In today’s briefing:
- P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update
- Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes
- EOFLOW/Medtronic Tender: Appeals Brief Is All Bark, No Bite
- Dissenters Mobilise As Chindata (CD US)’s Shareholders Approve Bain’s Offer
- Navigating the Potential of Hankook & Company’s Revised Tender Offer
- Medikit (7749 JP) Below Market Tender Offer Buyback
- JETS US Equity: Takeoff Accomplished, Time to Return to Base
- EQD | Nikkei 225 MONTHLY Analysis
P.S.Mitsubishi Contruction (1871 JP) – Pro-Ration Expectations Update
- The Partial Offer launched last month by Taisei Corp (1801 JP) to take a 50.2% stake in Ps Mitsubishi Construction (1871 JP) ends at the beginning of next week.
- This hasn’t been a very “exciting” trade. Small, boring sector. One big company selling to another. But it has traded cheap. However, volume has been high.
- Volume has been so high it causes me to revisit my pro-ration expectations, so I have updated estimates and tables below.
Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes
- The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
- Depending on the changes, passives trackers will need to buy 2.4-22.5x ADV (10-24% of real float) on the inclusions and sell between 3.5-42.5x ADV on the deletions.
- Fast Retailing (9983 JP) capping, Nitori Holdings (9843 JP) increase in PAF, a big funding trade, and potentially new stocks being added in two-steps.
EOFLOW/Medtronic Tender: Appeals Brief Is All Bark, No Bite
- Eoflow (294090 KS) filed a 117-page appeal against the amended preliminary injunction (PI), sparking a 16% share price rally. Insulet Corp (PODD US) is required to respond by 14 December.
- Eoflow argues that the Massachusetts District Court committed legal errors. However, Eoflow’s arguments are rehashed from those that the district court has already dismissed with balanced counterarguments.
- The appeal is Eoflow’s last roll of the dice. Eoflow’s appeal brief worryingly notes that the PI profoundly imperils both the Medtronic transaction and its status as a going concern.
Dissenters Mobilise As Chindata (CD US)’s Shareholders Approve Bain’s Offer
- Back on the 11 August, Chinese data center provider Chindata Group (CD US) and major shareholder Bain Capital entered into a definitive agreement at US$8.60/ADS.
- The EGM was held yesterday, the 4 December, and the merger was approved by 97.75% of the total votes cast. No specific PRC regulatory approval is needed for this merger.
- All good right? Not quite. There’s still the nagging issue involving 22.79% of shares out objecting to the deal, exceeding the 12% dissenting threshold, a condition to the merger.
Navigating the Potential of Hankook & Company’s Revised Tender Offer
- With the price almost 10% above ₩20,000, it’s practically fair to regard MBK’s tender offer as effectively canceled, raising the question of the proxy battle’s potential continuation.
- There is a significant likelihood that MBK has prepared a next-phase plan involving an upward adjustment of the offering price, considering the tight situation of successfully securing the target volume.
- Essentially, there’s a high likelihood that the situation will resemble the earlier battle between HYBE and Kakao Corp over S.M. Entertainment Co at the start of this year.
Medikit (7749 JP) Below Market Tender Offer Buyback
- Japanese medical products maker Medikit Co Ltd (7749 JP) Tuesday announced a buyback of ~12% of its shares from the founder’s company.
- The stock is extraordinarily illiquid. 12mo ADV is <US$40k/day. But Medikit runs 40% gross margins, 20% EBIT margins, and trades at an EV/revenue ratio of ~0.8x. It’s cash-rich, and cheap.
- But it’s an interesting situation. The buyback (and its reason) combined with the shareholder structure allow me to idly speculate this is an MBO candidate.
JETS US Equity: Takeoff Accomplished, Time to Return to Base
- The surprise US$1.9 billion acquisition of Hawaiian Holdings (HA US) by Alaska Air Group (ALK US) could potentially rerate the U.S. airline sector
- US Global Jets ETF (JETS US) is up 16% from our initiation on 13 November, a mere 5% to our target price of US$19
- We advocate to take profits and square this trade in the upcoming days
EQD | Nikkei 225 MONTHLY Analysis
- After a strong rally in November, the Nikkei is currently in a temporary corrective phase, reaching between the Q1 and Q2 support levels of the MRM LONG chart.
- There are 2 possible paths from here: 1) a modest pullback, followed by a rally into the end of December, 2) a dive to <= 31672, and December closes down.
- Both these scenarios offer very good seasonal LONG odds for January closing up (based on our SRM model), so we suggest going LONG the Nikkei 225 on the pullback.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
