In today’s briefing:
- KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade
- EQD | If the Nikkei Begings to Rally, Where Will It Encounter Resistance?
- Merger Arb Mondays (30 Oct) – JSR, Eoflow, Azure Minerals, Symbio, Hollysys, Haitong Intl
- M3: Margins Continue to Dip and Likely to Miss Full Year Guidance
KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade
- The merger between Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) is done. Newco starts trading this week as KDX.
- The trade was fine until I wrote 9 days ago there was still room to run. It fell the next day, bounced 3%, then got CRUSHED into the index upweight.
- NEWREIT is now as cheap relative to its Pro-Forma Peer Group as it was at announcement.
EQD | If the Nikkei Begings to Rally, Where Will It Encounter Resistance?
- Last week, the Nikkei closed down at 30991.69 (CC=-2). The index’s sell-off could end in November, marking a temporary bottom from which a rally could start.
- MRM models say that if the Nikkei bounces this week, it could rise for 3 weeks and reach a price area between 31624 (Q3/CC=+1) and 32892 (Q3/Gen.Pattern Boxplot).
- The upcoming rally comes as a reaction to quite OVERSOLD conditions, as previously discussed, but could be followed by another pullback. This insight points to where the rally may end.
Merger Arb Mondays (30 Oct) – JSR, Eoflow, Azure Minerals, Symbio, Hollysys, Haitong Intl
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), Symbio Holdings (SYM AU), JSR Corp (4185 JP), Healius (HLS AU), Haitong International.
- Lowest spreads – Pact Group Holdings (PGH AU), Origin Energy (ORG AU), Chindata Group (CD US), Allkem Ltd (AKE AU), T&K Toka Co Ltd (4636 JP), Azure Minerals (AZS AU).
M3: Margins Continue to Dip and Likely to Miss Full Year Guidance
- M3 Inc (2413 JP) reported 2QFY03/2023 results on Friday. Revenues increased 3.0YoY while OP decreased 7.1% YoY, both revenues and OP fell below consensus estimates by 0.2% and 4.7% respectively.
- Medical Platform’s earnings continue to deteriorate while we are yet to see a meaningful improvement in overseas segment’s earnings to drive the next phase of growth for m3.
- Given continued decrease in profits, we think the company will struggle to meet its full-year guidance suggesting there is further downside to m3’s share price.
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