In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
- India – Positioning on Some Interesting* Names
- Ryoyo (8068) – Ryosan (8140): Recent and Former Activist Targets To Merge
- Taiwan Cement GDS – Momentum Hasn’t Been the Greatest, Although It Is Very Well Flagged
- Pan Ocean To Sell 5.8% Stake in Hanjin Kal To Secure Funds to Acquire HMM
- Newcrest/Newmont & Potential S&P/ASX Changes
- Golden Eagle Energy: Last Day To Buy Cum-Divvie
- Liontown Resources (LTR AU): Trading Halt Extended; Passive Selling Update
- J&T Global Express IPO: Peer Comparison and Valuation
- Ohayo Japan | More US Tech Restrictions on China; Nidec & The Future of Urban Air Mobility
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.
India – Positioning on Some Interesting* Names
- Polycab India, Macrotech Developers, Paytm, Tata Communications, Tata Motors DVR, Apl Apollo Tubes, Persistent Systems and Suzlon Energy have run up over the recent past and have heightened investor attention.
- The increase in market cap has put the stocks on active manager radars and could also result in the stocks being added to global indices in the near future.
- We take a look at the positioning on the stocks and recommend pair trades to reduce market risk while trying to capture alpha.
Ryoyo (8068) – Ryosan (8140): Recent and Former Activist Targets To Merge
- Today post-close, Ryoyo Electro (8068 JP) and larger equity affiliate (20.1%) Ryosan Co Ltd (8140 JP) announced their final Management Integration Plan (merger by holdco) after signalling a deal May23.
- Activist-Ish-Y Silchester sold their stake in Ryosan to Ryoyo in February at a 20% premium. Activist Murakami-san had a top10 Ryosan stake end-March, went substantial 27 June, now owns 10%.
- Both low-margin/ROE electronics traders have been subject to activist campaigns over the years. Both “survived”. Now they are banding together to be a bigger independent low-margin electronics trader.
Taiwan Cement GDS – Momentum Hasn’t Been the Greatest, Although It Is Very Well Flagged
- Taiwan Cement (1101 TT) is looking to raise US$395m in its global depository share (GDSs) issuance. Included in the offering is a concurrent US$420m convertible bond issuance.
- The deal is a relatively large one to process at 19.5 days of three months ADV. Recent momentum on the stock hasn’t been the greatest as well.
- That being said, the deal is very well flagged, and short interest remains elevated as well.
Pan Ocean To Sell 5.8% Stake in Hanjin Kal To Secure Funds to Acquire HMM
- On 17 October, Pan Ocean (028670 KS) announced that it will sell its 3.9 million shares (5.85% stake) in Hanjin KAL Corp (180640 KS) for about 163 billion won.
- The main purpose of this stake sale is to secure more funds for Pan Ocean to potentially acquire HMM Co., Ltd. (011200 KS).
- As evidenced by the recent increase in Baltic Dry Index, the potential expansion of the war in Israel could benefit major bulk shipping companies such as Pan Ocean.
Newcrest/Newmont & Potential S&P/ASX Changes
- Newcrest Mining (NCM AU) shares stop trading after the close on 26 October and Newmont Mining (NEM US) CDIs will start trading from the open on 27 October.
- Newmont Mining (NEM US) CDIs should replace Newcrest Mining (NCM AU) in the S&P/ASX indices from 27 October. But there could be index changes at the subsequent rebalances.
- Based on the case of Block (SQ2 AU), we could see Newmont Mining (NEM US) CDIs deleted from the ASX20 Index in December and from the ASX50 Index in March/June.
Golden Eagle Energy: Last Day To Buy Cum-Divvie
- Back on the 26 July, Geo Energy Resources (GERL SP) announced an intention to acquire a majority stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
- GEO shareholders have now approved the purchase of a 58.7% stake in Golden Eagle from Indonesian conglomerate Rajawali Group, triggering an MTO at IDR1,255/share, which is subject to Indonesia’s OJK.
- In addition, GEE announced a special/additional dividend, with a cum-entitlement today, the 17th of October.
Liontown Resources (LTR AU): Trading Halt Extended; Passive Selling Update
- Liontown Resources‘ Suspension from Quotation “pending the release of an announcement regarding the finalisation of funding arrangements associated with the Kathleen Valley Project” could last till the open 20 October.
- Short interest continued to increase prior to the trading halt and passive selling will be higher following Hancock increasing its stake to 19.9%.
- The immediate funding for Liontown Resources (LTR AU) could come from debt sources with an equity raise coming later this year or early next year.
J&T Global Express IPO: Peer Comparison and Valuation
- J&T Global Express (1519 HK) has announced the terms for its IPO. The company plans to issue 327m shares at HK$12 per share, which should raise proceeds of around US$501m.
- Though profitability of the company’s China business has improved, SEA margins continue to decline, hence our analysis suggests that J&T may not be able to generate profits in the near-term.
- Our SOTP valuation offers per share value of HK$9.48 per share which is at a 21% discount to the indicative IPO price suggesting J&T’s IPO is overvalued.
Ohayo Japan | More US Tech Restrictions on China; Nidec & The Future of Urban Air Mobility
- Overseas: SPX flat , Nasdaq -0.3%; Treasury yields resumed rise on stronger-than-expected retail sales
- Today: NKY Futs +0.3% v cash. JPY 249.8; Keisei Electric Rail attracts activist interest; SONY/Honda unveil new EV
- JapanX: Nidec Powering the Future of Urban Air Mobility; perhaps a new growth driver to think about
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