In today’s briefing:
- Renesas Clean-Up Block Trade – Overhang Out of The Way And Time To Own Again
- Benesse (9783) MBO – ¥2600/Share Is Up 40+% But It Is Still the Wrong Price
- Japan – Increase in Shorts on Some Interesting*** Stocks
- Index Rebalance & ETF Flow Recap: SSE50, Chinext/50, Renesas, Tencent, Amman Mineral
- KOSPI 200 December Rebalancing: Rule Change Clarifications & Possible Delay in Price Impact
- Taisei Corp (1801) Partial Tender for PS Mitsubishi Construction (1871)
- Softbank (9984 JP): WeWork Hangover and Other Challenges
- Shidax Corporation (4837 JP): MBO Tender Offer at JPY800
- ECM Weekly (12th Nov 2023)-Renesas, Bajaj, Alchip, Hybe, Will, Wuxi, ChaPanda, Chenqi, Cello, Honasa
- IJTT (7315 JP): SPARX Group’s Tender Offer at JPY812
Renesas Clean-Up Block Trade – Overhang Out of The Way And Time To Own Again
- INCJ made a lot of money on Renesas Electronics (6723 JP) over the years and arguably did a great job helping the firm change direction. Now they are out.
- Last night they launched a block sale through JPM and Bof A for 130.2317mm shares. They priced the heavily-oversubscribed deal at a discount of 8% or ¥2143/share.
- That’s a big discount (so bad broking) for such oversubscription on a clearly-flagged deal but now they are out.
Benesse (9783) MBO – ¥2600/Share Is Up 40+% But It Is Still the Wrong Price
- Just before the close Friday, the Nikkei reported Benesse Holdings (9783 JP) would be the subject of an MBO in order to restructure the flagging private shinken-zemi business. And grow.
- It turns out it is EQT and the Fukutake family at ¥2600/share – a 2-year high. Wow. It is also a ridiculously cheap price given the assets and money flows.
- I expect this may get some people upset as the valuation methodology is dodgy and the artful (hehehe) Balance Sheet has some easter eggs, and spotted pumpkins… or something.
Japan – Increase in Shorts on Some Interesting*** Stocks
- Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent Inc, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp have underperformed the Nikkei 225 recently.
- The underperformance could lead to selling from global passive trackers and liquidity events on some of the stocks at month-end.
- There has been an increase in short interest on most stocks over the last week as positioning for the liquidity event ramps up.
Index Rebalance & ETF Flow Recap: SSE50, Chinext/50, Renesas, Tencent, Amman Mineral
- Wednesday will be a busy day as positions are put on and unwound following announcement of the changes to the MSC indices.
- Friday will end the review cutoff for the ASX indices and Hang Seng Indexes will announce the December changes for the HSI, HSCEI, HSTECH and HSCI post market close.
- Another week of large outflows for China focused ETFs with redemptions across all the major indices.
KOSPI 200 December Rebalancing: Rule Change Clarifications & Possible Delay in Price Impact
- Although not explicitly outlined, it appears practical to interpret that we should filter out stocks that have entered a trading suspension among those receiving a WARNING designation.
- The dynamics of KOSPI 200 flow trading have become notably tumultuous due to the abrupt short selling ban and additional liquidity halts imposed on market makers in the futures market.
- The manifestation of price impact due to passive flows may be significantly delayed. So, we should prepare for this week’s announcement day setup targeting the delayed impact of passive flows.
Taisei Corp (1801) Partial Tender for PS Mitsubishi Construction (1871)
- Last week, as Ps Mitsubishi Construction (1871 JP) reported earnings, Taisei Corp (1801 JP) announced a Partial Offer for PS Mitsubishi, buying out Ube Cement & Taiheiyo Cement stakes.
- Partial offers have recently traded well before the close, and badly after the result. As we near year-end, this one could trade a bit softer, suggesting a lower back end.
- Shareholder Structure, Pro-ration analysis, and back end calculation grids below.
Softbank (9984 JP): WeWork Hangover and Other Challenges
- Softbank’s exposure to WeWork continues to haunt it beyond the close of 2QFY23, due to its credit support agreements
- Aside from WeWork, we continue to see risks to valuations supporting the NAV; in particular, Arm Holdings and SVF2 which accounted for 45% of group equity value
- Softbank shares trade at a 45% discount to the stated NAV yet there is downside risk to Arm’s valuation along with questions over private company valuations at SVF1 and SVF2
Shidax Corporation (4837 JP): MBO Tender Offer at JPY800
- Shidax Corp (4837 JP) has recommended an MBO tender offer of JPY800 per share, a 10.3% premium to the undisturbed price (9 November).
- After the settlement of the tender offer, Oisix ra daichi (3182 JP) will acquire a 66.0% stake in the offeror by way of third-party allotment at the tender offer price.
- Despite the skinny premium, the offer is just shy of the ten-year share price high. The minimum acceptance condition requires a 12.5% minority acceptance rate.
ECM Weekly (12th Nov 2023)-Renesas, Bajaj, Alchip, Hybe, Will, Wuxi, ChaPanda, Chenqi, Cello, Honasa
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- In the IPO space, WuXi XDC provided some rare rays of hope in Hong Kong, while Honasa Consumer, Cuscal (1229Z AU) and EcoPro Materials did the opposite.
- This week was more about placement with two US$1bn+ deals, a cleanup in Renesas Electronics (6723 JP) and a QIP for Bajaj Finance Ltd (BAF IN).
IJTT (7315 JP): SPARX Group’s Tender Offer at JPY812
- IJTT Co., Ltd. (7315 JP) has recommended Sparx Group (8739 JP)’s offer of JPY812 per share, an 18.5% and 16.0% premium to the undisturbed (9 November) and last close price, respectively.
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 23.48% ownership ratio.
- Despite the modest premium, the offer represents a high five-year share price. The minimum acceptance condition requires a 41.3% minority acceptance rate.
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