Most Read

The JIC Deal for Shinko Electric Industries (6967 JP) started trading wide when announced five weeks ago. It is still at 9% for perhaps 9 months.
There is FUD. There are Flows. Just like JSR (4185). Some of that FUD can be explained by “gap risk” on deal break…. or can it? We look at risks.
5 weeks ago, there was more positioning risk than fundamental risk. But now main comp Ibiden has outperformed Shinko by 17%. Gap risk is fundamentally lower now. Bump risk exists.

Furuya Metal (7826 JP) TOPIX Inclusion: Big Impact but Even Bigger Overhang

By Janaghan Jeyakumar, CFA

On 16th November 2023, Tokyo-based Industrial-use precious metal products manufacturer Furuya Metal (7826 JP) announced they would be moving from TSE Standard to TSE Prime on 6th December 2023.
This move would trigger a TOPIX Index Inclusion event at the end of January 2024 which would require all the TOPIX-tracking passive funds to buy shares in the company.
The company also launched an offering in conjunction with the TSE Prime announcement. In this insight, we take a look at the flow dynamics of the upcoming TOPIX Inclusion event.

Ping An A/H Premium: Blow Out Could Lead to Sharp Reversal

Ping An Insurance (601318 CH) trades at a 40% premium to Ping An Insurance (2318 HK). The premium has blown out the last week and there could be a reversal.
The difference in Ping An’s AH premium versus the HSAHP Index has shrunk to its narrowest level in the last 10 years.
Shareholding in Ping An Insurance Group of (601318 CH) via Northbound Connect has dropped and shareholding in Ping An Insurance (H) (2318 HK) via Southbound Connect has increased steadily.

TSE Action to Implement Management Conscious of Capital Cost and Stock Price – The Data Tool

A few days ago, the TSE announced a “name-and-shame” list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】
That translates to “Action to Implement Management That is Conscious of Cost of Capital and Stock Price”. The TSE asked companies in Mar-2023 to formulate and disclose a policy.
Some have. Some have not. The TSE made a list. They will update the list every month. However, their list is wholly inadequate, so we made it better.

CSI300 Index Rebalance Preview: A Dozen Changes for June

With three-quarters of the review period nearly complete, there could be 12 changes for the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) in June.
We estimate one-way turnover of 1.3% at the June rebalance leading to a one-way trade of CNY 5.06bn. There are a lot of stocks with over 1x ADV to trade.
There have been big ETF inflows to the CSI 300 Index trackers, but the potential adds have still outperformed the index and the potential deletes.

ASMedia Placement – Momentum Has Been Strong, but an Overhang Exists

WT Microelectronics (3036 TT) is looking to raise US$256m from selling half of its stake in Asmedia Technology (5269 TT).
The deal wouldn’t be a very large one to process at just 3.4 days of ASMedia’s ADV.
Although, the selldown doesn’t appear to be particularly well flagged. The remaining WT Microelectronics’ stake will also create an overhang on ASMedia’s share price as well.

T&K TOKA (4636 JP): Bletcherous Bain Bump Doesn’t Even Reach Blandiloquent – Another Offensive Deal

I expected a blandiloquent but bletcherous bump from Bain. Discussed in T&K TOKA (4636 JP): Expect ANOTHER Blandiloquent But Bletcherous Bump From Bain. We got bletcherous.
But at a mere ¥10 uplift to ¥1,410, we did not get blandiloquent. That’s insulting. But as suggested in the first piece, there was NAVF Risk. And we got it.
NAVF agreed to sell its 24+% to Bain at ¥1,410 in return for being able to buy 15% of the bidco, fully-levered (i.e. they roll in at minimal cost).

KOSDAQ150 Adhoc Index Rebalance: Seronics to Replace L&F

L&F Co Ltd (066970 KS) will move from the KOSDAQ Market to the KOSPI Market on 29 January. That means KOSDAQ 150 Index deletion at the close on 26 January.
As the highest ranked non-constituent from the Information Technology sector at the December rebalance, Seronics Co Ltd (042600 KS) will be added to the index.
Short interest on L&F Co (066970 KS) is 1.8m shares (KRW 364bn; 4.98% of shares outstanding; 7.24% of float; 2.4x ADV). There could be recalls from passives and forced covering.

CSI500 Index Rebalance Preview: High Turnover & Big Flow

With three-quarters of the review period nearly complete, we forecast 50 changes (the maximum permitted) for the CSI 500 Index at the close on 14 June.
There is a big sector skew in the potential changes. We estimate a one-way turnover of 9.1% at the June rebalance resulting in a one-way trade of CNY 5.34bn.
The potential adds and deletes and the CSI 500 Index have performed in line since August and the current setup appears attractive.

