Most Read

On Friday, Pasona Group (2168 JP) announced its expected use of funds into the May 2024 results, including a special dividend plan, investment for growth, and “strengthening the operating platform.”
The plan will disappoint. The stock may get hit hard. The truth is somewhere in the middle. This is where active stewardship matters. So get stewarding.
A special div paid over 5yrs should be paid one-shot, now. If the company has plans worth supporting, set KPIs now, ask for money later. Good plans get good money.

Kokusai Elec (6525) – The Much-Anticipated Lockup Expiry

Last autumn, Kokusai Electric (6525 JP) was IPOed by KKR. The lockup expires next week, on 21 April 2024 (a Sunday). That frees up about 70% of the stock.
KKR’s own stake is worth about US$2.8bn. It is not clear that Applied Materials, Qatar, or the Koch Strategic Platforms stakes would be for sale (now, or near-term).
There is an interesting schedule of events between here and a likely offering date. It pays to pay attention to the details.

Kokusai Electric IPO Lock-Up – KKR Will Be Tempted by the US$2.7bn Release but Might Have to Wait

KKR raised around US$730m via selling some stake in Kokusai Electric (6525 JP) Japan IPO in Sep 2023. Its remaining stake will be released from its IPO linked lockup soon.
KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

Baicha Baidao (2555 HK) IPO: Valuation Insights

Sichuan Baicha Baidao Industrial (SCBCBDID CH), a leading freshly made tea drinks company, has launched an HKEx IPO to raise US$330 million. The shares will be listed on 23 April.
We previously discussed the IPO in Baicha Baidao IPO: The Bull Case and Baicha Baidao IPO: The Bear Case.
There are no cornerstone investors. Our valuation analysis suggests that Baicha is fairly valued at the HK$17.50 IPO price. Therefore, we would pass on the IPO.

Idemitsu (5019): First SumiChem’s, Now JERA’s Stake in Fuji Oil (5017) To Go to 22%. It’s Coming…

In the mid-late teens, four refinery groups merged to create two refinery groups – JX and Tonen General became JXTG under ENEOS Holdings (5020 JP) and Idemitsu took over ShowaShell.
When Idemitsu got ShowaShell, it got 50+% in Toa Oil Co Ltd (5008 JP), 6.58% of Fuji Oil Co Ltd (5017 JP). In 2020, they tried to buy in Toa.
That was delayed by an activist. Today, Idemitsu announced they had gone to 23% in Fuji Oil. That stake will go up before it goes down.

Market Chats About What Really Went Down with HPSP This Morning

This morning’s HPSP (403870 KS) situation began with Maekyung’s report, indicating Crescendo PE contacted local bankers for the controlling stake sale.
The surge in HPSP’s stock price after Maekyung’s report suggests Crescendo PE’s tacit approval, implying their involvement in the news’s emergence.
Despite the likely confirmed sale of Crescendo PE’s stake, timing remains uncertain due to disclosure rules. Continued monitoring is vital, considering potential market reactions later.

Hollysys (HOLI US): Keep Calm as Closing Date Slips

On 15 April, Hollysys Automation Technologies (HOLI US) issued a 6-K filing stating that Ascendent remains in the process of obtaining regulatory approvals.
The gross spread has widened to 8% as the closing date has slipped from the end of March guidance, and an updated timeline is lacking.
A delay in securing regulatory approvals is not uncommon. However, regulatory approvals should be forthcoming as the transaction involves Chinese entities (including a SASAC entity) acquiring a Chinese-focused company.

Multiple Positive Catalysts Ahead Of Q124 Earnings Season

By William Keating

PC, Smartphone Unit shipments both registering YoY growth in Q124
TSMC will beat guidance & likely guide Q224 up ~5% QoQ. Samsung’s pre earnings showed strong recovery in operating profit
Server unit shipments are on a ~17% YoY growth run rate

Belle Fashion IPO: The Investment Case

Belle Fashion Group (2007708D HK), the largest fashion footwear company in China, is seeking to raise up to US$1 billion in a HKEx IPO.
Belle Fashion originated from Belle International Holdings (2129452D HK), which was privatised in 2017. In October 2019, Belle International spun off its sportswear business as Topsports International Holdings (6110 HK).
The investment case rests on a market-leading position, return to growth, margin improvement, cash generation and modest leverage.

Megastudy Education: A Major Shareholder Return Policy in 2024-2026

On 16 April, Megastudyedu Co, Ltd. (215200 KS) announced a major shareholder return plan, driving up its share price by 14.2% to 60,400 won.
Driven by this attractive shareholder return plan combined with improving fundamentals, we believe that Megastudy Education’s shares could continue to outperform the market in the next several months.
The total shareholder returns including share buybacks/cancellation and dividends are 60% of the company’s non-consolidated net profit from 2024 to 2026.

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Apr 16

Most Read: Pasona Group, Guangzhou Automobile Group, Sichuan Baicha Baidao Industrial, Hanmi Science, Vodafone Idea , HD Hyundai Marine Solution , Tietto Minerals Ltd, Horizon Robotics and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Pasona (2168 JP) Special Div – Too Small to Matter
Get Your Pasona (2168 JP) Rump For Free
A/H Premium Tracker (To 12 Apr 2024): Liquid AH Premia Still Very Wide, The Right Spreads Behaving
Baicha Baidao (2555 HK) IPO: Valuation Insights
Imminent Block Deals Involving Hanmi Science Shares Due to Inheritance Tax Payments
Vodafone Idea Placement – Very Well Flagged but Its Not Going to Fix a Whole Lot of Issues
ECM Weekly (15th Apr 2024) – Hyundai Marine, Bharti, Kayou, Zeekr, ChaPanda, Samsung, WT Micr, Sompo
Tietto Minerals (TIE AU): Zhaojin’s Revised and Final Takeover Offer Remains Light
Ohayo Japan | Escalating Tensions
Horizon Robotics IPO Preview: “Journey Together”, Strong Business Position and Market Share Gains

Pasona (2168 JP) Special Div – Too Small to Matter

On Friday, Pasona Group (2168 JP) announced its expected use of funds into the May 2024 results, including a special dividend plan, investment for growth, and “strengthening the operating platform.”
The plan will disappoint. The stock may get hit hard. The truth is somewhere in the middle. This is where active stewardship matters. So get stewarding.
A special div paid over 5yrs should be paid one-shot, now. If the company has plans worth supporting, set KPIs now, ask for money later. Good plans get good money.

Get Your Pasona (2168 JP) Rump For Free

Dai Ichi (8750 JP) agreed with Pasona (2168 JP) for Pasona to sell its shares back to Benefit One (2412 JP) in a buyback after Dai-Ichi’s Tender Offer for Benefit.
This process gives Pasona a tax advantage versus selling into a Tender Offer at the same price.
What does Pasona take home? ~¥2,822/share versus its last price of ¥2,733/share. Then you have stubs ops (conservatively worth up to ~¥1,960/share) and Pasona’s stake in Bewith (9216 JP) (~¥360/share).

