Most Read

Today, Japan Post Holdings (6178 JP) announced results (and Mar25 guidance) as did its subsidiaries Japan Post Insurance (7181 JP) and Japan Post Bank (7182 JP).
There are a number of interesting things in all the announcements/presentations but the most interesting one for JPH holders is a big buyback. Another one.
The company has announced a ¥350bn buyback. It is larger than last year’s (¥300bn) buyback and has another important difference.

Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows

Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June

Post market close tomorrow, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 7 June.
There were no constituent changes to the index in March. We highlight ten profitable and eligible stocks that could be added to the index in June.
Changes to the Hang Seng Industry Classification System (HSICS) could lead to inclusions for the Information Technology industry while there could also be inclusions for the underweighted Healthcare industry.

Sep24 Nikkei 225 Rebal – Still 1 ADD (Ryohin Keikaku), 1 DELETE, and 1 Very Large Very Dark Horse

The Sep 2024 Nikkei 225 Review data set is mostly done, and one can interpolate results relatively accurately. It still leaves us with one ADD, one DELETE, and capping fun.
Recently, Yanai-san sold more Fast Retailing (9983 JP). There is more Real World Float- more active holders own more stock (which may mean less interest to buy later).
There is a dark horse candidate which is on investor radar for other reasons. It would not be out of the question, but the precedent is old, and different.

L’Occitane (973 HK): Dilemma as the Share Alternative Pre-Condition Met

L’Occitane (973 HK) announced that the share alternative pre-condition was satisfied. However, The share alternative offer is at the offeror’s discretion and with the consent of the financing parties.
The share alternative offer poses a dilemma due to the requirement to satisfy the minimum acceptance condition while not breaching the upper limit of the share alternative offer.
The share alternative offer is a play on higher multiples by relisting the business. At HK$50.00, L’Occitane would trade in line with its median global beauty peers’ multiples.

Hyundai Heavy Industries Block – Not Well Flagged and Recent Korean Deals Haven’t Done Well

HD Korea Shipbuilding & Offshore Engineering (009540 KS) is looking to raise approximately US$258m, via selling 2.6m shares (2.9% of TSO) of HD Hyundai Heavy Industries (329180 KS) stock.
The deal is a large one to digest at 14.6 days of three month ADV.
In this note, we will talk about the placement and run the deal through our ECM framework.

L’Occitane (973 HK): On Activism And The Scrip Alternative

In the 29th April HK$34/share VGO announcement, a share scrip alternative may be afforded if 10% of L’Occitane (973 HK)‘s disinterested shareholders expressed interest by the 15th May
That pre-condition has been satisfied. However, we are none the wiser whether you receive shares of the levered-up Bidco, at some undetermined scrip ratio; or keep shares of L’Occitane as-is.
Some shareholders, like Butler Hall, considered terms low-balled. They now have the option to rollover. But there are still other large activists on the register, whose intentions are not known.

Business On The Fly: Malaysia Airports (MAHB MK)’s RM11.00/Share Offer

Khazanah Nasional, the EPF, the Abu Dhabi Investment Authority, and Global Infrastructure Partners, are offering to buy all shares not already owned in Malaysia Airports Holdings (MAHB MK) at RM11.00/share.
The pre-conditional voluntary Offer price is a 5.77% premium to last close; but a life-time high. The Offeror consortium collectively holds 41.22% of shares out.
The pre-cons include regulatory approvals (in Malaysia, Turkey, Saudi Arabia, and Egypt). The Offer is subject to a 90% acceptance condition; which may be reduced.

Kansai Food Market (9919) Minorities Get Squeezed into H2O Retailing (8242)

Two and a half years ago, H2O Retailing (8242 JP) the 10.9% owner, arranged to merge its own units into Kansai Super Market (9919 JP) to get control. OK Corp complained.
OK Corp offered to double the price in a Tender Offer but wouldn’t go hostile. KSM/KFM said no go. Shares popped to ¥2,000+ then when the deal failed, they fell.
H₂O ended up with 58% (64.9% of votes now). The ultimate goal was to swallow it paying zero premium. On 15 May, it announced the merger to do just that.

Alibaba (9988 HK): Core Segments Moving Into The Right Direction

By Steve Zhou, CFA

On first look, Alibaba Group Holding (9988 HK) missed on margins in 4QFY24 as adjusted EBITA declined by 5% yoy.
We can give the company the benefit of the doubt given that the important segments of the company are heading into the right direction.
Alibaba returned USD13.4bn and USD16.5bn to shareholders in FY23 and FY24, compared to the current market cap of USD197bn

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May 16

Most Read: Square Enix Holdings, Japan Post Holdings, Modec Inc, BYD Electronics, Alibaba Group Holding , Malaysia Airports Holdings, S Line Co Ltd, Lock&Lock and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan – Another Big Round of Passive Selling
YUUUGE Modec (6269) Offering To Stay Listed in TSE Prime – Effectively a Re-IPO
Japan Post Holdings (6178) – Bigger Better Bullish Buyback With Caveats
Modec Placement – Deal Seems a Little Opportunistic but Not Particularly Expensive
Alibaba: Our Take on 4QFY24
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June
Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
Malaysia Airports (MAHB MK): Pre-Conditional Voluntary Offer at RM11.00
S Line (9078 JP) TOB/MBO at 0.57x Book – Wrong Price by Far but Only AGGRESSIVE Activism Blocks It
Lock & Lock: Second Tender Offer by Affinity Equity Partners

Japan – Another Big Round of Passive Selling

There are 15 stocks in Japan that will be sold by passive trackers at the close on 31 May.
Short interest has been increasing in these stocks over the last few months and there will be covering on implementation date.
Cumulative excess volume on all stocks has risen in the last couple of months though the pace of the increase has varied.

YUUUGE Modec (6269) Offering To Stay Listed in TSE Prime – Effectively a Re-IPO

In March, Modec Inc (6269 JP) announced the TSE had said Modec at 29.3% (end-Dec-23) was below the required 35% tradable shares level required for continued listing on TSE Prime.
It announced a “Basic Plan” to comply with the criteria which involved convincing one of the three major corporate holders to sell some. They needed to sell about 6%.
Mitsui E&S has announced it will sell 32%, and 37% including greenshoe. This is overdoing it in a huge way. Mitsui E&S is getting out. This is a re-IPO.

Japan Post Holdings (6178) – Bigger Better Bullish Buyback With Caveats

Today, Japan Post Holdings (6178 JP) announced results (and Mar25 guidance) as did its subsidiaries Japan Post Insurance (7181 JP) and Japan Post Bank (7182 JP).
There are a number of interesting things in all the announcements/presentations but the most interesting one for JPH holders is a big buyback. Another one.
The company has announced a ¥350bn buyback. It is larger than last year’s (¥300bn) buyback and has another important difference.

