In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
- Nintendo (7974) | Game Over for Switch
- Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps
- SBI Affiliate To Buy 45-49% of E-Guardian (6050) In Partial Tender Offer
- Nippon Yusen (9101) BIG Buyback Announced
- KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue
- SF Holding (002352 CH): H-Share Listing & Index Implications
- Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach
- StubWorld: Takara Holdings Trading “Rich”
- Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns
Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
- The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
- There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
- If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn).
Nintendo (7974) | Game Over for Switch
- Nintendo reported operating profit of 190b yen (-8% YoY), falling far short of Street expectations
- The Nintendo Switch is now a six-year old console and demand is exhausted. A normalization of chip/supply chain issues benefits the newer PS5
- Our thesis is that the hardware cycle has peaked and that the share price will head lower in tandem with the dwindling top line
Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps
- Itochu Corp (8001 JP) today announced it had agreed with 61%-owned Itochu Techno Solutions (4739 JP) sub to take over CTC and squeeze out minorities.
- The stock released earnings mid-day, somehow, but not on TDNet until post-close. The stock jumped in the last two hours. The Tender Offer is at a 10% premium to close.
- Growth will be up, and there are lots of financial assets and net receivables so this is 8+x March 2025. Itochu is not overpaying. But there will be no counter.
SBI Affiliate To Buy 45-49% of E-Guardian (6050) In Partial Tender Offer
- Today, Change Inc (3962 JP) (30%-owned by SBI Holdings (8473 JP)) announced a Tender Offer to buy 32-36.9% of E-Guardian, followed by a third-party placement to get them to 45-49%.
- Small cap E-Guardian does internet services support, ad processing, cyber security (their fastest growing segment) and top line has been growing.
- The partial offer is big enough to matter, and up 50%. It is worth a look for people who like small cap special sits.
Nippon Yusen (9101) BIG Buyback Announced
- In March, NYK announced a new Mid-Term Management Plan discussed in Nippon Yusen – New MidTermPlan = New Shareholder Return Policy. They promised a full Shareholder Return Policy in May.
- There was limited new SRP discussion in the 9 May earnings announcement. The MTMP suggested ¥200bn over 2yrs. The (Japanese) earnings announcement did too. Then May ended.
- Now the Buyback Plan is out. ¥200bn over 9mos. That is different. This could move.
KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue
- Today, Kawasaki Kisen Kaisha (9107 JP) announced Q1 earnings. As expected, net was WAY down on weak container business. But the company revised up H1 and Full-Year.
- KLINE increased its FY2023 payout, upping its expected buyback plan from ¥50bn to ¥60bn. This is still cheap at 8.5x and 0.7x book, and there is non-container growth.
- The structure of the buyback deserves attention. It may deserve a very short-term trade. The buyback construct has the possibility of “fun and games.”
SF Holding (002352 CH): H-Share Listing & Index Implications
- S.F. Holding (002352 CH) could raise between HK$26-33bn (US$3.4-4.2bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
- The H-shares could get Fast Entry to certain indices and regular entry to others depending on the number of shares that are allotted to cornerstone and/or strategic investors.
- The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.
Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach
- On 28 July, Toshiba Corp (6502 JP) disclosed that JIP delayed the tender start to “sometime in August 2023” vs the target “in the last ten days of July 2023.”
- Toshiba reports 1Q results on 7 August. A solid 1Q will undermine the Board’s recommendation of the offer in part on the premise that the IFA’s DCF valuation is unrealistic.
- The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip away at the offer’s attractiveness.
StubWorld: Takara Holdings Trading “Rich”
- On an implied stub and simple ratio, Takara Holdings (2531 JP) is trading rich to 60.9%-held Takara Bio Inc (4974 JP).
- Preceding my comments on Takara 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%.
Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns
- Nextrade aims to secure the business permit within the next year’s second half. They intend to launch their services by the end of next year or early the following year.
- All eyes are focused on the proposal to be operational from 8:30 AM to 11:59 PM, with the afternoon call auction session running from 3:00 PM to 6:00 PM.
- It would be crucial to observe how the elongation of the time period for specific issues to be reflected in prices could potentially lead to changes in intraday flow patterns.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Analytics and News
- ✓ Events & Webinars