A/H Premium Tracker (To 12 Apr 2024): Liquid AH Premia Still Very Wide, The Right Spreads Behaving

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. NORTHBOUND has started selling (but buying semi tech).
Hs rebounded vs As. AH Premia still wide. Fabulous two-week performance by the Quiddity Portfolio (+2.09% over the two weeks) on a delta 3:1 long H/short A

Baicha Baidao (2555 HK) IPO: Valuation Insights

Sichuan Baicha Baidao Industrial (SCBCBDID CH), a leading freshly made tea drinks company, has launched an HKEx IPO to raise US$330 million. The shares will be listed on 23 April.
We previously discussed the IPO in Baicha Baidao IPO: The Bull Case and Baicha Baidao IPO: The Bear Case.
There are no cornerstone investors. Our valuation analysis suggests that Baicha is fairly valued at the HK$17.50 IPO price. Therefore, we would pass on the IPO.

Imminent Block Deals Involving Hanmi Science Shares Due to Inheritance Tax Payments

The local market anxiously awaits the family’s ability to pay by early May. Failure could prompt the Tax Service to sell their pledged stocks, including Hanmi Science shares.
Preventing Tax Service from selling Hanmi Science shares requires additional collateral, unlikely due to existing pledges. Rumor suggests mother and daughter may sell shares before May, followed by Tax Service.
Given negotiation uncertainty with KKR, it’s crucial to prepare for potential failure rather than solely relying on success, necessitating a pragmatic approach.

Vodafone Idea Placement – Very Well Flagged but Its Not Going to Fix a Whole Lot of Issues

Vodafone Idea (IDEA IN) plans to raise around US$2.2bn via a follow-on public offering.
The deal has been in the works for years and proceeds will be used for capex and short-term debt repayment.
In this note, we will run the deal through our ECM framework and talk about the deal dynamics.

ECM Weekly (15th Apr 2024) – Hyundai Marine, Bharti, Kayou, Zeekr, ChaPanda, Samsung, WT Micr, Sompo

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, the focus remained on HD Hyundai Marine Solution (443060 KS), even as Sichuan Baicha Baidao Industrial is gearing up to launch its IPO.
On the placement front, there were deals across India, South Korea and Australia.

Tietto Minerals (TIE AU): Zhaojin’s Revised and Final Takeover Offer Remains Light

Tietto Minerals Ltd (TIE AU) has disclosed a revised conditional proposal from Zhaojin Mining Industry H (1818 HK) at A$0.68 per share, a 17.2% premium to the previous offer of A$0.58.
The offer is conditional on a 50.1% minimum acceptance condition (which can be waived). The offer is declared best and final.
Despite the bump, the offer is below the IE’s valuation range of A$0.79 to A$0.93 per share. The IE’s valuation range would be around 25% higher at current gold prices.

Ohayo Japan | Escalating Tensions

The Dow Jones Industrial Average marked its sixth consecutive decline amidst fears of further conflict escalation
The yen slipped to the mid-154 range against the dollar on Monday, marking its lowest level since June 1990
Sony Group is preparing to unveil a more potent PS5 console, possibly by the end of this year.

Horizon Robotics IPO Preview: “Journey Together”, Strong Business Position and Market Share Gains

By Andrei Zakharov

Horizon Robotics, a consumer-centric and fast-growing provider of integrated ADAS and AD solutions for passenger vehicles, filed for an IPO and plans to raise up to $500M in Hong Kong.
Horizon Robotics was founded in 2015 by Dr. Yu Kai, Dr. Chang Huang, Ms. Feiwen Tao, and a group of scientists and tech entrepreneurs.
I have a positive view of an upcoming IPO and believe Horizon Robotics is in a great position to capitalize on rapidly growing smart vehicles market in China and worldwide.

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Apr 15

Most Read: Deep Yellow Ltd, Pasona Group, CGN New Energy Holdings, Roland DG Corp, CSPC Innovation Pharmaceutical-A, Azure Minerals, Guangzhou Automobile Group, Tietto Minerals Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Get Your Pasona (2168 JP) Rump For Free
S&P/ASX Index Rebalance Preview: Potential Changes from Now to June
Pasona (2168 JP) Special Div – Too Small to Matter
CGN New Energy (1811 HK): Takeover Rumours
Roland DG (6789) – Brother Still Not Making Friends
Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: Bullish Names Outperform Bearish Names Again
Merger Arb Mondays (15 Apr) – Azure, Silver Lake, Genex, Boral, China TCM, C&F Logistics, Roland DG
Ohayo Japan | Expect Weak Open
A/H Premium Tracker (To 12 Apr 2024): Liquid AH Premia Still Very Wide, The Right Spreads Behaving
Tietto Minerals (TIE AU): Zhaojin Mining Secures Reg Approvals. Then Bumps

Get Your Pasona (2168 JP) Rump For Free

Dai Ichi (8750 JP) agreed with Pasona (2168 JP) for Pasona to sell its shares back to Benefit One (2412 JP) in a buyback after Dai-Ichi’s Tender Offer for Benefit.
This process gives Pasona a tax advantage versus selling into a Tender Offer at the same price.
What does Pasona take home? ~¥2,822/share versus its last price of ¥2,733/share. Then you have stubs ops (conservatively worth up to ~¥1,960/share) and Pasona’s stake in Bewith (9216 JP) (~¥360/share).

S&P/ASX Index Rebalance Preview: Potential Changes from Now to June

With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.

Pasona (2168 JP) Special Div – Too Small to Matter

On Friday, Pasona Group (2168 JP) announced its expected use of funds into the May 2024 results, including a special dividend plan, investment for growth, and “strengthening the operating platform.”
The plan will disappoint. The stock may get hit hard. The truth is somewhere in the middle. This is where active stewardship matters. So get stewarding.
A special div paid over 5yrs should be paid one-shot, now. If the company has plans worth supporting, set KPIs now, ask for money later. Good plans get good money.

CGN New Energy (1811 HK): Takeover Rumours

Another week, another rumoured (from Bloomberg) takeover. This time it’s for clean energy play CGN New Energy Holdings (1811 HK).
Back in 2020, CGN was subject to a potential privatisation from its SOE-parent – see CGN New Energy: The Latest SOE Clean Energy Play – but it failed to materialise.
A couple of years back, a “valuation system with Chinese characteristics” had the media discussing whether this implied a premium for SOEs and companies aligned with national goals.

Roland DG (6789) – Brother Still Not Making Friends

Taiyo Pacific’s Tender Offer for Roland DG Corp (6789 JP) was to end Friday, but it was extended 10 days.
Roland DG provided an update regarding the status of the Brother overbid. It did not show as much strategic-mindedness as it might have.
Shares are now trading at a post-overbid high. Strategic missteps up the risk but Brother can pay more.

Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: Bullish Names Outperform Bearish Names Again

By Janaghan Jeyakumar, CFA

The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
In this insight, we take a look at the names leading the race to become ADDs and DELs in the June 2024 index rebal event.

