Most Read

Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

NTT’s Partial Offer for Marketing Consultant Intage (4326) –

Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP).
Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%.
The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership.

Metro Pacific’s Tender Offer Kicks Off

Back on the 26 April, First Pacific (142 HK) and three other entities, proposed delisting Metro Pacific Investments (MPI PM) at PHP 4.63/share. This was subsequently bumped to PHP 5.20.
A Special Stockholders’ Meeting was held on August 8, and MPI stakeholders approved all the resolutions. An SGM for independent First Pac shareholders will be held on the 24 August.
The Tender Offer is now open and closes on the 7 September, with (expected) settlement on 19 September – provided the Tender Offer delisting conditions are met.

CSI300 Index Rebalance Preview: 14 Potential Changes in December

Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.

KRX BBIG K-New Deal Rebalancing: Official Results & Passive Flow Impacts

After results were transitioned to non-public information, it has been observed that results are reflected in prices significantly later, with substantial price impact occurring close to the rebalancing trading day.
Even though the AUMs have recently decreased, the passive impact size is quite substantial, considering a recent pattern of price impact concentrating within a maximum of about two trading days.
A heavy Long-Short setup on these pairs, DearU / Douzone Bizon and SK Biopharmaceuticals / SK Bioscience (302440 KS), is something we should very actively consider.

Japan Tobacco High Conviction Call: No Price Hikes This Year, But Profits Poised to Soar

By Oshadhi Kumarasiri

Combustible tobacco is declining globally, but Japan Tobacco (2914 JP) is defying the odds by outperforming the industry significantly through capturing market share from competitors.
Also in Heated Tobacco, Japan Tobacco is slowly but steadily capturing market share from IQOS and other heated tobacco makers.
There will be no price hikes this year, but we think that there’s enough spillover from the price hikes in the past 3-4 years to maintain JT’s OP growth momentum.

Aquila Acquisition Corp (7836 HK): ZG Group’s Punchy Valuation

Aquila Acquisition Corporation (7836 HK) agreed to a De-SPAC transaction with ZG Group (formerly Zhaogang.com), the world’s largest digital platform for third-party steel transactions.
ZG has a questionable business model, struggling to generate profits or underlying FCF. This dynamic suggests that ZG has not established a sustainable competitive advantage.
The negotiated value of ZG in the De-SPAC transaction is HK$10,004 million (US$1,277 million). Our valuation analysis suggests that this negotiated value is unrealistic.

SoftBank Group (9984 JP); Arm IPO, Priced for Disappointment

By Victor Galliano

SoftBank’s internal transaction acquiring the 25% Arm stake held by SVF1 valued Arm at USD64bn; the IPO valuation range is from USD48bn to USD52bn
This valuation range implies an Nvidia-like price to prospective 2024E sales multiple range of 22x-25x; the prospectus reveals risks with Arm China, and confirms its lacklustre revenue and earnings growth
Given SoftBank’s largely negative track record on the after-market performance of its investee companies IPOs and SPOs; we expect further downside to SoftBank’s share price

JMDC (4483 JP): Omron’s Partial Tender Offer

JMDC (4483 JP) announced a partial tender offer for Omron Corp (6645 JP), the largest shareholder. Omron aims to make JMDC a consolidated subsidiary.
The offer is for a minimum of 12.0m shares (18.52% ownership ratio) and a maximum of 15.0m shares (23.08%) at JPY5,700 per share, a 22.4% premium to the undisturbed price.
Irrevocables (Noritsu Koki (7744 JP)) represent a 13.63% ownership ratio. While the offer is light, it will likely succeed as the minimum acceptance condition requires a 7.1% minority acceptance rate.

Newcrest: Shareholder Vote On 13th Oct

After being granted due diligence, Newmont (NEM US) firmed an all-scrip Offer on the 15 May for Newcrest (NCM AU) at 0.400 new Newmont shares for each Newcrest share held.
The Offer, by way of a Scheme, permits Newcrest to pay a special franked dividend of up to $US1.10/share on top of the Offer terms.
The Scheme Booklet has now been lodged with ASIC. Newcrest shareholders vote on the transaction on the 13 October. The record date for the special dividend is the 19 October.

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Sep 08

Most Read: JFE Holdings, Intage Holdings, Youngpoong Paper Mfg, Mirae Asset Tiger Top 10 ETF, Empyrean Technology , ARM Holdings, Aquila Acquisition Corporation, Oriental Watch, Hana Micron Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JFE Holdings (5411) Stock+CB Offering
NTT’s Partial Offer for Marketing Consultant Intage (4326) –
Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF
Single-Day ETF Flow Event Not to Be Missed in Korea in December
CSI300 Index Rebalance Preview: 14 Potential Changes in December
ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding
Arm IPO – Don’t Worry, It’ll Be Fine
Aquila Acquisition: The De-SPACed Arb
Oriental Watch: Addressing the Rolex Acquisition of Bucherer
Hana Micron’s Boost From Samsung/Nvidia Agreement

JFE Holdings (5411) Stock+CB Offering

Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

NTT’s Partial Offer for Marketing Consultant Intage (4326) –

Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP).
Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%.
The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership.

Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF

The HSI, HSCEI, HSTECH and HSCI rebalances will take place at the close on 4 September since the market was closed on 1 September due to Typhoon Saola.
There will be a few announcements next week with Nikkei 225 early in the week and the MVIS series post close on Friday. Plus the STAR50 rebalances on Friday.
Another week of huge inflows into mainland China ETFs focused on the CSI 300 Index, STAR50 INDEX and CSI Smallcap 500 Index.

Single-Day ETF Flow Event Not to Be Missed in Korea in December

Ecopro Co will replace Celltrion Inc. Their float market cap difference is nearly 5 trillion won, so it doesn’t seem likely that this will reverse by the end of November.
Ecopro may not have a very significant passive impact x ADTV, given its still high trading volume. On the other hand, Celltrion seems likely to be the target of traders.
From a trading perspective, it’s important to focus on the potential price impact of this flow event on Celltrion, which could be amplified depending on the possibility of merger cancellation.

CSI300 Index Rebalance Preview: 14 Potential Changes in December

Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.

ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding

Softbank Group (9984 JP) aims to raisebetween US$4.5-4.9bn via selling some of its stake in ARM Holdings‘ US IPO.
ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In our previous notes, we looked at the company’s past performance. In this note, we talk about valuation.

Arm IPO – Don’t Worry, It’ll Be Fine

By Mio Kato

So the terms are out for Softbank’s attempt to list Arm.
In typical sparkling form, Masayoshi Son has clocked a ~19% drawdown within weeks.
Good thing all the bankers will easily get their $8bn loan paid back in full and aren’t subject to conflicting interests…?

Aquila Acquisition: The De-SPACed Arb

SPACs – remember them? US offerings in 2021 topped ~US$150bn, falling to US$13bn in 2022. Singapore joined the bandwagon in January 2022 and Hong Kong two months later.
That Hong Kong stock is Aquila Acquisition Corporation (7836 HK), and it recently announced a merger with ZG Group, a Chinese steel trading website.
That’s positive. Less positive is how de-SPACed shares tend to trade in the US.

Oriental Watch: Addressing the Rolex Acquisition of Bucherer

By Sameer Taneja

Rolex acquisition of Bucherer signals the company’s intention to own retail distribution and gain access to what its competitors are doing, with the battleground currently being Europe.
We believe it will take years for Rolex to digest this acquisition before foraying into other markets, but with a similar approach, potentially making Oriental Watch (398 HK) a target.
Trading at 6.9x PE with 50% of the market cap in cash and a ~15% dividend yield, the company presents a great investment opportunity.

Hana Micron’s Boost From Samsung/Nvidia Agreement

US graphics chip designer NVIDIA Corp (NVDA US) has, to date, sourced HBM3 chips exclusively from SK Hynix (000660 KS).
Shares in Samsung Electronics (005930 KS) promptly popped ~6% last Friday on news it had been added as a supplier to NVIDIA.
Hana Micron Inc (067310 KS), which boasts Samsung as its largest customer, similarly jumped, and is up 45% in the past week. Too much too quickly?

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Sep 07

Most Read: JFE Holdings, Boss Resources, Intage Holdings, ARM Holdings, Axiata Group, Empyrean Technology , Mirae Asset Tiger Top 10 ETF and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JFE Holdings (5411) Stock+CB Offering
Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions
NTT’s Partial Offer for Marketing Consultant Intage (4326) –
JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction
Intage Holdings (4326 JP): NTT’s Partial Tender Offer
Arm IPO – Don’t Worry, It’ll Be Fine
ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding
StubWorld: Axiata Is Coming Up Cheap
CSI300 Index Rebalance Preview: 14 Potential Changes in December
Single-Day ETF Flow Event Not to Be Missed in Korea in December

JFE Holdings (5411) Stock+CB Offering

Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions

There are a bunch of stocks that are constituents of the S&P/ASX family of indices and could go private or merge prior to the next scheduled rebalance in December.
That will lead to ad hoc inclusions for the S&P/ASX 200 (AS51 INDEX) and could also lead to ad hoc inclusions for the S&P/ASX 50 and S&P/ASX 100 indices.
There is a fair amount of short interest on some of the potential inclusions and short covering due to index inclusion could take the stocks higher.

NTT’s Partial Offer for Marketing Consultant Intage (4326) –

Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP).
Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%.
The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership.

JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction

JFE Holdings (5411 JP) is looking to raise around US$870m to fund its capacity expansion plans. Together with the offering, it will undertake a US$610m CB issuance.
The deal appears to be well flagged with the firm disclosing its JV and other related CapEx plans in its earlier earnings announcement.
Overall, the new shares would result in a 8.2% dilution and represent 12 days of three month ADV.

Intage Holdings (4326 JP): NTT’s Partial Tender Offer

NTT (Nippon Telegraph & Telephone) (9432 JP) has announced a partial tender offer for Intage Holdings (4326 JP) to make it a consolidated subsidiary.
The offer is for a minimum of 15.4m shares (40.00% ownership ratio) and a maximum of 19.6m shares (51.00%) at JPY2,400 per share, a 26.4% premium to the undisturbed price.
Irrevocables represent a 19.90% ownership ratio. The minimum acceptance condition requires a 20% minority acceptance rate. The offer is attractive and represents an all-time high.

Arm IPO – Don’t Worry, It’ll Be Fine

By Mio Kato

So the terms are out for Softbank’s attempt to list Arm.
In typical sparkling form, Masayoshi Son has clocked a ~19% drawdown within weeks.
Good thing all the bankers will easily get their $8bn loan paid back in full and aren’t subject to conflicting interests…?

ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding

Softbank Group (9984 JP) aims to raisebetween US$4.5-4.9bn via selling some of its stake in ARM Holdings‘ US IPO.
ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In our previous notes, we looked at the company’s past performance. In this note, we talk about valuation.

StubWorld: Axiata Is Coming Up Cheap

Axiata Group (AXIATA MK)‘s NAV discount and implied stub are around their lows since the CelcomDigi (CDB MK) / Digi.com merger last November.
Preceding my comments on Axiata 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%.

CSI300 Index Rebalance Preview: 14 Potential Changes in December

Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.

Single-Day ETF Flow Event Not to Be Missed in Korea in December

Ecopro Co will replace Celltrion Inc. Their float market cap difference is nearly 5 trillion won, so it doesn’t seem likely that this will reverse by the end of November.
Ecopro may not have a very significant passive impact x ADTV, given its still high trading volume. On the other hand, Celltrion seems likely to be the target of traders.
From a trading perspective, it’s important to focus on the potential price impact of this flow event on Celltrion, which could be amplified depending on the possibility of merger cancellation.