Modec Placement – Deal Seems a Little Opportunistic but Not Particularly Expensive

Mitsui E&S Holdings (7003 JP) is looking to raise approximately US$451m through a secondary follow-on offering, via selling approximately 21.9m shares (32% of TSO) of Modec Inc (6269 JP)’s stock.
The deal is a large one to digest at 81 days of three month ADV.
In this note, we will talk about the placement and run the deal through our ECM framework.

Alibaba: Our Take on 4QFY24

By Oshadhi Kumarasiri

Alibaba Group Holding (BABA US)‘s FQ4 announcement portrays a resilient comeback to growth, suggesting the past four years’ challenges barely impacted its dominance in Chinese e-commerce.
However, a closer look beyond the surface of Alibaba Group Holding (9988 HK)‘s FQ4 results announcement reveals that little has actually changed in recent months.
Taobao and Tmall face challenges in a tough, stagnant market; AIDC’s growth largely covers for other Alibaba units’ failings, while AliExpress’s expansion cuts into margins.

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June

Post market close tomorrow, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 7 June.
There were no constituent changes to the index in March. We highlight ten profitable and eligible stocks that could be added to the index in June.
Changes to the Hang Seng Industry Classification System (HSICS) could lead to inclusions for the Information Technology industry while there could also be inclusions for the underweighted Healthcare industry.

Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows

Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.

Malaysia Airports (MAHB MK): Pre-Conditional Voluntary Offer at RM11.00

Malaysia Airports Holdings (MAHB MK)’s pre-conditional voluntary conditional offer from a four-member consortium is RM11.00, a 5.8% premium to the last close.
Despite the offer representing an all-time high, the 90% minimum acceptance condition could be challenging due to the low takeover premium and discount to historical and peer multiples.
The consortium can overcome issues satisfying the minimum acceptance condition by bumping the offer or lowering the acceptance condition.

S Line (9078 JP) TOB/MBO at 0.57x Book – Wrong Price by Far but Only AGGRESSIVE Activism Blocks It

Today, S Line Co Ltd (9078 JP) announced its CEO would conduct a Tender Offer MBO to buy out the ¥50bn-target revenue logistics company, at 0.6x book.
The company announced results with revenues up. But withdrew its existing MTMP which said revenues would be up 10% from here to March 2025 and ROE would be higher.
This is the wrong price. It should engender some upset, but active investors own almost nothing it seems.

Lock & Lock: Second Tender Offer by Affinity Equity Partners

On 15 May, it was reported in the local media that Affinity Equity Partners (AEP) is expected to launch a second tender offer for Lock & Lock (115390 KS).
The tender offer price in this second tender offer is 8,750 won (same as the first tender offer). The second tender offer will last from 16 May to 5 June.
In the first tender offer, only about half of the target was reached. There was a strong backlash from investors due to low tender offer price.

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May 15

Most Read: Toppan Printing, Tencent, Shinva Medical Instrument A, Modec Inc, SK IE Technology , Ushio Inc, Square Enix Holdings, Great Eastern Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Toppan Printing (7911) Accelerates Buyback Pace and Amount; But Crossholder Sales Lurk
Tencent Q1 FY24 Results Due, a Look into What Is Priced
CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains
YUUUGE Modec (6269) Offering To Stay Listed in TSE Prime – Effectively a Re-IPO
Key Timing Window for a Surge in Block Deals Before Pre-Disclosure Takes Effect in July
Another HUGE Ushio (6925) Buyback After A HUGE Buyback Last Year
MODEC (6296 JP): A US$535 Million Secondary Offering
Japan – Another Big Round of Passive Selling
Modec Placement – Deal Seems a Little Opportunistic but Not Particularly Expensive
Great Eastern (GE SP): Getting Technical

Toppan Printing (7911) Accelerates Buyback Pace and Amount; But Crossholder Sales Lurk

Toppan Printing (7911 JP) established a new Medium-Term Management Plan with targets in May 2023. 8% ROE, PBR >1.0x. More DX business. More management modernisation. More ESG. Mooooarrrrr!
They also promised capital measures: ¥100bn of buybacks over three years. Total shareholder return of 50%+ over three years. More progress in selling down cross-holdings.
Today the company reported better-than expected full-year revenues, OP, and Net Profit, added more to the buybacks, and shortened the buyback period to two years. Details matter.

Tencent Q1 FY24 Results Due, a Look into What Is Priced

By Charlotte van Tiddens, CFA

Tencent is due to release Q1 FY24 results today. The earnings call is scheduled for 14:00 SAST
In this note, we unpack what is priced and how Tencent has performed relative to constituents in the HSTECH index since our last update (29 April).
We also provide an update on how the discounts of Naspers and Prosus have traded.

CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains

The review period ended on 30 April, there are just over 2 weeks to announcement of the changes, and implementation will be done at the close on 14 June.
We forecast 5 potential changes for the index in June where there could be buying of 1.6-2.6x ADV on the adds and selling of 0.7-2.6x ADV on the deletes.
At the December 2023 rebalance, the adds outperformed the deletes in the weeks prior to announcement of the changes and then spiked post-announcement. Repeat this time?

YUUUGE Modec (6269) Offering To Stay Listed in TSE Prime – Effectively a Re-IPO

In March, Modec Inc (6269 JP) announced the TSE had said Modec at 29.3% (end-Dec-23) was below the required 35% tradable shares level required for continued listing on TSE Prime.
It announced a “Basic Plan” to comply with the criteria which involved convincing one of the three major corporate holders to sell some. They needed to sell about 6%.
Mitsui E&S has announced it will sell 32%, and 37% including greenshoe. This is overdoing it in a huge way. Mitsui E&S is getting out. This is a re-IPO.

Key Timing Window for a Surge in Block Deals Before Pre-Disclosure Takes Effect in July

Anticipation grows for increased block deals before July 24th’s pre-announcement rule takes effect, emerging as a key investment focus in the local market.
The local market expects heightened activity in the three weeks post-May 15th, following first-quarter earnings announcements, a strategic move to mitigate insider trading controversies.
Local traders eagerly await which companies will capitalize on the post-first-quarter earnings window, with a highly anticipated block deal involving SK Innovation selling a portion of its stake in SKIET.

Another HUGE Ushio (6925) Buyback After A HUGE Buyback Last Year

Last year with earnings, Ushio Inc (6925 JP) announced a HUUUGE buyback discussed in HUUUGE Ushio (6925) Buyback. The headline was 17% of shares out. They ended up buying 13.2%.
Last year the stock popped on the news. Then shares went sideways for months. Then they went up on stable (bad) earnings guidance in H2. Today they beat Q3-updated guidance.
But today they announced a “new growth strategy” to 2030, and guided to a SHARP (-60%) drop in OP and NP to March 2025, and announced a HUUUGE Buyback. Again.