Amer Sports (AS US) IPO: Valuation Insights

Amer Sports (AS US) is a global iconic sports and outdoor brand group. Amer has launched an NYSE IPO to raise US$1.6-1.8 billion at a US$16.00 to US$18.00 price range.
We previously discussed the IPO in Amer Sports IPO: The Bull Case, Amer Sports IPO: The Bear Case and Amer Sports IPO: Valuation First-Look.
We revise our forecasts to reflect the FY23 preliminary estimates and long-term growth targets. Our valuation analysis suggests that Amer is fairly valued at the IPO price range.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jan 22

Most Read: Shinko Electric Industries, Denso Corp, Budweiser Brewing APAC , Ping An Insurance (H), JSR Corp, Benefit One Inc, Activia Properties, Korea Stock Exchange KOSPI 200, Ganfeng Lithium and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Shinko Electric (6967) Takeover: Changing Break/Gap Risk as Comps Gain
The Hunt for the Japanese Laggards, Here Are 47 Attractive Companies
Index Rebalance & ETF Flow Recap: ASX, KS200, KQ150, HSIII, STTF, L&F, Costa Group, Japan, Bud APAC
Ping An A/H Premium: Blow Out Could Lead to Sharp Reversal
Merger Arb Mondays (22 Jan) – JSR, Benefit One, T&K Toka, Guppy’s, Genetron, Weiqiao, Probiotec
Last Week in Event SPACE: Benefit One, China Unicom, Zhejiang Expressway/ Zheshang Sec, Hollysys
Activia Properties (3279) – Short-Term Higher-Impact Buyback on Better Fundamental Results
Ohayo Japan | Stocks Surge; Japan’s Seven-Year Streak of Prosperity
KRX Introduces Market Orders for Single Stock Futures: Potential Trading Impacts
A/H Premium Tracker (To 19 Jan 2024): Hs Shellacked Vs As. Near Multi-Year High Average AH Premia

Shinko Electric (6967) Takeover: Changing Break/Gap Risk as Comps Gain

The JIC Deal for Shinko Electric Industries (6967 JP) started trading wide when announced five weeks ago. It is still at 9% for perhaps 9 months.
There is FUD. There are Flows. Just like JSR (4185). Some of that FUD can be explained by “gap risk” on deal break…. or can it? We look at risks.
5 weeks ago, there was more positioning risk than fundamental risk. But now main comp Ibiden has outperformed Shinko by 17%. Gap risk is fundamentally lower now. Bump risk exists.

The Hunt for the Japanese Laggards, Here Are 47 Attractive Companies

By Mohshin Aziz

Tokyo Stock Exchange (TSE) has published the list of companies that are conscious of stock capital and share price; this will be a recurring monthly feat
The initial compliance rate is encouraging and should continue to grow as peer pressure is relentless and doing nothing is not an option. The shake-up is happening
We narrow down a list of companies that are the most compelling laggard opportunities based on their low price to book ratio (PBR) and strong balance sheet

Index Rebalance & ETF Flow Recap: ASX, KS200, KQ150, HSIII, STTF, L&F, Costa Group, Japan, Bud APAC

The review period for a global index commenced last week and will run through this week as well.
The announcement of the changes for the LQ45 Index should be announced in the coming week and will be implemented at the close on 31 January.
Huge inflows to CSI 300 Index trackers during the week while there was a big outflow from Tracker Fund of Hong Kong (2800 HK).

Ping An A/H Premium: Blow Out Could Lead to Sharp Reversal

Ping An Insurance (601318 CH) trades at a 40% premium to Ping An Insurance (2318 HK). The premium has blown out the last week and there could be a reversal.
The difference in Ping An’s AH premium versus the HSAHP Index has shrunk to its narrowest level in the last 10 years.
Shareholding in Ping An Insurance Group of (601318 CH) via Northbound Connect has dropped and shareholding in Ping An Insurance (H) (2318 HK) via Southbound Connect has increased steadily.

Merger Arb Mondays (22 Jan) – JSR, Benefit One, T&K Toka, Guppy’s, Genetron, Weiqiao, Probiotec

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 – GUPPY’s Inc (5127 JP), Hollysys Automation Technologies (HOLI US), Shinko Electric Industries (6967 JP), Probiotec Ltd (PBP AU), Irc Ltd (1029 HK), Genetron Holdings Ltd (GTH US).
Lowest spreads – T&K Toka Co Ltd (4636 JP), Tietto Minerals Ltd (TIE AU), Benesse Holdings (9783 JP), Benefit One Inc (2412 JP), Orecorp Ltd (ORR AU).

Last Week in Event SPACE: Benefit One, China Unicom, Zhejiang Expressway/ Zheshang Sec, Hollysys

Dai Ichi Life (8750 JP) has the wherewithal, and probably the synergies to make a bump for Benefit One (2412 JP) work. M3 is clearly not in the driver’s seat.
China United Network (600050 CH) is, for all intent and purpose, a pseudo-A to China Unicom (762 HK). Go long Unicom, short United due to Unicom’s significantly cheaper valuation.
Zhejiang Expressway (576 HK) has had a stonking run since its rights issue. Look to unwind this set-up and take the other side: short Expressway, long Zheshang Securities (601878 CH).

Activia Properties (3279) – Short-Term Higher-Impact Buyback on Better Fundamental Results

Activia Properties (3279 JP) announced results Wednesday. Higher DPU on better rental income looks to continue next period, but an asset disposal will produce some drag ahead.
Activia Properties also announced a buyback of 10% of ADV for the next four months.
The REIT is slightly cheap to peers. Yield spread to JGBs is high which is good. It needs to be 10% higher to restart accretive equity offerings.

