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Rakuten Bank (5838 JP) (RB), the online banking arm of Rakuten Group (4755 JP), raised around US$630m in its Japan IPO. Its IPO linked lockup will expire soon.
RB is the largest internet bank in Japan, by number of accounts. As of Jun 23, it had 14.0m deposit accounts with a total deposit base of JPY9.4tn.
In this note, we will talk about the lock-up dynamics and updates since our last note.

Rakuten Bank (5838 JP) Overnight Offering at a Fat Discount

After the close today, Rakuten Group (4755 JP) announced the sale of 25.5mm shares of Rakuten Bank (5838 JP), right as the IPO lockup was reaching its expiry. Expected.
Pricing is 6-7 Dec (pre-Tokyo open 7 Dec), delivery 11 Dec 2023. Indicative price range is 8.5-12.5% discount for a deal of US$425mm or so.
In an interesting technical detail, this will take Rakuten below 50%. There is some near-term index demand, some in April, some next October. Rheos could be more overhang.

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

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passives trackers will need to buy 2.4-22.5x ADV (10-24% of real float) on the inclusions and sell between 3.5-42.5x ADV on the deletions.
Fast Retailing (9983 JP) capping, Nitori Holdings (9843 JP) increase in PAF, a big funding trade, and potentially new stocks being added in two-steps.

Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback

Yesterday afternoon, Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK) announced a new buyback program. The last one was announced August 2022 and ran until the AGM.
That was HK$4bn. In the meantime the company paid an HK$8.12 special div on the Swire As (14%) in September (on top of the HK$1.20 regular div).
Now they have announced a new HK$6bn buyback buying both A Shares and B shares. Details, index impact, historical B/A trading patterns, etc, below.

Toyota To Sell Harmonic Drive (6324 JP) Shares in Overseas Offering

Today, Toyota Motor (7203 JP) announced it would sell 4.379mm shares (4.55%) of Harmonic Drive Systems (6324 JP) in an overseas placement.
This is not so big as it is emblematic, adding to the recent news on Toyota unwinds.
Harmonic Drive is heavily held by foreign institutions. This is a foreigners-only deal. But it will need to be absorbed by that group too.

Rakuten Bank Placement – Was Expected at Some Point, Current Timing Seems Opportunistic

Rakuten Group (4755 JP) aims to raise US$430m via selling around 14.6% of Rakuten Bank (5838 JP).
RB is the largest internet bank in Japan, by number of accounts. As of Sep 23, it had 14.3m deposit accounts with a total deposit base of JPY9.5tn.
In this note, we will talk about the deal dynamics and updates since our last note.

Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock

Rakuten Group (4755 JP) is looking to sell 25.5m shares of Rakuten Bank (5838 JP) via a secondary offering at a discount of between 8.7%-12.3%.
The offering will raise a maximum of US$433m and Rakuten Group (4755 JP) will use the funds to reduce its interest-bearing debt by the early repayment of its bonds.
There will be limited passive buying at the time of settlement of the stock but there is an index inclusion coming up that will result in passives buying.

StubWorld: Swire’s Latest Buyback

Yesterday afternoon (5th Dec), Swire Pacific (A) (19 HK) (and Swire Pacific (B) (87 HK)) announced a large (HK$6bn) buyback.
The response this morning sees Swire A up 14.4% (as I type), and 11.8% for Swire Bs.
I still like the idea of buying Swire A and Swire B outright here.

Harmonic Drive Placement – Cleanup Share Sale Will Remove the Overhang

By Clarence Chu

Toyota Motor (7203 JP) is looking to raise US$116m from selling its entire stake in Harmonic Drive Systems (6324 JP).
Toyota Motors has indicated over the past one-two weeks that it will be looking to sell/trim its stakes in various entities as part of its exit from its multiple cross-holdings.
While the deal would be a relatively large one to digest at 10 days of ADV, Toyota Motors will be selling its entire stake, clearing the overhang.

Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV.

Yesterday, Tokyo Rakutenchi (8842 JP)‘s #1 shareholder Toho Co Ltd (9602 JP) agreed to buy out the rest of Tokyo Rakutenchi from its #2 and #3 shareholders and minorities.
The Takeover Price is a 51% premium. Which is nice. But the asset is a real estate portfolio, and it was sold as a company, not a real estate portfolio.
The revaluation surplus to market value for the real estate assets is more than net equity, so Takeover PBR >1.0, but Price/NAV of the takeover is 0.7x, without synergies included.

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Dec 06

Most Read: Eoflow, IJTT Co., Ltd., Benefit One Inc, Weiqiao Textile Co, AMP Ltd, Ps Mitsubishi Construction, Ryohin Keikaku, Chindata Group, Hankook & Company and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

EOFlow (Further) Tests Investor Patience
IJTT (7315 JP) – A Truly Offensive Takeover Price and Process To Buy Out Minorities at 0.46x Book
Benefit One (2412) – Pro-Ration Expectations Update
Weiqiao Textile (2698 HK)’s Pre-Conditional Merger By Absorption
MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone
P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update
EOFLOW/Medtronic Tender: Appeals Brief Is All Bark, No Bite
Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes
Dissenters Mobilise As Chindata (CD US)’s Shareholders Approve Bain’s Offer
Navigating the Potential of Hankook & Company’s Revised Tender Offer

EOFlow (Further) Tests Investor Patience

Back on the 25 May, when Medtronic Plc (MDT US) enter into a SPA with EOFlow (294090 KS)‘s CEO, with a follow-on Tender Offer, the whole construct looked pretty clean.
Then in August Insulet Corp (PODD US) launched its lawsuit, which in hindsight, should have been expected. Then earlier this month, news surfaced concerning a stock-backed loan to the CEO.
Now the CEO is selling, presumably to repay his collateralized loan. Shares are down 38% since the resumption of trading, and are now at a whopping 122% spread to terms.

IJTT (7315 JP) – A Truly Offensive Takeover Price and Process To Buy Out Minorities at 0.46x Book

A Fund named Mirai Creation Fund, investing in five “fields” “vital to the future” (“intelligent technologies”, robotics, hydrogen-economy, electrification, and “new materials”) will buy out casting/forging mainstay IJTT.
The look and feel of this fund screams “lead me to the future”, so of course, the buy-out is being done with 26% equity, 74% debt. Levered is good.
That’s to buy at 0.46x PBR. Equity check is 12% of net assets. The Board says “yes” because it will lead to “improvement of corporate value”. Unfortunately, not for shareholders.

