In today’s briefing:
- Kokusai Elec (6525) – The Much-Anticipated Lockup Expiry
- Shinko Electric (6967) – Break/Gap Risk Update
- JSR (4185) – Deal Done, Now Back End Arbs Need To Be Card Counters
- Hang Lung Group: Thoughts On HLP’s Scrip Dividend
- J&T Global Express IPO Lock-Up Expiry – Tiny Float with 87%+ Stake Lockup Release Worth >US$8.8bn
- Hang Lung Properties (101 HK): Scrip Div Helps the Family to Chip Away at Minorities
- Lynas (LYC AU): Gina’s Stake Revives MP Materials Merger
- ChiNext/ChiNext50 Index Rebalance Preview: Plenty of Overlap Between the Indices
- Hollysys (HOLI US): This Is A Buy
- Ohayo Japan | A Healthy Correction
Kokusai Elec (6525) – The Much-Anticipated Lockup Expiry
- Last autumn, Kokusai Electric (6525 JP) was IPOed by KKR. The lockup expires next week, on 21 April 2024 (a Sunday). That frees up about 70% of the stock.
- KKR’s own stake is worth about US$2.8bn. It is not clear that Applied Materials, Qatar, or the Koch Strategic Platforms stakes would be for sale (now, or near-term).
- There is an interesting schedule of events between here and a likely offering date. It pays to pay attention to the details.
Shinko Electric (6967) – Break/Gap Risk Update
- When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
- 12wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 5wks ago, reco’d trimming.
- Shinko had outperformed Ibiden, and gross spreads had come in 5+% on JSR’s approval. Spreads are now 3% wider than their narrowest, but gap risk has widened as Shinko outperforms.
JSR (4185) – Deal Done, Now Back End Arbs Need To Be Card Counters
- Today after the close, the results of the JSR Corp (4185 JP) Tender Offer were announced. Bidco JICC-02 obtained 84.36% of the shares out in the Tender Offer.
- That means imminent index downweights, delayed index downweights, and theoretically another selldown on the last day of listed existence.
- News which came up since the start of the Tender Offer make this a little more difficult than it might have otherwise been.
Hang Lung Group: Thoughts On HLP’s Scrip Dividend
- And eagle-eyed reader spotted Hang Lung Properties (101 HK)‘s scrip dividend option for the FY23 final dividend. That’s the first time I’ve seen HLP provide this alternative.
- Over the years, the Chan family and Hang Lung (10 HK) have chipped away at HLG’s and HLP’s minorities. HLP and HLG are currently trading at all-time low P/Bs.
- This scrip dividend, which takes a page out of Jardine Matheson (JM SP)‘s playbook, would boost HLG’s stake in HLP to ~63% from 61.24% currently; if opting only for scrip.
J&T Global Express IPO Lock-Up Expiry – Tiny Float with 87%+ Stake Lockup Release Worth >US$8.8bn
- J&T Global Express, a global logistics provider, raised about US$500m in its Hong Kong IPO in Oct 2023. Its pre-IPO investors will be released from its IPO linked lockup soon.
- As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 25.4% market share as per 2023 parcel volume.
- In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.
Hang Lung Properties (101 HK): Scrip Div Helps the Family to Chip Away at Minorities
- In its final results on 30 January, the Hang Lung Properties (101 HK) board declared a final dividend of HK$0.60 per share, which can be paid in cash or by scrip.
- The Chan family’s share of outstanding shares has steadily increased from 53.15% in 2013 to 61.89%. The scrip dividend could increase the family to 63.57% of post-dividend outstanding shares.
- The Chan family have plenty of headroom to chip away at minorities before breaching the 25% public float requirements. HPL’s valuation is undemanding, but a privatisation offer is unlikely.
Lynas (LYC AU): Gina’s Stake Revives MP Materials Merger
- Lynas Corp Ltd (LYC AU) is the proverbial Aussie battler. Post the 2018 general elections, the new Malaysian government put Lynas on notice it may halt it rare-earth operations.
- Since then, Lynas’ Malaysian facility, which cuts into China’s near-monopoly on processing elements for defense/aerospace/EV/electronics industries, has (mostly) operated without substantial disruptions. Profit peaked in FY22; but has since rolled-over.
- Gina Rhinehart’s Hancock has now disclosed a 5.82% stake in Lynas; having disclosed a 5.3% stake in MP Materials (MP US) earlier this month. Lynas confirmed discussions with MPM in February.
ChiNext/ChiNext50 Index Rebalance Preview: Plenty of Overlap Between the Indices
- Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
- There are overlapping names for the two indices and some of the stocks will also have flows from the CSI Smallcap 500 Index – Shang (SH000905 INDEX) trackers.
- The potential adds have outperformed the potential deletes between 9-10% for both indices over the last month with the deletes dropping a lot more than the adds.
Hollysys (HOLI US): This Is A Buy
- On the 8th February 2024, 85% of Hollysys Automation (HOLI US) shareholders present and via proxy, voted for Ascendent Capital’s Offer. After three-plus years, the end was finally in sight.
- Then crickets. The merger was to complete in the 1Q. On the 15th April, HOLI released an accountant resignation notice. No word on dissenters or regulatory approvals. Shares sold off.
- The accountant resignation is a nothing burger. HOLI should lift their game and provide more transparency on the outstanding merger conditions. Still, the spread is attractive. This is a buy.
Ohayo Japan | A Healthy Correction
- The market is experiencing its first bout of volatility this year, with the S&P trading below 50-day moving average
- Toshiba is considering cutting its domestic workforce by 5,000, approximately 7% of its total in Japan, in its latest move to accelerate restructuring
- ASML’s Q1 orders fall short, reflecting chipmakers’ cautious stance on equipment purchases.
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