Ohayo Japan | Stocks Surge; Japan’s Seven-Year Streak of Prosperity

By Mark Chadwick

Last week, stocks surged, propelling the S&P 500 and Dow Jones to record highs. Positive economic data and consumer sentiment overshadowed a decline in existing home sales.
This week, CB meetings in the eurozone, Canada, and BoJ (Tues) will shape market expectations. US earnings will further contribute to a dynamic week.
Japan’s equity market remains popular, but divergence from the PMI output index raises concerns of overheating. A flash PMI (Wed) report will provide insight into Japan’s growth conditions.

KRX Introduces Market Orders for Single Stock Futures: Potential Trading Impacts

KRX notified local brokerages last week about allowing market orders for single stock futures (SSF) from April. Currently, 192 SSFs are listed.
Anticipating short-term effects, heightened frequency and impact of erroneous orders may cause spot market confusion. KRX plans real-time bid disclosure for SSFs to prevent price distortions.
Nonetheless, we will likely observe SSF price volatility surges. Real-time bid exposure could exacerbate volatility due to premature information revelation. Preemptive position setups considering these factors are advised.

A/H Premium Tracker (To 19 Jan 2024): Hs Shellacked Vs As. Near Multi-Year High Average AH Premia

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. But that didn’t help.
SOUTHBOUND flows were bigly positive and NORTHBOUND flows a large net sell. Nevertheless AH Premia had their best week in ages as HK large caps, mid-caps, small-caps got shellacked.
Now at new 52wk wides on A premia. Now within 3% of 5+ year highs.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jan 21

Most Read: Douzone Bizon, Shriram Finance , Posco DX, LS Materials , Softbank Group, Minsheng Education, GUPPY’s Inc, Budweiser Brewing APAC , Weiqiao Textile Co, Genetron Holdings Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

KRX New Deal Index Rebalance Preview: Changes with Flow & Impact
NIFTY50 Index Rebalance Preview: One Change, Maybe Two, Low Probability of Three
KOSPI200 Index Rebalance Preview: Four Potential Changes in June
KOSDAQ150 Index Rebalance Preview: Potential Adds Soaring; Short Sell Ban Not Helping
Softbank (9984 JP): Big Fat NAV Discount, but Headwinds Outweigh Tailwinds Going Forward
Asian Dividend Gems: Minsheng Education
GUPPY’s (5127 JP): Medley (4480 JP) Tender Offer at JPY3,250
Index Rebalance & ETF Flow Recap: ASX, KS200, KQ150, HSIII, STTF, L&F, Costa Group, Japan, Bud APAC
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Genetron, Guppy, Weiqiao Textile, Taisho Pharma, T&K Toka
Genetron (GTH US): Wide Spread Ahead of the 21 February Vote

KRX New Deal Index Rebalance Preview: Changes with Flow & Impact

The review period for the March rebalance ends on 31 January, the changes will be announced early March and implemented at the close of trading on 14 March.
There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. There are two changes for the BBIG Index.
There will be big flow on Ecopro BM (247540 KS) and Posco Future M (003670 KS) and big impact on Douzone Bizon (012510 KS) and DearU (376300 KS).

NIFTY50 Index Rebalance Preview: One Change, Maybe Two, Low Probability of Three

Shriram Finance (SHFL IN) is a high probability add and UPL Ltd (UPLL IN) is a high probability delete at the NIFTY Index (NIFTY INDEX) rebalance in March.
There is a lower probability of Bharat Electronics (BHE IN) or Trent Ltd (TRENT IN) replacing Bharat Petroleum Corp (BPCL IN) at the rebalance.
Jio Financial Services (JIOFIN IN), Avenue Supermarts Ltd (DMART IN) and Zomato (ZOMATO IN) will enter the running once added to the F&O segment of the market.

KOSPI200 Index Rebalance Preview: Four Potential Changes in June

Less than halfway 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 inclusion ranges from 0.14-6 days of ADV while the impact on the potential deletions varies from 3.6-12 days of ADV.
There are small shorts on the potential inclusions while short interest on the potential deletions varies from 5-10 days of ADV and 1.7-8.2% of free float.

KOSDAQ150 Index Rebalance Preview: Potential Adds Soaring; Short Sell Ban Not Helping

With over 40% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
There could be two changes before that if L&F Co Ltd (066970 KS) and HLB Inc (028300 KS) complete their transfer from the KOSDAQ market to the KOSPI market.
The adds have outperformed the deletes and the KOSDAQ 150 Index since the start of the review period. The ban on short selling could lead to another leg up.

Softbank (9984 JP): Big Fat NAV Discount, but Headwinds Outweigh Tailwinds Going Forward

By Victor Galliano

SoftBank group’s headline NAV discount is over 50%, factoring in the T-Mobile shares windfall at December-end
SoftBank Corp is looking to IPO digital payments company PayPay, which should also be a positive driver for SoftBank Group shares going forward, but only a marginal one
Arm shares have been defying gravity, but we see downside risk going forward, as well as questions over SVF1 and SVF2 private company valuations; and the threat of JPY appreciation

Asian Dividend Gems: Minsheng Education

Minsheng Education (1569 HK) is a highly undervalued Chinese education stock with high dividend yields. Market cap of the company has declined by nearly 90% from Jun 2018 to today.
Minsheng Education’s dividend yield averaged 5.1% from 2020 to 2022. Estimated dividend yield is 14.6% in 2023.
Minsheng Education mainly provides educational services in China. The company is one of the leaders of China’s private higher education industry.

