In today’s briefing:
- Rio Tinto (RIO AU/RIO LN): Unification Index Flows
- JX Advanced Metals (5016 JP) IPO: Big Retail Allocation Means No Fast Entry
- Proto Corp (4298 JP) – Activists Getting More Activish, Watch for Position Changes?
- [Activism Japan] Nissan Tokyo Sales (8291) Gets An ‘Outsourced Activist’ but the Value Prop Remains
- Asian Equities: Valuation Mean Reversion – The Winners and Losers
- CSI500 Index Rebalance Preview: 50 Changes; 10% Turnover; US$3.6bn Round-Trip Trade
- US Lands Some Disinflation In Feb-25
- Seven & I Holdings (3382 JP): Awaiting the Board’s Response as Couche-Tard Goes on a Charm Offensive
- Recruit Holdings Placement – Relatively Small US$520m Deal but Momentum Is Weak
- Rio Tinto (RIO LN/RIO AU): Thinking About Unification
Rio Tinto (RIO AU/RIO LN): Unification Index Flows
- At the upcoming AGM, Rio Tinto Ltd and Rio Tinto PLC shareholders will vote on the company commencing a review on the benefits vs costs of Unification.
- Palliser Capital has been pushing for Unification while the Rio Tinto Board has recommended that shareholders vote against Resolution 21/24 citing tax costs among other reasons.
- If the Unification completes, S&P/ASX trackers will need to buy Rio Tinto Ltd (RIO AU) while UKX Index (UKX INDEX) trackers will sell Rio Tinto PLC (RIO LN). Net positive.
JX Advanced Metals (5016 JP) IPO: Big Retail Allocation Means No Fast Entry
- JX Advanced Metals (5016 JP) has priced its IPO at ¥820/share, at the top end of the IPO range but lower than the initial indication of ¥862/share.
- With the bulk of the domestic offering going to retail investors, there is no chance of Fast Entry for the stock in global indices.
- TOPIX INDEX inclusion will take place at the close on 28 April, while inclusion in major global indices is likely to take place in August and September.
Proto Corp (4298 JP) – Activists Getting More Activish, Watch for Position Changes?
- The MBO for Proto Corp (4298 JP) where the founder/chair is buying out from minorities is being done at the wrong price. His reasons are good, but not for minorities.
- One large foreign shareholder – the second largest shareholder of the firm – has offered substantial pushback in the form of a letter asking for discussions. That went nowhere.
- So now they have come out harder. The solution here is a really big bump or a broken deal if investors keep the share price above the TOB price.
[Activism Japan] Nissan Tokyo Sales (8291) Gets An ‘Outsourced Activist’ but the Value Prop Remains
- On 12 March 2025, a minor Twitter account @nanahoshiuk started in January announced a website shiftnissantokyo.com where they point out the value proposition in Nissan Tokyo Sales (8291 JP).
- The writeup is by a UK company led by a young man with an equity-investing career, some experience at an activist shop, who now runs a “Shareholder Activism Outsourcing Service.”
- The content sounds familiar to my piece in December, has a few unpolished edges, but clearly points out the value proposition. The stock deserves a re-visit. My comments are below.
Asian Equities: Valuation Mean Reversion – The Winners and Losers
- Valuations across Asia are mean reverting – expensive markets derating and the cheap ones rerating. We think this is likely to continue somewhat longer.
- We think HK/China could rerate more; India and Taiwan could derate slightly further. India looks interesting. Valuation range has structurally shifted upwards. But another 5-10% relative valuation correction is warranted.
- Principal stock choices in HK/China, Korea and India pertain to themes of domestic consumption, AI resilience and unloved sectors. Some of the companies have mitigating strategies for the tariff war.
CSI500 Index Rebalance Preview: 50 Changes; 10% Turnover; US$3.6bn Round-Trip Trade
- With 85% of the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index at the close on 13 June.
- We estimate a one-way turnover of 10% at the rebalance resulting in a round-trip trade of CNY26.4bn (US$3.6bn). The Information Technology gains at the expense of Healthcare and Consumer Staples.
- The forecast adds have outperformed the forecast deletes and the CSI Smallcap500 Index over the last 6 months. The best part is that the volatility of the trade is very low.
US Lands Some Disinflation In Feb-25
- The upwards trend in monthly US inflation of the past several months broke in February with a surprisingly steep slowing to 0.2% m-o-m, although airfares drove the downside.
- Drift in consensus expectations is not yet obviously broken, with this outcome 0.2pp above forecasts from a month ago. A rebound after Easter remains likely.
- Disinflation is unlikely to dissuade the Fed from holding rates in March. We doubt soft surveys will translate to recessionary conditions, so we still see no more Fed cuts.
Seven & I Holdings (3382 JP): Awaiting the Board’s Response as Couche-Tard Goes on a Charm Offensive
- On 13 March, Alimentation Couche-Tard (ATD CN)’s management held its first press conference in Japan since it disclosed its Seven & I Holdings (3382 JP) offer.
- The Couche-Tard charm offensive was designed to pressure the Board to engage and facilitate a definite agreement. The press conference provided incremental new information.
- The Board’s next move will likely provide limited due diligence, partly to avoid a protest vote at the May AGM. However, the prospect of a Board-recommended binding proposal remains low.
Recruit Holdings Placement – Relatively Small US$520m Deal but Momentum Is Weak
- An undisclosed seller is looking to raise around US$520m via selling 0.5% of its stake in Recruit Holdings (6098 JP) .
- We have covered a number of placements in the stock over the past few years, most of which have ended up doing well.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
Rio Tinto (RIO LN/RIO AU): Thinking About Unification
- Rio Tinto Ltd (RIO AU) shareholders will vote on Palliser’s AGM resolution to conduct an independent review on whether the potential unification is in the best interests of shareholders.
- Palliser and the Board’s arguments for and against unification focus on five factors: tax costs, post-unification share price, lack of scrip M&A, wastage of franking credits, and shareholder support.
- A Grant Thornton report supports unification. The board’s case is strong primarily on tax costs, while Palliser’s case is strong on post-unification share price, M&A, and franking credits.
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
Unlock all research summaries