Benefit One (2412) – Pro-Ration Expectations Update

Since the announcement of the Benefit One Inc (2412 JP) partial offer, the stock has traded 16+mm shares in the market, which is about 40% of Real World Float.
Some of that has been traded multiple times. Looking only at that data would suggest a higher pro-ration, but I expect there is other data one must take into account.
Benefit One shares are currently trading at a level suggesting either lower participation OR higher back-end despite the earnings guidance downgrade at announcement.

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.

MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone

AMP Ltd (AMP AU) and A2 Milk Co Ltd (A2M AU) could be deleted as the lowest ranked current index constituents.
There are three other stocks that are close to the deletion threshold and a change in the free float could result in the stocks being deleted.
With the exception of A2 Milk Co Ltd (A2M AU), shorts have been increasing on nearly all the potential and close deletions.

P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update

The Partial Offer launched last month by Taisei Corp (1801 JP) to take a 50.2% stake in Ps Mitsubishi Construction (1871 JP) ends at the beginning of next week.
This hasn’t been a very “exciting” trade. Small, boring sector. One big company selling to another. But it has traded cheap. However, volume has been high.
Volume has been so high it causes me to revisit my pro-ration expectations, so I have updated estimates and tables below.

EOFLOW/Medtronic Tender: Appeals Brief Is All Bark, No Bite

Eoflow (294090 KS) filed a 117-page appeal against the amended preliminary injunction (PI), sparking a 16% share price rally. Insulet Corp (PODD US) is required to respond by 14 December.
Eoflow argues that the Massachusetts District Court committed legal errors. However, Eoflow’s arguments are rehashed from those that the district court has already dismissed with balanced counterarguments.
The appeal is Eoflow’s last roll of the dice. Eoflow’s appeal brief worryingly notes that the PI profoundly imperils both the Medtronic transaction and its status as a going concern.

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

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passives trackers will need to buy 2.4-22.5x ADV (10-24% of real float) on the inclusions and sell between 3.5-42.5x ADV on the deletions.
Fast Retailing (9983 JP) capping, Nitori Holdings (9843 JP) increase in PAF, a big funding trade, and potentially new stocks being added in two-steps.

Dissenters Mobilise As Chindata (CD US)’s Shareholders Approve Bain’s Offer

Back on the 11 August, Chinese data center provider Chindata Group (CD US) and major shareholder Bain Capital entered into a definitive agreement at US$8.60/ADS.
The EGM was held yesterday, the 4 December, and the merger was approved by 97.75% of the total votes cast. No specific PRC regulatory approval is needed for this merger.
All good right? Not quite. There’s still the nagging issue involving 22.79% of shares out objecting to the deal, exceeding the 12% dissenting threshold, a condition to the merger.

Navigating the Potential of Hankook & Company’s Revised Tender Offer

With the price almost 10% above ₩20,000, it’s practically fair to regard MBK’s tender offer as effectively canceled, raising the question of the proxy battle’s potential continuation.
There is a significant likelihood that MBK has prepared a next-phase plan involving an upward adjustment of the offering price, considering the tight situation of successfully securing the target volume.
Essentially, there’s a high likelihood that the situation will resemble the earlier battle between HYBE and Kakao Corp over S.M. Entertainment Co at the start of this year.

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Dec 05

Most Read: Fast Retailing, Uber Technologies , Samsung KODEX Top5Plus Total Return ETF, Benefit One Inc, Helia Group , Cheng Shin Rubber Ind Co., Ltd., Gentrack, NTPC Ltd, Nexon, Great Wall Motor and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade
S&P500 Index Rebalance: Calling an UBER
Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
Benefit One (2412) – Pro-Ration Expectations Update
S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough
Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover
S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up
NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum
Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion
A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold

March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade

Minimal 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) AND funkiness with Fast Retailing (9983) to consider. We are right on the threshold. The question is whether it gets “help” in January.

S&P500 Index Rebalance: Calling an UBER

Uber Technologies (UBER US), Jabil Circuit (JBL US) and Builders Firstsource (BLDR US) will be added to the S&P 500 INDEX (SPX INDEX) at the close on 15 December.
There are a bunch of inclusions. deletions and migrations across the S&P 500 INDEX (SPX INDEX), the S&P Midcap 400 Index, and the S&P SmallCap 600 Index.
We estimate passive trackers will need to buy around US$18bn of Uber Technologies (UBER US). There has been positioning in the stock for just over a month now.

Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea

Korea’s financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
Therefore, it’s time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.

Benefit One (2412) – Pro-Ration Expectations Update

Since the announcement of the Benefit One Inc (2412 JP) partial offer, the stock has traded 16+mm shares in the market, which is about 40% of Real World Float.
Some of that has been traded multiple times. Looking only at that data would suggest a higher pro-ration, but I expect there is other data one must take into account.
Benefit One shares are currently trading at a level suggesting either lower participation OR higher back-end despite the earnings guidance downgrade at announcement.

S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough

There are 3 changes for the S&P/ASX 200 (AS51 INDEX) that will be implemented at the close on 15 December. One name is a relative surprise.
There will be 8-15 days of ADV to buy on the inclusions and there will be 12-18 days of ADV to sell on the deletions.
Cumulative excess volume and changes in short interest indicate there will be positioning in most stocks. But it may not yet be enough to cover the passive trade.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover

There are 5 adds and 4 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December with implementation taking place from 15-21 December.
The constituent changes and capping changes result in an estimated one-way turnover of 16.1% resulting in a one-way trade of US$1.26bn.
There will be positioning in a lot of the adds/deletes and the real action could be in the other stocks with capping and/or funding flows.

S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up

Gentrack (GTK NZ) and Turners Automotive (TRA NZ) will be added to the S&P/NZX 50 Index while Synlait Milk (SML NZ) and Pacific Edge (PEB NZ) will be deleted.
There is a lot to trade on the stocks. The impact in terms of days of ADV appears high but historically there has been volume on implementation date.
The adds have jumped recently and there will be pre-positioning on the stocks. Not so much on the deletes.

NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum

There could be 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December.
If all changes are on expected lines, one-way turnover is estimated at 58.2% and that will result in a one-way trade of INR 20bn (US$240m).
Since July, the potential adds to the index have outperformed the index and the potential deletes by a big margin. Momentum could keep the outperformance going till implementation date.

Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion

By Douglas Kim

On 4 December, the South Korean government announced that it will launch a tender offer to sell a 29.3% stake in NXC Corp for about US$3.6 billion.
The two daughters of ex-Chairman Kim Jung-Ju handed over a 29.3% stake in NXC Corp to the Korean government as payment-in-kind in May 2023 to pay for inheritance taxes.
The tender offer sale of the Korean government’s 29.3% stake in NXC Corp (worth nearly 4.7 trillion won) is a positive catalyst for Nexon (3659 JP).

A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold

The New and Better (17 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
Hs with H/A pairs under-perform their As on average by 220+bp. Liquid HK H/A Pairs saw H/As -244bp. H/A Pair intracorrelation is up and A premia continue to trend better.
SOUTHBOUND and NORTHBOUND were net buys overall but Hs had a VERY BAD WEEK vs their A-Shares where pairs were concerned.

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Dec 04

Most Read: Taisho Pharmaceutical Holdin, Cosmo Energy Holdings , Uber Technologies , Fast Retailing, Helia Group , Cheng Shin Rubber Ind Co., Ltd., Kia Corp, Samsung KODEX Top5Plus Total Return ETF and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan Activism: Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price
Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake
S&P500 Index Rebalance: Calling an UBER
March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade
Taisho Pharmaceutical (4581 JP): Japan Catalyst Pushes for a Bump
S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough
Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover
FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M
Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX

Japan Activism: Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price

Japan Catalyst Fund is a relatively young effort in the Japan “engagement activism” space, having been founded by Monex Group in September 2019. Total assets remain apparently small.
Championed by Monex Group founder Oki Matsumoto, despite small AUM, the fund has decent access. As of end-October, Taisho Pharmaceutical Holdings (4581 JP) was #5 and 5.26%. Now it’s #2.
Friday, they released a statement about the MBO. It isn’t a barn-burner, but the stock has traded through terms since announcement at a too-low price. And nobody else has commented.

Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake

The question of how Murakami-san would get out of his stake in Cosmo Energy Holdings (5021 JP) was always a biggie. He likes to sell stock in tender offer buybacks.
Cosmo wasn’t going to do that for him. They promised dividends and a high payout ratio, but that left the question was how he was going to get out.
A semi-obvious solution was to find a corporate partner to buy his stake and today, Iwatani Corp (8088 JP) announced that it had bought 19.86% of Murakami-san’s 20.01% holding.

S&P500 Index Rebalance: Calling an UBER

Uber Technologies (UBER US), Jabil Circuit (JBL US) and Builders Firstsource (BLDR US) will be added to the S&P 500 INDEX (SPX INDEX) at the close on 15 December.
There are a bunch of inclusions. deletions and migrations across the S&P 500 INDEX (SPX INDEX), the S&P Midcap 400 Index, and the S&P SmallCap 600 Index.
We estimate passive trackers will need to buy around US$18bn of Uber Technologies (UBER US). There has been positioning in the stock for just over a month now.

March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade

Minimal 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) AND funkiness with Fast Retailing (9983) to consider. We are right on the threshold. The question is whether it gets “help” in January.

Taisho Pharmaceutical (4581 JP): Japan Catalyst Pushes for a Bump

Japan Catalyst’s press release supports the idea of a Taisho Pharmaceutical Holdin (4581 JP) MBO but not the proposed offer price as it implies a P/B less than 1.0x.
The press release is a discovery exercise encouraging other like-minded shareholders to show their hand. The shares are trading marginally above the JPY8,620 offer.
While justifiable, a bump is unlikely due to the lack of a substantial activist shareholder, irrevocables, no competing bid and the offer’s 55.5% premium to the undisturbed price.

S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough

There are 3 changes for the S&P/ASX 200 (AS51 INDEX) that will be implemented at the close on 15 December. One name is a relative surprise.
There will be 8-15 days of ADV to buy on the inclusions and there will be 12-18 days of ADV to sell on the deletions.
Cumulative excess volume and changes in short interest indicate there will be positioning in most stocks. But it may not yet be enough to cover the passive trade.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover

There are 5 adds and 4 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December with implementation taking place from 15-21 December.
The constituent changes and capping changes result in an estimated one-way turnover of 16.1% resulting in a one-way trade of US$1.26bn.
There will be positioning in a lot of the adds/deletes and the real action could be in the other stocks with capping and/or funding flows.

FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M

The Samsung KODEX Fn Top10 Equal Weight ETF (395170 KS) tracks the FnGuide Top 10 Index and has an AUM of US$264m.
We expect Kia Corp (000270 KS) to replace Posco Future M (003670 KS) in the index at the December rebalance.
There will be 0.4x ADV to buy in Kia Corp (000270 KS) while passives will need to sell 0.1x ADV of Posco Future M (003670 KS).

Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea

Korea’s financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
Therefore, it’s time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.

Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX

The announcement of the inclusion of Uber Technologies (UBER US) in the S&P 500 INDEX was a big one last week. There were announcements for some other indices too.
There are many indices in China that will be rebalanced at the close on Friday, the biggest being the CSI 300, CSI 500, STAR50, SSE50 and KWEB US.
Relatively quiet in ETF world with net inflows to China focused ETFs and net outflows for Japan.