MODEC (6296 JP): A US$535 Million Secondary Offering

Modec Inc (6269 JP) has announced a secondary offering of up to 25.2 million shares (including overallotment). The largest shareholder, Mitsui E&S Holdings (7003 JP), is the seller.
MODEC’s goal with the secondary offering is to reconfigure its shareholder mix to have a diverse base of shareholders who support its long-term strategies and a better tradable share ratio.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will likely fall between 22 and 28 May (likely 22 May).

Japan – Another Big Round of Passive Selling

There are 15 stocks in Japan that will be sold by passive trackers at the close on 31 May.
Short interest has been increasing in these stocks over the last few months and there will be covering on implementation date.
Cumulative excess volume on all stocks has risen in the last couple of months though the pace of the increase has varied.

Modec Placement – Deal Seems a Little Opportunistic but Not Particularly Expensive

Mitsui E&S Holdings (7003 JP) is looking to raise approximately US$451m through a secondary follow-on offering, via selling approximately 21.9m shares (32% of TSO) of Modec Inc (6269 JP)’s stock.
The deal is a large one to digest at 81 days of three month ADV.
In this note, we will talk about the placement and run the deal through our ECM framework.

Great Eastern (GE SP): Getting Technical

Great Eastern Holdings (GE SP) has consistently traded through OCBC (OCBC SP)‘s Offer terms from the onset.
OCBC did not declare its S$25.60 cash Offer final. And someone appears to be accumulating a stake to block an Exit/Delisting Offer, presumably towards negotiating a bump in terms.
But what happens if GE’s free float falls <10% at the close of the Offer and GE is suspended? And OCBC has no intention of restoring the float?

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May 14

Most Read: Great Eastern Holdings, JD.com , ESR Group , I’Rom Group, Aozora Bank Ltd, Toppan Printing, Taiwan Semiconductor (TSMC), Softbank Group, Shinva Medical Instrument A and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer
HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
ESR Group (1821 HK): Offer Musings
ESR Group (1821 HK): Starwood Capital and SSW Partners Gauging a Privatisation Bid
Blackstone to Take I’rom (2372 JP) Private in MBO at ¥2800/Share (49% Premium)
Aozora (8304) – Daiwa Securities Group (8601) Tie-Up – Daiwa To Buy 15+%
Toppan Printing (7911) Accelerates Buyback Pace and Amount; But Crossholder Sales Lurk
TSMC Surges As April Revenue Soars 60% YoY
Softbank (9984 JP): Has Group NAV Peaked?
CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains

Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer

OCBC (OCBC SP) has made a voluntary unconditional general Offer for the 11.56% in Great Eastern Holdings (GE SP) not held.
The S$25.60 cash Offer for the life/non-life insurer is a 36.9% premium to last close; and a 30% discount to its S$36.59/share embedded value (as at 31st Dec 2023).
The Offer is unconditional in all respects. This will trade tight. A delisting Offer is next on the cards.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June

We do not forecast any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June but there could be capping changes for 7 stocks.
Capping changes will result in a one-way turnover of 7.6% leading to a round-trip trade of US$2.4bn. 17 stocks will have over 0.5x ADV to trade from passive trackers.
Li Auto (2015 HK) will have the largest inflow while there will be big outflows from Meituan (3690 HK), Xiaomi Corp (1810 HK), JD.com (9618 HK) and Tencent (700 HK).

ESR Group (1821 HK): Offer Musings

Back in February this year, various media sources reported that the key shareholders of warehouse/fund management play ESR Group (1821 HK), were exploring options, including a privatisation.
Long-Term holders Warburg Pincus and Canadian pension fund OMERS hold 14% and 10.7% respectively. ESR co-founders/directors Jeffrey Shen, Stuart Gibson, Charles de Portes, and Hwee Chiang collectively hold another ~23%.
Shares in ESR were suspended this morning “pursuant to the Hong Kong Code on Takeovers and Mergers“.

ESR Group (1821 HK): Starwood Capital and SSW Partners Gauging a Privatisation Bid

ESR Group (1821 HK) is on a trading halt. Press reports suggest a consortium featuring Starwood Capital Group and SSW Partners is considering a buyout.
Starwood and SSW are approaching other shareholders to join the consortium. The other members are likely Warburg Pincus, OMERS, Jinchu Shen, and Hwee Chiang Lim.
The offer is likely to be structured as a Cayman privatisation scheme. Our best guess is that an offer of at least HK$14.00 per share would be needed.

Blackstone to Take I’rom (2372 JP) Private in MBO at ¥2800/Share (49% Premium)

Today SMO and CRO operator I’Rom Group (2372 JP) announced an MBO where Blackstone would be the sponsor.
From outward appearances, it would seem to be an estate management exercise. It’s not particularly rich as a bid, but it isn’t awful.
I expect this gets done as Mori-san and family and friends appear to have 58% going in. Expected to start in June.

Aozora (8304) – Daiwa Securities Group (8601) Tie-Up – Daiwa To Buy 15+%

Pre-Open on February 1 2024, Aozora Bank Ltd (8304 JP) announced writedowns and a forecast revision, lowering full-year net profit expectations from +¥24bn to -¥28bn.
Shares which had been trading relatively richly (and heavily shorted) fell sharply over the following days, then noted activist Murakami-san started buying in. Then he bought more and went silent.
Today, Aozora reported full-year earnings – much worse than expected and Mar25 guidance lower than already low Street estimates. And they are selling 15% stake to Daiwa Securities Group. Oof!

Toppan Printing (7911) Accelerates Buyback Pace and Amount; But Crossholder Sales Lurk

Toppan Printing (7911 JP) established a new Medium-Term Management Plan with targets in May 2023. 8% ROE, PBR >1.0x. More DX business. More management modernisation. More ESG. Mooooarrrrr!
They also promised capital measures: ¥100bn of buybacks over three years. Total shareholder return of 50%+ over three years. More progress in selling down cross-holdings.
Today the company reported better-than expected full-year revenues, OP, and Net Profit, added more to the buybacks, and shortened the buyback period to two years. Details matter.

TSMC Surges As April Revenue Soars 60% YoY

By William Keating

April revenue ~NT$236.02 billion, +20.9% MoM & + 59.6% YoY
It was the company’s second highest monthly revenue ever, made all the more remarkable by the fact that it occurred during its seasonally low first half year
Our April YoY Taiwan monthly revenue comps are flashing green across the board with just one exception, Globalwafers

Softbank (9984 JP): Has Group NAV Peaked?