GUPPY’s (5127 JP): Medley (4480 JP) Tender Offer at JPY3,250

GUPPY’s Inc (5127 JP) has recommended Medley (4480 JP)’s tender offer of JPY3,250 per share, an 81.0% premium to the undisturbed price (19 January).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 10.19% ownership ratio.
Despite the premium, the offer is light vs the IFA DCF valuation. Based on the irrevocables, the minimum acceptance condition requires a 23.4% minority acceptance rate, which is achievable.

Index Rebalance & ETF Flow Recap: ASX, KS200, KQ150, HSIII, STTF, L&F, Costa Group, Japan, Bud APAC

The review period for a global index commenced last week and will run through this week as well.
The announcement of the changes for the LQ45 Index should be announced in the coming week and will be implemented at the close on 31 January.
Huge inflows to CSI 300 Index trackers during the week while there was a big outflow from Tracker Fund of Hong Kong (2800 HK).

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Genetron, Guppy, Weiqiao Textile, Taisho Pharma, T&K Toka

I tally 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals discussed this week on Smartkarma: Genetron Holdings Ltd (GTH US)‘s take-private transaction; andMedley (4480 JP)‘s buy out of GUPPY’s Inc (5127 JP).
Key updates took place on: Orecorp (ORR AU), Weiqiao Textile (2698 HK), Benefit One (2412 JP), Taisho Pharmaceutical (4581 JP), T&K Toka (4636 JP), and Hollysys Automation Technologies (HOLI US).

Genetron (GTH US): Wide Spread Ahead of the 21 February Vote

Genetron Holdings Ltd (GTH US) shareholders will vote on the consortium’s US$4.08 per ADS offer on 21 February. The offer is light in comparison to historical trading ranges.
Completion is conditional on shareholder approval, dissenting shareholders representing less than 15% of outstanding shares and regulatory approvals (NDRC, MoC and SAFE).
Despite the light offer, the completion conditions should be met. At the last close price and end of March completion, the gross and annualised spread is 7.7% and 45.5%, respectively.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jan 20

Most Read: Douzone Bizon, Socionext, Budweiser Brewing APAC , APR, Taiwan Semiconductor (TSMC), Hyundai Steel, Genetron Holdings Ltd, Asmedia Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

KRX New Deal Index Rebalance Preview: Changes with Flow & Impact
March 2024 Nikkei 225 Rebal: Socionext, Disco, and a Consumer Goods Stock, Still
Bud APAC (1876 HK): Nursing a Hangover; Now Comes a Passive Overhang
Why Is APR IPO Getting Delayed?
44% of Korean Stocks Are Trading Below Book Value – FSC Wants to Improve This (Following Japan)
2024 High Conviction: TSMC (2330 TT) Is Perfectly Poised for Revenue and FCF Growth Acceleration
TSMC. Roaring Into Year Of The Dragon
Identifying Specific Implementation Plans for Korea’s Low-PBR Improvement Policy
Genetron Holdings (GTH US): Clear Diagnosis
ASMedia Placement – Momentum Has Been Strong, but an Overhang Exists

KRX New Deal Index Rebalance Preview: Changes with Flow & Impact

The review period for the March rebalance ends on 31 January, the changes will be announced early March and implemented at the close of trading on 14 March.
There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. There are two changes for the BBIG Index.
There will be big flow on Ecopro BM (247540 KS) and Posco Future M (003670 KS) and big impact on Douzone Bizon (012510 KS) and DearU (376300 KS).

March 2024 Nikkei 225 Rebal: Socionext, Disco, and a Consumer Goods Stock, Still

No changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
There is the upweight to Nitori (9843) but now less funkiness with Fast Retailing (9983). But it will continue being an interesting Nikkei 225 influence (for years to come).

Bud APAC (1876 HK): Nursing a Hangover; Now Comes a Passive Overhang

Budweiser Brewing APAC (1876 HK) has seen investors run for the hills over the last year. The halving of the stock price could mean deletion from passive portfolios.
Other Hong Kong listed brewers, China Resources Beer Holdings (291 HK) and Tsingtao Brewery Co Ltd H (168 HK) have been beaten down too and have underperformed their Asian peers.
The deletion from passive portfolios could provide a buying opportunity in Budweiser Brewing APAC (1876 HK) at the end of February (or earlier if the stock drops due to positioning).

Why Is APR IPO Getting Delayed?

APR announced it will delay its IPO. Now, APR’s book building has been postponed to 2 to 8 February. The IPO price range remains the same.
The company has provided updated preliminary sales and operating profits for 2023 in the revised IPO prospectus. Revenue was a bit light but OP was better than expected in 4Q23.
Our base case valuation of APR is 370,809 won per share which represents an 85% upside from the high end of the bankers’ valuation range (200,000 won).

