In today’s briefing:
- MSCI Feb 2022 Index Rebalance: Day 1 Chosen Again
- Toyota Industries Back To Covid Lows Vs. Toyota Motors
- Shimizu Corp Partial Offer for Nippon Road (1884 JP) May Get Interesting
- LG Energy IN/LG Chem OUT: TIGER (WISE) Done on Feb 8 & KODEX (FnGuide) Under Progress Until Feb 22
- KOSPI Size Index Series Rebalancing Screening Results
- I O Data Device (6916) MBO – Not as Clean And Nice As One Would Like
- MSCI Feb 2022 Index Rebalance: Float/Share Changes
- MSCI Korea February 2022 Review: Sell the News
- Kumho Petrochemical: Restart of the M&A Fight Between Uncle and Nephew
- Advent & CenterBridge/Aareal Bank AG: Lapsed Offer
MSCI Feb 2022 Index Rebalance: Day 1 Chosen Again
- There are 17 adds and 8 deletes for the Asia Pacific region. Most of the changes were expected, but there are a few surprises.
- China Resources Microelectronics-A (688396 CH), Grab (GRAB US) and Lufax Holdings (LU US) have been added, while Qinghai Salt Lake (000792 CH) and Pop Mart International (9992 HK) have not.
- The last tranche of Sea‘s inclusion in the SIMSCI INDEX will take place at the QIR. With the inclusion of GRAB, there will be two foreign listings in the SIMSCI.
Toyota Industries Back To Covid Lows Vs. Toyota Motors
- Toyota Industries (6201 JP)‘s implied stub and simple ratio with 8.5%-held Toyota Motor (7203 JP) has significantly bifurcated in the last 12 months.
- Yet recent and forward earnings at the stub level indicate this dislocation is unjustified.
- Toyota Industries is a set up at this current level.
Shimizu Corp Partial Offer for Nippon Road (1884 JP) May Get Interesting
- Shimizu Corp (1803 JP) has held ~25% of Nippon Road (1884 JP) and has now announced a Partial Tender Offer to go to 50.1%. It’s a 20-year high, but…
- … it’s the wrong price. And it has been. And a quasi-activist has built a 16% stake in recent years.
- The question is whether this gets done. They only need to buy 25.25% out of the 75% they don’t own, but it’s a question.
LG Energy IN/LG Chem OUT: TIGER (WISE) Done on Feb 8 & KODEX (FnGuide) Under Progress Until Feb 22
- For KODEX (FnGuide), the actual rebalancing trading must have begun yesterday, Feb 8, and runs until Feb 22, presumably at an equal daily weighting.
- TIGER (WISE) announced that its implementation of LG Energy IN/LG Chem OUT was completed as of the end of yesterday.
- As for the daily passive impact from KODEX until Feb 22, LG Energy is expected to receive an inflow of 0.03x DTV, whereas LG Chem’s outflow should be -0.10x ADTV.
KOSPI Size Index Series Rebalancing Screening Results
- KOSPI Size Index Series rebalances twice a year in March and September. The base date is February 28. It is a three-month review, so, from December 1 to February 28.
- In the KOSPI size index rebalancing, an increase in the buying volume of local institutions for stocks moving from LargeCap to MidCap is generally detected.
- 14 new MidCap entrants are expected to have a sizable passive impact.
I O Data Device (6916) MBO – Not as Clean And Nice As One Would Like
- This MBO is designed to for the 77-year-old Founder to take the company private.
- The evolution of the balance sheet the last 12-18 months has been a little strange, and may not be benign. It has certainly changed the fair value lower.
- The question, as always, is whether someone will take this up.
MSCI Feb 2022 Index Rebalance: Float/Share Changes
- MSCI announced the changes to the Standard Index pre market open in Asia today. There were changes to the number of shares and free floats for stocks too.
- The increase in the IIF on Sea Ltd (SE US) was known, while the increase in FIF on SK Square (402340 KS) was expected.
- There are quite a few stocks that have over US$10m to trade or over a days ADV to trade from passive funds. These could be interesting to watch.
MSCI Korea February 2022 Review: Sell the News
- MSCI announced the additions and deletions to the MSCI Korea Index today. The two additions include Meritz Financial Group (138040 KS) and Meritz Fire & Marine Insurance (000060 KS).
- The two deletions include Shinpoong Pharmaceutical (019170 KS) and Douzone Bizon (012510 KS).
- These changes have been mostly expected by the market. As a result, sell the news (ie, sell Meritz Financial Group & Meritz F&M Insurance and Buy Douzone Bizon).
Kumho Petrochemical: Restart of the M&A Fight Between Uncle and Nephew
- Kumho Petro Chem’s price rose by 9.3% to 164,000 won on 9 February due to a renewed potential M&A fight between Park Chul-Wan (nephew) and his uncle Park Chan-Koo (uncle).
- It was announced that Park Chul Wan had sent a shareholder proposal ahead of next month’s AGM, recommending candidates to replace outside directors.
- The sharp decline in share price of the company in the past 8 months is likely to encourage some minority shareholders to demand more changes in the company.
Advent & CenterBridge/Aareal Bank AG: Lapsed Offer
- By considering both Advent’s valuation of Aareon and Aareon’s multiple implied valuation, the consortium was paying 0.43x P/BV for the banking business, well below comparables trading at 1.4x.
- It is no surprise then that the offer lapsed. According to my SOTP, by conservatively applying 0.8x P/BV for the banking business, upside for the shares ranges from 52-62%.
- Recommendation is long ARL GR. The shares represent good value and the catalyst is the future spin-off.
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