In today’s briefing:
- Kioxia IPO Preview
- Kansai Electric Power (9503 JP) – Huge Offering Is Smaller Now; Reward/Risk Skews Upwards
- HSTECH Index Rebalance: Midea (300 HK) Replaces Weibo (9898 HK); US$1.5bn Round-Trip Trade
- Hang Seng Index (HSI) Rebalance: Still Baby Steps to Get to 100 Members
- Henlius (2696 HK): The Spread Should Narrow After NDRC Approval
- Keisei Electric Jumps 14% on Reports of Murakami Stake
- FineToday Holdings (289A JP) IPO: The Bear Case
- Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Big Shift in Divs Leads to Last Minute Changes
- Kansai Electric Power (9503 JP): The Current Playbook
- Taiwan Top 50 ETF Rebalance Preview: Double Inclusion for Yang Ming Marine (2609 TT)
Kioxia IPO Preview
- Kioxia plans to complete its IPO on 18 December, valuing Kioxia at 750 billion yen ($4.8 billion), down nearly 50% from the initial market value estimates about 2-3 months ago.
- Kioxia had revenue of 909.4 billion Yen (up 84.6% YoY) and EBITDA of 449.6 billion Yen in 1H FY24, driven by the recovering demand for data center and enterprise SSDs.
- As of 2Q 2024, Samsung Electronics was the largest player in the global NAND Flash market with a 36.9% market, followed by SK Group (22.1%), and Kioxia (13.8%).
Kansai Electric Power (9503 JP) – Huge Offering Is Smaller Now; Reward/Risk Skews Upwards
- On 13 November, Kansai Electric Power (9503 JP) announced an equity offering to raise capital for capex expenditures over the next several years. It is significantly dilutive.
- The shares responded by falling 23% to 8-months lows of ¥1,850 last Thursday and Friday. That puts the stock at the same forward PER post-offering as it was pre-offering.
- That’s probably not an awful place to own now that the stock will have been slightly de-risked/de-levered.
HSTECH Index Rebalance: Midea (300 HK) Replaces Weibo (9898 HK); US$1.5bn Round-Trip Trade
- In a surprise, Midea Group (300 HK) will replace Weibo (9898 HK) in the Hang Seng TECH Index (HSTECH INDEX) after the close of trading on 6 December.
- Estimated one-way turnover at the rebalance is 4.5% resulting in a round-trip trade of HK$11.72bn (US$1.51bn). Passives need to buy 9x ADV in Midea Group (300 HK).
- The Midea Group Co Ltd A (000333 CH) / Midea Group (300 HK) premium could drop due to the index inclusion providing an entry point into an AH expansion trade.
Hang Seng Index (HSI) Rebalance: Still Baby Steps to Get to 100 Members
- Kuaishou Technology (1024 HK) and New Oriental Education (9901 HK) will be added to the Hang Seng Index in December while New World Development (17 HK) will be deleted.
- Estimated one-way turnover is 2.7% and the estimated round-trip trade is HK$10.89bn (US$1.4bn) with over 1 day of ADV to trade in the adds and the delete.
- The index committee has net added 1 stock to the Hang Seng Index this year to go from 82 to 83 constituents. Reaching the 100-member target will drag into 2026.
Henlius (2696 HK): The Spread Should Narrow After NDRC Approval
- On the 24th June, Fosun Pharmaceutical (2196 HK) made a HK$24.60/share Offer, in cash, for H-shares not held in Shanghai Henlius Biotech (2696 HK). A scrip alternative was subsequently afforded.
- This is a pre-conditional Offer, subject to NDRC, Mofcom and SAFE – followed by a Scheme-like vote for independent H-shareholders. Henlius has announced that NDRC approval has now been secured.
- Trading at a massive gross spread of ~21.5% compared to ~10% just prior to China Traditional Chinese Medicine (570 HK)‘s capitulation. This is excessive.
Keisei Electric Jumps 14% on Reports of Murakami Stake
- Keisei Electric Railway Co (9009 JP) rose 14% after reports that a fund linked to activist investor Murakami bought a stake, while Oriental Land also gained 2.9% in a volatile market.
- Down 50% since February 2024, Keisei Electric seems to have limited downside risks. We believe its valuation could increase if Murakami’s stake leads to activism.
- The long Keisei Electric, short Oriental Land (4661 JP) trade could work well too, especially if Murakami’s activism and the risks to Oriental Land’s guidance materialize.
FineToday Holdings (289A JP) IPO: The Bear Case
- FineToday Holdings Co Ltd (289A JP) is a Japanese personal care business seeking to raise up to US$500 million. It will be listed on 17 December.
- In FineToday Holdings (289A JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on the weak 3Q24 revenue performance, mid-tier revenue growth, leveraged balance sheet, share overhang and pre-IPO dividend.
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Big Shift in Divs Leads to Last Minute Changes
- Using data from the close on 25 November, there could be 6 adds and 5 deletes for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
- There will also be capping and funding flows that will lead to a one-way turnover of 17.3% and a one-way trade of TWD 60.6bn (US$1.86bn).
- On average, the forecast adds have started to outperform the forecast deletes. Positioning should continue in stocks that have large flow/impact or have recently joined the list of forecast adds/deletes.
Kansai Electric Power (9503 JP): The Current Playbook
- Since the US$3.5 billion primary/secondary offering announcement, Kansai Electric Power (9503 JP)’s shares have been down 20.6% from the undisturbed price of JPY2,397 per share (13 November).
- Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, KEPCO’s shares have followed the pattern of previous large placements.
- The offering will likely be priced on 26 November. The average large Japanese placement tends to generate positive returns.
Taiwan Top 50 ETF Rebalance Preview: Double Inclusion for Yang Ming Marine (2609 TT)
- Yang Ming Marine Transport (2609 TT) is forecast to be added to the Yuanta/P-Shares Taiwan Top 50 ETF in December, replacing Airtac International (1590 TT).
- Yang Ming Marine Transport (2609 TT) is also expected to be added to the Yuanta/P-shares Dividend Plus ETF in December, so there will be buying from multiple trackers.
- Shorts are near their lows in Yang Ming Marine Transport (2609 TT) while there has been covering in Airtac International (1590 TT) after an increase in the last few months.
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