Most Read

H1 sales were GOOD. H1 earnings were BAD. New forecasts are UGLY. The CVS initiatives are RESPECTABLE, but US CVS market environment UNFORTUNATE. The creation of the new Holdco ENCOURAGING.
The Couche-Tard Bid? That’s SEPARATE. Confidential. But three weeks after receiving the new proposal, it hasn’t been publicly rejected. So that’s a thing.
7&i is progressing with its Standalone Plan, as it should, because ACT’s bid is more a show of faith for discussions. The York Holdings structure is INTERESTING.

7-Eleven Corporation: A Clear Strategy for Long-Term Value, Founding Family Return to Super-Stores

By Michael Causton

Seven & I released 1H24 earnings today as well as details on planned restructuring of its business. Results included some one-off items hitting operating profit as well as lower footfall.
The bigger news was the plan to hive off the non-CVS retail operations into a new company, York Holdings, leaving a newly named 7-Eleven Corporation running CVS globally.
Unusually, Seven also mentioned the possibility of new strategic partners investing in York, including even the “original founding families”, suggesting one way of holding on to control.

Shin Kong and Taishin – There’s a Good Value Swap Trade To Do Here

Media reports indicate that the shareholder base of Shin Kong Financial Holding (2888 TT) and Taishin Financial Holding (2887 TT) have approved their merger.
Shin Kong meeting results were public just before the market closed. The results from Taishin were known earlier. The market and spread were un-moved. If anything, things widened a little.
Next, the two companies try to get fair Trade Commission, FSC, and Exchange approval to join to become Taishin Shin Kong FHC. And there’s a good trade to do here.

HSCI Index Rebalance Preview: Midea Group (300 HK) To Be Added in December; Stock Connect Next Week

There were only 13 new listings on the Main Board of the HKEX (388 HK) in the third quarter of the year.
Of those stocks, we only see Midea Group (300 HK) having a chance of being added to the HSCI in December.
Midea Group (300 HK) should be added to Southbound Stock Connect next week after the price stabilisation period has ended.

SENSEX Index Rebalance: And That’s a Googly

Adani Ports & Special Economic Zone (ADSEZ IN) will replace Wipro Ltd (WPRO IN) in the S&P BSE SENSEX Index at the close on 21 June.
Adani Ports & Special Economic Zone (ADSEZ IN)‘s inclusion is a big surprise and there should be a move higher in the stock in the short-term.
Wipro Ltd (WPRO IN)‘s deletion was expected and there is positioning in the stock. But there is a lot that passives need to sell too.

Hyundai Motor India: Index Entry Timing for India’s Biggest IPO

Hyundai Motor India (1342Z IN) is looking to list on the exchanges by selling up to INR 279bn (US$3.3bn) of stock at a valuation of up to INR 1,593bn (US$19bn).
The anchor allocations will be completed early next week, and the stock is expected to start trading on 22 October.
The stock will not get Fast Entry to global indices. Inclusion at regular rebalances should take place in February and June next year.

Quiddity Mar25 Nikkei 225 Rebal: Likely 2 IN, 2 OUT, Again; Minimal Surprise Factor

The Sep24 Nikkei 225 Rebal was odd. They could have done 3. They did 2. For now, I see 2 IN and 2 OUT for the Mar25 Nikkei 225 Rebal.
There is also a capping event for Fast Retailing which on mild outperformance could become a double-capping event.
There is a bit of a tech bent to potential ADDs. Some Consumer Goods stocks need stock splits to get in. The Committee will regret not adding PPIH last time.

TOPIX Inclusions: Who Is Ready (Oct 2024)

By Janaghan Jeyakumar, CFA

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
Our long-term pre-event candidate CELSYS (3663 JP) has moved to TSE Prime. There will be a TOPIX Inclusion event on 30-Oct-24. The stock has outperformed TOPIX by 43% since July.
PKSHA Technology (3993 JP) and GENOVA (9341 JP) also moved to the TSE Prime market in September and will be having TOPIX Inclusion events at the end of October 2024.

Another Play to Consider: Spread Trading Korea Zinc Single-Stock Futures

Another play is spread trading Korea Zinc single-stock futures: go long on the front-month and short on the farther-out contract to profit from price convergence.
The key is when longer-dated futures’ volume will rise and if the basis difference with front-month futures will create arbitrage opportunities. November’s volume seems more for hedging than arbitrage.
MBK is likely to launch a second tender offer, potentially extending the spread trading timeline and giving us more chances to hit sweet spots.

Hillhouse To Buy Out Minorities In Samty Holdings (187A) – Small Premium, High Leverage, Hmmm

Today, Hillhouse announced it would buy the 63% of SAMTY HOLDINGS Co Ltd (187A JP) not owned by Daiwa Securities Group (8601 JP) at an 18% premium.
It’s a highly-levered real estate company. Huge inventory. Decent margins on sale so embedded profit sitting in inventory. Not a very big premium, but an all-time high.
Retail including some large former insiders and passive own the vast bulk of the float here. The former get this done. Or not.

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Oct 11

Most Read: Haitong Securities Co Ltd (H), Seven & I Holdings, Korea Zinc, Midea Group, Shin Kong Financial Holding, Arcadium Lithium , Adani Ports & Special Economic Zone and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Revised Couche-Tard Bid for 7&I and a Flurry of News Items Ahead of Earnings
Haitong Securities (6837 HK)/GTJA (2611 HK) Merger Is a Done Deal
Guotai Junan (2611 HK)/Haitong (6837 HK)’s Merger: A Win For H-Shareholders
7&I Results and Plans – The Good, The Bad, The Ugly, The Respectable, Unfortunate, and Encouraging
MBK Rules Out Further Tender Price Hike for Korea Zinc, Game Plans Shift
HSCI Index Rebalance Preview: Midea Group (300 HK) To Be Added in December; Stock Connect Next Week
Shin Kong and Taishin – There’s a Good Value Swap Trade To Do Here
7-Eleven Corporation: A Clear Strategy for Long-Term Value, Founding Family Return to Super-Stores
Rio Tinto Goes All-In for Arcadium Lithium
SENSEX Index Rebalance: And That’s a Googly

Revised Couche-Tard Bid for 7&I and a Flurry of News Items Ahead of Earnings

This AM, partway through the morning session, Bloomberg carried an article saying Alimentation Couche-Tard (ATD CN) had upped its bid for Seven & I Holdings (3382 JP) to US$18.19/share.
The stock popped, then faded sharply. Near and after the close we got more headlines. Some of these preview tomorrow’s earnings report. Some preview the restructuring announcements.
The Nikkei comment regarding an earnings shortfall vs Plan suggests weaker US convenience store sales and consumer footfall are to blame. Details will matter. But I’d buy dips.

Haitong Securities (6837 HK)/GTJA (2611 HK) Merger Is a Done Deal

Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) all-scrip merger is set at an exchange ratio of 0.62x.
The merger is conditional on the GJTA/Haitong shareholder vote, which is low risk. Regulatory approvals are a formality as they involve two entities with SOE backgrounds.
The share exchange ratio is attractive compared to historical price ratios and precedent transactions. The recent material re-rating of peers is irrelevant to the vote as the offer is all-scrip.

Guotai Junan (2611 HK)/Haitong (6837 HK)’s Merger: A Win For H-Shareholders

A month after China’s leading state-backed brokerages, Guotai Junan Securities (2611 HK) and Haitong Securities (H) (6837 HK), announced an intention to merge, we have a firm deal.
Via a share swap, each Haitong H share may be exchanged for 0.62 H shares of GJS. A similar ratio is in place for the As. Cash options are afforded
Conditions include GJS and Haitong shareholder approval; plus the usual suspects on the regulatory front. The key risk, as with TCM (570 HK)‘s Offer, is one of timing.

