In today’s briefing:
- Rakuten (4755 JP) – A Big Deal With Very Interesting Characteristics – Index Matters
- S&P/ASX Index Rebalance Preview: Potential Changes, Impact, Shorts & Positioning
- KOSPI200 Index Rebalance: Two Sets of Changes
- Sony (6758 JP) – Big-But-Meh Buyback, and Bigger Potential Sony Financial Spinoff
- KOSDAQ150 Index Rebalance: 8 Changes with Some Surprises; Performance Deteriorating
- Alibaba Potential IPOs – Part 3 – An Early Look at Cloud, Easy US$10bn+
- Suruga Bank (8358) To Sell, Then Buy Back 17% of the Bank, but HOW Is Key.
- How Should We Time the L&F Shorting Event for Another Share Dilution Risk?
- Trading Strategy Post KRX Rebalance Announcement of KOSPI 200 and KOSDAQ 150
- Sing Tao (1105 HK) Makes Its Own News
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.
S&P/ASX Index Rebalance Preview: Potential Changes, Impact, Shorts & Positioning
- The review period for the June rebalance of the S&P/ASX family of indices ends tomorrow and we expect two changes for the S&P/ASX 200 (AS51 INDEX).
- Impact of passive trading on the stocks varies between 4.3-11 days of ADV. Short interest on the potential adds is small while there are significant shorts on the potential deletes.
- We expect there is pre-positioning on at least three of the four stocks. In some cases that is small, while it could be a lot larger in other stocks.
KOSPI200 Index Rebalance: Two Sets of Changes
- There will be 2 additions and 2 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the June rebalance that will be implemented on 8 June.
- Kum Yang (001570 KS) and Cosmochemical (005420 KS), both high probability names, are inclusions while Hwaseung Enterprise (241590 KS) and Dongwon Industries (006040 KS) are deletions.
- Not surpisingly, there is almost no short interest on the adds. Short interest on the deletes is higher and rising. Expect short covering on the deletes prior to implementation.
Sony (6758 JP) – Big-But-Meh Buyback, and Bigger Potential Sony Financial Spinoff
- Sony Corp (6758 JP) reported earnings on 28 April, which saw profit-taking the next day after a brief two-day run-up, as revenues, OP, and NP were guided down.
- There previous ¥200bn buyback ended about two weeks later. Yesterday they launched a new ¥200bn buyback, and the stock reacted well this AM. And then BIG new news this morning.
- Sony announced an assessment of a partial spin-off of Sony Financial. Assessment this FY, spinoff “within next 2-3yrs” (if possible). This garnered more excitement. Brief analysis of both follows.
KOSDAQ150 Index Rebalance: 8 Changes with Some Surprises; Performance Deteriorating
- There are 8 inclusions and 8 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance to be implemented at the close on 8 June.
- There is one surprise on the deletions and there are a few surprise non-deletions. Smaller surprise on some non-inclusions.
- Short interest is non-existent on the adds and is a lot larger on the deletes. Shorts on the deletes will be covered in the next few weeks.
Alibaba Potential IPOs – Part 3 – An Early Look at Cloud, Easy US$10bn+
- 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.
- In our previous note, we highlighted which division could list. In this note, we will look at the Cloud segement.
Suruga Bank (8358) To Sell, Then Buy Back 17% of the Bank, but HOW Is Key.
- Suruga Bank Ltd (8358 JP) today signed an MOU (with board resolution) to form a business and capital alliance with Credit Saison (8253 JP).
- Suruga will sell (post-dilution) 15+% of voting rights to Credit Saison, and buy 4.44% of CreditSaison. Then Suruga will try to buy back the shares it sold to Credit Saison.
- A look at the history is instructive, as is a look at the shareholder structure and the change in business model post-2019. Not as easy as it looks.
How Should We Time the L&F Shorting Event for Another Share Dilution Risk?
- The main challenge is the construction of new production facilities in the US. The investment amount is estimated to be around ₩1T, achieving an annual production capacity of 100,000 tons.
- The government’s approval is the most significant factor to monitor. It will likely be granted between late June or early July, which is when we should start building positions.
- Due to the local market’s expectation of L&F’s upcoming fundraising event, some traders may start building their positions early on. It’s important to consider this possibility and act preemptively.
Trading Strategy Post KRX Rebalance Announcement of KOSPI 200 and KOSDAQ 150
- Korea Exchange announced the KOSPI 200 and KOSDAQ 150 indices constituents changes today.
- Kum Yang (001570 KS) and Cosmochemical (005420 KS) were included in the KOSPI 200. Dongwon Industries (006040 KS) and Hwaseung Enterprise (241590 KS) were excluded in KOSPI 200 index.
- We expect continued underperformance of Kumyang and Cosmo Chemical as many investors will now start to sell these stocks based on “buy on rumor, sell on news” strategy.
Sing Tao (1105 HK) Makes Its Own News
- Sing Tao News Corp (1105 HK), which owns Hong Kong’s oldest and third-largest Chinese language newspaper, is suspended pursuant to the Hong Kong Code on Takeovers and Mergers.
- A takeover of Sing Tao was mooted in 2019-2021 when Charles Ho, the former chairman, sought to exit his 48.98% stake; but that transaction fizzled out.
- At a market cap of just US$50mn, this (likely) Offer hardly rates a mention. Yet a takeover of a Hong Kong newspaper is still newsworthy.
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