In today’s briefing:
- Taiwan Dividend+ Index Rebal Trades – Offsets Other Index Risk
- Hitachi Transport (9086) – KKR Deal Is Here And There Are Index Implications
- StubWorld: PCCW Coming Up “Cheap”
- Aruhi (7198) Forecast Reduction, Tender Extended, Watch for Index and Trading Flow
- KOSPI 200 & KOSDAQ 150: Rule Clarifications & Rebalancing Predictions
- SSE50 Index Rebalance Preview: Sector Shift as IT and Financials Drop
- Sembcorp Marine & Keppel O&M: Revised Terms & Index Implications
- Lifestyle (1212 HK): Timing Is Everything As Shareholders Go To Vote on 21 Nov
- Keppel & Sembcorp Marine Revise Transaction, Improve Terms to SMM
- Z Holdings (Neutral) – Quick Thoughts on the Read Across from Google, Meta, and CyberAgent
Taiwan Dividend+ Index Rebal Trades – Offsets Other Index Risk
- The FTSE Taiwan Dividend+ Index is a fabulously interesting index from an index prediction trading standpoint. Because it works off negative momentum, the bias risk is different from normal indices.
- And there is a turn. That turn is where what had been bad becomes good, becomes very good, then turns bad again.
- This insight proposes a basket to buy, and a basket to short, and if the basket to buy ends up not going in, it is a high quality problem.
Hitachi Transport (9086) – KKR Deal Is Here And There Are Index Implications
- The KKR deal for Hitachi Transport System (9086 JP) is here.
- Some were worried KKR would walk. That was never a worry. Some worried Russia wouldn’t approve. There was always a way.
- This deal should trade tight. New money might be better allocated elsewhere. Arbitrageurs and investors should be wary of the index effects of the TOPIX FFW adjustment tomorrow at close.
StubWorld: PCCW Coming Up “Cheap”
- PCCW Ltd (8 HK) is coming up “cheap” on my monitor, both from a discount to NAV and implied stub angle.
- Preceding my comments PCCW / HKT Ltd (6823 HK) and Bank of Kyoto (8369 JP) are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Aruhi (7198) Forecast Reduction, Tender Extended, Watch for Index and Trading Flow
- Aruhi Corp (7198 JP) is under Tender Offer by SBI Holdings (8473 JP) which wants to buy back in and expand the offering through SBI and Shinsei Bank (8303 JP).
- The Tender Offer was expected to close on Monday, and Aruhi earnings were expected on the 10th of November. Today Aruhi changed its forecasts, so SBI extended the tender.
- This engenders a bit of 🧐👀 on my part, but we gotta go with the flow. Discussion ensues. And watch for trading opportunities.
KOSPI 200 & KOSDAQ 150: Rule Clarifications & Rebalancing Predictions
- The 2nd screening only deals with those who have passed the 1st screening. The 2nd screening does NOT include the first company to cross the threshold.
- Lotte Confectionery will be the only addition to the KOSPI 200. Samyang Holdings or Hyundai Home Shopping Network will leave the index.
- There will be ten changes in the KOSDAQ 150: eight regular & two special entries. WCP’s special entry still seems uncertain due to the GICS classification issue.
SSE50 Index Rebalance Preview: Sector Shift as IT and Financials Drop
- The review period nearly complete, we see 7 potential adds and 9 potential deletes at the December rebalance. However, there can be a maximum of 5 changes at a rebalance.
- We estimate a one-way turnover of 4.28% at the December rebalance leading to a one-way trade of CNY 3.42bn. Index arb activity could add to the impact on the stocks.
- The potential adds have dropped over the last month while the potential deletes have moved higher over the last couple of weeks.
Sembcorp Marine & Keppel O&M: Revised Terms & Index Implications
- Sembcorp Marine (SMM SP) will now acquire Keppel O&M from Keppel Corp (KEP SP) at an 8% lower consideration at a revised exchange ratio of 46:54 vs 44:56 earlier.
- The simplified transaction structure is expected to reduce consent and approval requirements and could reduce completion time by up to 2 months. Expected completion now is December or Jan.
- At a proforma market cap of S$7bn, there could be selling in Sembcorp Marine from MSCI Singapore and FTSE Straits Times Index (STI) (STI INDEX) trackers at the time of implementation.
Lifestyle (1212 HK): Timing Is Everything As Shareholders Go To Vote on 21 Nov
- Back on the 5 August, Thomas Yau, Lifestyle International Holdings (1212 HK)‘s controlling shareholder, tabled a Scheme at HK$5/share, a 62.3% premium to last close.
- The Scheme Doc is now out with the Court Meeting on the 21st of November. The outcome of this transaction will pivot off the reassessed net asset value of HK$10.60/share.
- Trading at a gross spread of 9.6% using yesterday’s close, reflecting the perceived opportunistic nature of the Offer. Yet Hong Kong’s 2018 visitor glory days remain a long way off.
Keppel & Sembcorp Marine Revise Transaction, Improve Terms to SMM
- Today, Keppel Corp (KEP SP) and Sembcorp Marine (SMM SP) made an announcement of revised structure and revised terms.
- Under revised terms, Sembcorp will issue fewer shares to Keppel, and it will be a takeover rather than Scheme of Arrangement. Keppel will deliver more shares to shareholders, keeping less.
- Just like the first announcement, there is a little here for everyone. Keppel doesn’t do a great job of selling it but it is still win-win.
Z Holdings (Neutral) – Quick Thoughts on the Read Across from Google, Meta, and CyberAgent
- Internet advertising revenue growth has come in below expectations for Google, Meta and CyberAgent as ad budgets appear to be shrinking
- There is an indirect read-across to Z Holdings which has almost always posted slower ad growth although it has some insulation from volatility with eCommerce and LINE official accounts
- Sill, management targets for ad revenue growth of 5-10% look increasingly challenging which is an issue when Media generates c. 80% of profitability. We remain cautious
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