44% of Korean Stocks Are Trading Below Book Value – FSC Wants to Improve This (Following Japan)

FSC Chairman Kim Joo-hyun mentioned that too many companies in Korea are trading below book value and the FSC plans to implement changes to improve upon this issue.
According to Korea Exchange, 1,111 companies out of total listed in KOSPI and KOSDAQ in Korea (2,538) are trading at below 1x book value (PBR) (liquidation value).
According to the Capital Group, about 39% of companies in the TOPIX trade below book value, compared to just 5% for companies in the S&P 500 Index.

2024 High Conviction: TSMC (2330 TT) Is Perfectly Poised for Revenue and FCF Growth Acceleration

By Wium Malan, CFA

TSMC looks set for a significant recovery in top-line growth in 2024F, driven by continued faster-than-expected demand for its 3nm volume production leading to significantly improved overall ASP.
This should be supported by a concurrent improvement in the inventory cycle at major clients, helping recover TSMC’s utilisation back to historic norms.
Lower capital intensity, improving internal inventory levels, and accelerating top-line growth should all combine to drive record levels of Free Cash Flow generation during 2024F.

TSMC. Roaring Into Year Of The Dragon

By William Keating

Q423 revenues of $19.62 billion, at the high end of guidance, up 13.8% QoQ and down 1.5% YoY. Net profit margin of 38.2% results in net income of ~$7.5 billion.
FY23 revenues of $69.3 billion, down 8.7% YoY, only the second such down year since 2005
Bullish FY24 forecast for >20% YoY growth sends share price soaring in overnight trading.

Identifying Specific Implementation Plans for Korea’s Low-PBR Improvement Policy

The Korean government has introduced policies ahead of April’s elections, with a recent notable announcement addressing the “Korea Discount” by enhancing low PBR stock valuations.
A leading proposal involves creating an index of low PBR companies. There are hints of listing ETFs tracking this index, with potential directives compelling pension funds to invest.
Identifying early inclusions is vital. High-likelihood candidates are low PBR large caps with maintained earnings, dividends/share buyback potential, including Hyundai Dept, E-Mart, Hyundai Steel, IBK, Korean Re, & DL E&C.

Genetron Holdings (GTH US): Clear Diagnosis

Back on the 11th October 2023, Genetron Holdings Ltd (GTH US), a precision oncology platform, entered into a definitive take-private transaction, at $4.08/ADS, a 15% premium to undisturbed.
The EGM for shareholders to vote on the transaction will be held on the 21 February. The record date is the 9 Feb.
This merger requires approval from at least two-thirds of the votes cast, and 59.7% are supportive. Trading at a gross spread of 7.7%. This is a clean deal.

ASMedia Placement – Momentum Has Been Strong, but an Overhang Exists

WT Microelectronics (3036 TT) is looking to raise US$256m from selling half of its stake in Asmedia Technology (5269 TT).
The deal wouldn’t be a very large one to process at just 3.4 days of ASMedia’s ADV.
Although, the selldown doesn’t appear to be particularly well flagged. The remaining WT Microelectronics’ stake will also create an overhang on ASMedia’s share price as well.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jan 19

Most Read: Fujitsu General, Douzone Bizon, Taiwan Semiconductor (TSMC), Budweiser Brewing APAC , Emperador, Taiwan Semiconductor (TSMC) – ADR, EcoPro Materials, Irc Ltd, APR and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Fujitsu General (6755) – Fujitsu Wants Out, May Force the Issue
KRX New Deal Index Rebalance Preview: Changes with Flow & Impact
What Stories TSMC Investor Conference Telling Us About Customers, Supply Chains, and Competitors
Bud APAC (1876 HK): Nursing a Hangover; Now Comes a Passive Overhang
STTF Rebalance Preview: One Potential Change in March
TSMC Results Make Buy Story Even More Clear; Strong 2024E Guidance & Reiterates Multi-Year Growth
KOSPI Size Indices – The Outperformance Continues
Spotting Position Patterns: TIGER Battery ETF January Review & KODEX ETF’s March Rebalancing
IRC (1029 HK)’s MBO’s MGO: Still An Avoid
Why Is APR IPO Getting Delayed?

Fujitsu General (6755) – Fujitsu Wants Out, May Force the Issue

In 2019, it became apparent Fujitsu Ltd (6702 JP) wanted to sell down its stakes in non-core businesses (Shinko Electric, Fujitsu General, and FDK), and move on to better things.
In early January 2023, a Bloomberg article suggested a sale process. A 20 Jan 2023 article suggested Fujitsu General’s auction was imminent. I wrote a piece. It was not bullish.
The stock rose a bit, then fell 40+% through last week. Now another article suggests some urgency at Fujitsu. That changes things.

KRX New Deal Index Rebalance Preview: Changes with Flow & Impact

The review period for the March rebalance ends on 31 January, the changes will be announced early March and implemented at the close of trading on 14 March.
There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. There are two changes for the BBIG Index.
There will be big flow on Ecopro BM (247540 KS) and Posco Future M (003670 KS) and big impact on Douzone Bizon (012510 KS) and DearU (376300 KS).

