In today’s briefing:
- Newcrest/Newmont – More Selling on the NCM Means More Buying on NEM, And Settlement Logistics Matter
- Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading
- Keisei Electric: Activists Arrive As Expected
- Japan Post Bank (7182) October TOPIX FFW Upweight Upon Us
- IDX30/LQ45/IDX80 Index Rebalance: Float & Capping Changes on Tuesday
- Increasing Probability of Kakao Corp Losing Its Controlling Shareholding of Kakao Bank
- J&T Global Express IPO: Trading Debut
- Passive Flow Trading Opportunities Emerge from L&F’s Transition to KOSPI Listing
- Alibaba (BABA US): Still One of if Not the Best China Consumer Play
- Leapmotor (9863 HK): Stellantis’ Stake Doesn’t Come Cheap
Newcrest/Newmont – More Selling on the NCM Means More Buying on NEM, And Settlement Logistics Matter
- Today saw 65mm shares of Newcrest Mining (NCM AU) print at the close and 85+mm shares crossed in blocks post-close. There was another 15mm shares traded in additional excess volume.
- That suggests a certain lack of “risk taking” by passive managers, increasing today’s trade in NY.
- Furthermore, the settlement logistics appear to indicate an interesting trade to do 7 November (worth checking with your custodian/broker).
Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading
- First, we can take on some risk and build up a short position using SSFs from now, aiming for an aggressively low price (likely Day 1) during the rights trading.
- If this approach seems somewhat risky, the second is to wait until the rights trading and, although accepting some sacrifice in the spread, build positions relatively risk-free.
- We can also actively build up a long position in the significantly backwardated SSFs from now and, instead, set up an aggressive short on the underlying shares.
Keisei Electric: Activists Arrive As Expected
- Just as we suspected earlier in the year, there is now talk of an impending investor activism campaign targeting Keisei Electric Railway Co (9009 JP).
- The activist is Palliser Capital, a multi-strategy fund based in London and run by former employees of Elliott Management, a company well-known for its activist campaigns in Japan.
- Their proposal is simple and straightforward, requesting for a 35% reduction in Keisei Electric’s Oriental Land holding.
Japan Post Bank (7182) October TOPIX FFW Upweight Upon Us
- Japan Post Bank (7182 JP) gets a dramatic upweight in TOPIX on Monday 30 October. There is a LOT of stock to buy. Call it US$2.2bn.
- Shares have to come from someplace. Basically it will all come from retail or from those who pre-positioned themselves in the stock (buying from retail). Some could come from short-sellers.
- The stock WAS not cheap vs regional banks (what I see as their best set of comps) and the Q2 Unrealised Loss on Securities has ballooned. But care is needed.
IDX30/LQ45/IDX80 Index Rebalance: Float & Capping Changes on Tuesday
- Float and capping changes will require passive trackers to sell Bank Central Asia (BBCA) and Adaro Energy (ADRO) while buying Bank Rakyat Indonesia (BBRI) and GoTo Gojek Tokopedia (GOTO).
- There will be passive trading to other stocks too, though the impact and flow is not material on most of the stocks.
- Passive trackers will trade at the close on 31 October, so there are only 3 days to implementation of the changes.
Increasing Probability of Kakao Corp Losing Its Controlling Shareholding of Kakao Bank
- In this insight, we discuss the increasing probability of Kakao Corp (035720 KS) losing its controlling shareholding of KakaoBank (323410 KS).
- The FSS Chairman Lee Bok-Hyun emphasized that the FSS may punish Kakao Corp for a potential stock manipulation of S.M.Entertainment amid the M&A tender offer process earlier this year.
- At this point, the higher probability event appears to be a combination of fine and Kakao Corp selling at least 10% of its stake in Kakao Bank to another company.
J&T Global Express IPO: Trading Debut
- J&T priced its IPO at a fixed price of HK$12.00 per share to raise the gross proceeds of the offering of US$500 million. The shares will start trading tomorrow.
- We previously discussed the IPO in J&T Global Express IPO: The Bull Case, J&T Global Express IPO: The Bear Case and J&T Global Express IPO: Valuation Insights.
- The market sentiment on the sector continues to weaken. The de-rating of peers lowers our SoTP valuation to HK$10.01 per share, 16.5% below the IPO price.
Passive Flow Trading Opportunities Emerge from L&F’s Transition to KOSPI Listing
- L&F will likely be listed on the KOSPI in mid-December. The top reserved issue within the KOSDAQ 150 IT Sector will be added to the index via an ad-hoc change.
- Selvas AI stands as the foremost candidate for the screened top reserved issue, with a mere two trading days remaining in the six-month screening period.
- Given the relatively limited proactive position buildup due to more uncertainty regarding timing, the price impact leading up to the effective date might become even more significant.
Alibaba (BABA US): Still One of if Not the Best China Consumer Play
- The increasing dominance of retailers (off/online) in the US consumer sector measured by market cap over last three decades tellingly illustrates the long term potential of Alibaba in China.
- While we believe consensus underestimates bottom line for 2QFY24, investors will likely focus on the outlook for 2024, with growth of Taobao/Tmall group remaining key share price driver.
- Investors pulling out of Alibaba due to geopolitical risks remind me of how ESG drove investments away from oil & gas years ago and eventually led to the latter’s outperformance.
Leapmotor (9863 HK): Stellantis’ Stake Doesn’t Come Cheap
- Stellantis, a merger between France’s PSA with Fiat Chrysler Automobiles NV (FCAM BQ), is buying a 17% stake (14.53% fully diluted) in Zhejiang Leapmotor Technologie (9863 HK).
- Leapmotor will issue 194mn H shares at HK$43.8/share, a 19% premium to last close, in a HK$8.51bn transaction. Stellantis will also hold a 51% stake in newly formed JV.
- Stellantis is paying a chunky 3.64x market cap-trailing-revenue; but ~2.25x forward revs, which compares to the average for key peers of 1.9x.
💡 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
