Daily Brief Financials: HDFC Bank, Jafco Co Ltd, Bitcoin, Lippo Karawaci, Jb Financial Group, Howard Hughes Corp and more

• Foreign shareholding in HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) has dropped over the December quarter resulting in higher foreign room.
• The merger is expected to complete in Q2/Q3 when we expect there will be large buying from MSCI trackers.
• The merger (and the timing of implementation) will have implications for changes to the NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) at the forthcoming rebalances.

• The Jafco Co Ltd (8595 JP) Greenmail Tender Offer to take Murakami-san out of his position is nearing its close. 
• Investors should make a decision imminently about where they believe the stock should trade in Price/NAV terms after the buyback is complete, once management is “stabilised.”
• My earlier piece written on the day of the announcement needs a few corrections. Those are below. 

• On 12 January we published a bullish tactical recommendation in Bitcoin (XBTUSD).
• We determined that Bitcoin at 18281 was evolving into a sustainable multi-month uptrend and was likely to initially target a 17.4% upswing to 21469.50.
• •Bitcoin achieved our initial target at 21469.50 (+17.4%) on 17 January 2023.

On 11 January 2023, Lippo Karawaci (LPKR) launched a cash tender offer for the USD 405 mn LPKRIJ 8.125% 25 and USD 417 mn LPKRIJ 6.75% 26. The early tender consideration for the 2025 and 2026 notes is USD 870 and USD 770 per USD 1,000 principal, respectively. The company will fund the tender offer with an IDR 6.0 tn (c. USD 380 mn) seven-year amortising secured credit facility by two local banks. The total tender amount will be up to the size of the credit facility (which is secured over land and some buildings).

We recommend to tender the USD LPKRIJ 2025 and 2026 notes. The amount of secured debt will increase significantly if the transaction is completed, and will likely account for the majority of LPKR’s total debt. The offering prices are somewhat in line with market prices. Hence, it is better to tender the notes, as the bonds may have lower recovery values.

• On 18 January, the KRX announced rebalance to KOSPI 200 index. The new addition to KOSPI 200 is JB Financial Group and the deletion is Meritz Fire & Marine Insurance.
• We expect JB Financial to continue to outperform the market in the first half of this year.
• However, we do not expect the sharp appreciation of JB Financial versus the other leading Korean banking stocks post JB Financial’s inclusion in KOSPI 200 on 30 January. 

• The tender offer of a month ago has helped reduce the selling pressure on the shares of HHC and is bringing attention to the underlying asset value of the business
• HHC’s MPCs have attracted more people causing the MPCs to reach optimal levels to sustain cash flow generation. 
• HHC’s ability to grow cash flow to reinvest into its MPCs should lead to greater earnings growth over the long-term.