Merger Arb Mondays (15 Apr) – Azure, Silver Lake, Genex, Boral, China TCM, C&F Logistics, Roland DG

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Qantm Intellectual Property (QIP AU), Southern Cross Media (SXL AU), QV Equities Ltd (QVE AU), Silver Lake Resources (SLR AU), Azure Minerals (AZS AU), China TCM.
Lowest spreads: Tietto Minerals Ltd (TIE AU), Chilled & Frozen Logistics Holdings (9099 JP), Roland DG Corp (6789 JP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU).

Ohayo Japan | Expect Weak Open

Global markets are likely to react cautiously following Israel’s interception of over 200 Iranian drones and missile. Bitcoin saw sharp 5%+ decline
Japan’s greenhouse gas emissions hit a record low in fiscal 2022 at 1.14 billion tons of CO2 equivalent, down 2.5% from fiscal 2021
US Steel shareholders have greenlit Nippon Steel’s proposed acquisition, which offers a 40% premium on the trading price at the time of announcement

A/H Premium Tracker (To 12 Apr 2024): Liquid AH Premia Still Very Wide, The Right Spreads Behaving

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. NORTHBOUND has started selling (but buying semi tech).
Hs rebounded vs As. AH Premia still wide. Fabulous two-week performance by the Quiddity Portfolio (+2.09% over the two weeks) on a delta 3:1 long H/short A

Tietto Minerals (TIE AU): Zhaojin Mining Secures Reg Approvals. Then Bumps

On the 30 October 2023, Chinese gold producer Zhaojin Mining Industry (1818 HK) pitched a non-binding off-market Offer for Aussie-listed West African gold miner Tietto Minerals (TIE AU).
Zhaojin held 7.02% of shares out, and sought 50.1%. Tietto subsequently rejected the A$0.58/share cash proposal. The IE backed out a fair value range of A$0.793-A$0.927/share.
Zhaojin has now announced it has secured all Chinese regulatory approvals; and that Côte d’Ivoire government approval is not required. Plus Zhaojin bumped terms to A$0.68/share – best and final.

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Apr 14

Most Read: Li Auto , Zijin Mining Group Co Ltd H, Amvis Holdings Inc, Cosco Shipping Energy Transportation Co. Ltd. (H), Genex Power Ltd, Roland DG Corp, Nikkei 225, Ansarada Group Ltd, L’Occitane and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June
HSCEI Index Rebalance Preview: One Change or Two in June?
Updated TOPIX Big April Basket Flows; More Big Flows and ¥270bn a Side
COSCO Shipping Energy (1138 HK): Surfing the High Tide
Genex Power (GNX AU): J-Power’s Binding Proposal as Skip’s Intentions Remain Unknown
Roland DG (6789) – Brother Still Not Making Friends
EQD | Nikkei 225 What’s Up Next: Up or Down?
Ansarada (AND AU): Scheme Vote on 14 June
GEMWeekly (12 Apr 2024): South Korea, China Macro; Wipro, TSMC, Samsung Electronics, NetEase
Weekly Deals Digest (14 Apr) – L’Occitane, CGN New Energy, Azure, Genex, C&F Logistics, Riso Kyoiku

HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June

With no stocks in outright inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June.
Capping changes will result in a one-way turnover of 5.3% leading to a round-trip trade of US$1.51bn.
Li Auto (2015 HK) is expected to be the largest buy in June following the stock being the largest sell at the March rebalance (also due to capping).

HSCEI Index Rebalance Preview: One Change or Two in June?

SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.

Updated TOPIX Big April Basket Flows; More Big Flows and ¥270bn a Side

Several days ago I published a piece showing the data for TOPIX flows for April month-end.
This is an update reflecting new data companies have reported to regulators, one large correction to a data provider’s data, and one Very Large Flow.
I believe that the revised data is more accurate. And there is more flow. With a spreadsheet attached.

COSCO Shipping Energy (1138 HK): Surfing the High Tide

By Osbert Tang, CFA

Despite YTD strengths in share price, Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK) is still cheap at 5.7x PER and 0.9x P/B.
VLCC is forecast to stay undersupplied in FY24 and FY25, supporting the rates and CSET’s profitability. YTD, the VLCC rates have recovered by 19.5%.
LNG transportation generated 19% of FY23 earnings. With 40 more vessels on order, compared with a current fleet of 43, there is immense upside from this segment.

Genex Power (GNX AU): J-Power’s Binding Proposal as Skip’s Intentions Remain Unknown

Genex Power Ltd (GNX AU) has entered a transaction implementation deed with Electric Power Development C (9513 JP) for a scheme (A$0.275) and an off-market takeover offer (A$0.270).
Skip could vote against the scheme due to the low 10% premium to its 2022 offer and Genex’s operational capacity rising by 2.7x by the end of 2024.
The likely scenario is that J-POWER succeeds with its takeover offer. At the last close, the gross spread of the scheme and takeover offer was 3.8% and 1.9%, respectively.

Roland DG (6789) – Brother Still Not Making Friends

Taiyo Pacific’s Tender Offer for Roland DG Corp (6789 JP) was to end Friday, but it was extended 10 days.
Roland DG provided an update regarding the status of the Brother overbid. It did not show as much strategic-mindedness as it might have.
Shares are now trading at a post-overbid high. Strategic missteps up the risk but Brother can pay more.

EQD | Nikkei 225 What’s Up Next: Up or Down?

By Nico Rosti

The Nikkei 225 Index last week bounced back, after a 2-weeks down pullback.
The index is at a fork in our view: it could go higher from here, but we would like to see a sustained, multi-week rally to be convinced.
If doubt about this potential rally continuation is strong, target the 40500-40800 price area to place SHORT trades against the index.

Ansarada (AND AU): Scheme Vote on 14 June

The Ansarada Group Ltd (AND AU) IE considers Datasite’s A$2.50 scheme offer fair and reasonable. However, the inter-conditional carve-out transaction is NOT fair but reasonable.
ACCC clearance (findings on 6 June) is a prerequisite for FIRB approval (scheme condition). As Datasite has a limited Australian presence, ACCC approval should be forthcoming.
The offer is attractive, with no vocal shareholder opposition. At the last close and for the 1 July payment, the gross/annualised spread was 2.5%/12.2%.

