Most Read

Just pre-close on 2 July, Reuters carried an article suggesting a ¥500bn secondary offering in Honda Motor (7267 JP) as insurers sold. The stock fell 4% in minutes.
Honda semi-confirmed but it took two days to get to the details, now out. The stock climbed in the meantime.
At launch, this deal is two-thirds covered by buyback + passive demand but the supply is heavily-weighted to retail. Cheaper than it looks, lots of moving parts. Read the details!

Robosense IPO Lock-Up Expiry – US$2.8bn Lockup Expiry for 99% of the Stock, CCASS Movement

Robosense Technology (2498 HK) raised around US$126m in its Hong Kong IPO in Jan 2024. The lockup on its shareholders will expire soon.
The company provides LiDAR and perception solutions to its customers. As of March 2024, it had design wins for mass production of LiDAR products with 22 automotive OEMs and suppliers.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

A Practical Guide to Create A Workable Electronic File for KOSPI 200 Rebalancing Simulation

Predicting KOSPI 200 rebalancing is straightforward, focusing on quantitative screening rather than qualitative factors, unlike other indices.
Accurate simulation of KOSPI 200 requires daily data on shares, volume, and prices for six months, typically sourced from KOSCOM due to limitations in free data access.
I plan to share a practical KOSPI 200 simulation file with Smartkarma readers, leveraging freely available data from Google Finance.

Hanwha Corp Tender Offer Details & Arbitrage Trading Assessment

Hanwha Energy, wholly owned by the Hanwha Group’s owning family, announced a tender offer for an 8% stake in Hanwha Corp at ₩30,000. The tender period is until July 24.
Hanwha Energy will buy all shares if tendered less than planned, otherwise pro-rata. Payment in cash eliminates cancellation risk but poses allocation risk.
Approximately 10-15% of shares are likely to be the potential ceiling for tendering, minimizing allocation risk for the 8% target. A widening spread of 2-3% could offer arbitrage opportunities.

Aisin (7259 JP): The Current Playbook

Since the US$1.1 billion secondary placement announcement, Aisin (7259 JP)’s shares are up 2.5% from the undisturbed price of JPY5,243 per share (27 June).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Aisin’s shares have deviated from the pattern of previous large placements.
The offering will likely be priced on 8 July. Investors who have participated in previous large Japanese placements tend to secure positive returns.

Aisin Corp Placement – Follow Up – Could Fall into a Similar Fate as past Large JP Secondary Deals

Denso Corp (6902 JP), Toyota Motor (7203 JP) and Toyota Industries (6201 JP) are looking to raise US$1.1bn from selling some of their stakes in Aisin (7259 JP).
We have covered the background of the deal in our earlier note, Aisin Corp Placement – US$1.1bn Selldown by Toyota and DENSO.
In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.

JAPAN ACTIVISM: Murakami Target Mitsui Matsushima Cleans Up

On 20 May, I wrote that Japanese activist MURAKAMI Yoshiaki and relations/affiliates had gone from 5% to 20% of Mitsui Matsushima (1518 JP) in 5 trading days.
I wondered if it was real, or a pump & dump, but they went to near 30% in following days. THEN they drifted off as Murakami-Fille sold while Murakami-Père bought.
The reasoning was not clear, but the story had real potential. Still does. Today, shareholders got more good news.

Impact of Kim Byung-Hwan’s Appointment as Korea FSC Chairman on Value-Up Policy

Kim Byung-hwan addressed criticism of weak incentives in tax support for the value-up policy, emphasizing boosting dividends. His background suggests effective advocacy for tax reforms in his new role.
He prioritized abolishing the FIIT in the National Assembly, citing its hindrance to capital market liquidity and investment promotion, indicating a robust approach to the value-up policy.
Kim’s appointment as FSC Chairman signals the government’s commitment to advancing the value-up policy. He emphasizes boosting dividends and aligning tax policies accordingly, shaping trading strategies toward dividend-expanding companies.

SHEIN: Teaming up with Reliance Retail to Re-Enter India. A Win-Win Move

By Devi Subhakesan

SHEIN’s fast-fashion apparel is set to hit India through Reliance Retail’s platforms, marking a major comeback after the 2020 ban.
This partnership could be a win-win, tapping into India’s booming fashion demand and offering Shein access to the world’s largest youth market, ahead of its proposed IPO.
With Shein’s affordable styles and Reliance’s extensive network, this alliance targets the youth market, challenging brands like Tata Group’s Trent Ltd (TRENT IN) owned Zudio.

HK CEO & Director Dealings (5th Jul 2024): J&T Global Express, Flat Glass, Lifetech Scientific, PCCW

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
The key stocks mentioned in this regular insight include: J&T Global Express (1519 HK), Flat Glass (6865 HK), Lifetech Scientific (1302 HK), and PCCW Ltd (8 HK).

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Jul 05

Most Read: China Traditional Chinese Medicine, Honda Motor, Toyota Motor, Daidoh Ltd, Douyu International Holdings, SUNWELS Co, Yangzijiang Shipbuilding, Korea Stock Exchange KOSPI 200 and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress
Big ¥500bn Honda (7267) Offering Is Small
Japan Cross-Shareholding – Summary Matrix – Over US$100bn of Selling in 118 Companies
JAPAN ACTIVISM: Strategic Capital Target Daido (3205) Now A Murakami Target Too
Screening For The Next Douyu (DOYU US)
Sunwels Co (9229) – Nursing Care Operator Offering and TOPIX Inclusion
Honda (7267 JP): A US$3.3 Billion Secondary Offering
Yangzijiang Shipbuilding (YZJSGD SP): Cheaper than Peers with Index Inclusion Kicker
Honda Motor Placement – Large in Size, Relatively Small in Other Terms
A Practical Guide to Create A Workable Electronic File for KOSPI 200 Rebalancing Simulation

China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress

The slow progress of privatization is related to recent high-level changes in CNPGC. Decisions on SOE deals with “strategic purpose” require careful considerations, not based on “one leader’s personal preferences”.
Based on public information, we cannot find convincing reason to prove that CNPGC has changed its mind.There’re rumors that China TCM’s privatization is still considered important project on the agenda.
China TCM’s has strong fundamentals to support valuation. If there is no announcement, the privatization process is expected to proceed as usual, and we continue to wait for the voting.

Big ¥500bn Honda (7267) Offering Is Small

Just pre-close on 2 July, Reuters carried an article suggesting a ¥500bn secondary offering in Honda Motor (7267 JP) as insurers sold. The stock fell 4% in minutes.
Honda semi-confirmed but it took two days to get to the details, now out. The stock climbed in the meantime.
At launch, this deal is two-thirds covered by buyback + passive demand but the supply is heavily-weighted to retail. Cheaper than it looks, lots of moving parts. Read the details!

