In today’s briefing:
- Aeon (8267) Partial Tender at ¥1610 for Inageya (8182) Aiming for Takeover Next Year
- Liontown Resources (LTR AU): Passive Selling on Lower Float
- October 2023 TOPIX Free Float Review – $22.6bn to Trade and JPB (7182) The Biggie
- HDFC Bank (HDFCB IN): Increasing Foreign Room & Decreasing ADR Premium
- Merger Arb Mondays (09 Oct) – Eoflow, Haitong Intl, NWS, Boustead, Newcrest, Liontown, Hollysys
- ECM Weekly (8th Oct 2023) – Kokusai, J&T Global, Doosan, Cainiao, Ecopro, UBox, JSW Infra, Seibu
- Korea – Positioning in Stocks That Could Have Global Passive Flows
- Ecopro Materials IPO – Thoughts on Valuation – Needs a Margin of Safety
- TOPIX Inclusions: Who Is Ready (Oct 2023)
- Prime Target for Flow Trading Due to Low Pre-Exposure in December KOSPI 200 Rebalancing
Aeon (8267) Partial Tender at ¥1610 for Inageya (8182) Aiming for Takeover Next Year
- Aeon Co Ltd (8267 JP) and Inageya Co Ltd (8182 JP) agreed in late April to prepare a plan so Aeon would buy 51% this year.
- They would combine Inageya with 53+%-owned United Super Markets (3222 JP) aiming for a ¥1trln sales supermarket chain in Kanto. That is due end- calendar 2024.
- There is a partial offer to buy 33+% of Inageya at a small premium, and inadequate price before merging next year. Cross-holders determine pro-ration.
Liontown Resources (LTR AU): Passive Selling on Lower Float
- Liontown Resources (LTR AU) is trading near A$3/share, the level of Albemarle Corp (ALB US)‘s revised offer and where Hancock Prospecting has been buying recently.
- With Hancock Prospecting accumulating a stake of nearly 17% over the last month, there will be a float reduction for Liontown Resources (LTR AU) in the next few months.
- Short interest has been increasing and the passive selling could provide an exit for the shorts. But Hancock Prospecting could also use the opportunity to buy more Liontown Resources stock.
October 2023 TOPIX Free Float Review – $22.6bn to Trade and JPB (7182) The Biggie
- The TOPIX October Free Float Weight Review details are out. This is the biggest FFW review of the year. This year, it’s $11.3bn a side.
- As discussed in Japan Post Bank (7182) – The October TOPIX FFW Adjustment, JPB is the big buy. $2bn/23d of ADV. There is $2bn to buy of trading cos too.
- There are lots of large names to trade in both directions. If you have interests to sell the buys and vice versa, it is good to know the flows.
HDFC Bank (HDFCB IN): Increasing Foreign Room & Decreasing ADR Premium
- Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 59% and the HDFC Bank (ADR) (HDB US) premium to the local line has dropped to 7%.
- HDFC Bank (HDFCB IN) has underperformed its peers and the local indices on expectations of lower NIMs and higher NPAs.
- There will be passive buying in HDFC Bank in December and March. Further passive buying will require foreign room to increase above 25% which will first require foreign investor selling.
Merger Arb Mondays (09 Oct) – Eoflow, Haitong Intl, NWS, Boustead, Newcrest, Liontown, Hollysys
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – Haitong International Securities Group (665 HK), 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), IMAX China Holding (1970 HK), BPLANT.
- Lowest spreads – Yaizu Suisankagaku Industry (2812 JP), Healius (HLS AU), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Seiko Pmc Corp (4963 JP).
ECM Weekly (8th Oct 2023) – Kokusai, J&T Global, Doosan, Cainiao, Ecopro, UBox, JSW Infra, Seibu
- Aequitas Reserach puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- In the IPO space, Doosan Robotics (454910 KS) lived up to its hype, while JSW Infrastructure continued India’s strong run.
- In the placement space, IDFC First Bank Limited (IDFCBK IN) launched its well flagged QIP, while CALB Group (3931 HK)‘s shareholders were released from their IPO lockup.
Korea – Positioning in Stocks That Could Have Global Passive Flows
- Posco DX (022100), Kum Yang (001570), SK Telecom (017670), Lotte Energy Materials (020150), Kakao Games (293490), Pan Ocean (028670), BGF retail (282330), Netmarble (251270) have been on investors/traders radars recently.
- There could be liquidity events in some of the stocks next month as passive index trackers look to buy/sell the stocks.
- Foreign investors have sold Lotte Energy Materials (020150 KS), Kakao Games (293490 KS), Pan Ocean (028670 KS) and Netmarble (251270 KS) while buying BGF retail (282330 KS).
Ecopro Materials IPO – Thoughts on Valuation – Needs a Margin of Safety
- EcoPro Materials (ECO123 KS) is looking to raise up to US$500m in its Korean IPO.
- Ecopro Materials (EPM) manufactures and sells high-nickel precursors, one of the key materials for high-nickel cathode materials for secondary (rechargeable) batteries.
- In our previous note, we covered the company’s performance and undertook a peer comparison. In this note, we will share our thoughts on valuation.
TOPIX Inclusions: Who Is Ready (Oct 2023)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- Since my last insight, CellSource (4880 JP) and Kasumigaseki Capital (3498 JP) have confirmed they will move to TSE Prime which means they will be included in TOPIX at end-November.
- FP Partner (7388 JP) and I-NE (4933 JP) will get included in TOPIX at the end of October.
Prime Target for Flow Trading Due to Low Pre-Exposure in December KOSPI 200 Rebalancing
- Posco DX’s KOSPI 200 fast entry effective date will likely coincide with the December regular rebalancing date.
- We should focus on the ad-hoc change deletion as we can expect more pronounced price impact near the effective date due to lower chances of premature exposure than regular reviews.
- The following three candidates are screened: K Car, Daesang Corporation, and Shinsegae International. They are all likely to exhibit a significant passive impact (x ADTV).
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