By Victor Galliano

Arm’s valuation has driven the group NAV to a new high at fiscal year-end in March; with Arm accounting for 45% of group equity value, NAV downside risk is high
JPY depreciation has been NAV supportive, but this could reverse; SVF2 remains very exposed to financing costs, with 87% of its equity value in private companies
Softbank shares trade at a 57% discount to the estimated NAV; yet the downside risks to Arm’s valuation, along with SVF2 valuation headwinds, should keep the discount wide

CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains

The review period ended on 30 April, there are just over 2 weeks to announcement of the changes, and implementation will be done at the close on 14 June.
We forecast 5 potential changes for the index in June where there could be buying of 1.6-2.6x ADV on the adds and selling of 0.7-2.6x ADV on the deletes.
At the December 2023 rebalance, the adds outperformed the deletes in the weeks prior to announcement of the changes and then spiked post-announcement. Repeat this time?

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May 13

Most Read: KDDI Corp, Nissin Corp, JD.com , Yichang HEC Changjiang Pharma, Greatview Aseptic Packaging, Great Eastern Holdings, Sumitomo Chemical, Naver Corp, LG Chem and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!) Redux (Another Buyback in H2 Possible)
Nissin (9066) – Super Big Buyback Race-Walks the Governance Walk – Super Cheap Logistics Biz
Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer
HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder
Greatview Aseptic (468 HK): Shandong Xinjufeng VGO Could Force Mengniu to Act
Great Eastern Holdings (GE SP): OCBC’s Offer Needs a Bump to Achieve Privatisation Ambitions
Sumitomo Chemical (4005): To Believe Or Not To Believe, That Is the Question
Local Reports in Korea Regarding A Holdings Stake Sale Between Naver & Softbank
Underexposed Flow Trading Opportunity: LONG Banks & SHORT LG Chem/Energy on June 14

KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!) Redux (Another Buyback in H2 Possible)

In May 2023, KDDI Corp (9433 JP) announced a ¥300bn buyback program, did nothing for two months, then announced a Tender Offer Buyback to buy shares from Toyota.
Toyota had increased its stake years before, then KDDI bought back shares from others, so Toyota was backing its ownership down. I discussed the relationships, history, etc, here.
This year, KDDI announced Friday with earnings that is buying back another large stake from Toyota.

Nissin (9066) – Super Big Buyback Race-Walks the Governance Walk – Super Cheap Logistics Biz

Yesterday after the close, Nissin Corp (9066 JP) announced earnings (down vs last year), guidance (back up partway to last year), and a sale of securities to raise ¥6+bn.
Nissin also announced an employee share incentive plan (¥900mm) and an adjustment to its MTMP from Apr24 to Mar27. Much lower revenues. Same OP. Higher net. Higher Div Payout ratio.
They also announced a really big buyback which should be done by the time people read this. It is really big.

Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer

OCBC (OCBC SP) has made a voluntary unconditional general Offer for the 11.56% in Great Eastern Holdings (GE SP) not held.
The S$25.60 cash Offer for the life/non-life insurer is a 36.9% premium to last close; and a 30% discount to its S$36.59/share embedded value (as at 31st Dec 2023).
The Offer is unconditional in all respects. This will trade tight. A delisting Offer is next on the cards.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June

We do not forecast any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June but there could be capping changes for 7 stocks.
Capping changes will result in a one-way turnover of 7.6% leading to a round-trip trade of US$2.4bn. 17 stocks will have over 0.5x ADV to trade from passive trackers.
Li Auto (2015 HK) will have the largest inflow while there will be big outflows from Meituan (3690 HK), Xiaomi Corp (1810 HK), JD.com (9618 HK) and Tencent (700 HK).

HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder

Yichang HEC Changjiang Pharma (1558 HK)‘s pre-conditional privatisation from Sunshine Lake Pharma comprises scrip (0.263614 new offeror H Share per HEC CJ Pharma share) and cash (special dividend of HK$1.5).
The pre-condition is regulatory approvals from NDRC, MOFCOM, and SAFE. The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection).
There is valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, with no shareholder close to a blocking stake, the deal should get up.

Greatview Aseptic (468 HK): Shandong Xinjufeng VGO Could Force Mengniu to Act

Shandong Xinjufeng Technology Packaging (301296 CH) disclosed a pre-conditional voluntary offer for Greatview Aseptic Packaging (468 HK) at HK$2.65, a 26.2% premium to the undisturbed price.
The pre-condition relates to Chinese regulatory approvals and Shandong Xinjufeng shareholder approval. The offer is conditional on a 50% minimum acceptance condition.
Shandong Xinjufeng’s previous acquisition of Jardine Matheson’s 28.22% stake elicited a defensive move by China Mengniu Dairy Co (2319 HK). This development is likely to force a Mengniu competing VGO.

Great Eastern Holdings (GE SP): OCBC’s Offer Needs a Bump to Achieve Privatisation Ambitions

OCBC (OCBC SP) has announced a voluntary unconditional general offer for Great Eastern Holdings (GE SP) at S$25.60 per share, a 36.90% premium to the undisturbed price.
OCBC aims to privatise Great Eastern by delisting resolutions or exercising compulsory acquisition rights. The offer has not been declared final.
While the offer is reasonable, it is not a knockout bid which would comfortably allow OCBC to privatise through either option. A bump is highly likely.

Sumitomo Chemical (4005): To Believe Or Not To Believe, That Is the Question

By Michael Allen

Sumitomo Chemical issued new guidance in-line for 3/24 and xx% ahead of consensus for 3/25 EBIT, yet, the shares promptly declined by 10%.
Traders were probably spooked by the company’s booking of ¥340bn in impairments that was ¥200bn more than published consensus, but we argue that this was more than already priced in.
The only reasonable explanation for the reaction is that the market doesn’t believe the new guidance for 3/25. This could prove to be a huge mistake.

Local Reports in Korea Regarding A Holdings Stake Sale Between Naver & Softbank

Naver doesn’t view the sale of its A Holdings stake unfavorably; insiders suggest it’s been planning this move since last year.
Market speculation suggests Naver was disappointed by Softbank’s rejection of CLOVA X in LINE, prompting plans to sell A Holdings stake for AI development. A sale agreement is expected soon.
The method through which Softbank secures funds for this acquisition is worth the attention from a short-term trading perspective.

Underexposed Flow Trading Opportunity: LONG Banks & SHORT LG Chem/Energy on June 14

Despite time until screening, predictions likely hold due to market cap gaps; all candidates are banks, benefiting from recent momentum.
Historical patterns show profit-taking selling affecting price impact, particularly on additions with significant pre-inclusion price rises. Monitor banks’ pre-June 14th price appreciation to anticipate impact distortions.
Shorting LG Chem and LG Energy Solution based on high price cointegration, consider basket-trading them before the rebalancing, using the battery sector as a long hedge.

