In today’s briefing:
- KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!) Redux (Another Buyback in H2 Possible)
- Nissin (9066) – Super Big Buyback Race-Walks the Governance Walk – Super Cheap Logistics Biz
- Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer
- HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
- HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder
- Greatview Aseptic (468 HK): Shandong Xinjufeng VGO Could Force Mengniu to Act
- Great Eastern Holdings (GE SP): OCBC’s Offer Needs a Bump to Achieve Privatisation Ambitions
- Sumitomo Chemical (4005): To Believe Or Not To Believe, That Is the Question
- Local Reports in Korea Regarding A Holdings Stake Sale Between Naver & Softbank
- Underexposed Flow Trading Opportunity: LONG Banks & SHORT LG Chem/Energy on June 14
KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!) Redux (Another Buyback in H2 Possible)
- In May 2023, KDDI Corp (9433 JP) announced a ¥300bn buyback program, did nothing for two months, then announced a Tender Offer Buyback to buy shares from Toyota.
- Toyota had increased its stake years before, then KDDI bought back shares from others, so Toyota was backing its ownership down. I discussed the relationships, history, etc, here.
- This year, KDDI announced Friday with earnings that is buying back another large stake from Toyota.
Nissin (9066) – Super Big Buyback Race-Walks the Governance Walk – Super Cheap Logistics Biz
- Yesterday after the close, Nissin Corp (9066 JP) announced earnings (down vs last year), guidance (back up partway to last year), and a sale of securities to raise ¥6+bn.
- Nissin also announced an employee share incentive plan (¥900mm) and an adjustment to its MTMP from Apr24 to Mar27. Much lower revenues. Same OP. Higher net. Higher Div Payout ratio.
- They also announced a really big buyback which should be done by the time people read this. It is really big.
Great Eastern (GE SP): OCBC’s S$25.60 Unconditional Offer
- OCBC (OCBC SP) has made a voluntary unconditional general Offer for the 11.56% in Great Eastern Holdings (GE SP) not held.
- The S$25.60 cash Offer for the life/non-life insurer is a 36.9% premium to last close; and a 30% discount to its S$36.59/share embedded value (as at 31st Dec 2023).
- The Offer is unconditional in all respects. This will trade tight. A delisting Offer is next on the cards.
HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
- We do not forecast any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June but there could be capping changes for 7 stocks.
- Capping changes will result in a one-way turnover of 7.6% leading to a round-trip trade of US$2.4bn. 17 stocks will have over 0.5x ADV to trade from passive trackers.
- Li Auto (2015 HK) will have the largest inflow while there will be big outflows from Meituan (3690 HK), Xiaomi Corp (1810 HK), JD.com (9618 HK) and Tencent (700 HK).
HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder
- Yichang HEC Changjiang Pharma (1558 HK)‘s pre-conditional privatisation from Sunshine Lake Pharma comprises scrip (0.263614 new offeror H Share per HEC CJ Pharma share) and cash (special dividend of HK$1.5).
- The pre-condition is regulatory approvals from NDRC, MOFCOM, and SAFE. The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection).
- There is valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, with no shareholder close to a blocking stake, the deal should get up.
Greatview Aseptic (468 HK): Shandong Xinjufeng VGO Could Force Mengniu to Act
- Shandong Xinjufeng Technology Packaging (301296 CH) disclosed a pre-conditional voluntary offer for Greatview Aseptic Packaging (468 HK) at HK$2.65, a 26.2% premium to the undisturbed price.
- The pre-condition relates to Chinese regulatory approvals and Shandong Xinjufeng shareholder approval. The offer is conditional on a 50% minimum acceptance condition.
- Shandong Xinjufeng’s previous acquisition of Jardine Matheson’s 28.22% stake elicited a defensive move by China Mengniu Dairy Co (2319 HK). This development is likely to force a Mengniu competing VGO.
Great Eastern Holdings (GE SP): OCBC’s Offer Needs a Bump to Achieve Privatisation Ambitions
- OCBC (OCBC SP) has announced a voluntary unconditional general offer for Great Eastern Holdings (GE SP) at S$25.60 per share, a 36.90% premium to the undisturbed price.
- OCBC aims to privatise Great Eastern by delisting resolutions or exercising compulsory acquisition rights. The offer has not been declared final.
- While the offer is reasonable, it is not a knockout bid which would comfortably allow OCBC to privatise through either option. A bump is highly likely.
Sumitomo Chemical (4005): To Believe Or Not To Believe, That Is the Question
- Sumitomo Chemical issued new guidance in-line for 3/24 and xx% ahead of consensus for 3/25 EBIT, yet, the shares promptly declined by 10%.
- Traders were probably spooked by the company’s booking of ¥340bn in impairments that was ¥200bn more than published consensus, but we argue that this was more than already priced in.
- The only reasonable explanation for the reaction is that the market doesn’t believe the new guidance for 3/25. This could prove to be a huge mistake.
Local Reports in Korea Regarding A Holdings Stake Sale Between Naver & Softbank
- Naver doesn’t view the sale of its A Holdings stake unfavorably; insiders suggest it’s been planning this move since last year.
- Market speculation suggests Naver was disappointed by Softbank’s rejection of CLOVA X in LINE, prompting plans to sell A Holdings stake for AI development. A sale agreement is expected soon.
- The method through which Softbank secures funds for this acquisition is worth the attention from a short-term trading perspective.
Underexposed Flow Trading Opportunity: LONG Banks & SHORT LG Chem/Energy on June 14
- Despite time until screening, predictions likely hold due to market cap gaps; all candidates are banks, benefiting from recent momentum.
- Historical patterns show profit-taking selling affecting price impact, particularly on additions with significant pre-inclusion price rises. Monitor banks’ pre-June 14th price appreciation to anticipate impact distortions.
- Shorting LG Chem and LG Energy Solution based on high price cointegration, consider basket-trading them before the rebalancing, using the battery sector as a long hedge.
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