In today’s briefing:
- Fujitsu (6702) Subsidiary Selldowns To Come
- JCNC Is Even More Overstretched Vs. Astra
- January TOPIX FFW Review – Some Big Sells
- LG Energy Solution: Trading Strategy on End of ESOP Lockup & Valuation Comparisons
- Petrodollars Fan Olam’s Agri Listing In Singapore And Saudi Arabia
- Triton/Caverion: Hostile Competing Offer
- K200 ETFs’ Swap Trading on Meritz & Fresh Buy-In JB Financial on Jan 27
- EQD | HSI Index Vs SPX Index: Sell Chinese Equity Vol to Buy US Equity Vol
- PIF and GIC Combined Invest About 1.2 Trillion Won in Kakao Entertainment
Fujitsu (6702) Subsidiary Selldowns To Come
- Three years ago I wrote Fujitsu Subsidiary Selldowns or Buy-Ins? My choice then was Fujitsu Frontech which was bought out 8 months later.
- A Bloomberg article today with quotes from an interview with the CEO of Fujitsu fuelled some movement today.
- The “obvious” trade is Shinko Electric Industries (6967 JP) but you have to buy the new dream.
JCNC Is Even More Overstretched Vs. Astra
- Jardine Cycle & Carriage (JCNC SP)‘s is currently trading tight at a ~6% discount to NAV.
- The implied stub and JCNC/Astra International (ASII IJ) ratio are the highest outside the 2008 financial crisis.
- Key catalysts for JCNC’s outperformance, such as the SIMSCI Index inclusion, have passed. JCNC is trading rich. Look to reverse the stub.
January TOPIX FFW Review – Some Big Sells
- The January 2023 TOPIX FFW Trade was announced today. The two-way trade is worth about ¥325bn.
- There are four ADDs previously discussed: Sun* (4053 JP), Appier Group (4180 JP), Chubu Steel Plate (5461 JP), and Chubu Steel Plate (5461 JP).
- There are 57 downweights, 11 upweights (but only seven FFW buys). The rest is reverse funding to buy. There are 10 names with >$10mm AND >3 days ADV to sell.
LG Energy Solution: Trading Strategy on End of ESOP Lockup & Valuation Comparisons
- This insight provides a trading strategy on LG Energy Solution (373220 KS) with a focus on the end of the ESOP shares lockup period on 27 January.
- Currently, LG Energy Solution is trading at P/E of 46.5x in 2024 which is more than 100% higher than the P/E multiples of CATL (20.4x) and Tesla (19.2x) in 2024.
- Our view is that in the long-term, LG Energy Solution should not trade at such high valuation premium to Tesla given the latter company’s higher return on capital.
Petrodollars Fan Olam’s Agri Listing In Singapore And Saudi Arabia
- After selling a 35.43% stake in Olam Agri to Saudi Arabia’s Public Investment Fund last month, Olam Group (OLG SP) intends to dual list the company in Singapore and Saudi Arabia.
- The stake sale implied a US$3.5bn value for the agricultural arm, or ~50% of OGL’s current market cap based on its remaining position in Olam Agri.
- Olam Agri may raise up to US$1bn via the listing. A separate London listing of OGL’s food ingredient business is expected to occur subsequent to Olam Agri’s listing.
Triton/Caverion: Hostile Competing Offer
- On 10 January, former significant shareholder Triton gatecrashed the Bain Capital consortium offer with an €8/share hostile competing offer, 14.3% premium to Bain’s). There could be upside up to c.€9.01.
- Shareholder families have a c.27% (thus blocking) stake. Either they cash out in Triton’s offer, with a possible sweetener (a small increase could be likely) or will raise over Triton’s.
- The shares are trading 0.62% above Triton’s offer on expectations of a bidding war and/or that offer is not declared unconditional by 30 June. Risk/return looks again positive. Long.
K200 ETFs’ Swap Trading on Meritz & Fresh Buy-In JB Financial on Jan 27
- KOSPI 200 ETFs will have to sell Meritz FIRE and buy Meritz FINANCIAL at the close on January 27. JB Financial, the top reserved issue, will replace FIRE.
- We should consider a Long Short for two Meritz companies just before the 27th. As a follow-up setup, we should aim for a potential widening of the swap arb spread.
- As for the Long JB Financial, I would set the entry timing one week towards the implementation at the latest and look into Kodex Banks ETF (091170) for a hedge.
EQD | HSI Index Vs SPX Index: Sell Chinese Equity Vol to Buy US Equity Vol
- Chinese equity vol has been high over the last few months with extreme market moves on a number of headlines but is starting to calm down
- US equity volatility continues to screen cheap despite calls for a challenging year and likely recession
- We consider 2 relative vol trades to play a narrowing of the spread
PIF and GIC Combined Invest About 1.2 Trillion Won in Kakao Entertainment
- On 11 January, it was announced that Kakao Entertainment (103260 KS) has attracted large scale investments from Saudi Arabia’s Sovereign Fund (Public Investment Fund – PIF) and GIC (Singapore).
- Maekyung Business Daily reported that PIF and GIC combined invested about 1.1 trillion won to 1.2 trillion won in Kakao Entertainment, valuing the company at about 10 trillion won.
- This major investment in Kakao Entertainment by PIF and GIC should have a positive impact on Kakao Corp (035720 KS), the controlling shareholder of the company.
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