In today’s briefing:
- Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?
- [JAPAN ACTIVISM] KKR Reportedly Plans Takeover of Fuji Soft (9749) – Relief from Activist Pressure
- StubWorld: Barito Renewables Rolling Over – More To Come. Also Kyocera/KDDI
- China: Passive Selling Expected Later This Month
- KKR ¥8,800 Takeover of Fuji Soft (9749) – Details and Arb Grid
- Ola Electric IPO Trading – Decent Anchor, Tepid Overall Demand
- Trading Opportunities from the Rise of Sector Pairs Trading Using SSFs & MM Unwinding at Expiry
- Fuji Soft (9749 JP): KKR Pre-Conditional Tender Offer at JPY8,800
- Money Forward (3994): A Must-Buy Amid Yen Volatility
- Tata Motors (TTMT IN): Index Impact of DVR Cancellation
Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?
- In its last update, Alibaba Group announced that the company was preparing for its primary listing in Hong Kong and the process was expected to complete by the end August.
- The Board meets on 14 August to approve results for the three months ending June. Could there be an announcement on the dual primary listing too?
- Mainland Chinese own between 3.5%-15.5% of companies that converted from Secondary to Dual-Primary in the last few years. Similar buying in Alibaba could take the stock higher from here.
[JAPAN ACTIVISM] KKR Reportedly Plans Takeover of Fuji Soft (9749) – Relief from Activist Pressure
- Last year into early 2024, Fuji Soft Inc (9749 JP) – partially at the prodding of 3D Investment Partners – took in 4 subs and conducted a strategic review.
- In January, I explored the situation here suggesting the stock had run, FujiSoft needed to liquidate more assets, but a PE firm would look at a valuation of ¥600bn.
- Last night, the Nikkei reported that US PE Firm KKR planned to take Fuji Soft private with a TOB valued at ¥600bn. Limit up will take us to ¥560bn+.
StubWorld: Barito Renewables Rolling Over – More To Come. Also Kyocera/KDDI
- Barito Renewables Energy (BREN IJ) is down 19% in the past month. But still accounts for ~730% of parent Barito Pacific (BRPT IJ)‘s market cap. Still unsustainable.
- Preceding my comments on the Barito complex AND the Kyocera Corp (6971 JP) / KDDI Corp (9433 JP) Holdco, are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation (sub/parent) >20%.
China: Passive Selling Expected Later This Month
- The China equity markets have continued to trade lower with the CSI 300 Index outperforming other mainland indices as the National Team continues to pump money into ETFs tracking the index.
- We currently estimate selling of around US$1.39bn across 74 stocks listed on the mainland and in Hong Kong. There could be fewer deletions depending on the review date chosen.
- The potential deletes have dropped a lot since the start of the calendar year with big underperformance versus the HSCEI Index, CSI 300 Index and CSI Smallcap 500 Index.
KKR ¥8,800 Takeover of Fuji Soft (9749) – Details and Arb Grid
- KKR has announced its previously leaked takeover of Fuji Soft Inc (9749 JP). Two activists with 30+% between them have agreed to tender at ¥8,800.
- Given what the founder, crossholders, and other arbs own, this gets done easily. Congrats on the win to the activists.
- We will see more activism and more pressure on under-earning companies to go private to clean themselves up outside the public eye. Big opportunities for years.
Ola Electric IPO Trading – Decent Anchor, Tepid Overall Demand
- Ola Electric managed to raise around US$734m in its India IPO.
- Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells
- In our previous notes, we looked at the company’s past performance and valuations. In this note, we talk about the trading dynamics.
Trading Opportunities from the Rise of Sector Pairs Trading Using SSFs & MM Unwinding at Expiry
- Trading opportunities arise when overseas traders’ SSF positions face unwinding by local market makers, who enter SSF positions and take opposing spot positions, unwinding at expiry.
- August-Expiry SSF data shows reverse flow impact by local market makers today, with varying degrees of impact per stock but an observable overall trend.
- With ongoing market volatility in Korea, consider setups targeting price impacts from reverse flows of sector pairs trading on the next SSF expiration date.
Fuji Soft (9749 JP): KKR Pre-Conditional Tender Offer at JPY8,800
- Following media reports, Fuji Soft Inc (9749 JP) announced a pre-conditional tender offer from KKR at JPY8,800 per share, a 1.0% discount to the last close price of JPY8,890 (8 August).
- The pre-condition is approvals under competition laws of Japan, Vietnam and possibly Belgium. The offer is anticipated to commence in mid-September.
- The offer is a knockout bid and the culmination of an auction process. The board’s recommendation and the irrevocables from activist shareholders ensure this deal is done.
Money Forward (3994): A Must-Buy Amid Yen Volatility
- Amidst the volatility in the Japanese yen, companies like Money Forward, with a strong domestic revenue base and minimal exposure to forex risk, present an attractive investment opportunity.
- Despite broader market uncertainties, Money Forward continues to demonstrate impressive growth, with its corporate ARR surging by 38% YoY in the most recent quarter, signaling sustained momentum.
- The recent agreement to divest 49% of its non-core B2C segment, Money Forward ME, underscores the significant undervaluation of its core operations.
Tata Motors (TTMT IN): Index Impact of DVR Cancellation
- The Tata Motors Ltd (TTMT IN) / Tata Motors DVR (TTMT/A IN) scheme of arrangement has received shareholder approval and regulatory approvals and should be implemented in the short-term.
- There will be small buying from global passive trackers while there will be much bigger buying from NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) trackers.
- In total, we estimate passive trackers will need to buy 25.2m shares (US$308m; 1.9x ADV) of Tata Motors Ltd (TTMT IN) with buying coming in at different times.
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