In today’s briefing:
- TRACKING TRAFFIC/Lalatech IPO: Attractive Segment | ‘Unbelievable’ Cost Control | Hidden Competition
- J&T Global Express (1519 HK): The US$9.9 Billion Lock up Expiry
- Last Week in Event SPACE: JSR, Austal, Rakuten, Hyundai Home Shopping, Hanmi Science
- NTT Data’s ¥1,940/Share Deal For Jastec (9717) – Not Enough But Probably Enough
- HSCEI Index Rebalance Preview: One Change or Two in June?
- Observations on Post-Election Flows of Value-Up Stocks, Based on Recent Local Institutional Trades
- Merger Arb Mondays (08 Apr) – JSR, Jastec, Shinko, Azure, Genex, Best World, Isetan
- KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High
- SENSEX Index Rebalance Preview: Wipro Deletion to Bring Sector Balance into Play
- STAR50 Index Rebalance Preview: APT Medical Moving Higher
TRACKING TRAFFIC/Lalatech IPO: Attractive Segment | ‘Unbelievable’ Cost Control | Hidden Competition
- Lalatech’s largest segment by revenue — Chinese intra-city on-demand freight — features many of the attributes that are attractive to online logistics intermediaries
- At the top of the list of red flags in its prospectus is Lalatech’s company’s dramatic 71% Y/Y reduction in Sales and Marketing expenses last year
- Although Lalatech appears to be the leading platform for Chinese intra-city on-demand freight matching, the company faces ‘hidden’ competition from several larger groups
J&T Global Express (1519 HK): The US$9.9 Billion Lock up Expiry
- J&T Global Express (1519 HK)’s 180-day IPO lock-up period for 88% of outstanding shares expires on 24 April. The shares exiting the lock-up period are worth US$9.9 billion.
- The likely sellers will be the Series pre-A1, pre-A2, A and B investors as are they are materially in the money at the last close price.
- J&T has returned to organic growth with a shift to profits and declining cash burn. While the last close is 17% below the IPO price, the shares are fairly valued.
Last Week in Event SPACE: JSR, Austal, Rakuten, Hyundai Home Shopping, Hanmi Science
- Murakami to tender stake in JSR Corp (4185 JP)? Maybe the “double arb”: i.e. short on swap, long on cash, will tender the cash, remain short the back end.
- Austal Ltd (ASB AU) rejected (for now) Hanwha Ocean (042660 KS)‘s bid based on regulatory concerns. Hanwha reckons these should not be an issue.
- If you can tolerate owning the mobile biz, buy Rakuten (4755 JP) on dips. If not, avoid Rakuten Group and Rakuten Bank short-term; buy Rakuten Bank on larger dips.
NTT Data’s ¥1,940/Share Deal For Jastec (9717) – Not Enough But Probably Enough
- NTT Data Corp (9613 JP) on Friday announced a Tender Offer to take over small custom software developer and system integrator Jastec Co Ltd (9717 JP).
- It’s at a premium. But for a growing company ahead of “The 2025 Problem” where synergies are expected, you’d want to get a premium vs where comps trade. You don’t.
- But this gets to near 50% just from friendlies. Someone who wanted to interfere would have to be publicly noisy. I expect this gets done.
HSCEI Index Rebalance Preview: One Change or Two in June?
- SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
- For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
- Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.
Observations on Post-Election Flows of Value-Up Stocks, Based on Recent Local Institutional Trades
- Opposition’s probable win in the election sparks concerns about Value-up initiative’s momentum. However, market sentiment doesn’t universally echo these worries.
- Value-Up stocks’ recent corrections likely stem from Q4 dividend arbitrage liquidation, rather than election result concerns.
- Post-Election, even if the opposition wins, the left-leaning Value-up program might continue, limiting the opposition’s influence, as seen in recent National Pension Service flows.
Merger Arb Mondays (08 Apr) – JSR, Jastec, Shinko, Azure, Genex, Best World, Isetan
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Jastec Co Ltd (9717 JP), Qantm Intellectual Property (QIP AU), Southern Cross Media (SXL AU), Genex Power Ltd (GNX AU), QV Equities Ltd (QVE AU), China TCM.
- Lowest spreads: Roland DG Corp (6789 JP), Tietto Minerals Ltd (TIE AU), Newmark Property REIT (NPR AU), Mma Offshore (MRM AU), CPMC Holdings (906 HK), Pact Group Holdings (PGH AU).
KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High
- Around 85% of the way through the review period, we see four changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance.
- The impact on the potential inclusions ranges from 0.4-8 days of ADV while the impact on the potential deletions varies from 1-13 days of ADV.
- Hanmi Semiconductor (042700 KS) is up 72% in the last two months following its appearance on the list of potential Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusions in June.
SENSEX Index Rebalance Preview: Wipro Deletion to Bring Sector Balance into Play
- Nearly 90% of the way through the review period of the June rebalance, we see one potential index change with Wipro Ltd (WPRO IN) in deletion zone.
- Oil & Natural Gas Corp (ONGC IN), Coal India Ltd (COAL IN) and Adani Enterprises (ADE IN) are potential replacements with sector balance likely to come into play.
- Passive trackers will need to trade over 13 days of delivery volume on the potential index changes.
STAR50 Index Rebalance Preview: APT Medical Moving Higher
- The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
- We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.
- With a big jump in tracking AUM over the last few months, passives will need to trade a lot of stock on implementation date.
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