7&I Results and Plans – The Good, The Bad, The Ugly, The Respectable, Unfortunate, and Encouraging

H1 sales were GOOD. H1 earnings were BAD. New forecasts are UGLY. The CVS initiatives are RESPECTABLE, but US CVS market environment UNFORTUNATE. The creation of the new Holdco ENCOURAGING.
The Couche-Tard Bid? That’s SEPARATE. Confidential. But three weeks after receiving the new proposal, it hasn’t been publicly rejected. So that’s a thing.
7&i is progressing with its Standalone Plan, as it should, because ACT’s bid is more a show of faith for discussions. The York Holdings structure is INTERESTING.

MBK Rules Out Further Tender Price Hike for Korea Zinc, Game Plans Shift

MBK’s strategy is clear: they believe they have the upper hand with the current price level and are optimistic about a favorable ruling on the second injunction.
All eyes are on Choi to raise the price by this Friday, the 11th, before the deadline, especially with the FSS’s scrutiny looming.
If that happens, MBK will likely go all-in on the second injunction whose hearing is on the 18th. Choi raising the price this Friday won’t significantly boost Korea Zinc’s stock.

HSCI Index Rebalance Preview: Midea Group (300 HK) To Be Added in December; Stock Connect Next Week

There were only 13 new listings on the Main Board of the HKEX (388 HK) in the third quarter of the year.
Of those stocks, we only see Midea Group (300 HK) having a chance of being added to the HSCI in December.
Midea Group (300 HK) should be added to Southbound Stock Connect next week after the price stabilisation period has ended.

Shin Kong and Taishin – There’s a Good Value Swap Trade To Do Here

Media reports indicate that the shareholder base of Shin Kong Financial Holding (2888 TT) and Taishin Financial Holding (2887 TT) have approved their merger.
Shin Kong meeting results were public just before the market closed. The results from Taishin were known earlier. The market and spread were un-moved. If anything, things widened a little.
Next, the two companies try to get fair Trade Commission, FSC, and Exchange approval to join to become Taishin Shin Kong FHC. And there’s a good trade to do here.

7-Eleven Corporation: A Clear Strategy for Long-Term Value, Founding Family Return to Super-Stores

By Michael Causton

Seven & I released 1H24 earnings today as well as details on planned restructuring of its business. Results included some one-off items hitting operating profit as well as lower footfall.
The bigger news was the plan to hive off the non-CVS retail operations into a new company, York Holdings, leaving a newly named 7-Eleven Corporation running CVS globally.
Unusually, Seven also mentioned the possibility of new strategic partners investing in York, including even the “original founding families”, suggesting one way of holding on to control.

Rio Tinto Goes All-In for Arcadium Lithium

Late last evening, Rio Tinto Ltd (RIO AU) and Arcadium Lithium (LTM AU) announced a definitive agreement where Rio will acquire Arcadium for US$5.85/share in cash.
Arcadium Lithium (ALTM US) closed nearly 31% higher at US$5.55/share and Arcadium Lithium (LTM AU) should follow when the stock opens.
Arcadium Lithium (LTM AU) could move around 40% higher today to catch up with Arcadium Lithium (ALTM US) – that would still leave a 5.4% spread to the offer price.

SENSEX Index Rebalance: And That’s a Googly

Adani Ports & Special Economic Zone (ADSEZ IN) will replace Wipro Ltd (WPRO IN) in the S&P BSE SENSEX Index at the close on 21 June.
Adani Ports & Special Economic Zone (ADSEZ IN)‘s inclusion is a big surprise and there should be a move higher in the stock in the short-term.
Wipro Ltd (WPRO IN)‘s deletion was expected and there is positioning in the stock. But there is a lot that passives need to sell too.

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Oct 10

Most Read: Seven & I Holdings, Haitong Securities Co Ltd (H), Korea Zinc, Hyundai Motor India , Arcadium Lithium , Fadu , Midea Group, Crompton Greaves and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Revised Couche-Tard Bid for 7&I and a Flurry of News Items Ahead of Earnings
Haitong Securities (6837 HK)/GTJA (2611 HK) Merger Is a Done Deal
MBK Rules Out Further Tender Price Hike for Korea Zinc, Game Plans Shift
Seven & I Holdings (3382 JP): Pressure Mounts with a Couche-Tard Revised Offer
Hyundai Motor India: Index Entry Timing for India’s Biggest IPO
Arcadium Lithium (ALTM US/LTM AU): Rio’s Binding Proposal
KOSDAQ150 Index Rebalance Preview: 10 Changes in December
HSCI Index Rebalance Preview: Midea Group (300 HK) To Be Added in December; Stock Connect Next Week
Quiddity Leaderboard NIFTY Mar 25: Four Changes Likely for NIFTY Next 50 + Hyundai Motor India IPO
Ohayo Japan | Record Highs…again

Revised Couche-Tard Bid for 7&I and a Flurry of News Items Ahead of Earnings

This AM, partway through the morning session, Bloomberg carried an article saying Alimentation Couche-Tard (ATD CN) had upped its bid for Seven & I Holdings (3382 JP) to US$18.19/share.
The stock popped, then faded sharply. Near and after the close we got more headlines. Some of these preview tomorrow’s earnings report. Some preview the restructuring announcements.
The Nikkei comment regarding an earnings shortfall vs Plan suggests weaker US convenience store sales and consumer footfall are to blame. Details will matter. But I’d buy dips.

Haitong Securities (6837 HK)/GTJA (2611 HK) Merger Is a Done Deal

Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) all-scrip merger is set at an exchange ratio of 0.62x.
The merger is conditional on the GJTA/Haitong shareholder vote, which is low risk. Regulatory approvals are a formality as they involve two entities with SOE backgrounds.
The share exchange ratio is attractive compared to historical price ratios and precedent transactions. The recent material re-rating of peers is irrelevant to the vote as the offer is all-scrip.

MBK Rules Out Further Tender Price Hike for Korea Zinc, Game Plans Shift

MBK’s strategy is clear: they believe they have the upper hand with the current price level and are optimistic about a favorable ruling on the second injunction.
All eyes are on Choi to raise the price by this Friday, the 11th, before the deadline, especially with the FSS’s scrutiny looming.
If that happens, MBK will likely go all-in on the second injunction whose hearing is on the 18th. Choi raising the price this Friday won’t significantly boost Korea Zinc’s stock.

Seven & I Holdings (3382 JP): Pressure Mounts with a Couche-Tard Revised Offer

In response to media reports, Seven & I Holdings (3382 JP) confirmed receiving a revised non-binding proposal from Alimentation Couche-Tard (ATD CN).
The rumoured revised offer is US$18.19, a 22.4% premium to the initial US$14.86 offer. The revised terms are attractive vs precedent transactions and analyst price targets.
The Board would cite regulatory concerns and the revised offer’s implied discount compared to peer multiples. At tomorrow’s results, the Board must present a credible alternative value generation path.

Hyundai Motor India: Index Entry Timing for India’s Biggest IPO

Hyundai Motor India (1342Z IN) is looking to list on the exchanges by selling up to INR 279bn (US$3.3bn) of stock at a valuation of up to INR 1,593bn (US$19bn).
The anchor allocations will be completed early next week, and the stock is expected to start trading on 22 October.
The stock will not get Fast Entry to global indices. Inclusion at regular rebalances should take place in February and June next year.

