In today’s briefing:
- JD.com (9618 HK): Overhang a Bigger Worry than Immediate Selling
- Toshiba Coin Toss Is Neither Heads Nor Tails as Both Proposals Fail
- KOSPI200 June Index Rebalance Preview: 7 Changes as Adds Outperform Deletes
- JD Logistics Placement – Not Wholly Convinced, JD’s US$700m Support Helps
- KT (030200): MSCI Re-Inclusion Possibility with a Sharp Rise in Foreign Room
JD.com (9618 HK): Overhang a Bigger Worry than Immediate Selling
- We do not expect there will be huge selling in JD.com Inc. (9618 HK) immediately. However, there will be an overhang on the stock in the near to medium term.
- JD.com could drop in the next few days as the ADR allotment is sold in the market. Shorts that have been built up could soak up some of the flow.
- The big worry is the US$4bn of JD.com stock that Prosus will receive. It is likely they will look to sell and use the cash to buy back their own stock.
Toshiba Coin Toss Is Neither Heads Nor Tails as Both Proposals Fail
- Toshiba EGM fails to provide a positive result as both Toshiba’s own Separation Plan and 3D Investment’s proposal to enhance privatisation bidder engagement and transparency fail.
- Activists are stuck. Management is too. 3+ years since the last big buyback and 3 new CEOs and we are back to the drawing board for both management and activists.
- But both have a head start. The Shareholder Return Plan, eventual disposition of Kioxia, and non-core asset sales would be a start. And Raymond Zage’s letter is worth a re-read.
KOSPI200 June Index Rebalance Preview: 7 Changes as Adds Outperform Deletes
- Over 3/4th of the way through the review period for the June rebalance, we see 7 potential changes to the KOSPI200 Index. Most are high probability changes.
- Potential inclusions: F&F (383220 KS), SD Biosensor (137310 KS), Meritz Fire & Marine (000060 KS), Iljin Hysolus (271940 KS), K Car (381970 KS), Hanil Cement (300720 KS), Hana Tour (039130).
- Potential deletions: Cuckoo Holdings (192400 KS), S&T Motiv (064960 KS), Nexen Tire (002350 KS), Hyundai Home Shopping (057050 KS), Cuckoo Homesys (284740 KS), Sk Discovery (006120), Grand Korea Leisure (114090).
JD Logistics Placement – Not Wholly Convinced, JD’s US$700m Support Helps
- JD Logistics (JDL) aims to raise around US$1.1bn, with US$400m coming via an institutional placement. The balance will be funded by issuing shares at the same price to JD.com.
- We have covered the stock extensively, links to our previous notes are below.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
KT (030200): MSCI Re-Inclusion Possibility with a Sharp Rise in Foreign Room
- Based on yesterday’s closing price, KT’s foreign room fell to 17.6%. MSCI’s foreign room threshold for non-constituents subject to foreign ownership limit (FOLs) is 15%.
- If KT’s foreign room stays above 15% by March 31, it will be re-included with an adjustment factor of 0.5 in May SAIR. Its float is 25%, 0.5x FOL (49%).
- Passive flow is estimated at 6.17x ADTV, assuming a 25% float. This could provide momentum to outperform the sector peers, making us consider a sector long/short setup aimed at this.
Before it’s here, it’s on Smartkarma