What Stories TSMC Investor Conference Telling Us About Customers, Supply Chains, and Competitors

By Andrew Lu

TSMC expects 2024 semi sector in recovery with 20-25% y/y growth itself, driven by AI customers. By controlling capex, more rooms to raise dividends but no growth for equipment vendors.
Faster ramp on N3, likely N3E, N3P than competitor’s. TSMC expects 3nm from 6% of sales in 3Q23, 12.7% in 4Q23 to 15% in 2024, 3x y/y increase in 2024.
TSMC reports a nearly 30% q/q drop on IOT and consumer IC demand and sees weakness on 12″ mature technology despite better demand 8″ specialty technology.

Bud APAC (1876 HK): Nursing a Hangover; Now Comes a Passive Overhang

Budweiser Brewing APAC (1876 HK) has seen investors run for the hills over the last year. The halving of the stock price could mean deletion from passive portfolios.
Other Hong Kong listed brewers, China Resources Beer Holdings (291 HK) and Tsingtao Brewery Co Ltd H (168 HK) have been beaten down too and have underperformed their Asian peers.
The deletion from passive portfolios could provide a buying opportunity in Budweiser Brewing APAC (1876 HK) at the end of February (or earlier if the stock drops due to positioning).

STTF Rebalance Preview: One Potential Change in March

Emperador (EMI SP) currently fails the liquidity test and could be removed from the SPDR Straits Times Index ETF (STTF SP) in March.
Frasers Centrepoint Trust (FCT SP) is currently the highest ranked non-constituent and could be added to the ETF. FCT has a 6% higher market cap compared to Olam (OLG SP).
We estimate trackers will need to buy 5 days of ADV in Frasers Centrepoint Trust (FCT SP) and sell over 37 days of ADV in Emperador (EMI SP).

TSMC Results Make Buy Story Even More Clear; Strong 2024E Guidance & Reiterates Multi-Year Growth

By Vincent Fernando, CFA

TSMC reported 4Q23 results at the upper end of its guidance. More importantly, the company guided for low/mid 20% 2024E sales growth and reiterated an expected 15-20% multi-year CAGR.
The company provided optimistic guidance for the overall semiconductor industry, forecasting 10% growth in 2024E. TSMC expects to grow much faster than the industry, however.
TSMC is one of our Structural Longs; our NT$760 target implies 29% upside. The latest results make TSMC’s Buy case even more clear, in our view.

KOSPI Size Indices – The Outperformance Continues

The review period for the March rebalance of the KOSPI Size Indices started 1 December and will end 29 February. The changes will be implemented at the close 14 March.
We currently see 3 migrations from MidCap to LargeCap, 3 new adds to LargeCap, 6 migrations from LargeCap to MidCap, and 11 migrations from SmallCap to MidCap.
Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.

Spotting Position Patterns: TIGER Battery ETF January Review & KODEX ETF’s March Rebalancing

TIGER ETF (305540) rebalanced on January 11th, with Ecopro Materials correcting by 4%, contrasting a 20% surge from Jan 8-10. TIGER recorded net purchases aligning with a 2% inclusion weight.
Preemptive positions by local hedge funds were observed from Jan 8-10, closing on the 11th. Despite a KOSPI decline and minimal sector movement, Ecopro Materials exhibited this unusual price pattern.
Observing this pattern implies a potential recurrence during the March rebalancing of KODEX ETF. Notably, local hedge funds may initiate similar preemptive positions. We should consider this in position setup.

IRC (1029 HK)’s MBO’s MGO: Still An Avoid

Back on the 1st November, Nikolai Levitskii, Russian iron-ore play IRC (1029 HK)‘s chairman and largest shareholder, acquired 4.72% of shares out, lifting his stake above 30%, triggering an MGO.
The Offer is conditional on Levitskii holding more than 50% of shares out. His intention is to maintain IRC’s listing. At the first close, he held 35.77% (5.16% had tendered).
The current spread is 9.2%. MIC, with 16.67% of shares out, has yet to tender. Nor do I expect them to. Plus IRC is on the OFAC sanction list. Avoid.

Why Is APR IPO Getting Delayed?

APR announced it will delay its IPO. Now, APR’s book building has been postponed to 2 to 8 February. The IPO price range remains the same.
The company has provided updated preliminary sales and operating profits for 2023 in the revised IPO prospectus. Revenue was a bit light but OP was better than expected in 4Q23.
Our base case valuation of APR is 370,809 won per share which represents an 85% upside from the high end of the bankers’ valuation range (200,000 won).

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jan 18

Most Read: Weiqiao Textile Co, Benefit One Inc, LS Materials , Flowing Cloud Technology, Anycolor , Alibaba (ADR), Yamae Group Holdings, Emperador and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Weiqiao Textile (2698 HK)’s Pre-Conditional Merger By Absorption
Benefit One (2412): The Plot Thickens
KOSDAQ150 Index Rebalance Preview: Potential Adds Soaring; Short Sell Ban Not Helping
Hang Seng Internet & IT Index Rebalance Preview: ZX Inc Could Replace Flowing Cloud
TOPIX Jan FFW Change – Visional (4194), Anycolor (5032), Furuya Metal (7826)
44% of Korean Stocks Are Trading Below Book Value – FSC Wants to Improve This (Following Japan)
Aequitas 2024 Asia IPO Pipeline – US ADRs
Yamae Group Placement – Would Result in a Large Dilution, Although Its Momentum Has Been Strong
Weiqiao Textile (2698 HK): Pre-Condition Satisfied as Prudence Edges Towards a Blocking Stake
STTF Rebalance Preview: One Potential Change in March

Weiqiao Textile (2698 HK)’s Pre-Conditional Merger By Absorption

After shares were suspended on the 27 November, Weiqiao Textile Co (2698 HK) has now announced a pre-conditional privatisation at HK$3.50 per H-share.
This Offer, from its parent, is by way of a Merger by Absorption, which incorporates a Scheme-like vote. There is no tendering condition.
The Offer Price is a premium to last close is a hefty 104.68%. and around a six-year high. This is done.