Japan Cross-Shareholding – Summary Matrix – Over US$100bn of Selling in 118 Companies

Following up on our earlier cross-shareholding work, in this note we look to summarize our work so far by looking at where most of the selling will likely come.
Of the seven companies that we have looked at so far, collectively they have around US$102bn worth of shares to sell in 118 companies.
Of these, they have a combined stake of over US$1bn in 23 companies.

JAPAN ACTIVISM: Strategic Capital Target Daido (3205) Now A Murakami Target Too

Small cap Japanese manufacturer and purveyor of apparel Daidoh Ltd (3205 JP) has consistently been a target for value investors. In late 2022, Strategic Capital went over 5%.
They have bought more, and as of end-March, they declared 24.85% of TSO (28% of voting rights), but they have 33%. They made proposals for the AGM. They won one.
Now Murakami-san has bought in, going over 5%. This gets interesting. Together they have 39.4% as of last week, and probably more now. That should get them 50+% next AGM/EGM.

Screening For The Next Douyu (DOYU US)

In a particularly altruistic move, live-streaming game platform play Douyu International Holdings (DOYU US) announced a special cash dividend of US$9.76/share, vs. a last price of US$12.59.
The cash outlay is roughly US$308mn, and Douyu had cash (as at 1Q24) of US$936.6mn. And no debt. Founder/chairman/CEO Shaojie Chen (17.2% shareholder) will pocket a tidy ~US$53mn.
An outlier; or should we expect more of the same for other cash-rich US-listed China plays?

Sunwels Co (9229) – Nursing Care Operator Offering and TOPIX Inclusion

On 2 July 2024, nursing care operator SUNWELS Co (9229 JP) announced a sale of Treasury shares and newly-issued shares, and with it, a move to TSE Prime (therefore TOPIX)
The stock, of course, popped. The stock starts with VERY low float because the CEO and his company own 64% of shares out ex-treasury.
The offering is much larger than the TOPIX inclusion, so this is really more about the growth story.

Honda (7267 JP): A US$3.3 Billion Secondary Offering

Honda Motor (7267 JP) has announced a secondary offering of up to 298.9 million shares (including overallotment). At the close, the offer, including overallotment, is worth JPY535 billion (US$3.3 million).
The offering is another sign that the unwinding of cross-shareholdings is catching pace as part of Japan’s corporate governance reforms.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 17 and 22 July (likely 17 July).

Yangzijiang Shipbuilding (YZJSGD SP): Cheaper than Peers with Index Inclusion Kicker

The rally in Yangzijiang Shipbuilding (YZJSGD SP) over the last month should result in the stock being added to global passive portfolios late next month.
Yangzijiang Shipbuilding (YZJSGD SP) trades cheaper than peers on forward PE but there has been a big rally in the stock over the last month.
There has been an increase in cumulative excess volume since mid-May and there will be positioning for the event, but there could be further gains in the stock.

Honda Motor Placement – Large in Size, Relatively Small in Other Terms

A group of shareholders aims to raise up to US$3.2bn via selling around 5% of Honda Motor (7267 JP) .
The possibility of such a selldown was flagged earlier in the week by Reuters. Thus, the deal is well flagged.
In this note, we will talk about the placement and run the deal through our ECM framework.

A Practical Guide to Create A Workable Electronic File for KOSPI 200 Rebalancing Simulation

Predicting KOSPI 200 rebalancing is straightforward, focusing on quantitative screening rather than qualitative factors, unlike other indices.
Accurate simulation of KOSPI 200 requires daily data on shares, volume, and prices for six months, typically sourced from KOSCOM due to limitations in free data access.
I plan to share a practical KOSPI 200 simulation file with Smartkarma readers, leveraging freely available data from Google Finance.

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

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Jul 04

Most Read: Honda Motor, HDFC Bank, China Traditional Chinese Medicine, Stella International, Timee Inc, ASM Pacific Technology, Shinko Electric Industries, ESR Group , Barito Renewables Energy and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

BIG ¥500bn Honda (7267) Offering Coming?
HDFC Bank (HDFCB IN): Foreign Room Crosses 25%; Index Implications & Positioning for US$5bn+ Buying
China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September
Timee (215A JP) IPO: The Bull Case
HSTECH Index Rebalance Preview: ASM Pacific (522) Could Replace Ping An Health (1833); US$1bn Trade
Shinko Electric (6967) – Break/Gap Risk Early July 2024 Update
ESR Group (1821 HK): Consortium’s Expansion Talks Suggest Progress
StubWorld: Barito Renewables (BREN IJ) – This Too Shall Pop
Korean Government Announces Corporate and Dividend Tax Incentives Under Corporate Value Up Program

BIG ¥500bn Honda (7267) Offering Coming?

Today just before the close, Reuters came out with an article saying Japan’s four major insurers and some financial institutions would offer ¥500bn of shares in a secondary offering.
That implies about 275-280mm shares (insurers hold ~195mm). In May, Honda announced a ¥300bn buyback with earnings, with nothing done so far.
The supply/demand dynamics here are key. There are a lot of moving parts over time. Honda is cheaper than it looks but there are moving parts there too.

HDFC Bank (HDFCB IN): Foreign Room Crosses 25%; Index Implications & Positioning for US$5bn+ Buying

Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 54.83% and that results in foreign room crossing the ‘magical’ 25% mark.
The increase in foreign room could lead to passive trackers of a global index needing to buy 256m shares (US$5.3bn; 11.5x ADV) at the end of August.
There will definitely be positioning in the stock but there should still be upside in the stock. The HDFC Bank (ADR) (HDB US) line was up 4.5% overnight.

China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress

The slow progress of privatization is related to recent high-level changes in CNPGC. Decisions on SOE deals with “strategic purpose” require careful considerations, not based on “one leader’s personal preferences”.
Based on public information, we cannot find convincing reason to prove that CNPGC has changed its mind.There’re rumors that China TCM’s privatization is still considered important project on the agenda.
China TCM’s has strong fundamentals to support valuation. If there is no announcement, the privatization process is expected to proceed as usual, and we continue to wait for the voting.

HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September

We see 37 potential adds (including plenty of new listings) and 25 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in September.
We expect 32 stocks to be added to Southbound Stock Connect following the rebalance while 24 stocks could be deleted from the trading link and become Sell-only.
There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

Timee (215A JP) IPO: The Bull Case

Timee Inc (215A JP), a leading part-time job platform in Japan, is seeking to raise up to US$286 million. Book-building runs from 9 to 23 July.
Timee’s app allows users to work shifts as short as one hour at restaurants, convenience stores, and hotels, with quick payment for their work.
The bull case rests on favourable market trends, best-in-class revenue growth, good retention rates, credible growth drivers, and top-quartile EBITDA margins.

