In today’s briefing:
- Updates on The Couche-Tard Deal for 7&I (3382 JP)
- Toyota Partial Offer Results – What Next?
- Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October
- Huafa Prop (982 HK)’s CCASS Movements: Nothing To See Here
- KOSPI 200 December Rebalancing: Key Points to Watch for in Proactive Position Build-Up
- Tohokushinsha Film (2329 JP): 3D Persists Despite Strong Pushback
- Understanding Potential Issues Within SK Group from Hynix’s Kioxia CB Conversion
- MV Australia A-REITs Index Rebalance Preview: One Close Add & Capping Changes
- JSE Sep 24 Rebalance: PPH Expected to Enter Top 40, AMS to Fall Out
- LG Corp: Three Key Catalysts + NAV Valuation
Updates on The Couche-Tard Deal for 7&I (3382 JP)
- Today saw the publication of three different articles regarding the Alimentation Couche-Tard (ATD CN) approach and offer to purchase all the shares of Seven & I Holdings (3382 JP)
- The first in the Nikkei said ATD could push offer a high price, even up to ¥8 trillion. The second mentioned debt financing being feasible because of prodigious cash flow.
- The third in Bloomberg noted that 7&i had requested the government upgrade its FEFTA status to “core”, which would lead to a more burdensome/restrictive government approval process.
Toyota Partial Offer Results – What Next?
- Today after the close, Toyota Motor (7203 JP) reported the results of their ¥800bn Tender Offer Buyback, originally intended to repurchase 290.12mm shares from cross-holders.
- In the end, 343.83mm shares were tendered (53.71mm shares more than originally expected, worth about ¥150bn at Tender Price). That creates back-end “issues” which must be considered.
- The resulting supply/demand profile is mixed, but on balance, I expect sees positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.
Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October
- Kioxia and Tokyo Metro with valuations of ~$10bn and ~$4.6bn are expected to be listed in October 2024 and become the largest Japanese IPOs since Softbank Corp (9434 JP) in 2018.
- Kioxia Holdings (6600 JP) is currently forecasted to fail fast entries of both Global indices due to low IPO free float.
- Tokyo Metro is expected to be added via fast-entry in one Global Index because of higher IPO free float. Forecasted demand of ~$140m is expected on the fifth trading day.
Huafa Prop (982 HK)’s CCASS Movements: Nothing To See Here
- Ahead of Huafa Property Services Group (982 HK)‘s Scheme Meeting tomorrow, the 28th August, 42.57% of shares outstanding moved out of CCASS on the 8th July.
- One argument for Huafa trading wide-ish to terms is due to “suspicious” CCASS moves between the Offer announcement and the vote.
- Some investors even cite the Golden Throat Holdings (6896 HK) debacle. This is not a Golden Throat situation. Not even close. It is decidedly less interesting and benign.
KOSPI 200 December Rebalancing: Key Points to Watch for in Proactive Position Build-Up
- The momentum for getting ahead on positions with KOSPI 200 rebalancing is holding steady. With around 60% of the screening period behind us, it’s time to start preparing our positions.
- The current rebalancing’s screened changes have a relatively lower price volatility, suggesting a stronger chance for more aggressive position build-up now compared to previous rebalancings.
- Trading volumes vary greatly among these changes, affecting their passive impact sizes. Consider using different weights in basket trading instead of equal weights.
Tohokushinsha Film (2329 JP): 3D Persists Despite Strong Pushback
- On 24 July, 3D Investment Partners proposed to privatise Tohokushinsha Film (2329 JP) through a tender at JPY600-650. 3D has extended the offer validity period from 23 to 30 August.
- The controlling shareholder, Mr Hisako, claims he is not a seller regardless of price. The Board goes through the motions, knowing that Mr Hisako will decide the offer’s fate.
- 3D’s persistence suggests that Mr Hisako’s resolve might be checked by bumping the offer. As this outcome is likely, the shares will continue to trade through terms.
Understanding Potential Issues Within SK Group from Hynix’s Kioxia CB Conversion
- Hynix’s potential 15% stake in Kioxia doesn’t violate the 20% rule because KFTC’s mandatory stake rule doesn’t apply to foreign investments.
- SK Group may transfer Hynix’s 15% Kioxia stake to SK Square by splitting Hynix and merging its investment arm with SK Square for future AI investments.
- SK Square may attract more attention than Hynix short-term, as Kioxia’s stake via Hynix could boost market expectations for value transfer to SK Square.
MV Australia A-REITs Index Rebalance Preview: One Close Add & Capping Changes
- The review period for the September rebalance ends on 30 August. We do not see any constituent changes for the index but there will be capping changes.
- Home Consortium Ltd (HMC AU) is just outside inclusion zone at the moment and outperformance over the rest of the week could result in inclusion.
- Home Consortium Ltd (HMC AU)‘s inclusion and capping changes will result in a one-way turnover of 5% and in a round-trip trade of A$62m.
JSE Sep 24 Rebalance: PPH Expected to Enter Top 40, AMS to Fall Out
- Last night, the price snapshot was taken for the JSE September rebalance. The rebalance is scheduled to take place during the closing auction on Friday the 20th of September.
- PPH is expected to enter the Top 40 with AMS falling out. No changes are expected for the FINI, FINDI, INDI or RESI.
- There are several noteworthy free float changes across ALSI constituents, particularly amongst foreign counters (detail below).
LG Corp: Three Key Catalysts + NAV Valuation
- Three key catalysts for LG Corp include potential inclusion in Korea Value Up Index, an IPO of LG CNS in 1Q 2025, and an increasing probability of higher shareholder returns.
- An IPO of LG CNS is likely in 1Q 2025. LG CNS is currently valued at about 7 trillion won and LG Corp has a 50% stake.
- Our base case NAV valuation analysis of LG Corp suggests implied NAV of 15.3 trillion won or NAV per share of 96,957 won, which is 19.8% higher than current price.
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