Benefit One (2412): The Plot Thickens

Today, the day before the previously extended M3 Inc (2413 JP) Partial Tender Offer for Benefit One Inc (2412 JP) was due to expire, M3 extended it another 20 days.
Dai Ichi Life Insurance (8750 JP) several days ago extended their expected start date by weeks – from mid-January to early February.
The wording in the new document from M3 is curious. It bears examination. As does the strategy positioning and choice of each of the participants.

KOSDAQ150 Index Rebalance Preview: Potential Adds Soaring; Short Sell Ban Not Helping

With over 40% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
There could be two changes before that if L&F Co Ltd (066970 KS) and HLB Inc (028300 KS) complete their transfer from the KOSDAQ market to the KOSPI market.
The adds have outperformed the deletes and the KOSDAQ 150 Index since the start of the review period. The ban on short selling could lead to another leg up.

Hang Seng Internet & IT Index Rebalance Preview: ZX Inc Could Replace Flowing Cloud

The review cutoff date for the March rebalance of the HSIII was 29 December. The changes will be announced on 16 February and become effective after the close 1 March.
We see a high probability of Zx Inc replacing Flowing Cloud Technology (6610 HK) in the index. There is a lower probability of 4Paradigm (6682 HK) replacing CMGE Tech (302 HK).
Capping will result in passives buying Meituan (3690 HK) and selling Tencent (700 HK), Kuaishou Technology (1024 HK), JD.com (9618 HK) and Alibaba Group Holding (9988 HK).

TOPIX Jan FFW Change – Visional (4194), Anycolor (5032), Furuya Metal (7826)

Late last week, the TSE announced the changes in FFW for companies which have FY-end in the calendar Q2. Changes at 30 Jan close also include Phased Weighting Changes.
There are two additions and 61 upweights (including net effect of PWR/PWIs). There are 456 down-weights with two-way flows of about US$1bn. There is a tiny funding trade.
Visional (4194 JP) and Furuya Metal (7826 JP) are the two adds. Other large dollar upweights are Asahi Intecc (7747 JP) and Anycolor (5032 JP).

44% of Korean Stocks Are Trading Below Book Value – FSC Wants to Improve This (Following Japan)

FSC Chairman Kim Joo-hyun mentioned that too many companies in Korea are trading below book value and the FSC plans to implement changes to improve upon this issue.
According to Korea Exchange, 1,111 companies out of total listed in KOSPI and KOSDAQ in Korea (2,538) are trading at below 1x book value (PBR) (liquidation value).
According to the Capital Group, about 39% of companies in the TOPIX trade below book value, compared to just 5% for companies in the S&P 500 Index.

Aequitas 2024 Asia IPO Pipeline – US ADRs

By Sumeet Singh

In this note, we will look at the Asia Pacific IPO pipeline for 2024, following up with US ADRs, after having looked at HK, India, Japan and Korea earlier.
This list has been compiled on a best effort basis from tracking the company filings and through various other sources
The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.

Yamae Group Placement – Would Result in a Large Dilution, Although Its Momentum Has Been Strong

Yamae Group Holdings (7130 JP) is looking to raise US$115m from a primary follow-on. As per the firm, proceeds will be used to pay down its acquisition-linked debt.
We would argue that the deal is somewhat well flagged given the firm’s track record of acquisitions, with the most recent being Confex Holdings.
That being said, the deal would result in a large dilution for the firm, and would be a large one to digest at 48 days of Yamae’s three month ADV.

Weiqiao Textile (2698 HK): Pre-Condition Satisfied as Prudence Edges Towards a Blocking Stake

Weiqiao Textile Co (2698 HK)’s offer pre-condition is satisfied. Prudence has increased its shareholding to 3.39% of the outstanding shares (9.79% of H Shares), marginally short of a blocking stake.
The HK$3.50 offer has been declared final, which rules out a bump. Therefore, Prudence’s strategy could be to play the gross spread or to block the deal.
The Shandong Luoxin Pharmaceutical (8058 HK) precedent supports the gross spread play view. However, unlike the precedent, Prudence is marginally short of a blocking stake in Weiqiao Textile.

STTF Rebalance Preview: One Potential Change in March

Emperador (EMI SP) currently fails the liquidity test and could be removed from the SPDR Straits Times Index ETF (STTF SP) in March.
Frasers Centrepoint Trust (FCT SP) is currently the highest ranked non-constituent and could be added to the ETF. FCT has a 6% higher market cap compared to Olam (OLG SP).
We estimate trackers will need to buy 5 days of ADV in Frasers Centrepoint Trust (FCT SP) and sell over 37 days of ADV in Emperador (EMI SP).

