In today’s briefing:
- KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade
- Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning
- Onewo (2602 HK) – Full Circulation & HSCI Inclusion
- Bank Rakyat Indonesia (BBRI IJ) – Forging a Healthier Future
- StubWorld’s: Amorepacific’s Multi-Year Lows
- BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling
- Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster
- SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
- Quiddity JPX-Nikkei 400 Rebal 2024: End-Oct 2023
- Tietto (TIE AU): Zhaojin Makes An Offer
KDX (8972) – The Kenedix REIT Merger After a Disastrous Index Inclusion Trade
- The merger between Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) is done. Newco starts trading this week as KDX.
- The trade was fine until I wrote 9 days ago there was still room to run. It fell the next day, bounced 3%, then got CRUSHED into the index upweight.
- NEWREIT is now as cheap relative to its Pro-Forma Peer Group as it was at announcement.
Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning
- The coming week has a lot of review periods ending – KOSPI 200, KOSDAQ 150, CSI 300, CSI 500, SSE50, STAR50, ChiNext and SENSEX, among others.
- The TOPIX rebalance will be implemented on Monday while the Global X Lithium & Battery Tech ETF (LIT US) and IDX indices will rebalance at the close on Tuesday.
- There were outflows from Emerging Market ETFs including iShares Emerging Markets (EEM), iShares Core Emerging Mar (IEMG), Schwab Emerging Markets Equi (SCHE) and IShares Edge Min Vol Emerging Markets ETF (EEMV).
Onewo (2602 HK) – Full Circulation & HSCI Inclusion
- Onewo (2602 HK) has announced the full conversion of 1.05bn Domestic Shares and Unlisted Foreign Shares to H-shares. The increased market cap will help in HSCI inclusion.
- Onewo (2602 HK) should be added to the HSCI in March and will be added to Southbound Stock Connect soon after index inclusion.
- Onewo (2602 HK) has drastically underperformed its peers since listing and the HSCI inclusion could mark a turning point for the stock.
Bank Rakyat Indonesia (BBRI IJ) – Forging a Healthier Future
- Bank Rakyat Indonesia’s numbers made for positive reading with loan growth coming through in productive areas, especially for Kupedes commercial micro-loans but also from its PNM and Pegadaian subsidiaries.
- The bank maintained its funding costs at highly competitive levels despite rising rates and time deposit growth with NIMs improving due to a better loan mix in micro.
- Bank Rakyat Indonesia (BBRI IJ) remains the most direct way to get exposure to greater financial inclusion and the underbanked in Indonesia. Valuations remain attractive with rising ROA and ROE.
StubWorld’s: Amorepacific’s Multi-Year Lows
- Both the implied stub for Amorepacific Group (002790 KS) and the simple ratio (Group/Amorepacific Corp (090430 KS)) are around lifetime low levels.
- Preceding my comments on Amorepacific 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%.
BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling
- Nippon Electric Glass (5214 JP) is going through a rebuilding year. Lots of restructuring expenses and I expect there will be more.
- The company today announced the outline of its next Mid-Term Management Plan for the 5 years to 2028. It will announce details in early Feb 2024 with results.
- In that, there is ¥50bn of buybacks through Dec2026, of which ¥20bn will be made in the next 4mos. That is about 11-14% of ADV assuming the price jumps.
Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster
- A small specialty adhesives maker – Teraoka Seisakusho (4987 JP) has had an MBO proposed and approved. At 0.54x book. NetCash+securities+2.5mos of net A/R+inventory = 99% of Takeover Market Cap.
- Borrow 2x EBITDA, pay out the cash and securities, and this is being done at <0.3x remaining book. The takeover is 100+% bank funded. It’s ridiculous.
- For this to get stopped, however, someone has to go activist on a smallcap where retail owns the entire float and friends and family own 55% to start.
SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
- Two thirds of the way through the review period, we see one change for the SET 50 Index in December with KCE Electronics (KCE TB) replacing Ngern Tid Lor (TIDLOR TB).
- There is one close change where I-TAIL (ITC TB) could replace Srisawad Power 1979 (SAWAD TB) in the index.
- Delta Electronics Thailand (DELTA TB) is unlikely to be deleted while Berli Jucker (BJC TB) fails liquidity and is unlikely to be added.
Quiddity JPX-Nikkei 400 Rebal 2024: End-Oct 2023
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2024 based on trading data as of end-October 2023.
Tietto (TIE AU): Zhaojin Makes An Offer
- SOE-Backed Zhaojin Mining Industry H (1818 HK), China’s fourth largest integrated gold producer, has tabled a non-binding Offer for Aussie-listed West African gold miner Tietto Minerals Ltd (TIE AU).
- The A$0.58/share cash Offer is a 36% premium to undisturbed. Zhaojin is seeking 50.1% of shares out, with 7.02% already held.
- Conditions include a raft of PRC and Côte d’Ivoire regulatory approvals. None of these should face opposition.
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