ASX Stock Pairs Trade Journal

[skc]

I have noticed BWP and SCP are showing strength against the sector, have both of those short up against some others.

SCP trading @ all time high $2.19. Has anyone seen takeover rumours on them? I seem to remember reading about it ages ago...

 

[VSntchr]

SCP trading @ all time high $2.19. Has anyone seen takeover rumours on them? I seem to remember reading about it ages ago...

I haven't heard anything.
I haven't seen AREIT outperformance like this since IOF a few months back.
Chart shows IOF v SLR


And now currently, SCP v SLR


Had a few opportunities with this one and I actually traded in and out of SCP twice. Am back in again now although already underwater a few ticks..


Also, back on that first chart - hasn't IOF really gone quiet since that breakout ran out of steam. Morgan Stanley is selling some part of the IOF entity, couldn't really get my head around the complicated structure..but perhaps this is part of the underperformance?

 

[SilverRanger]

Also, back on that first chart - hasn't IOF really gone quiet since that breakout ran out of steam. Morgan Stanley is selling some part of the IOF entity, couldn't really get my head around the complicated structure..but perhaps this is part of the underperformance?

I think Morgan Stanley is selling Investa Property Trust (IPT) and Investa Office Management (IOM). IPT shares some properties with IOF and IOM has management rights over IOF, and hold some IOF shares (about 9%).

IOF has some pre-emptive rights over the properties it shares with IPT and its own management rights with IOM. It's not that complicated right?

SCP trading @ all time high $2.19. Has anyone seen takeover rumours on them? I seem to remember reading about it ages ago...

I haven't heard/read anything, otherwise I wouldn't get burnt today

 

[SilverRanger]

Also got back into AMM/VOC today. It seems too good to miss. I may get a chance with FDC/NVN tomorrow too.

 

[skc]

I think Morgan Stanley is selling Investa Property Trust (IPT) and Investa Office Management (IOM). IPT shares some properties with IOF and IOM has management rights over IOF, and hold some IOF shares (about 9%).

IOF has some pre-emptive rights over the properties it shares with IPT and its own management rights with IOM. It's not that complicated right?

If IOF wants to exercise the pre-emptive rights they'd need to raise a fair bit of capital... so may be that contributes to the underperformance.

Having said that, it's headline yield is only now @ 4.97%, so may be it just ran too hard for too long. It's hard to make an accretive deal when you acquire someone yielding less than you.

 

[VSntchr]

It's not that complicated right?

:bonk:

Also got back into AMM/VOC today. It seems too good to miss. I may get a chance with FDC/NVN tomorrow too.

I hopped into FDC/NVN today already, aswell as AMM/VOC. Started out as a divvie play on AMM but got the chance to go bigger and turned it into a merger pair play.

Wish I'd been more vigilant on AMM/VOC - it's been behaving well...yet this is my first time!

Now - let us all pray that SCP starts to behave today.

 

[SilverRanger]

:bonk:



I hopped into FDC/NVN today already, aswell as AMM/VOC. Started out as a divvie play on AMM but got the chance to go bigger and turned it into a merger pair play.

Wish I'd been more vigilant on AMM/VOC - it's been behaving well...yet this is my first time!

Now - let us all pray that SCP starts to behave today.

I'm in for FDC/NVN at market close as well, although the chart doesn't look as pretty as AMM/VOC, this pair is definitely the cash cow of the year for me, and there's still 1 more month to go!

 

[VSntchr]

I'm in for FDC/NVN at market close as well, although the chart doesn't look as pretty as AMM/VOC, this pair is definitely the cash cow of the year for me, and there's still 1 more month to go!

Let's just hope that nothing comes from left field and wipes out the previous arb profits!

Have either of you ever had any foul plays arbing mergers? I can imagine it would be quite ugly depending on specifics.

 

[skc]

Have either of you ever had any foul plays arbing mergers? I can imagine it would be quite ugly depending on specifics.

No thankfully but SKE/PRG would be a recent example that didn't work out.

I played with a really small arb a few years back... PAN taking over someone (can't even remember the code). It was so small and thin that it didn't even revert on the last day. I got issued PAN shares and the broker squared off my position.

I found the AMM/VOC pair a bit tricky to get set for a decent enough size, and for that 1.5% takes a lot of my eyeball away from other market actions. May be I should just accumulate and wait for the actual deal completion.

 

[VSntchr]

I found the AMM/VOC pair a bit tricky to get set for a decent enough size, and for that 1.5% takes a lot of my eyeball away from other market actions.

Sometimes there are advantages to being a minnow

 

[Atari rose]

Short Honda, Long Ford......

 

[SilverRanger]

Just read on AFR that MTU is mulling an all-script offer for IIN, IIN is already reacting in the open market auction. It's a bit hard to evaluate the impact of this on AMM/VOC, but TPG does hold some shares in AMM, looks like another fun ride for the week.

 

[VSntchr]

Just read on AFR that MTU is mulling an all-script offer for IIN, IIN is already reacting in the open market auction. It's a bit hard to evaluate the impact of this on AMM/VOC, but TPG does hold some shares in AMM, looks like another fun ride for the week.

Some nice profit potential based on the pre-open if you don't think TPG will engage in a bidding war. Not so sure id be game enough to short IIN until we can be more certain. It certainly is the in-demand asset at the moment!