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May 12

Most Read: Fast Retailing, Deep Yellow Ltd, Shenyang Xingqi Pharmaceutical, Eoflow, Greatview Aseptic Packaging, Yichang HEC Changjiang Pharma, China Traditional Chinese Medicine, OCBC, Korea Stock Exchange KOSPI 200, Cosmecca Korea and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes
ASX200 Index Rebalance Preview: Potential Changes Prior to the June Rebalance
ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Continues
Eoflow Announced that US Federal Court Has Decided to Suspend the Effect of 1st Injunction Decision
Greatview Aseptic (468 HK): Shandong Xinjufeng VGO Could Force Mengniu to Act
HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder
Weekly Deals Digest (12 May) – China TCM, GA Pack, HEC CJ Pharma, CPMC, Alps Logistics, Infocom
(Mostly) Asia-Pac M&A: Namoi Cotton, Great Eastern, GAPack, Nihon, Chilled & Frozen, Shinko Electric
EQD | KOSPI 200 Ready to Pullback
Cosmecca Korea Plans to Switch Listing from KOSDAQ to KOSPI

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.
Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.
Fast Retailing (9983 JP) will be capped to 10% of the index weight while Tokyo Electron (8035 JP) is also close to the 10% cap.

ASX200 Index Rebalance Preview: Potential Changes Prior to the June Rebalance

Seven Group Holdings (SVW AU)‘s holding in Boral Ltd (BLD AU) continues to increase and that could lead to an index change at the June rebalance, if not earlier.
The Silver Lake Resources (SLR AU)/ Red 5 Ltd (RED AU) merger could lead to an index change early June.
Cie De Saint-Gobain (SGO FP)‘s acquisition of CSR Ltd (CSR AU) could lead to another index change just ahead of the regular June rebalance.

ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Continues

With the review period now complete, we forecast 7 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
There are 4 stocks that could be added to both indices while some stocks will also have same way flows from CSI Smallcap 500 Index (SH000905 INDEX) trackers.
The potential adds have outperformed the potential deletes over the last 6 months. There has been a big move higher in the potential adds over the last few weeks.

Eoflow Announced that US Federal Court Has Decided to Suspend the Effect of 1st Injunction Decision

On 8 May, Eoflow announced that the U.S. federal court has decided to suspend the effect of the first injunction decision.
While the effect of the second preliminary injunction decision remains intact, Eoflow has requested a review of the suspension of the effect of the second revised injunction decision as well.
There has been a renewed optimism on Eoflow (294090 KS)’s share price in the past week which increased by 46% from 7 May to 10 May.

Greatview Aseptic (468 HK): Shandong Xinjufeng VGO Could Force Mengniu to Act

Shandong Xinjufeng Technology Packaging (301296 CH) disclosed a pre-conditional voluntary offer for Greatview Aseptic Packaging (468 HK) at HK$2.65, a 26.2% premium to the undisturbed price.
The pre-condition relates to Chinese regulatory approvals and Shandong Xinjufeng shareholder approval. The offer is conditional on a 50% minimum acceptance condition.
Shandong Xinjufeng’s previous acquisition of Jardine Matheson’s 28.22% stake elicited a defensive move by China Mengniu Dairy Co (2319 HK). This development is likely to force a Mengniu competing VGO.

HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder

Yichang HEC Changjiang Pharma (1558 HK)‘s pre-conditional privatisation from Sunshine Lake Pharma comprises scrip (0.263614 new offeror H Share per HEC CJ Pharma share) and cash (special dividend of HK$1.5).
The pre-condition is regulatory approvals from NDRC, MOFCOM, and SAFE. The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection).
There is valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, with no shareholder close to a blocking stake, the deal should get up.

Weekly Deals Digest (12 May) – China TCM, GA Pack, HEC CJ Pharma, CPMC, Alps Logistics, Infocom

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: HD Hyundai Marine Solution (443060 KS) and ZEEKR (ZK US) have strong IPO debuts.
Event-Driven developments China Traditional Chinese Medicine (570 HK), Greatview Aseptic Packaging (468 HK), Yichang HEC Changjiang Pharma (1558 HK), CPMC Holdings (906 HK), Alps Logistics (9055 JP), Infocom Corp (4348 JP).

(Mostly) Asia-Pac M&A: Namoi Cotton, Great Eastern, GAPack, Nihon, Chilled & Frozen, Shinko Electric

Tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Six(!) new deals was discussed on Smartkarma this week: Perpetual (PPT AU), Alps Logistics (9055 JP), Namoi Cotton (NAM AU)‘; Great Eastern (GE SP); Nihon Housing (4781 JP) and GAPack (468 HK)‘.
Key updates took place on: QANTM Intellectual Property (QIP AU), Adbri (ABC AU), L’Occitane (973 HK), Chilled & Frozen Logistics Holdings (9099 JP), and Shinko Electric Industries (6967 JP).

EQD | KOSPI 200 Ready to Pullback

By Nico Rosti

This is an update to our previous insight published on April 22nd: “EQD | KOSPI 200 WEEKLY Bounce: Rally or Not?“.
The KOSPI 200 INDEX has performed a nearly +6% rally in the last 3 weeks, closing up 3 weeks in a row (CC=+3).
We have something to say about this pattern that was identified 3 weeks and ago and so we wanted to post this insight to explicit our view.

Cosmecca Korea Plans to Switch Listing from KOSDAQ to KOSPI

On 10 May, Cosmecca Korea (241710 KS) announced that it plans to switch its listing from KOSDAQ to KOSPI.
The company plans to convene an extraordinary general meeting of shareholders on 29 August to finalize on the switching of Cosmecca Korea listing from KOSDAQ to KOSPI.
Cosmecca Korea is one of the leading Korean ODM manufacturers of cosmetic products.

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May 11

Most Read: Toyota Motor, Infocom Corp, Alps Logistics, Nissin Corp, Greatview Aseptic Packaging, Great Eastern Holdings, HYBE , Eoflow, ZEEKR and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Toyota Cross-Shareholding – To Say a Whole Lot Is Left Would Be a US$26bn Understatement
Infocom (4348 JP): Rumoured Tender Offer as Teijin Seeks to Exit
Logisteed/KKR Bid BIGLY for Alps Logistics (9055). A Gobsmacking Price/Multiple
Nissin (9066) – Super Big Buyback Race-Walks the Governance Walk – Super Cheap Logistics Biz
GAPack (468 HK): Mengniu & Bi Weigh Options On Shandong Xinjufeng’s VGO
Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer
Netmarble Plans to Sell 2.6% Stake in HYBE Through PRS (Price Return Swap).
Eoflow Announced that US Federal Court Has Decided to Suspend the Effect of 1st Injunction Decision
Zeekr IPO Trading – Not as Cheap as It Looks but Float Is Tiny
Hong Kong Buybacks Weekly (May 10th): Meituan, Hang Seng Bank, Swire Pacific

Toyota Cross-Shareholding – To Say a Whole Lot Is Left Would Be a US$26bn Understatement

By Sumeet Singh

With Toyota (7203 JP) having sold some of its stake in Denso, KDDI and Harmonic Drive this year, it has firmly set the ball rolling for unwinding some of its cross-shareholding.
Toyota has a shareholding in around 60 listed companies, with its combined disposable stake worth over US$26bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

Infocom (4348 JP): Rumoured Tender Offer as Teijin Seeks to Exit

Bloomberg reports that Teijin Ltd (3401 JP) wants to sell its 55% stake in Infocom Corp (4348 JP). The rumoured bidders are Sony Corp (6758 JP), Blackstone and KKR.
Based on precedents, the offer structure will likely be structured such that Teijin provides an irrevocable NOT to accept but vote in favour of share consolidation at the EGM.
Bloomberg suggests that Infocom could be valued at JPY200 billion. If this refers to market cap, the tender offer is JPY3,472, a 16.5% premium to the last close.

