In today’s briefing:
- Japan – Increase in Shorts on Some Interesting*** Stocks
- Hanwha Ocean: Potential Capital Raise of Nearly 2 Trillion Won
- Benesse (9783) MBO – ¥2600/Share Is Up 40+% But It Is Still the Wrong Price
- STAR50 Index Rebalance Preview: Big Impact Expected on the Changes
- WuXi XDC (2268 HK): Index Inclusion Possibility & Timelines
- Japan Best Rescue (2453) MBO at ¥1,000; High Premium, Low Multiple, No Money For Synergies or Growth
- Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting
- Ajinomoto (2802) Secondary Offering (Cross-Holder Unwind) Matched Against Large Buyback
- CSI300 Index Rebalance Preview: 13 Potential Changes in December
- Vinda International (3331 HK): Essity’s Stake Attracts More Potential Bidders
Japan – Increase in Shorts on Some Interesting*** Stocks
- Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent Inc, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp have underperformed the Nikkei 225 recently.
- The underperformance could lead to selling from global passive trackers and liquidity events on some of the stocks at month-end.
- There has been an increase in short interest on most stocks over the last week as positioning for the liquidity event ramps up.
Hanwha Ocean: Potential Capital Raise of Nearly 2 Trillion Won
- Hanwha Ocean’s share price declined by 5% today, mainly due to local media reports about a potential capital raise of nearly 2 trillion won to 2.5 trillion won.
- Although the company has not officially announced a rights offering, we believe the probability of Hanwha Ocean announcing a major rights offering is relatively high in the next 3-6 months.
- We estimate this probability range is closer to about 60-70%. The company needs additional capital to improve its highly leveraged balance sheet and to make major investments.
Benesse (9783) MBO – ¥2600/Share Is Up 40+% But It Is Still the Wrong Price
- Just before the close Friday, the Nikkei reported Benesse Holdings (9783 JP) would be the subject of an MBO in order to restructure the flagging private shinken-zemi business. And grow.
- It turns out it is EQT and the Fukutake family at ¥2600/share – a 2-year high. Wow. It is also a ridiculously cheap price given the assets and money flows.
- I expect this may get some people upset as the valuation methodology is dodgy and the artful (hehehe) Balance Sheet has some easter eggs, and spotted pumpkins… or something.
STAR50 Index Rebalance Preview: Big Impact Expected on the Changes
- With the review period complete, we expect one change for the STAR50 INDEX in December if the index committee continues to use a 6-month minimum listing history.
- With net inflows to mainland China ETFs over the last few months, passive trackers will need to trade between 9-25 days of ADV on the potential add and delete.
- SMIC (688981 CH) will be capped and there will be reverse funding flows on the index constituents. One-way turnover is estimated at 1.8% resulting in a one-way trade of CNY2,580m.
WuXi XDC (2268 HK): Index Inclusion Possibility & Timelines
- WuXi XDC Cayman (1877628D HK) is looking to raise up to HK$4.07bn (US$521m) in its IPO by selling 197.6m shares at HK$20.6/share, valuing the company at HK$24.67bn (US$3.16bn).
- WuXi XDC Cayman (1877628D HK) will not get Fast Entry to any indices but should be added to the HSCI and to Southbound Stock Connect in March.
- Inclusion in other indices will take longer with the highest probability of index inclusion starting in September 2024.
Japan Best Rescue (2453) MBO at ¥1,000; High Premium, Low Multiple, No Money For Synergies or Growth
- This MBO by MBK is a strong premium because of a low recent price, but it pays a low P/FCF multiple for growth, and no synergies counted.
- Yet another MBO where insiders and friends take advantage of structural inferiority of minority shareholders. Something Should Be Done.
- What do Minority Shareholders in Japan Say When They Meet Death? “OK, Today it is then.” (with apologies to Game Of Thrones).
Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting
- Last week, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May, and the Circular on 26 June.
- The company applied, got CSRC approval on 5 Nov, announced the issuance on 6 Nov, and shares went ex- on 10 November. It’s probably unneeded, but it’s there.
- The stock is cheap. The company will boost its payout ratio. And it isn’t that “heavy” a deal. The Rights Trading Dynamics may be interesting.
Ajinomoto (2802) Secondary Offering (Cross-Holder Unwind) Matched Against Large Buyback
- Today after the close, Ajinomoto Co (2802 JP) announced a large secondary offering of 14.3mm shares (2.75% of shs out). At last price that is ¥82bn.
- At the same time, they announced a 10mm share (1.92%) ¥40bn buyback to be conducted from the delivery date of the Offering through 31 March 2024.
- Over time, there would be some index upweight as float increases. On a net basis, this is a small deal on a low vol stock with a semiconductor story lurking.
CSI300 Index Rebalance Preview: 13 Potential Changes in December
- With the review period for the December rebalance of the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) complete, there could be 13 changes for the index.
- We estimate one-way turnover of 1.94% at the December rebalance leading to a one-way trade of CNY 6.98bn. There are a lot of stocks with over 1x ADV to trade.
- Over the last 6 months, the potential adds and potential deletes have tracked each other and underperformed the index. Positioning has led to outperformance in the last week.
Vinda International (3331 HK): Essity’s Stake Attracts More Potential Bidders
- Bloomberg reported Asia Pulp & Paper is the latest party to have expressed interest in acquiring Essity (ESSITYB SS)’s controlling Vinda International (3331 HK) stake at more than HK$20 per share.
- Vinda has three substantial shareholders. We think the most likely structure is a bidder acquiring Essity’s stake, which would trigger a mandatory general offer.
- Vinda’s recent update points to improving growth and margins. Peers and historical multiples imply a fair price range of HK$21-26 per share, a 7-32% premium to the last close.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Analytics and News
- ✓ Events & Webinars
