Daily Brief TMT/Internet: Canon Inc, Mercari Inc, Link Administration, Samsung Electronics Pref Shares, SOCAR, Tencent, ISC Co Ltd, Apple, Inari Amertron and more

• Mercari Inc (4385 JP) will be added to the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) at the close on 28 July.
• There are a lot of FFW changes, mainly reductions. This leads to large funding inflows on the large index stocks.
• We estimate the inclusion of Mercari and the FFW changes will lead to a one-way turnover of 0.56% leading to a one-way trade of JPY 442.23bn (US$3.25bn).

• In mid-January, I wrote about Mercari’s likely TOPIX inclusion 4-5 months later. 4.5mos later, it had been included (Mercari (4385) TOPIX Inclusion, Finally… And It’s Bigger Than It Looks) .
• The publicly-visible announcement data often does not show TOPIX inclusion parameters. A little sleuthing gets you there. 
• It’s still bigger than it looks, but some large holders have recently been selling.

• The Link Administration (LNK AU) Board will not recommend Dye&Durham/DND’s revised lower offer of A$4.57 per share due to shareholder feedback, the underlying value and alternative options.
• The slightly above guidance is designed to show that Link’s contribution to DND’s build a billion objective remains on track and there is little chance of triggering the MAC clause.
• DND needs to secure a deal this week to use its attractive deal financing, according to AFR. This could be the cue for DND to give a little more.

• The Samsung Electronics single-stock futures trading volume has increased significantly. In the most recent F 202207, the futures/cash TV ratio soared to 80%, considerably higher than the usual 40% level.
• Local pension funds are doing spot/futures arbitrage quite aggressively on Samsung Electronics, resulting in unintended consequences, including the 1P discount distortion we witnessed on June 16.
• This 1P discount distortion provides a higher spread than futures/spot arbitrage. So, we need to preemptively set up pref arbitrage while closely monitoring Samsung Electronics’ basis.

• After the market close today, Seoul Economic Daily reported that Socar is likely to delay its IPO to later on. 
• Although Socar has not formally announced that it will delay the IPO, we believe that there is a high probability that the IPO will be postponed. 
• The overall sentiment on the Socar IPO appears to be negative by many institutional investors, unless the company reduces the IPO price range substantially. 

• On 10th July, SAMR published 28 administrative penalties for violating anti-monopoly law related to disclosing past transactions on firms including Tencent, Alibaba, Didi, Weibo and Bilibili.
• A fine of RMB17.2m (US$2.56m) was imposed in total and were fined for not properly reporting past deals between March 2011 to July 2021.
• The market has come to believe that the anti-monopoly investigation in China is easing off, however, the recent development suggests that the anti-monopoly normalisation will continue.

• One third of the way through the review period for the June rebalance, we see 11 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX). 
• One-Way turnover is estimated at 3.88% and the impact on the expected deletions is a lot higher than the impact on the expected inclusions.
• The potential adds have outperformed the potential deletes over the last few months. With the potential adds not short sell eligible, there could be more to go here.

• Richie Capital Group invests on behalf of clients using an established investment process leveraging decades of investment experience. Our investment goal is to provide superior returns over time through the active management of long-only investment strategies.
• In our view, the Fed is “letting the air out of the tires” to keep our economy from skidding off the runway.
• Another “positive” sign that we are heading in the right direction is rising unemployment.

• Richie Capital Group invests on behalf of clients using an established investment process leveraging decades of investment experience. Our investment goal is to provide superior returns over time through the active management of long-only investment strategies.
• In our view, the Fed is “letting the air out of the tires” to keep our economy from skidding off the runway.
• Another “positive” sign that we are heading in the right direction is rising unemployment.

• We came away from our recent plant visit to INARI’s P13 and P55 plants in Bayan Lepas, Penang with a renewed conviction on the company after learning about its customer requesting the group to add in more RF testers for the upcoming US smartphone launch in September.
• A positive change we noticed in the facility is the integration of its proprietary EMI machines with each RF tester which further widens the gap between the company and their competitors, increasing customer’s dependency on INARI.
• Maintain OUTPERFORM with an unchanged Target Price of RM3.30 based on 28.5x FY23E EPS.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.