In today’s briefing:
- Keisei Electric Rail (9009) – A BUYBACK! But It’s Likely To Be Crossholders Selling in ToSTNeT-3
- Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger?
- Details of Korea Value-Up Initiatives & Index, Announced This Morning
- STAR100 Index Rebalance: Ten Changes a Side; Adds Outperforming as Expected
- Rakuten Bank (5838 JP) – Introduces a Yutai Program to Goose the Mar24 Price, Mar25 EPS
- Alibaba (9988 HK): Value Proposition Looks Clean
- Alcoa (AA US) Makes an Offer for Alumina (AWC AU)
- Toei Animation (4816 JP): The Current Playbook
- Aeon, Welcia and Tsuruha: Creating an FMCG Behemoth
- StubWorld: Keisei Electric Appears Stretched Amid Latest Buyback
Keisei Electric Rail (9009) – A BUYBACK! But It’s Likely To Be Crossholders Selling in ToSTNeT-3
- Keisei Electric Railway Co (9009 JP) has long been the target of activist-ish-y holders who seek to have the company monetise its 20+% stake in Oriental Land (4661 JP).
- Last autumn (17-Oct-2023), Keisei was the subject of a presentation by activist-ish-y fund Palliser Capital who called the stock 43% undervalued. They want Keisei to sell some OLC shares.
- Palliser wanted Keisei to use resulting monies for growth capex+shareholder return, improve IR/governance, shrink board, adopt KPIs, etc. Thursday we got an announcement of a 2.9% stock buyback.
Tsuruha (3391) And Welcia (3141) – Aeon Tsuruha Stake Buy Followed by Merger?
- Over the weekend there was an article in the Nikkei saying that Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) were considering a merger. Other media outlets followed.
- This has been a possible outcome. Aeon Co Ltd (8267 JP) owns 51% of Welcia, 13.6% in Tsuruha, and is negotiating to buy another 13% in Tsuruha from Oasis.
- This would create a behemoth. ¥2.2trln in revenues vs ¥1trln for MatsukiyoCocokara (3088 JP). It would be 25% of the market. Questions will be asked about concentration.
Details of Korea Value-Up Initiatives & Index, Announced This Morning
- The rollout of the Korea Value-Up Index has encountered a minor delay. Completion of the index is slated for 3Q, with ETFs scheduled for release in 4Q.
- The government will encourage the National Pension Service to utilize it as a benchmark.
- Dividend payout ratio, dividend yield, PER, and cash flow will be included as screening factors for this index, in addition to the already known factors of PBR and ROE.
STAR100 Index Rebalance: Ten Changes a Side; Adds Outperforming as Expected
- There are 10 changes for the STAR100 Index in March. We correctly forecast all 10 deletes and got 8 of the 10 adds right.
- Estimated one-way turnover is 6.8% and that results in a one-way trade of CNY 1.79bn. Nearly all constituent changes have more than 1 day of ADV to trade.
- The adds have started to outperform the deletes and the index over the last couple of weeks and there could be more outperformance in the next two weeks.
Rakuten Bank (5838 JP) – Introduces a Yutai Program to Goose the Mar24 Price, Mar25 EPS
- The Rakuten Bank offering in early December was a great time to buy the dip of you sold end-September. It should have been a good time to buy outright.
- Unfortunately, the stock priced at ¥2,470, then closed that day at ¥2,500. That was the high for the next ten weeks. Two weeks later it was 20% lower. Ouch.
- But it climbed out of the abyss, gained 35% in 8wks, then Thursday the Bank announced a new Shareholder Benefit program. Today the stock was +7%. Worth looking at details.
Alibaba (9988 HK): Value Proposition Looks Clean
- It is well-known that Alibaba (ADR) (BABA US) is cheap (9x FY24 PE, fiscal year ending March; 8x FY23 free cash flow; net cash 25% of market cap).
- Taking into account all of the major moving parts, I believe Alibaba can now be categorized as a good value stock.
- Shareholder returns through buyback and dividend, minus stock-based compensation in 2023 calendar year equal to around 5% yield.
Alcoa (AA US) Makes an Offer for Alumina (AWC AU)
- Alcoa (AA US) has made a non-binding, indicative and conditional proposal to acquire all shares in Alumina (AWC AU). Shareholders will receive 0.02854 shares of Alcoa for each Alumina share.
- Alcoa (AA US) has entered into an agreement with Allan Gray Australia that gives them the right to acquire 19.9% of Alumina Ltd (AWC AU) at the same swap ratio.
- Alumina Ltd (AWC AU) is a potential delete from the ASX100 Index at the March rebalance and that could provide an entry into the stock.
Toei Animation (4816 JP): The Current Playbook
- Since the US$550 million secondary placement announcement, Toei Animation (4816 JP)’s shares are down 7.0% from the undisturbed price of JPY18,560 per share (14 February).
- Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Toei Animation’s shares have followed the pattern of previous large placements.
- The offering will likely be priced on 27 February. Investors participating in previous large Japanese placements tend to secure positive returns.
Aeon, Welcia and Tsuruha: Creating an FMCG Behemoth
- The possible merger between Welcia and Tsuruha under Aeon has been talked about for years despite concerns from both drugstores, but may now happen.
- But calling these retailers drugstores is increasingly a misnomer: FMCG-drugstores is better because they and many others in the sector, increasingly compete with FMCG retailers like supermarkets and even CVS.
- This evolution is rapid so the merits of a deal make more sense when we view it from a sector five years in the future than how it is today.
StubWorld: Keisei Electric Appears Stretched Amid Latest Buyback
- Keisei Electric (9009 JP) has been an outperformer since activist fund Palliser Capital called on the company sell some Oriental Land (4661 JP) shares. It has now announced another buyback.
- Preceding my comments on Keisei Electric are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
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