – the largest REIT in the ‘Diversified REIT’ JREIT space – announced sponsor Nomura Real Estate (3231 JP) would up its stake.
- They would lift their stake from 4.47% by 2.54% to 7.01%. There is a reason for this, just like there was last time with Japan Excellent (8987 JP).
- Understanding the reason is how you understand the trade to do.
KRX Autos Sept Rebalancing: Less Known, Still Juicy Trading Event with 4 Constituent Changes
- At the current stage, with the three-month review period almost complete, there will likely be two additions and two deletions:
- Additions: KG Mobility (003620 KS) & Nexen Tire Corp (002350 KS) Deletions: Sebang Global Battery (004490 KS) & Kumho HT Inc (214330 KS)
- In the past few years, KRX Autos has shown a significant price impact for constituent changes on the rebalancing trading day. This pattern will likely repeat in the upcoming rebalancing.
EOFLOW/Medtronic Tender: Assessing the Wide Spread
- Medtronic Plc (MDT US) aims to acquire Eoflow (294090 KS) through share purchase agreements (SPA), a share subscription agreement (SSA) and a public tender offer at KRW30,000.
- Since the deal announcement on 26 May, the spread has widened, reflecting deal risk around patent litigation risk, regulatory approvals and the minimum acceptance condition.
- Our assessment of these risks suggests a low probability of a deal break. At the last close, the gross spread is an attractive 8.5%.
A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback
- The chances of SKT’s inclusion in the August MSCI Review seem slim. SKT narrowly missed meeting the 15% threshold on both Day 1 and Day 2 during this review.
- SK Telecom’s buyback completion can be accelerated to align with the MSCI November Review period, just like the previous case of KT Corp back in April.
- The estimated size of passive funds flowing into SKT is approximately ₩160 billion, which is expected to be around 5.5 times the average daily trading volume (ADTV).
GQG Mulls Offer As Pacific Current Balks At Regal’s NBIO
- Yesterday (26 July), asset manager Pacific Current (PAC AU) announced a cash/scrip NBIO from Regal Partners (RPL AU).
- Under Regal’s proposal, Pacific Current shareholders would receive an implied $10.77/share. Pacific Current considers the current share price doesn’t reflect the underlying value of its portfolio and business.
- Now GQG Partners (GQG AU) has announced it intends to submit its own NBIO. No price was mentioned.
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