In today’s briefing:
- Sanrio (8136 JP) Placement: Price Likely Determined Today; What Next?
- Japan: Potential Passive Selling in February
- LG CNS IPO: Limited Float Pushes Back Passive Buying
- Korea: Potential Relegations from K League 1
- Nidec Goes Hostile On Makino Milling at ¥11,000/Share
- Shin Kong/Taishin Merger – Proceeding Apace
- Korea FSC Official: New Rule to Block “Treasury Stock Magic” Takes Effect on 31st
- Our Best Calls in 2024: Review and Outlook for 2025
- What We’ve Got on Samsung Electronics’ Value-Up Disclosure
- Makino Milling Machine (6135 JP): Nidec’s (6594 JP) Hostile Preconditional Tender Offer at JPY11,000
Sanrio (8136 JP) Placement: Price Likely Determined Today; What Next?
- The Sanrio (8136 JP) placement is likely to be priced today. With the stock 8.8% lower from undisturbed, expect a small discount to today’s close.
- The stock has traded as expected over the last 9 trading days – a sharp drop followed by a strong upward move and then profit taking.
- We expect there will be strong interest in the placement and oversubscription could lead to upside from here. Shorts have increased and will look to cover into the placement.
Japan: Potential Passive Selling in February
- Currently, 9 stocks could be deleted from global passive portfolios in February. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
- There has been a buildup on shorts on few stocks with minimal positioning in the other stocks. That could change once the calendar ticks over to 2025.
- Kokusai Electric (6525 JP) is a potential inclusion to the Nikkei 225 (NKY INDEX) in March and this deletion could provide liquidity to enter a position ahead of that announcement.
LG CNS IPO: Limited Float Pushes Back Passive Buying
- LG CNS (LGCNSZ KS) is looking to raise up to KRW 1,199bn (US$830m), valuing the company at KRW 6 trillion (US$4.15bn) at the top end of the IPO price range.
- As a member of the IT sector, inclusion in the KOSPI200 Index will only take place via Fast Entry (near impossible) or as a large-scale company.
- Inclusion in global indices could commence in September 2025 and will be easier if the identity of the pre-IPO minority shareholders is disclosed or if the strategic investors sell.
Korea: Potential Relegations from K League 1
- There are quite a few stocks in Korea that have underperformed their peers and could be deleted from global passive portfolios in February.
- There are still 3 weeks left for the stocks to redeem themselves and avoid relegation from the K League, so watch out for big price moves.
- Based on our estimate of passive assets, trackers will need to trade between US$45m to US$114m of the stocks. Impact will vary between 2.6x-30x of ADV to trade.
Nidec Goes Hostile On Makino Milling at ¥11,000/Share
- This morning, Nidec Corp (6594 JP)announced that it intended to launch a Tender Offer on Makino Milling Machine Co (6135 JP) without the support of Makino management.
- The same pattern as Takisawa Machine Tool (6121 JP). Nidec decides, relying on the METI Guidelines for Corporate Takeovers for procedure, announces, and puts the onus on the Target to accept.
- But shareholders should hope Makino Milling takes a page from the example provided by Chilled & Frozen Logistics Holdings (9099 JP) back in spring 2024. This could get funky.
Shin Kong/Taishin Merger – Proceeding Apace
- Once shareholders of Shin Kong Financial Holding (2888 TT) and Taishin Financial Holding (2887 TT) agreed to the merger two months ago, that meant an FSC submission would come shortly.
- It came on 3rd December. Normally it takes two months, but can be extended. It appears the TFTC submission (which is considered wholly separately) was made as early as September.
- This should get approved within the timeframe or not long afterwards. There is one known “document” missing from the application as of submission, but it shouldn’t be a problem.
Korea FSC Official: New Rule to Block “Treasury Stock Magic” Takes Effect on 31st
- Korea FSC announced on the 24th that the updated Capital Markets Act rules, approved by the Cabinet, will take effect on the 31st.
- Banning new shares to treasury stocks during spin-offs could shift board focus in Korea, reducing big shareholder influence and prioritizing the broader shareholder base.
- The capital markets law change could shift shareholder returns from buybacks to dividends, marking a key inflection point for traders, especially in Korea’s preferred stock market.
Our Best Calls in 2024: Review and Outlook for 2025
- With a range of 34.5-68.1%, our five best calls in 2024 generated an average return of 54.1% YTD, outperforming the Hang Seng Index by 26.2pp.
- China Communications Construction (1800 HK) and Dongfang Electric (1072 HK) are expected to sustain strengths into 2025 on market value management and pick-up in new orders.
- Xinhua Winshare (811 HK), China Everbright Environment (257 HK), and SITC International (1308 HK) may hold their share price, but gains are unlikely to be as much as 2024.
What We’ve Got on Samsung Electronics’ Value-Up Disclosure
- Yesterday, the FSC pushed for value-up policies, but the real buzz was about Samsung Electronics hinting at rolling out its own value-up plan soon.
- Samsung may raise its dividend payout from 50% to 60% and could issue a special dividend if semiconductor results improve or FCF exceeds expectations.
- Samsung’s value-up disclosure may not cause short-term price action but could strengthen downside support. It may focus on dividends over buybacks, potentially boosting preferred stock.
Makino Milling Machine (6135 JP): Nidec’s (6594 JP) Hostile Preconditional Tender Offer at JPY11,000
- Nidec Corp (6594 JP) announced a hostile preconditional tender offer for Makino Milling Machine Co (6135 JP) at JPY11,000 per share, an 18.9% premium to the last close.
- The offer is preconditioned on several regulatory approvals. It is scheduled to start on 4 April, even if the Board does not recommend it.
- The Board has three options: engage to facilitate a friendly offer, find a white knight bidder and launch an ambitious MTM plan to thwart the offer.
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