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✓ Company Analytics and News
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Sep 06

Most Read: Lasertec Corp, Mercari , ZOZO Inc, JFE Holdings, EcoPro Materials, Boss Resources, Golden Eagle Retail, Orora Ltd, ARM Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

September Nikkei 225 Review – Lasertec, Mercari, Nitori IN, Expected DELETEs Out (Matsui the Biggie)
Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT
March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split
JFE Holdings (5411) Stock+CB Offering
Korea’s Latest IPO Rule Change: Daily Differential Allocation
Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions
Golden Eagle (3308 HK): CCASS Movements Are Standard Fare
JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction
Orora Limited Placement – Large Deal to Digest, Although Seems Well Flagged and Accretive
ARM Holdings Pre-IPO – Thoughts on Valuations

September Nikkei 225 Review – Lasertec, Mercari, Nitori IN, Expected DELETEs Out (Matsui the Biggie)

Today, somewhat earlier than expected), the Nikkei Index Team announced the changes to the Nikkei 225.
Lasertec Corp (6920 JP), Mercari (4385 JP), and Nitori Holdings (9843 JP) are added. Nippon Sheet Glass (5202 JP), Mitsui E&S Holdings (7003 JP), and Matsui Securities (8628 JP) removed.
That triggers flows of about ¥480bn a side, and some big, big changes. The announcement helps understand new process better.

Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT

Mercari (4385 JP), Lasertec (6920 JP) and Nitori (9843 JP) will replace Nippon Sheet Glass (5202 JP), Mitsui E&S (7003 JP) and Matsui Securities (8628 JP) in the Nikkei 225.
As expected, Nitori Holdings (9843 JP) will be added at half the planned PAF since the trading value is low compared to the expected index weight.
Passive trackers need to buy between 1-17 days of ADV on the adds while selling between 1.2-16.5 days of ADV on the deletes. There is a big funding trade too.

March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split

Now that the September 2023 Nikkei 225 Rebal is announced, we look at the March 2024 rebal and its possibilities.
Socionext (6526 JP) is the only automatic ADD, but it might not be. ZOZO Inc (3092 JP) and Ryohin Keikaku (7453 JP) would be sector balance ADDs.
Fast Retailing (9983 JP) could get capped if it outperforms Nikkei 225 by ~10%+ to 31Jan2024. And Nitori Holdings (9843 JP) will see an add of ~14 days of ADV.

JFE Holdings (5411) Stock+CB Offering

Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

Korea’s Latest IPO Rule Change: Daily Differential Allocation

Korea FSS has provided guidelines to assign different weights to IPO orders from Day 1 to Day 5. Bookrunners should give higher weights to institutions that place their orders early.
The question of whether this will deter the rush to place bulk orders close to the deadline and lead to a higher weighting of essential pricing is generating significant interest.
The volume of orders and allocation by price range could serve as practical clues for assessing post-IPO pricing, making it a crucial factor in formulating post-IPO trading strategies.

Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions

There are a bunch of stocks that are constituents of the S&P/ASX family of indices and could go private or merge prior to the next scheduled rebalance in December.
That will lead to ad hoc inclusions for the S&P/ASX 200 (AS51 INDEX) and could also lead to ad hoc inclusions for the S&P/ASX 50 and S&P/ASX 100 indices.
There is a fair amount of short interest on some of the potential inclusions and short covering due to index inclusion could take the stocks higher.

Golden Eagle (3308 HK): CCASS Movements Are Standard Fare

Back on the 28th May, PRC department store play Golden Eagle (3308 HK) announced a privatisation offer, by way of a Scheme, at $6.88/share, a 40.41% premium to last close.
The Offeror is the Wang family, who together with concert parties, held 80.29%. 7.18% of the 19.71% held by the disinterested stakeholders have given irrevocables in favour of the Scheme.
Ahead of the Scheme Meeting on September 15th, a significant amount of shares have moved out of CCASS. This is not something to concern investors.

JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction

JFE Holdings (5411 JP) is looking to raise around US$870m to fund its capacity expansion plans. Together with the offering, it will undertake a US$610m CB issuance.
The deal appears to be well flagged with the firm disclosing its JV and other related CapEx plans in its earlier earnings announcement.
Overall, the new shares would result in a 8.2% dilution and represent 12 days of three month ADV.

Orora Limited Placement – Large Deal to Digest, Although Seems Well Flagged and Accretive

Orora Ltd (ORA AU) is looking to raise A$1,345m (~US$870m) via a primary placement and an entitlement offer to partially fund its acquisition of Saverglass.
While the exact size/target of an acquisition wasn’t explicitly mentioned earlier, the firm had discussed its potential use of M&A to grow its North American/Europe regions.
Including the entitlement offer, the deal would represent 212 days of three month ADV and add 58.9% to the firm’s total shares outstanding.

ARM Holdings Pre-IPO – Thoughts on Valuations

Softbank Group (9984 JP) aims to raise around US$8-10bn via selling some of its stake in ARM Holdings‘ US IPO.
ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In our earlier note, we looked at Arm’s past performance and undertook a peer comparison. In this note, we talk about valuations.

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Sep 05

Most Read: Ramelius Resources, Lasertec Corp, Mercari , Lunit , ZOZO Inc, Eoflow , Lake Resources Nl, ARM Holdings, Integral Corporation and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P/ASX Index Rebalance (Sep 2023): Mostly Expected with a Few Surprises
September Nikkei 225 Review – Lasertec, Mercari, Nitori IN, Expected DELETEs Out (Matsui the Biggie)
Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT
KOSDAQ150 Index Rebalance Preview: Strong Momentum Leads to Outperformance
March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split
Merger Arb Mondays (04 Sep) – Eoflow, JSR, Seiko PMC, ENM, NWS, Costa, Symbio, Origin
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Review Period Complete
ARM Holdings Pre-IPO – Peer Comparison – The Smallest and One of the Slowest
Integral Corporation IPO: New Price Range Is Tempting
Ohayo Japan| Lack of Direction with US Closed; JAPAN X: JFE to Raise ¥200bn for Green Steel Drive

S&P/ASX Index Rebalance (Sep 2023): Mostly Expected with a Few Surprises

There is 1 change for the S&P/ASX100 Index, 5 adds/ 6 deletes for the S&P/ASX 200 INDEX, and 10 adds/ 8 deletes for the S&P/ASX300 Index at the September rebalance.
There will be 4-14 days of ADV to trade on the S&P/ASX100 Index and S&P/ASX 200 INDEX adds while the impact on the deletions is between 3-12 days of ADV.
On average, the adds to the S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index have outperformed the deletes over the last few months.

