In today’s briefing:
- S&P Global Water Index: Market Consultation Driven Potential Changes
- FTSE Japan: Potential Inclusions in March Following TSE Restructure
- Lifestyle (1212 HK): Thomas Yau’s Scheme
- Inpex (1605 JP) – Earnings, Forecasts and a BIGLY Buyback
- EVOC (2308 HK)’s Merger By Absorption
- Magic Empire Global – Not Clear Who Is Driving and Who Is Being Taken For a Ride
- Nexon Q2 In-Line, New Buyback Plan Too Small To Matter Near-Term
- MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals
- SOCAR IPO Book Building Results
- Appraisal Rights (& Possibly Preemptive Too) To Be Granted in an ECO in Korea
S&P Global Water Index: Market Consultation Driven Potential Changes
- S&P DJI commenced a market consultation for the S&P Global Water Index on 29 July and that could lead to quite a few changes to the index in October.
- We currently see 14 deletions and 10 inclusions for the index in October. Most of the changes will have a high impact from passive fund trading.
- There could be more changes in April 2023 once stocks listed in Emerging Markets are included in the index.
FTSE Japan: Potential Inclusions in March Following TSE Restructure
- Stocks that migrated from the JASDAQ and Mothers Boards to the Standard Market in April will be eligible for inclusion in the FTSE All-World/All-Cap indices at the March 2023 SAIR.
- Currently, we see 4 potential inclusions to the All-World Index and 12 potential inclusions to the All-Cap Index. There are some close adds on market cap and liquidity.
- The potential adds underperformed the TOPIX Index from April to June, but there has been a significant outperformance since then.
Lifestyle (1212 HK): Thomas Yau’s Scheme
- Thomas Yau, Lifestyle International Holdings (1212 HK)‘s controlling shareholder, is offering to take the company private by way of a Scheme at HK$5/share, a 62.3% premium to last close.
- Independent shareholders comprise 23.51% of shares out, therefore the blocking stake at the forthcoming Court Meeting is 2.351% of shares out.
- The Offer price is final. No dividends will be paid during the Offer period.
Inpex (1605 JP) – Earnings, Forecasts and a BIGLY Buyback
- Today Inpex Corp (1605 JP) announced Q2 earnings (results, presentation), a revised full-year forecast due to higher crude and lower yen, an 11%-above-guidance dividend, and a big buyback.
- The buyback is for up to 120mm shares spending up to ¥120bn, to run through year-end. Practically speaking, it is limited to 80mm shares or so at current price.
- This should be a non-negligible portion of Real World Float, and I expect the buyback to have impact over the next five months.
EVOC (2308 HK)’s Merger By Absorption
- After shares were suspended on the 1 August, electronics play and property developer EVOC Intelligent Technology Company Limited H (2308 HK) has announced a privatisation at HK$1.75 per H-share.
- This Offer is by way of a Merger by Absorption, which incorporates a Scheme-like vote. There is no tendering condition.
- The premium to last close is just 15.13%; however, it is a 42.28% premium to the five-day closing average. This is EVOC’s third privatisation attempt in the past five years.
Magic Empire Global – Not Clear Who Is Driving and Who Is Being Taken For a Ride
- Just days after AMTD Digital (HKD US) was ramped 30,000% to a ridiculous valuation only weeks after its IPO, Magic Empire Global (MEGL US) IPOed and rose 2000+ on Day1.
- MEGL is a corporate advisory, helping smallcaps IPO then helping them comply with listing rules. 2 principals, 2 professionals, 5 staff with no moat had US$2.16mm in revenue in 2021.
- And it is worth US$2.3bn – 1000 x revenues and 10,000x earnings? This is not OK. And it smacks of something unsavoury.
Nexon Q2 In-Line, New Buyback Plan Too Small To Matter Near-Term
- Nexon (3659 JP) reported Q2 earnings and Q3 forecasts today. Everything is generally “in-line” to tilting slightly light. But USD/yen volatility matters a lot.
- The company announced a small dividend hike, from largely meaningless to ever-so-slightly less meaningless. And a plan to buy back ¥100bn of shares over 3 years.
- The inheritance tax issue remains a big one, but overhang appears delayed and buyback accretion is small, and also appears delated. And there’s an index sell at end-September.
MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals
- We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (12 August) that are being highlighted by the locals.
- The potential inclusion candidates in the MSCI Korea Index emphasized by the locals in August 2022 include LG Energy Solution and Kakao Pay; potential exclusion candidate include SK Telecom.
- The overall assessment of the MSCI Korea Index rebalance in August is rather mixed. There are two potential inclusions (LG Energy Solution and Kakao Pay) and one exclusion (SK Telecom).
SOCAR IPO Book Building Results
- SOCAR announced its IPO book building results. The IPO price has been determined at 28,000 won (18% lower than the low end of the IPO range).
- Our base case target price for SOCAR is 27,176 won, which is 3% lower than the IPO price of 28,000 won.
- We remain Negative on this IPO due to lack of upside. There were 348 companies involved in the IPO survey with the final demand ratio of 56 to 1.
Appraisal Rights (& Possibly Preemptive Too) To Be Granted in an ECO in Korea
- The Korea FSC disclosed the policy agenda, which was presented to President Yoon. The implementation will likely be in the fourth quarter.
- The FSC stated that it would grant appraisal rights to the shareholders of a parent company in an ECO (equity carve-out).
- This rule will likely be applied to DB Hitek and Foosung. Hence, our trading setup targeting these ECO events will require more sophisticated modifications.
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