HSTECH Index Rebalance Preview: ASM Pacific (522) Could Replace Ping An Health (1833); US$1bn Trade

ASM Pacific Technology (522 HK) is expected to replace Ping An Healthcare and Technol (1833 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the September rebalance.
Constituent changes and capping changes will result in a one-way turnover of 3.7% and that will result in a round-trip trade of HK$7.8bn (US$1bn).
Short interest is near the lows on both stocks but there has been a recent tick higher for ASM Pacific Technology (522 HK).

Shinko Electric (6967) – Break/Gap Risk Early July 2024 Update

When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
Nearly 6mos ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 16+wks ago, recommended taking profits.
Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Gross spread is now 4.6% but time is shorter so annualised is 10+% even out to December launch.

ESR Group (1821 HK): Consortium’s Expansion Talks Suggest Progress

Bloomberg reports that the bidding consortium is in talks to bring in other partners, such as QIA, PIF, and CPP Investment Board, to aid in privatising ESR Group (1821 HK).
Warburg Pincus and OMERS have blocking stakes for a Cayman scheme. Warburg Pincus is seemingly supportive, and the consortium’s expansion talks suggest confidence in meeting OMERS’ price expectations.
Our best guess is that an offer is around HK$14.00. ESR’s current valuation is undemanding, with its forward EV/EBITDA multiple at a 40% discount compared to the median peers’ multiple.

StubWorld: Barito Renewables (BREN IJ) – This Too Shall Pop

Barito Pacific (BRPT IJ)‘s 64.7% stake in Barito Renewables Energy (BREN IJ) (now Indonesia’s largest company by market cap), is worth 8x its market cap. That’s unsustainable.
Preceding my comments on the Barito complex 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%.

Korean Government Announces Corporate and Dividend Tax Incentives Under Corporate Value Up Program

The Korean government announced corporate tax incentives for companies that actively increase capital returns to shareholders and also dividend tax incentives and as part of the Corporate Value Up program.
For companies that provide shareholder returns, a 5% corporate tax amount on the increase will be deducted and the tax burden on increased dividends of the company will be reduced.
For dividends under 20mn won, the tax rate will be reduced from 14% to 9%. Investor can choose lower rate (25% or comprehensive tax rate) for dividends exceeding 20mn won.

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Jul 03

Most Read: Honda Motor, SenseTime Group , MS&AD Insurance, L’Occitane, Hyundai Mobis, CPMC Holdings, Robosense Technology, HDFC Bank, China Traditional Chinese Medicine, Stella International and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

BIG ¥500bn Honda (7267) Offering Coming?
HSCEI Index Rebalance Preview: Two Changes Likely in September
Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Jul24)
L’Occitane (973 HK): Tendering Now Open
Korean Holdcos Vs Opcos Gap Trading Opportunities in 3Q 2024
CPMC Holdings (906.HK) Privatization – Some New Information Worth the Attention
Robosense IPO Lock-Up Expiry – US$2.8bn Lockup Expiry for 99% of the Stock, CCASS Movement
HDFC Bank (HDFCB IN): Foreign Room Crosses 25%; Index Implications & Positioning for US$5bn+ Buying
China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September

BIG ¥500bn Honda (7267) Offering Coming?

Today just before the close, Reuters came out with an article saying Japan’s four major insurers and some financial institutions would offer ¥500bn of shares in a secondary offering.
That implies about 275-280mm shares (insurers hold ~195mm). In May, Honda announced a ¥300bn buyback with earnings, with nothing done so far.
The supply/demand dynamics here are key. There are a lot of moving parts over time. Honda is cheaper than it looks but there are moving parts there too.

HSCEI Index Rebalance Preview: Two Changes Likely in September

SenseTime Group (20 HK) and JD Logistics (2618 HK) are potential deletions while PICC Property & Casualty (2328 HK) and New Oriental Education & Techn (9901 HK) are potential adds.
Estimated one-way turnover at the rebalance is 1.8% resulting in a one-way trade of HK$950m. Official capping will be based off the close of trading on 3 September.
There will be 1-2x ADV to buy on the adds and over 2x ADV to sell in JD Logistics. The impact on SenseTime is lower given the recent surge in volume.

Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Jul24)

This month (June) saw 1,673 Corporate Governance Reports filed and 5 new “Mgmt Conscious of Capital Cost/Stock Price” policies filed.
We created a tool show every report, provide links to every document, and now a new diff file tool. Put in a name, see the difference between the Old/New Reports.
We hope this took will help. It is designed to be a shelf reference. We update the tool once a month, a couple of weeks ahead of the TSE.

L’Occitane (973 HK): Tendering Now Open

Exactly two weeks after the scrip alternative was announced, L’Occitane (973 HK)‘s Composite Document has been issued. The Offer is now open for acceptances.
The IFA (Somerley) considers terms to be fair & reasonable. A lifetime high coupled with a scrip option – yes, this is fair.
Keep an eye on CCASS moves prior to the first closing date, the 23rd July. I have a call with the FA tomorrow. Hit me up with any questions.

Korean Holdcos Vs Opcos Gap Trading Opportunities in 3Q 2024

In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 3Q 2024.
Of the 38 pair trades, 21 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.
These pairs could generate trading opportunities in terms of their pricing gaps closing reversal (Doosan Corp vs. Doosan Enerbility; Hyundai Mobis vs Hyundai Motor).

CPMC Holdings (906.HK) Privatization – Some New Information Worth the Attention

ORG purchased 27% of CPMC’s shares at HK$6/share in 2015.After about eight years, Baosteel’s Offer Price was only HK$6.87/share. The annualized return rate was low, which obviously cannot satisfy ORG.
Baosteel and CPMC have been in talks for a long time – There may have been some “tacit agreement” between the two parties. The approval process is smooth so far.
For acquisitions/consolidation between SOEs, private enterprises usually have limited chances of winning.ORG has financial pressure and the approval process face uncertainties. There would be more negotiations among CPMC, ORG, Baosteel.

Robosense IPO Lock-Up Expiry – US$2.8bn Lockup Expiry for 99% of the Stock, CCASS Movement

Robosense Technology (2498 HK) raised around US$126m in its Hong Kong IPO in Jan 2024. The lockup on its shareholders will expire soon.
The company provides LiDAR and perception solutions to its customers. As of March 2024, it had design wins for mass production of LiDAR products with 22 automotive OEMs and suppliers.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

HDFC Bank (HDFCB IN): Foreign Room Crosses 25%; Index Implications & Positioning for US$5bn+ Buying

Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 54.83% and that results in foreign room crossing the ‘magical’ 25% mark.
The increase in foreign room could lead to passive trackers of a global index needing to buy 256m shares (US$5.3bn; 11.5x ADV) at the end of August.
There will definitely be positioning in the stock but there should still be upside in the stock. The HDFC Bank (ADR) (HDB US) line was up 4.5% overnight.