September Nikkei 225 Review – Lasertec, Mercari, Nitori IN, Expected DELETEs Out (Matsui the Biggie)

Today, somewhat earlier than expected), the Nikkei Index Team announced the changes to the Nikkei 225.
Lasertec Corp (6920 JP), Mercari (4385 JP), and Nitori Holdings (9843 JP) are added. Nippon Sheet Glass (5202 JP), Mitsui E&S Holdings (7003 JP), and Matsui Securities (8628 JP) removed.
That triggers flows of about ¥480bn a side, and some big, big changes. The announcement helps understand new process better.

Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT

Mercari (4385 JP), Lasertec (6920 JP) and Nitori (9843 JP) will replace Nippon Sheet Glass (5202 JP), Mitsui E&S (7003 JP) and Matsui Securities (8628 JP) in the Nikkei 225.
As expected, Nitori Holdings (9843 JP) will be added at half the planned PAF since the trading value is low compared to the expected index weight.
Passive trackers need to buy between 1-17 days of ADV on the adds while selling between 1.2-16.5 days of ADV on the deletes. There is a big funding trade too.

KOSDAQ150 Index Rebalance Preview: Strong Momentum Leads to Outperformance

Over two-thirds of the way through the review period, we see 14 potential changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
There could be index changes even before the December rebalance if there are delistings and stocks migrate from the KOSDAQ Market to the KOSPI Market.
Momentum in Korea has been strong. The potential adds have outperformed the potential deletes over the last few months and there could be further outperformance.

March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split

Now that the September 2023 Nikkei 225 Rebal is announced, we look at the March 2024 rebal and its possibilities.
Socionext (6526 JP) is the only automatic ADD, but it might not be. ZOZO Inc (3092 JP) and Ryohin Keikaku (7453 JP) would be sector balance ADDs.
Fast Retailing (9983 JP) could get capped if it outperforms Nikkei 225 by ~10%+ to 31Jan2024. And Nitori Holdings (9843 JP) will see an add of ~14 days of ADV.

Merger Arb Mondays (04 Sep) – Eoflow, JSR, Seiko PMC, ENM, NWS, Costa, Symbio, Origin

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 – Seiko Pmc Corp (4963 JP), 111 Inc (YI US), Costa Group Holdings (CGC AU), Symbio Holdings (SYM AU), Eoflow (294090 KS), Orecorp Ltd (ORR AU).
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Pacific Current (PAC AU), T&K Toka Co Ltd (4636 JP), Allkem Ltd (AKE AU), Celltrion Healthcare (091990 KS).

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Review Period Complete

The review period for the MVIS Global Rare Earth/Strategic Metals Index ended 31 August. The changes will be announced on 8 September and implemented at the close on 15 September.
Coming in around the 85% cutoff, Rising Nonferrous Metals Share (600259 CH) is a potential inclusion. There are two stocks that are very close to the 98% deletion threshold.
Lake Resources Nl (LKE AU) is a deletion from the S&P/ASX 200 (AS51 INDEX) at the September rebalance and there could be more to sell if deleted from this index.

ARM Holdings Pre-IPO – Peer Comparison – The Smallest and One of the Slowest

Softbank Group (9984 JP) aims to raise around US$8-10bn via selling some of its stake in ARM Holdings’ US IPO.
ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In our earlier note, we looked at Arm’s past performance. In this note, we undertake a peer comparison.

Integral Corporation IPO: New Price Range Is Tempting

Integral Corporation (5842 JP) has set its IPO price at JPY2,300-2,400 per share, 18%-29% lower than the IPO reference price range of JPY2,800-3,400 per share.
We previously discussed the IPO in Integral Corporation IPO: The Bull Case, Integral Corporation IPO: The Bear Case and Integral Corporation IPO: Valuation Insights.
Our analysis suggests that the revised IPO price range is attractive compared to peer multiples. The re-rating of peers since the release of the prospectus also makes the offer tempting.

Ohayo Japan| Lack of Direction with US Closed; JAPAN X: JFE to Raise ¥200bn for Green Steel Drive

By Mark Chadwick

OVERSEAS. US LABOR DAY HOLIDAY. With US out, No leaders in Global Equities; European shares closed flat on thin Volumes; China’s measures to support Property market taking hold.
JAPAN.US Markets Off. NKY Futs vs Cash -0.1%; USDJPY 146.5; Nikkei Rebal: Mercari, Lasertec, Nitori ADDED; Nippon Sheet Glass, Mitsui E&S, Matsui Sec OUT; JFE 200bn Equity/CB raising
JAPAN X: JFE Holdings Plans to Raise ¥200 Billion for Carbon Emissions Reduction Efforts. Still need clarity willingness of customers to accept “green pricing”. Watch Nippon Steel and Kobe Steel.

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Sep 04

Most Read: Seiko Pmc Corp, Ramelius Resources, Youngpoong Paper Mfg, Wisdom Marine Lines, Shanghai Friendess Electronic, Ferrari N.V., Lake Resources Nl, Eoflow , Lunit and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Carlyle Group Tender Offer for Seiko PMC (4963) At 89% Premium
S&P/ASX Index Rebalance (Sep 2023): Mostly Expected with a Few Surprises
Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF
Yuanta ETFs Rebalance: AI-Frenzy Means Tech Replaces Industrials; Shorts Surge; Big Positioning
China ETFs: Inflows Continue to Support the Market
Quiddity ES50 Sep 23 Rebal: Ferrari/Vonovia Change Confirmed + Another US$2bn+ Flow Surprise!
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Review Period Complete
Quiddity TDIV/50/100 Sep 23 Rebal: ALL 15 Changes Expected; US$420mn One-Way
Merger Arb Mondays (04 Sep) – Eoflow, JSR, Seiko PMC, ENM, NWS, Costa, Symbio, Origin
KOSDAQ150 Index Rebalance Preview: Strong Momentum Leads to Outperformance

Carlyle Group Tender Offer for Seiko PMC (4963) At 89% Premium

Carlyle Group is buying Seiko Pmc Corp (4963 JP) from 54+% owner Dic Corp (4631 JP) and minorities in a Tender Offer with optical premium of 89%.
It looks good, takes advantage of tax code particularities, and the nature of the company disguises some value. Shareholder structure means this is basically a done deal before it starts.
With minimal foreign active investor ownership, and significant crossholder, ESOP, and director ownership, only a bit of retail actually needs to tender to make this successful.

