In today’s briefing:
- Oriental Land (4661) Placement by Keisei Rail (9009) Says “That’s the Door”
- Shinko Electric (6967) – Break/Gap Risk Is Considerably Changed Now
- JSR (4185) – Reporters Reportedly Report Conditions Such That JIC Deal Could Come Soon
- CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
- Interglobe Aviation (Indigo) Lockup – Still Has US$3bn+ Stake Left, After Three Prior Selldowns
- Emerging Markets Ex-China: Looking Back… And Forward
- MVIS Australia A-REITs Index Rebalance Preview: One Deletion & Capping Changes
- Paradise Announces A Switch in Listing from KOSDAQ to KOSPI
- Local Observations on Carlyle’s Possible Buyout of Hanon Systems
- Nippon Express (9147 JP): The Current Playbook
Oriental Land (4661) Placement by Keisei Rail (9009) Says “That’s the Door”
- Over two decades, Keisei Electric Railway Co (9009 JP) has been the subject of softer and harder activist efforts to have Keisei monetise its stake in affiliate Oriental Land (4661).
- The most recent efforts were by Palliser last fall, briefly discussed here two weeks ago when Keisei announced a buyback.
- Today, Keisei announced (Japanese only) an Accelerated Block Offering of 1% of Oriental Land shares. The accompanying announcement is worth reading. It’s pretty clear.
Shinko Electric (6967) – Break/Gap Risk Is Considerably Changed Now
- Seven weeks ago I wrote about Shinko Electric Industries (6967 JP)‘s changing Break/Gap Risk as comps had gained. Shinko was cheap to its main comp and peers vs Announcement Date.
- Since then, Shinko is +4.1% and direct peer Ibiden Co Ltd (4062 JP) is -14.5%. This has erased Shinko’s underperformance since announcement, and shrunk a 9% spread to 3.3% yesterday.
- With the spread tighter and tech showing some weakness, I’d be happy unwinding at yesterday’s closing spread (3.3%).
JSR (4185) – Reporters Reportedly Report Conditions Such That JIC Deal Could Come Soon
- JSR Corp (4185 JP) saw its stock pop Monday when an article in a Japanese paper said the Tender Offer would start “within the month.”
- Investors went from “concerned about delay or worse” to “anticipating resolution.” Then Wednesday just before the close the stock popped as media outlets reportedly reported no SAMR approval was required.
- There has been no comment from either JIC or JSR but the discount to terms has gone from 6.9% last Friday to a 1.7% discount now.
CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
- With 85% of the review period complete, we see 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in June.
- We estimate one-way turnover of 1.2% at the rebalance leading to a one-way trade of CNY 7.3bn (US$1bn). There are a lot of stocks with multiple days ADV to trade.
- The potential adds have outperformed the potential deletes despite large flows from the National Team into ETFs tracking the CSI 300 Index. That support for the potential deletes will reverse.
Interglobe Aviation (Indigo) Lockup – Still Has US$3bn+ Stake Left, After Three Prior Selldowns
- InterGlobe Aviation Ltd (INDIGO IN)’s co-founder Rakesh Gangwal’s 25%+ stake will be released from lock-up tomorrow.
- He had earlier stated his intention to pare down his stake. He has sold shares in Sep 2022, Feb 2023 and Aug 2023.
- In this note, we will talk about the lockup dynamics and possible placement.
Emerging Markets Ex-China: Looking Back… And Forward
- We first wrote about the iShares Emerging Markets ex-China (EMXC US) ETF 3 years ago when AUM was less than US$500m. AUM now stands at US$11bn.
- IShares Emerging Markets ex-China (EMXC US) has outperformed iShares Emerging Markets (EEM US) and iShares Emerging Markets Asia (EEMA US) with lower volatility and a lower drawdown.
- With the Chinese economy misfiring and markets under pressure, we could see a further shift in positioning away from China and that means inflows to other Emerging Markets.
MVIS Australia A-REITs Index Rebalance Preview: One Deletion & Capping Changes
- With the review period for the March rebalance complete, Abacus Storage King (ASK AU) could be deleted from the index and there will be capping changes.
- The index changes will lead to a one-way turnover of 3.6% resulting in a one-way trade of A$21m. There are three stocks with over A$4m to trade.
- Goodman Group (GMG AU) is an inclusion to a global index in March and that buying will far outweigh the selling from the Vaneck Vectors Australian Property ETF (MVA AU).
Paradise Announces A Switch in Listing from KOSDAQ to KOSPI
- On 7 March, Paradise Co Ltd (034230 KS) announced that it plans to switch its listing from KOSDAQ to KOSPI.
- Paradise will be excluded from KOSDAQ150 when it makes the switch to KOSPI. However, it is not certain if and when the company will be included in KOSPI200.
- All in all, we would argue that the valuations are not especially appealing for Paradise, despite the sharp pick-up in business in 2023.
Local Observations on Carlyle’s Possible Buyout of Hanon Systems
- Carlyle’s renewed interest in acquiring Hanon Systems is evident from recent local market news, indicating outreach to bankers for a potential buyout, as confirmed by a local brokerage.
- Carlyle eyes majority control of Hanon Systems, targeting 50.5% from Hahn & Co and 19.5% from Hankook Tire. Carlyle may extend a tender offer for the remaining 30%.
- Still early stages; no solid info on deal certainty or specifics. Limited immediate trading opportunities, but worth monitoring as it progresses.
Nippon Express (9147 JP): The Current Playbook
- Since the US$260 million secondary placement announcement, Nippon Express Holdings (9147 JP) shares are down 5.3% from the undisturbed price of JPY8,039 per share (1 March).
- Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Nippon Express shares have followed the pattern of previous large placements.
- The offering will likely be priced on 11 March. Investors who have participated in previous large Japanese placements tend to secure positive returns.
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