In today’s briefing:
- Kioxia (285A JP) IPO: The Bear Case
- STAR Chip Index Rebalance: 3 Changes; US$413m Round-Trip Trade
- Merger Arb Mondays (02 Dec) – Shinko, WealthNavi, AVJennings, SG Fleet, Latin Res, Get Nice, GA Pack
- CES China Semiconductor Chips Index Rebalance: Multiple Index Inclusions for the Adds
- Quiddity STAR 50/100 Dec 24 Results: US$793mn Capping Outflow for SMIC; 4 Changes for STAR 100
- CSI All Share Semiconductor Index Rebalance: Methodology Change Leads to 7 Adds, 29 Deletes
- (Mostly) Asia M&A, Nov 2024: Net One System, Amcor/Berry, I D & E Holdings, SG Fleet, Macromill
- HONG KONG ALPHA PORTFOLIO (November 2024)
- ECM Weekly (2nd Dec 2024) – Kioxia, FineToday, MNC Solutions, JST, Pateo, Carraro, Hulic, Sanrio
- Tech News This Week: Samsung Re-Org, QCOM Gives up on Intel, TSMC Increase CoWoS, Apple Delays 2nm
Kioxia (285A JP) IPO: The Bear Case
- Kioxia Holdings (285A JP) is a leading player in the NAND flash memory market. It will list on 18 December and seek to raise up to US$740 million.
- In Kioxia (285A JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on unrealistic long-term financial model assumptions, market share losses, high customer concentration risk, volatile gross margin due to JV and weak FCF profile.
STAR Chip Index Rebalance: 3 Changes; US$413m Round-Trip Trade
- CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
- There are 3 changes for the index and we estimate passive buying of 0.3-0.65x ADV in the adds and selling of between 0.4-0.6x ADV in the deletes.
- On average, the adds to the index have outperformed the deletes over the last 5 weeks with the adds moving higher and the deletes trending lows.
Merger Arb Mondays (02 Dec) – Shinko, WealthNavi, AVJennings, SG Fleet, Latin Res, Get Nice, GA Pack
- 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: WealthNavi (7342 JP), Shanghai Henlius Biotech (2696 HK), Shinko Electric Industries (6967 JP), Get Nice Financial Group Ltd (1469 HK), Arcadium Lithium (LTM AU), Canvest.
- Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP), Elematec Corp (2715 JP), I-PEX (6640 JP).
CES China Semiconductor Chips Index Rebalance: Multiple Index Inclusions for the Adds
- CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
- There are 3 changes for the index, and we estimate one-way turnover of 1.7% resulting in a round-trip trade of CNY 570m (US$79m).
- Nexchip Semiconductor (688249 CH) and United Nova Technology (688469 CH) are adds to other indices as well and the impact on the stocks will be a lot higher.
Quiddity STAR 50/100 Dec 24 Results: US$793mn Capping Outflow for SMIC; 4 Changes for STAR 100
- The December 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 29th November 2024.
- There will be zero changes for the STAR 50 index and four changes for the STAR 100 index.
- We expect one-way flows of approximately US$793mn and US$136mn for the STAR 50 and STAR 100 index rebal events respectively.
CSI All Share Semiconductor Index Rebalance: Methodology Change Leads to 7 Adds, 29 Deletes
- Following a methodology change in mid-November for the CSI All Share Semiconductor Index, there are 7 adds and 29 deletes for the index in December.
- Estimated one-way turnover at the rebalance is 6% leading to a round-trip trade of CNY 3.15bn (US$435m).
- The adds outperformed the deletes bigly in the first 2 weeks of November. Some of those gains have been given back but a new uptrend seems to be taking shape.
(Mostly) Asia M&A, Nov 2024: Net One System, Amcor/Berry, I D & E Holdings, SG Fleet, Macromill
- For the month of November 2024, 14 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$15bn.
- The average premium for the new transactions announced (or first discussed) in November was ~44%. The average premium YTD is ~43%.
- This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.
HONG KONG ALPHA PORTFOLIO (November 2024)
- Hong Kong Alpha portfolio lost 2.9% in November, but has outperformed its benchmark by 4.9% since inception on October 1st. It has outperformed HSI, HSCI and HSCEI by 9%.
- Hong Kong Alpha has generated idiosyncratic returns during the market correction. The portfolio has no exposure to energy, healthcare and property sectors.
- We exit 4 positions at the end of the month and add positions in software, tech components, travel and restaurant sectors.
ECM Weekly (2nd Dec 2024) – Kioxia, FineToday, MNC Solutions, JST, Pateo, Carraro, Hulic, Sanrio
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPOs front, listing in the past week didn’t do much, while a number of comapnies are still looking to beat the year end deadline.
- On the placements front, there were a number of secondary selldowns in Japan.
Tech News This Week: Samsung Re-Org, QCOM Gives up on Intel, TSMC Increase CoWoS, Apple Delays 2nm
- Samsung Semiconductor re-org, new reporting lines, top management promotions and demotions, but the same people. That’s going to solve problems? Qualcomm gives up on buying Intel – good idea.
- Xiaomi to launch its smartphone chip, but what for? Intel launching a PC GPU again . Apple delays or abandons 2nm for M5 chip (too expensive). TSMC increasing CoWoS again.
- China – US worsening relations, side effect is over buying, over stocking of semiconductors? is there a bunch of inventories in China that we can’t see?
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