S&P/ASX Index Rebalance (Sep 2023): Mostly Expected with a Few Surprises

There is 1 change for the S&P/ASX100 Index, 5 adds/ 6 deletes for the S&P/ASX 200 INDEX, and 10 adds/ 8 deletes for the S&P/ASX300 Index at the September rebalance.
There will be 4-14 days of ADV to trade on the S&P/ASX100 Index and S&P/ASX 200 INDEX adds while the impact on the deletions is between 3-12 days of ADV.
On average, the adds to the S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index have outperformed the deletes over the last few months.

Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF

The HSI, HSCEI, HSTECH and HSCI rebalances will take place at the close on 4 September since the market was closed on 1 September due to Typhoon Saola.
There will be a few announcements next week with Nikkei 225 early in the week and the MVIS series post close on Friday. Plus the STAR50 rebalances on Friday.
Another week of huge inflows into mainland China ETFs focused on the CSI 300 Index, STAR50 INDEX and CSI Smallcap 500 Index.

Yuanta ETFs Rebalance: AI-Frenzy Means Tech Replaces Industrials; Shorts Surge; Big Positioning

There are 4 changes to the Yuanta/P-Shares Taiwan Top 50 ETF and 1 deletion for the Yuanta/P-Shares Taiwan Dividend Plus ETF in September.
The impact on the inclusions is larger in terms of flow but smaller in terms of days to ADV to buy. Shorts are higher on the deletions.
There appears to be big positioning on a lot of the stocks. But the ETF adds could move higher in the short-term on short covering.

China ETFs: Inflows Continue to Support the Market

Money continues to flow into mainland China ETFs taking the total inflows since 18 July to over US$25bn. This has likely helped stabilise the market and prevent a bigger fall.
The inflows continue to be largest on ETFs tracking headline indices – CSI 300, STAR50, CSI1000, CSI 500, SSE50, ChiNext. Plus there are inflows on some sectoral and thematic ETFs.
The skew between stocks gaining 20%+ over the period vs those dropping -20% or more has improved significantly over the last week.

Quiddity ES50 Sep 23 Rebal: Ferrari/Vonovia Change Confirmed + Another US$2bn+ Flow Surprise!

By Janaghan Jeyakumar, CFA

The September 2023 index changes for the ES50 index was confirmed after the close on Friday 1st September 2023.
There will be two ADDs and two DELETEs. One set of changes was well anticipated by us. The other set comes as a major surprise to us.
Collectively, the two ADDs could see ~US$2.4bn index flows and the two DELs could see ~US$2.9bn index flows, with US$500mm of reverse funding flows.

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Review Period Complete

The review period for the MVIS Global Rare Earth/Strategic Metals Index ended 31 August. The changes will be announced on 8 September and implemented at the close on 15 September.
Coming in around the 85% cutoff, Rising Nonferrous Metals Share (600259 CH) is a potential inclusion. There are two stocks that are very close to the 98% deletion threshold.
Lake Resources Nl (LKE AU) is a deletion from the S&P/ASX 200 (AS51 INDEX) at the September rebalance and there could be more to sell if deleted from this index.

Quiddity TDIV/50/100 Sep 23 Rebal: ALL 15 Changes Expected; US$420mn One-Way

By Janaghan Jeyakumar, CFA

The September 2023 index changes for the TDIV, T50, and T100 Indices were confirmed after the close on Friday 1st September 2023.
In this insight, we take a look at our final flow expectations for these index changes and the capping flow expectations for the TDIV index.
There could US$420mn one-way flows across these three indices during this rebalance event.

Merger Arb Mondays (04 Sep) – Eoflow, JSR, Seiko PMC, ENM, NWS, Costa, Symbio, Origin

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 – Seiko Pmc Corp (4963 JP), 111 Inc (YI US), Costa Group Holdings (CGC AU), Symbio Holdings (SYM AU), Eoflow (294090 KS), Orecorp Ltd (ORR AU).
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Pacific Current (PAC AU), T&K Toka Co Ltd (4636 JP), Allkem Ltd (AKE AU), Celltrion Healthcare (091990 KS).

KOSDAQ150 Index Rebalance Preview: Strong Momentum Leads to Outperformance

Over two-thirds of the way through the review period, we see 14 potential changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
There could be index changes even before the December rebalance if there are delistings and stocks migrate from the KOSDAQ Market to the KOSPI Market.
Momentum in Korea has been strong. The potential adds have outperformed the potential deletes over the last few months and there could be further outperformance.

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Sep 03

Most Read: East Buy Holding , Trip.com Group , Brilliance China Automotive, Tcc Steel, Accton Technology, JB Hi-Fi Ltd, Doosan Robotics, Youngpoong Paper Mfg, Tencent and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks
HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)
Index Rebalance & ETF Flow Recap: ASX, NEXT50, MVMVA, MVMVW, Celltrion, Brilliance, KQ150, HSCI
KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
Index Rebalance & ETF Flow Recap: HSCEI, HSI, HSTECH, Yuanta ETFs, China ETFs, REMX, KOSPI
China Is Adding to World Liquidity, But At A Cost…
MVIS Australia Equal Weight Index Rebalance Preview: Potential Deletes & Capping Increase Turnover
Doosan Robotics IPO: Valuation Insights
Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF
Last Week In Event SPACE: Vingroup/VinFast, Prosus/Naspers, STAR CM

HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks

As expected, East Buy Holding (1797 HK) replaces AAC Technologies Holdings (2018 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 September.
Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.
Short interest is 15% of float on both stocks. Short covering could take East Buy Holding (1797 HK) higher while providing support for AAC Technologies (2018 HK) closer to deletion.

HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)

As expected, Trip.com Group (9961 HK) replaces Country Garden Services (6098 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 1 September.
BeiGene (6160 HK) fails the Velocity Test and misses inclusion, while an increase in Zhongsheng Group (881 HK)‘s float keeps it in the index.
Using prices from the close on 18 August, estimated one-way turnover is 2.78% leading to a one-way trade of HK$1.73bn (US$221m).

