Smartkarma Daily Briefs

On 14 February, Sony Corp (6758 JP) and Bandai Namco Holdings (7832 JP) announced an equity offering of nearly 4.5mm shares of Toei Animation (4816 JP).
Float on Toei Animation (4816 JP) has been low. This would raise it to meet the minimum standard to stay listed on the TSE Standard market section.
To get to TSE Prime, it needs another offering. And there are lots of cross-holders to go.

Rakuten’s New “Bond-Type Share” Issuance – Quite Quirky to Quantulate Rakuten’s Quisquous New Quoz

Today, Rakuten Group (4755 JP) announced it would propose an amendment to its Articles at the AGM (28 March) to issue “Bond-Type Class Shares.” First reaction: You wot, mate?
The company states it wants to “strengthen its financial base through reducing interesting-bearing debt by equity-related financings and conduct proactive control of debt maturity schedule, etc.”
Now it wants to issue listed bond-type shares. Dividends not interest. The last Japanese issuer of something similar was NEC in 2001. Few will remember, so we study the situation.

Outsourcing (2427) MBO Arrives! Bain Launches Cheeky, Opportunistic, Low(Priced) TOB

After an extension due to a European Foreign Subsidies Review filing, and a small ‘accident’ regarding the earnings release, we have a deal.
The earnings release itself seemed more innocuous than articles and rumour suggested show the causes of impairments and so it seemed like there was little cause to walk/declare MAC.
Now it will be done in 20 days. I still think this is cheeky, opportunistic, and low, and it is up to the float to decide what to do.

Outsourcing (2427 JP): Relief as Bain Launches Tender at Unchanged Terms

Outsourcing Inc (2427 JP) announced that the pre-condition was satisfied, and Bain’s tender offer remains unchanged at JPY1,755 per share, a 52.1% premium to the undisturbed (8 December).
Shareholders will breathe a sigh of relief as the weak 4Q and significant impairments have raised concerns that Bain would cut its offer or walk away.
The offer attractiveness has increased partly due to lower consensus. At the last close and for a 3 April payment, the gross/annualised spread is 2.0%/22.8%.

Aeon: Logistics Issues Drive Efficiency

By Michael Causton

Restrictions on driver overtime due in April are forcing logistics rationalisation across supply chains.
Aeon is one of the few retailers that runs its own logistics platforms but, even so, changes to logistics practices will feed through to how stores are merchandised
This could result in competitive pressure on smaller supermarket chains.

Olympus Corp (7733 JP): Q3 Operating Profit Misses Estimates Despite Sales Beat; FY24 Guidance Cut

By Tina Banerjee

Olympus Corp (7733 JP) announced disappointing Q3FY24 result. Although revenue increased 7% YoY to ¥239B, beating estimate of ¥236B, operating profit declined 30% YoY to ¥34B, below estimate of ¥43B.
The company cut FY24 operating profit guidance for second time and reduced revenue guidance after raising it in November. Noto Peninsula earthquake is the main reason for reducing revenue guidance.
Although both revenue and profits are expected to improve in FY25, it will be difficult to achieve an operating margin of 20% and sales growth of 5%.

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Feb 28

Daily Brief China: Tongcheng Travel Holdings , Li Auto , Baidu, Cathay Pacific Airways, Luckin Coffee, Air China Ltd (H), China Vanke , Xunfei Healthcare Technology and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Final Flows for Hang Seng, HSCEI, HS Tech on 1 March Rebal
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Mar 2024)
[Baidu, Inc. (BIDU US, BUY, TP US$146)TP Change]: The Commercialization Path of AI Is Becoming Clear
Cathay Pacific – Reported Air China Interest Prompts Assessment of Structural Disadvantages
[Luckin Coffee (LKNCY US, BUY, TP US$41) TP Change]: Weak Earnings Could Be Temporary…Reiterate BUY
Air China (753 HK): Up Stakes in CX?
Morning Views Asia: China Vanke
Pre-IPO Xunfei Healthcare Technology – Continuous Losses Will Be the Norm

Final Flows for Hang Seng, HSCEI, HS Tech on 1 March Rebal

The Hang Seng Index, HSCEI, and HS Tech rebals were announced on 16 Feb. Janaghan Jeyakumar, CFA had expected GDS out, Tongcheng Travel in on HSTECH, along with the…
…deletion of Zhongsheng Group (881 HK) in HSCEI, with a low conviction replacement of Zijin Mining, which turned out to be an add of China Unicom Hong Kong (762 HK).
No changes to the main HSI Index, which means evolution is further delayed. Today was the day to recap the caps. Mar1 Flow estimates are included below for all three.

HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Mar 2024)

The March rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
Tencent (700 HK), Meituan (3690 HK) and Tongcheng Travel (780 HK) are the biggest buys while Alibaba (9988 HK), Li Auto (2015 HK), HSBC (5 HK) are the biggest sells.
The round-trip trade across all stocks across the four indices is estimated at HK$16.16bn (US$2.06bn).

[Baidu, Inc. (BIDU US, BUY, TP US$146)TP Change]: The Commercialization Path of AI Is Becoming Clear

By Ying Pan

We expect Baidu to report C4Q23 revenue, GAAP op. profit and GAAP net income inline, (2.3%) and (4.5%) vs. consensus.
The slight bottom-line miss was mainly attribute to the increased marketing costs related to user acquisition. Baidu cloud revenue is robust due to AI product stimulating demand.
We cut our target price to US$146 for the spendings related to the construction of future e-commerce business but maintain BUY for its cheap valuation.

Cathay Pacific – Reported Air China Interest Prompts Assessment of Structural Disadvantages

By Neil Glynn

We publish a deep dive on historical margin management at Cathay Pacific following Bloomberg reports that Air China is considering raising its 29.99% stake.
We see Cathay’s consistent underperformance of the global industry as due to structural disadvantages competing against lower cost competitors without the benefit of attractive joint ventures or M&A.
Our deep dive comparing margin generation to ten major global peers highlights weak pricing power without sufficient offset from staff cost/other cost efficiencies as the key problem.

[Luckin Coffee (LKNCY US, BUY, TP US$41) TP Change]: Weak Earnings Could Be Temporary…Reiterate BUY

By Eric Wen

Luckin Coffee reported 4Q23 revenue/non-GAAP NI in-line/(39.8%) vs. our estimate due to (1) extra winter subsidies; (2) rental cost from new stores; (3) more operating expenditures.
We view the non-GAAP NPM decline to 5.1% in 4Q23 as temporary and outlook for sequential improvements in 1H24 from (1)ASP rebound from easing competition, (2)efficiency improvement in rental cost
We think Luckin’s profitability outlook is intact and maintain BUY rating, but lower TP by US$2 to US$41 to factor in the rising cost.

Air China (753 HK): Up Stakes in CX?

By Osbert Tang, CFA

Speculations on Air China Ltd (753 HK) seeking control of Cathay Pacific (293 HK) reappeared recently. We think a change in CX’s ownership is just a matter of time.
CX has been a more important profit contributor to Air China after the pandemic, and depends on pricing, Air China is expected to benefit from such acquisition.
Both are trading on 0.5SD below their 5-year P/B average and we prefer CX in the short term, but Air China looks to be a better long-term choice.

Morning Views Asia: China Vanke

By Leonard Law, CFA

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

China Vanke

Pre-IPO Xunfei Healthcare Technology – Continuous Losses Will Be the Norm

By Xinyao (Criss) Wang

In healthcare AI industry, the commercialization process is complex and burdened with challenges. Related products mainly plays an auxiliary role in medical scenarios, rather than a core support or rigid-demand.
The idea of creating corresponding solutions for C-end and B-end customers by FUNFEI is not inappropriate. However, both B-end and C-end businesses of FUNFEI have encountered varying degrees of problems.
We’re not optimistic about XUNFEI’s profitability. The sluggish stock price performance after Airdoc’s listing indicates that the market/investors have not fully recognized healthcare AI enterprises, leading to low valuation.

