In today’s briefing:
- JFE Holdings (5411) Stock+CB Offering
- NTT’s Partial Offer for Marketing Consultant Intage (4326) –
- Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF
- Single-Day ETF Flow Event Not to Be Missed in Korea in December
- CSI300 Index Rebalance Preview: 14 Potential Changes in December
- ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding
- Arm IPO – Don’t Worry, It’ll Be Fine
- Aquila Acquisition: The De-SPACed Arb
- Oriental Watch: Addressing the Rolex Acquisition of Bucherer
- Hana Micron’s Boost From Samsung/Nvidia Agreement
JFE Holdings (5411) Stock+CB Offering
- Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
- ¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
- This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.
NTT’s Partial Offer for Marketing Consultant Intage (4326) –
- Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP).
- Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%.
- The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership.
Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF
- The HSI, HSCEI, HSTECH and HSCI rebalances will take place at the close on 4 September since the market was closed on 1 September due to Typhoon Saola.
- There will be a few announcements next week with Nikkei 225 early in the week and the MVIS series post close on Friday. Plus the STAR50 rebalances on Friday.
- Another week of huge inflows into mainland China ETFs focused on the CSI 300 Index, STAR50 INDEX and CSI Smallcap 500 Index.
Single-Day ETF Flow Event Not to Be Missed in Korea in December
- Ecopro Co will replace Celltrion Inc. Their float market cap difference is nearly 5 trillion won, so it doesn’t seem likely that this will reverse by the end of November.
- Ecopro may not have a very significant passive impact x ADTV, given its still high trading volume. On the other hand, Celltrion seems likely to be the target of traders.
- From a trading perspective, it’s important to focus on the potential price impact of this flow event on Celltrion, which could be amplified depending on the possibility of merger cancellation.
CSI300 Index Rebalance Preview: 14 Potential Changes in December
- Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
- We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
- The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.
ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding
- Softbank Group (9984 JP) aims to raisebetween US$4.5-4.9bn via selling some of its stake in ARM Holdings‘ US IPO.
- ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
- In our previous notes, we looked at the company’s past performance. In this note, we talk about valuation.
Arm IPO – Don’t Worry, It’ll Be Fine
- So the terms are out for Softbank’s attempt to list Arm.
- In typical sparkling form, Masayoshi Son has clocked a ~19% drawdown within weeks.
- Good thing all the bankers will easily get their $8bn loan paid back in full and aren’t subject to conflicting interests…?
Aquila Acquisition: The De-SPACed Arb
- SPACs – remember them? US offerings in 2021 topped ~US$150bn, falling to US$13bn in 2022. Singapore joined the bandwagon in January 2022 and Hong Kong two months later.
- That Hong Kong stock is Aquila Acquisition Corporation (7836 HK), and it recently announced a merger with ZG Group, a Chinese steel trading website.
- That’s positive. Less positive is how de-SPACed shares tend to trade in the US.
Oriental Watch: Addressing the Rolex Acquisition of Bucherer
- Rolex acquisition of Bucherer signals the company’s intention to own retail distribution and gain access to what its competitors are doing, with the battleground currently being Europe.
- We believe it will take years for Rolex to digest this acquisition before foraying into other markets, but with a similar approach, potentially making Oriental Watch (398 HK) a target.
- Trading at 6.9x PE with 50% of the market cap in cash and a ~15% dividend yield, the company presents a great investment opportunity.
Hana Micron’s Boost From Samsung/Nvidia Agreement
- US graphics chip designer NVIDIA Corp (NVDA US) has, to date, sourced HBM3 chips exclusively from SK Hynix (000660 KS).
- Shares in Samsung Electronics (005930 KS) promptly popped ~6% last Friday on news it had been added as a supplier to NVIDIA.
- Hana Micron Inc (067310 KS), which boasts Samsung as its largest customer, similarly jumped, and is up 45% in the past week. Too much too quickly?
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