Index Rebalance & ETF Flow Recap: ASX, NEXT50, MVMVA, MVMVW, Celltrion, Brilliance, KQ150, HSCI

Friday was the review cutoff for the September rebalance of the ASX family of indices. The September changes for the Hang Seng family of indices were also announced.
The September changes for the SSE STAR50 (STAR50 INDEX) will be announced after the close of trading on 25 August.
For a second week running, there were big inflows to mainland China ETFs and were spread across multiple index trackers. There were outflows from iShares Emerging Markets (EEM US).

KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December

Nearly two-thirds of the way through the review period, we see nine potential changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
The potential adds are dominated by the Materials sector while the potential deletions are mainly from the Consumer Discretionary sector.
The impact on the potential inclusion ranges from 0.14-12 days of ADV while the impact on the potential deletions varies from 3.1-30 days of ADV.

Index Rebalance & ETF Flow Recap: HSCEI, HSI, HSTECH, Yuanta ETFs, China ETFs, REMX, KOSPI

The JPX Nikkei 400 index rebalance will take place on Wednesday, MSIC on Thursday and HSI, HSCEI, HSTECH and HSCI on Friday.
There are review cutoffs for the MVIS family of indices, and multiple announcements of changes to various indices during the week.
There were inflows to mainland China ETFs, iShares India ETF (INDA), Ishares India Small-Cap (SMIN) and iShares EmergingMarkets ex China (EMXC) while there were outflows for iShares Emerging Markets (EEM).

China Is Adding to World Liquidity, But At A Cost…

By Michael J. Howell

China’s economy is not anything like as ‘bad’ as being reported by the popular media. Yet, there are deep structural challenges which will hinder future economic growth
Monetary policy makers have recently been constrained by the weak Yuan (CNY)
Liquidity is now being re-injected aggressively. More liquidity boosts economic activity. The cost could be a CNY of RMB8/ US$

MVIS Australia Equal Weight Index Rebalance Preview: Potential Deletes & Capping Increase Turnover

JB Hi-Fi Ltd (JBH AU) and Charter Hall (CHC 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.
Short interest has been increasing on JB Hi-Fi Ltd (JBH AU), Charter Hall (CHC AU) and Lendlease Group (LLC AU) and could be partially driven by potential index deletions.

Doosan Robotics IPO: Valuation Insights

Doosan Robotics (454910 KS) is a global industrial and collaborative robotics leader. It has opened the books on an up to US$318 million IPO.
We previously discussed the IPO in Doosan Robotics IPO: The Bull Case and Doosan Robotics IPO: The Bear Case.
In this note, we look at the syndicate’s valuation methodology. Our valuation analysis suggests that the IPO price range is unattractive, and we would pass on the IPO.

Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF

The HSI, HSCEI, HSTECH and HSCI rebalances will take place at the close on 4 September since the market was closed on 1 September due to Typhoon Saola.
There will be a few announcements next week with Nikkei 225 early in the week and the MVIS series post close on Friday. Plus the STAR50 rebalances on Friday.
Another week of huge inflows into mainland China ETFs focused on the CSI 300 Index, STAR50 INDEX and CSI Smallcap 500 Index.

Last Week In Event SPACE: Vingroup/VinFast, Prosus/Naspers, STAR CM

Marginal float helped fuel the VinFast (VFS US) bubble. Then it popped.
The Prosus (PRX NA)/Naspers (NPN SJ) Circularity Detour and subsequent unwind created the B-Share construct which means they can maintain the voting control in South Africa without maintaining economic control.
The backlash against Star CM Holdings (6698 HK) calls into question the broader Chinese entertainment industry, and how it strikes a balance between viewership/profitability and ethical boundaries.

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Sep 02

Most Read: Lake Resources Nl, ZJLD Group , Ventia Services Group Pty , Rakuten Bank , Abacus Group, JB Hi-Fi Ltd, Vinfast, Celltrion Inc, Bank Rakyat Indonesia and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: A Week to Go
HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect
Ventia Services Group US$450m Placement Lockup Expiry – Past Deals Have Done Well
Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks
MVIS Australia A-REITs Index Rebalance Preview: Abacus Group Could Be Deleted
MVIS Australia Equal Weight Index Rebalance Preview: Potential Deletes & Capping Increase Turnover
Vinfast: Stock Is in Free Fall; Still Expensive
(Mostly) Asia M&A, Aug 2023: Celltrion Inc/Healthcare, Itochu Techno, UMW, Boustead, SK Rent
Bank Rakyat Indonesia (BBRI IJ) – Steering Towards Higher Returns
Ventia Services Group Placement – Well Flagged and All past Deals Have Done Well

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: A Week to Go

The changes for the next rebalance will use closing prices from 31 August, will be announced after the close on 8 September with implementation at the close on 15 September.
One stock is very close to the 85% cumulative market cap inclusion threshold, while there are two stocks that are near the 98% cumulative market cap deletion threshold.
With one inclusion and capping changes, estimated one-way turnover at the rebalance will be 3.5% resulting in a one-way trade of US$20m. That could change over the next week.

HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect

There are 22 adds and 27 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents down to 518.
We expect all 22 inclusions to the HSCI will be added to Stock Connect, while 24 of the 27 HSCI deletions will be removed from Southbound Stock Connect.
Since the end of June, shares held though Southbound Connect have increased on 20 of the 27 HSCI deletions and there could be some unwinding in the next two weeks.

Ventia Services Group US$450m Placement Lockup Expiry – Past Deals Have Done Well

Ventia Services Group Pty (VNT AU)’s two largest shareholders, Apollo Global Management and CIMIC Group, will come off their placement linked lockup soon.
The two largest shareholders together owned nearly 30% of the company and have pared their stake twice this year.
In this note, we will talk about the likely placement and past deal performance.

Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks

Four months ago, Rakuten Bank (5838 JP) was IPOed too low, then the price went up. It would appear foreign active ownership is relatively high.
Rakuten Bank stands out with high ROE and earnings growth. Banks stand out because, well, they’re going up.
Given expected 5yr earnings growth, Rakuten Bank at current price is probably “wrong.” But it has much less “bankness” than most banks, so you have to think about it differently.

