In today’s briefing:
- KRX New Deal Index Rebalance Preview: A Change for Each Index
- NTT (9432 JP) – Would the Govt Sell All Its Shares? Why? How? How Long? Overhang?
- Toshiba – Tendering Now Recommended
- AMFI Stock Reclassification Preview (June 2023): Significant Outperformance
- Is Bain Permitted To Take Over Chindata?
- China E-Commerce: Is Still a Dead Cat
- Toshiba (6502 JP): Risk/Reward as Board Unconvincingly Recommends JIP’s Offer
- Toshiba’s Board Buckles Under – As Things Stand, Board Supports and Recommends JIP Offer
- Amman Mineral IPO: Offering Details & Index Inclusion
- Redox IPO – Pricing Is Tricky
KRX New Deal Index Rebalance Preview: A Change for Each Index
- The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
- There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. Large stock price moves mean no changes for the BBIG Index currently.
- Douzone Bizon (012510 KS) has flipped from a passive sell to a passive buy over the last month and the stock could move higher from here.
NTT (9432 JP) – Would the Govt Sell All Its Shares? Why? How? How Long? Overhang?
- The Kishida administration is looking for funding sources for its two big objectives – 1) raising the birthrate, 2) raising defense spending by 60% in 5yrs to 2% of GDP.
- The second is not new. It was in an “order” PM Kishida gave to FinMin Suzuki and MinDef Hamada last November. They need ¥48trln by end 2027.
- Yesterday, in an LDP meeting, the idea of changing the NTT Law so the government could sell more NTT shares was mooted. It’s worth thinking about.
Toshiba – Tendering Now Recommended
- Toshiba announced today that its board had shifted stance on JIP’s upcoming tender and would recommend shareholders tender.
- The special committee will review its opinion on the tender offer and based on that the company will offer another opinion when the tender commences.
- Despite peers rising 13-30% since April an offer price increase still looks unlikely.
AMFI Stock Reclassification Preview (June 2023): Significant Outperformance
- We see 8 stocks moving from MidCap to LargeCap, 9 stocks moving from LargeCap to MidCap, 9 stocks from SmallCap to MidCap, and 10 stocks from MidCap to SmallCap.
- Following a strong listing, Mankind Pharma (6596876Z IN) should be added to the Large Cap segment of the market in July.
- The expected migrations from SmallCap to MidCap have outperformed the other migrations by a huge margin over the last couple of months and there could be profit taking ahead.
Is Bain Permitted To Take Over Chindata?
- Chinese data centre outfit Chindata (CD US) has no end of alleged suitors, rumoured to include SOE-backed China Merchants, GDS (GDS US), PE outfit PAG, and EQT (EQT SS)-backed EdgeConneX.
- Now Bain Capital, Chindata’s largest shareholder with 42.17% (and 87.39% of the voting power) has made a non-binding proposal of $8/share per ADS, a 33% premium to last close.
- Chindata’s board has made no decision on the proposal. It’s hardly a knockout Offer. But the key question is whether Bain will get regular approval to take Chindata private.
China E-Commerce: Is Still a Dead Cat
- Positive surprises in profitability during Q1 2023 failed to reverse the long-term decline of Chinese e-commerce, possibly due to market recognition of the temporary impact of cost-cutting and monetization efforts.
- In our opinion, robust growth in GMV is fundamentally essential to reverse the long-term downward trend of the Chinese e-commerce sector.
- Chinese e-commerce sector no longer discloses GMV, but Express delivery volume indicates a 20% decline in parcel volumes compared to 2021, potentially reflecting a decrease in GMV.
Toshiba (6502 JP): Risk/Reward as Board Unconvincingly Recommends JIP’s Offer
- Toshiba Corp (6502 JP) Board now recommends shareholders accept Japan Industrial Partners (JIP)’s pre-conditional tender offer of JPY4,620 per share. The Board also effectively rules out a bump.
- The Board unconvincingly recommends the offer in part on the premise that the IFA’s DCF valuation is unrealistic due to punchy forecasts and positive feedback from stakeholders.
- The Board fails to consider that the peers have materially re-rated, the offer’s price ratio remains unattractive and the declining premium of the offer’s implied multiple vs peers’ multiples.
Toshiba’s Board Buckles Under – As Things Stand, Board Supports and Recommends JIP Offer
- In March, when the JIP Offer for Toshiba Corp (6502 JP) was announced, the Toshiba Board supported the Offer but declined, at the time, to recommend it to shareholders.
- “[The price] has clearly not reached the level at which it is possible to recommend to general shareholders that they tender their shares at this time.” That was then.
- 10 weeks later and the Board has a Revised Opinion. It has recommended the Offer for reasons which smack of resignation rather than appropriate deliberation. Investors beware.
Amman Mineral IPO: Offering Details & Index Inclusion
- Amman Mineral Internasional (1416286D IJ) is offering 7.288bn shares in its IPO at a price range of IDR 1650-1775/share to raise between US$808-870m and valuing the company between US$8.08-8.7bn.
- The stock will not get fast entry to global indices or local Indonesia indices (IDX30 Index/ LQ45 Index/ IDX80 Index).
- With listing planned for 5 July, the earliest index inclusion will be in December and there are no near-term passive flows expected for the stock.
Redox IPO – Pricing Is Tricky
- Redox (RDX AU), a chemical and ingredients distributor, is looking to raise around US$270m in its Australia IPO.
- In 2022 it was ranked as the largest chemicals and ingredients distributor in Australia, as well as the 13th largest in the Asia Pacific region and the 35th largest worldwide.
- In this note, we undertake a quick peer comaprison and talk about valuations.
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