Arcadium Lithium (ALTM US/LTM AU): Rio’s Binding Proposal

Arcadium Lithium (LTM AU) has disclosed a binding offer from Rio Tinto PLC (RIO LN) at US$5.85 per share, a 90% premium to the undisturbed price of US$3.08 (4 October).
The offer is attractive compared to analyst price targets and peer multiples but unattractive compared to cyclical low timing and precedent transactions.
The shareholder structure requires an activist to disrupt the vote. The long-dated offer provides optionality on a bump if lithium prices materially re-rates.

KOSDAQ150 Index Rebalance Preview: 10 Changes in December

With over 85% of the review period complete, there could be 10 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
Even with 10 potential changes, there is sector balance with half the changes in the Information Technology sector. Passive trading impact varies from 0.2-7.7x ADV.
The potential adds have outperformed the potential deletes and the KOSDAQ150 Index since the start of the review period, though there has been a gentle drift lower since July.

HSCI Index Rebalance Preview: Midea Group (300 HK) To Be Added in December; Stock Connect Next Week

There were only 13 new listings on the Main Board of the HKEX (388 HK) in the third quarter of the year.
Of those stocks, we only see Midea Group (300 HK) having a chance of being added to the HSCI in December.
Midea Group (300 HK) should be added to Southbound Stock Connect next week after the price stabilisation period has ended.

Quiddity Leaderboard NIFTY Mar 25: Four Changes Likely for NIFTY Next 50 + Hyundai Motor India IPO

By Janaghan Jeyakumar, CFA

NIFTY 50 represents the 50 largest stocks listed in the National Stock Exchange (NSE) of India and the NIFTY Next 50 index tracks the next 50 largest names.
In this insight, we take a look at the names leading the race to become ADDs/DELs for these indices in the March 2025 index rebal event.
There are no changes for NIFTY 50 but there could be four changes for NIFTY Next 50 according to current rankings.

Ohayo Japan | Record Highs…again

By Mark Chadwick

Stocks advanced for a second straight session Wednesday, with the S&P 500 and Dow Jones Industrial Average closing at record highs
Japan’s Prime Minister Ishiba dissolved parliament for an October 27 snap election, seeking mandate amid low public support due to a fundraising scandal
Canadian retailer Couche-Tard has increased its takeover offer for Seven & i Holdings to $47 billion, up from $38.5 billion

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Oct 09

Most Read: Tokyo Metro, Seven & I Holdings, KB Financial, Taiwan Semiconductor (TSMC) – ADR, Hyundai Motor India , Mitra Keluarga Karyasehat Tbk, Dongwon Industries and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Tokyo Metro (9023 JP) IPO: TPX Inclusion in November; Global Indices: One in October, One in Feb
The TOPIX October FFW Trade – BIG Numbers
Tokyo Metro IPO Valuation Analysis
Korea Value-Up Index: Detailed Methodology, Weights, Float Rates, & Passive Impacts Obtained
All Is Not Well in Tech Sector, AI Growth Slows, TSMC Expensive. Samsung, SK Hynix More Attractive.
Hyundai Motor India: Index Entry Timing for India’s Biggest IPO
Hyundai Motor India Sets IPO Price Range
Hyundai Motor India Pre-IPO – Index Inclusion Won’t Have Near-Term Impact
LQ45 Index Rebalance Preview (Oct 2024): Identifying Potential Index Changes
Quiddity Leaderboard KOSPI 200 Dec 24: Up to 5 ADDs & 6 DELs Possible

Tokyo Metro (9023 JP) IPO: TPX Inclusion in November; Global Indices: One in October, One in Feb

Tokyo Metro (9023 JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 23 October.
At the reported indicative IPO price of JPY 1100/share, Tokyo Metro (9023 JP) will be valued at JPY 639.1bn (US$4.49bn).
The stock should be added to one global index on 29 October, to the TOPIX INDEX on 28 November, while another global index inclusion will need to wait till February.

The TOPIX October FFW Trade – BIG Numbers

Post-Close on the 5th business day of October every year, the TSE announces the Free Float Weight review for all stocks where the FY ends in the Jan-March quarter.
Yesterday saw 210 decent changes to FFW (more up than down). There are still 400+ Phased Weight Reductions, 3 new adds (3663, 3993, 9341), and some share cancellation-based share-count reductions.
It turns out there is a LOT to trade. I see ¥2trln one-way (¥2trln net to buy on 245 names, and ¥2trln to sell on the other nearly 1,900 names).

Tokyo Metro IPO Valuation Analysis

Tokyo Metro set the IPO price range at 1,100 to 1,200 Yen per share. At the top end of the range, Tokyo Metro would raise 349 billion yen ($2.35 billion).
Our base case valuation of Tokyo Metro is implied target price of 1,178 yen per share. This is within the top end of the IPO price range (1,200 yen).
Given the lack of upside relative to the IPO price range, we have a Negative view of this IPO.

Korea Value-Up Index: Detailed Methodology, Weights, Float Rates, & Passive Impacts Obtained

This post dives into the official details of the Korea Value-Up Index methodology that I obtained from KRX. Plus, it has the official weights and free-float rates for each constituent.
The 3rd and 4th Phases led to surprising stocks entering the index, causing drops for KB and Hana, while SK Hynix benefited from the Exception Application rule.
The index’s straightforward methodology suggests low rebalancing uncertainty, but flexible Special Entry rules and upcoming December changes may add unpredictability, targeting bank stocks like KB, Hana, and JB.

All Is Not Well in Tech Sector, AI Growth Slows, TSMC Expensive. Samsung, SK Hynix More Attractive.

By Nicolas Baratte

The rally of the Asia Tech sector (+24% YTD) is highly concentrated in a handful of stocks. TSMC is up 64% but Samsung is down -22% YTD.
With the exception of AI, end-demand isn’t great. Smartphone up 8% but below 2019-21 level. PC flattish. x86 Server flattish. Telecom capex declining. Automotive electronics declining.
AI is the most disruptive trend since Cloud in 2010. Years of increasing Capex are in front of us. But short-term, stocks are properly valued to rich, growth is slowing.

Hyundai Motor India: Index Entry Timing for India’s Biggest IPO

Hyundai Motor India (1342Z IN) is looking to list on the exchanges by selling up to INR 279bn (US$3.3bn) of stock at a valuation of up to INR 1,593bn (US$19bn).
The anchor allocations will be completed early next week, and the stock is expected to start trading on 22 October.
The stock will not get Fast Entry to global indices. Inclusion at regular rebalances should take place in February and June next year.

Hyundai Motor India Sets IPO Price Range

Hyundai Motor India (1342Z IN) has set an IPO price range of 1,865 to 1,960 rupees per share, aiming for a valuation as high as US$19 billion.
Hyundai Motor (005380 KS) is selling a 17.5% stake in Hyundai Motor India in this public offering. Hyundai Motor India IPO is scheduled to trade starting 22 October.
Our updated base case valuation of Hyundai Motor India is market cap of US$19.7 billion based on P/E of 25.9x our estimated net profit of 64.1 billion INR.

Hyundai Motor India Pre-IPO – Index Inclusion Won’t Have Near-Term Impact

Hyundai Motor (005385 KS) is looking to raise around US$3.3bn 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 our previous notes, we have looked at the company’s past performance and provided our thoughts on valuations. In this note, we talk about index inclusion.