MVIS Australia A-REITs Index Rebalance Preview: Abacus Group Could Be Deleted

The review period for the September rebalance ended yesterday. There could be one deletion from the index and a bunch of capping changes.
The index changes will lead to a one-way turnover of 3.4% resulting in a one-way trade of A$21m. There are two stocks with over A$5m to trade.
Short interest has increased on a few REITs recently while decreasing on most of the other names.

MVIS Australia Equal Weight Index Rebalance Preview: Potential Deletes & Capping Increase Turnover

By Shifara Samsudeen, ACMA, CGMA

JB Hi-Fi Ltd (JBH AU) and Charter Hall (CHC 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.
Short interest has been increasing on JB Hi-Fi Ltd (JBH AU), Charter Hall (CHC AU) and Lendlease Group (LLC AU) and could be partially driven by potential index deletions.

Vinfast: Stock Is in Free Fall; Still Expensive

Vietnamese automaker Vinfast (VFS US) made its public debut on 15th August via a SPAC deal which valued the company approx. US$23bn.
Shares opened US$22 per share and went up to $37.06 at the end of first-day. Share price hit a peak of $82.35, however, shares closed last at $34.71 per share.
Our forecasts and valuation for Vinfast suggest that the company’s shares are still overvalued even after falling more than 50% from its peak over the last few days.

(Mostly) Asia M&A, Aug 2023: Celltrion Inc/Healthcare, Itochu Techno, UMW, Boustead, SK Rent

For the month of August 2023, 11 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$29bn.
The average premium for the new deals announced (or first discussed) in August was 25%. The average YTD is 34%.
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.

Bank Rakyat Indonesia (BBRI IJ) – Steering Towards Higher Returns

By Angus Mackintosh

Bank Rakyat Indonesia (BBRI IJ) continues to be the key and unique proxy for micro and ultra-micro lending in Indonesia, with 1H2023 reflecting its increasingly strategic positioning in the space.
Microloans now account for 48% of loans and of this higher-yielding Kupedes microloans make up an increasingly larger portion, as it diversifies its KUR exposure.
The bank is set to see improving returns in 2H2023, with loan growth expected to pick-up and NIMs should also improve. 2.6x PBV with an ROE of 20.0% is attractive.

Ventia Services Group Placement – Well Flagged and All past Deals Have Done Well

Ventia Services Group Pty (VNT AU) (VSG)’s two largest shareholders, Apollo Global Management and CIMIC Group, aim to raise around US$214m via selling 14% of the company.
The two largest shareholders together owned nearly 30% of the company and have pared their stake twice this year.
In this note, we will talk about the deal dynamics.

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Sep 01

Most Read: Jio Financial Services, Digital Core REIT, Ichigo Inc, Rakuten Bank , Kakao Games , Daiwa House Reit Investment, Doosan Robotics, Auckland Intl Airport, Abacus Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing
REIT Pair Trade: Long DCREIT SP/ Short KDCREIT SP
Ichigo (2337) Buyback – History and Shareholder Structure Give an Edge
Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks
End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2023
Daiwa House REIT Placement – Sponsor Cutting Stake, Would Likely Need a Wider Correction
Doosan Robotics IPO – Thoughts on Valuation – A Punt at Best, a Crash at Worst
Auckland Airport Placement – Well Flagged, LO Support but Still a Bit Tricky
Doosan Robotics IPO: Valuation Insights
MVIS Australia A-REITs Index Rebalance Preview: Abacus Group Could Be Deleted

Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing

Jio Financial Services (JIOFIN IN) started trading on 21 August following its demerger from Reliance Industries (RIL IN). The stock was locked limit down on its first four trading days.
Passive NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) trackers hold Jio Financial Services (JIOFIN IN) stock and will need to sell over the next few days.
We estimate passive trackers will need to sell around 188m shares (US$487m) of Jio Financial Services (JIOFIN IN) next week and the stock could head lower in the short term.

REIT Pair Trade: Long DCREIT SP/ Short KDCREIT SP

After underperforming since listing, Digital Core REIT (DCREIT SP) has outperformed Keppel DC REIT (KDCREIT SP) over the last few months.
However, Digital Core REIT (DCREIT SP) still trades at cheaper valuations as compared to Keppel DC REIT (KDCREIT SP).
There could be relative outperformance over the next few weeks and any underperformance can be used to enter positions in the pair. There is an important catalyst.

Ichigo (2337) Buyback – History and Shareholder Structure Give an Edge

Today after the close, Ichigo Inc (2337 JP) announced a stock buyback to go through the next 6 months. It is ¥3bn, which is not huge, but not nothing.
It seems like a constant refrain, but shareholder structure matters.
Ichigo has a history of doing buybacks (10% of shares out are in treasury), and the historical patterns are interesting when comparing announced intention and actual result.

Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks

Four months ago, Rakuten Bank (5838 JP) was IPOed too low, then the price went up. It would appear foreign active ownership is relatively high.
Rakuten Bank stands out with high ROE and earnings growth. Banks stand out because, well, they’re going up.
Given expected 5yr earnings growth, Rakuten Bank at current price is probably “wrong.” But it has much less “bankness” than most banks, so you have to think about it differently.

End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2023

By Douglas Kim

We discuss the end of the mandatory lock-up periods for 49 stocks in Korea in September 2023, among which 7 are in KOSPI and 42 are in KOSDAQ.
These 49 stocks on average could be subject to further selling pressures in September and could underperform relative to the market.
Among these 49 stocks, top five market cap stocks include Kakao Games (293490 KS), SK Oceanplant (100090 KS), Korea Zinc (010130 KS), Fadu (440110 KS), and Vaxcell-Bio Therapeutics (323990 KS).

Daiwa House REIT Placement – Sponsor Cutting Stake, Would Likely Need a Wider Correction

Daiwa House Industry (1925 JP) is looking to raise US$175m from trimming a portion of its stake in Daiwa House Reit Investment (8984 JP).
Given that a selldown in the REIT hadn’t been explicitly guided, we would thus argue that the deal here isn’t particularly well flagged.
Overall, the base deal would represent 4.09% of the REIT’s total outstanding shares, representing 20 days of three month ADV.

