In today’s briefing:
- Kansai Paint (4613) – Going Hard with a BIG Buyback and More Capital Moves Beyond
- Toyota Partial Offer Results – What Next?
- Updates on The Couche-Tard Deal for 7&I (3382 JP)
- Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October
- Jardine Matheson (JM SP): Trading “Cheap”
- MV Australia A-REITs Index Rebalance Preview: One Close Add & Capping Changes
- KT Corp (030200 KS): Foreign Room Drops Below Critical Level; Passive Selling to Come
- Hyundai Motor’s Value-Up Disclosure: Trading Implications from Release Timing & Pref-Skewed Buyback
- Huafa Props (982 HK): A Quick Word On Voting
- Seven & I (3382) | Strategic Refocus and Acquisition Interest Signal Major Upside Potential
Kansai Paint (4613) – Going Hard with a BIG Buyback and More Capital Moves Beyond
- 24mos ago, Kansai Paint (4613 JP) announced a new MTMP, a large buyback, and plans to unwind cross-holdings. Big. 15mos ago a large secondary offering kicked off the festivities.
- Key was Toyota sold. Then KP could sell its Toyota shares – two-thirds of its cross-holdings. The offering was one to buy. A buyback followed. KP vs Nippon Paint doubled.
- KP offered a CB recently with the delta hedge done by TN-3. Now there is a HUGE new buyback. Really big. This gets rid of more cross-holders. And there’s more.
Toyota Partial Offer Results – What Next?
- Today after the close, Toyota Motor (7203 JP) reported the results of their ¥800bn Tender Offer Buyback, originally intended to repurchase 290.12mm shares from cross-holders.
- In the end, 343.83mm shares were tendered (53.71mm shares more than originally expected, worth about ¥150bn at Tender Price). That creates back-end “issues” which must be considered.
- The resulting supply/demand profile is mixed, but on balance, I expect sees positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.
Updates on The Couche-Tard Deal for 7&I (3382 JP)
- Today saw the publication of three different articles regarding the Alimentation Couche-Tard (ATD CN) approach and offer to purchase all the shares of Seven & I Holdings (3382 JP)
- The first in the Nikkei said ATD could push offer a high price, even up to ¥8 trillion. The second mentioned debt financing being feasible because of prodigious cash flow.
- The third in Bloomberg noted that 7&i had requested the government upgrade its FEFTA status to “core”, which would lead to a more burdensome/restrictive government approval process.
Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October
- Kioxia and Tokyo Metro with valuations of ~$10bn and ~$4.6bn are expected to be listed in October 2024 and become the largest Japanese IPOs since Softbank Corp (9434 JP) in 2018.
- Kioxia Holdings (6600 JP) is currently forecasted to fail fast entries of both Global indices due to low IPO free float.
- Tokyo Metro is expected to be added via fast-entry in one Global Index because of higher IPO free float. Forecasted demand of ~$140m is expected on the fifth trading day.
Jardine Matheson (JM SP): Trading “Cheap”
- I see Jardine Matheson Holdings (JM SP)‘s discount to NAV and implied stub at 12-month lows.
- Recent interim results were okay. Stripping out DFI Retail Group Holdings (DFI SP)‘s outperformance, the remainder of the Jardine stable delivered weaker numbers.
- Further afield, the implied stub is marginally below the long-term average since the Jardine Strategic Holdings (JS SP) circularity was collapsed in April 2021.
MV Australia A-REITs Index Rebalance Preview: One Close Add & Capping Changes
- The review period for the September rebalance ends on 30 August. We do not see any constituent changes for the index but there will be capping changes.
- Home Consortium Ltd (HMC AU) is just outside inclusion zone at the moment and outperformance over the rest of the week could result in inclusion.
- Home Consortium Ltd (HMC AU)‘s inclusion and capping changes will result in a one-way turnover of 5% and in a round-trip trade of A$62m.
KT Corp (030200 KS): Foreign Room Drops Below Critical Level; Passive Selling to Come
- Foreign investors have continued buying KT Corp (030200 KS) and the stock has outperformed SK Telecom (017670 KS), though not by a lot.
- Foreign buying has pushed foreign room in KT Corp (030200 KS) below 3.75% and the stock could be deleted from a global index at the next rebalance.
- There will be some interesting trading dynamics in KT Corp (030200 KS) over the next couple of months and there will be trading opportunities versus its peers.
Hyundai Motor’s Value-Up Disclosure: Trading Implications from Release Timing & Pref-Skewed Buyback
- Hyundai’s TSR target is 35%+ (dividends plus buybacks), up 10 percentage points from previous years. They’ve also set a new annual dividend of ₩10,000, paid evenly quarterly.
- Hyundai’s Value-Up targets may not fully meet market expectations, but the key is the timing. By aligning early with government policies, Hyundai has reduced risks and secured investment flow.
- Hyundai plans a pref-skewed buyback, likely continuing this approach as retiring preferred shares first may boost ROE.
Huafa Props (982 HK): A Quick Word On Voting
- Huafa Property (982 HK) shareholders overwhelmingly approved (99.52% [of shares present and/or via proxy] FOR; 0.48% AGAINST) the Scheme yesterday. This part was expected. The headcount test was less certain.
- The final headcount tally, on a look-through basis into HKSCC Nominees by CCASS Participants, was 111 FOR, 14 AGAINST. Again, a pretty clear pass.
- Normally a Scheme Vote, if approved, wouldn’t warrant a full note. But when the headcount test is involved, it is worthwhile understanding the mechanics.
Seven & I (3382) | Strategic Refocus and Acquisition Interest Signal Major Upside Potential
- 7&I Holdings is reviewing a confidential acquisition proposal from $ATD, highlighting significant potential for value creation through strategic refocusing on its core convenience store business
- ValueAct Capital previously criticized 7&I as an “unfocused holding company,” urging a focus on core assets, estimating a potential value of ¥4,200 per share.
- Our valuation suggests 7&I could reach ¥3,700 per share, driven by the repricing of its overseas CVS business; $ATD will need a strong offer.
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