LQ45 Index Rebalance Preview (Oct 2024): Identifying Potential Index Changes

The review period for the LQ45 Index October rebalance ended 30 September. The changes should be announced the last week of October, becoming effective after the close on 31 October.
We highlight 4 potential inclusions and 5 potential exclusions for the index at the rebalance. The actual number of changes could be lower at 2-3 a side.
There are a few stocks that will have over 1x ADV to trade from passive trackers if they are added to or deleted from the index.

Quiddity Leaderboard KOSPI 200 Dec 24: Up to 5 ADDs & 6 DELs Possible

KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX).
In this insight, we take a look at the names leading the race to become ADDs and DELs during the upcoming semiannual review in December 2024.
We expect up to five ADDs and six DELs for the KOSPI 200 Index during this rebal event based on the latest available data. Small increase vs two weeks ago.

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Oct 08

Most Read: Tokyo Metro, CPMC Holdings, Hyundai Motor, Tianjin Port, Korea Zinc, Arcadium Lithium , USS Co Ltd, Zhejiang Expressway Co H, KB Financial and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Tokyo Metro IPO – Thoughts on Valuation
CPMC Holdings (906.HK) Privatization Update – Will ORG Withdraw Midway?
WisdomTree Emerging Markets High Dividend Index Rebalance: US$2.5bn Round-Trip Trade
7&I (3382) – Asset Sale News Designed to Get Shareholder Attention to Future Value
Korea Zinc: Breaking Down the Cancel Risk with Specific Legal Provisions for Both Camps
Rio Tinto Taps Arcadium As Lithium Prices Sag
USS (4732 JP) – Small Offering on ‘Growth Darling’ – Buyback Offsets 50%
Zhejiang Expressway (576 HK): “Cheap” Access To Zheshang Securities
Tokyo Metro IPO Valuation Analysis
Korea Value-Up Index: Detailed Methodology, Weights, Float Rates, & Passive Impacts Obtained

Tokyo Metro IPO – Thoughts on Valuation

Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.3bn in its Japan IPO.
Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
We have looked at the company’s past performance in our previous notes. In this note, we will talk about valuations.

CPMC Holdings (906.HK) Privatization Update – Will ORG Withdraw Midway?

By Xinyao (Criss) Wang

Acquiring CPMC at low price is in line with Baosteel’s strategic goals and the new assessment indicators of Baowu Group. This explains why Baosteel didn’t choose to raise its Offer
ORG intends to acquire 100% equity of CPMC. This means state-owned capital needs to withdraw completely from CPMC. So, would China Foods/COFCO (both SOEs) agree to be acquired by ORG?
If ORG is “forced to” acquire CPMC due to Baosteel’s low Offer Price, will ORG change mind and choose to withdraw midway?Such “potential unwillingness” from ORG makes the deal “tricky”.

WisdomTree Emerging Markets High Dividend Index Rebalance: US$2.5bn Round-Trip Trade

The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
The changes at the October rebalance were announced after market close on 4 October with implementation scheduled at the close on 16 October.
There are 241 adds and 208 deletes for the index with an estimated round-trip trade of US$2.5bn. There are many stocks with over 2x ADV to trade.

7&I (3382) – Asset Sale News Designed to Get Shareholder Attention to Future Value

Seven & I Holdings (3382 JP) is currently “in limbo” as the initial Alimentation Couche-Tard (ATD CN) (“ACT”) has been rejected, some news is out, and we await earnings/presentations.
The news last week was that 7&i might sell down a stake in Seven Bank Ltd (8410 JP) and could sell its retail/superstore business to PE rather than an IPO.
Both selldowns mean the focus on CVS everyone seems to want. That’s good news. And the shares are trading at/below ACT terms which “grossly undervalued” the company. Bullish.

Korea Zinc: Breaking Down the Cancel Risk with Specific Legal Provisions for Both Camps

MBK is unlikely to lower the tender price or cancel the offer due to legal constraints and potential regulatory hurdles, along with compensating investors.
Just keep in mind that if you want to participate in MBK’s Korea Zinc offer, you’ll need to submit your bid to secure that compensation safety net.
We can’t rule out the second injunction request being accepted on the 21st, leaving Choi’s camp in a tough position with tender offer cancellation risks compared to MBK.

Rio Tinto Taps Arcadium As Lithium Prices Sag

Rio Tinto Ltd (RIO AU) has confirmed it has approached Arcadium Lithium (LTM AU)/(ALTM US) regarding a potential acquisition.
No Offer Price has been announced; however a proposed bid with a 30%+ premium, on top of last week’s 11% bounce, has been rumoured. That implies a price of ~$6/share.
Given shares were trading ~A$10/share in January this year, one Aussie-based fund reckons such an Offer would be highly opportunistic; and that a bid 2.5-3x higher is reasonable.

USS (4732 JP) – Small Offering on ‘Growth Darling’ – Buyback Offsets 50%

Ubiquitous used car auction house USS Co Ltd (4732 JP) today announced MUFJ Bank’s Retirement Benefit Trust account would sell its 3.5% stake in an offering.
Given how much cash the company has and how little cross-holding there is, this seems a bit odd, but they are doing a buyback for half the offer.
Small offer. Low ADV count. Well-liked by numerous foreign active holders. This should get taken easily.

Zhejiang Expressway (576 HK): “Cheap” Access To Zheshang Securities

Since Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) were suspended around a month ago, pending a merger, a basket of peers are up 37%.
The Shanghai Composite is up 21%. Volumes are up, commissions are up. Citic Securities (600030 CH), the largest broker by market cap, is up 42% in the past month.
Zhejiang Expressway (576 HK) is also up ~45% in recent weeks due to its 40.3% look-through stake in Zheshang Securities (601878 CH). The question: how much more in the tank?

Tokyo Metro IPO Valuation Analysis

Tokyo Metro set the IPO price range at 1,100 to 1,200 Yen per share. At the top end of the range, Tokyo Metro would raise 349 billion yen ($2.35 billion).
Our base case valuation of Tokyo Metro is implied target price of 1,178 yen per share. This is within the top end of the IPO price range (1,200 yen).
Given the lack of upside relative to the IPO price range, we have a Negative view of this IPO.

Korea Value-Up Index: Detailed Methodology, Weights, Float Rates, & Passive Impacts Obtained

This post dives into the official details of the Korea Value-Up Index methodology that I obtained from KRX. Plus, it has the official weights and free-float rates for each constituent.
The 3rd and 4th Phases led to surprising stocks entering the index, causing drops for KB and Hana, while SK Hynix benefited from the Exception Application rule.
The index’s straightforward methodology suggests low rebalancing uncertainty, but flexible Special Entry rules and upcoming December changes may add unpredictability, targeting bank stocks like KB, Hana, and JB.

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Oct 07

Most Read: Shin Kong Financial Holding, Ibiden Co Ltd, Korea Zinc, ESR Group , Tianjin Port, Hyundai Motor, Tokyo Metro, Sinopec Engineering Group H, CPMC Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Shin Kong (2888 TT) Deal – Activism, Proxy Advice, Proxy Fight, Voting Risk, and Discounts
Shinko Electric (6967 JP) Takeover – Still Buy Dips, and Ibiden (4062 JP)
Impact on Korea Zinc’s Balance Sheet and Debt Ratios Post Massive Debt Raise Proposed by Choi Family
ESR Group (1821 HK): Inching Closer to a Binding Proposal
7&I (3382) – Asset Sale News Designed to Get Shareholder Attention to Future Value
WisdomTree Emerging Markets High Dividend Index Rebalance: US$2.5bn Round-Trip Trade
Weekly Deals Digest (06 Oct) – Tokyo Metro, Rigaku, CR Beverage, K Bank, ASMPT, Samson, T-Gaia
WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: US$1bn to Trade
Korea Zinc: Breaking Down the Cancel Risk with Specific Legal Provisions for Both Camps
CPMC Holdings (906.HK) Privatization Update – Will ORG Withdraw Midway?

