Industrials

• Shortly after the Hindenburg Report came out, MSCI said it was seeking feedback from clients. They got it, and last night announced they would conduct a special review. 
• They concluded some holders heretofore in the float might not be float. They announce results tonight. That can only be bad news for Adani Group companies. 
• We don’t know numbers yet, but passive inclusion was one reason why stocks skyrocketed. Few of the companies will be unaffected. Some could be heavily affected.

• The Nikkei was out this morning with its belated take on JIP securing financing. 
• The article was nevertheless rather negative in its tone causing Toshiba to drop as much as 3.6% before recovering most of those losses. 
• We aren’t entirely sure it should have but Toshiba Tec does pique our interest.

• The Nikkei reports that Japan Industrial Partners (JIP), the preferred bidder, has finally secured financing and submitted a final offer to Toshiba Corp (6502 JP)’s Board.
• Nikkei notes that JIP expects to spend about JPY2 trillion on the acquisition suggesting an offer price around JPY4,750 per share, -4% below the undisturbed price of JPY4,957.60 (21 April).
• The hard part now is getting the Board to accept the unremarkable offer and the banks’ conditions. If the Board succumbs, the next challenge is to get shareholders to accept.

• Blue Bird is an iconic brand in Indonesia, where consumers take a BlueBird not a taxi, much like taking a Gojek, and in taxi terms, it embodies trust and reliability. 
• The company had a tough time through COVID but is now firmly on a recovery track, with revenue per taxi in 4Q2022 20% above pre-pandemic levels, with more to come.
• Blue Bird (BIRD IJ) is a beneficiary of the tech winter in that ride-hailing companies are spending less on promotions, easing competition. Valuations are attractive in recovery.

• Shortly after the Hindenburg Report came out, MSCI said it was seeking feedback from clients. They got it, and last night announced they would conduct a special review. 
• They concluded some holders heretofore in the float might not be float. They announce results tonight. That can only be bad news for Adani Group companies. 
• We don’t know numbers yet, but passive inclusion was one reason why stocks skyrocketed. Few of the companies will be unaffected. Some could be heavily affected.

• The Nikkei was out this morning with its belated take on JIP securing financing. 
• The article was nevertheless rather negative in its tone causing Toshiba to drop as much as 3.6% before recovering most of those losses. 
• We aren’t entirely sure it should have but Toshiba Tec does pique our interest.

• The Nikkei reports that Japan Industrial Partners (JIP), the preferred bidder, has finally secured financing and submitted a final offer to Toshiba Corp (6502 JP)’s Board.
• Nikkei notes that JIP expects to spend about JPY2 trillion on the acquisition suggesting an offer price around JPY4,750 per share, -4% below the undisturbed price of JPY4,957.60 (21 April).
• The hard part now is getting the Board to accept the unremarkable offer and the banks’ conditions. If the Board succumbs, the next challenge is to get shareholders to accept.

• Blue Bird is an iconic brand in Indonesia, where consumers take a BlueBird not a taxi, much like taking a Gojek, and in taxi terms, it embodies trust and reliability. 
• The company had a tough time through COVID but is now firmly on a recovery track, with revenue per taxi in 4Q2022 20% above pre-pandemic levels, with more to come.
• Blue Bird (BIRD IJ) is a beneficiary of the tech winter in that ride-hailing companies are spending less on promotions, easing competition. Valuations are attractive in recovery.

• In an unprecedent step, MSCI will reassess the float and likely lower the FIF of the Adani Group companies at the February QCIR. There will be BIG passive selling.
• The affected securities will be further reviewed as part of the scheduled Full Country Float Review during the May QCIR. There could be some index deletions and BIGGER passive selling.
• Expect active selling before the passive selling and the rally in the Adani Group stocks over the last couple of days should come to a grinding halt today.

• As mentioned yesterday here and more clearly by Mio Kato in Toshiba – Good News?, the Nikkei was strangely silent over the fact that loan details were agreed. 
• The Nikkei comes out with a surprise article this morning saying they hear the Commitment Letter has been handed over. It also says the “Final Bid” is “about ¥2trln.”
• Toshiba shares quickly reacted badly quickly. The article deserves parsing and I try to clarify the arguments.

