In today’s briefing:
- Rakuten Possible US$2.2bn Placement – Will Be a Huge Deal to Digest, but It’s Not All Bad
- Rakuten (4755 JP) – A Big Deal With Very Interesting Characteristics – Index Matters
- MVIS Australia Equal Weight Index Rebalance: Potential Deletes & Capping Changes
- JAPAN BUYBACKS – Alfresa (2784) Cheap Stock, Uncheapening, Goes Big
- Yuexiu Rights – The Trading Pattern Fits
- Rakuten US$2.4bn Placement – Larger than Rumored, Some Indications of Finality
- Rakuten (4755 JP) Offering: Could Drop Some More Before Passive Buying Kicks In
- Capitaland Ascendas REIT Placement – Good Track Record and Most Deals Have Performed Well
- Alibaba Potential IPOs – Part 1 – Six Mini-Alibabas – Some Are More Ready than Others to List
- Rakuten: ¥333bn Offering Confirmed, Cheap Valuation and Mobile Turnaround on the Horizon
Rakuten Possible US$2.2bn Placement – Will Be a Huge Deal to Digest, but It’s Not All Bad
- Rakuten (4755 JP) is considering raising around US$2.2bn (JPY300bn), as per Reuters reports. The company hasn’t confirmed or denied the same in its press release.
- The company has been listing some of its subsidiaries and monetising investments to raise cash and has recently hinted at a possible equity issuance.
- While there is no guarantee that the deal will ever materialize, in this note, we take an early look at the possible deal dynamics.
Rakuten (4755 JP) – A Big Deal With Very Interesting Characteristics – Index Matters
- Yesterday (15 May 2023) just before EOD, an article ran suggesting a ¥300bn capital raise by Rakuten (4755 JP). The stock fell 10% in 10mins. Rakuten hemmed/hawed but didn’t deny.
- One day later, we have a deal. It is up to 546mm shares including greenshoe, which at the close was ¥333bn. 468mm shares to the public, 79mm to 3rd parties.
- This increases Real World Float by 95%. In that respect this is vaguely IPO-ish. Investors have to re-underwrite. Then Passive re-shrinks the float. Details matter.
MVIS Australia Equal Weight Index Rebalance: Potential Deletes & Capping Changes
- There are unlikely to be any inclusions to the index in June while there are three stocks that are close to the deletion threshold.
- Even if there are no constituent changes, there will be capping changes that will result in one-way turnover of over 4% and a one-way trade of A$78m.
- Short interest on AMP Ltd (AMP AU) has been increasing as the stock has dropped and a further decline in the stock could lead to deletion.
JAPAN BUYBACKS – Alfresa (2784) Cheap Stock, Uncheapening, Goes Big
- Born of a merger between two not-very-well-known businesses 20 years ago, Alfresa Holdings (2784 JP) is still not very well known. It is in a boring, low-margin business.
- The highest EBIT margin in the past two decades was…. 1.8%. ROE was in the 8-10% range for 2016-2020 but has since fallen below, as PBR has fallen below 1.0x.
- Today, we got an amended Mid-Term Management Plan, a new dividend policy, and buyback of 10% of shares out based on last price. It’s worth looking in the details.
Yuexiu Rights – The Trading Pattern Fits
- The Yuexiu Property (123 HK) Rights start trading today. Last day is next Monday. There is a general pattern to the flows and it behooves investors to be aware.
- There is a pattern to these trades which is worth understanding.
- In this case, I expect it is worth going long Yuexiu Rights vs Short peer basket equity earlier in the cycle.
Rakuten US$2.4bn Placement – Larger than Rumored, Some Indications of Finality
- Rakuten (4755 JP) aims to raise up to US$2.4bn (JPY323bn) via a global offering.
- The deal was undoubtedly accelerated by Reuters breaking the news of a possible equity raising on 15th May 2023.
- We have covered most aspects of the deal in our previous note, in this note we talk about the deal dynamics and run the deal through our ECM framework.
Rakuten (4755 JP) Offering: Could Drop Some More Before Passive Buying Kicks In
- Rakuten (4755 JP) is looking to raise around US$2.4bn by selling shares via a Japanese Public Offering and an International Offering as well as through a third-party allotment.
- The stock has already dropped 13.7% in the last couple of days on large volumes as the rumours of the offering started to swirl.
- The offering prices late next week and passive trackers will be buying stock once the stock settles and this will provide support in the near-term.
Capitaland Ascendas REIT Placement – Good Track Record and Most Deals Have Performed Well
- CapitaLand Ascendas REIT (CLAR SP) is looking to raise up to S$459m (US$344m) in its primary placement. The proceeds will be used for acquisition, redevelopment and debt repayment purposes.
- The deal will be a large one to digest at 15.8 days of three month ADV and 3.9% dilution.
- In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.
Alibaba Potential IPOs – Part 1 – Six Mini-Alibabas – Some Are More Ready than Others to List
- On 28th Mar 2023, Alibaba Group (9988 HK) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
- Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
- Having looked at the past performance of its division, some appear more worthy than others of undertaking a listing in the next year or two.
Rakuten: ¥333bn Offering Confirmed, Cheap Valuation and Mobile Turnaround on the Horizon
- Rakuten (4755 JP) announced a public offering of 468.1m new shares and third-party allotment of 78.8m shares to secure ¥333bn.
- Enhanced network coverage via KDDI network sharing to attract new users and overcome previous barriers for Rakuten Mobile.
- Mobile breakeven could drive Rakuten’s operating profit to ¥150-200bn, potentially boosting the share price to around ¥2,000.
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