Shin Kong (2888 TT) Deal – Activism, Proxy Advice, Proxy Fight, Voting Risk, and Discounts

Taishin Financial Holding (2887 TT) has raised its bid for Shin Kong Financial Holding (2888 TT) and CTBC Financial Holding (2891 TT) has dropped its bid after FSC rejection.
Shin Kong’s Board approved the revised (25% higher) Taishin bid. Shares in Shin Kong fell sharply on the FSC rejection of the CTBC bid.
Taishin’s bid clearly has governance/related party issues and a significant portion of the “non-Taishin” reps on the Shin Kong Board had issues. October 9th passage is not a done deal.

Shinko Electric (6967 JP) Takeover – Still Buy Dips, and Ibiden (4062 JP)

In August, Shinko Electric Industries (6967 JP) announced that the JIC consortium Tender Offer due to be launched by end-August would be delayed. Next update? January 2025.
Everyone had expected a delay, but the stock fell. Then tech/AI fell out of bed, Ibiden crashed, China export restrictions noise/pushback caused further upset. But Ibiden and tech are rebounding.
At 9% it was a raging buy;post-dip at 7% it was good. Now it’s 6+%. Still wide, still interesting, still stable but year-end path dependency… So I still like Ibiden.

Impact on Korea Zinc’s Balance Sheet and Debt Ratios Post Massive Debt Raise Proposed by Choi Family

We discuss the impact on the balance sheet and debt ratios of Korea Zinc’s efforts to conduct a massive debt increase to buyback and cancel shares.
Although the Choi family may consider raising further debt to increase the tender offer price even further, we believe this could pose further balance sheet risk on Korea Zinc.
We provide sensitivity analysis of higher debt on the interest coverage ratios of Korea Zinc.

ESR Group (1821 HK): Inching Closer to a Binding Proposal

ESR Group (1821 HK) provided a positive update on the indicative proposal. The update notes that the consortium has expanded from three to six, representing 39.91% of outstanding shares.
The addition of new consortium members is a positive. While the recent market rally is not a dealbreaker, it should give the consortium renewed impetus to launch an acceptable offer.
The downside to a deal break is low as ESR’s valuation is undemanding, which is supported by the potential earnings recovery in a more benign interest rate environment.

7&I (3382) – Asset Sale News Designed to Get Shareholder Attention to Future Value

Seven & I Holdings (3382 JP) is currently “in limbo” as the initial Alimentation Couche-Tard (ATD CN) (“ACT”) has been rejected, some news is out, and we await earnings/presentations.
The news last week was that 7&i might sell down a stake in Seven Bank Ltd (8410 JP) and could sell its retail/superstore business to PE rather than an IPO.
Both selldowns mean the focus on CVS everyone seems to want. That’s good news. And the shares are trading at/below ACT terms which “grossly undervalued” the company. Bullish.

WisdomTree Emerging Markets High Dividend Index Rebalance: US$2.5bn Round-Trip Trade

The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
The changes at the October rebalance were announced after market close on 4 October with implementation scheduled at the close on 16 October.
There are 241 adds and 208 deletes for the index with an estimated round-trip trade of US$2.5bn. There are many stocks with over 2x ADV to trade.

Weekly Deals Digest (06 Oct) – Tokyo Metro, Rigaku, CR Beverage, K Bank, ASMPT, Samson, T-Gaia

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: Tokyo Metro (9023 JP), Rigaku Holdings (268A JP), K Bank (279570 KS) and China Resources Beverage (CRB HK) IPOs.
Event-Driven developments: ASM Pacific Technology (522 HK), Greatview Aseptic Packaging (468 HK), Samson Holding (531 HK), Descente Ltd (8114 JP), T Gaia Corp (3738 JP).

WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: US$1bn to Trade

The WisdomTree Emerging Markets SmallCap Dividend Index is a fundamentally weighted index that measures the performance of small cap stocks within Emerging Markets.
The changes at the October rebalance were announced after market close on 4 October with implementation scheduled at the close on 16 October.
There are 8 trading days to implementation and there are a bunch of stocks with over 2x ADV to trade.

Korea Zinc: Breaking Down the Cancel Risk with Specific Legal Provisions for Both Camps

MBK is unlikely to lower the tender price or cancel the offer due to legal constraints and potential regulatory hurdles, along with compensating investors.
Just keep in mind that if you want to participate in MBK’s Korea Zinc offer, you’ll need to submit your bid to secure that compensation safety net.
We can’t rule out the second injunction request being accepted on the 21st, leaving Choi’s camp in a tough position with tender offer cancellation risks compared to MBK.

CPMC Holdings (906.HK) Privatization Update – Will ORG Withdraw Midway?

By Xinyao (Criss) Wang

Acquiring CPMC at low price is in line with Baosteel’s strategic goals and the new assessment indicators of Baowu Group. This explains why Baosteel didn’t choose to raise its Offer
ORG intends to acquire 100% equity of CPMC. This means state-owned capital needs to withdraw completely from CPMC. So, would China Foods/COFCO (both SOEs) agree to be acquired by ORG?
If ORG is “forced to” acquire CPMC due to Baosteel’s low Offer Price, will ORG change mind and choose to withdraw midway?Such “potential unwillingness” from ORG makes the deal “tricky”.

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Oct 06

Most Read: Ventia, Auckland Intl Airport, Longfor Properties, Kokusai Electric , Korea Zinc, Ibiden Co Ltd, Descente Ltd, Tokyo Metro and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

ASX100/ASX200 Index: Replacement Candidates for Virgin Money (VUK AU)
Auckland Airport (AIA NZ) Placement: Index Impact
HSCEI Index Rebalance Preview: High & Low Probability Changes
HK RE Series (4) With Macro Backdrop in US & China, HK Is Positioned for a Strong Rerating, Buy Now!
Quiddity Mar25 Nikkei 225 Rebal: Likely 2 IN, 2 OUT, Again; Minimal Surprise Factor
Impact on Korea Zinc’s Balance Sheet and Debt Ratios Post Massive Debt Raise Proposed by Choi Family
Shinko Electric (6967 JP) Takeover – Still Buy Dips, and Ibiden (4062 JP)
(Mostly) Asia-Pac M&A: Descente, Shin Kong Financial, T Gaia, Shinsegae E&C, MPHB, Pacific Smiles
ASX Short Interest Weekly (Sep 27th): Rio Tinto, BHP, Fortescue, Goodman, Santos
Weekly Deals Digest (06 Oct) – Tokyo Metro, Rigaku, CR Beverage, K Bank, ASMPT, Samson, T-Gaia

ASX100/ASX200 Index: Replacement Candidates for Virgin Money (VUK AU)

Following its acquisition by Nationwide, Virgin Money UK Plc (VUK AU) is scheduled to stop trading on the ASX Ltd (ASX AU) after market close on 25 September.
Virgin Money UK Plc (VUK AU) is a member of the S&P/ASX100 Index and S&P/ASX 200 (AS51 INDEX) and there will be adhoc inclusions at the close on 25 September.
There are a couple of stocks vying for inclusion in each index and the next couple of days will determine which ones make it.