China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress

The slow progress of privatization is related to recent high-level changes in CNPGC. Decisions on SOE deals with “strategic purpose” require careful considerations, not based on “one leader’s personal preferences”.
Based on public information, we cannot find convincing reason to prove that CNPGC has changed its mind.There’re rumors that China TCM’s privatization is still considered important project on the agenda.
China TCM’s has strong fundamentals to support valuation. If there is no announcement, the privatization process is expected to proceed as usual, and we continue to wait for the voting.

HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September

We see 37 potential adds (including plenty of new listings) and 25 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in September.
We expect 32 stocks to be added to Southbound Stock Connect following the rebalance while 24 stocks could be deleted from the trading link and become Sell-only.
There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

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

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✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jul 02

Most Read: Vanguard Intl Semiconductor, Keisei Electric Railway Co, L’Occitane, Fancl Corp, Shift Up, Aisin , Toenec Corp, Hollysys Automation Technologies, SenseTime Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

TIP Taiwan Technology Dividend Highlight Index Rebalance: 12 Changes & US$4bn Round-Trip Trade
Keisei Electric Investor Activism Update: The Vote Count Could Shake Keisei’s Board
L’Occitane (973 HK): Conditional Offer Opens
(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio
Shift Up IPO Book Building Results Analysis
Aisin (7259) | Nine Months Ago
Toenec (1946 JP) Offering – Nearly $50mm on SmallCap Utility Infra Co as Chubu EPCO Sells Down
Hollysys (HOLI US): Ascendent Finally Obtains Regulatory Approvals
ECM Weekly (1st July 2024)-Aisin, Mitsui, Japan Hotel, Allied Blenders, Webtoon, Hyundai India
HSCEI Index Rebalance Preview: Two Changes Likely in September

TIP Taiwan Technology Dividend Highlight Index Rebalance: 12 Changes & US$4bn Round-Trip Trade

There are 12 changes for the TIP Taiwan Technology Dividend Highlight Index in June/July. The Fuh Hwa Taiwan Technology Dividend Highlight ETF (00929 TW) has an AUM of US$7.16bn.
One-Way turnover is estimated at 35% and that will result in a round-trip trade of TWD 134.7bn (US$4.1bn). There are 8 stocks that could have over 5x ADV to trade.
The ETF started rebalancing their portfolio on Friday and will continue to trade the stock over the next 7 trading days.

Keisei Electric Investor Activism Update: The Vote Count Could Shake Keisei’s Board

By Oshadhi Kumarasiri

Palliser’s proposal failed to meet the challenging two-thirds threshold at the AGM. Given the ownership landscape, this outcome was anticipated.
Palliser nearing 50% approval at Keisei’s AGM could signify a triumph, potentially leading to significant pressure on management and a positive shift in share price performance.
Keisei Electric Railway Co (9009 JP)‘s valuation, now attractively low post a 33% drop and with a potential OP guidance hike, presents minimal downside at a 26.0x EV/OP multiple.

L’Occitane (973 HK): Conditional Offer Opens

The L’Occitane (973 HK) IFA opines that Reinold Geiger’s conditional voluntary cash (HK$34.00) or scrip offer (10 rollover shares for each share, subject to a cap) is fair and reasonable.
Irrevocable/Letters of support have nudged lower from 49.83% (17 June) to 47.66% of disinterested shares due to Southeastern Asset Management selling its shares.
Nevertheless, the scrip option, an attractive offer and no vocal opposition should facilitate achieving the minimum acceptance condition. At the last close, the gross spread was 2.4%.

(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio

For the month of June 2024, 8 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$6bn.
The average premium for the new transactions announced (or first discussed) in June was ~52%. The average premium YTD is ~47%.
This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

Shift Up IPO Book Building Results Analysis

Shift Up reported solid IPO book building results. Shift Up’s IPO price has been determined at 60,000 won won, which is at the high end of the IPO price range.
According to Hankyung Business Daily, the demand ratio was 223 to 1. Shift Up will start trading on 11 July.
Our base case valuation of Shift Up is market cap of 5.7 trillion won or target price of 95,510 won (59% higher than the IPO price of 60,000 won).

Aisin (7259) | Nine Months Ago

By Mark Chadwick

Nine months have passed since Aisin announced a transformative MTP. Investors remain sceptical that it will deliver higher returns.
Improving margins on hybrid transmissions, new products for BEVs and better capital allocation could deliver 70% upside for investors.
The key risk is the assumption that operating margins can rise above 8% versus the historical average of 5%.

Toenec (1946 JP) Offering – Nearly $50mm on SmallCap Utility Infra Co as Chubu EPCO Sells Down

Today, Toenec Corp (1946 JP) – an integrated facilities company 50+% owned by Chubu Electric Power Co (9502 JP) announced Chubu EPCO would sell down 7.7% to go to 43%+.
This is surprising. It suggests there are more selldowns to come. It’s also “big” at 88 days of ADV and about 26% of Max Real World Float (85% retail).
This is an odd sell-down. Chubu EPCO obviously doesn’t want to buy it in. That means overhang for years.

Hollysys (HOLI US): Ascendent Finally Obtains Regulatory Approvals

Six months after announcing a binding proposal, Ascendent has obtained all the Chinese regulatory approvals for its US$26.50 Hollysys Automation Technologies (HOLI US) offer.
The gross spread was wide due to the information vacuum, which has resulted in various conspiracy theories and rumours circulating.
The two remaining conditions required for close are the maximum dissenting cap (should be waived) and minimum net cash condition (satisfied). At the last close, the gross spread was 22.5%.

ECM Weekly (1st July 2024)-Aisin, Mitsui, Japan Hotel, Allied Blenders, Webtoon, Hyundai India

Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
On the IPO front, we looked at the upcoming mega-listing for Hyundai Motor India.
On the placement front, the week was dominated by the cross-shareholding unwinds in Aisin (7259 JP) and Mitsui & Co Ltd (8031 JP).

HSCEI Index Rebalance Preview: Two Changes Likely in September

SenseTime Group (20 HK) and JD Logistics (2618 HK) are potential deletions while PICC Property & Casualty (2328 HK) and New Oriental Education & Techn (9901 HK) are potential adds.
Estimated one-way turnover at the rebalance is 1.8% resulting in a one-way trade of HK$950m. Official capping will be based off the close of trading on 3 September.
There will be 1-2x ADV to buy on the adds and over 2x ADV to sell in JD Logistics. The impact on SenseTime is lower given the recent surge in volume.

