In today’s briefing:
- Big Honda (7267) Offering – Flow Timing Matters
- Kokusai Electric Placement Updates – Misbehaving
- Quiddity Leaderboard STAR 50 Sep 24: Final Ranks; Some Question Marks over Ninebot Re-Inclusion
- Capitol Health (CAJ AU): Binding Merger with Integral Diagnostics (IDX AU)
- Kyoto Financial Group (5844 JP) – Limited Shareholdings Unwind, for Now
- S&P 500 September Forecasts: Saved by the Dell?
- Capitol Health (CAJ AU)/Integral Diagnostics (IDX AU): An Improved Image – Now Firmed
- Thai Bev to Get F&N Stake from Promoters At Book Value than Fair Market Value
- Kokusai Electric (6525 JP): The Current Playbook
- Launch of Korea Value Up Index in September
Big Honda (7267) Offering – Flow Timing Matters
- The ¥500bn Offering of Honda shares is now priced (¥1,664.5/share) making it ¥497.46bn. Bookbuilding for retail – 80% of the book – is now. The price today closed at ¥1,665/share.
- The Offering has follow-on “non-discretionary” demand which is non-negligible. It is worth understanding the amounts and timing.
- The lockups and non-discretionary demand, along with Honda’s relative cheapness as a large cap OEM and likely upcoming offerings on competitors means it has support.
Kokusai Electric Placement Updates – Misbehaving
- KKR and KSP Kokusai Investments are looking to raise approximately US$1.7bn through an extended secondary follow-on offering, via selling approximately 22.3% of Kokusai Electric (6525 JP).
- We have looked at the lockup expiry and deal dynamics in our earlier notes.
- In this note, we talk about share price performance since then.
Quiddity Leaderboard STAR 50 Sep 24: Final Ranks; Some Question Marks over Ninebot Re-Inclusion
- STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
- Unlike the other popular Chinese indices (CSI, SSE, ChiNext, etc.) that rebalance semiannually, the STAR 50 index has a quarterly rebalance cycle and the next rebalance will be in September.
- With the reference period for the September 2024 STAR 50 index rebal event coming to an end, we have presented our final expectations for ADDs and DELs in this insight.
Capitol Health (CAJ AU): Binding Merger with Integral Diagnostics (IDX AU)
- Capitol Health (CAJ AU) has entered a binding merger proposal with Integral Diagnostics (IDX AU) at 0.12849 Integral shares per Capitol share.
- The transaction will require approval from the ACCC and Capitol shareholders. Due to the minimal geographic overlap, ACCC clearance should be forthcoming.
- The offer is attractive compared to historical exchange ratios, trading ranges and peer multiples. At the last close, the gross spread was 8.0%.
Kyoto Financial Group (5844 JP) – Limited Shareholdings Unwind, for Now
- Kyoto Financial’s stakes in three key listed Japanese corporates are valued at over 85% of its market capitalization with its total equity holdings accounting for 130%+ of its market capitalization
- Kyoto management intends to retain the bulk of the bank’s equity holdings, opposing the growing trend for Japanese listed companies to unwind crossholdings; management will review this policy in November
- In the near term, we see no major catalyst for Kyoto to accelerate its equity holdings unwind and so, combined with its underwhelming fundamentals, we are negative on Kyoto Financial
S&P 500 September Forecasts: Saved by the Dell?
- Dell Technologies (DELL US) is the main candidate for addition-transition with uncertainty arising from the ‘Multiple Share Classes’ criterion. Forecasted demand is ~$7bn and ~4 ADV.
- Williams Sonoma (WSM US) is one of the top candidates for addition-migration with uncertainty due to the migrations’ inconsistent market cap selection pattern. Forecasted demand is $840m and ~2.6 ADV.
- American Airlines Group (AAL US) is one of the main candidates for deletion with uncertainty due to price hence ranking fluctuations until cut-off. Forecasted supply is $290m and ~0.8 ADV.
Capitol Health (CAJ AU)/Integral Diagnostics (IDX AU): An Improved Image – Now Firmed
- Back on the 17th June, diagnostic imaging provider Capitol Health (CAJ AU) announced it had entered into a process deed with Integral Diagnostics (IDX AU). Terms are now firmed.
- IDX will issue 0.12849 new IDX shares for each Capitol share. Scrip terms are unchanged from that announced previously. Upon completing the transaction, Integral would hold 63% in the NewCo.
- Apart from ACCC signing off, this transaction looks priced to complete.
Thai Bev to Get F&N Stake from Promoters At Book Value than Fair Market Value
- Thai Beverage(THBEVSP)‘s proposed swap deal involves acquiring a 41.3% stake in F&N from promoters, seemingly at book value than fair market value, expected in case of an arms length transaction.
- Fraser And Neave (FNN SP) holds a 20.3% stake in Vietnam Dairy(VNM VN), Vietnam’s leading dairy player, which is now trading at nearly a 40% discount to the investment value.
- Understanding TCC Assets’ ownership history of F&N may help clarify the deal’s valuation rationale.
Kokusai Electric (6525 JP): The Current Playbook
- Since the US$2.0 billion secondary placement announcement, Kokusai Electric (6525 JP)’s shares are down 5.6% from the undisturbed price of JPY5,520 per share (8 July).
- Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Kokusai’s shares have followed the pattern of previous large placements.
- The offering will likely be priced on 22 July. Investors who have participated in previous large Japanese placements tend to secure positive returns.
Launch of Korea Value Up Index in September
- Korea Value-Up index is finally expected to be launched in September 2024 which is likely to include at least 100 companies in KOSPI and KOSDAQ.
- There are expectations that Korea’s Value Up index could resemble JPX Prime 150 index which is a Japanese version of the value up index launched last year.
- We provide 70 stocks in Korea that could be included in the Korea Value Up index. These 70 stocks could outperform the market in the next several months.
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