In today’s briefing:
- Canon ADR Cancellation – There May Be A Trade To Do
- Absolutely GINORMOUS Citizen Watch (7762 JP) Buyback
- Toshiba – As Bad As It Gets?
- KOSPI Size Indices – Potential Changes in March
- Link REIT US$2.4bn Rights Issue – Mistimed but Yield at the Rights Price Might Be the Saving Grace
- K-Pop Battle: HYBE’s Tender Offer For S.M. Entertainment:
- Long Short Idea: Ecopro Co Ltd & Iljin Materials on March 9 with K-New Deal Rebalancing
- REPT BATTERO Energy Pre-IPO – The Positives – Has Scaled Rapidly
- Both C&T & SDS Are Still on the Table for Block Deals by Lee Seo-Hyun, Here’s Why
- Idemitsu (5019) – A Big Miss and A Big Buyback
Canon ADR Cancellation – There May Be A Trade To Do
- Last week (on 10 February), Canon Inc (7751 JP) announced it intended to delist its ADRs from the NYSE.
- Canon is the third Japanese company to do so in two months, after Eisai Co Ltd (4523 JP) announced in December and Olympus Corp (7733 JP) in January.
- No related investment opportunity but there may be a trade to do.
Absolutely GINORMOUS Citizen Watch (7762 JP) Buyback
- Today, Citizen Watch (7762 JP) reported Q3 earnings, and a BIG buyback.
- It is a VERY BIG BUYBACK at up to 75mm shares (25.61% of shares out), with an allocation of up to ¥40bn (which is ~22.1% at last price).
- The buyback is to be executed over the next year. Buyback structure (undisclosed) matters and shareholder structure matters too. There is a big short. This could get really interesting.
Toshiba – As Bad As It Gets?
- Toshiba results looked rather poor at the headline on account of additional one-off costs leading to a guidance downgrade to ¥95bn in OP.
- Despite that, we see some small positive signs across the various industrial segments.
- On balance, however, the downgrade and tight lips on the JIP bid leave little to be positive about in the near term.
KOSPI Size Indices – Potential Changes in March
- The review period for the March rebalance of the KOSPI Size Indices ends 28 February. The results will be announced early March and implemented at the close on 9 March.
- We see 5 migrations between MidCap and LargeCap, 8 migrations from SmallCap to MidCap, 3 new adds to MidCap, and 11 migrations from MidCap to SmallCap.
- Stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.
Link REIT US$2.4bn Rights Issue – Mistimed but Yield at the Rights Price Might Be the Saving Grace
- Link REIT (823 HK) (LREIT) aims to undertake a 1 for 5 rights issue at a subscription price of HK$44.20/unit, to raise around US$2.4bn.
- After announcing a S$2.2bn acquisition in late Dec 2022, the company explicitly mentioned that it didn’t need to raise any new capital. Thus, the rights issue marks an abrupt turnaround.
- In this note, we talk about the right issue, its previous acquisition and the overall implications.
K-Pop Battle: HYBE’s Tender Offer For S.M. Entertainment:
- In a move to counter Lee Soo-man’s influence, S.M.Entertainment Co (041510 KS) intends to issue new shares (9.05% on a fully diluted basis) to Kakao Corp (035720 KS).
- Lee, with 18.4% in SM, responded by selling 14.8% to SM’s rival HYBE (352820 KS). HYBE concurrently announced a tender offer for an additional 25%, at ₩120,000/share, a 22% premium.
- Kakao and SM are less than impressed. But these developments are a power grab for the pioneer of K-pop.
Long Short Idea: Ecopro Co Ltd & Iljin Materials on March 9 with K-New Deal Rebalancing
- One constituent change is expected in the BATTERY index rebalancing as Ecopro Co Ltd surpassed Iljin Materials based on the average daily market cap during the review period.
- Ecopro Co Ltd is a pure holding company, so it may not be subject to inclusion. However, KRX recognizes related sales from unlisted subsidiaries as sales from the holding company.
- The actual passive impact of the rebalancing day will likely be 0.15x or more for both. This level can enable a long-short setup for these from a day trading perspective.
REPT BATTERO Energy Pre-IPO – The Positives – Has Scaled Rapidly
- REPT BATTERO Energy (REPT HK) is looking to raise US$1bn in its upcoming Hong Kong IPO.
- REPT BATTERO Energy (REPT) is a lithium-ion battery manufacturer in China, focusing on R&D, production, and sales of EV/ESS lithium-ion battery products such as battery cells, modules and packs.
- In this note, we will talk about the positive aspects of the deal.
Both C&T & SDS Are Still on the Table for Block Deals by Lee Seo-Hyun, Here’s Why
- The family devoted all their efforts to maintaining 33.4% of voting shares in Samsung C&T, a level that can block a special resolution at the general shareholders’ meeting.
- The most likely scenario being speculated by the market at this point is to touch both Samsung C&T and Samsung SDS. However, the C&T stake sale is to be minimized.
- The possibility currently circulating in the local market is that she has 0.40% (Hana Sec) and 0.62% (Hana Bank), which currently have the highest interest burden, on the table.
Idemitsu (5019) – A Big Miss and A Big Buyback
- On 14 February 2023, Idemitsu Kosan (5019 JP) reported Q3 results. They were less impressive than one would have hoped.
- Lower USDJPY and lower Dubai crude prices mean a JPY 90bn hit to inventory marks, but the rest of the petro business made almost no money in the quarter.
- However, the company announced a large buyback. THAT is worth looking at.
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