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Jul 01

Most Read: Keisei Electric Railway Co, Telix Pharmaceuticals, Lunit , China Traditional Chinese Medicine, Taiwan Semiconductor (TSMC) – ADR, Vanguard Intl Semiconductor, Shanghai Henlius Biotech , Fancl Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Last Week in Event SPACE: Keisei Electric, China Merchants, Great Eastern, Jardine Matheson/JCNC
Quiddity Leaderboard ASX Sep 24 Rebal: Altium to Trigger Two Intra-Review Replacements in July
End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024
Weekly Deals Digest (30 Jun) – China TCM, Henlius, Midea RE, MMG, Aisin, Sanil, Shift Up
(Mostly) Asia-Pac M&A: TCM, Henlius Bio, Mideal Real Estate, Malaysia Airports, S Line, Best World
Taiwan Dual-Listings Monitor: TSMC Premium Rangebound; UMC Hits Upper End of Range
Ohayo Japan | First Half Done
TIP Taiwan Technology Dividend Highlight Index Rebalance: 12 Changes & US$4bn Round-Trip Trade
Merger Arb Mondays (01 Jul) – Henlius, China TCM, GA Pack, CPMC, Asia Cement, Great Eastern
(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio

Last Week in Event SPACE: Keisei Electric, China Merchants, Great Eastern, Jardine Matheson/JCNC

No surprise: Keisei Electric Railway (9009 JP) shareholders voted down Palliser’s proposal. If the vote was close, Palliser may ups its rhetorical game, and takes a harder stance.
Argyle failed to boot one CMCDI (133 HK) director. They’ll next target the management agreement renewal; and agitate the company buy back 20% of shares outstanding at 90% of NAV.
The Offeror now has 90.16% in Great Eastern Holdings (GE SP) – so this will get suspended at the close of the Offer.

Quiddity Leaderboard ASX Sep 24 Rebal: Altium to Trigger Two Intra-Review Replacements in July

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run-up to the September 2024 index rebal event.
In July 2024, a couple of important Australian M&A deals could close and one of them could trigger intra-review additions for ASX 100 and ASX 200.
Separately, we see one ASX 100 change and one ASX 200 change during the September 2024 rebalance. For ASX 300, there could be 13 ADDs and 6 DELs.

End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024

We discuss the end of the mandatory lock-up periods for 55 stocks in Korea in July 2024, among which 6 are in KOSPI and 49 are in KOSDAQ.
These 55 stocks on average could be subject to further selling pressures in July and could underperform relative to the market.
The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in July include Lunit, Mezzion Pharma, and DS Dansuk.

Weekly Deals Digest (30 Jun) – China TCM, Henlius, Midea RE, MMG, Aisin, Sanil, Shift Up

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: MMG (1208 HK) rights issue, Aisin (7259 JP) placement, Sanil Electric (062040 KS) IPO, and Shift Up (462870 KS) IPO.
Event-Driven developments: China Traditional Chinese Medicine (570 HK), Shanghai Henlius Biotech (2696 HK), Midea Real Estate Holding (3990 HK), Best World International (BEST SP).

(Mostly) Asia-Pac M&A: TCM, Henlius Bio, Mideal Real Estate, Malaysia Airports, S Line, Best World

I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One. new deal was discussed this week: Shanghai Henlius Biotech (2696 HK)‘s cash/scrip Offer. Midea Real Estate Holding (3990 HK) also fielded a “Partial Scheme”.
Key updates took place on: China Traditional Chinese Medicine (570 HK), Malaysia Airports Holdings (MAHB MK), S Line Co Ltd (9078 JP), Best World International (BEST SP) .

Taiwan Dual-Listings Monitor: TSMC Premium Rangebound; UMC Hits Upper End of Range

By Vincent Fernando, CFA

TSMC: +16.7% Premium, Has Remained Rangebound; Watching for Over 20% or Under 15%
UMC: +2% Premium, Upper End of Trading Range, Can Consider Shorting
ASE: +9.9% Premium; Spread Could Have Further Room to Bounce Higher

Ohayo Japan | First Half Done

By Mark Chadwick

U.S. stocks dipped on Friday as investors processed economic data signaling slowing inflation. Nike down 20%.
Japan’s Ministry of Internal Affairs and Communications and KDDI will collaborate on developing generative AI
NTT DATA plans to launch multiple satellites by 2026 to create a space-based observation network, enhancing disaster monitoring and national security

TIP Taiwan Technology Dividend Highlight Index Rebalance: 12 Changes & US$4bn Round-Trip Trade

There are 12 changes for the TIP Taiwan Technology Dividend Highlight Index in June/July. The Fuh Hwa Taiwan Technology Dividend Highlight ETF (00929 TW) has an AUM of US$7.16bn.
One-Way turnover is estimated at 35% and that will result in a round-trip trade of TWD 134.7bn (US$4.1bn). There are 8 stocks that could have over 5x ADV to trade.
The ETF started rebalancing their portfolio on Friday and will continue to trade the stock over the next 7 trading days.

Merger Arb Mondays (01 Jul) – Henlius, China TCM, GA Pack, CPMC, Asia Cement, Great Eastern

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: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Asia Cement China (743 HK).
Lowest spreads: Fancl Corp (4921 JP), Great Eastern Holdings (GE SP), Tatsuta Electric Wire & Cable (5809 JP), Infocom Corp (4348 JP), Kfc Holdings Japan (9873 JP).

(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio

For the month of June 2024, 8 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$6bn.
The average premium for the new transactions announced (or first discussed) in June was ~52%. The average premium YTD is ~47%.
This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

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Jun 30

Most Read: Aisin , Nikkei 225, China Traditional Chinese Medicine, Lunit , Keisei Electric Railway Co, Sanil Electric, Polestar Automotive Holding UK, Tencent Music and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind
EQD | The Nikkei’s Rally May Be About To Restart
Weekly Deals Digest (30 Jun) – China TCM, Henlius, Midea RE, MMG, Aisin, Sanil, Shift Up
(Mostly) Asia-Pac M&A: TCM, Henlius Bio, Mideal Real Estate, Malaysia Airports, S Line, Best World
End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024
Japan Weekly | IHI, Sumi Pharma, Toho, Sawai, JEOL
Last Week in Event SPACE: Keisei Electric, China Merchants, Great Eastern, Jardine Matheson/JCNC
Sanil Electric IPO: The Bull Case
Polestar Automotive Holding UK: A Tale Of An Enhanced Product Mix and Margin Improvement Strategy! – Major Drivers
Tencent Music Entertainment Group: How Are They Enhancing User Engagement through Artificial Intelligence? – Major Drivers

Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind

Today (27 June 2024) after the close, Aisin (7259 JP) announced three Toyota Group companies (Toyota, Toyota Industries, and Denso) would sell shares in Aisin in a ¥180bn offering.
This is ALL of Denso’s holdings, 63% of Toyota Industries stake, and ~12% of Toyota’s stake. Separately, Aisin announced a 17mm share (6.3%) ¥100bn buyback and a 3:1 split Oct1.
The recent yuho shows us the progress of Aisin’s promised selldown of crossholdings. There are three large chunks left. One is easy. The climb to capital allocation credibility easier too.