GEMWeekly (12 Apr 2024): South Korea, China Macro; Wipro, TSMC, Samsung Electronics, NetEase

By Wium Malan, CFA

The Global Emerging Markets Weekly summarizes the key news and related developments impacting the largest countries and constituents of the Global Emerging Markets equity indices.
Macro data points: South Korean interest rates, Chinese inflation data.
Companies mentioned:Wipro Ltd (WPRO IN), Taiwan Semiconductor (TSMC) (2330 TT), Samsung Electronics (005930 KS), NetEase (9999 HK)

Weekly Deals Digest (14 Apr) – L’Occitane, CGN New Energy, Azure, Genex, C&F Logistics, Riso Kyoiku

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: Kokusai Electric (6525 JP) and J&T Global Express (1519 HK) lock-ups. HD Hyundai Marine Solution (443060 KS), ZEEKR (ZK US)and Sichuan Baicha Baidao Industrial (SCBCBDID CH) IPOs.
Event-Driven developments L’Occitane (973 HK), CGN New Energy Holdings (1811 HK), Azure Minerals (AZS AU), Genex Power Ltd (GNX AU), Riso Kyoiku (4714 JP), Chilled & Frozen Logistics Holdings (9099 JP).

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Apr 13

Most Read: Mitsui Fudosan, Deep Yellow Ltd, Fast Retailing, CGN New Energy Holdings, Bandhan Bank Ltd, Melco International Development, Boral Ltd, The Keepers Holdings, Amvis Holdings Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JAPAN ACTIVISM: Mitsui Fudosan (8801) Responds to Elliott with Buyback, Amended Long-Term Plan
S&P/ASX Index Rebalance Preview: Potential Changes from Now to June
CGN New Energy (1811 HK): Evaluating a Potential Privatisation
Fast Retailing(9983) | Not So Fast
CGN New Energy (1811 HK): Takeover Rumours
NIFTY Bank Index Rebalance Preview: Canara Bank Still Cheap; Double Deletion for Bandhan?
StubWorld: Melco Gains As Lawrence Ho Buys
Boral Backs Seven’s “Enhanced” Offer
Keepers Holdings (KEEPR PM) FY23: 30% YoY, Net Cash, Growth 6.8x PE, And A 7.6% Dividend Yield
Updated TOPIX Big April Basket Flows; More Big Flows and ¥270bn a Side

JAPAN ACTIVISM: Mitsui Fudosan (8801) Responds to Elliott with Buyback, Amended Long-Term Plan

9 weeks ago, the FT reported Elliott Management had a stake in Mitsui Fudosan (8801 JP) and had asked them to sell cross-holdings and do a ¥1trln buyback.
The stock popped 7% the next day to ¥1302, on the highest volume since the covid crash, hesitated a day, then powered almost 20% higher through the end of March.
Today, Mitsui Fudosan responded with an Amendment to their Plan out to 2030. It has a higher dividend, a share buyback, higher EPS target growth, and higher ROE target. But…

S&P/ASX Index Rebalance Preview: Potential Changes from Now to June

With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.

CGN New Energy (1811 HK): Evaluating a Potential Privatisation

Bloomberg reports that CGN, the parent and largest shareholder, is reconsidering taking CGN New Energy Holdings (1811 HK) private.
CGN New Energy shares have underperformed the median peer’s shares since the announcement of CGN’s previous aborted privatisation attempt (2 March 2020) and on the last twelve-month basis.
The probability of an offer is high as CGN, an SOE has access to financing, and CGN New Energy’s valuation is low. We estimate a potential offer range of HK$2.80-4.30.

Fast Retailing(9983) | Not So Fast

Fast Retail missed analyst estimates for Q2 sales and operating profit. Revenue growth slowed to 5% YoY
Full year operating profit guidance maintained at Y450 billion, just slightly below the street
The stock is trading at 27x EV/EBIT, in-line with historical averages, but still expensive in absolute terms and versus global peers

CGN New Energy (1811 HK): Takeover Rumours

Another week, another rumoured (from Bloomberg) takeover. This time it’s for clean energy play CGN New Energy Holdings (1811 HK).
Back in 2020, CGN was subject to a potential privatisation from its SOE-parent – see CGN New Energy: The Latest SOE Clean Energy Play – but it failed to materialise.
A couple of years back, a “valuation system with Chinese characteristics” had the media discussing whether this implied a premium for SOEs and companies aligned with national goals.

NIFTY Bank Index Rebalance Preview: Canara Bank Still Cheap; Double Deletion for Bandhan?

Canara Bank (CBK IN) should replace Bandhan Bank Ltd (BANDHAN IN) in the NSE Nifty Bank Index (NSEBANK INDEX) at the September rebalance.
Passive trackers will need to buy nearly 2 days of ADV in Canara Bank (CBK IN) while selling over 1 day of ADV in Bandhan Bank Ltd (BANDHAN IN).
Canara Bank (CBK IN) is one of the best performing banking stocks while Bandhan Bank Ltd (BANDHAN IN) has been the worst performer over the last two years.

StubWorld: Melco Gains As Lawrence Ho Buys

Melco International (200 HK) gains as Lawrence Ho increases his position. Melco and 51.1%-held Melco Resorts (MLCO US) are the two worst performing gaming stocks over the past year.
Preceding my comments on Melco 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%.

Boral Backs Seven’s “Enhanced” Offer

After Boral (BLD AU) rejected Seven Group (SVW AU)‘s cash/scrip Offer, Seven slammed the Independent Expert’s report, calling the Target Statement “unbalanced, selective and risks fundamentally misleading Boral minority shareholders“.
Seven has now waived certain tendering thresholds, increasing the cash terms to A$1.70/share from A$1.50/share. Boral will also pay a fully-franked dividend of A$0.26/share, providing A$0.11/share of franking credits.
The IE now considers the Offer to be reasonable. Boral’s board recommends shareholders to accept. This is done.

Keepers Holdings (KEEPR PM) FY23: 30% YoY, Net Cash, Growth 6.8x PE, And A 7.6% Dividend Yield

By Sameer Taneja

The Keepers Holdings (KEEPR PM) demonstrated a 5-year CAGR of 16%/25% revenue/profit growth with an ROE averaging 20%.
FY23 surpassed our expectations with 17%/30% revenue and net profit growth. 4Q 2023 high season revenue and profit growth was an astounding 21%/75% YoY.
The stocks trades at 6.9x/6.2x PE FY23/FY24e with a 7.5% dividend yield (assuming ten centavos/dividend based on FY23 earnings for FY24 and a 50% payout ratio).

Updated TOPIX Big April Basket Flows; More Big Flows and ¥270bn a Side

Several days ago I published a piece showing the data for TOPIX flows for April month-end.
This is an update reflecting new data companies have reported to regulators, one large correction to a data provider’s data, and one Very Large Flow.
I believe that the revised data is more accurate. And there is more flow. With a spreadsheet attached.