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Feb 27

Most Read: Keisei Electric Railway Co, Tsuruha Holdings, Korea Stock Exchange KOSPI 200, Bio-Thera Solutions Ltd, Rakuten Bank , Alibaba (ADR), Alumina Ltd, Toei Animation and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Keisei Electric Rail (9009) – A BUYBACK! But It’s Likely To Be Crossholders Selling in ToSTNeT-3
Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger?
Details of Korea Value-Up Initiatives & Index, Announced This Morning
STAR100 Index Rebalance: Ten Changes a Side; Adds Outperforming as Expected
Rakuten Bank (5838 JP) – Introduces a Yutai Program to Goose the Mar24 Price, Mar25 EPS
Alibaba (9988 HK): Value Proposition Looks Clean
Alcoa (AA US) Makes an Offer for Alumina (AWC AU)
Toei Animation (4816 JP): The Current Playbook
Aeon, Welcia and Tsuruha: Creating an FMCG Behemoth
StubWorld: Keisei Electric Appears Stretched Amid Latest Buyback

Keisei Electric Rail (9009) – A BUYBACK! But It’s Likely To Be Crossholders Selling in ToSTNeT-3

Keisei Electric Railway Co (9009 JP) has long been the target of activist-ish-y holders who seek to have the company monetise its 20+% stake in Oriental Land (4661 JP).
Last autumn (17-Oct-2023), Keisei was the subject of a presentation by activist-ish-y fund Palliser Capital who called the stock 43% undervalued. They want Keisei to sell some OLC shares.
Palliser wanted Keisei to use resulting monies for growth capex+shareholder return, improve IR/governance, shrink board, adopt KPIs, etc. Thursday we got an announcement of a 2.9% stock buyback.

Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger?

Over the weekend there was an article in the Nikkei saying that Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) were considering a merger. Other media outlets followed.
This has been a possible outcome. Aeon Co Ltd (8267 JP) owns 51% of Welcia, 13.6% in Tsuruha, and is negotiating to buy another 13% in Tsuruha from Oasis.
This would create a behemoth. ¥2.2trln in revenues vs ¥1trln for MatsukiyoCocokara (3088 JP). It would be 25% of the market. Questions will be asked about concentration.

Details of Korea Value-Up Initiatives & Index, Announced This Morning

By Sanghyun Park

The rollout of the Korea Value-Up Index has encountered a minor delay. Completion of the index is slated for 3Q, with ETFs scheduled for release in 4Q.
The government will encourage the National Pension Service to utilize it as a benchmark.
Dividend payout ratio, dividend yield, PER, and cash flow will be included as screening factors for this index, in addition to the already known factors of PBR and ROE.

STAR100 Index Rebalance: Ten Changes a Side; Adds Outperforming as Expected

There are 10 changes for the STAR100 Index in March. We correctly forecast all 10 deletes and got 8 of the 10 adds right.
Estimated one-way turnover is 6.8% and that results in a one-way trade of CNY 1.79bn. Nearly all constituent changes have more than 1 day of ADV to trade.
The adds have started to outperform the deletes and the index over the last couple of weeks and there could be more outperformance in the next two weeks.

Rakuten Bank (5838 JP) – Introduces a Yutai Program to Goose the Mar24 Price, Mar25 EPS

The Rakuten Bank offering in early December was a great time to buy the dip of you sold end-September. It should have been a good time to buy outright.
Unfortunately, the stock priced at ¥2,470, then closed that day at ¥2,500. That was the high for the next ten weeks. Two weeks later it was 20% lower. Ouch.
But it climbed out of the abyss, gained 35% in 8wks, then Thursday the Bank announced a new Shareholder Benefit program. Today the stock was +7%. Worth looking at details.

Alibaba (9988 HK): Value Proposition Looks Clean

By Steve Zhou, CFA

It is well-known that Alibaba (ADR) (BABA US) is cheap (9x FY24 PE, fiscal year ending March; 8x FY23 free cash flow; net cash 25% of market cap).
Taking into account all of the major moving parts, I believe Alibaba can now be categorized as a good value stock.
Shareholder returns through buyback and dividend, minus stock-based compensation in 2023 calendar year equal to around 5% yield.

Alcoa (AA US) Makes an Offer for Alumina (AWC AU)

Alcoa (AA US) has made a non-binding, indicative and conditional proposal to acquire all shares in Alumina (AWC AU). Shareholders will receive 0.02854 shares of Alcoa for each Alumina share.
Alcoa (AA US) has entered into an agreement with Allan Gray Australia that gives them the right to acquire 19.9% of Alumina Ltd (AWC AU) at the same swap ratio.
Alumina Ltd (AWC AU) is a potential delete from the ASX100 Index at the March rebalance and that could provide an entry into the stock.

