In today’s briefing:
- S&P/ASX Index Rebalance Preview: Review Period (Nearly) Complete
- HK Electric Investments (2638 HK): MSCI Deletion Could Mark a Bottom
- Who Wants SM Entertainment More? Kim Bum-Soo (Kakao) Or Bang Si-Hyuk (Hybe)?
- Thinking About the Ito-En (2593 JP) MSCI Index Exclusion Event
- Rakuten Bank IPO Early Look – The Positives – Has Grown Fast over the past Few Years
- Samsung C&T Shareholder Return: Directly Related to Lee Family’s Inheritax Tax Issue
- O2Micro Wraps Up. GSMG Capitulates
- Adways (2489 JP) – Really, Really Big News for a SmallCap
- SciClone Pharma (6600 HK): Inexpensive Ahead Of New Therapies Rolling Out
- Trend Micro (4704 JP) – Value Act’s Activism Starts To Show, But It’s Still Small Potatoes
S&P/ASX Index Rebalance Preview: Review Period (Nearly) Complete
- We currently see 1 change for the ASX20 Index, 2 changes for the ASX100 Index, 4 changes for the ASX200 Index, 10 adds/7 deletes for the ASX300 Index in March.
- On average, the potential adds to each of the indices have outperformed the potential deletes with the largest outperformance for the ASX300 Index.
- Shorts have continued to increase positions on the potential deletes while covering their positions on the potential adds. We expect there are large pre-positions on some of the stocks now.
HK Electric Investments (2638 HK): MSCI Deletion Could Mark a Bottom
- HK Electric Investments (2638 HK) will be deleted from the MSCI Hong Kong Index at the close on 28 February. This was largely expected.
- We estimate passive MSCI trackers will need to sell 172.3m shares (US$111m; 19.1 days of ADV to trade). That is a lot. But there are pre-positions on the stock.
- HK Electric Investments (2638 HK) has underperformed its peers and now trades at a lower price to book. There could be outperformance post the MSCI deletion.
Who Wants SM Entertainment More? Kim Bum-Soo (Kakao) Or Bang Si-Hyuk (Hybe)?
- It has been reported that Kakao has hired local brokerage firms to discuss the details of another tender offer of SM Entertainment shares (at more than 130,000 won).
- We believe that this has been the key reason why SM Entertainment’s shares rose an additional 5% on 15 February.
- We believe that eventually Kakao Group will win the M&A fight for SM Entertainment and shares of SM could rise further in the coming weeks.
Thinking About the Ito-En (2593 JP) MSCI Index Exclusion Event
- Ito En Ltd (2593 JP) is a slightly strange stock in the grand scheme of things.
- It is expensive for its growth, and the shareholder register is such that it is subject to the whims and vagaries of forces over which investors may have no control.
- This time, it is MSCI. Stock prices go up, stocks go in the indices. Stock prices fall, they come out. It’s coming out this month. So who buys?
Rakuten Bank IPO Early Look – The Positives – Has Grown Fast over the past Few Years
- Rakuten Bank, the online banking arm of Rakuten Inc (4755 JP), aims to raise around US$500m (estimated) in its Japan listing in April 2023.
- RB is the largest internet bank in Japan, by number of accounts. As of Mar 2023, it had 13.39m deposit accounts with a total deposit base of JPY8.6tn.
- In this note we take an early look at the IPO and talk about the positive aspects of its past performance.
Samsung C&T Shareholder Return: Directly Related to Lee Family’s Inheritax Tax Issue
- The target volume is 24,718,099 ordinary shares (13.2%) and 159,835 preferred shares (9.8%). That is, C&T will cancel all of its treasury shares in the next five years.
- C&T’s decision to cancel treasury shares clearly indicates that the family’s fundraising strategy is focused on stake sales rather than dividend increases.
- The number of shares inherited will be the volume Lee Seo-hyun will sell in the short term as this is within the range that minimizes the tax liability through LIFO.
O2Micro Wraps Up. GSMG Capitulates
- At the EGM held on January 31, O2Micro International (OIIM US)’s shareholders approved the Merger Agreement. Completion was subject to satisfying certain conditions, which appeared rudimentary.
- An equity corporate action notice released yesterday (15 February) indicates the last day of trading will be the 24 February, with an effective date of 27 Feb.
- O2Micro is currently at a 2.7% gross spread. At the other end of the spectrum, Glory Star New Media (GSMG US) is at a staggering 79% spread, despite shareholder approval.
Adways (2489 JP) – Really, Really Big News for a SmallCap
- Adways Inc (2489 JP) is an ad agency, ad platform, marketing platform, and a variety of sub-platforms serving certain mobile, PC, marketing, and app development niches.
- They released earnings last Friday, but today released other – follow-on information.
- Included was a buyback – up to 5.7mm shares (13.57% of shares out) for up to ¥2bn (9% of mktcap) – over the next 5.5 months. Seems big. Look closer.
SciClone Pharma (6600 HK): Inexpensive Ahead Of New Therapies Rolling Out
- Shareholders have given SciClone Pharmaceuticals (6600 HK)‘s buyback the go-ahead which will result in the major shareholder holding (upward of) 31.63%, and the freedom to creep.
- As such, a concentrated shareholder register, primarily comprising entities that privatised SciClone in 2017, gets even more concentrated.
- Trading inexpensively ahead of the launch of a new (and approved) drug, SciClone is worth a second look.
Trend Micro (4704 JP) – Value Act’s Activism Starts To Show, But It’s Still Small Potatoes
- Trend Micro Inc (4704 JP) is an interesting, but odd little company in an interesting odd little niche. They make cybersecurity products and are good at it.
- Last summer, well-known activist Value Act Capital showed up on the tape in August with an 8.7% position.
- What had been good dividend payout ratios are now cemented. Now there is a big buyback to return cash. Look for more. And as always, details matter.
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