In today’s briefing:
- Alibaba’s Sum of the Parts Valuation: Why the Initial Excitement May Be Overblown
- Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp
- ECM Weekly (2nd Apr 2023) – Meituan, Rakuten Bank, SBI, Merdeka, ZJLD, Trial Hol, DPC, WCP, MLT
- Weekly Deals Digest (02 Apr) – AAG, Liontown, Mincor, Toshiba, Rakuten Bank, Trial, Harita Nickel
- Short Interest Movements (Q1 2023): HK, Korea, Taiwan, Australia
- DB Hitek: KCGI Goes Activist & A Potential Inclusion in MSCI Korea Standard Index in 2023
- Merger Arb Mondays (03 Apr) – Toshiba, Toyo, AAG, Origin, United Malt, Liontown, Mincor, Healius
- Rakuten Bank IPO: Valuation Insights
- Burlington Stores Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
- Good Morning Japan |SPX-Sizzling 1Q Close; NUGGET: Labor Mobility Needed for Sustainable Wage Growth
Alibaba’s Sum of the Parts Valuation: Why the Initial Excitement May Be Overblown
- Alibaba Group (9988 HK)‘s shares rallied after announcing the business split, with investors believing that the sum of parts could be worth more than the current valuation.
- Our analysis shows that NAV is only 12% higher than the current valuation, contrary to the idea of a significantly higher sum of parts value.
- Therefore, we would be looking to short Alibaba (ADR) (BABA US) yet again once this initial excitement settles.
Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp
- The March rebalances of the NIFTY indices and the Nikkei 225 (NKY INDEX) were implemented last week. Plus some ad hoc rebalances for the KOSPI2 INDEX and KOSDQ150 INDEX.
- A quieter week coming up with multiple market holidays across markets. We also near the start of the review period for the MSCI May QCIR.
- There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and iShares FTSE/Xinhua A50 China (2823 HK) during the week while there were outflows from some Korea ETFs.
ECM Weekly (2nd Apr 2023) – Meituan, Rakuten Bank, SBI, Merdeka, ZJLD, Trial Hol, DPC, WCP, MLT
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- Alibaba (ADR) (BABA US)‘s restructuring news caused some exiciting in the IPO market this week, with Hong Kong filings picking up as well.
- On the placements front, all eyes remain on Meituan (3690 HK) and whether Prosus (PRX NA) will do a placement.
Weekly Deals Digest (02 Apr) – AAG, Liontown, Mincor, Toshiba, Rakuten Bank, Trial, Harita Nickel
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments – Rakuten Bank (5838 JP), Trial Holdings (5882 JP), PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) and Merdeka Battery Materials (2012725D IJ) IPOs.
- Event-Driven developments Aag Energy Holdings (2686 HK), Toshiba Corp (6502 JP), Toyo Construction (1890 JP), Liontown Resources (LTR AU), Mincor Resources NL (MCR AU), Origin Energy (ORG AU).
Short Interest Movements (Q1 2023): HK, Korea, Taiwan, Australia
- Total short interest in Hong Kong is HK$435.1bn, marginally higher from end-December. Short notional has moved in line with the Hong Kong Hang Seng Index (HSI INDEX).
- Total short notional of the KOSPI and KOSDAQ market has moved up since end-December and is in line with the move higher in the KOSPI2 INDEX and KOSDAQ 150 Index.
- Short notional in Taiwan is lower over the quarter even as the TWSE INDEX has moved higher over the period. There has been big short covering on some stocks.
DB Hitek: KCGI Goes Activist & A Potential Inclusion in MSCI Korea Standard Index in 2023
- It was announced on 30 March that a local activist firm called KCGI has invested 7.05% stake in DB Hitek, spending 196.4 billion won on buying this amount.
- KCGI mentioned that DB Hitek’s corporate value is extremely undervalued that the company should cancel its treasury shares and establish independent Board of Directors.
- The probability of DB Hitek being included in MSCI Korea Standard could rise materially if its market cap climbs to more than 4 trillion won in the coming weeks.
Merger Arb Mondays (03 Apr) – Toshiba, Toyo, AAG, Origin, United Malt, Liontown, Mincor, Healius
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Genesis Minerals (GMD AU), Estia Health (EHE AU), Tyro Payments (TYR AU), Aag Energy Holdings (2686 HK), Toyo.
- Lowest spreads Healius (HLS AU), Liontown Resources (LTR AU), Golden Energy & Resources (GER SP), Mincor Resources NL (MCR AU), GK Goh Holdings (GKG SP), SHL Japan Ltd (4327 JP).
Rakuten Bank IPO: Valuation Insights
- Rakuten Bank (5838 JP) is an online bank in Japan. It is looking to raise up to $878m. Pricing is on 5 April and the listing is on 21 April.
- We previously discussed the IPO in Rakuten Bank IPO: The Investment Case and Rakuten Bank Vs SBI Sumishin Net Bank.
- In this note, we discuss valuation. Our analysis suggests that Rakuten Bank is fairly valued at the IPO price range of JPY1,630-1,960 per share. We would participate in the IPO.
Burlington Stores Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
- Burlington Stores is one of the major off-price retailer chains in the U.S.
- The company has strong fundamentals and has seen sizable, consecutive improvement in its sales trends in recent times.
- The management interprets this increase in traffic as a sign that the macro headwinds may be beginning to weaken.
Good Morning Japan |SPX-Sizzling 1Q Close; NUGGET: Labor Mobility Needed for Sustainable Wage Growth
- OVERSEAS. Strong close to SPX on Friday +1.4% on the Day; 3.5%WoW; +7.0%QTD; Light Macro calender this week with Job report Key; OPEC+ surprise cut; Tesla Misses 1Q
- JAPAN. NKY Fut +0.7% vs Cash; USDJPY 132.9; At the start of the new fiscal year, strong tailwinds ahead for Japan: BOJ normalization; Shareholder AGMs; Shareholder returns improvements; Bullish !
- NUGGET. Labor Mobility Needed for Sustainable Wage Growth in Japan. This is essential to extend the gains made this year, or we risk reverting to the status quo.
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