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Apr 12

Most Read: Socionext, Mitsui Fudosan, Sompo Holdings, Alibaba Group Holding , Bank of Communications , CGN New Energy Holdings, Fast Retailing, Bharti Hexacom, Melco International Development and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Mar24 Nikkei 225 Rebal – Socionext, Disco, Zozo IN; US$4bn One-Way; More Impactful Than It Looks
JAPAN ACTIVISM: Mitsui Fudosan (8801) Responds to Elliott with Buyback, Amended Long-Term Plan
Sompo Holdings Cross-Shareholding – At Least US$8bn of Cross-Shareholding to Sell
Spending on Customers Precedes Customer Spending
EM Watch: China is preparing something BIG!
SSE50 Index Rebalance Preview: 5 Changes and US$2.7bn Round-Trip Trade
CGN New Energy (1811 HK): Evaluating a Potential Privatisation
Fast Retailing(9983) | Not So Fast
Bharti Hexacom IPO: Index Inclusion Timeline
StubWorld: Melco Gains As Lawrence Ho Buys

Mar24 Nikkei 225 Rebal – Socionext, Disco, Zozo IN; US$4bn One-Way; More Impactful Than It Looks

The changes to the Nikkei 225 Average for the March 2024 Review were announced today after the close. A little earlier than I expected.
Socionext, Disco, Zozo IN; Takara Hldgs, Sumi Osaka Cement, Pacific Metals OUT. Nitori PAF increase. US$4bn+ to trade one way on 29Mar close. One interesting surprise.
Overall more impactful than it looks. And it changes the front-end arithmetic on Fast Retailing (9983 JP). There may be fun on the DELETEs.

JAPAN ACTIVISM: Mitsui Fudosan (8801) Responds to Elliott with Buyback, Amended Long-Term Plan

9 weeks ago, the FT reported Elliott Management had a stake in Mitsui Fudosan (8801 JP) and had asked them to sell cross-holdings and do a ¥1trln buyback.
The stock popped 7% the next day to ¥1302, on the highest volume since the covid crash, hesitated a day, then powered almost 20% higher through the end of March.
Today, Mitsui Fudosan responded with an Amendment to their Plan out to 2030. It has a higher dividend, a share buyback, higher EPS target growth, and higher ROE target. But…

Sompo Holdings Cross-Shareholding – At Least US$8bn of Cross-Shareholding to Sell

The Japanese Financial Services Agency has asked the general insurers to reduce/eliminate their cross-shareholdings.
Sompo Holdings (8630 JP) had a stake over US$100m in at least 16 listed Japanese stocks, amounting to a total of around US$6bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

Spending on Customers Precedes Customer Spending

By Ying Pan

We expect Alibaba to report CY1Q24 top-line, non-GAAP EBITA and non-GAAP net income in-line, (14.2%) and (7.4%) vs. consensus. We cut non-GAAP EBITA by 10% and kept topline unchanged;
BABA is prioritizing growth of both AliCloud and cross-border ecommerce (AliExpress), which will weaken profitability in the near-term but is the right thing to do.
BABA is transforming itself into Chinese Microsoft with hopes of e-commerce mainly pinned on overseas. We maintain BUY and US$ 85 TP, implying 9.5x CY24 P/E.

EM Watch: China is preparing something BIG!

By Andreas Steno

The below chart of ours have made the rounds in recent days and weeks as China seems to be preparing for something big given the heavy restocking efforts in Copper space.
As the price trends are diverging in copper versus steel and iron ore, the strategic initiatives of China are becoming increasingly evident in price action across the commodity complex, but we are yet to fully understand and accept the ramifications for global rates.
We have read plenty of bad takes on why China is building up copper reserves and the most obvious reason seems to be neglected by many.

SSE50 Index Rebalance Preview: 5 Changes and US$2.7bn Round-Trip Trade

With the review period nearing completion, 6 stocks are in inclusion zone and 8 are in deletion zone. However, there can be a maximum of 5 changes at a review.
We estimate a one-way turnover of 7% at the June rebalance leading to a one-way trade of CNY 9.7bn (US$1.34bn). Index arb balances could increase the impact on the stocks.
The inflows into mainland China ETFs have further increased the flow and impact on the potential changes. The potential adds have continued to outperform the potential deletes.

CGN New Energy (1811 HK): Evaluating a Potential Privatisation

Bloomberg reports that CGN, the parent and largest shareholder, is reconsidering taking CGN New Energy Holdings (1811 HK) private.
CGN New Energy shares have underperformed the median peer’s shares since the announcement of CGN’s previous aborted privatisation attempt (2 March 2020) and on the last twelve-month basis.
The probability of an offer is high as CGN, an SOE has access to financing, and CGN New Energy’s valuation is low. We estimate a potential offer range of HK$2.80-4.30.

Fast Retailing(9983) | Not So Fast

Fast Retail missed analyst estimates for Q2 sales and operating profit. Revenue growth slowed to 5% YoY
Full year operating profit guidance maintained at Y450 billion, just slightly below the street
The stock is trading at 27x EV/EBIT, in-line with historical averages, but still expensive in absolute terms and versus global peers

Bharti Hexacom IPO: Index Inclusion Timeline

Telecommunications Consultants India Limited (TCIL) raised US$513m by selling 15% of the shares outstanding in Bharti Hexacom (6597372Z IN). Post the sale, they still hold 15% of the company.
Bharti Hexacom (6597372Z IN) will start trading on 12 April and the grey market indicates the stock will open at INR 664/share, 16.5% higher than the IPO price.
Bharti Hexacom should be added to one smallcap index in August and another smallcap index in December. A move above INR 700/share could result in midcap inclusion in December.

StubWorld: Melco Gains As Lawrence Ho Buys

Melco International (200 HK) gains as Lawrence Ho increases his position. Melco and 51.1%-held Melco Resorts (MLCO US) are the two worst performing gaming stocks over the past year.
Preceding my comments on Melco 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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Apr 11

Most Read: China Traditional Chinese Medicine, Deep Yellow Ltd, HD Hyundai Marine Solution , KT Corp, Aozora Bank Ltd, 3peak , Chilled & Frozen Logistics Holdings, Bank of Communications and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China TCM (570.HK) – Latest Updates on Privatization and the Potential Merger with Taiji Group
Let’s Talk Aussie Franking Credits
S&P/ASX Index Rebalance Preview: Potential Changes from Now to June
HD Hyundai Marine Solution IPO Valuation Analysis
Early Sign of AI GPU Market Inflection Point?
KT’s Foreign Room Below 7.5%, Weight Down-Adjustment Expected in May, Resulting in 3x ADTV Outflow
JAPAN ACTIVISM: Murakami’s Aozora Bet Not Going Anywhere, But No Sales Yet
Quiddity Leaderboard STAR 50 Jun 24: 3 ADDs/DELs Possible but Should Be Monitored Closely
Chilled & Frozen Logistics (9099 JP): Pass The🍿as the Board Responds to AZ-COM Maruwa (9090 JP)
SSE50 Index Rebalance Preview: 5 Changes and US$2.7bn Round-Trip Trade

China TCM (570.HK) – Latest Updates on Privatization and the Potential Merger with Taiji Group

By Xinyao (Criss) Wang

Since “no dividend was proposed for the year ended 31 December 2023”, the privatization is highly likely to succeed. It may not be wise for investors to bet against privatization.
The recent high-level personnel changes in Taiji is “thought-provoking”, which seems to be preparing for the next step of integrating with China TCM. Spin-offs and integrations are expected within Taiji.
We analyzed possible playbook. In this way, CNPGC is able to solve the problem of horizontal competition. China TCM could also relist in A-share to gain higher valuations/better liquidity.