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jan 17

Most Read: Tongcheng Travel Holdings , Alchip Technologies, Newmont , Benefit One Inc, Suzhou Novosense Microelectron, L&F Co Ltd, Hyundai Motor, LS Materials and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)
Alchip Technologies GDRs Early Look – Another Well Flagged GDR Issuance in the Pipeline
S&P/ASX Index Rebalance Preview: Lots of Changes; A$1bn to Sell in Newmont
Benefit One (2412): The Plot Thickens
Quiddity Leaderboard STAR 50 Mar 24: Three Changes; ~US$1bn One-Way; Some Trade Ideas
L&F (066970 KS): Will the Stock Move Like PoscoDX Following the KOSDAQ to KOSPI Transfer?
40 Names for Dividend Arbitrage in 1Q, Marking a Pioneering Initiative in Korea
Alchip Technologies GDR Offering – Has Been Riding on an Unwavering Momentum over the past Year
Benefit One (2412 JP): Who Will Blink First as M3 Extends the Closing Date?
KOSDAQ150 Index Rebalance Preview: Potential Adds Soaring; Short Sell Ban Not Helping

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)

Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK).

Alchip Technologies GDRs Early Look – Another Well Flagged GDR Issuance in the Pipeline

Alchip Technologies (3661 TT) is looking to raise around US$375m in its upcoming global deposit receipts (GDRs) offering.
Similar to previous GDR listings, the deal is a very well flagged one, with a drawn out process of regulatory/approval loops the firm has to jump through up till issuance.
Based on its board’s approval to issue up to 4m new shares in its GDR offering, the deal is a relatively small one at just 5.4% of Alchip’s current mcap.

S&P/ASX Index Rebalance Preview: Lots of Changes; A$1bn to Sell in Newmont

With over 80% of the review period complete, there could be 26 adds/deletes across the S&P/ASX family of indices in March.
The largest flow will be on Newmont (NEM AU) due to the potential S&P/ASX 20 Index deletion and a large decrease in the number of shares held in Australia.
There will be 1.2-38 days of ADV to buy in the inclusions while the impact on the deletions will range between 1-21 days of ADV.

Benefit One (2412): The Plot Thickens

Today, the day before the previously extended M3 Inc (2413 JP) Partial Tender Offer for Benefit One Inc (2412 JP) was due to expire, M3 extended it another 20 days.
Dai Ichi Life Insurance (8750 JP) several days ago extended their expected start date by weeks – from mid-January to early February.
The wording in the new document from M3 is curious. It bears examination. As does the strategy positioning and choice of each of the participants.

Quiddity Leaderboard STAR 50 Mar 24: Three Changes; ~US$1bn One-Way; Some Trade Ideas

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 March 2024 index rebal event.
I currently expect three changes for the STAR 50 index in March 2024.

L&F (066970 KS): Will the Stock Move Like PoscoDX Following the KOSDAQ to KOSPI Transfer?

Posco DX (022100 KS) rallied 50% following approval of its application to transfer from the KOSDAQ to the KOSPI market. Then the stock dropped 20% following completion of the transfer.
With L&F Co Ltd (066970 KS) applying for a section transfer a couple of weeks after Posco DX (022100 KS), approval could be imminent.
L&F Co Ltd (066970 KS) is up 46% since the start of November, but the stock has performed in line with the average of its peers.

40 Names for Dividend Arbitrage in 1Q, Marking a Pioneering Initiative in Korea

K200 futures’ yearend contango exceeded expectations, triggering a surge in buy arbitrage. The subsequent selling pressure intensified, with strategic shifts observed in January futures/options, contributing to KOSPI’s underperformance this year.
Still, significant closure of K200 futures buy arbitrage should come around March, impacting February or March single-stock futures, potentially introducing substantial contango and suggesting lucrative dividend arbitrage in select stocks.
These 40 K200 constituents, with single-stock futures, are vital for our pioneering dividend arbitrage in Korea, directly influenced by buy arbitrage closures using K200 futures from last year.

Alchip Technologies GDR Offering – Has Been Riding on an Unwavering Momentum over the past Year

Alchip Technologies (3661 TT) is looking to raise US$415m in its GDR offering. As per the firm, the proceeds from the GDR offering will be used to purchase raw materials.
Offering 3.7m GDRs, the deal wouldn’t be a very large one for the firm to digest at just 1.6 days of its three month ADV.
The deal is very well flagged one and momentum on the stock has been very strong.

Benefit One (2412 JP): Who Will Blink First as M3 Extends the Closing Date?

Ahead of the 17 January close, M3 Inc (2413 JP) has extended the close of its offer to 15 February due to a request from Benefit One Inc (2412 JP).
The merger arb situation has four parties with different priorities – the Board, Pasona Group (2168 JP), Dai Ichi Life Insurance (8750 JP) (with a pre-conditional JPY2,123 offer) and M3.
The Board and Pasona want the highest possible price. M3’s inability to table a revised offer suggests that Dai-ichi Life has set the bar too high.

KOSDAQ150 Index Rebalance Preview: Potential Adds Soaring; Short Sell Ban Not Helping