Auckland Airport (AIA NZ) Placement: Index Impact

Auckland Intl Airport (AIA NZ) has announced an underwritten placement of NZ$1.2bn and a non-underwritten retail offer to raise NZ$200m.
The stock is trading near the low end of its range over the last few years and the 7% discount from the last close should attract investor interest.
We estimate passive trackers will need to buy around 13.5% of the placement shares coinciding with the settlement date on 20 September.

HSCEI Index Rebalance Preview: High & Low Probability Changes

PICC Property & Casualty H (2328 HK) inclusion and Longfor Properties (960 HK) deletion are high probability changes for the Hang Seng China Enterprises Index (HSCEI INDEX) in December.
There is a lower probability of China Resources Power (836 HK) being added and of Sino Biopharmaceutical (1177 HK) being deleted at the rebalance.
There has been big short covering in PICC Property & Casualty (2328 HK) over the last couple of months while shorts would have covered Longfor Properties (960 HK) recently.

HK RE Series (4) With Macro Backdrop in US & China, HK Is Positioned for a Strong Rerating, Buy Now!

By Jacob Cheng

The wait is finally over. The Fed delivered a 50bps rate cut in September meeting, kick- starting a new rate cut cycle
The rate cut is an absolute game changer for Hong Kong real estate. Physical market will recover with lower mortgage rate and companies will enjoy lower borrow rate
With the macro backdrop in US and China, Hong Kong is well positioned for as strong re-rating with mega catalysts ahead – Buy HK real estate, especially SHKP and NWD

Quiddity Mar25 Nikkei 225 Rebal: Likely 2 IN, 2 OUT, Again; Minimal Surprise Factor

The Sep24 Nikkei 225 Rebal was odd. They could have done 3. They did 2. For now, I see 2 IN and 2 OUT for the Mar25 Nikkei 225 Rebal.
There is also a capping event for Fast Retailing which on mild outperformance could become a double-capping event.
There is a bit of a tech bent to potential ADDs. Some Consumer Goods stocks need stock splits to get in. The Committee will regret not adding PPIH last time.

Impact on Korea Zinc’s Balance Sheet and Debt Ratios Post Massive Debt Raise Proposed by Choi Family

We discuss the impact on the balance sheet and debt ratios of Korea Zinc’s efforts to conduct a massive debt increase to buyback and cancel shares.
Although the Choi family may consider raising further debt to increase the tender offer price even further, we believe this could pose further balance sheet risk on Korea Zinc.
We provide sensitivity analysis of higher debt on the interest coverage ratios of Korea Zinc.

Shinko Electric (6967 JP) Takeover – Still Buy Dips, and Ibiden (4062 JP)

In August, Shinko Electric Industries (6967 JP) announced that the JIC consortium Tender Offer due to be launched by end-August would be delayed. Next update? January 2025.
Everyone had expected a delay, but the stock fell. Then tech/AI fell out of bed, Ibiden crashed, China export restrictions noise/pushback caused further upset. But Ibiden and tech are rebounding.
At 9% it was a raging buy;post-dip at 7% it was good. Now it’s 6+%. Still wide, still interesting, still stable but year-end path dependency… So I still like Ibiden.

(Mostly) Asia-Pac M&A: Descente, Shin Kong Financial, T Gaia, Shinsegae E&C, MPHB, Pacific Smiles

I tally 44 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals discussed this week: T Gaia (3738 JP)‘s and Shinsegae E&C (034300 KS) Tender Offers, and MPHB (MPHB MK)‘s SCR. Plus ASMPT (522 HK) in the crosshairs. Again.
Key updates took place on: Sigma Healthcare (SIG AU), Descente Ltd (8114 JP), Shin Kong Financial Holding (2888 TT), Pacific Smiles (PSQ AU), and Greatview Aseptic Packaging (468 HK).

ASX Short Interest Weekly (Sep 27th): Rio Tinto, BHP, Fortescue, Goodman, Santos

By Ke Yan, CFA, FRM

We analyzed the changes in short interest of ASX Stocks as of Sep 27th (reported today) which has an aggregated short interest worth USD27.6bn.
We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases & decreases in short value, short as multiple of ADT.
We highlight short interest changes in Rio Tinto, BHP, Fortescue, Goodman, Santos.

Weekly Deals Digest (06 Oct) – Tokyo Metro, Rigaku, CR Beverage, K Bank, ASMPT, Samson, T-Gaia

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: Tokyo Metro (9023 JP), Rigaku Holdings (268A JP), K Bank (279570 KS) and China Resources Beverage (CRB HK) IPOs.
Event-Driven developments: ASM Pacific Technology (522 HK), Greatview Aseptic Packaging (468 HK), Samson Holding (531 HK), Descente Ltd (8114 JP), T Gaia Corp (3738 JP).

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Oct 05

Most Read: Longfor Properties, Kusuri no Aoki Holdings , Young Poong Precision, Rigaku Holdings, Korea Zinc, Mphb Capital, Com7 , Shiseido Company and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSCEI Index Rebalance Preview: High & Low Probability Changes
Korea Zinc: Plans to Buy Back and Cancel Shares Worth 2.7 Trillion Won + Team Up with Bain Capital
Kusuri No Aoki (3549) Big Buyback – Accretive, And May Involve Musical Shares
MBK Hikes Youngpoong Precision Tender Price to ₩30,000: Tender Deadline Extended to the 14th
Rigaku IPO – Peer Comparison – Compensating for Smaller Scale with Better Growth and Margins
MBK Raised Korea Zinc’s Tender Price to ₩830K and Dropped the Hard Floor, Keeping the Upper Hand
MPHB Capital (MPHB MK)’s Offer Stalls At the Finish Line
MBK Raises Tender Offer Price of Korea Zinc to 830,000 Won
SET50 Index Rebalance Preview: Four Changes as Adds Outperform Deletes
China Consumer Plays Listed In Japan

HSCEI Index Rebalance Preview: High & Low Probability Changes

PICC Property & Casualty H (2328 HK) inclusion and Longfor Properties (960 HK) deletion are high probability changes for the Hang Seng China Enterprises Index (HSCEI INDEX) in December.
There is a lower probability of China Resources Power (836 HK) being added and of Sino Biopharmaceutical (1177 HK) being deleted at the rebalance.
There has been big short covering in PICC Property & Casualty (2328 HK) over the last couple of months while shorts would have covered Longfor Properties (960 HK) recently.

Korea Zinc: Plans to Buy Back and Cancel Shares Worth 2.7 Trillion Won + Team Up with Bain Capital

Korea Zinc plans to repurchase and cancel shares worth 2.663 trillion won. Korea Zinc’s partner Bain Capital also plans to purchase around 430 billion won for a 2.5% stake.
Korea Zinc plans to buy back shares at 830,000 won per share, which is 11% higher than MBK’s revised up tender offer price of 750,000 won.
Choi family/Bain Capital’s efforts to conduct a massive share buyback and cancellation at higher prices than the market price goes against the globally accepted market practices.

Kusuri No Aoki (3549) Big Buyback – Accretive, And May Involve Musical Shares

The drugstore space in Japan is super-interesting. The stories, the mergers, the activists. And of course, the defence against activists.
In Feb-2024, Aeon did a deal with an activist to cause a future deal between Tsuruha and Welcia. Aeon also owns a stake in Kusuri no Aoki Holdings (3549 JP).
The Aoki brothers (CEO and VP) exercised warrants in August and re-arranged their holdings. Now the family owns 34.7%. Today, after Q1 earnings, the company announced a 5+% buyback.

