In today’s briefing:
- Japan Post Holdings (6178 JP) – Ugly Group Forecasts But a Very Bigly Buyback
- NIFTY50 Index Rebalance Preview: High Probability Add; Impact Higher than the Headline Numbers
- Merger Arb Mondays (16 May) – Link Admin, Infomedia, VNET, Alliance Aviation, Ramsay, Link Net
- Japan Post Holdings – Silly Guidance And A Not So Silly Buyback
- Kintetsu World Express (9375 JP) Tender Offer by Parent – Too Cheap But Tough To Block
- MSCI Korea Standard: Constituents with Index Up/Down-Weight in May SAIR
- Yamaguchi Financial (8418) – Big On-Market Buyback for Middling Not Too Expensive Regional Bank
- Brambles (BXB AU): Where Could CVC’s Bid Come In?
Japan Post Holdings (6178 JP) – Ugly Group Forecasts But a Very Bigly Buyback
- Japan Post Holdings (6178 JP) and its two main components Japan Post Insurance (7181 JP) and Japan Post Bank (7182 JP) reported excellent earnings for the year to March 2022…
- ….but not so excellent forecasts for the year to March 2023. Some of that is conservative. Some is “finger-in-the-air”, and some of it is the vagaries of insurance sales accounting.
- But they all pay high dividends and Japan Post Holdings announced a ¥200bn buyback. And remember, there will likely Never Be Another JPH Equity Offering, Ever Again. Ever.
NIFTY50 Index Rebalance Preview: High Probability Add; Impact Higher than the Headline Numbers
- We are past the halfway mark in the review period of the NIFTY Index (NIFTY INDEX) September rebalance. We see one potential change which should be announced end August.
- There is a high probability of Adani Enterprises (ADE IN) being included in the index, while either Shree Cement (SRCM IN) or Hero Motocorp (HMCL IN) will be deleted.
- The impact of passive fund trading on the stocks is high in terms of days of ADV, but very high in terms of delivery volume.
Merger Arb Mondays (16 May) – Link Admin, Infomedia, VNET, Alliance Aviation, Ramsay, Link Net
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia and the US (ADRs only).
- This week, highest gross spreads are Dongzheng Automotive Finance (2718 HK), Sezzle Inc (SZL AU), 21Vianet Group (VNET US), Infomedia Ltd (IFM AU), Link Administration Holdings (LNK AU), Alliance Aviation.
- Lowest gross spreads are Virtus Health (VRT AU), China Logistics Property Holdings (1589 HK), Uniti Group Ltd (UWL AU), Mapletree North Asia Commercial Trust (MAGIC SP), Irongate Group (IAP AU).
Japan Post Holdings – Silly Guidance And A Not So Silly Buyback
- Japan Post Holdings beat by 1.5% at the revenue line and 1% at the NP line with each of the three major businesses beating guidance slightly.
- Guidance was, as usual, for NP to decline YoY and at ¥400bn was slightly below consensus at ¥428bn.
- The more important news was a buyback for ¥200bn or 7.6% of outstanding shares.
Kintetsu World Express (9375 JP) Tender Offer by Parent – Too Cheap But Tough To Block
- Kintetsu Group Holdings Co L (9041 JP) has announced a Tender Offer to acquire the shares in Kintetsu World Express (9375 JP) that it doesn’t hold (it controls 47%)
- This is not a done deal, but they only need about 20% of the remaining 53%.
- At a 40% premium to last after a great year, this is still being done at the wrong price. But it will likely get done
MSCI Korea Standard: Constituents with Index Up/Down-Weight in May SAIR
- Woori Financial has a 15%p upward adjustment in its float rate. The other 15 constituents will get a 5%p upward adjustment. We then have nine constituents suffering a 5%p drop.
- We need to approach them with LONG/SHORT basket trading. However, some have recently shown excessive price volatility, so we should consider setting a basket excluding those with relatively large fluctuations
- Another thing to consider is the coupling effect with the KOSPI 200 inflow. Since the lag gap between the two is not large, we expect a substantial coupling effect.
Yamaguchi Financial (8418) – Big On-Market Buyback for Middling Not Too Expensive Regional Bank
- Yamaguchi Financial Group In (8418 JP) is the holding company for three western Japan regional banks. Cheapish/overcapitalised, restructuring painfully, but aimed at 5% ROE and capital efficiency.
- To that end, it is buyback back a lot of stock.
- Compared to its Real World Float, it really is a lot of stock, and it is on-market.
Brambles (BXB AU): Where Could CVC’s Bid Come In?
- Brambles Ltd (BXB AU) is in preliminary discussions for CVC to acquire all shares in the company. Media speculation indicates the bid would be at an Enterprise Value > A$20bn.
- Brambles Ltd (BXB AU) trades cheaper than its peers and a bid at an EV/EBITDA of 9x would imply a buyout price of A$12.84/share, a 23.1% premium to last close.
- At the last traded price of A$11.58/share, there is upside. Especially if other private equity investors enter the fray. Buy on weakness; hedge market risk with ASX200 futures.
Before it’s here, it’s on Smartkarma
