In today’s briefing:
- Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins
- HSTECH Index Rebalance Preview: Round-Trip Trade of US$255m in December
- Doosan Robotics IPO – Updated Thoughts on Valuation – Sentiments Going Out of Control
- T&K TOKA (4636) Gets More Interesting – A Bump Is Now A Distinct Possibility
- HSCEI Index Rebalance Preview: China Unicom (762) Could Replace Zhongsheng (881)
- Nidec (6594) Turns Vinegar to Wine as Takisawa Machine Tool (6121) Agrees To Takeover
- Sun Hung Kai (16 HK): The Kwoks Step In To Stem The Tide
- SK Innovation: Update on Its Rights Offering Subscription Allocation
- A Fresh Short-Selling Target in Korea: Youlchon Chemical
- T&K Toka (4636 JP): Possible Offer Scenarios as Dalton Ups Its Stake
Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins
- In March 2023, Japan Post Holdings (6178 JP) sold ¥1.1trln of shares in Japan Post Bank (7182 JP), lowering its stake considerably, raising float. There will be a TOPIX upweight.
- In May, with earnings, they announced their intention to buy back ¥300bn of shares or up to 10% of shares out. Today, they announced the details. ¥300bn through March end.
- In a ¥300bn ToSTNeT-3 tomorrow, the govt will sell back ¥105.7bn. That leaves a residual worth examining. So we examine.
HSTECH Index Rebalance Preview: Round-Trip Trade of US$255m in December
- With no stocks in inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December.
- Capping changes will result in a one-way turnover of a touch below 1% and that will result in a round-trip trade of US$255m.
- The impact on the stocks is relatively small for now but that could increase till the end of November when the stocks will be capped.
Doosan Robotics IPO – Updated Thoughts on Valuation – Sentiments Going Out of Control
- Doosan Robotics (454910 KS) is looking to raise up to US$318m in its Korean IPO.
- Doosan Robotics (DR) manufactures and sells collaborative robots (Cobots). The firm’s product portfolio primarily includes different series of robot arms as well as its coffee module.
- In our previous notes, we assessed the company’s past performance, undertook a peer comparison and shared our thoughts on valuation. In this note, we share our updated thoughts on valuation.
T&K TOKA (4636) Gets More Interesting – A Bump Is Now A Distinct Possibility
- Last year, 20% owner Dalton approached T&K Toka Co Ltd (4636 JP) for an MBO, but walked when questioned. Then in January bid ¥1300 to double their stake to 44%.
- They were not successful. The firm held a beauty contest. Bain won at ¥1400 despite ¥1300 getting no response and markets up big since. It’s possible not everyone was invited.
- Since the Bain deal announcement, the stock has mostly traded at/through terms. Now we find out Dalton has been buying (now 23.77%). This increases the chances of a bump.
HSCEI Index Rebalance Preview: China Unicom (762) Could Replace Zhongsheng (881)
- Zhongsheng Group (881 HK) is a potential deletion in December and that could result in China Unicom Hong Kong (762 HK) being added to the index.
- Estimated one-way turnover at the rebalance is 1.36% resulting in a one-way trade of HK$845m. Passives will need to trade over 1x ADV on both stocks.
- There is a very small impact on the fair value of the HSCEI 2023 dividend futures but there will be a larger impact on the dividend futures expiring in 2024.
Nidec (6594) Turns Vinegar to Wine as Takisawa Machine Tool (6121) Agrees To Takeover
- Nidec Corp (6594 JP) has had ambitions in machine tool space. They wanted to buy Takisawa Machine Tool (6121 JP) but Takisawa wouldn’t give them the time of day.
- So Nidec announced hostile intentions and a 60-day period to negotiate. That’s done, and today they announced a now-friendly deal.
- This looks like an easy done deal. There is one major risk factor remaining, then another consideration when thinking about path.
Sun Hung Kai (16 HK): The Kwoks Step In To Stem The Tide
- After Sun Hung Kai Properties (16 HK) released its interim results, shares declined 12.7% intra-day this past Monday, touching a 14-year low, before closing down 9.5%.
- The same day, the Kwok family increased their stake in the company, purchasing ~2.2mn shares for ~HK$175mn.
- SHKP is currently trading a trailing P/B of 0.36x versus its five-year average of 0.54x, and the five-year average preceding Covid of 0.68x.
SK Innovation: Update on Its Rights Offering Subscription Allocation
- On 13 September, SK Innovation announced that the subscription rate for the rights offering allocated to ESOA and existing shareholders was 87.66%.
- The rights offering price is 139,600 won, which is 12.7% lower than current price of 159,900 won.
- There is likely to be a strong demand for the subscription of rights offering forfeited shares for the general investors scheduled to take place on 14 to 15 September.
A Fresh Short-Selling Target in Korea: Youlchon Chemical
- Youlchon Chemical’s CFD balance accounts for 3.54% of SO, with approximately 2x leverage trading. It is one of the few in the top CFD balance list that can be short-sold.
- Our primary concern should lie with the upcoming December rebalancing of the KOSPI 200 index. Youlchon Chemical finds itself perilously close to the borderline within the Materials sector.
- When proactive flow trading targeting KOSPI 200 is set to influence prices early October, we must remain vigilant regarding the potential trades aimed at exploiting a CFD balance squeeze.
T&K Toka (4636 JP): Possible Offer Scenarios as Dalton Ups Its Stake
- Nippon Active Value Fund/Michael 1925/Dalton has increased their T&K Toka Co Ltd (4636 JP) shareholding from 22.23% to 23.77% of outstanding shares (22.25% to 23.79% of ownership ratio including share options).
- T&K Toka shares have traded above Bain’s JPY1,400 pre-conditional offer, fuelling speculation of a bump. A rival proposal at least 5% above triggers the “Counter Tender Offer” clause.
- The four possible scenarios with declining probabilities are: Bain calls Dalton’s bluff, Bain marginally bumps, Dalton launches a rival offer or Dalton rollovers its stake into a privatised T&K Toka.
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