In today’s briefing:
- LG Chem: Considering a Block Deal Sale of About 2 Trillion Won of LG Energy Solution: A Big Overhang
- JSR (4185 JP) Takeover – Why So Wide? FUD and Flows
- Socionext (6526 JP): The Current Playbook
- LG Energy – Quick Thoughts on US$2bn EB Offering by Parent
- S&P/ASX Index Rebalance Preview: Potential Changes in September
- LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion
- LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations
- Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion
- Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes
- Chindata: Bain’s Move Spurs China Merchants Into Action
LG Chem: Considering a Block Deal Sale of About 2 Trillion Won of LG Energy Solution: A Big Overhang
- After the market close on 16 June, it was reported in the local media that LG Chem is close to selling about 2 trillion won worth of LG Energy Solution.
- This block deal sale is likely to pose overhang on more stake sales of LG Energy Solution (about 10% stake) in the next 3-5 years.
- Our NAV valuation analysis of LG Chem suggests an implied price of 1,057,770 won per share, which is 41% higher than current share price.
JSR (4185 JP) Takeover – Why So Wide? FUD and Flows
- In the last week of June, Japanese government-affiliated Japan Investment Corp (“JIC”) announced it would take over JSR Corp (4185 JP). A “surprise” but perhaps not totally.
- It traded tight, then it traded back out. Then worse. Then worse again. There were good reasons for this. There were perhaps less good reasons too.
- FUD and Flows mean that it is likely to continue to trade wide for the near future.
Socionext (6526 JP): The Current Playbook
- Since the announcement of the US$1.9 billion secondary placement, Socionext (6526 JP)’s shares are down -25.0% from the undisturbed price of JPY21,950 per share (5 July).
- So far, Socionext’s shares have mostly followed the pattern of previous large placements. Investors participating in previous large Japanese placements tend to secure positive returns.
- The offering will likely be priced on 11 July. Due to the steep share price decline, Socionext is trading at an undemanding multiple compared to global SoC peers.
LG Energy – Quick Thoughts on US$2bn EB Offering by Parent
- LG Chem Ltd (051910 KS) aims to raise around US$2bn via offering 2028 and 2030 puttable USD exchangeable bonds for LG Energy Solution (373220 KS) shares.
- LG Chem (LGC) had been rumoured to sell down some of its stake in LG Energy Solutions (LGES), hence, this deal will remove the overhang on LGES.
- In this note, we have a quick look at the deal and provide our thoughts on the structure.
S&P/ASX Index Rebalance Preview: Potential Changes in September
- We forecast 22 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
- Some of the changes are high probability while others are close to cutoffs. The impact of passive trading will be pretty large on a lot of stocks.
- Short interest on the potential deletes indicates some pre-positioning but there should still be a fair bit more to do.
LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion
- On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion to raise funs to expansion into its rechargeable battery materials.
- Investors in LG Energy Solution will likely have a more positive view of this EB issue rather than a block sale of common shares, because of lack of price discount.
- We believe LG Chem is not done in selling its shares of LGES as we think LG Chem is likely to sell additional 5-10% stake in LGES in 3-5 years.
LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations
- The exchange prices are ₩687,500 and ₩715,000 at a premium of 25-30% to the closing price of LG Energy Solution today.
- The commencement date for both the 5-year and 7-year bonds’ exchange is August 28th.
- We should design a strategic setup that targets a band play within the current price range and the low ₩700,000 range.
Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion
- Plus Alpha Consulting (4071 JP) listed on TSE Growth at end-June 2021 at ¥2300/share, which was 90x the trailing fiscal year’s earnings. but only about 65x then-current year earnings.
- The stock popped 20+% on Day 1 to close ¥2803. Last Friday, two years and 13% higher at ¥3185/share, the company announced a Secondary Offering and move to TSE Prime.
- It’s a big offering. It’s a smaller TOPIX inclusion event. Next spring we’ll see more upweights.
Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes
- Based on prices and turnover from 10 July, there could be one deletion from the index in July. Plus there will be capping and float changes.
- There are four stocks that meet the inclusion criteria but all are non-pure play companies and the index is already at the limit of 15 non-pure play companies.
- There will be a large impact on a lot of stocks but the flows are not very large due to the limited assets tracking the index.
Chindata: Bain’s Move Spurs China Merchants Into Action
- My read of Bain’s Offer last month, was a tactic to flesh out a competing Offer. It seemed unlikely Bain would get the regulatory approval to take Chindata (CD US) private.
- Now state-backed China Merchants Capital Holdings International Ltd. has made a non-binding offer of $9.20/ADS, compared to $8/ADS from Bain.
- This Offer is indicative. But an SOE taking over data centres makes a lot of sense.
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