MBK Hikes Youngpoong Precision Tender Price to ₩30,000: Tender Deadline Extended to the 14th

MBK is raising its tender offer for Young Poong Precision to ₩30,000 per share, matching Choi’s offer and extending the deadline to October 14. Filing expected tomorrow before market open.
MBK targets 6.84 million shares, surpassing Choi’s 3.94 million cap. No hard floor, no cancellation risk, but MBK holds an edge in proration.
The buzz is whether MBK will raise its Korea Zinc bid beyond 900,000 KRW, as Choi prepped with a 950,000 KRW offer. A bid hike and extension seem likely.

Rigaku IPO – Peer Comparison – Compensating for Smaller Scale with Better Growth and Margins

By Clarence Chu

Rigaku Holdings (268A JP) is looking to raise US$762m in its Japan IPO.
Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
In our earlier notes, we looked at the firm’s past performance. In this note, we undertake a peer comparison.

MBK Raised Korea Zinc’s Tender Price to ₩830K and Dropped the Hard Floor, Keeping the Upper Hand

MBK ditched the hard floor, eliminating cancellation risk. With a 15% GGT rate, there’s a 4% spread, so if you can secure volume, the deal looks solid.
MBK’s tender offer has less volume than Choi’s buyback (18%), increasing proration risk, but Choi’s deal also faces legal headaches, leaving some cancellation risk.
Tax implications differ: MBK’s offer incurs capital gains tax, while Choi’s buyback is subject to dividend tax. Foreign investors may prefer MBK’s 0% withholding tax, impacting participation.

MPHB Capital (MPHB MK)’s Offer Stalls At the Finish Line

On the 28 May, credit service provider MPHB Capital (MPHB MK) announced that controlling shareholder and chairman Tan Sri Surin Upatkoon intended to delist the company via a selective capital reduction.
Shareholders approved the RM1.70/share (87.21% FOR, 8.34% AGAINST) terms. The Offer required the Court to sign off on the SCR, and that’s when matters unravelled.
ISM Sdn Bhd, MPHB’s minority partner in six JVs, filed an intervening application on the grounds that sanctioning the SCR may affect its rights in an ongoing legal dispute.

MBK Raises Tender Offer Price of Korea Zinc to 830,000 Won

On 4 October, MBK Partners announced that it is raising its tender offer price of Korea Zinc from 750,000 won to 830,000 won, matching Choi family’s tender offer price.
As the price and conditions have changed, the tender offer period for Korea Zinc by MBK Partners and Young Poong will be extended by 10 days until 14 October.
Unless the Choi family makes another counter offer, upping the tender offer price even further, MBK/Young Poong is in a better position to win this M&A war for Korea Zinc.

SET50 Index Rebalance Preview: Four Changes as Adds Outperform Deletes

A third of the way through the review period for the December rebalance of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX), we see four potential index changes.
Passive trackers will need to buy between 0.5-4.3 days of ADV on the inclusions and sell between 0.1-2.9 days of ADV on the deletions.
The forecast adds have outperformed the forecast deletes and the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) over the last 5 months.

China Consumer Plays Listed In Japan

By Steve Zhou, CFA

Nippon Paint Holdings (4612 JP) is a branded decorative paint player. China made up nearly 40% of the operating profit of the company.
Saizeriya (7581 JP) is a Japanese restaurant chain of fast casual Italian food, with currently the majority of operating profit and growth coming from China.
Shiseido Company (4911 JP) is a Japanese beauty company that relies heavily on China.

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Oct 04

Most Read: Alibaba Group Holding , ASM Pacific Technology, Korea Zinc, Hyosung Heavy Industries Corp, XPeng , Kusuri no Aoki Holdings , Rigaku Holdings, Young Poong Precision and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSTECH Index Rebalance Preview: $800m Round-Trip Trade
Korea Zinc’s Buyback Tender Offer at ₩830,000: Market Vibe Still Leans Towards MBK
ASMPT (522 HK): KKR’s Proposal Is A Non-Starter
Korea Zinc (010130 KS)’s ₩830,000/Share Offer. Mmm …
KOSPI200 Index Rebalance Preview: 4 Adds, 5 Deletes Likely in December
Legal Chaos Amid Young Poong Filing a Criminal Complaint Against Korea Zinc’s BOD and What’s Next?
Quiddity Leaderboard HSTECH Dec 24: Midea Group Question Mark and Final Rankings for Exp ADDs/DELs
Kusuri No Aoki (3549) Big Buyback – Accretive, And May Involve Musical Shares
Rigaku Holdings (268A JP) IPO: The Bear Case
MBK Hikes Youngpoong Precision Tender Price to ₩30,000: Tender Deadline Extended to the 14th

HSTECH Index Rebalance Preview: $800m Round-Trip Trade

The review period for the December rebalance of the Hang Seng TECH Index (HSTECH INDEX) ended on 30 September.
We do not forecast any constituent changes for the index. Capping changes will lead to a one-way turnover of 2.15% and a round-trip trade of HK$6.1bn (US$785m).
If any stocks have outsized moves on expectations of being added to or deleted from the index, there could be opportunities to enter trades.

Korea Zinc’s Buyback Tender Offer at ₩830,000: Market Vibe Still Leans Towards MBK

Korea Zinc is launching a 3.21M share buyback (15.5% of total shares) via a KRW 2.66T tender offer at ₩830,000 per share, with Bain Capital involved.
If tendered shares fall short, Korea Zinc and Bain Capital will buy all. If over the target, they’ll buy pro rata. Below 1,215,283 shares, they will opt out.
Should we dive into Korea Zinc’s risky buyback or choose safer, lower-priced MBK? The market vibe favors MBK, reflected in Korea Zinc’s closing price today.

ASMPT (522 HK): KKR’s Proposal Is A Non-Starter

Reportedly – Bloomberg – KKR has made a non-binding proposal for ASM Pacific Technology (522 HK), the world’s leading back-end semiconductor production equipment supplier.
ASMPT’s largest shareholder, ASM International Nv (ASM NA), with 25%, has been the focus of activists for some time to sell its stake.
This bid has all the hallmarks of the approach (also cited by Bloomberg) by PAG last year. Which came to nought. From a regulatory standpoint, I can’t see this happening.

Korea Zinc (010130 KS)’s ₩830,000/Share Offer. Mmm …

Never a dull moment for Korea Zinc (010130 KS) (KZ). After MBK/Young Poong’s injunction to block KZ’s buyback was denied, KZ, together with Bain Capital, tabled a punchy Offer.
KZ has launched a 3.21mn share buyback (15.5% of shares out) at ₩830,000/share. Bain will also buy 2.5%. KZ’s buyback is to be funded by short-term loans and corporate bonds.
MBK/Young Poong have filed another injunction against this buyback. Its case has merit. And that legal overhang ostensibly accounts for KZ trading ~14% below the buyback terms.

KOSPI200 Index Rebalance Preview: 4 Adds, 5 Deletes Likely in December

85% of the way through the review period, there could be 4 adds and 5 deletes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) in December.
The impact on the potential inclusions ranges from 1.4-17 days of ADV while the impact on the potential deletions varies from 4-8 days of ADV.
The potential adds outperformed the potential deletes early in the review period before giving up all the gains over the following months.

Legal Chaos Amid Young Poong Filing a Criminal Complaint Against Korea Zinc’s BOD and What’s Next?

Young Poong filed a criminal complaint against the board of directors of Korea Zinc (010130 KS) who voted in favor of the tender offer by buying back Korea Zinc’s shares.
If Korea Zinc proceeds with the share buyback at higher price than the tender offer price by MBK, there are two main scenarios.
Trading Action Point: If Uncertain, Watch the Price Action in the Next Several Days

Quiddity Leaderboard HSTECH Dec 24: Midea Group Question Mark and Final Rankings for Exp ADDs/DELs

By Janaghan Jeyakumar, CFA

The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
In this insight, we take a look at the final rankings of potential ADDs and potential DELs for the December 2024 index rebal event.
We do not expect any changes for the HSTECH index in December 2024. However, we expect there to be capping flows of US$1,079mn one-way.