Let’s Talk Aussie Franking Credits

To an Australian individual investor, franking credits simply recognise tax already paid by a company on their earnings. These credits may reduce tax you would otherwise pay on dividend income.
This dividend imputation system prevents double taxation and essentially treats company tax paid as a prepayment of shareholder tax.
The system makes a lot of sense. It’s a curious thing so few countries have adopted a similar corporate tax structure.

S&P/ASX Index Rebalance Preview: Potential Changes from Now to June

With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.

HD Hyundai Marine Solution IPO Valuation Analysis

Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, representing an 18% upside from the high end of the IPO price range.
The company’s ROE averaged 67% in 2022 and 2023. In comparison, the comps’ ROE averaged 10.6% in the same period. [HD Hyundai Marine Solution > Comps]
Our base case valuation is based on 24.7x P/E (comps’ average) using our estimated net profit of 178.7 billion won for the company in 2024.

Early Sign of AI GPU Market Inflection Point?

By Andrew Lu

Taiwan Dell said “AI GPU shortage issue has been resolved. The lead time has been cut from 40 weeks by the end of 2023 to 8-12 weeks or less now.
We see this news short term positive but medium term negative to AI GPU supply chain vendors but need more information to confirm if this is an inflection point.
1. Taiwan Dell got priority supply? 2. Earlier overbooking over? 3. Lead time cut by supply upside? 4. Cooling company said the same; 5. Will lead time continue to shrink?

KT’s Foreign Room Below 7.5%, Weight Down-Adjustment Expected in May, Resulting in 3x ADTV Outflow

KT’s foreign ownership declined since January, below 7.5% by last month. If it remains, the adjustment factor halves to 0.25, impacting KT’s Global Index weight.
With the May review screening date estimated for April 17th, swift reversal of foreign inflows seems improbable. Thus, KT’s adjustment factor dropping to 0.25 is likely.
This could lead to an outflow of 1.6M shares, approximately 3x ADTV. Given the prolonged price impact on telcos, exploring a long-short setup with SKT might be prudent.

JAPAN ACTIVISM: Murakami’s Aozora Bet Not Going Anywhere, But No Sales Yet

Just under 6 weeks ago, Japanese activist Murakami-san’s company and daughter reported a 5+% stake in Aozora Bank Ltd (8304 JP). They bought after a sharp dip caused CRE-related writedowns.
As is normal, they bought more (now 8.92%) post-5%-filing-trigger, but before the actual first filing. And as is normal these days, the stock popped on the first filing.
Then it fell, and hasn’t recovered much. So far, on a weighted basis, they are up 1% vs TOPIX Banks Index.

Quiddity Leaderboard STAR 50 Jun 24: 3 ADDs/DELs Possible but Should Be Monitored Closely

By Janaghan Jeyakumar, CFA

STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the June 2024 index rebal event.
I currently expect three changes resulting in a one-way flow of around US$531mn but there is still room for the expectations to change.

Chilled & Frozen Logistics (9099 JP): Pass The🍿as the Board Responds to AZ-COM Maruwa (9090 JP)

The Chilled & Frozen Logistics Holdings (9099 JP) Board has responded with several questions regarding AZ-Com Maruwa Holdings (9090 JP)’s pre-conditional hostile offer of JPY3,000 per share.
The Board questions the transaction’s schedule, terms and potential synergies. The Board has also used the ruse that due diligence access would justify a higher offer price.
Expect several rounds of Q&A and a delay to the tender start. If shares continue trading through terms ahead of the tender start, AZ-COM Maruwa will likely have to bump.

SSE50 Index Rebalance Preview: 5 Changes and US$2.7bn Round-Trip Trade

With the review period nearing completion, 6 stocks are in inclusion zone and 8 are in deletion zone. However, there can be a maximum of 5 changes at a review.
We estimate a one-way turnover of 7% at the June rebalance leading to a one-way trade of CNY 9.7bn (US$1.34bn). Index arb balances could increase the impact on the stocks.
The inflows into mainland China ETFs have further increased the flow and impact on the potential changes. The potential adds have continued to outperform the potential deletes.

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Apr 10

Most Read: L’Occitane, Ryohin Keikaku, Riso Kyoiku, Aichi Financial Group , Hainan Jinpan Smart Technology, Bangchak Corporation, Shanghai Electric Group Company, HD Hyundai Marine Solution , WT Microelectronics, Deep Yellow Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

L’Occitane (973 HK): Blackstone Pondering an Offer
Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is
Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51%
The TOPIX Big April Basket Flows: ¥200bn a Side Including Many Multi-ADV Flows
STAR100 Index Rebalance Preview: 10 Changes as Potential Adds Outperform
SET50 Index Rebalance Preview: Three Potential Changes in June
Quiddity Leaderboard CSI 300/500 Jun 24: SHORTs Down 11% Vs Index Since Mid-Feb; Change the Hedge
HD Hyundai Marine Solution IPO Valuation Analysis
WT Micro Placement – Another Well-Flagged Taiwan GDR Offering, This One Is Easier to Digest
S&P/ASX Index Rebalance Preview: Potential Changes from Now to June

L’Occitane (973 HK): Blackstone Pondering an Offer

Bloomberg reports that L’Occitane (973 HK) draws takeover interest from Blackstone (BX US), which is considering partnering with Chairman and largest shareholder Reinold Geiger.
Blackstone needs an attractive takeover premium due to the presence of significant disinterested shareholders (Mr. Geiger and Acatis KVG).
Shareholders will be wary of the latest rumour due to Mr Geiger’s aborted offer on 4 September 2023. Nevertheless, the valuation is undemanding compared to peer multiples.

Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is

The March 2024 rebal is done and dusted. When announced, there were 2 prospective DELETEs for Sep 2024. Now there is only one expected DELETE, Nippon Paper Industries (3863 JP).
The one likely inclusion is therefore Ryohin Keikaku (7453 JP). But there is more fun afoot with Fast Retailing (9983 JP) and Tokyo Electron (8035 JP).
The two stocks – of totally different sectors – interact somewhat, both in determining Nikkei 225 direction, and their relative potential selldowns.

Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51%

Today, cram school operator Riso Kyoiku (4714 JP) and 20% owner real estate developer Hulic Co Ltd (3003 JP) amended their Capital and Business Alliance agreement.
Hulic will buy 25.5% of shares out in a Partial Offer at +43.5% vs last. Then post-tender, they will buy shares at last from the company to go to 51.%
The founder will sell his 10%. The rest is interesting. It’s a high ROE high div stock. Some own it from higher. Pro-ration is tough to estimate. But we try.

