In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
- Nippon Yusen (9101) BIG Buyback Announced
- SBI Affiliate To Buy 45-49% of E-Guardian (6050) In Partial Tender Offer
- SF Holding (002352 CH): H-Share Listing & Index Implications
- KT&G: First Shares Cancellation in 14 Years
- Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns
- PCCW’s Stub Ops Spill More Red Ink
- EQD | NIFTY Index WEEKLY Correction May Be Ending
- Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc
- Fadu IPO Trading – Strong Subscription Rates Compared to Recent Korean IPOs
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).
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.
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.
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.
KT&G: First Shares Cancellation in 14 Years
- KT&G announced that it will buy back 3.47 million shares (2.5% of outstanding shares) and cancel them. This would be the first share cancellation for KT&G in 14 years.
- If the company’s DPS is 5,200 won for 2023 fiscal year, this would represent dividend yield of 6.2% at current prices.
- Although we have a positive view on KT&G’s share buyback and cancellation of 3.47 million shares, the company could do much more to improve its shareholder returns to its shareholders.
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.
PCCW’s Stub Ops Spill More Red Ink
- Net of HKT Ltd (6823 HK), PCCW Ltd (8 HK) recorded negative EBITDA of HK$378mn in the 1H23.
- This is the largest six-month negative EBITDA figure since the EBITDA loss of HK$427mn in 2H22, and the third largest in the past decade.
- PCCWs current discount to NAV is at an unsustainable 5%.
EQD | NIFTY Index WEEKLY Correction May Be Ending
- The NIFTY Index has been falling for 2 weeks and is reaching mildly OVERSOLD territory. If this was a retracement during the main rally, it may be time to BUY.
- The Market Reversal Matrix’s shows a bullish pattern, the time+price combined probability of success for LONG trades from current prices, after 2 weeks down, is >66%.
- Price area to go LONG: 19400 to 18792, you can go LONG this week and also next week, if down (CC=-3).
Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc
- In a surprising move, SK Inc confirmed the interim dividend amount (₩1,500) on July 26, and the ex-dividend date is set for August 10.
- As a result, this enables risk-free dividend arb trading in Korea as SK Inc carries single-stock futures, whose liquidity level is around 70% of the spot since July 26.
- The backwardation level has not yet pushed this arbitrage to a profitable level. Nevertheless, it’s still possible to observe the basis spread moving to a meaningful extent before the ex-date.
Fadu IPO Trading – Strong Subscription Rates Compared to Recent Korean IPOs
- Fadu (440110 KS) raised US$151m in its Korean IPO, after the deal was priced at KRW31,000/share, the top end of its IPO price range.
- Fadu is a South Korean fabless semiconductor maker mainly engaged in flash storage technology innovation. Its core products are Enterprise Solid State Drive (SSD) and Enterprise SSDs.
- In this note, we will talk about the demand for the deal and other trading dynamics.
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