In today’s briefing:
- Fast Retailing (9983) – Now At Double Downweight Levels
- JSR (4185 JP) – Launch of The Official Tender Offer (And the Double Arb)
- Investigating the Size and Timing of Korea’s Local Dividend Arbitrage Traders’ Position Liquidation
- TCS US$1.1bn Placement – Relatively Small but Isn’t Well Flagged, Could Have Implications for Others
- ECM Weekly (18th Mar 2024) – ITC, Interglobe (Indigo), MS&AD, GlobalWafer, Belle, Auntea, Trial
- Quiddity Leaderboard S&P 500 Jun 24 Rebal: Many Intra-Review Changes Possible Due to M&A, Spin-Offs
- JSR Corporation (4185 JP): JIC Tender Starts and Should Succeed Despite Shin-Etsu’s Re-Rating
- Orecorp Should Now Back Perseus’ Offer
- LG Corp: Updated NAV Analysis Amid Ongoing Corporate Value Up Program in Korea
- Exploring Trading Setups Utilizing NPS’s ESG Fund Flows After July
Fast Retailing (9983) – Now At Double Downweight Levels
- Fast Retailing (9983 JP) is the largest weight in the Nikkei 225. On Friday, it closed at 11.36% of the Nikkei 225, putting it well above the 10% cap level.
- If the stock is above 10% on a pro-forma basis on the base date of 31 July 2024, it will get a capping coefficient. 8.4mm shares (US$2.5bn) to sell.
- At Friday’s close, we were borderline above a double-downweight trigger. At Monday’s open, just below. 30mins later? Back well above. Lots of interesting issues and nuances here for a short.
JSR (4185 JP) – Launch of The Official Tender Offer (And the Double Arb)
- The Tender Offer is finally here. JIC announced the official launch after the close today.
- JIC appears to be taking on the SUNY RF risk as-is. The Tender Offer details vs the original expectations in the late June 2023 document are unchanged.
- Once started, unless a US court approves an injunction causing regulatory delay, this is done. But there are path events. And of course there is a double arb here.
Investigating the Size and Timing of Korea’s Local Dividend Arbitrage Traders’ Position Liquidation
- Estimating FINANCIAL INVESTMENT’s dividend arbitrage positions’ exact size and liquidation plans is challenging. Yet, past trading patterns suggest a substantial portion may be liquidated soon, akin to January’s volume (≥₩2T).
- Many local market participants expect a scenario unfolding post-March, aligning with KOSPI companies rescheduling ex-dividend dates. Expect substantial position liquidation by April’s end, likely impacting index negatively, akin to January.
- Position setups should adapt to short-term index corrections, leveraging earnings season for earnings-based spreads using index short hedging.
TCS US$1.1bn Placement – Relatively Small but Isn’t Well Flagged, Could Have Implications for Others
- Tata Sons, holding company of Tata Group, is looking to raise around US$1.1bn via selling a 0.65% stake in Tata Consultancy Svcs (TCS IN).
- The deal doesn’t appear to be well-flagged although it could be part of Tata Sons’ recent moves to avoid an RBI mandated listing next year.
- In this note, we talk about the deal dynamics and run the deal through our ECM framework.
ECM Weekly (18th Mar 2024) – ITC, Interglobe (Indigo), MS&AD, GlobalWafer, Belle, Auntea, Trial
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, Hong Kong appears to be heading towards its first US$100m+ IPO for the year.
- For placements, after a flurry of placements in the prior week, past week was relatively quiet with only the US$2bn ITC Ltd (ITC IN) block.
Quiddity Leaderboard S&P 500 Jun 24 Rebal: Many Intra-Review Changes Possible Due to M&A, Spin-Offs
- The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
- The index is reviewed quarterly. The next review will be in June 2024 and the evaluation date for the rankings for the constituent selection process is 6th June 2024.
- In this insight, we take a look at the Potential ADDs and Potential DELs for the June 2024 index rebal event and the intra-review ADDs/DELETEs.
JSR Corporation (4185 JP): JIC Tender Starts and Should Succeed Despite Shin-Etsu’s Re-Rating
- JSR Corp (4185 JP) notes that the pre-condition for JIC’s tender has been satisfied. The offer price remains unchanged at JPY4,350 per share.
- The offer remains attractive despite the material re-rating of peers. The tender should succeed when combined with shareholder fatigue and a lack of vocal opposition.
- The tender requires a 66.7% minority acceptance rate. The gross and annualised spread for a 23 April payment is 0.6% and 7.1%, respectively.
Orecorp Should Now Back Perseus’ Offer
- Back in August, Silvercorp (SVM CN) bid A$0.15/share and 0.967 scrip for Orecorp (ORR AU); and secured board support after bumping the cash portion to A$0.19/share via an Off-market Offer.
- Perseus Mining (PRU AU) countered on the 22 January with a A$0.55/share Offer, which was rejected by Orecorp, ostensibly over concerns Perseus had not secured Tanzanian Fair Competition Commission approval.
- That regulatory approval has now been satisfied. The Offers for both Perseus and Silvercorp are conditional on 50.1% acceptance hurdles. I think Perseus’ all-cash Offer is superior.
LG Corp: Updated NAV Analysis Amid Ongoing Corporate Value Up Program in Korea
- Our NAV analysis of LG Corp suggests an implied market cap of 16.3 trillion won or 103,781 won per share which is 16% higher than current share price.
- For holdco discount, we used a 50% holdco discount. If investors perceive improvement in value (such as through corporate governance improvements), the holdco discount on LG Corp would decline.
- LG Corp’s shares are up 5.9% in the past six months, outperforming all the major LG Group related companies including LG Chem, LG H&H, LG Electronics, and LG Energy Solution.
Exploring Trading Setups Utilizing NPS’s ESG Fund Flows After July
- From July, Korea’s listed firms will disclose value enhancement plans. Korea’s NPS may exclude non-compliant firms, pending official response, though internal review suggests likely implementation.
- It’s crucial to know portfolio stocks for proactive positioning. A setup targeting potential exclusion from NPS’s ESG funds due to post-July compliance must be designed.
- Managers often use KRX ESG Leaders 150, aligning portfolios with it. Thus, it’s crucial to use this list for post-July compliance monitoring and to adapt setups for NPS’s flow impacts.
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