 

[SilverRanger]

Some nice profit potential based on the pre-open if you don't think TPG will engage in a bidding war. Not so sure id be game enough to short IIN until we can be more certain. It certainly is the in-demand asset at the moment!

Sometimes I can only blame myself not thinking quick enough, shorting TPM should be on a good trader's mind today

 

[VSntchr]

Having trouble calculating the MTU/IIN deal arb.

-The ratio is set at 0.803 MTU shares for every IIN share owned.
-IIN holders will receive a 75c dividend.
-For calculations assume scheme is 100% successful

1) Ignoring dividend, we have ~12% profit (0.899 current ratio) on the table if you assume that this deal goes through.

2) Adjust for the fact that IIN holders will be receiving a 75c dividend. Which would result in IIN going ex-div and the current ratio approximating 0.83 giving 3.4% profit potential.

3) Theoretical price for IIN = 0.803x$10.90 + $0.75 = $9.50, and then using this for the current ratio = 0.872. Which gives profit potential of 8.6%.



I'm not sure which of the above to apply; why am I having trouble with something so simple?

Either way, it appears that IIN has risen more than the deal warrants (as it should) due to speculation of a sweetened offer from TPG.

 

[skyQuake]

Agree with 3), though not sure how u're getting 8.6% profit potential

All I see is IIN trading at around a 2% prem to the bid.

Might also be worth considering what happens if either bidder decides to take a Blocking stake.

 

[McLovin]

Having trouble calculating the MTU/IIN deal arb.

-The ratio is set at 0.803 MTU shares for every IIN share owned.
-IIN holders will receive a 75c dividend.
-For calculations assume scheme is 100% successful

1) Ignoring dividend, we have ~12% profit (0.899 current ratio) on the table if you assume that this deal goes through.

2) Adjust for the fact that IIN holders will be receiving a 75c dividend. Which would result in IIN going ex-div and the current ratio approximating 0.83 giving 3.4% profit potential.

3) Theoretical price for IIN = 0.803x$10.90 + $0.75 = $9.50, and then using this for the current ratio = 0.872. Which gives profit potential of 8.6%.



I'm not sure which of the above to apply; why am I having trouble with something so simple?

Either way, it appears that IIN has risen more than the deal warrants (as it should) due to speculation of a sweetened offer from TPG.

I'm confused by what you're trying to work out.

All I see is a $0.75c cash component, by way of a dividend + a scrip component of 0.803 MTU share for every IIN share. Which gives a value of $9.50 (or more depending on your tax position!). I imagine IIN will have been delisted by the time the cash component is paid.

This feels like MTU trying to get TPG to pay overs, as much as it feels like them wanting to acquire the business.

 

[SilverRanger]

Reading through M2's announcement:

M2 values its Competing Proposal for iiNet at $11.37 per share by considering three elements of value, being:
(i)the current value of the M2 shares being offered ($9.25)1;
(ii) the cash value of the special dividend ($0.75); and
(iii) the value of the expected synergies ($1.37) that would accrue to iiNet shareholders as shareholders in the
enlarged M2 Group

i) is worth less now, ii) is the only part I like, for its franking credits, and iii) is BS. The best part, the deal is "indicating and non-binding", and makes no mention of TPG's stake, who can easily fork another $52 mil to form a blocking stake!

 

[skc]

Sometimes I can only blame myself not thinking quick enough, shorting TPM should be on a good trader's mind today

Traded these on a string today! Shorted TPM, shorted IIN, shorted MTU, longed TPM then finished with an arb of IIN/MTU.

This feels like MTU trying to get TPG to pay overs, as much as it feels like them wanting to acquire the business.

Agree. Not a bad game strategy.

Having trouble calculating the MTU/IIN deal arb.

-The ratio is set at 0.803 MTU shares for every IIN share owned.
-IIN holders will receive a 75c dividend.
-For calculations assume scheme is 100% successful

1) Ignoring dividend, we have ~12% profit (0.899 current ratio) on the table if you assume that this deal goes through.

2) Adjust for the fact that IIN holders will be receiving a 75c dividend. Which would result in IIN going ex-div and the current ratio approximating 0.83 giving 3.4% profit potential.

3) Theoretical price for IIN = 0.803x$10.90 + $0.75 = $9.50, and then using this for the current ratio = 0.872. Which gives profit potential of 8.6%.

I'm not sure which of the above to apply; why am I having trouble with something so simple?

Either way, it appears that IIN has risen more than the deal warrants (as it should) due to speculation of a sweetened offer from TPG.

Just work out what IIN is worth at current MTU price, and divide by current MTU price. So IIN is worth 0.803*10.90 + 0.75 = $9.50. If you include franking credits it can add another 30c. So the current premium is simply $9.8 (IIN close) / $9.5 = 3.2% if you ignore. Or no premium if you include franking.

To place an arb trade, just spread at the 0.803 ratio. The cash component is just that and doesn't change how many shares you buy/sell. The profit potential will come from further bidding. It won't come from the IIN/MTU deal parameters.

 

[VSntchr]

Thanks all. Feel a bit silly at the moment, I knew I was over complicating things and in the process missed all the good trading opps! Might go hide for a few days.

Wait - I found the best place to go https://www.aussiestockforums.com/forums/showthread.php?t=24553

SKC - you mentioned trading TPG short and long, are you trading based on discretionary price/vol type signals..or are you using your knowledge of the stocks, the situation and your perception of any over/under reactions?