In today’s briefing:
- JPX Nikkei 400 Index Rebalance: Some Big Impact Names
- Samsung Electronics: Prefs Need to Catch Up
- JIP Tender Offer for Toshiba (6502) Finally Here
- Toshiba – The Tender Arrives
- Bank of Kyoto (8369) – Too Far Too Fast
- 2023 JPX Nikkei 400 Rebal – 38 IN, 36 OUT, 4.2% One Way Flow
- Kenedix Merger: Big Passive Inflows on the Cards
- Toshiba (6502) Tender Offer – Kioxia Optionality
- Zomato Lock-Up – A US$650m+ Worth Acquisition Linked Lockup Release
- EOFLOW/Medtronic Tender: Insulet’s US Complaint Materially Increases Deal Break Risks
JPX Nikkei 400 Index Rebalance: Some Big Impact Names
- There are 38 adds/36 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
- Based on the adds, deletes and capping changes, we estimate one way turnover of 4.35% and a two-way trade of JPY 461bn (US$3.24bn).
- There are a few stocks that will have same way flow from other index trackers within a few weeks of the JPX Nikkei 400 Index rebalance.
Samsung Electronics: Prefs Need to Catch Up
- Over the last year, the discount of Samsung Electronics Pref Shares (005935 KS) to Samsung Electronics (005930 KS) has increased from 5% to 17%.
- The preferred shares have adequate liquidity, a large issue market cap, and now trade at a much higher dividend yield. A special dividend will further increase the dividend yield differential.
- Breaking from history, the preferred shares discount has continued to increase as the stock has moved higher. With the preferred shares trading near its widest discount, that could change.
JIP Tender Offer for Toshiba (6502) Finally Here
- The JIP TOB for Toshiba is here. Finally. It is still too low. Since the announcement, when it was too low, peers are up a lot, and memory looks healthier.
- But it is not clear that activists who pushed this for years want to push any more. There appears to be Toshiba Fatigue, as I warned in March.
- That makes this deal look “safe” but there are technical aspects which make it less “comfortable” than normal large and long-awaited deals.
Toshiba – The Tender Arrives
- At long last the end to the Toshiba saga appears at hand with JIP’s belated tender offer being formally announced today at the previously quoted price of ¥4,620.
- With a minimum target of 66.7% this does not seem guaranteed to pass but we nevertheless believe that odds are good.
- The question is whether there is any room for a small hike in the price as alluded to by the Chairman.
Bank of Kyoto (8369) – Too Far Too Fast
- Bank of Kyoto (8369 JP) has been on a relative tear recently. This is a bit surprising. On a static equity-portfolio discount measure, it has outperformed regional banks.
- On a static regional bank PBR basis, it has outperformed its equity portfolio and the discount to the After Tax Equity Portfolio Value (ATEPV) is the smallest in eight years.
- Is there a sea change? There is a possibility, however remote, that domestic investor disappointment rears its voting head. That’s the dream scenario. But I don’t see it coming soon.
2023 JPX Nikkei 400 Rebal – 38 IN, 36 OUT, 4.2% One Way Flow
- The Tenth Annual JPX Nikkei 400 Index Review was announced on Monday 7 August. There are 38 Inclusions, 36 Deletions. They are mostly in line with Janaghan Jeyakumar, CFA‘s predictions.
- The BIG SELL is T&D Holdings (8795 JP), which surprised me. The top BUY is ROHM Co Ltd (6963 JP) which was not on the Quiddity Leaderboard.
- Otherwise, the ADDs and DELETEs are 1.8-2.0 days of ADV, there are several NEW CAPs and some RECAPS among LARGE CAPS
Kenedix Merger: Big Passive Inflows on the Cards
- The shareholders of Kenedix Office Investment (8972 JP), Kenedix Residential Investment (3278 JP) and Kenedix Retail REIT (3453 JP) meet in a couple of weeks to vote on the merger.
- The stocks are trading in line with the merger ratio and the initial spike following merger announcement has been followed by some selling.
- The market cap of the combined entity should now be large enough for migration to indices with larger tracking assets bringing in large passive flows on merger completion.
Toshiba (6502) Tender Offer – Kioxia Optionality
- Yesterday, JIP finally announced its Tender Offer for Toshiba Corp (6502 JP) as discussed in JIP Tender Offer for Toshiba (6502) Finally Here
- I got a few questions this morning on the earnings call comments from Chairman Watanabe regarding what might happen if a Kioxia Transaction were announced mid-JIP Tender.
- My assumption before, during, and after, is that the Board wants this deal done. And doesn’t really want to take any responsibility for pushing any more.
Zomato Lock-Up – A US$650m+ Worth Acquisition Linked Lockup Release
- In Aug 2022, Zomato completed the acquisition of Blinkit’s outstanding shares via issuing its own shares. These issued shares will come up for lockup release on 10th Aug 2023.
- Zomato is one of two leading food delivery app operators in India. Its acquisition of Blinkit marked its foray into the instant grocery segment.
- In this note, we will talk about the lock-up dynamics and recent updates.
EOFLOW/Medtronic Tender: Insulet’s US Complaint Materially Increases Deal Break Risks
- Insulet Corp (PODD US) filed with the United States District Court a complaint for patent infringement against Eoflow (294090 KS), Flex (FLEX US), Luis Malave, Steven DiIanni, and Ian Welsford.
- Insulet’s primary allegation is that Eoflow’s EOPatch device is built using Insulet’s proprietary trade secrets and infringes three Insulet US patents (‘741, ’883 and ‘950 patents).
- The most likely scenarios are that Medtronic Plc (MDT US) and Insulet sign a licensing agreement (resulting in a possible tender offer price cut) or Medtronic walks.
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