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Dec 03

Most Read: Zhongjin Gold Corp A, Shanxi Meijin Energy Co, Ltd., Hygon Information Technology C, Eoptolink Technology , KCE Electronics PCL, Uber Technologies , Taisho Pharmaceutical Holdin, China Tourism Group Duty Free Corp Ltd, Cosmo Energy Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

CSI300 Index Rebalance: 14 Changes & A Few Surprises
CSI500 Index Rebalance: 50 Changes a Side; Adds Gaining Ground on Deletes
CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon
ChiNext/ChiNext 50 Index Rebalance: Adds Outperforming Deletes Now
SET50 Index Rebalance Preview: KCE Could Replace TIDLOR
S&P500 Index Rebalance: Calling an UBER
Japan Activism: Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price
[Blue Lotus Daily]: XPEV/NIO/BYD/TSLA LI/Geely/ACMR/ MU/NVDA/981.HK/1810.HK/000660.KS
2024 High Conviction: China Tourism Group (601888 CH, BUY, TP:CNY106): See the Forest for the Trees
Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake

CSI300 Index Rebalance: 14 Changes & A Few Surprises

There are 14 changes for the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 8 December.
While most changes are in line with forecasts, there are some stocks that have not been added or deleted as the index committee has used their discretion.
The adds outperformed the deletes in the first half of the year with performance staying stable over the second half of the year. Position for outperformance ahead of implementation.

CSI500 Index Rebalance: 50 Changes a Side; Adds Gaining Ground on Deletes

There are 50 changes a side for the CSI Smallcap 500 Index at the upcoming rebalance that will be implemented at the close of trading on 8 December.
There are 15 stocks that overlap between the CSI 300 Index and the CSI Smallcap 500 Index and there will be opposing flows from passive trackers.
One way turnover at the rebalance is estimated at 9.56% leading to a one-way trade of CNY 6.04bn. Industrials and Information Technology gain index spots while Materials and Financial lose.

CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon

There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 8 December.
This is yet another index inclusion for Hygon Information Technology C (688041 CH) – the stock continues to move higher on expected passive buying over the next two weeks.
Over the last 6 months, the adds have underperformed the deletes but there has been a significant improvement in performance over the last 2 months.

ChiNext/ChiNext 50 Index Rebalance: Adds Outperforming Deletes Now

There will be 6 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index. Implementation is at the close on 8 December.
There is a lot of overlap between the adds and deletes across both indices with the one-way trade across both indices estimated to be CNY 2.4bn.
The adds and deletes have drifted lower over the last few months. However, the adds have outperformed the deletes significantly in the last month.

SET50 Index Rebalance Preview: KCE Could Replace TIDLOR

With the review period complete, KCE Electronics PCL (KCE TB) should replace Ngern Tid Lor (TIDLOR TB) in the SET50 INDEX at the December rebalance.
Liquidity is poor in Intouch Holdings (INTUCH TB) and Thai Life Insurance (TLI TB) but the stocks should be maintained in the index.
Passive trackers will need to buy 0.9x ADV (1.2% of float) of KCE Electronics PCL (KCE TB) and sell 0.8x ADV (1.6% of float) of Ngern Tid Lor (TIDLOR TB).

S&P500 Index Rebalance: Calling an UBER

Uber Technologies (UBER US), Jabil Circuit (JBL US) and Builders Firstsource (BLDR US) will be added to the S&P 500 INDEX (SPX INDEX) at the close on 15 December.
There are a bunch of inclusions. deletions and migrations across the S&P 500 INDEX (SPX INDEX), the S&P Midcap 400 Index, and the S&P SmallCap 600 Index.
We estimate passive trackers will need to buy around US$18bn of Uber Technologies (UBER US). There has been positioning in the stock for just over a month now.

Japan Activism: Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price

Japan Catalyst Fund is a relatively young effort in the Japan “engagement activism” space, having been founded by Monex Group in September 2019. Total assets remain apparently small.
Championed by Monex Group founder Oki Matsumoto, despite small AUM, the fund has decent access. As of end-October, Taisho Pharmaceutical Holdings (4581 JP) was #5 and 5.26%. Now it’s #2.
Friday, they released a statement about the MBO. It isn’t a barn-burner, but the stock has traded through terms since announcement at a too-low price. And nobody else has commented.

[Blue Lotus Daily]: XPEV/NIO/BYD/TSLA LI/Geely/ACMR/ MU/NVDA/981.HK/1810.HK/000660.KS

By Eric Wen

XPEV/NIO/BYD/TSLA: Luxeed S7 officially launched, price lowered by RMB 8,200 (-)
NIO: Geely and NIO enter into strategic cooperation agreement for battery swapping (+)
ACMR/ MU/ NVDA/ 981.HK/ 1810.HK/ 000660.KS: CXMT launches first domestic LPDDR5 RAM (+/+/+/-/-/-)

2024 High Conviction: China Tourism Group (601888 CH, BUY, TP:CNY106): See the Forest for the Trees

By Mohshin Aziz

China stock market despair has brought down China Tourism Group Duty Free Corp Ltd (601888 CH) to its lowest forward valuation in the past ten years
Poised for long-term growth, Chinese are buying albeit more prudently, government supportive on promoting domestic consumption, efficiency enhancements will lower cost and boost margins
Using the company’s lowest recorded PE ratio in the past 10 years of 23.2x into FY24, we derive a target price of CNY106 (+21% UPSIDE)

Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake

The question of how Murakami-san would get out of his stake in Cosmo Energy Holdings (5021 JP) was always a biggie. He likes to sell stock in tender offer buybacks.
Cosmo wasn’t going to do that for him. They promised dividends and a high payout ratio, but that left the question was how he was going to get out.
A semi-obvious solution was to find a corporate partner to buy his stake and today, Iwatani Corp (8088 JP) announced that it had bought 19.86% of Murakami-san’s 20.01% holding.

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Dec 02

Most Read: Teco Electric & Machinery, Helia Group , Zhongjin Gold Corp A, Amman Mineral Internasional, Ito En Ltd Preferred Shares, REPT BATTERO Energy, KCE Electronics PCL, Greatview Aseptic Packaging, Taisho Pharmaceutical Holdin, Sun Hung Kai Properties and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 18% One-Way Turnover & US$2.74bn Trade
S&P/ASX Index Rebalance Preview: Big Impact; A Week From Announcement
CSI300 Index Rebalance: 14 Changes & A Few Surprises
Amman Mineral (AMMN IJ): Potential Passive Inflows Coming Up Soon
Itoen Pref (25935 JP) – Big Discount, Big Buyback, No Big Governance Change
REPT BATTERO Energy Pre-IPO – The Positives – Has Scaled Rapidly
SET50 Index Rebalance Preview: KCE Could Replace TIDLOR
GAPack (468 HK): Unpacking XJF’s Move To Send The Board Packing
(Mostly) Asia M&A, Nov 2023: Taisho Pharma, CIMC Vehicle, CMIC, Japan Best Rescue, Shidax
HK CEO & Director Dealings (1 Dec 2023): Kwoks Still Buying SHK; Co-Founder Selling Akeso

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 18% One-Way Turnover & US$2.74bn Trade

Using data from the close on 20 November, there could be 6 adds and 5 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
There will also be capping and funding flows that will lead to a one-way turnover of 17.8% and a one-way trade of US$1.37bn.
There are 16 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1-day ADV to trade.

