In today’s briefing:
- Kokusai Electric IPO Lock-Up – KKR Will Be Tempted by the US$2.7bn Release but Might Have to Wait
- KKR To Sell a 20-22% Stake in Kokusai Electric (6525)?
- Toyota Group Cross-Holding Structure Primer – Holdings, Unwind Progress, Buyback Policies, Etc
- Recruit (6098 JP) – BIG Headline Buyback But Disappointing if That Is Best Use Of Cash
- StubWorld: Hanwha Corp’s Steep Discount & Tender Offer
- Asia Cement China (743.HK) – Investors Are Facing the Dilemma of Low-Priced Privatization
- Nikkei 225 Index Rebalance Preview (Sep 2024): Potential Adds/Deletes, Capping & Funding Changes
- Kelun-Biotech IPO Lock-Up Expiry – Strong Performance Leaves Pre-IPO Investors with Large Gains
- Kokusai Electric (6525 JP): Rumoured KKR US$1.8 Billion Secondary Offering
- Details of Block Deal Pre-Disclosure Rule Disclosed: Cancellation Risk from 30% Price Correction
Kokusai Electric IPO Lock-Up – KKR Will Be Tempted by the US$2.7bn Release but Might Have to Wait
- KKR raised around US$730m via selling some stake in Kokusai Electric (6525 JP) Japan IPO in Sep 2023. Its remaining stake will be released from its IPO linked lockup soon.
- KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
- In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.
KKR To Sell a 20-22% Stake in Kokusai Electric (6525)?
- Today, a Reuters article came out saying that KKR would sell down half its 43% stake in Kokusai Electric (6525 JP) according to “two people familiar with the matter.”
- The article also said Kokusai Electric would buy back shares. Kokusai responded with a TDNET release saying “we did not release this info but we are considering various capital policies.
- It pays to look at the Shareholder Structure as it stands. This is bigger than it looks.
Toyota Group Cross-Holding Structure Primer – Holdings, Unwind Progress, Buyback Policies, Etc
- Last September in the release of its new Mid-Term Management Plan, Toyota Group member Aisin (7259 JP) announced a plan to cut cross-holdings to zero. JTEKT Corp (6473 JP) followed suit.
- It started with a selldown of Denso Corp (6902 JP), then Toyota Industries (6201 JP), now Aisin. Last FY, Toyota Group cos reduced crossholdings by ¥870bn. This year will be more.
- Attached below is a general breakdown of Toyota Group cross-holdings, discussion of cross-holding policies, and analysis of what is next, and what is not.
Recruit (6098 JP) – BIG Headline Buyback But Disappointing if That Is Best Use Of Cash
- Last December, Recruit Holdings (6098 JP) announced a ¥200bn buyback which sounded big but with lots of cross-holders, wasn’t huge. The stock is up 80% in 6+ months since.
- Today, the company announced a new buyback of ¥600bn. This is very aggressive, and at 25x EBITDA and 40x PER, is probably due to demand to sell.
- Crossholders now hold ¥2trln which is three-plus times this buyback. And if the price were to rise 10% a year for 3yrs, it would be four times.
StubWorld: Hanwha Corp’s Steep Discount & Tender Offer
- With Hanwha Corporation (000880 KS) trading around a one-year low NAV discount, the Hanwha Group has made a Tender Offer for 8% of shares outstanding at ₩30,000/share.
- Preceding my comments on Hanwha 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%.
Asia Cement China (743.HK) – Investors Are Facing the Dilemma of Low-Priced Privatization
- Many minority shareholders have lodged complaints against ACC with the SFC, since unfair privatization price damages the ecology of the entire market.It depends on whether the SFC will take action.
- The failure of privatization does not necessarily mean better returns for investors. On the contrary, it may result in greater losses. ACC can have other ways “hollow out” the Company.
- Arbitrageurs can choose to bet on a second privatization (with higher Offer Price) and also on the potential dividends, but the prerequisite is that the management choose to “act honorably”.
Nikkei 225 Index Rebalance Preview (Sep 2024): Potential Adds/Deletes, Capping & Funding Changes
- The review period for the Nikkei 225 Index September rebalance ends in three weeks. There could be three changes at the rebalance with sector balance used for the additions.
- Depending on the changes, passive trackers will need to buy between 3-57x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-8.4x ADV on the deletions.
- Fast Retailing (9983 JP)‘s index weight is currently higher than 10% and that will result in capping in September. Passives will need to sell 6x ADV in the stock.
Kelun-Biotech IPO Lock-Up Expiry – Strong Performance Leaves Pre-IPO Investors with Large Gains
- Kelun Biotech (KB) raised around US$170m in its IPO in July 2023, the lockup on its pre-IPO shareholders is set to expire soon.
- KB is a China-based integrated innovative biopharmaceutical company. It has accumulated more than ten years of experience in antibody drug conjugates (ADC) development.
- In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.
Kokusai Electric (6525 JP): Rumoured KKR US$1.8 Billion Secondary Offering
- Reuters reported that KKR & Co (KKR US), the largest Kokusai Electric (6525 JP) shareholder, plans to sell about half of its 43% stake, worth around JPY300 billion.
- As Kokusai’s shares are trading at 3.2x the IPO price of JPY1,840, KKR would be tempted to reduce its stake further. The 180-day IPO lock-up period expired on 22 April.
- Kokusai anticipates a return to growth and margin improvement. However, Kokusai trades at a material premium to peer multiples and is fully priced.
Details of Block Deal Pre-Disclosure Rule Disclosed: Cancellation Risk from 30% Price Correction
- Today’s press release unveils details on new flow trading events in Korea’s local market from the second half of this year, highlighting two key points.
- Firstly, the disclosure rule starts with block deals from August 23rd. Secondly, a 30% or greater stock price correction on disclosure day may cancel the transaction plan.
- This highlights the need to consider cancellation risks in pre-disclosure positions and design setups with consideration for the potential for reverse flows as stock prices approach 30% corrections.
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