The TOPIX Big April Basket Flows: ¥200bn a Side Including Many Multi-ADV Flows

Every year in April there is an interesting phenomenon with TOPIX. It is what Janaghan Jeyakumar, CFA calls “The Big April Basket.” The TSE re-assesses Liquidity Factor Coefficients.
It also does a FFW change, and this year it has Phased Weight Reductions for those slowly leaving TOPIX and PWR re-inclusions for those identified last October as going back.
Janaghan had 18 “High Conviction” LF removals. All were hits. They are upweights. Then there are 34 changes to FFW coefficients.

STAR100 Index Rebalance Preview: 10 Changes as Potential Adds Outperform

The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
We forecast 10 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX).
Excluding the migrations, the potential adds have outperformed the potential deletes over the last few months and that could continue as we head to the end of the review period.

SET50 Index Rebalance Preview: Three Potential Changes in June

Nearing the halfway mark in the review period, we see 3 potential changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the June rebalance.
Passive trackers will need to buy between 1.2-4.5 days of ADV on the inclusions and sell 0.9-1.3 days of ADV on the deletions.
Berli Jucker (BJC TB) continues to be a close add on liquidity while Gulf Energy Development (GULF TB) and Intouch Holdings (INTUCH TB) continue to be close deletes.

Quiddity Leaderboard CSI 300/500 Jun 24: SHORTs Down 11% Vs Index Since Mid-Feb; Change the Hedge

By Janaghan Jeyakumar, CFA

CSI 300 represents the 300 largest stocks by marketcap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500. There is subjectivity.
Here we look at potential ADDs/DELs for the CSI 300/500 rebalance in June 2024. With 93% of time passed, I expect 11 changes for CSI300, 50 for CSI 500.
Some names have changed since my last insight, but the long/short trades recommended eight weeks ago gained 11.26% since. We make small changes this time.

HD Hyundai Marine Solution IPO Valuation Analysis

Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, representing an 18% upside from the high end of the IPO price range.
The company’s ROE averaged 67% in 2022 and 2023. In comparison, the comps’ ROE averaged 10.6% in the same period. [HD Hyundai Marine Solution > Comps]
Our base case valuation is based on 24.7x P/E (comps’ average) using our estimated net profit of 178.7 billion won for the company in 2024.

WT Micro Placement – Another Well-Flagged Taiwan GDR Offering, This One Is Easier to Digest

By Clarence Chu

WT Microelectronics (3036 TT) is looking to raise US$341m in its GDR offering. The proceeds will be used to purchase raw materials overseas.
The deal is a very well flagged one, and will be a relatively small one to digest at just 4.8 days of the stock’s three month ADV.
In this note, we run the deal through our ECM framework and comment on the deal dynamics.

S&P/ASX Index Rebalance Preview: Potential Changes from Now to June

With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.

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Apr 09

Most Read: Riso Kyoiku, Zijin Mining Group Co Ltd H, Ryohin Keikaku, Azure Minerals, APM Human Services, Samsung Electronics and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Azure Min (AZS AU): Trading Wide Ahead Of 8th April Vote
Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51%
HSCEI Index Rebalance Preview: One Change or Two in June?
Riso Kyoiku (4714 JP): Hulic (3003 JP)’s Partial Tender Offer
Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is
Azure Minerals (AZS AU): FIRB Approval Concerns Are Overdone
APM (APM AU): Madison Dearborn’s “Disappointing” NBIO
Samsung Electronics: Block Deal Sale of 5.2 Million Shares by Lee Boo-Jin
Samsung Electronics Placement – Better Timing This Time Around
S-REITs: Climate Disclosures and Inclusion in ESG-Related Equity Indexes

Azure Min (AZS AU): Trading Wide Ahead Of 8th April Vote

Back on the 19th Dec, Sociedad Quimica y Minera (SQM/B CI)/Hancock offered Azure Minerals (AZS AU) shareholders A$3.70/share by way of a Scheme, a ~52% premium to the undisturbed price.
Creasy Group (12.64%) and Delphi Group (10.15%) gave irrevocables. Mineral Resources (MIN AU)‘s 14.5% stake was unclear; but they exited on the 21 Feb. “Arbitrageurs should arb. Corporations should Corp“.
The Transaction Booklet is now out with a Scheme Meeting on the 8th April. The IE says fair. Expected implementation on the 18 April.

Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51%

Today, cram school operator Riso Kyoiku (4714 JP) and 20% owner real estate developer Hulic Co Ltd (3003 JP) amended their Capital and Business Alliance agreement.
Hulic will buy 25.5% of shares out in a Partial Offer at +43.5% vs last. Then post-tender, they will buy shares at last from the company to go to 51.%
The founder will sell his 10%. The rest is interesting. It’s a high ROE high div stock. Some own it from higher. Pro-ration is tough to estimate. But we try.

HSCEI Index Rebalance Preview: One Change or Two in June?

SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.

Riso Kyoiku (4714 JP): Hulic (3003 JP)’s Partial Tender Offer

Riso Kyoiku (4714 JP) announced a partial tender offer and third-party allotment with Hulic Co Ltd (3003 JP), the largest shareholder. Hulic aims to make Riso Kyoiku a consolidated subsidiary.
The offer is for a maximum of 39.4 million shares (23.15% post-allotment ownership ratio) at JPY320 per share, a 46.8% premium to the undisturbed price (5 April).
Irrevocable (from the founder and Chairman) represents a 9.26% post-allotment ownership ratio. The offer is light, but there is no minimum acceptance condition.

Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is

The March 2024 rebal is done and dusted. When announced, there were 2 prospective DELETEs for Sep 2024. Now there is only one expected DELETE, Nippon Paper Industries (3863 JP).
The one likely inclusion is therefore Ryohin Keikaku (7453 JP). But there is more fun afoot with Fast Retailing (9983 JP) and Tokyo Electron (8035 JP).
The two stocks – of totally different sectors – interact somewhat, both in determining Nikkei 225 direction, and their relative potential selldowns.

Azure Minerals (AZS AU): FIRB Approval Concerns Are Overdone

Azure Minerals (AZS AU) shareholders have overwhelmingly approved the dual-track bid from Sociedad Quimica y Minera de Chile (SQM US) and Hancock. The scheme offer is A$3.70 per share.
The shares fell 7%, seemingly due to concerns about FIRB approval sparked by FIRB’s request for an extension on 3 April and today’s AFR article on China’s Australian lithium holdings.
FIRB approval should be forthcoming due to Tianqi Lithium (9696 HK) small indirect interest in Andover, Lithium Power International (LPI AU) precedent, and SQM and Tianqi’s strained relationship.

APM (APM AU): Madison Dearborn’s “Disappointing” NBIO

On the 28th Feb, PE-outfit CVC Asia Pacific bumped its NBIO to A$2.00/share, and was granted exclusive due diligence. On the 27th Mar, CVC said they were “unable to proceed“.
Today, the 8th April, Madison Dearborn Partners, holding ~29%, has pitched an non-indicative, non-binding Offer at A$1.40/share, in cash, by way of a Scheme. An unlisted scrip option is available.
A key condition is APM Human Services (APM AU)‘s executive-chair Megan Wynne, founding related parties, and key management, electing scrip. The Independent Board Committee reckons the Offer Price is disappointing.