S&P/ASX Index Rebalance Preview: Big Impact; A Week From Announcement

There could be 3 changes for the S&P/ASX 200 (AS51 INDEX) in December. There are unlikely to be any changes for indices higher up the hierarchy.
Passive trackers will need to buy between 7-11 days of ADV in the inclusions while the impact on the deletions will be larger at between 11-23 days of ADV.
Short interest has decreased on the potential inclusions and increased on the potential deletions. There is significant pre-positioning on some of the stocks.

CSI300 Index Rebalance: 14 Changes & A Few Surprises

There are 14 changes for the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) at the upcoming rebalance that will be implemented at the close of trading on 8 December.
While most changes are in line with forecasts, there are some stocks that have not been added or deleted as the index committee has used their discretion.
The adds outperformed the deletes in the first half of the year with performance staying stable over the second half of the year. Position for outperformance ahead of implementation.

Amman Mineral (AMMN IJ): Potential Passive Inflows Coming Up Soon

Amman Mineral Internasional (AMMN IJ) listed on the Main Board of the IDX in July by raising US$715m in the largest Indonesia IPO for the year.
The stock did not get Fast Entry to any of the local or global indices given the low float, but there could be multiple index inclusions in the near future.
The stock is up 3x from its IPO price and there could be supply from some of the investors that got in at the offering price.

Itoen Pref (25935 JP) – Big Discount, Big Buyback, No Big Governance Change

This is always a tough subject, but every now and then I throw myself on the mercy of the ho-humming crowd and write about the Ito En Prefs (25935 JP).
No strong catalyst. Limited capacity for strongly better governance. Even less apparent corporate interest in good governance.
But we have a mini-catalyst, and it has been a while, and I think there IS a good way to think about this stock, so here’s another crack at it.

REPT BATTERO Energy Pre-IPO – The Positives – Has Scaled Rapidly

REPT BATTERO Energy (REPT HK) is looking to raise US$1bn in its upcoming Hong Kong IPO.
REPT BATTERO Energy (REPT) is a lithium-ion battery manufacturer in China, focusing on R&D, production, and sales of EV/ESS lithium-ion battery products such as battery cells, modules and packs.
In this note, we will talk about the positive aspects of the deal.

SET50 Index Rebalance Preview: KCE Could Replace TIDLOR

With the review period complete, KCE Electronics PCL (KCE TB) should replace Ngern Tid Lor (TIDLOR TB) in the SET50 INDEX at the December rebalance.
Liquidity is poor in Intouch Holdings (INTUCH TB) and Thai Life Insurance (TLI TB) but the stocks should be maintained in the index.
Passive trackers will need to buy 0.9x ADV (1.2% of float) of KCE Electronics PCL (KCE TB) and sell 0.8x ADV (1.6% of float) of Ngern Tid Lor (TIDLOR TB).

GAPack (468 HK): Unpacking XJF’s Move To Send The Board Packing

Back on the 27 January 2023, Jardine Matheson (JM SP) entered an agreement with Shandong Xinjufeng (301296 CH) (XJF) to sell its 28.22% stake in GAPack (468 HK).
That sale completed in September. Last week, XJF requisitioned an EGM to consider appointing five new (& friendly) directors, all-but taking control of the board.
CEO and founder Jeff Bi holds 9.65%. The question is: what are his options?

(Mostly) Asia M&A, Nov 2023: Taisho Pharma, CIMC Vehicle, CMIC, Japan Best Rescue, Shidax

For the month of November 2023, 16 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$13bn.
The average premium for the new deals announced (or first discussed) in November was 41%. The average YTD is 38% (97 deals).
This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

HK CEO & Director Dealings (1 Dec 2023): Kwoks Still Buying SHK; Co-Founder Selling Akeso

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
The key stocks mentioned in this regular insight are Sun Hung Kai Properties (16 HK) and Akeso Biopharma Inc (9926 HK).

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Dec 01

Most Read: Pasona Group, Kurita Water Industries, Denso Corp, Ito En Ltd Preferred Shares, Sapporo Holdings, Greatview Aseptic Packaging and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Pasona: The Wrong Price
Denso Offering, Buyback, and New Cross-Holding Reduction Policy – It WAS a Trap
Huge Denso (6902) Secondary Sale by Toyota Group – Admiral Ackbar Says “It’s A Trap!”
Denso (6902 JP): US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback
Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning
Denso – Thoughts On The Cross-Holdings Sell-Down
Itoen Pref (25935 JP) – Big Discount, Big Buyback, No Big Governance Change
Sapporo Holdings: Activist Investor 3D Investment Partners Assumes Majority Ownership
Risks Ahead for Japanese Trading Companies. Marubeni, Mitsui, Sumitomo, Mitsubishi
GAPack (468 HK): Unpacking XJF’s Move To Send The Board Packing

Pasona: The Wrong Price

As discussed here in a piece about the Partial Tender Offer, Pasona Group (2168) has agreed to sell its controlling stake in Benefit One (2412) to M3 (2413).
That will leave Pasona Group with a fair chunk of cash and possibly a residual stake in Benefit One, depending on the results.
Though we don’t know what the future holds, Pasona now is the wrong price for its future.

Denso Offering, Buyback, and New Cross-Holding Reduction Policy – It WAS a Trap

15 minutes after I published what I thought was a considered analysis, Denso dumps the details. I thought it might be a trap. It looks like a trap.
A holistic view of the three different documents here suggests, indeed, “It was a trap”.
This giant offering is not bearish overhang but likely tilts bullish with greenshoe support, a large buyback, a new cross-holding reduction policy, and the follow-on effects from that.