Toei Animation (4816 JP): The Current Playbook

Since the US$550 million secondary placement announcement, Toei Animation (4816 JP)’s shares are down 7.0% from the undisturbed price of JPY18,560 per share (14 February).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Toei Animation’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 27 February. Investors participating in previous large Japanese placements tend to secure positive returns.

Aeon, Welcia and Tsuruha: Creating an FMCG Behemoth

By Michael Causton

The possible merger between Welcia and Tsuruha under Aeon has been talked about for years despite concerns from both drugstores, but may now happen.
But calling these retailers drugstores is increasingly a misnomer: FMCG-drugstores is better because they and many others in the sector, increasingly compete with FMCG retailers like supermarkets and even CVS.
This evolution is rapid so the merits of a deal make more sense when we view it from a sector five years in the future than how it is today.

StubWorld: Keisei Electric Appears Stretched Amid Latest Buyback

Keisei Electric (9009 JP) has been an outperformer since activist fund Palliser Capital called on the company sell some Oriental Land (4661 JP) shares. It has now announced another buyback.
Preceding my comments on Keisei Electric 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%.

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Feb 27

Daily Brief ESG: Companies with High Stock Valuations and High Profitability Will Increasingly Attract Investment and more

By Smartkarma Daily Briefs | Daily Briefs, ESG

In today’s briefing:

Companies with High Stock Valuations and High Profitability Will Increasingly Attract Investment

Companies with High Stock Valuations and High Profitability Will Increasingly Attract Investment

By Aki Matsumoto

P/B’s slightly higher valuations in October 2023 while ROE, EPS, and BPS did not change much were due to external factors, not internal factors.
Clearly, improvements in ROE and ROA are effective in improving stock valuations, but valuations have further increased for companies with higher valuations and profitability for the past year.
Some of these companies have begun to use cash more effectively for investment and shareholder returns. The gap in market capitalization between these companies and the rest will increasingly widen.

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Feb 27

Daily Brief Thematic (Sector/Industry): AI-Driven Semiconductor Rally Leaves Small-Cap Chipmakers Behind and more

By Smartkarma Daily Briefs | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

AI-Driven Semiconductor Rally Leaves Small-Cap Chipmakers Behind
Ohayo Japan | Sluggish Start to Week; Spotlight on Fujikura
China Private Education: Trigger for the Sharp Rebound, and What Follows……
Comparing Performance of Online Travel Agents, Trip.com Is Indeed Attractive
UK Real Estate Sector Hots Up
Global Commodities: Learnings from Earnings: One US gas producer steps up; European industrial de…
Maverick Charts & Markets – February 2024 Edition #15
The Highlights – Cannabis News for the Week Ending February 23, 2024
Direct Sellers – Currency Outlook Remains Mixed

AI-Driven Semiconductor Rally Leaves Small-Cap Chipmakers Behind

By Raghav Chandra Mathur

Chipmakers and chip-making tool providers are set to continue benefitting from the surge in demand that has rallied the equity prices for the companies that are at the forefront of AI-related semiconductor research, development, and production.
One of the key drivers in the resurgence of new chip demand is the acceleration of upgrade demand for PCs and smartphones to meet the novel generative AI needs, while companies build up storage and data center capabilities to transition to utilizing generative AI capabilities in their operations.
However, so far, the benefit of the market rally has been disproportionately felt across the industry.

Ohayo Japan | Sluggish Start to Week; Spotlight on Fujikura

By Mark Chadwick

US equities fell slightly on Monday as US Treasury yields rose; oil prices higher on shipping disruptions
Nikkei 225 hits record highs, up 0.35% on Monday. NKY Futures point to a positive open in Japan; key inflation data in Japan today
Fujikura stock surges 40% post-earnings; Quarterly results prompted upward full-year outlook revision. Several LT structural drivers; Stock cheap versus global peers

China Private Education: Trigger for the Sharp Rebound, and What Follows……

By Osbert Tang, CFA

The announcement of “Draft for Comments on the Regulations on the Management of off-campus Training” has led to a 43.6% rebound of the education sector from the 2024 trough.
The “Draft” has cleared regulatory worries on after-school tutoring of high school students and non-academic subjects. For higher education space, we like China East Education (667 HK).
New Oriental Education & Techn (9901 HK), TAL Education (TAL US), and Gaotu Techedu (GOTU US) are the most direct beneficiaries of the “Draft”.

