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)
- Tokio Marine Cross-Shareholding – At Least US$18bn of Cross-Shareholding to Sell
- TCS US$1.1bn Placement – Relatively Small but Isn’t Well Flagged, Could Have Implications for Others
- Quiddity Leaderboard S&P 500 Jun 24 Rebal: Many Intra-Review Changes Possible Due to M&A, Spin-Offs
- Swire Pac (19 HK): Flying High
- Shinko Electric (6967 JP): Tender State of Play
- Boral (BLD AU) Rejects Seven’s Offer
- Japan – Rising Rates: Focus On Banks With High Cash And Low Margins
- Korean Government Announces Tax Incentives for Shares Cancellation and Dividends
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.
Tokio Marine Cross-Shareholding – At Least US$18bn of Cross-Shareholding to Sell
- The Japanese Financial Services Agency has asked the general insurers to reduce/eliminate their cross-shareholdings.
- Tokio Marine Holdings (8766 JP) had a stake over US$100m in at least 33 listed Japanese stocks, amounting to a total of US$16.5bn.
- In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.
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.
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.
Swire Pac (19 HK): Flying High
- Swire Pacific (19 HK)‘s discount to NAV is around a one-year high; and its implied stub (net of Swire Properties (1972 HK) has just rolled over from a multi-year high.
- 45%-Held Cathay Pacific Airways (293 HK) recently reported its highest annual profit in more than a decade.
- Reportedly (Bloomberg) Air China Ltd (A) (601111 CH) is mulling a stake increase in the Hong Kong carrier. This is inevitable. It’s just a question of timing.
Shinko Electric (6967 JP): Tender State of Play
- Shinko Electric Industries (6967 JP) pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The gross spread has narrowed from a high of 10.4% to the current 4.2%.
- The narrowing spread can be attributed to the JSR Corp (4185 JP) tender launch, which suggests likely China SAMR approval, and Ibiden Co Ltd (4062 JP) giving up recent gains.
- Like JSR, we expect China SAMR to allow JIC to withdraw its Shinko merger control filing. There is a good chance the tender launches before the guided late August start.
Boral (BLD AU) Rejects Seven’s Offer
- Back on the 19 Feb, Seven Group Holdings (SVW AU) made a cash/scrip Offer for Boral Ltd (BLD AU) shares not owned, with certain tendering thresholds triggering more cash.
- Boral has now recommended shareholders to reject the Offer after the independent expert (Grant Samuel) concluded the Offer is neither fair nor reasonable, supporting the view of Boral’s board.
- Grant Samuel backed out a price range of $6.50-$7.13/share, versus SGH’s Offer of $5.96-$6.19/share; and up to $6.39/share including the conditional payments. SGH’s terms were best & final.
Japan – Rising Rates: Focus On Banks With High Cash And Low Margins
- We look at which Japan banks have the most cash which can see a major boost to returns.
- Banks with lower margins can see a higher net interest income pick up from rising rates.
- Loan growth in Japan has been relatively strong, supportive of rising rates from BOJ.
Korean Government Announces Tax Incentives for Shares Cancellation and Dividends
- On 19 March, Choi Sang-Mok announced that the Korean government plans to provide corporate tax reduction benefits to companies that cancel their treasury shares.
- The separate taxation of dividend income is also expected to be promoted. All of these are law amendment issues and must go through the legislative process of the National Assembly.
- At this time, the Korean government did not provide the entire details about the exact amount of corporate tax reductions from share cancellation and separate taxation of dividend income.
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