Huge Denso (6902) Secondary Sale by Toyota Group – Admiral Ackbar Says “It’s A Trap!”

Yesterday, Reuters reported that multiple Toyota Group companies would sell ~10% of Denso Corp (6902 JP) worth ¥700bn in a secondary share sale by year-end.
The sellers would be Toyota, selling down to just over 20%, Toyota Industries (6201) (selling down a bit more than half, and Aisin Seiki (7259 JP) selling its 2% stake.
Denso would buy back shares. This whole thing is both interesting and complicated so I discuss the interesting complications below. It looks bigger than it probably is.

Denso (6902 JP): US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback

Denso Corp (6902 JP) announced a secondary offering of up to 294.8 billion shares (including overallotment) and a buyback (maximum shares of 125 million or maximum value of JPY200 billion).
Denso also announced a cross-holding reduction policy. In an unspecified timeframe, it will sell part of its holdings in Toyota Industries (6201 JP) and Aisin (7259 JP).
Looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 13 and 18 December (likely 13 December).

Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning

There should be liquidity events on Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp tomorrow.
On average, the stocks have underperformed the Nikkei 225 Index over the last 2-3 months but there has been near-term outperformance.
There has been a big increase in shorts on the stocks over the last couple of months and positioning varies across stocks.

Denso – Thoughts On The Cross-Holdings Sell-Down

By Mio Kato

The trend of governance reform in Japan continues with Toyota, Toyota Industries and Aisin selling shares of Denso.
Denso is buffering some of the flow impact by repurchasing roughly half of the shares to be sold.
While the size of these moves is relatively large we believe their impact could be disproportionately large for the market as a whole.

Itoen Pref (25935 JP) – Big Discount, Big Buyback, No Big Governance Change

This is always a tough subject, but every now and then I throw myself on the mercy of the ho-humming crowd and write about the Ito En Prefs (25935 JP).
No strong catalyst. Limited capacity for strongly better governance. Even less apparent corporate interest in good governance.
But we have a mini-catalyst, and it has been a while, and I think there IS a good way to think about this stock, so here’s another crack at it.

Sapporo Holdings: Activist Investor 3D Investment Partners Assumes Majority Ownership

By Oshadhi Kumarasiri

Last week, activist investor 3D Investment Partners raised its stake in Sapporo Holdings (2501 JP) by an additional 13%, cementing its position as the majority shareholder in the business.
This suggests the activist investor is optimistic about successfully advancing their proposals.
If investment properties are sold or spun off, and Alcoholic Beverages and Food & Soft Drinks undergo the suggested turnaround, we anticipate an additional 80-100% upside in the near term.

Risks Ahead for Japanese Trading Companies. Marubeni, Mitsui, Sumitomo, Mitsubishi

By Rikki Malik

Headwinds are turning to tailwinds for the Japanese Trading companies.
Risks rising in the short term due to JPY strength, weakening commodity prices and the upcoming US recession.
Massive outperformance over the last two years, most recently due to multiple expansion

GAPack (468 HK): Unpacking XJF’s Move To Send The Board Packing

Back on the 27 January 2023, Jardine Matheson (JM SP) entered an agreement with Shandong Xinjufeng (301296 CH) (XJF) to sell its 28.22% stake in GAPack (468 HK).
That sale completed in September. Last week, XJF requisitioned an EGM to consider appointing five new (& friendly) directors, all-but taking control of the board.
CEO and founder Jeff Bi holds 9.65%. The question is: what are his options?

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Nov 30

Most Read: GMO Payment Gateway, Denso Corp, Toyota Motor, Celltrion Healthcare , SK Square , Kurita Water Industries and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan – Increase in Shorts on Some Interesting*** Stocks
Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying
Huge Denso (6902) Secondary Sale by Toyota Group – Admiral Ackbar Says “It’s A Trap!”
Denso Offering, Buyback, and New Cross-Holding Reduction Policy – It WAS a Trap
StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS
Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger
Denso (6902 JP): US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback
SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve
Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning
Denso Corp Placement – Toyota to Raise US$4.4bn, as Expected

Japan – Increase in Shorts on Some Interesting*** Stocks

Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent Inc, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp have underperformed the Nikkei 225 recently.
The underperformance could lead to selling from global passive trackers and liquidity events on some of the stocks at month-end.
There has been an increase in short interest on most stocks over the last week as positioning for the liquidity event ramps up.

Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying

There could be a US$4.6bn secondary placement in Denso Corp (6902 JP) before year-end as Toyota Motor (7203 JP), Toyota Industries (6201 JP) and Aisin Corp (7259 JP) unwind cross-holdings.
Denso Corp (6902 JP) was down 4.85% yesterday (and even more intra-day) and the stock could remain under pressure for the next few weeks.
There will be limited passive buying in conjunction with the secondary offering and active investors will need to buy a lot of stock.

Huge Denso (6902) Secondary Sale by Toyota Group – Admiral Ackbar Says “It’s A Trap!”

Yesterday, Reuters reported that multiple Toyota Group companies would sell ~10% of Denso Corp (6902 JP) worth ¥700bn in a secondary share sale by year-end.
The sellers would be Toyota, selling down to just over 20%, Toyota Industries (6201) (selling down a bit more than half, and Aisin Seiki (7259 JP) selling its 2% stake.
Denso would buy back shares. This whole thing is both interesting and complicated so I discuss the interesting complications below. It looks bigger than it probably is.

Denso Offering, Buyback, and New Cross-Holding Reduction Policy – It WAS a Trap

15 minutes after I published what I thought was a considered analysis, Denso dumps the details. I thought it might be a trap. It looks like a trap.
A holistic view of the three different documents here suggests, indeed, “It was a trap”.
This giant offering is not bearish overhang but likely tilts bullish with greenshoe support, a large buyback, a new cross-holding reduction policy, and the follow-on effects from that.

StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS

The Toyota Group of companies are proposing to reduce their holdings in Denso (6902 JP) by selling about 10% by year-end, in a share sale worth ~$4.7bn.
Preceding my comments on Toyota Industries (6201 JP) / Toyota Motor (7203 JP) – and Las Vegas Sands (LVS US) – 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%.

Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger

KOSDAQ 150’s passive outflow occurs on December 14th for Celltrion Healthcare, whereas it would be January 11th for Celltrion with KOSPI 200.
The estimated passive flow size (x ADTV) on their respective rebalancing trading days is anticipated to be approximately -2.79x (Celltrion Healthcare) and +1.76x (Celltrion).
We should monitor the potential expansion of the swap spread on December 14th. Additionally, contemplating an outright approach for Celltrion, akin to the Hanwha Ocean scenario, could be worth considering.

Denso (6902 JP): US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback

Denso Corp (6902 JP) announced a secondary offering of up to 294.8 billion shares (including overallotment) and a buyback (maximum shares of 125 million or maximum value of JPY200 billion).
Denso also announced a cross-holding reduction policy. In an unspecified timeframe, it will sell part of its holdings in Toyota Industries (6201 JP) and Aisin (7259 JP).
Looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 13 and 18 December (likely 13 December).

SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve

By Douglas Kim

SK Square announced it will not exercise the call option to repurchase minority stake in 11 Street. This is likely to have a positive impact on the company.
SK Square does not need to pay 500 billion won plus 3.5% annualized interest to the financial investors of 11 Street. This will also accelerate sale of 11 Street.
In addition, SK Square announced the merger of TVing and Wavve OTT services.

Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning

There should be liquidity events on Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp tomorrow.
On average, the stocks have underperformed the Nikkei 225 Index over the last 2-3 months but there has been near-term outperformance.
There has been a big increase in shorts on the stocks over the last couple of months and positioning varies across stocks.

Denso Corp Placement – Toyota to Raise US$4.4bn, as Expected

Following yesterday’s news release by Reuters that Toyota Motor (7203 JP) could sell up to 10% of Denso Corp (6902 JP), the deal was officially launched today.
Toyota is the company’s largest shareholder and its largest customer.
We have covered the deal background in our earlier note, Denso Corp Placement – Possible Placement by Toyota to Raise US$4.7bn. In this note, we talk about the final terms.

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Nov 29

Most Read: Eoflow , Korea Stock Exchange Kospi Index, Denso Corp, Glosel , Wuxi Lead Intelligent Equipmen, Kotak Mahindra Bank, Alibaba Group Holding , CIMC Vehicle Group Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

EOFlow (Further) Tests Investor Patience
Breaking Down Korean Regulators’ Official Details on New Short Selling System
Denso Corp Placement – Possible Placement by Toyota to Raise US$4.7bn
Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying
Another Day Ending in Y, Another Low-Balled Takeover – This Time Glosel (9995)
Wuxi Lead GDR Listing – Early Look – Another One in the Pipeline, Will Be Net Cash Post-Deal
Kotak Mahindra Bank – US$1.2 Billion Lockup Release
Hang Seng Indices (HSI, HSCEI, HS Tech) Recapping the Recaps – A Bit More To Trade
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2023)
CIMC Vehicles (1839 HK): $7.00/Share Indicative Offer From Parent – Really?!

EOFlow (Further) Tests Investor Patience

Back on the 25 May, when Medtronic Plc (MDT US) enter into a SPA with EOFlow (294090 KS)‘s CEO, with a follow-on Tender Offer, the whole construct looked pretty clean.
Then in August Insulet Corp (PODD US) launched its lawsuit, which in hindsight, should have been expected. Then earlier this month, news surfaced concerning a stock-backed loan to the CEO.
Now the CEO is selling, presumably to repay his collateralized loan. Shares are down 38% since the resumption of trading, and are now at a whopping 122% spread to terms.

Breaking Down Korean Regulators’ Official Details on New Short Selling System

Concerning the newly imposed 90-day mandatory repayment period for institutional investors, the elimination of the recall risk during this period is not included in this improvement plan.
The right to re-establish the same short-selling position after the 90-day repayment period is unlimited. We should pay attention to the potential of this creating new trading events.
Institutions borrowing stocks from overseas are not subject to the 105% collateral ratio. However, everyone is subject to the 90-day repayment period, even for investors who borrow stocks from overseas.

Denso Corp Placement – Possible Placement by Toyota to Raise US$4.7bn

As per Reuters, Toyota Motor (7203 JP) could look to sell up to 10% of Denso Corp (6902 JP) to raise around US$4.7bn before the end of the year.
Toyota is the company’s largest shareholder and its largest customer.
In this note, we will talk about the deal dynamics.

Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying

There could be a US$4.6bn secondary placement in Denso Corp (6902 JP) before year-end as Toyota Motor (7203 JP), Toyota Industries (6201 JP) and Aisin Corp (7259 JP) unwind cross-holdings.
Denso Corp (6902 JP) was down 4.85% yesterday (and even more intra-day) and the stock could remain under pressure for the next few weeks.
There will be limited passive buying in conjunction with the secondary offering and active investors will need to buy a lot of stock.

Another Day Ending in Y, Another Low-Balled Takeover – This Time Glosel (9995)

Today, Macnica Fuji Electronics Hol (3132 JP) (Macnica Holdings) announced that it would launch a tender offer to buy 100% of Glosel (9995 JP), a semiconductor trading company.
Glosel is special because it has three main assets. 1) 61% of net assets are inventory (<3mo), 2) 34% of net assets are net receivables (<3mos), 3) 8+% is securities.
For that, Glosel’s Board decided 0.71x book was OK. Nah. The register is reasonably wide open, and this is a delayed start. Someone might get noisy, but < 50/50 bet.

Wuxi Lead GDR Listing – Early Look – Another One in the Pipeline, Will Be Net Cash Post-Deal

By Clarence Chu

Wuxi Lead Intelligent Equipmen (300450 CH) is looking to raise around US$300m in its upcoming Switzerland GDR listing.
As per media reports, Wuxi Lead was said to be looking to raise US$495m via a Swiss GDR issuance, having secured approval to sell up to 78.3m shares.
Given the decline in its share price over the year, the eventual deal size could come to around US$300m as of its current last close.