Samsung Electronics: Block Deal Sale of 5.2 Million Shares by Lee Boo-Jin

After the market close on 8 April, it was reported that Lee Boo-Jin will sell 5,247,140 shares of Samsung Electronics in a block deal (up to 443 billion won).
The expected block deal sale price is 83,700 to 84,500 won per share, which represents a discount rate of up to 0.95% compared to the closing price on 8 April.
We are positive on this block deal sale and on Samsung Electronics. We would take the deal.

Samsung Electronics Placement – Better Timing This Time Around

KEB Hana Bank, on behalf of Lee Boo-Jin, is looking to raise up to US$325m via selling 0.1% of Samsung Electronics (005930 KS).
The deal appears to be somewhat well flagged and the company recently reported better operating numbers for 1Q24.
In this note, we will run the deal through our ECM framework and talk about the recent updates.

S-REITs: Climate Disclosures and Inclusion in ESG-Related Equity Indexes

By Kyle Rudden

New SGX climate-related disclosure requirements based on ISSB’s standards are more stringent than current requirements, most notably regarding mandatory Scope 3 emissions reporting.
The implications for S-REITs are significant. Real Estate is one of the most emissions-intensive sectors, and Scope 3 emissions comprise 85-95% of total emissions for real estate companies.
Motivated by a strong “business case” for best-in-class climate performance and transparency, many S-REITs are ahead of the curve, evidenced by prominence in climate-related indexes.

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Apr 08

Most Read: Lalatech Holdings Co Ltd, J&T Global Express , Rakuten, Jastec Co Ltd, Zijin Mining Group Co Ltd H, GS Holdings, JSR Corp, Hanmi Semiconductor, Adani Enterprises, APT Medical and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

TRACKING TRAFFIC/Lalatech IPO: Attractive Segment | ‘Unbelievable’ Cost Control | Hidden Competition
J&T Global Express (1519 HK): The US$9.9 Billion Lock up Expiry
Last Week in Event SPACE: JSR, Austal, Rakuten, Hyundai Home Shopping, Hanmi Science
NTT Data’s ¥1,940/Share Deal For Jastec (9717) – Not Enough But Probably Enough
HSCEI Index Rebalance Preview: One Change or Two in June?
Observations on Post-Election Flows of Value-Up Stocks, Based on Recent Local Institutional Trades
Merger Arb Mondays (08 Apr) – JSR, Jastec, Shinko, Azure, Genex, Best World, Isetan
KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High
SENSEX Index Rebalance Preview: Wipro Deletion to Bring Sector Balance into Play
STAR50 Index Rebalance Preview: APT Medical Moving Higher

TRACKING TRAFFIC/Lalatech IPO: Attractive Segment | ‘Unbelievable’ Cost Control | Hidden Competition

By Daniel Hellberg

Lalatech’s largest segment by revenue — Chinese intra-city on-demand freight — features many of the attributes that are attractive to online logistics intermediaries
At the top of the list of red flags in its prospectus is Lalatech’s company’s dramatic 71% Y/Y reduction in Sales and Marketing expenses last year
Although Lalatech appears to be the leading platform for Chinese intra-city on-demand freight matching, the company faces ‘hidden’ competition from several larger groups

J&T Global Express (1519 HK): The US$9.9 Billion Lock up Expiry

J&T Global Express (1519 HK)’s 180-day IPO lock-up period for 88% of outstanding shares expires on 24 April. The shares exiting the lock-up period are worth US$9.9 billion.
The likely sellers will be the Series pre-A1, pre-A2, A and B investors as are they are materially in the money at the last close price.
J&T has returned to organic growth with a shift to profits and declining cash burn. While the last close is 17% below the IPO price, the shares are fairly valued.

Last Week in Event SPACE: JSR, Austal, Rakuten, Hyundai Home Shopping, Hanmi Science

Murakami to tender stake in JSR Corp (4185 JP)? Maybe the “double arb”: i.e. short on swap, long on cash, will tender the cash, remain short the back end.
Austal Ltd (ASB AU) rejected (for now) Hanwha Ocean (042660 KS)‘s bid based on regulatory concerns. Hanwha reckons these should not be an issue.
If you can tolerate owning the mobile biz, buy Rakuten (4755 JP) on dips. If not, avoid Rakuten Group and Rakuten Bank short-term; buy Rakuten Bank on larger dips.

NTT Data’s ¥1,940/Share Deal For Jastec (9717) – Not Enough But Probably Enough

NTT Data Corp (9613 JP) on Friday announced a Tender Offer to take over small custom software developer and system integrator Jastec Co Ltd (9717 JP).
It’s at a premium. But for a growing company ahead of “The 2025 Problem” where synergies are expected, you’d want to get a premium vs where comps trade. You don’t.
But this gets to near 50% just from friendlies. Someone who wanted to interfere would have to be publicly noisy. I expect this gets done.

HSCEI Index Rebalance Preview: One Change or Two in June?

SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.

Observations on Post-Election Flows of Value-Up Stocks, Based on Recent Local Institutional Trades

Opposition’s probable win in the election sparks concerns about Value-up initiative’s momentum. However, market sentiment doesn’t universally echo these worries.
Value-Up stocks’ recent corrections likely stem from Q4 dividend arbitrage liquidation, rather than election result concerns.
Post-Election, even if the opposition wins, the left-leaning Value-up program might continue, limiting the opposition’s influence, as seen in recent National Pension Service flows.

Merger Arb Mondays (08 Apr) – JSR, Jastec, Shinko, Azure, Genex, Best World, Isetan

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Jastec Co Ltd (9717 JP), Qantm Intellectual Property (QIP AU), Southern Cross Media (SXL AU), Genex Power Ltd (GNX AU), QV Equities Ltd (QVE AU), China TCM.
Lowest spreads: Roland DG Corp (6789 JP), Tietto Minerals Ltd (TIE AU), Newmark Property REIT (NPR AU), Mma Offshore (MRM AU), CPMC Holdings (906 HK), Pact Group Holdings (PGH AU).

KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High

Around 85% of the way through the review period, we see four changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance.
The impact on the potential inclusions ranges from 0.4-8 days of ADV while the impact on the potential deletions varies from 1-13 days of ADV.
Hanmi Semiconductor (042700 KS) is up 72% in the last two months following its appearance on the list of potential Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusions in June.

SENSEX Index Rebalance Preview: Wipro Deletion to Bring Sector Balance into Play

Nearly 90% of the way through the review period of the June rebalance, we see one potential index change with Wipro Ltd (WPRO IN) in deletion zone.
Oil & Natural Gas Corp (ONGC IN), Coal India Ltd (COAL IN) and Adani Enterprises (ADE IN) are potential replacements with sector balance likely to come into play.
Passive trackers will need to trade over 13 days of delivery volume on the potential index changes.

STAR50 Index Rebalance Preview: APT Medical Moving Higher