In today’s briefing:
- JPX Proposes BIG Changes To TOPIX Rules, Affects IPOs More Than Market
- TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already
- Shin-Etsu Chem TOB for Rest of Mimasu Semi (8155) – Far Too Cheap, But No Squeaky Wheel No Grease
- Mizuho Cross-Shareholding – US$11bn of Cross-Shareholding, with at Least US$2bn to Sell over FY24-26
- Tatsuta Electric (5809 JP): Eneos Refuses to Bump, Board Capitulates
- MMA Offshore (MRM AU): Cyan Lifts Offer
- ENEOS Launches Tatsuta Elec (5809) “Minority” Takeout at Same Price as 18mos Ago
- Digging into Chosun Ilbo’s Report on SK Group’s SK Innovation & SK E&S Merger Plans
- Sensetime Placement – Seems Highly Opportunistic
- Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close
JPX Proposes BIG Changes To TOPIX Rules, Affects IPOs More Than Market
- In 2021 the JPX established new Listing Rules, and in April 2022 introduced new market segments (Prime/Standard/Growth) to much fanfare. Today, the TSE basically said those changes were meaningless.
- Today, the TSE announced proposed new rules for TOPIX constituent selection. There is a 2-month consultation period, then rules come out end-Sep 2024. Expect few changes from the Proposal.
- NextGen TOPIX will be created October 2026. 3-4 dozen ADDs, 500-600 DELETEs to create an index of 1,100-1,200 names. Some obvious large impacts 2+yrs from now, but this changes IPOs.
TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already
- JPX has commenced a market consultation on changes to the TSE Tokyo Price Index TOPIX (TPX INDEX) including expansion of the universe and periodic stock selection.
- Based on current market cap/ liquidity, there could be 38 adds and 447 deletions for the TSE Tokyo Price Index TOPIX, though the changes only start in October 2026.
- The deletions will be phased out of the index in 8 steps that will end in July 2028 and most of the stocks will move to the TOPIX Next-tier.
Shin-Etsu Chem TOB for Rest of Mimasu Semi (8155) – Far Too Cheap, But No Squeaky Wheel No Grease
- Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), will launch the TOB to buy out Mimasu minority holders, as pre-announced 2mos ago.
- Not surprising. They bought in 19yrs ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. It’s too cheap but in 18yrs, I recall zero activism here.
- Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 53%. Then they need a bit to get them to 67% but it should be straightforward.
Mizuho Cross-Shareholding – US$11bn of Cross-Shareholding, with at Least US$2bn to Sell over FY24-26
- Following up on our earlier cross-shareholding notes, in this note we look at Mizuho Financial Group (8411 JP)‘s cross-shareholding.
- Mizuho had a stake over US$100m in at least 34 listed Japanese stocks, amounting to a total of around US$7bn.
- In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.
Tatsuta Electric (5809 JP): Eneos Refuses to Bump, Board Capitulates
- 18 months after announcing the offer, ENEOS Holdings (5020 JP) launched the Tatsuta Electric Wire & Cable (5809 JP) tender offer at unchanged JPY720, 4.9% below the last close price.
- The Board requested a bump, but Eneos refused due to Tatsuta’s missed targets, no competing offer and the supportive updated IFA valuation
- The lack of a bump, no vocal opposition, deal fatigue, the Board’s unexpected recommendation, weak earnings and 73.9% takeover premium will help acceptance.
MMA Offshore (MRM AU): Cyan Lifts Offer
- Back on 25 March, marine and subsea services provider MMA Offshore (MRM AU) entered into a Scheme with Singapore’s Cyan Renewables, a wholly-owned vehicle of Seraya Partners.
- The A$2.60/share Offer in cash, a 11% premium to last close, was within the IE’s fair value range of A$2.03 to A$2.83. However, shares have consistently traded through terms.
- Cyna has now bumped the Offer to A$2.70/share – best & final. Thorney (7.95% of shares out) is supportive. The Scheme Meeting will still be held on the 1 July.
ENEOS Launches Tatsuta Elec (5809) “Minority” Takeout at Same Price as 18mos Ago
- ENEOS announced its deal for Tatsuta Electric Wire & Cable (5809 JP) 18mos ago. China approval took a while. Now they have launched.
- The TOPIX Non-Ferrous Metals sector has returned 60%. TOPIX 50%. There is a new TSE Sheriff in town asking for PBR 1.0x. BVPS is up. Presumably, forward CF is up.
- But the TOB Price is unchanged. That is disappointing. One reason why a higher price was rejected was that no other buyer approached to take over the company. 🤷🏻♂️
Digging into Chosun Ilbo’s Report on SK Group’s SK Innovation & SK E&S Merger Plans
- SK Group plans to merge SK Innovation and 90%-owned SK E&S by month-end. Chosun Ilbo’s report solidifies market confidence due to its credibility and likely intentional leak by SK Group.
- Initially considered but deemed lower priority than SK IE Technology sale; SK Group opts for this alternative due to challenging market conditions for SKITE sale.
- SK Innovation and SKIET rise with hopes of resolving liquidity issues and avoiding sacrifice. SK Inc is negatively impacted by concerns over valuation double counting from this merger.
Sensetime Placement – Seems Highly Opportunistic
- SenseTime Group (20 HK) aims to raise up to US$263m via selling around 4.5% stake.
- Sensetime hasn’t had the best of times since listing, however, the shares have rebounded recently on generative AI buzz around the stock.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close
- The Sep 2024 Nikkei 225 Review base date is six weeks away. One can no extrapolate results quite accurately. It still gives us one ADD, one DELETE, and capping fun.
- Recently, Yanai-san sold more Fast Retailing (9983 JP). More active holders own more stock (which may mean less interest to buy later), and only 1% to go to avoid capping.
- There should be one DELETE, one ADD. There is a low-probability Dark Horse ADD but I expect Kokusai Electric (6525) to be added in March 2025.
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