Comparing Performance of Online Travel Agents, Trip.com Is Indeed Attractive

By Mohshin Aziz

We compare the performance of the top-4 global online travel agents (OTA) from the recently concluded 2023 result
All the OTAs recorded strong 2023 and 4Q23, but the forward outlook indicates growth rate is slowing in North America and Europe while Asia is picking up speed
Trip.com is indeed comparatively most attractive among the big-4 global OTAs; our fellow Smartkarma Insight provider’s conviction is justified

UK Real Estate Sector Hots Up

By Steven Holden

Record number of UK funds now exposed to Real Estate sector.
CT, BlackRock and Quilter Among Funds Adding to Exposure Since Mid 2023.
SEGRO and Land Securities the key holdings and the drivers behind the recent rotation

Global Commodities: Learnings from Earnings: One US gas producer steps up; European industrial de…

By At Any Rate

US natural gas market seeing production reduction by Chesapeake, but overall storage trajectory only slightly affected
European natural gas market showing signs of rebound in industrial demand, with companies reporting higher demand in key countries like France and Germany
Weather forecasts and production reductions in the Lower 48 indicating potential for lower prices for longer in the natural gas market

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

Maverick Charts & Markets – February 2024 Edition #15

By Maverick Equity Research

Despite working in various headquarters in European banks, my work likely did not reach directly more than 500 people at any time (confidential/secretive/sensitive etc), hence a 10x bigger reach now is quite crazy and interesting for sure!
Let’s begin with 2 charts on US monetary policy and inflation that I was humbled to have them liked and retweeted on Twitter by the great Danielle DiMartino Booth (CEO & Chief Strategist, QI Research LLC, Fmr Federal Reserve insider, Economist): M2 with a negative growth of -2.04% working to make inflation low / back to target
note how the -4.63% growth last year was a rate that meant it was the fastest pace of money supply compression since Jan 1933 … let that sink in!

The Highlights – Cannabis News for the Week Ending February 23, 2024

By Water Tower Research

The US cannabis MSOS ETF broke a two-week slide and gained 6.77% over the holiday-shortened four- day trading week.
Once again, the global YOLO ETF lagged at just 0.27% over the same stretch. MSOS is +37.23% YTD, while YOLO is +22.18%.
The discrepancy shows the increased interest in US cannabis due to the potential for rescheduling and the continuing difficult environment for most Canadian operators.

Direct Sellers – Currency Outlook Remains Mixed

By Water Tower Research

Direct selling as a business model has a large global presence.
According to the World Federation of Direct Selling Associations (WFDSA), approximately 77% of global direct sales were conducted outside the US in 2022.
Therefore, foreign currency exchange rates can have a significant impact on reported earnings and cash flows for the dollar-based direct selling platforms, such as NUS, HLF, USNA, and LFVN.

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Feb 27

Daily Brief ECM: Toei Animation (4816 JP): The Current Playbook and more

By Smartkarma Daily Briefs | Daily Briefs, ECM

In today’s briefing:

Toei Animation (4816 JP): The Current Playbook
Trading Strategy of APR on the First Day of IPO
Pre-IPO 160 Health – The Lack of Moat Has Led to Development Falling Far Short of Expectations
Astera Labs IPO Preview and Valuation Analysis: Will Pricey IPO Frighten The Investors Off?
MIXUE/ChaPanda/Good Me Pre-IPO – Peer Comparison
QuantumPharm (Xtalpi) Pre-IPO – The Negatives – Requires Deep Pockets to Fund Its Cash Burn

Toei Animation (4816 JP): The Current Playbook

Since the US$550 million secondary placement announcement, Toei Animation (4816 JP)’s shares are down 7.0% from the undisturbed price of JPY18,560 per share (14 February).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Toei Animation’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 27 February. Investors participating in previous large Japanese placements tend to secure positive returns.

