In today’s briefing:
- Korea’s Short Selling Ban to Stay, Likely Until EquiLend-Korean Version Launch
- New Year New NISA Accounts – It’s BIG, But Not so Big
- NIFTY NEXT50 Index Rebalance Preview: Potential Adds Skyrocketing
- Gap Trades in Korean Prefs Vs Common Share Pairs in 1Q 2024
- Fast Retailing: Earnings Preview
- Quiddity Leaderboard for Hang Seng Index Mar 24: More Room Being Created for IT Names?
- Aoki Super (9977) MBO at ¥3,800/Share (All-Time High, 15x Forecast FCF)
- Hyundai Hyms IPO Valuation Analysis
- Kerry Express (KEX TB): Kerry Logistics (636 HK)’s In-Specie Triggers MTO
- Aoki Super (9977 JP): MBO Tender Offer at JPY3,800
Korea’s Short Selling Ban to Stay, Likely Until EquiLend-Korean Version Launch
- Local market information indicates potential collaboration between KRX, FSS, and KSD to create a Korean EquiLend, aiming to centralize the stock lending channel.
- Unprecedented globally, President Yoon aims to centralize short selling. The challenge lies in mandating foreign investors to use Korea’s platform, necessitating a complex legal framework.
- Despite the difficulty, local authorities are compelled to pursue this initiative, raising the likelihood of a Korean EquiLend. Developing strategic plans in response is imperative.
New Year New NISA Accounts – It’s BIG, But Not so Big
- The Kishida administration put out a Doubling Asset-Based Income Plan in 2022. The goal? To get cash savings (corporate/individual) into growth assets and increase asset-based return contribution to income.
- The goal included doubling the number of NISA accounts, and the amount invested in the next five years. On 1 January 2024, NEW NISA account contribution totals were trebled.
- If accounts double, and contribution totals treble, and exemptions are now permanent, investment doubling is a quasi-certainty. The question is how it turns into income-producing assets. That’s MUCH tougher.
NIFTY NEXT50 Index Rebalance Preview: Potential Adds Skyrocketing
- Nearing the end of the review period, we see 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
- Estimated one-way turnover is 13.9% resulting in a one-way trade of INR 26.9bn. There will be more than 1.5x ADV to sell on nearly all deletes.
- The potential adds have outperformed the potential deletes by 35% over the last two months and some stocks are looking extremely frothy.
Gap Trades in Korean Prefs Vs Common Share Pairs in 1Q 2024
- In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 1Q 2024.
- The excessive gaps in the preferred and common shares of Kumho Petro Chemical, Amorepacific Corp, and Samsung Electronics could reverse in the next several months.
- We see some attractive longer-term opportunities for Amorepacific, Doosan Fuel Cell, LG Electronics, and CJ Cheiljedang which have especially high discounts for the preferred shares versus their counterpart common shares.
Fast Retailing: Earnings Preview
- While domestic revenues may have slowed, Uniqlo’s domestic OP shows upside potential driven by gross margin growth and a gradual reduction in SG&A costs.
- Meanwhile, we expect Uniqlo’s International business OP to surpass ¥75bn, driven by a rebound in China demand and strong momentum in South Korea, SE Asia & Ocenia.
- Thus, we see the upcoming earnings as a compelling opportunity for trading Fast Retailing (9983 JP).
Quiddity Leaderboard for Hang Seng Index Mar 24: More Room Being Created for IT Names?
- In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes for the Hang Seng Index in March 2024.
- The index changes for the March 2024 index rebal will be announced on 16th February 2024.
- While the Hang Seng Index selection process is highly subjective, we continue to believe that identifying eligible names and grouping them by conviction level could be a valuable exercise.
Aoki Super (9977) MBO at ¥3,800/Share (All-Time High, 15x Forecast FCF)
- The family which owns and controls ubiquitous Nagoya supermarket chain Aoki Super (9977 JP) will acquire the 47% it does not own in an MBO.
- This appears to be an estate planning exercise, creating a context to hand off ownership from the 77yr old former CEO to his 44yr old son and current CEO.
- This comes in at a 44% premium, an all-time high price, and 15+x forecast FCF (even if the forecast looks a little light). This gets done easily.
Hyundai Hyms IPO Valuation Analysis
- Our base case valuation of Hyundai Hyms is implied target price of 8,025 won per share, which is 27% higher than the high end of the IPO price range.
- We believe Hyundai Hyms’ valuation premium to the comps is appropriate due to much stronger operating profit growth and its strong relationships with HD Hyundai Heavy Industries.
- Hyundai Hyms’s main business includes shipbuilding equipment and related services. The company manufactures a wide variety of items necessary for ship construction, such as ship unit blocks and piping manufacturing.
Kerry Express (KEX TB): Kerry Logistics (636 HK)’s In-Specie Triggers MTO
- Last week Kerry Logistics Network (636 HK) (KLN) announced it would in-specie its entire 52.1% stake in Kerry Express Thailand (KEX TB) (KET).
- As S.F. Holding (002352 CH) holds a controlling 51.5% stake in KLN after the 2021 partial Offer, it will hold 26.8% in KET post-in-specie. That triggers an unconditional MTO.
- The MTO price will be THB5.50/share. The key regulatory approval is Thai SFC. That won’t be an issue.
Aoki Super (9977 JP): MBO Tender Offer at JPY3,800
- Aoki Super (9977 JP) has recommended an MBO tender offer of JPY3,800 per share, a 43.9% premium to the undisturbed (5 January).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 13.35% ownership ratio.
- Based on the irrevocables, the minimum acceptance condition requires a 28.6% minority acceptance rate. This acceptance rate is achievable as the offer represents an all-time high.
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