Logisteed/KKR Bid BIGLY for Alps Logistics (9055). A Gobsmacking Price/Multiple

In late February, a specialty media outlet noted Alps Logistics (9055 JP) was up for sale. I missed that. Yesterday pre-close, a headline crossed the wires. A deal was imminent.
Nikkei overnight said “¥150bn+ market cap”. I thought KKR might slightly overpay the Hitachi Transport System (9086 JP) multiple paid. That meant +13% today was full-ish. I was wrong.
KKR is paying ¥5,774 to minorities, and about ¥4,084-ish to the parent, who is reinvesting at ¥5,774. This is a total knock-out price paid. HUGE MINORITY WIN.

Nissin (9066) – Super Big Buyback Race-Walks the Governance Walk – Super Cheap Logistics Biz

Yesterday after the close, Nissin Corp (9066 JP) announced earnings (down vs last year), guidance (back up partway to last year), and a sale of securities to raise ¥6+bn.
Nissin also announced an employee share incentive plan (¥900mm) and an adjustment to its MTMP from Apr24 to Mar27. Much lower revenues. Same OP. Higher net. Higher Div Payout ratio.
They also announced a really big buyback which should be done by the time people read this. It is really big.

GAPack (468 HK): Mengniu & Bi Weigh Options On Shandong Xinjufeng’s VGO

Back in September 2023, Jardine Matheson Holdings (JM SP) sold its 28.22% stake in Greatview Aseptic Packaging (468 HK) to Shandong Xinjufeng Technology Packaging (301296 CH) (XJF).
Then in November, XJF requisitioned an EGM to spill the board. At the EGM on the 26th January, not one of XJF’s five new proposed appointments were successful.
XJF has now made a pre-conditional (various PRC approvals) voluntary general Offer at $2.65/share (best & final), contingent on a 50% acceptance hurdle. Final/special dividends to be added.

Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer

OCBC (OCBC SP) has made a voluntary unconditional general Offer for the 11.56% in Great Eastern Holdings (GE SP) not held.
The S$25.60 cash Offer for the life/non-life insurer is a 36.9% premium to last close; and a 30% discount to its S$36.59/share embedded value (as at 31st Dec 2023).
The Offer is unconditional in all respects. This will trade tight. A delisting Offer is next on the cards.

Netmarble Plans to Sell 2.6% Stake in HYBE Through PRS (Price Return Swap).

After the market close on 9 May, Netmarble announced that it plans to sell 2.6% stake in HYBE for 219.9 billion won.
The transaction is based on PRS (price return swap) basis. Previous to this deal, Netmarble sold 2.5 million shares (about 6%) of HYBE shares in November 2023.
We continue to remain negative on HYBE including on this deal involving Netmarble’s plan to sell additional 2.6% stake in HYBE.

Eoflow Announced that US Federal Court Has Decided to Suspend the Effect of 1st Injunction Decision

On 8 May, Eoflow announced that the U.S. federal court has decided to suspend the effect of the first injunction decision.
While the effect of the second preliminary injunction decision remains intact, Eoflow has requested a review of the suspension of the effect of the second revised injunction decision as well.
There has been a renewed optimism on Eoflow (294090 KS)’s share price in the past week which increased by 46% from 7 May to 10 May.

Zeekr IPO Trading – Not as Cheap as It Looks but Float Is Tiny

By Sumeet Singh

ZEEKR (ZK US), a premium EV brand by Geely, raised around US$440m in its US listing, after the deal was upsized and priced at the top.
Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
We have looked at the company’s past performance and provided our thoughts on valuations in our earlier notes. In this note, we talk about the trading dynamics.

Hong Kong Buybacks Weekly (May 10th): Meituan, Hang Seng Bank, Swire Pacific

By Ke Yan, CFA, FRM

We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on May 10th based on HKEx daily reports.
In the past 7 days, the top 3 companies that repurchased the most shares from the market were Meituan (3690 HK), Hang Seng Bank (11 HK), Swire Pacific (19 HK).
In the past 30 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Meituan (3690 HK), Hang Seng Bank (11 HK).

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May 10

Most Read: Fast Retailing, Alps Logistics, China Traditional Chinese Medicine, HD Hyundai Marine Solution , Infocom Corp, CELSYS, Melco International Development, HYBE and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes
KKR Deal for Alps Logistics (9055) Appears Imminent
China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks
HD Hyundai Marine Solution (443060 KS): Nearing KOSPI200 Index Inclusion in June
Infocom (4348 JP): Rumoured Tender Offer as Teijin Seeks to Exit
Logisteed/KKR Bid BIGLY for Alps Logistics (9055). A Gobsmacking Price/Multiple
Alps Logistics (9055 JP): KKR’s Knockout Pre-Conditional Offer at JPY5,774
TOPIX Inclusions: Who Is Ready (May 2024)
HK CEO & Director Dealings (9 May 2024): Lawrence Adds More Melco; Ng Adds More Sino Land
Netmarble Plans to Sell 2.6% Stake in HYBE Through PRS (Price Return Swap).

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.
Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.
Fast Retailing (9983 JP) will be capped to 10% of the index weight while Tokyo Electron (8035 JP) is also close to the 10% cap.

KKR Deal for Alps Logistics (9055) Appears Imminent

There was a news article I missed in late February saying Alps Alpine (6770 JP), parent of Alps Logistics (9055 JP) was in the process of selling the logistics unit.
A deal made sense for a strategic given the upcoming “2024 Problem”. Pre-close, headlines blared, the stock popped 12%, now we’re at double the end-February price.
Late in the evening,Alps Logistics said it had received a bid from Logisteed but nothing had been decided. This morning we have a few more details, but nothing concrete

China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks

On 21 February, China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
The wide gross spread (7.0%) reflects risks around the re-rating of peers, the slow pace of satisfying the pre-condition, the completion timetable and Ping An’s blocking stake.
The key risk is the deal close timing due to the slow pace of regulatory approvals, which increases the chance that the vote will held after the August interim.

