Daily Brief Financials: Japan Post Bank, Edelweiss Financial Services, GK Goh Holdings, Hang Seng China Enterprises Index, Regional REIT Ltd and more

• Japan Post Bank (7182 JP) has announced the mooted offering by Japan Post Holdings (6178 JP) whereby they will sell 29% of the bank to go from 89% to 60%.
• There are two buybacks – one pre offering and one after – which is an attempt to mitigate impact. This creates interesting but complicated strategy possibilities. Lots of details here.
• Big picture, this is a Very Big Offering at ¥1.236trln at today’s close including greenshoe. 80/20 dom/international. A TOUGH sell. 1.089bn shares is 4x current float. 

• Japan Post Holdings (6178 JP) plans to sell around US$9bn worth of Japan Post Bank (7182 JP), trimming its stake by a third.
• Initial news of the deal broke last week, and we had a look in, Japan Post Bank Possible Placement – Here We Go Again with the US$9bn Overhang.
• In this note, we talk about the deal structure and impact.

• Japan Post Holdings (6178 JP) is looking to reduce its stake in Japan Post Bank (7182 JP) from 89% to 60%. That is over US$9bn at the last close.
• The placement is supported by buybacks (ToSTNeT-3 and on-market) that will absorb some of the offering. Then there is the passive buying that will absorb a third of the offering. 
• One of the key short-term supports will be the exercise of the over-allotment of the Japan offering. But that will require persuading retail investors to buy into the offering.

• Japan Post Holdings (6178 JP)/JPH has announced the offering of up to 1.1 billion shares in Japan Post Bank (7182 JP)/JPB to reduce its stake from 89.00% to 59.95%.
• JPB will carry out a ToSTNeT-3 buyback (maximum of JPY70 billion) and an on-market buyback (maximum of JPY80 billion). JPH can sell additional shares into the ToSTNeT-3 buyback.
• For long-term investors, JPB’s forward P/B of 0.47x and yield of 4.41% are attractive to peers. JPB’s current price ratio is undemanding vs TOPIX Banks ETF and JPH.

• A key re-rating trigger for Edelweiss’ stock is nearing as its wealth management (WM) arm gets close to demerge and list over the next couple of months.
• Edelweiss’ WM business could list at a market cap of around INR 8750cr, suggesting that Edelweiss’ 44% stake in it alone could be valued at INR 3850cr.
• Edelweiss also reported strong Q3FY23 earnings with 31% YoY growth in ex-insurance PAT. Edelweiss has significant potential to re-rate over the next couple of years as the credit business normalizes.

• Verveine Pte. Ltd., a vehicle controlled by Goh Geok Khim (executive chairman) and Goh Yew Lin (MD), has made a voluntary offer for GK Goh Holdings (GKG SP).
• The Offer price of $1.26/share, which is final, is a 38.5% premium to last close.  It is conditional on the Gohs holding 90%, which may be reduced to 50%.
• GKG Investment, with 62.89%, has given an irrevocable to tender. 

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• The HSCEI has produced 2 material failures below 5000 in the last 17 years, in October 2008 and October 2022. Aggressive bullish multi-month reversals followed in both cases. 
• The 2008 upswing paused when a bearish monthly reversal pattern was delivered in January 2009, but only for 2 months. The bearish monthly reversal pattern in February 2023 appears similar. 

Regional REIT (RGL) has confirmed a Q422 DPS of 1.65p, taking the total for the year to 6.6p. It expects this to be fully covered by EPRA earnings when results are published in March, supported by leasing progress and strong rent collection. Market-wide valuation yield widening reduced NAV and increased gearing, but RGL notes that it has ample headroom available across the debt facilities, which are fixed at a cost of 3.5%.