In today’s briefing:
- KOSPI200 Index Rebalance: Two Sets of Changes
- Sony (6758 JP) – Big-But-Meh Buyback, and Bigger Potential Sony Financial Spinoff
- KOSDAQ150 Index Rebalance: 8 Changes with Some Surprises; Performance Deteriorating
- Suruga Bank (8358) To Sell, Then Buy Back 17% of the Bank, but HOW Is Key.
- How Should We Time the L&F Shorting Event for Another Share Dilution Risk?
- Trading Strategy Post KRX Rebalance Announcement of KOSPI 200 and KOSDAQ 150
- Sing Tao (1105 HK) Makes Its Own News
- Golden Energy: IFA Says Fair & Reasonable. It Is Neither
- Golden Energy (GER SP): Art of the Lie as the IFA Says Offer Is Fair and Reasonable
KOSPI200 Index Rebalance: Two Sets of Changes
- There will be 2 additions and 2 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the June rebalance that will be implemented on 8 June.
- Kum Yang (001570 KS) and Cosmochemical (005420 KS), both high probability names, are inclusions while Hwaseung Enterprise (241590 KS) and Dongwon Industries (006040 KS) are deletions.
- Not surpisingly, there is almost no short interest on the adds. Short interest on the deletes is higher and rising. Expect short covering on the deletes prior to implementation.
Sony (6758 JP) – Big-But-Meh Buyback, and Bigger Potential Sony Financial Spinoff
- Sony Corp (6758 JP) reported earnings on 28 April, which saw profit-taking the next day after a brief two-day run-up, as revenues, OP, and NP were guided down.
- There previous ¥200bn buyback ended about two weeks later. Yesterday they launched a new ¥200bn buyback, and the stock reacted well this AM. And then BIG new news this morning.
- Sony announced an assessment of a partial spin-off of Sony Financial. Assessment this FY, spinoff “within next 2-3yrs” (if possible). This garnered more excitement. Brief analysis of both follows.
KOSDAQ150 Index Rebalance: 8 Changes with Some Surprises; Performance Deteriorating
- There are 8 inclusions and 8 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance to be implemented at the close on 8 June.
- There is one surprise on the deletions and there are a few surprise non-deletions. Smaller surprise on some non-inclusions.
- Short interest is non-existent on the adds and is a lot larger on the deletes. Shorts on the deletes will be covered in the next few weeks.
Suruga Bank (8358) To Sell, Then Buy Back 17% of the Bank, but HOW Is Key.
- Suruga Bank Ltd (8358 JP) today signed an MOU (with board resolution) to form a business and capital alliance with Credit Saison (8253 JP).
- Suruga will sell (post-dilution) 15+% of voting rights to Credit Saison, and buy 4.44% of CreditSaison. Then Suruga will try to buy back the shares it sold to Credit Saison.
- A look at the history is instructive, as is a look at the shareholder structure and the change in business model post-2019. Not as easy as it looks.
How Should We Time the L&F Shorting Event for Another Share Dilution Risk?
- The main challenge is the construction of new production facilities in the US. The investment amount is estimated to be around ₩1T, achieving an annual production capacity of 100,000 tons.
- The government’s approval is the most significant factor to monitor. It will likely be granted between late June or early July, which is when we should start building positions.
- Due to the local market’s expectation of L&F’s upcoming fundraising event, some traders may start building their positions early on. It’s important to consider this possibility and act preemptively.
Trading Strategy Post KRX Rebalance Announcement of KOSPI 200 and KOSDAQ 150
- Korea Exchange announced the KOSPI 200 and KOSDAQ 150 indices constituents changes today.
- Kum Yang (001570 KS) and Cosmochemical (005420 KS) were included in the KOSPI 200. Dongwon Industries (006040 KS) and Hwaseung Enterprise (241590 KS) were excluded in KOSPI 200 index.
- We expect continued underperformance of Kumyang and Cosmo Chemical as many investors will now start to sell these stocks based on “buy on rumor, sell on news” strategy.
Sing Tao (1105 HK) Makes Its Own News
- Sing Tao News Corp (1105 HK), which owns Hong Kong’s oldest and third-largest Chinese language newspaper, is suspended pursuant to the Hong Kong Code on Takeovers and Mergers.
- A takeover of Sing Tao was mooted in 2019-2021 when Charles Ho, the former chairman, sought to exit his 48.98% stake; but that transaction fizzled out.
- At a market cap of just US$50mn, this (likely) Offer hardly rates a mention. Yet a takeover of a Hong Kong newspaper is still newsworthy.
Golden Energy: IFA Says Fair & Reasonable. It Is Neither
- Responding to SIAS and the SGX, the Widjaja Family revised terms such that Golden Energy (GER SP) shareholders opting for an all-cash payout would receive S$0.973/share, up from S$0.846/share.
- The Offer remains low-balled. The Offer should include a similar in-specie of the Stanmore Coal (SMR AU) stake together with a cash-out option. This is the most transparent approach.
- The Circular is out and the IFA reckons the Offer is fair & reasonable – despite a fair value of S$0.574/share for Stanmore versus the Exit Offer of A$0.181/share.
Golden Energy (GER SP): Art of the Lie as the IFA Says Offer Is Fair and Reasonable
- The IFA has concluded that the Widjaja family’s offer for Golden Energy & Resources (GER SP) is fair and reasonable. The EGM will be held on 9 June.
- The IFA has justified its conclusion based on a convoluted methodology that has serious flaws. A fairer SOTP valuation is 37% higher than the IFA’s SOTP valuation range.
- Notably, Dian Swastatika Sentosa (DSSA IJ) will abstain from voting on both resolutions. While the prospect of a bump is diminishing, the offeror is yet to declare the offer final.
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