HD Hyundai Marine Solution (443060 KS): Nearing KOSPI200 Index Inclusion in June

After a 96.5% gain on listing day, HD Hyundai Marine Solution (443060 KS) is very close to levels needed for Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusion in June.
HD Hyundai Marine Solution needs to outperform the 50th ranked stock in the KOSPI2 INDEX by 11.4% on average over the next 15 trading days to be added to the index.
Retail investors sold 25% of their allocation on listing day while foreign investors sold 22% of their IPO allocation with local institutions mopping up the shares.

Infocom (4348 JP): Rumoured Tender Offer as Teijin Seeks to Exit

Bloomberg reports that Teijin Ltd (3401 JP) wants to sell its 55% stake in Infocom Corp (4348 JP). The rumoured bidders are Sony Corp (6758 JP), Blackstone and KKR.
Based on precedents, the offer structure will likely be structured such that Teijin provides an irrevocable NOT to accept but vote in favour of share consolidation at the EGM.
Bloomberg suggests that Infocom could be valued at JPY200 billion. If this refers to market cap, the tender offer is JPY3,472, a 16.5% premium to the last close.

Logisteed/KKR Bid BIGLY for Alps Logistics (9055). A Gobsmacking Price/Multiple

In late February, a specialty media outlet noted Alps Logistics (9055 JP) was up for sale. I missed that. Yesterday pre-close, a headline crossed the wires. A deal was imminent.
Nikkei overnight said “¥150bn+ market cap”. I thought KKR might slightly overpay the Hitachi Transport System (9086 JP) multiple paid. That meant +13% today was full-ish. I was wrong.
KKR is paying ¥5,774 to minorities, and about ¥4,084-ish to the parent, who is reinvesting at ¥5,774. This is a total knock-out price paid. HUGE MINORITY WIN.

Alps Logistics (9055 JP): KKR’s Knockout Pre-Conditional Offer at JPY5,774

Alps Logistics (9055 JP) recommended a pre-conditional tender offer from a KKR & Co (KKR US) subsidiary at JPY5,774, 32.7% and 69.8% premium to the last close and undisturbed price, respectively.
The pre-condition is approvals under competition laws of Japan, China, the EU, South Korea and Vietnam. The tender offer is expected to start in mid-August.
The offer represents an all-time high and is a knockout bid. While the timing of regulatory approvals is a risk, the transaction is a done deal.

TOPIX Inclusions: Who Is Ready (May 2024)

By Janaghan Jeyakumar, CFA

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
Dozens of companies have been able to meet the key Section Transfer requirements on paper for several months but there have been no TOPIX Inclusions announcements in 2024 so far.
However, there are some pre-event candidates we believe are worth monitoring as they have previously confirmed their desire to move to the Prime Market.

HK CEO & Director Dealings (9 May 2024): Lawrence Adds More Melco; Ng Adds More Sino Land

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
The key stocks mentioned in this regular insight include Melco International Development (200 HK), Sino Land Co (83 HK), and ZJLD Group (6979 HK).

Netmarble Plans to Sell 2.6% Stake in HYBE Through PRS (Price Return Swap).

After the market close on 9 May, Netmarble announced that it plans to sell 2.6% stake in HYBE for 219.9 billion won.
The transaction is based on PRS (price return swap) basis. Previous to this deal, Netmarble sold 2.5 million shares (about 6%) of HYBE shares in November 2023.
We continue to remain negative on HYBE including on this deal involving Netmarble’s plan to sell additional 2.6% stake in HYBE.

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May 09

Most Read: Fast Retailing, Perpetual Ltd, WuXi XDC Cayman , Alibaba Group Holding , Alps Logistics, China Traditional Chinese Medicine, Nippon Yusen Kk, Naver Corp, Taiwan Semiconductor (TSMC) – ADR, HD Hyundai Marine Solution and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes
Perpetual (PPT AU): Shareholders Divided Over Carve Out
Wuxi XDC Lock-Up – US$300m Lockup Expiry Could See Some Selling Owing to the Regulatory Overhang
Alibaba (BABA US): Margin Pressure Overstated
KKR Deal for Alps Logistics (9055) Appears Imminent
China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks
Nippon Yusen (9101) – Another Big Buyback Announced, But Details Matter
Naver: Under Pressure from the Japanese Government To Sell Its Stake in LINE
Taiwan Dual-Listings: TSMC Spread Slumps Then Fully Rebounds; Shorts Spiking Ahead of IMOS Results
HD Hyundai Marine Solution (443060 KS): Nearing KOSPI200 Index Inclusion in June

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.
Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.
Fast Retailing (9983 JP) will be capped to 10% of the index weight while Tokyo Electron (8035 JP) is also close to the 10% cap.

Perpetual (PPT AU): Shareholders Divided Over Carve Out

Back in December last year, Aussie-listed equities manager Perpetual Ltd (PPT AU) rejected Washington H. Soul Pattinson (SOL AU)‘s $3bn all-scrip non-binding indicative proposal.
Yet Soul Patt’s proposal was in sync with Perpetual’s previously flagged intentions to explore a potential separation of its corporate trust and wealth management businesses, from its asset management business.
Perpetual has now entered a Scheme, to carve out the corporate trust and wealth management businesses to KKR for A$2.175bn. A lack of clarity on net proceeds saw shares rollover.

Wuxi XDC Lock-Up – US$300m Lockup Expiry Could See Some Selling Owing to the Regulatory Overhang

By Clarence Chu

WuXi XDC Cayman (2268 HK) was listed in Hong Kong on 17th Nov 2023 after raising US$470m. Its six-month lockup will expire on 16th May 2024.
WuXi XDC Cayman (WXDC) is a contract research, development, and manufacturing organization (CRDMO) focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
In this note, we will talk about the lock-up dynamics and updates since our last note.

Alibaba (BABA US): Margin Pressure Overstated

By Eric Chen

We feel consensus overstates margin pressure for Alibaba’s March quarter results. We expect its group adjusted EBITA to deliver single-digit growth vs. investors’ concern about earnings retreat.
March quarter should mark start of an earnings recovery cycle in our view, as improving China macro and well-executed business revamp plan put Alibaba back on growth track.
This also means an end to its multiple contraction which lasted for five quarters. We see 50% upside on double-digit earnings growth and multiple expansion over next 12 months.

KKR Deal for Alps Logistics (9055) Appears Imminent

There was a news article I missed in late February saying Alps Alpine (6770 JP), parent of Alps Logistics (9055 JP) was in the process of selling the logistics unit.
A deal made sense for a strategic given the upcoming “2024 Problem”. Pre-close, headlines blared, the stock popped 12%, now we’re at double the end-February price.
Late in the evening,Alps Logistics said it had received a bid from Logisteed but nothing had been decided. This morning we have a few more details, but nothing concrete

China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks

On 21 February, China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
The wide gross spread (7.0%) reflects risks around the re-rating of peers, the slow pace of satisfying the pre-condition, the completion timetable and Ping An’s blocking stake.
The key risk is the deal close timing due to the slow pace of regulatory approvals, which increases the chance that the vote will held after the August interim.