• AGC Inc (5201 JP) today announced Q4 earnings where revenues were great, OP was slightly disappointing, and Net Profits were awful because of significant impairments.
• The company, however, announced a large buyback – its first in 5 years and equivalent to all the buybacks in the previous five years. 
• The buyback should have impact on what is an interesting name with broad institutional ownership and not overwhelming liquidity.

• Ihara Science (5999 JP) announced an MBO by the chairman. 
• It’s at an all-time high, but it is not especially attractive. The register is also really interesting.
• This is a smallcap but i would not be surprised to see a bumpitrage effort. In fact, I’d be surprised if we didn’t.

Adani Ports and Special Economic Zone’s 9M/22-23 results were broadly stable. The main takeaway was management’s commitment to reduce debt by INR 50 bn using FCF in FY 2023-24, supported by lower capex and limiting new acquisitions. This would cover the INR 16 bn in repayments for onshore bonds maturing in H1/23-24, as well as the prepayment of certain bank debt. Management expects the company to generate the same amount of FCF in FY 2024-25, which would be channelled to repay the USD 650 mn ADSEZ 3.375 24 due in July 2024.

• Ihara Science (5999 JP) has recommended an MBO tender offer (Chairman and Toku Corporation) of JPY2,980 per share, a 31.3% premium to the undisturbed price (7 February).
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.25% ownership ratio.
• While the tender price represents an all-time share price, it is light in comparison to peer and historical multiples. This suggests deal risk. The offer runs from 9 Feb-24 Mar.

• In an unprecedent step, MSCI will reassess the float and likely lower the FIF of the Adani Group companies at the February QCIR. There will be BIG passive selling.
• The affected securities will be further reviewed as part of the scheduled Full Country Float Review during the May QCIR. There could be some index deletions and BIGGER passive selling.
• Expect active selling before the passive selling and the rally in the Adani Group stocks over the last couple of days should come to a grinding halt today.

• As mentioned yesterday here and more clearly by Mio Kato in Toshiba – Good News?, the Nikkei was strangely silent over the fact that loan details were agreed. 
• The Nikkei comes out with a surprise article this morning saying they hear the Commitment Letter has been handed over. It also says the “Final Bid” is “about ¥2trln.”
• Toshiba shares quickly reacted badly quickly. The article deserves parsing and I try to clarify the arguments.

• AGC Inc (5201 JP) today announced Q4 earnings where revenues were great, OP was slightly disappointing, and Net Profits were awful because of significant impairments.
• The company, however, announced a large buyback – its first in 5 years and equivalent to all the buybacks in the previous five years. 
• The buyback should have impact on what is an interesting name with broad institutional ownership and not overwhelming liquidity.

• Ihara Science (5999 JP) announced an MBO by the chairman. 
• It’s at an all-time high, but it is not especially attractive. The register is also really interesting.
• This is a smallcap but i would not be surprised to see a bumpitrage effort. In fact, I’d be surprised if we didn’t.

Adani Ports and Special Economic Zone’s 9M/22-23 results were broadly stable. The main takeaway was management’s commitment to reduce debt by INR 50 bn using FCF in FY 2023-24, supported by lower capex and limiting new acquisitions. This would cover the INR 16 bn in repayments for onshore bonds maturing in H1/23-24, as well as the prepayment of certain bank debt. Management expects the company to generate the same amount of FCF in FY 2024-25, which would be channelled to repay the USD 650 mn ADSEZ 3.375 24 due in July 2024.

• Ihara Science (5999 JP) has recommended an MBO tender offer (Chairman and Toku Corporation) of JPY2,980 per share, a 31.3% premium to the undisturbed price (7 February).
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.25% ownership ratio.
• While the tender price represents an all-time share price, it is light in comparison to peer and historical multiples. This suggests deal risk. The offer runs from 9 Feb-24 Mar.

• On 31 January, the expected “deadline” for a bank loan agreement with the JIP Consortium bidding for Toshiba, we got news that commitment confirmation would be extended to 3 February.
• Every other time we got a deadline extension, we got an article. On 3-6 Feb, we got no article, suggesting we were close. Today, a Bloomberg article says terms agreed.
• That gets us over the biggest hump. Now we have to look at possible next steps and timing.