Kusuri No Aoki (3549) Big Buyback – Accretive, And May Involve Musical Shares

The drugstore space in Japan is super-interesting. The stories, the mergers, the activists. And of course, the defence against activists.
In Feb-2024, Aeon did a deal with an activist to cause a future deal between Tsuruha and Welcia. Aeon also owns a stake in Kusuri no Aoki Holdings (3549 JP).
The Aoki brothers (CEO and VP) exercised warrants in August and re-arranged their holdings. Now the family owns 34.7%. Today, after Q1 earnings, the company announced a 5+% buyback.

Rigaku Holdings (268A JP) IPO: The Bear Case

Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement and testing instruments. It is seeking to raise up to US$760 million.
In Rigaku Holdings (268A JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on weakening forward growth indicators, China revenue risk, rising cash conversion cycles, mid-tier FCF margin and large post-IPO share overhang.

MBK Hikes Youngpoong Precision Tender Price to ₩30,000: Tender Deadline Extended to the 14th

MBK is raising its tender offer for Young Poong Precision to ₩30,000 per share, matching Choi’s offer and extending the deadline to October 14. Filing expected tomorrow before market open.
MBK targets 6.84 million shares, surpassing Choi’s 3.94 million cap. No hard floor, no cancellation risk, but MBK holds an edge in proration.
The buzz is whether MBK will raise its Korea Zinc bid beyond 900,000 KRW, as Choi prepped with a 950,000 KRW offer. A bid hike and extension seem likely.

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Oct 03

Most Read: Alibaba Group Holding , Longfor Properties, Korea Zinc, ASM Pacific Technology, Greatview Aseptic Packaging, K Bank, China Resources Beverage and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSTECH Index Rebalance Preview: $800m Round-Trip Trade
HSCEI Index Rebalance Preview: High & Low Probability Changes
Korea Zinc’s Buyback Tender Offer at ₩830,000: Market Vibe Still Leans Towards MBK
Court Dismisses Injunction; Korea Zinc to Announce Buyback Tender Offer Soon
ASMPT (522 HK): Don’t Bet on a KKR Privatisation
GA Pack (468 HK): Crunch Time
Korea Zinc: Plans to Buy Back and Cancel Shares Worth 2.7 Trillion Won + Team Up with Bain Capital
ASMPT (ASM Pacific). 522 HK. M&A. Takeover Target Talk. Déjà Vu ?
K Bank IPO – Should Price Below Its Range
China Resources Beverage Pre-IPO – PHIP Updates – Revenue Slowing, Margins Growing

HSTECH Index Rebalance Preview: $800m Round-Trip Trade

The review period for the December rebalance of the Hang Seng TECH Index (HSTECH INDEX) ended on 30 September.
We do not forecast any constituent changes for the index. Capping changes will lead to a one-way turnover of 2.15% and a round-trip trade of HK$6.1bn (US$785m).
If any stocks have outsized moves on expectations of being added to or deleted from the index, there could be opportunities to enter trades.

HSCEI Index Rebalance Preview: High & Low Probability Changes

PICC Property & Casualty H (2328 HK) inclusion and Longfor Properties (960 HK) deletion are high probability changes for the Hang Seng China Enterprises Index (HSCEI INDEX) in December.
There is a lower probability of China Resources Power (836 HK) being added and of Sino Biopharmaceutical (1177 HK) being deleted at the rebalance.
There has been big short covering in PICC Property & Casualty (2328 HK) over the last couple of months while shorts would have covered Longfor Properties (960 HK) recently.

Korea Zinc’s Buyback Tender Offer at ₩830,000: Market Vibe Still Leans Towards MBK

Korea Zinc is launching a 3.21M share buyback (15.5% of total shares) via a KRW 2.66T tender offer at ₩830,000 per share, with Bain Capital involved.
If tendered shares fall short, Korea Zinc and Bain Capital will buy all. If over the target, they’ll buy pro rata. Below 1,215,283 shares, they will opt out.
Should we dive into Korea Zinc’s risky buyback or choose safer, lower-priced MBK? The market vibe favors MBK, reflected in Korea Zinc’s closing price today.

Court Dismisses Injunction; Korea Zinc to Announce Buyback Tender Offer Soon

The court rejected MBK and Young Poong’s injunction to block Korea Zinc’s buyback, allowing Choi’s side to continue using buybacks to defend control.
Korea Zinc plans an emergency board meeting to launch a tender offer, using internal funds, to buy back shares at 800K-850K KRW starting around October 7.
If Choi converts discretionary reserves into distributable profits, Korea Zinc could unlock 2-3 trillion KRW for the buyback, but uncertainty keeps the stock around 700K KRW.

ASMPT (522 HK): Don’t Bet on a KKR Privatisation

Bloomberg reported that KKR has made a non-binding, preliminary approach to taking ASM Pacific Technology (522 HK) private. ASMPT has been the subject of takeover rumours in the past.
The trading patterns of the substantial shareholders suggest a willingness to exit. However, past privatisation rumours suggest issues with the offeror matching key shareholders’ price expectations.
A binding proposal is unlikely as the timing would be viewed as opportunistic, with the recent market rally eroding a potential takeover premium and ASMPT’s premium multiple compared to peers.

GA Pack (468 HK): Crunch Time

Unsurprisingly, the Greatview Aseptic Packaging (468 HK) Board has recommended shareholders vote against the appointment of Shandong Xinjufeng Technology Packaging (301296 CH)’s two director nominees.
The EGM vote on 18 October is too close to call and depends on Shandong Xinjufeng and management’s ability to rally disengaged minorities to their respective causes.
Irrespective of the EGM vote results, Shandong Xinjufeng will be keen to launch its offer to ward off the threat of a possible competing offer from management.

Korea Zinc: Plans to Buy Back and Cancel Shares Worth 2.7 Trillion Won + Team Up with Bain Capital

Korea Zinc plans to repurchase and cancel shares worth 2.663 trillion won. Korea Zinc’s partner Bain Capital also plans to purchase around 430 billion won for a 2.5% stake.
Korea Zinc plans to buy back shares at 830,000 won per share, which is 11% higher than MBK’s revised up tender offer price of 750,000 won.
Choi family/Bain Capital’s efforts to conduct a massive share buyback and cancellation at higher prices than the market price goes against the globally accepted market practices.

ASMPT (ASM Pacific). 522 HK. M&A. Takeover Target Talk. Déjà Vu ?

By Neil Campling

The second PE rumoured interest in ASMPT in 18 months, with KKR circling.
Semiconductor M&A has surged in 2024 YTD with a 33% increase in deal activity compared to 2023.
ASM’s leadership in TCB, potential growth within HBM, expansion at TSM and enabling the Nvidia Blackwell platform are all reasons for M&A interest.

K Bank IPO – Should Price Below Its Range

K Bank (279570 KS) plans to raise up to US$740m in its upcoming South Korean IPO.
K Bank is one of three Internet-only banks in Korea. It provides a full range of commercial banking products and services.
In our previous note, we have looked at the company’s past performance and undertaken a peer comparison. In this note, we will talk about valuations.

China Resources Beverage Pre-IPO – PHIP Updates – Revenue Slowing, Margins Growing