EQD | The Nikkei’s Rally May Be About To Restart

By Nico Rosti

The Nikkei 225 Index rallied last week, and closed the week up.
Although slightly overbought, our models are not pointing to a SHORT opportunity here.
If the index pulls back this coming week, it may be a good idea to BUY, in order to take advantage of a possible reprise of the rally.

Weekly Deals Digest (30 Jun) – China TCM, Henlius, Midea RE, MMG, Aisin, Sanil, Shift Up

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: MMG (1208 HK) rights issue, Aisin (7259 JP) placement, Sanil Electric (062040 KS) IPO, and Shift Up (462870 KS) IPO.
Event-Driven developments: China Traditional Chinese Medicine (570 HK), Shanghai Henlius Biotech (2696 HK), Midea Real Estate Holding (3990 HK), Best World International (BEST SP).

(Mostly) Asia-Pac M&A: TCM, Henlius Bio, Mideal Real Estate, Malaysia Airports, S Line, Best World

I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One. new deal was discussed this week: Shanghai Henlius Biotech (2696 HK)‘s cash/scrip Offer. Midea Real Estate Holding (3990 HK) also fielded a “Partial Scheme”.
Key updates took place on: China Traditional Chinese Medicine (570 HK), Malaysia Airports Holdings (MAHB MK), S Line Co Ltd (9078 JP), Best World International (BEST SP) .

End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024

We discuss the end of the mandatory lock-up periods for 55 stocks in Korea in July 2024, among which 6 are in KOSPI and 49 are in KOSDAQ.
These 55 stocks on average could be subject to further selling pressures in July and could underperform relative to the market.
The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in July include Lunit, Mezzion Pharma, and DS Dansuk.

Japan Weekly | IHI, Sumi Pharma, Toho, Sawai, JEOL

By Mark Chadwick

U.S. economy: Mixed signals with Q1 GDP growth revised up to 1.4%, driven by business investment and trade, while jobless claims hit a high, raising unemployment concerns.
Japan’s Nikkei 225: Strong performance, up 986 yen for the week, fueled by major stock rebounds and IPO interest, despite dollar-yen depreciation to 161 yen.
Market outlook: Nikkei up 2.2% in June, nearing 40,000 yen; cautious sentiment prevails with U.S. markets closed on July 4th and UK elections ahead

Last Week in Event SPACE: Keisei Electric, China Merchants, Great Eastern, Jardine Matheson/JCNC

No surprise: Keisei Electric Railway (9009 JP) shareholders voted down Palliser’s proposal. If the vote was close, Palliser may ups its rhetorical game, and takes a harder stance.
Argyle failed to boot one CMCDI (133 HK) director. They’ll next target the management agreement renewal; and agitate the company buy back 20% of shares outstanding at 90% of NAV.
The Offeror now has 90.16% in Great Eastern Holdings (GE SP) – so this will get suspended at the close of the Offer.

Sanil Electric IPO: The Bull Case

Sanil Electric (062040 KS), a Korean industrial transformer manufacturer, is seeking to raise up to US$165 million.
The IPO is a pure primary raise of 7.6 million shares at an IPO price range of KRW24,000-30,000. Book building will run from 9 to 15 July.
The bull case rests on US-led rapid revenue growth, high barriers to entry, good revenue visibility, improving margins, top-quartile margin performance and modest leverage.

Polestar Automotive Holding UK: A Tale Of An Enhanced Product Mix and Margin Improvement Strategy! – Major Drivers

By Baptista Research

Polestar presented a mixed but broadly positive financial picture in the third quarter of 2023.
The company, known for its focus on electric vehicles, reported record third-quarter deliveries of 13,976 units, marking a significant 51% increase from the previous year.
This robust performance can be attributed to a positive product and channel mix and the initial rollout of the Polestar 2’s model year ’24, illustrating a strong consumer demand for Polestar’s offerings.

Tencent Music Entertainment Group: How Are They Enhancing User Engagement through Artificial Intelligence? – Major Drivers

By Baptista Research

Tencent Music Entertainment Group, a leading player in China’s music streaming industry, started the year 2024 with some substantial financial and operational achievements, reflecting its continued emphasis on a dual-engine strategy of content richness and platform optimization.
However, not all indicators were uniformly positive, revealing certain challenges and strategic pivots.
On the upside, Tencent Music reported a marked increase in its subscriber base, adding a record 6.8 million net subscribers during the quarter, which pushes the total count to 113.5 million music-paying users.

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Jun 29

Most Read: China Traditional Chinese Medicine, MMG, Aisin , Brilliance China Automotive, LG Electronics, SK Networks, Emcure Pharmaceuticals, Bank Rakyat Indonesia and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait
TCM (570 HK): Where’s The Floor?
MMG (1208 HK) Rights Trading Dynamics
Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind
Aisin (7259 JP): A US$1.1 Billion Secondary Offering
Brilliance China (1114 HK): Reversing Out of Passive Portfolios
Initial Thoughts on LG Electronics India IPO
SK Square + SK Networks Merger Swap: A Guide to Pre-Merger Arb Spread Calculations
Emcure Pharmaceuticals Pre-IPO: IPO Price Band Set; Steep Valuation Offers Limited Upside Potential
Bank Rakyat Indonesia (BBRI IJ) – Special Mention on the Turn

China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait

The approval/filing process of China TCM’s privatization is complicated and would take some time, but there’re almost no cases of disapproval. It also depends on the adequacy of materials submitted.
Due to the extension of time for the despatch of Scheme Document, this process would be delayed for more months.But we should receive clear information by October at the latest.
For arbitrageurs, China TCM is an investment opportunity of high success rate, which becomes more attractive if HK stock market is depressed.It’s better suited to idle funds considering potential risks/returns.

TCM (570 HK): Where’s The Floor?

Just plain ugly. China Traditional Chinese Medicine (570 HK) (“TCM”) fell 11.7% yesterday. It’s down another 7.9%, on large volume, as I type. The stock is now ~35% below terms
Depending on who you talk to, the sudden move was triggered by a couple of event pods dumping stock; or the incoming CNPGC chairman is not supportive. Or perhaps both.
Since rumours surfaced early Feb as to an Offer, a basket of TCM’s peers are up 8% on average. The HSI is up 15%. TCM’s downside from here appears limited.

MMG (1208 HK) Rights Trading Dynamics

The MMG (1208 HK) rights, designed to raise US$1.15bn to pay off loans to the parent for the purchase of a large copper asset, start trading 24 June 2024.
There is some risk up for grabs, and it is likely to trade according to standard Hong Kong Rights Trading Dynamics. Shorts are down somewhat, but covering should be expected.
There is path-dependency to the Rights Trading, and while they trade for 7 trading days through Tuesday next, one should expect the volume to trade this week.

Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind

Today (27 June 2024) after the close, Aisin (7259 JP) announced three Toyota Group companies (Toyota, Toyota Industries, and Denso) would sell shares in Aisin in a ¥180bn offering.
This is ALL of Denso’s holdings, 63% of Toyota Industries stake, and ~12% of Toyota’s stake. Separately, Aisin announced a 17mm share (6.3%) ¥100bn buyback and a 3:1 split Oct1.
The recent yuho shows us the progress of Aisin’s promised selldown of crossholdings. There are three large chunks left. One is easy. The climb to capital allocation credibility easier too.

Aisin (7259 JP): A US$1.1 Billion Secondary Offering

Aisin (7259 JP) has announced a secondary offering of up to 38.9 million shares (including overallotment) and a buyback worth a maximum of JPY100 billion or 17 million shares.
Denso Corp (6902 JP), Toyota Industries (6201 JP), and Toyota Motor (7203 JP) are the selling shareholders. The offering aims to reconfigure the company’s shareholder mix and reduce cross-shareholdings.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 8 and 10 July (likely 8 July).

Brilliance China (1114 HK): Reversing Out of Passive Portfolios

Brilliance China Automotive (1114 HK) is up 220% on a total return basis since we first published our insight in August 2023.
The company paid a special dividend in April this year and will pay a large special dividend of HK$4.3/share going ex-div on 3 July.
The resultant drop in market cap will result in deletion of the stock from large global passive portfolios at the close on 3 July.

Initial Thoughts on LG Electronics India IPO

According to local media, LG Electronics is reviewing for a potential IPO of LG Electronics India. LG Electronics has approached JP Morgan and Morgan Stanley to be potential IPO underwriters.
If LG Electronics’ Indian subsidiary is listed, it is expected to be able to raise at least $500 million from the stock market.
Post IPO, the market value of LG Electronics India is estimated to be between $2.1 billion (3 trillion won) and $4.3 billion (6 trillion won).

SK Square + SK Networks Merger Swap: A Guide to Pre-Merger Arb Spread Calculations

SK Square’s market cap exceeds SK Networks’ by over 10 times, qualifying this merger as small-scale. Thus, only SK Networks needs shareholder approval and grants appraisal rights solely to shareholders.
The current arbitrage spread for SK Networks’ appraisal rights is 1.95%, and for the swap, it’s 4.16%. These are nominal values excluding trading costs and taxes.
Today’s SK Square and SK Networks prices reflect arbitrage spreads. Yesterday’s 8% spread widened, focusing on narrowing appraisal rights and swap spreads, essential before next week’s announcement.

Emcure Pharmaceuticals Pre-IPO: IPO Price Band Set; Steep Valuation Offers Limited Upside Potential

By Tina Banerjee

Emcure Pharmaceuticals seeks to raise INR19.5B in upcoming IPO through a fresh issue of INR8B and an OFS of 11.4M shares. IPO price band has been set at INR960–1,008.
The issue will open for subscription on July 3 and close on July 5. Bidding for anchor investors will open on July 2. Lot size for bidding is 14 shares.
IPO proceeds will be used to repay debt. As at March 31, 2024, the company’s outstanding borrowings stood at INR21B against cash balance of INR2B.

Bank Rakyat Indonesia (BBRI IJ) – Special Mention on the Turn

By Angus Mackintosh

Bank Rakyat Indonesia (BBRI IJ) have seen a significant correction on the back of concerns over credit quality, as provisions increased in 1Q2024, the bank addressed its problem micro-loans
The bank is addressing these loans with some further provisions likely over the coming quarter but special mention loans should plateau in July signifying a turn.
Bank Rakyat Indonesia will slow micro-lending and grow corporate loans this year to address the cost of credit. Profits will likely be flat and dividend payout up. Valuations are attractive.

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Jun 28

Most Read: China Traditional Chinese Medicine, Core Lithium Ltd, Aisin , Brilliance China Automotive, LG Electronics, Timee Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait
China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What
TCM (570 HK): Where’s The Floor?
Tax-Loss Selling In Australia 2024 – Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)
Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind
Aisin Corp Placement – US$1.1bn Selldown by Toyota and DENSO
Aisin (7259 JP): A US$1.1 Billion Secondary Offering
Brilliance China (1114 HK): Reversing Out of Passive Portfolios
LG Electronics’ Indian Subsidiary Is Gearing up for an IPO on the Indian Stock Market
Timee Pre-IPO – The Negatives – Competition Could Stiffen

China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait

The approval/filing process of China TCM’s privatization is complicated and would take some time, but there’re almost no cases of disapproval. It also depends on the adequacy of materials submitted.
Due to the extension of time for the despatch of Scheme Document, this process would be delayed for more months.But we should receive clear information by October at the latest.
For arbitrageurs, China TCM is an investment opportunity of high success rate, which becomes more attractive if HK stock market is depressed.It’s better suited to idle funds considering potential risks/returns.

China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What

On no news, China Traditional Chinese Medicine (570 HK) shares declined 12% today. We spoke to several readers to gauge the likely reasons for the fall.
The speculation is that the fall could be due to forced liquidation, Sinopharm’s new Chairman pulling the offer, the consortium unravelling, SAMR issues and Ping An blocking the deal.
There is clearly news behind today’s fall, but none of the above rumours seem credible. The risk/reward is attractive as the upside (25% spread) outweighs the downside (18% to undisturbed).

TCM (570 HK): Where’s The Floor?

Just plain ugly. China Traditional Chinese Medicine (570 HK) (“TCM”) fell 11.7% yesterday. It’s down another 7.9%, on large volume, as I type. The stock is now ~35% below terms
Depending on who you talk to, the sudden move was triggered by a couple of event pods dumping stock; or the incoming CNPGC chairman is not supportive. Or perhaps both.
Since rumours surfaced early Feb as to an Offer, a basket of TCM’s peers are up 8% on average. The HSI is up 15%. TCM’s downside from here appears limited.

Tax-Loss Selling In Australia 2024 – Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)

The original trade was discussed at end-April in Tax-Loss Selling in Australia 2024 – Historical Analysis and A Trade Basket then updated here and here.
That has done OK. The LIQUID basket has delta neutral performance of +8.4% over 2mos; LIQUID+LESSLIQUID +7.2%; If one did a mixed basket (3x L+LL + 1x Illiquids) it’s +8.6%.
Now it is time to reverse the trade, buying the basket you were short, and running it against index for the next 6-8 weeks.

Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind

Today (27 June 2024) after the close, Aisin (7259 JP) announced three Toyota Group companies (Toyota, Toyota Industries, and Denso) would sell shares in Aisin in a ¥180bn offering.
This is ALL of Denso’s holdings, 63% of Toyota Industries stake, and ~12% of Toyota’s stake. Separately, Aisin announced a 17mm share (6.3%) ¥100bn buyback and a 3:1 split Oct1.
The recent yuho shows us the progress of Aisin’s promised selldown of crossholdings. There are three large chunks left. One is easy. The climb to capital allocation credibility easier too.