• Carlyle has agreed to do an MBO on Iwasaki Electric (6924 JP) where the existing CEO who is 65yrs old will take a 0.5% stake.
• As a purveyor of specialist industrial lighting, including transition to LED lighting for public space use, the company’s place in the ecosystem is not undesirable. But it isn’t hugely profitable.
• This smallcap takeout at an 86% premium is probably still too light. And the Shareholder Structure is interesting.

• So JIP appears to have finally secured funding for its tortured Toshiba bid. 
• The market is reacting positively and we think this is reasonable but the real question is whether Toshiba management will be amenable to the new terms of JIP’s deal. 
• In our view, there are certain quirks regarding recent news flow which point to a potential answer to that question.

• YFO’s latest press release outlines the key objectives of a revamped Toyo Construction (1890 JP) Board, should its recommended directors get elected at the June AGM.
• YFO’s strategy is to revamp the Board, which should pave the way for its tender offer. YFO’s standstill agreement expires on 24 May and the tender offer starts in late-September.
• The Board could allege that YFO has breached its NDA agreement and re-introduce a poison pill. The Board could look to garner enough support to block YFO’s nominations. 

• HSI Index has paused for breath this month underperforming most other global indices
• The outlook for the region remains strong as reopening strength gains momentum and the Government continue to announce new supportive measures
• We favour a buy the dip strategy and suggest using derivatives to play it

• On 31 January, the expected “deadline” for a bank loan agreement with the JIP Consortium bidding for Toshiba, we got news that commitment confirmation would be extended to 3 February.
• Every other time we got a deadline extension, we got an article. On 3-6 Feb, we got no article, suggesting we were close. Today, a Bloomberg article says terms agreed.
• That gets us over the biggest hump. Now we have to look at possible next steps and timing.

• Carlyle has agreed to do an MBO on Iwasaki Electric (6924 JP) where the existing CEO who is 65yrs old will take a 0.5% stake.
• As a purveyor of specialist industrial lighting, including transition to LED lighting for public space use, the company’s place in the ecosystem is not undesirable. But it isn’t hugely profitable.
• This smallcap takeout at an 86% premium is probably still too light. And the Shareholder Structure is interesting.

• So JIP appears to have finally secured funding for its tortured Toshiba bid. 
• The market is reacting positively and we think this is reasonable but the real question is whether Toshiba management will be amenable to the new terms of JIP’s deal. 
• In our view, there are certain quirks regarding recent news flow which point to a potential answer to that question.

• YFO’s latest press release outlines the key objectives of a revamped Toyo Construction (1890 JP) Board, should its recommended directors get elected at the June AGM.
• YFO’s strategy is to revamp the Board, which should pave the way for its tender offer. YFO’s standstill agreement expires on 24 May and the tender offer starts in late-September.
• The Board could allege that YFO has breached its NDA agreement and re-introduce a poison pill. The Board could look to garner enough support to block YFO’s nominations. 

• HSI Index has paused for breath this month underperforming most other global indices
• The outlook for the region remains strong as reopening strength gains momentum and the Government continue to announce new supportive measures
• We favour a buy the dip strategy and suggest using derivatives to play it

• NPS said it would add 50 KOSPI stocks to KOSPI 200 for direct management. However, the key was when this would be implemented and which ones would be included.
• SBS, one of Korea’s major networks, exclusively reported that NPS finalized the constituent stocks of the NPS-KR250 and started rebalancing trading on the 50 additional KOSPI stocks from January.
• Hence, tracing and identifying who these additional 50 KOSPI stocks are is becoming the hottest topic in Korea’s local market at this point.

• Boustead Projects (BOCJ SP)/BPL has disclosed a voluntary unconditional offer from Boustead Singapore Limited (BOCS SP) at S$0.90 per share, a 7.8% premium to the undisturbed price (3 February).
• The offer price is unattractive in comparison to peer multiples, historical trading ranges and precedent transactions. However, the offer price is not final.
• As Boustead Singapore aims to privatise BPL there is a possibility of a bump. The offer document will be despatched and the offer opens by 27 February.

• Iwasaki Electric (6924 JP) has recommended an MBO tender offer, sponsored by Carlyle Group Inc (CG US), of JPY4,460 per share, an 86.1% premium to the undisturbed price (6 February).
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the offer has been set to meet the 66.67% ownership ratio.
• The tender offer is attractive and represents a ten-year share price high. This suggests a done deal. The tender offer period is from 7 February to 22 March.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• January completed a bullish 3 month reversal pattern in 688006 CH and thus confirmed a likely MT bottom.
• 688006 CH has had an incredible pivotal relationship with its 50 week MA since 2020. A weekly close above the 50 week MA will confirm a high probability MT uptrend.