Doosan Robotics IPO – Thoughts on Valuation – A Punt at Best, a Crash at Worst

By Ethan Aw

Doosan Robotics (DOOSANROBO KS) is looking to raise up to US$314m in its Korean IPO.
Doosan Robotics (DR) manufactures and sells collaborative robots (Cobots). The firm’s product portfolio primarily includes different series of robot arms as well as its coffee module.
In our previous notes, we looked at the company’s past performance and undertook a peer comparison. In this note, we talk about valuation.

Auckland Airport Placement – Well Flagged, LO Support but Still a Bit Tricky

Auckland City Council plans to sell around 4.5% of Auckland Intl Airport (AIA NZ) to fund its budget requirements for 2023-24.
The deal is very well flagged with Auckland City Council having publicly stated their intention to sell 7% of the stock in Jun 2023.
In this note, we talk about the deal dynamics and run the deal through our ECM framework.

Doosan Robotics IPO: Valuation Insights

Doosan Robotics (454910 KS) is a global industrial and collaborative robotics leader. It has opened the books on an up to US$318 million IPO.
We previously discussed the IPO in Doosan Robotics IPO: The Bull Case and Doosan Robotics IPO: The Bear Case.
In this note, we look at the syndicate’s valuation methodology. Our valuation analysis suggests that the IPO price range is unattractive, and we would pass on the IPO.

MVIS Australia A-REITs Index Rebalance Preview: Abacus Group Could Be Deleted

The review period for the September rebalance ended yesterday. There could be one deletion from the index and a bunch of capping changes.
The index changes will lead to a one-way turnover of 3.4% resulting in a one-way trade of A$21m. There are two stocks with over A$5m to trade.
Short interest has increased on a few REITs recently while decreasing on most of the other names.

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Aug 31

Most Read: Kenedix Office Investment Co, SBI Shinsei Bank, Prosus NV, Tcc Steel, East Buy Holding , Power Finance, Sinopharm Group Co Ltd H, Core Concept Technologies Inc, Star CM Holdings , Doosan Robotics and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Kenedix Office/Resi/Commercial Three-Way Merger – Size Matters and Index Flows Do Too
SBI Shinsei Bank (8303) Calls Its EGM and Appraisal Rights Seekers Prepare for Battle
Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!
KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)
AMFI Stock Reclassification Preview (Dec 2023): Overlap Between Active & Passive Flows
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Sep 2023)
Core Concept Technologies (4371 JP) – A BIGLY 2ndary Offering (Re-IPO), and Eventual TOPIX Inclusion
STAR CM (6698 HK): Grave Accusations
Doosan Robotics IPO: The Bear Case

Kenedix Office/Resi/Commercial Three-Way Merger – Size Matters and Index Flows Do Too

Today after the close, Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) announced a three-way merger for Nov 1.
Kenedix Office REIT (KDO) will be the surviving entity, and what is now three REITs of ¥150-250bn in size will become one diversified REIT of ¥630-650bn.
That will trigger a size uplift and should also trigger index inclusion.

SBI Shinsei Bank (8303) Calls Its EGM and Appraisal Rights Seekers Prepare for Battle

The SBI Holdings Tender Offer for SBI Shinsei Bank (8303 JP) was completed about four weeks ago, and in something of a surprise, only 3.7% of 26.98% minority holdings tendered.
The stock traded above terms every day during the Tender Offer Period. People accumulated in order to pursue their appraisal rights later. That is big.
This week, SBI Shinsei announced the schedule of dates relating to the squeezeout EGM. The record date was early. The reverse stock split announced is as expected, possibly game-able.

Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!

Shareholders of Prosus NV (PRX NA) and Naspers (NPN SJ) approved AGM agenda items late last week to enable the two Capitalisation Issues and Naspers’ Share Consolidation to move forward.
What Will Happen: Prosus will issue new N shares to its shareholders and Naspers will reject them. Naspers will issue new shares to its shareholders, and Prosus will reject them.
Naspers will own ~42.9% of Prosus, Prosus will own 0.02% of Naspers. Sales of Tencent shares will continue. Share Buybacks too. But the ouroboros will have spit out its tail.

KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December

Nearly two-thirds of the way through the review period, we see nine potential changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
The potential adds are dominated by the Materials sector while the potential deletions are mainly from the Consumer Discretionary sector.
The impact on the potential inclusion ranges from 0.14-12 days of ADV while the impact on the potential deletions varies from 3.1-30 days of ADV.

Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)

The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.
There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.
Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.

AMFI Stock Reclassification Preview (Dec 2023): Overlap Between Active & Passive Flows

We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 13 stocks from SmallCap to MidCap, and 13 stocks from MidCap to SmallCap.
The expected migrations from SmallCap to MidCap have outperformed the other potential migrations with all stocks moving higher over the last six month.
Active managers could continue to realign their portfolios. Some of the upward migrations will have passive flows in the next few days and over the next few months.

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

The September 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.
The largest passive inflows will be on East Buy (1797 HK), JD.com (9618 HK), Ping An (2318 HK), Sinopharm (1099 HK), BYD (1211 HK), Lenovo (992 HK) and Trip.com (9961).
The largest passive outflows will be on Alibaba (9988 HK), Li Auto (2015 HK), Meituan (3690 HK), AAC Technologies (2018 HK), Kuaishou (1024 HK), COGARD (2007) and CG Services (6098).

Core Concept Technologies (4371 JP) – A BIGLY 2ndary Offering (Re-IPO), and Eventual TOPIX Inclusion

Last week I wrote about another situation, noting Equity Offering Into TOPIX Inclusion is a standard construct. Here we have another.
DX and HR Support company Core Concept Technologies Inc (4371 JP) today announced a large (it ups Real World Float by 64%, and is 33 days of ADV) secondary offering.
The “reason” for the offering mentions a desire to move to TSE Prime in future.

STAR CM (6698 HK): Grave Accusations

STAR CM Holdings (6698 HK), a variety program intellectual property creator and operator, was listed last December and promptly gained 475% by early August. All good so far.
Shares cratered on the 18 August (-23.4%) and are currently 76% adrift from its recent high. The reason? A viral clip from late pop diva Coco Lee discussing unfair treatment.
The music competition show, in which Coco appeared, pushed back on any impropriety; however, its broadcaster has temporarily suspended the program. This is no easy fix.

Doosan Robotics IPO: The Bear Case