In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
- Shinko Electric (6967) Update – MitCorp In The Mix?
- APAC Insurers Series (#3): Initial Theses At Different Stages of Being Played Out
- Another Hidden Passive Flow Trading Opportunity Is Captured in Korea: SOL Semicon ETF December Rebal
- Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake
- Liontown Resources (LTR AU): State of Play
- Ohayo Japan | Rate Fears; Phase-Out of F-Gases for Heat Pumps Negative for Daikin
- A Merger Share Swap Between Kolmar Korea and Yonwoo
- Vinda (3331 HK): Tanoto Sees The Wood
- WH Group (288 HK): Potential US Listing Of Smithfield Foods Could Be A Catalyst
Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
- The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
- Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
- Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.
Shinko Electric (6967) Update – MitCorp In The Mix?
- Yesterday about 5 minutes before the close, Shinko Electric Industries (6967 JP) went into kehai, rising 8.6%, then falling back to end + 3% on the day.
- This morning, the stock opened down 2%, rose 4%, fell 4%, then rose 4%. All in the first 45 minutes. Then it fell back 4% and ended down 2% today.
- The proximate cause of all of this was a Reuters article out 5mins before the close yesterday suggesting Mitsubishi Corp (8058 JP) is considering bidding for Shinko Electric.
APAC Insurers Series (#3): Initial Theses At Different Stages of Being Played Out
- PICC P&C’s thesis has materialized and played out well this year, with the stock being HK’s best-performing Chinese insurer.
- Samsung Life’s share price recovered slightly since our last update as LT Korean government bond yields further increased.
- Prudential’s thesis is slowly being played out, with its P/BV discount to AIA having narrowed; but still a long way to go.
Another Hidden Passive Flow Trading Opportunity Is Captured in Korea: SOL Semicon ETF December Rebal
- For the impending December rebalancing, the effective date is set for December 18th, while the ETF rebalancing trading will take place on December 15th.
- Jusung Engineering and Eugene Technology are likely to be added, while Lake Materials and SFA Semicon are expected to exit the index.
- Aside from constituent changes, Hansol Chemical is anticipated to significantly benefit from the passive impact as the primary beneficiary of the ceiling reversion.
Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake
- Reuters reported that Mitsubishi Corp (8058 JP) is considering a joint bid for Fujitsu Ltd (6702 JP)’s 50% stake in Shinko Electric Industries (6967 JP).
- Fujitsu first flagged a potential stake sale in its 1HFY22 results last October. Previously rumoured suitors include Apollo Global Management, Bain Capital, Dai Nippon Printing, JIC and KKR.
- Shinko’s shares are up 73% YTD, which is not excessive compared to Ibiden Co Ltd (4062 JP) (up 63.2% YTD). The valuation is undemanding, which facilitates a potential offer.
Liontown Resources (LTR AU): State of Play
- Liontown Resources (LTR AU) resumes trading today after announcing a raise of up to A$1.18bn to fully fund the Kathleen Valley Lithium Project to first production and beyond.
- The equity component is up to A$421m and the placement price of A$1.8/share is a 35.5% discount to the last close.
- The placement price is higher than the stock price prior to the Albemarle Corp (ALB US) offer and during a period when its peers have performed poorly.
Ohayo Japan | Rate Fears; Phase-Out of F-Gases for Heat Pumps Negative for Daikin
- Overseas: SPX -0.8% , Nasdaq -0.8%; Fed Chair still concerned about inflation; jobs data shows ongoing econ strength; Tesla -9%
- Today: NKY Futs -0.5% v cash. JPY 149.8/$; Calbee to test biogas production; Disco expects weakness in demand to continue; Softbank to build data center in Hokkaido
- JapanX: The accelerated phase-out of F-gases, though aiming to make heat pumps cleaner, may hinder the shift from fossil fuels. Daikin and the industry face challenges and need swift adaptation.
A Merger Share Swap Between Kolmar Korea and Yonwoo
- On 19 October, Kolmar Korea announced that it will conduct a merger share swap with Yonwoo early next year to make it into a 100% wholly owned subsidiary.
- We believe the merger share swap agreement between Kolmar Korea and Yonwoo is likely to have positive impact on both Kolmar Korea and Yonwoo.
- After this share swap is completed, Yonwoo will be delisted. This merger is aimed at improving the inefficient governance structure caused by duplicate listings and improve management efficiency.
Vinda (3331 HK): Tanoto Sees The Wood
- On the 27 April, Vinda (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership. See Essity Mulls Holding In Vinda (3331 HK).
- That shook a variety of suitors out of the woodwork (so to speak) including (reportedly) Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, and DCP Capital.
- The latest (alleged) interested party is the Tanoto family, currently holding a 7.03% stake, having first cleared 5% on the 26 September.
WH Group (288 HK): Potential US Listing Of Smithfield Foods Could Be A Catalyst
- According to public news yesterday, WH Group (288 HK) plans to list its US pork business Smithfield Foods, the largest US pork producer, back in the US again.
- WH Group currently trades at 5x 2024E PE, assuming earnings return to the 2022 level in 2024E. Since 2016, the company has had an average PE of 11x.
- The stock is a buy with a fairly strong catalyst in the potential US listing of the Smithfield Foods business, while downside is limited.
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