Trading Strategy of APR on the First Day of IPO

By Douglas Kim

In this insight, we discuss a trading strategy for APR (278470 KS) which starts trading on 27 February. APR is the most anticipated IPO in Korea so far in 2024.
Our base case (6 months – 1 year) target price of APR is 370,809 won, which is 48% higher than the IPO price.
We recommend investors to take some profits off the table (30%-50%) if the share price shoots higher by 100% to 200%+ from the IPO price on the first day.

Pre-IPO 160 Health – The Lack of Moat Has Led to Development Falling Far Short of Expectations

By Xinyao (Criss) Wang

160 Health collaborates with medical institutions and then get access to high-caliber medical professionals, which helps to attract patients/other business parties. So, its business model is B2B2C, similar to ClouDr.
However, ClouDr has much better performance than 160 Health, because ClouDr has established moat/barriers to more effectively monetize medical resources, while 160 Health is clearly lagging behind in this regard.
160 Health’s revenue mainly comes from sales of pharmaceutical and healthcare products, whose gross margin is very low. As the competition intensifies, the C-end customer acquisition cost would also increase.

Astera Labs IPO Preview and Valuation Analysis: Will Pricey IPO Frighten The Investors Off?

By Andrei Zakharov

Astera Labs, a cloud- and AI connectivity-focused semiconductor company, filed to go public. Top-tier underwriters Morgan Stanley and J.P. Morgan are leading the offering.
The fabless semiconductor unicorn plans to raise up to $500M. Selling stockholders intend to sell shares and the number of shares is yet to be announced.
I like the long-term, AI/cloud story. However, the IPO may look too pricey at more than $3B valuation despite the company’s revenue acceleration and improving profitability.

MIXUE/ChaPanda/Good Me Pre-IPO – Peer Comparison

By Sumeet Singh

Mixue Group is looking to raise about US$1bn in its Hong Kong IPO, while Sichuan Baicha (ChaPanda) and Guming Holdings (Good me) are said to be looking to raise US$300m each.
All three are primarily focussed on providing freshly-made drinks, including freshly-made fruit drinks, and tea, with some selling ice cream, coffee, baked goods and ready to drink beverages as well.
In this note, we will undertake a peer comparison, including the Hong Kong listed peer, Nayuki Holdings (2150 HK).

QuantumPharm (Xtalpi) Pre-IPO – The Negatives – Requires Deep Pockets to Fund Its Cash Burn

By Clarence Chu

QuantumPharm (QUP HK) (Xtalpi) is looking to raise US$200m in its upcoming Hong Kong IPO.
QuantumPharm is a R&D platform, utilizing quantum physics-based first-principles calculation, advanced AI, high-performance cloud computing, and scalable and standardized robotic automation to provide drug and material science R&D solutions.
In this note, we will talk about the not so positive aspects of the deal.

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Feb 27

Daily Brief Event-Driven: Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger?
Rakuten Bank (5838 JP) – Introduces a Yutai Program to Goose the Mar24 Price, Mar25 EPS
Alcoa (AA US) Makes an Offer for Alumina (AWC AU)
Aeon, Welcia and Tsuruha: Creating an FMCG Behemoth
StubWorld: Keisei Electric Appears Stretched Amid Latest Buyback
CSR (CSR AU): Saint-Gobain’s Binding Proposal at A$9.00
Alumina (AWC AU): Alcoa’s All-Scrip Non-Binding Proposal Seems Opportunistic
KOSPI Size Indices – Potential Migrations as Focus Is on Price to Book
ABB Targets Superloop After Taking Out Symbio
CSR (CSR AU): Saint Gobain Firms $9/Share Bid

Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger?

Over the weekend there was an article in the Nikkei saying that Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) were considering a merger. Other media outlets followed.
This has been a possible outcome. Aeon Co Ltd (8267 JP) owns 51% of Welcia, 13.6% in Tsuruha, and is negotiating to buy another 13% in Tsuruha from Oasis.
This would create a behemoth. ¥2.2trln in revenues vs ¥1trln for MatsukiyoCocokara (3088 JP). It would be 25% of the market. Questions will be asked about concentration.