Nippon Yusen (9101) – Another Big Buyback Announced, But Details Matter

Last May, Nippon Yusen Kk (9101 JP) announced buybacks of ¥200bn over 2 years. In August, they changed it to say ¥200bn in the next nine months.
That helped support the stock through early March. It was big, and a decent percentage of ADV. Today, they announced earnings and guidance and another ¥100bn buyback through April 2025.
Earnings were OK. Guidance is a little low vs the Street. The stock popped 5% from where it was trading. Lower impact vs 2023. More cross-holder overhang consideration.

Naver: Under Pressure from the Japanese Government To Sell Its Stake in LINE

On 8 May, it was mentioned in numerous local media that Naver is under pressure from the Japanese government to sell its stake in LINE.
One of the reasons behind Japanese government’s efforts to force Naver to sell its stake in LINE is due a major data breach incident in November 2023.
Based on our current understanding of this situation, the most likely scenario is for Naver to sell about 20-30% stake in A Holdings (the controlling shareholder of LINE) to SoftBank.

Taiwan Dual-Listings: TSMC Spread Slumps Then Fully Rebounds; Shorts Spiking Ahead of IMOS Results

By Vincent Fernando, CFA

TSMC: Premium Fell and Then Rebounded, Now +15.6%; Can Consider Shorting Again
ASE: Falls to +12.3%; Wait for Higher Level Before Considering a New Short Again
ChipMOS: -0.6% Discount; Massing of Short Interest Right Ahead of Earnings

HD Hyundai Marine Solution (443060 KS): Nearing KOSPI200 Index Inclusion in June

After a 96.5% gain on listing day, HD Hyundai Marine Solution (443060 KS) is very close to levels needed for Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusion in June.
HD Hyundai Marine Solution needs to outperform the 50th ranked stock in the KOSPI2 INDEX by 11.4% on average over the next 15 trading days to be added to the index.
Retail investors sold 25% of their allocation on listing day while foreign investors sold 22% of their IPO allocation with local institutions mopping up the shares.

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May 08

Most Read: HD Hyundai Marine Solution , L’Occitane, KOSDAQ 150 Index, Fast Retailing, Kawasaki Kisen Kaisha, Chilled & Frozen Logistics Holdings, Namoi Cotton Co Operative, WuXi XDC Cayman and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HD Hyundai Marine Solution: IPO Book Building Results Analysis
L’Occitane (973.HK) Privatization – The Offer Price Is Good Enough
Trading Implications Of Intra-Day Naked Short Selling Rule Tightening in Korea
Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes
KLINE (9107) – More Profit, More Shareholder Return 3mo Buyback Inbound
HD Hyundai Marine Solution IPO Trading – Strong Demand and Peers Continue to Rise
Chilled & Frozen’s Target Opinion Statement; Chotto Matte (Four Counterbidders)
Namoi Cotton (NAM AU): Bloom Times As Louis Dreyfus & Olam Agri Tangle
Big Fines on Foreign Investment Banks for Naked Short Selling in Korea – Implications
Wuxi XDC Lock-Up – US$300m Lockup Expiry Could See Some Selling Owing to the Regulatory Overhang

HD Hyundai Marine Solution: IPO Book Building Results Analysis

HD Hyundai Marine Solution’s IPO price has been determined at 83,400 won per share, which is at the high end of the IPO price range.
A total of 2,021 institutional investors participated in this IPO book building. The demand ratio was 201 to 1. HD Hyundai Marine Solution will start trading on 8 May 2024.
Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, which represents an upside of 18% from the IPO price.

L’Occitane (973.HK) Privatization – The Offer Price Is Good Enough

By Xinyao (Criss) Wang

The HK$34/share offer price is final, which exceeds all-time high closing price of HK$33.60/share since IPO in 2010. EUR6 billion is equivalent to a PE of 52.17x, higher than peers.
Deploying China’s sinking market is “a good story full of imagination”. However, it may fail to bring expected profits considering increasing competition/potential price war, leading to uncertain future performance growth.
For minority shareholders, this privatization provides an attractive opportunity to monetise their investments at a premium over market price. We don’t think the current “technical bull market” to be lasting.

Trading Implications Of Intra-Day Naked Short Selling Rule Tightening in Korea

Aggressively curbing naked short selling may enhance flow conditions for Value-Up stocks by reducing market turnover.
Liquidity decline may worsen KOSDAQ’s underperformance relative to KOSPI stocks due to its higher vulnerability to liquidity fluctuations.
We should also monitor price impact from phased short selling in the absence of intra-day naked short selling post-regulation tightening.

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.
Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.
Fast Retailing (9983 JP) will be capped to 10% of the index weight while Tokyo Electron (8035 JP) is also close to the 10% cap.

KLINE (9107) – More Profit, More Shareholder Return 3mo Buyback Inbound

Kawasaki Kisen Kaisha (9107 JP) today announced earnings. Ocean Network Express earnings were out earlier and beyond that, Consolidated Revs beat, OP faltered, but NP was spot on guidance.
Guidance for the year to March 2025 is well ahead of consensus on revenue, slightly ahead on OP, and just a wee bit ahead on NP.
But the company raised its 5yr MTMP Shareholder Return from ¥500bn to ¥700bn and set a new ¥100bn (5.5%) buyback to be executed in the next 3 months.

HD Hyundai Marine Solution IPO Trading – Strong Demand and Peers Continue to Rise

HD Hyundai Marine Solution (443060 KS) had raised around US$539m in its Korean IPO, after pricing the deal at the top end of KRW83,400/share.
HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
In this note, we will talk about the demand for the deal and other trading dynamics.

Chilled & Frozen’s Target Opinion Statement; Chotto Matte (Four Counterbidders)

Today, after the close, Chilled & Frozen Logistics Holdings (9099 JP) released a required (by the FIEA) Target Opinion Statement saying “Opinion Withheld.”
C&F notes that it had received 9 possible counter-proposals, offered due dili to a certain extent, and by May 1, had 4 binding offers.
There are interesting competitive dynamics at play here, but cross-holding concentration matters. The question is… How much is enough?

Namoi Cotton (NAM AU): Bloom Times As Louis Dreyfus & Olam Agri Tangle

Singapore’s Olam Agri and global commodity merchant Louis Dreyfus Company (LDC) are duking it out for Namoi Cotton Co Operative (NAM AU), Australia’s largest cotton producer.
After both initially lobbed competing Schemes, both have now tabled off-market Offers – A$0.67/share from LDC, A$0.66/share from Olam – each contingent on a 50.1% acceptance hurdle, FIRB, and ACCC.
LDC, currently holding 17%, announced it will reject Olam Agri’s Offer. Top shareholder Samuel Terry Asset Management, with 24.5%, is expected to support the winning (or superior) bid.

Big Fines on Foreign Investment Banks for Naked Short Selling in Korea – Implications