Kotak Mahindra Bank – US$1.2 Billion Lockup Release

In Jun 2023, CPPIB raised around US$750m via selling a 1.6% stake in Kotak Mahindra Bank (KMB IN). Prior to that it had sold a similar amount in Mar 2022.
CPPIB will be released from its placement linked lockup early next month.
In this note, we will talk about the lockup dynamics and past deals performance.

Hang Seng Indices (HSI, HSCEI, HS Tech) Recapping the Recaps – A Bit More To Trade

The final datapoints for the December Hang Seng Indices rebalances were recorded today, slightly altering the initially expected weights and flows.
The expected flows have slightly increased since the initial estimates on 15 then 17 November.
Across all three indices, I see a net total of roughly HK$13.4bn a side to trade.

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2023)

The December rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
Li Auto (2015 HK) will have the largest inflows due to the HSI inclusion while Xiaomi (1810 HK) will have the largest outflow due to HSTECH capping.
There will be passive selling in HSBC Holdings (5 HK) for yet another rebalance due to capping of the stock in the Hang Seng Index (HSI INDEX).

CIMC Vehicles (1839 HK): $7.00/Share Indicative Offer From Parent – Really?!

After CIMC Vehicle Group Co Ltd (1839 HK) was suspended yesterday pursuant to Hong Kong’s Takeover Code, the expectation was an H-share Offer from its parent, SOE-backed CIMC Group.
CIMC subsequently announced an indicative Offer yesterday evening, from its parent, at a $7.00/share for each H-share, a pitiful 8.6% premium to last close. There is no concurrent A-share Offer.
CIMC traded around $7.00 late September, and comfortably traded through the indicative terms for most of July.

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Nov 28

Most Read: Eoflow , Fenbi Ltd, T&K Toka Co Ltd, WuXi AppTec , Asahi Group Holdings, Hollysys Automation Technologies, PCCW Ltd, Hygon Information Technology C, Korea Stock Exchange Kospi Index and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

EOFlow (Further) Tests Investor Patience
KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added
Asahi Group Placement – Follow Up – Shaping up for a Christmas Cheer
T&K TOKA (4636 JP): Imminent TOB Launch? Imminent Bump Needed?
CSI Medical Service Index Rebalance: Chunky Flows for Some Stocks
Asahi Group (2502 JP): The Current Playbook
2024 High Conviction: Buy Hollysys
StubWorld: Rumoured Interest In PCCW’s Fibre
CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon
Breaking Down Korean Regulators’ Official Details on New Short Selling System

EOFlow (Further) Tests Investor Patience

Back on the 25 May, when Medtronic Plc (MDT US) enter into a SPA with EOFlow (294090 KS)‘s CEO, with a follow-on Tender Offer, the whole construct looked pretty clean.
Then in August Insulet Corp (PODD US) launched its lawsuit, which in hindsight, should have been expected. Then earlier this month, news surfaced concerning a stock-backed loan to the CEO.
Now the CEO is selling, presumably to repay his collateralized loan. Shares are down 38% since the resumption of trading, and are now at a whopping 122% spread to terms.

KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added

The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 8 December.
Fenbi Ltd (2469 HK) and YSB (9885 HK) will be added to the index and there are no deletions.
There is a big lock-up expiry in YSB (9885 HK) soon after the index inclusion and this could be an opportunity to access liquidity in the stock.

Asahi Group Placement – Follow Up – Shaping up for a Christmas Cheer

By Clarence Chu

A group of shareholders aims to raise US$1.3bn (JPY197.8bn) by selling their respective stakes in Asahi Group Holdings (2502 JP) via an extended secondary follow-on.
We have covered the background of the deal in our earlier note, Asahi Group Placement – Relatively Small One when Compared to Previous Large JP Secondary Selldowns.
In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.

T&K TOKA (4636 JP): Imminent TOB Launch? Imminent Bump Needed?

In August, T&K Toka Co Ltd (4636 JP) announced a TOB by Bain with a clearance hurdle of selling a 3.51% stake in Hangzhou Toka Ink (SH:688571) before launch.
Friday, the company announced that they put up a 3.6% stake for auction, with the sale to be executed that day. That likely triggers an early launch of the TOB.
The TOB Price is offensively cheap at 0.63x “official” book, and 0.53x book adjusted for equity affiliate price. The shares have traded through terms since launch. This should get bumped.

CSI Medical Service Index Rebalance: Chunky Flows for Some Stocks

There are 4 changes for the CSI Medical Service Index that will be implemented at the close on 8 December.
The constituent changes plus capping result in one-way turnover of 5.9% and in a one-way trade of CNY 1.86bn (US$261m).
Some stocks will have passive flows from global trackers at the end of November while there will be flows from other local passive trackers at the close on 8 December.

Asahi Group (2502 JP): The Current Playbook

Since the US$1.3 billion secondary placement announcement, Asahi Group Holdings (2502 JP)’s shares are down -6.2% from the undisturbed price of JPY5,804 per share (16 November).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Asahi’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 28 November. Investors participating in previous large Japanese placements tend to secure positive returns.

2024 High Conviction: Buy Hollysys

Despite Hollysys Automation (HOLI US) receiving a myriad of proposals over the past three years, nothing moved forward. Calling an SGM to spill the board would change that status quo.
But Hollysys’ board stonewalled the SGM, pinning its reason – and a proposed injunction – on the subjective ownership of Ace Lead, and in turn, its 6.7% holding in Hollysys.
That injunction was dismissed last week. An SGM will now be held late January. A firm merger proposal is expected in the middle of next month. This is a buy.

StubWorld: Rumoured Interest In PCCW’s Fibre

Reportedly, Chinese investors, as well as Middle Eastern sovereign wealth funds, have expressed interest in acquiring a “significant ” minority stake in PCCW Ltd (8 HK)‘s fibre ops.
Preceding my comments on PCCW 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%.

CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon

There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 8 December.
This is yet another index inclusion for Hygon Information Technology C (688041 CH) – the stock continues to move higher on expected passive buying over the next two weeks.
Over the last 6 months, the adds have underperformed the deletes but there has been a significant improvement in performance over the last 2 months.

Breaking Down Korean Regulators’ Official Details on New Short Selling System