In today’s briefing:
- Fujitsu General (6755) – Fujitsu Wants Out, May Force the Issue
- KRX New Deal Index Rebalance Preview: Changes with Flow & Impact
- What Stories TSMC Investor Conference Telling Us About Customers, Supply Chains, and Competitors
- Bud APAC (1876 HK): Nursing a Hangover; Now Comes a Passive Overhang
- STTF Rebalance Preview: One Potential Change in March
- TSMC Results Make Buy Story Even More Clear; Strong 2024E Guidance & Reiterates Multi-Year Growth
- KOSPI Size Indices – The Outperformance Continues
- Spotting Position Patterns: TIGER Battery ETF January Review & KODEX ETF’s March Rebalancing
- IRC (1029 HK)’s MBO’s MGO: Still An Avoid
- Why Is APR IPO Getting Delayed?
Fujitsu General (6755) – Fujitsu Wants Out, May Force the Issue
- In 2019, it became apparent Fujitsu Ltd (6702 JP) wanted to sell down its stakes in non-core businesses (Shinko Electric, Fujitsu General, and FDK), and move on to better things.
- In early January 2023, a Bloomberg article suggested a sale process. A 20 Jan 2023 article suggested Fujitsu General’s auction was imminent. I wrote a piece. It was not bullish.
- The stock rose a bit, then fell 40+% through last week. Now another article suggests some urgency at Fujitsu. That changes things.
KRX New Deal Index Rebalance Preview: Changes with Flow & Impact
- The review period for the March rebalance ends on 31 January, the changes will be announced early March and implemented at the close of trading on 14 March.
- There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. There are two changes for the BBIG Index.
- There will be big flow on Ecopro BM (247540 KS) and Posco Future M (003670 KS) and big impact on Douzone Bizon (012510 KS) and DearU (376300 KS).
What Stories TSMC Investor Conference Telling Us About Customers, Supply Chains, and Competitors
- TSMC expects 2024 semi sector in recovery with 20-25% y/y growth itself, driven by AI customers. By controlling capex, more rooms to raise dividends but no growth for equipment vendors.
- Faster ramp on N3, likely N3E, N3P than competitor’s. TSMC expects 3nm from 6% of sales in 3Q23, 12.7% in 4Q23 to 15% in 2024, 3x y/y increase in 2024.
- TSMC reports a nearly 30% q/q drop on IOT and consumer IC demand and sees weakness on 12″ mature technology despite better demand 8″ specialty technology.
Bud APAC (1876 HK): Nursing a Hangover; Now Comes a Passive Overhang
- Budweiser Brewing APAC (1876 HK) has seen investors run for the hills over the last year. The halving of the stock price could mean deletion from passive portfolios.
- Other Hong Kong listed brewers, China Resources Beer Holdings (291 HK) and Tsingtao Brewery Co Ltd H (168 HK) have been beaten down too and have underperformed their Asian peers.
- The deletion from passive portfolios could provide a buying opportunity in Budweiser Brewing APAC (1876 HK) at the end of February (or earlier if the stock drops due to positioning).
STTF Rebalance Preview: One Potential Change in March
- Emperador (EMI SP) currently fails the liquidity test and could be removed from the SPDR Straits Times Index ETF (STTF SP) in March.
- Frasers Centrepoint Trust (FCT SP) is currently the highest ranked non-constituent and could be added to the ETF. FCT has a 6% higher market cap compared to Olam (OLG SP).
- We estimate trackers will need to buy 5 days of ADV in Frasers Centrepoint Trust (FCT SP) and sell over 37 days of ADV in Emperador (EMI SP).
TSMC Results Make Buy Story Even More Clear; Strong 2024E Guidance & Reiterates Multi-Year Growth
- TSMC reported 4Q23 results at the upper end of its guidance. More importantly, the company guided for low/mid 20% 2024E sales growth and reiterated an expected 15-20% multi-year CAGR.
- The company provided optimistic guidance for the overall semiconductor industry, forecasting 10% growth in 2024E. TSMC expects to grow much faster than the industry, however.
- TSMC is one of our Structural Longs; our NT$760 target implies 29% upside. The latest results make TSMC’s Buy case even more clear, in our view.
KOSPI Size Indices – The Outperformance Continues
- The review period for the March rebalance of the KOSPI Size Indices started 1 December and will end 29 February. The changes will be implemented at the close 14 March.
- We currently see 3 migrations from MidCap to LargeCap, 3 new adds to LargeCap, 6 migrations from LargeCap to MidCap, and 11 migrations from SmallCap to MidCap.
- Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.
Spotting Position Patterns: TIGER Battery ETF January Review & KODEX ETF’s March Rebalancing
- TIGER ETF (305540) rebalanced on January 11th, with Ecopro Materials correcting by 4%, contrasting a 20% surge from Jan 8-10. TIGER recorded net purchases aligning with a 2% inclusion weight.
- Preemptive positions by local hedge funds were observed from Jan 8-10, closing on the 11th. Despite a KOSPI decline and minimal sector movement, Ecopro Materials exhibited this unusual price pattern.
- Observing this pattern implies a potential recurrence during the March rebalancing of KODEX ETF. Notably, local hedge funds may initiate similar preemptive positions. We should consider this in position setup.
IRC (1029 HK)’s MBO’s MGO: Still An Avoid
- Back on the 1st November, Nikolai Levitskii, Russian iron-ore play IRC (1029 HK)‘s chairman and largest shareholder, acquired 4.72% of shares out, lifting his stake above 30%, triggering an MGO.
- The Offer is conditional on Levitskii holding more than 50% of shares out. His intention is to maintain IRC’s listing. At the first close, he held 35.77% (5.16% had tendered).
- The current spread is 9.2%. MIC, with 16.67% of shares out, has yet to tender. Nor do I expect them to. Plus IRC is on the OFAC sanction list. Avoid.
Why Is APR IPO Getting Delayed?
- APR announced it will delay its IPO. Now, APR’s book building has been postponed to 2 to 8 February. The IPO price range remains the same.
- The company has provided updated preliminary sales and operating profits for 2023 in the revised IPO prospectus. Revenue was a bit light but OP was better than expected in 4Q23.
- Our base case valuation of APR is 370,809 won per share which represents an 85% upside from the high end of the bankers’ valuation range (200,000 won).
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