In today’s briefing:
- Rio Tinto (RIO AU/RIO LN): Unification Index Flows
- CSI300 Index Rebalance Preview: 7 Changes a Side as Market Trades in a Range
- [Activism Japan] Nissan Tokyo Sales (8291) Gets An ‘Outsourced Activist’ but the Value Prop Remains
- SET50 Index: Market Moves Adjust for Consultation Proposal; DELTA in the Crosshairs (Again)
- Samsung SDI Capital Raise: A Mega Deal Rarely Seen in the Local Market
- CK Hutch (1 HK): Still Trading Cheap
- CSI 1000 Index Rebalance Preview: US$3.7bn Trade; Adds Outperform as ETFs Face Redemptions
- HEW: Payback In Trade And Pricing
- Tenma (7958 JP) MBO at ¥3,580 – Finally (Wipes Brow), An Exit. ATH But Not Yet PBR1.
- BMW Shifts into High Gear: A 10% Share Buyback to Drive Value
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.
CSI300 Index Rebalance Preview: 7 Changes a Side as Market Trades in a Range
- There could be 7 changes at the June rebalance with the Information Technology sector gaining 3 index spots and the Materials sector losing 3 spots.
- We estimate one-way turnover of 1.45% at the rebalance leading to a round-trip trade of CNY 28.1bn (US$3.9bn). There are 6 stocks with over 2x ADV to trade.
- There have been redemptions in mainland China ETFs over the last couple of months and that leads to a lower impact on the stocks compared to the last rebalance.
[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.
SET50 Index: Market Moves Adjust for Consultation Proposal; DELTA in the Crosshairs (Again)
- On 4 February, the SET floated a consultation paper on capping stocks in the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at 10%.
- The move was aimed at Delta Electronics Thailand (DELTA TB) since it was the only stock with an index weight higher than 10%.
- Delta Electronics Thailand (DELTA TB) has slid since then and at the current weight of 9.27% will not need to be capped. The market has adjusted for it.
Samsung SDI Capital Raise: A Mega Deal Rarely Seen in the Local Market
- The discount’s tight, but this near-2-trillion-won raise is a rare mega-deal in Korea, despite the issuance ratio below 20%.
- Samsung Electronics is in for 150 billion won, but plenty of supply remains. A smooth clearance? Unlikely. This could drive stock rights costs lower as price discovery unfolds.
- The optimal approach is to wait for a decline in rights prices and assess hedge costs through single stock futures (or TRS, if doable), given the shorting restrictions.
CK Hutch (1 HK): Still Trading Cheap
- To avoid a political landmine, on the 4th March CK Hutchison Holdings (1 HK) announced a deal with Blackrock to offload its entire port ops, including the contentious Panama ports.
- It’s an astute deal selling to a buyer, ostensibly backed by the Trump administration, at the top of the market, knowing global trade could fall under a new tariff regime.
- The risk to the transaction is one of timing. US/Panama approvals are a shoo-in. But it’s a complex deal, which will take time to work through the system.
CSI 1000 Index Rebalance Preview: US$3.7bn Trade; Adds Outperform as ETFs Face Redemptions
- With over 85% of the review period now complete, we forecast 100 changes (the maximum permitted) for the CSI 1000 Index at the close on 13 June.
- We estimate a one-way turnover of 11% at the rebalance resulting in a round-trip trade of CNY26.9bn (US$3.7bn). The Industrials sector could gain the most index spots.
- The forecast adds have outperformed the forecast deletes this calendar year. Part of that can be attributed to the outflows from ETFs tracking the CSI1000 Index.
HEW: Payback In Trade And Pricing
- Equities are facing difficulties due to unpredictable trade policies and retaliations, which are affecting profit forecasts. Despite this, hard data remains strong, although low airfares are impacting the US CPI. There has been a decrease in optimism about Europe.
- The Federal Reserve and the Bank of England are likely to maintain current interest rates in the coming week as there are no clear signs of a downturn. Two MPC members are expected to dissent for a 25bp cut to avoid acknowledging a previous error.
- Other upcoming announcements include those from the Bank of Japan, the Swiss National Bank, and the Riksbank.
Tenma (7958 JP) MBO at ¥3,580 – Finally (Wipes Brow), An Exit. ATH But Not Yet PBR1.
- Plastic household goods maker Tenma Corp (7958 JP) has been “undervalued” for decades. A variety of activish/activist holders have come and gone. Dalton went substantial in 2016, is 18% now.
- The family has always controlled the company, and in the last decade, the company has bought back shares, raising the family stake. Now they are buying out minorities.
- The deal is at 4.1x Adjusted EV/EBITDA for March 2026 (adjusted for securities sales, etc) and 0.82x book for the non-cash/securities portion of the business. But Dalton has thrown in.
BMW Shifts into High Gear: A 10% Share Buyback to Drive Value
- BMW plans to repurchase 10% of its share capital over five years, likely replacing the previous buy-back program to optimize capital efficiency.
- The share buy-back is expected to boost EPS and support stock prices, with a stronger impact on preferred shares due to lower liquidity.
- The Quandt family’s ownership stake could increase to approximately 54.36%, further solidifying their control over BMW.
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