Rakuten Bank (5838 JP) – Introduces a Yutai Program to Goose the Mar24 Price, Mar25 EPS

The Rakuten Bank offering in early December was a great time to buy the dip of you sold end-September. It should have been a good time to buy outright.
Unfortunately, the stock priced at ¥2,470, then closed that day at ¥2,500. That was the high for the next ten weeks. Two weeks later it was 20% lower. Ouch.
But it climbed out of the abyss, gained 35% in 8wks, then Thursday the Bank announced a new Shareholder Benefit program. Today the stock was +7%. Worth looking at details.

Alcoa (AA US) Makes an Offer for Alumina (AWC AU)

Alcoa (AA US) has made a non-binding, indicative and conditional proposal to acquire all shares in Alumina (AWC AU). Shareholders will receive 0.02854 shares of Alcoa for each Alumina share.
Alcoa (AA US) has entered into an agreement with Allan Gray Australia that gives them the right to acquire 19.9% of Alumina Ltd (AWC AU) at the same swap ratio.
Alumina Ltd (AWC AU) is a potential delete from the ASX100 Index at the March rebalance and that could provide an entry into the stock.

Aeon, Welcia and Tsuruha: Creating an FMCG Behemoth

By Michael Causton

The possible merger between Welcia and Tsuruha under Aeon has been talked about for years despite concerns from both drugstores, but may now happen.
But calling these retailers drugstores is increasingly a misnomer: FMCG-drugstores is better because they and many others in the sector, increasingly compete with FMCG retailers like supermarkets and even CVS.
This evolution is rapid so the merits of a deal make more sense when we view it from a sector five years in the future than how it is today.

StubWorld: Keisei Electric Appears Stretched Amid Latest Buyback

Keisei Electric (9009 JP) has been an outperformer since activist fund Palliser Capital called on the company sell some Oriental Land (4661 JP) shares. It has now announced another buyback.
Preceding my comments on Keisei Electric 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%.

CSR (CSR AU): Saint-Gobain’s Binding Proposal at A$9.00

CSR Ltd (CSR AU) has entered a scheme implementation deed with Cie De Saint-Gobain (SGO FP) at A$9.00 per share, a 32.9% premium to the undisturbed price (20 February).
The offer has a ticking fee of A$0.02 per month (accrued daily) if the scheme’s effective date is delayed beyond 26 June. The offer requires FIRB approval.
The offer is attractive and represents a 15-year high. At the last close and for a mid-June payment, the gross/annualised spread is 7.4%/28.8%.

Alumina (AWC AU): Alcoa’s All-Scrip Non-Binding Proposal Seems Opportunistic

Alumina Ltd (AWC AU)‘s non-binding proposal from Alcoa (AA US) is 0.02854 Alcoa shares per Alumina share, implying a value of A$1.15, a 13.1% premium to the undisturbed price.
Alcoa has been granted a 20-business day exclusivity period. The Board intends to recommend a binding proposal. Allan Gray, the largest shareholder, is supportive.
While strategically sensible, the offer is not a knockout bid. The headcount test is a risk as retail forums suggest a majority view forming against the offer.

KOSPI Size Indices – Potential Migrations as Focus Is on Price to Book

The review period for the March rebalance of the KOSPI Size Indices started 1 December and will end 29 February. The changes will be implemented at the close 14 March.
We see 3 migrations from MidCap to LargeCap, 4 new adds to LargeCap, 7 migrations from LargeCap to MidCap, and 11 migrations from SmallCap to MidCap.
On average, stocks migrating from SmallCap to MidCap have the lowest price to book value and have historically outperformed stocks migrating between other categories.

ABB Targets Superloop After Taking Out Symbio

The hunter becomes the hunted. After Superloop (SLC AU) failed to clinch Symbio Holdings (SYM AU) last year, Aussie Broadband (ABB AU) has now made an Offer for Superloop.
ABB’s indicative Offer provides Superloop shareholders with 0.21 new ABB shares for each Superloop share held, or an indicative Offer price of A$0.95/share, a 33.2% premium to the three-month VWAP.
ABB has picked up 19.9% in Superloop, also at A$0.95/share. Superloop has yet to respond.

CSR (CSR AU): Saint Gobain Firms $9/Share Bid