• NPS said it would add 50 KOSPI stocks to KOSPI 200 for direct management. However, the key was when this would be implemented and which ones would be included.
• SBS, one of Korea’s major networks, exclusively reported that NPS finalized the constituent stocks of the NPS-KR250 and started rebalancing trading on the 50 additional KOSPI stocks from January.
• Hence, tracing and identifying who these additional 50 KOSPI stocks are is becoming the hottest topic in Korea’s local market at this point.

• Boustead Projects (BOCJ SP)/BPL has disclosed a voluntary unconditional offer from Boustead Singapore Limited (BOCS SP) at S$0.90 per share, a 7.8% premium to the undisturbed price (3 February).
• The offer price is unattractive in comparison to peer multiples, historical trading ranges and precedent transactions. However, the offer price is not final.
• As Boustead Singapore aims to privatise BPL there is a possibility of a bump. The offer document will be despatched and the offer opens by 27 February.

• Iwasaki Electric (6924 JP) has recommended an MBO tender offer, sponsored by Carlyle Group Inc (CG US), of JPY4,460 per share, an 86.1% premium to the undisturbed price (6 February).
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the offer has been set to meet the 66.67% ownership ratio.
• The tender offer is attractive and represents a ten-year share price high. This suggests a done deal. The tender offer period is from 7 February to 22 March.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• January completed a bullish 3 month reversal pattern in 688006 CH and thus confirmed a likely MT bottom.
• 688006 CH has had an incredible pivotal relationship with its 50 week MA since 2020. A weekly close above the 50 week MA will confirm a high probability MT uptrend.

• Three quarters of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 9 June.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 11.47% at the June rebalance resulting in a one-way trade of CNY 10.11bn.
• The potential adds have outperformed the potential deletes and the CSI500 Index over the last few weeks. There could be more outperformance till nearer the end of the review period.

• Mitsui & Co Ltd (8031 JP) reported Q3 earnings Friday afternoon during the market session. Like at Q2, they upped their fiscal-year forecast to well above Street consensus.
• Also like Q2, they announced a buyback – this one an extension in time, shares, and money on the one already in place, raising the total Core CashFlow Payout Ratio.
• This creates interesting index flows over the next several months, and other trading cos have live buybacks too.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Pertamina Geothermal (0125738D IJ) launches a US$600 million IDX IPO and Hesai Group (HSAI US) launches a US$171 million Nasdaq IPO.
• Event-Driven developments Halcyon Agri (HACL SP), Toshiba Corp (6502 JP), Nissin Electric (6641 JP), Techno Associe (8249 JP), Pushpay Holdings (PPH NZ), Nitro Software Ltd (NTO AU), O2Micro International (OIIM US). 

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.

• Adani Ports & Special Economic Zone
• China Hongqiao

• Three quarters of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 9 June.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 11.47% at the June rebalance resulting in a one-way trade of CNY 10.11bn.
• The potential adds have outperformed the potential deletes and the CSI500 Index over the last few weeks. There could be more outperformance till nearer the end of the review period.

• Mitsui & Co Ltd (8031 JP) reported Q3 earnings Friday afternoon during the market session. Like at Q2, they upped their fiscal-year forecast to well above Street consensus.
• Also like Q2, they announced a buyback – this one an extension in time, shares, and money on the one already in place, raising the total Core CashFlow Payout Ratio.
• This creates interesting index flows over the next several months, and other trading cos have live buybacks too.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Pertamina Geothermal (0125738D IJ) launches a US$600 million IDX IPO and Hesai Group (HSAI US) launches a US$171 million Nasdaq IPO.
• Event-Driven developments Halcyon Agri (HACL SP), Toshiba Corp (6502 JP), Nissin Electric (6641 JP), Techno Associe (8249 JP), Pushpay Holdings (PPH NZ), Nitro Software Ltd (NTO AU), O2Micro International (OIIM US). 

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.

• Adani Ports & Special Economic Zone
• China Hongqiao