In today’s briefing:
- The October TOPIX FFW Review and Shinsei Bank (8303)’s Future Float
- Tencent Investee Selldown – The US$120bn Global Overhang
- Jinke Smart (9666 HK)’s Low-Balled But Virtually Unconditional Offer
- SET50 Index: Market Consultation & DTAC/TRUE Merger Impact
- About A Gajillion Yen of Index Flows At the Close
- Swire B Vs A – Surprising on Regs, Surprising on Risk; Short-Tm Displacement Now in 99th Percentile
- Jinke Smart’s VGO of HK$12.00 from Boyu Capital
- MACA’s A$1.075 Offer from Theiss Declared Unconditional
- STOXX Europe Quiddity Leaderboard Dec 22: Five Intra-Review Changes, Porsche Leading The Race
- Lotte Chemical Close to Acquiring Iljin Materials
The October TOPIX FFW Review and Shinsei Bank (8303)’s Future Float
- This is a hybrid insight on the upcoming TOPIX FFW Review to be announced 7 October, and the situation around Shinsei Bank (8303 JP).
- Shinsei Bank is in “limbo” post control-acquisition by SBI Holdings (8473 JP) and an attempt to go over 50% should be in the works. When is not known.
- The TOPIX FFW Review should see ¥2.0-2.2trln of one-way flow, and amongst that flow, a large sell on Shinsei to increase Real World Float by 60+% and 25d of ADV.
Tencent Investee Selldown – The US$120bn Global Overhang
- Multiple new agencies have been reporting that Tencent (700 HK) plans to trim its investment portfolio over the remainder of the year.
- The reports have been coming in since the second half of the year and the company has been duly denying these rumors.
- In this note, we look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how.
Jinke Smart (9666 HK)’s Low-Balled But Virtually Unconditional Offer
- PRC-Incorporated property management play Jinke Smart Services (9666 HK) has announced a voluntary cash offer at HK$12/share, a 33.04% premium to last close.
- The Offeror (Boyu) and concert parties collectively hold more than 50%. The Offer is contingent on regulatory approvals and 7.71% of shares out tendering. The tendering condition can be waived.
- The Offer appears geared to bring Boyu’s stake in line with Jinke Property Group (000656 CH)‘s.
SET50 Index: Market Consultation & DTAC/TRUE Merger Impact
- The SET has commenced a market consultation on lowering the turnover ratio level from 5% to 2% while selecting stocks to be added to and deleted from the SET50 INDEX.
- The change to the turnover ratio level could lead to three changes in December that result in one-way turnover of 7.44% and in a one-way trade of THB 6.79bn.
- Separately, the Total Access Communication (DTAC TB) / True Corp Pcl (TRUE TB) merger could result in an ad hoc inclusion prior to the regular rebalance in December.
About A Gajillion Yen of Index Flows At the Close
- Today is a day which happens twice a year in Japan.
- It is Day Before Divs Go Ex- Day. Which theoretically means a fair bit of buying.
- Nikkei 225 is pretty neutral. But there is a Nikkei 225 buy of Nidec Corp (6594 JP). TOPIX and other float market cap indices are a buy on the close.
Swire B Vs A – Surprising on Regs, Surprising on Risk; Short-Tm Displacement Now in 99th Percentile
- The Swire buyback has been impressive. In 27 trading days they have bought back 26.8% of teh HK$4bn promised. In that period, participation has been aggressive.
- Swire has bought back As at a pace of 52% of pre-buyback one-year ADV. For Bs, it has been 105%. But Bs have dramatically underperformed As on “HK Re-opening” trades.
- Historically, when B/A gets more than 6% from 3mo Avg VWAP Ratio, there is statistically significant reversion. We are now at 6.8%. I’d buy B vs A.
Jinke Smart’s VGO of HK$12.00 from Boyu Capital
- Jinke Smart Services (9666 HK) announced a voluntary conditional general offer from Boyu Capital at HK$12.00 per share, a 33.0% premium to the undisturbed price.
- The offer is conditional on 7.71% valid acceptances (such that Boyu represents 30.40% of outstanding shares) and anti-trust approval. The conditions can be waived.
- The offer is designed to flush out minorities unwilling to wait for the industry headwinds to dissipate. A low threshold suggests that the offer will be declared unconditional.
MACA’s A$1.075 Offer from Theiss Declared Unconditional
- Theiss’ offer of A$1.075 per share for MACA Ltd (MLD AU) has been declared unconditional despite acquiring 44.30% of outstanding shares, below the 50% threshold.
- The offer has met with resistance from retail shareholders as it remains below NRW’s rejected offer, and there is a lack of clarity on franking credits.
- Thiess can restart on-market purchases from 27 September. The offer closes on 7 October. The shares are trading in line with the offer.
STOXX Europe Quiddity Leaderboard Dec 22: Five Intra-Review Changes, Porsche Leading The Race
- In this insight, we take a look at the names leading the race to become ADDs/DELs for the STOXX Europe 600 and EuroSTOXX Indices for the December 2022 Rebalance.
- There could be five M&A-related intra-review deletions between now and the end of the year.
- There could be more index changes in the December 2022 Rebalance too.
Lotte Chemical Close to Acquiring Iljin Materials
- On 27 September, it was announced that Lotte Chemical (011170 KS) is close to acquiring a 53.3% stake in Iljin Materials (020150 KS) for about 2.7 trillion won (US$1.9 billion).
- Iljin Materials has relatively high valuation multiples. Despite recent share price decline, its shares are trading at 32.4x P/E and 15.7x EV/EBITDA in 2022.
- At such a high valuation premium (93% higher than current prices), there are going to be significant concerns that Lotte Chem may have overpaid for this acquisition.
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