In today’s briefing:
- September Nikkei 225 Review – Lasertec, Mercari, Nitori IN, Expected DELETEs Out (Matsui the Biggie)
- Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT
- March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split
- JFE Holdings (5411) Stock+CB Offering
- Korea’s Latest IPO Rule Change: Daily Differential Allocation
- Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions
- Golden Eagle (3308 HK): CCASS Movements Are Standard Fare
- JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction
- Orora Limited Placement – Large Deal to Digest, Although Seems Well Flagged and Accretive
- ARM Holdings Pre-IPO – Thoughts on Valuations
September Nikkei 225 Review – Lasertec, Mercari, Nitori IN, Expected DELETEs Out (Matsui the Biggie)
- Today, somewhat earlier than expected), the Nikkei Index Team announced the changes to the Nikkei 225.
- Lasertec Corp (6920 JP), Mercari (4385 JP), and Nitori Holdings (9843 JP) are added. Nippon Sheet Glass (5202 JP), Mitsui E&S Holdings (7003 JP), and Matsui Securities (8628 JP) removed.
- That triggers flows of about ¥480bn a side, and some big, big changes. The announcement helps understand new process better.
Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT
- Mercari (4385 JP), Lasertec (6920 JP) and Nitori (9843 JP) will replace Nippon Sheet Glass (5202 JP), Mitsui E&S (7003 JP) and Matsui Securities (8628 JP) in the Nikkei 225.
- As expected, Nitori Holdings (9843 JP) will be added at half the planned PAF since the trading value is low compared to the expected index weight.
- Passive trackers need to buy between 1-17 days of ADV on the adds while selling between 1.2-16.5 days of ADV on the deletes. There is a big funding trade too.
March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split
- Now that the September 2023 Nikkei 225 Rebal is announced, we look at the March 2024 rebal and its possibilities.
- Socionext (6526 JP) is the only automatic ADD, but it might not be. ZOZO Inc (3092 JP) and Ryohin Keikaku (7453 JP) would be sector balance ADDs.
- Fast Retailing (9983 JP) could get capped if it outperforms Nikkei 225 by ~10%+ to 31Jan2024. And Nitori Holdings (9843 JP) will see an add of ~14 days of ADV.
JFE Holdings (5411) Stock+CB Offering
- Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
- ¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
- This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.
Korea’s Latest IPO Rule Change: Daily Differential Allocation
- Korea FSS has provided guidelines to assign different weights to IPO orders from Day 1 to Day 5. Bookrunners should give higher weights to institutions that place their orders early.
- The question of whether this will deter the rush to place bulk orders close to the deadline and lead to a higher weighting of essential pricing is generating significant interest.
- The volume of orders and allocation by price range could serve as practical clues for assessing post-IPO pricing, making it a crucial factor in formulating post-IPO trading strategies.
Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions
- There are a bunch of stocks that are constituents of the S&P/ASX family of indices and could go private or merge prior to the next scheduled rebalance in December.
- That will lead to ad hoc inclusions for the S&P/ASX 200 (AS51 INDEX) and could also lead to ad hoc inclusions for the S&P/ASX 50 and S&P/ASX 100 indices.
- There is a fair amount of short interest on some of the potential inclusions and short covering due to index inclusion could take the stocks higher.
Golden Eagle (3308 HK): CCASS Movements Are Standard Fare
- Back on the 28th May, PRC department store play Golden Eagle (3308 HK) announced a privatisation offer, by way of a Scheme, at $6.88/share, a 40.41% premium to last close.
- The Offeror is the Wang family, who together with concert parties, held 80.29%. 7.18% of the 19.71% held by the disinterested stakeholders have given irrevocables in favour of the Scheme.
- Ahead of the Scheme Meeting on September 15th, a significant amount of shares have moved out of CCASS. This is not something to concern investors.
JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction
- JFE Holdings (5411 JP) is looking to raise around US$870m to fund its capacity expansion plans. Together with the offering, it will undertake a US$610m CB issuance.
- The deal appears to be well flagged with the firm disclosing its JV and other related CapEx plans in its earlier earnings announcement.
- Overall, the new shares would result in a 8.2% dilution and represent 12 days of three month ADV.
Orora Limited Placement – Large Deal to Digest, Although Seems Well Flagged and Accretive
- Orora Ltd (ORA AU) is looking to raise A$1,345m (~US$870m) via a primary placement and an entitlement offer to partially fund its acquisition of Saverglass.
- While the exact size/target of an acquisition wasn’t explicitly mentioned earlier, the firm had discussed its potential use of M&A to grow its North American/Europe regions.
- Including the entitlement offer, the deal would represent 212 days of three month ADV and add 58.9% to the firm’s total shares outstanding.
ARM Holdings Pre-IPO – Thoughts on Valuations
- Softbank Group (9984 JP) aims to raise around US$8-10bn via selling some of its stake in ARM Holdings‘ US IPO.
- ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
- In our earlier note, we looked at Arm’s past performance and undertook a peer comparison. In this note, we talk about valuations.
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