Aisin Corp Placement – US$1.1bn Selldown by Toyota and DENSO

Denso Corp (6902 JP), Toyota Motor (7203 JP) and Toyota Industries (6201 JP) are looking to raise US$1.1bn from selling some of their stakes in Aisin (7259 JP).
While the deal appears well-flagged, given that it is part of the cross-shareholding unwind theme in Japan, the timing of such a selldown isn’t always certain.
In this note, we will talk about the placement and run the deal through our ECM framework.

Aisin (7259 JP): A US$1.1 Billion Secondary Offering

Aisin (7259 JP) has announced a secondary offering of up to 38.9 million shares (including overallotment) and a buyback worth a maximum of JPY100 billion or 17 million shares.
Denso Corp (6902 JP), Toyota Industries (6201 JP), and Toyota Motor (7203 JP) are the selling shareholders. The offering aims to reconfigure the company’s shareholder mix and reduce cross-shareholdings.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 8 and 10 July (likely 8 July).

Brilliance China (1114 HK): Reversing Out of Passive Portfolios

Brilliance China Automotive (1114 HK) is up 220% on a total return basis since we first published our insight in August 2023.
The company paid a special dividend in April this year and will pay a large special dividend of HK$4.3/share going ex-div on 3 July.
The resultant drop in market cap will result in deletion of the stock from large global passive portfolios at the close on 3 July.

LG Electronics’ Indian Subsidiary Is Gearing up for an IPO on the Indian Stock Market

LG Electronics’ Indian subsidiary, fully owned, saw 2023 sales grow 17% to ₩3.3T and net profit rise 14% to ₩231.3B, driven by strong appliance demand.
LG Electronics aims for a ₩5T-₩6T valuation, planning to sell 15-20% of their Indian subsidiary to raise at least $500M.
LG Electronics plans to invest the $500M raised into their EV components business, moving quickly with the IPO due to urgent funding needs in the downturn-hit sector.

Timee Pre-IPO – The Negatives – Competition Could Stiffen

Timee Inc (215A JP) is looking to raise US$290m from its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
In this note, we will talk about the not so positive aspects of the deal.

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Jun 27

Most Read: China Traditional Chinese Medicine, Timee Inc, Malaysia Airports Holdings, Core Lithium Ltd, Sawai Group Holdings, Hyundai Motor India , Harmony Gold Mining Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

TCM (570 HK): Sinopharm’s $4.60/Share Offer
China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait
China Traditional Chinese Medicine (570 HK): Evaluating Deal-Break Risks
China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What
Timee Pre-IPO – The Positives – Exponential Growth Since Inception
Malaysia Airports (MAHB MK)’s Offer: Buckle Up!
Tax-Loss Selling In Australia 2024 – Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)
Sawai Group (4887) – BIGLY Buyback To “Drastically” Change Capital Structure
Hyundai Motor India Pre-IPO – The Negatives – Not All Hunky-Dory
Quiddity Leaderboard MV J-Gold Miners Sep 24: Mergers Mean Possible Up-And-Out DELETEs

TCM (570 HK): Sinopharm’s $4.60/Share Offer

$4.60/Share. That’s the number – by way of a Scheme – that only matters. Below the recently rumoured $6/share, and $5.10/share a little over three years ago. Terms are final.
As widely expected, the Offeror is SASAC-managed China National Pharmaceutical Group Corporation (CNPGC), indirectly owning 32.46% in China Traditional Chinese Medicine (570 HK) (TCM) via Sinopharm Group Hongkong,
Optically, the Offer price appears light. But this should still get up. TCM is trading rich to peers. No other competing bidder will emerge. Expect regulatory pre-cons to be fast-tracked.

China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait

The approval/filing process of China TCM’s privatization is complicated and would take some time, but there’re almost no cases of disapproval. It also depends on the adequacy of materials submitted.
Due to the extension of time for the despatch of Scheme Document, this process would be delayed for more months.But we should receive clear information by October at the latest.
For arbitrageurs, China TCM is an investment opportunity of high success rate, which becomes more attractive if HK stock market is depressed.It’s better suited to idle funds considering potential risks/returns.

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

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

China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What

On no news, China Traditional Chinese Medicine (570 HK) shares declined 12% today. We spoke to several readers to gauge the likely reasons for the fall.
The speculation is that the fall could be due to forced liquidation, Sinopharm’s new Chairman pulling the offer, the consortium unravelling, SAMR issues and Ping An blocking the deal.
There is clearly news behind today’s fall, but none of the above rumours seem credible. The risk/reward is attractive as the upside (25% spread) outweighs the downside (18% to undisturbed).

Timee Pre-IPO – The Positives – Exponential Growth Since Inception

Timee Inc (215A JP) is looking to raise US$290m from its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
In this note, we will talk about the positive aspects of the deal.

Malaysia Airports (MAHB MK)’s Offer: Buckle Up!

Back on the 15th May, Khazanah Nasional, the EPF, the Abu Dhabi Investment Authority, and GIP, offered to buy shares not already owned in Malaysia Airports (MAHB MK) at RM11.00/share.
The premium to undisturbed appears reasonable. The price is a life-time high. The 90% acceptance hurdle was not insurmountable, and the consortium had the flexibility to lower the %.
But the Offer is now facing unexpected political pushback, amid protests against the Israel-linked bid.

Tax-Loss Selling In Australia 2024 – Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)

The original trade was discussed at end-April in Tax-Loss Selling in Australia 2024 – Historical Analysis and A Trade Basket then updated here and here.
That has done OK. The LIQUID basket has delta neutral performance of +8.4% over 2mos; LIQUID+LESSLIQUID +7.2%; If one did a mixed basket (3x L+LL + 1x Illiquids) it’s +8.6%.
Now it is time to reverse the trade, buying the basket you were short, and running it against index for the next 6-8 weeks.

Sawai Group (4887) – BIGLY Buyback To “Drastically” Change Capital Structure

Two years ago, generic pharmaceuticals co Sawai Group Holdings (4887 JP) traded at 10x PER, 6% ROE, and far below book. 10mos ago the price got back to 1x PBR.
By then, their US sub had partly been put into “Current Assets AFS” as it was for sale. By Dec23, it was completely there. In Jan, a “business review” announcement.
The US business sale led to a loss, but growth this year, and a new MTMP in early June. Monday, we got a HUGE buyback announcement. Today, an 8+% pop.

Hyundai Motor India Pre-IPO – The Negatives – Not All Hunky-Dory

Hyundai Motor (005385 KS) is looking to raise around US$3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
In this note, we talk about the not-so-positive aspects of the deal.

Quiddity Leaderboard MV J-Gold Miners Sep 24: Mergers Mean Possible Up-And-Out DELETEs