In today’s briefing:
- Screen Holdings (7735 JP): Positioning & Potential Passive Buying
- Roland DG (6789) – Tender Offer by Taiyo Partners – Nice Premium But Too Cheap
- Index Rebalance & ETF Flow Recap: STAR100, NEXT50, LowVol30, KOSPI200, TW50, NWD, ITC, India Float
- Southeast Asia EM: Potential Passive Flows in February
- Korea: Surging Share Cancellations in 2024
- Exploring Prioritized Buyback/Cancellation of Samsung Electronics & Hyundai Motor Prefs
- Softbank (9984 JP): Relying on Arm Strength and JPY Weakness
- A/H Premium Tracker (To 9 Feb 2024): Liquid AH Premia Near Multi-Yr Wides, Narrow AH Premia Wider
- Recruit: HR Tech Top Line Further Declines; No Big Impact From Indeed Plus in the Near Term
- Quiddity HSTECH Mar 24 Flow Expectations: US$415mn One-Way if the Low-Conviction Change Takes Place
Screen Holdings (7735 JP): Positioning & Potential Passive Buying
- SCREEN Holdings (7735 JP) could be added to a global index at the end of the month and there will be a lot of buying in the stock.
- There is a fair bit of positioning for the potential passive buying and there will be supply in the stock.
- However, the stock trades cheaper than its peers and a correction could provide an opportunity for long-term investors to enter the stock.
Roland DG (6789) – Tender Offer by Taiyo Partners – Nice Premium But Too Cheap
- Taiyo Pacific Partners took the original parent company (Roland Corp (7944 JP) of Roland DG Corp (6789 JP) private in 2014. It was re-listed in 2020.
- Roland DG is one of the world’s leading large format digital printer manufacturers. They also make some interesting medical devices and systemic tools, and 3D milling/printing/engraving/photo impact machines.
- This TOB is at a 30.1% premium. Almost a 10yr high. But it is not expensive. And even if TPP has 20%, there is a LOT of float left over.
Index Rebalance & ETF Flow Recap: STAR100, NEXT50, LowVol30, KOSPI200, TW50, NWD, ITC, India Float
- There will be a bunch of rebalance announcements towards the start and at the end of the coming week. This includes the HSI, HSCEI, HSTECH, HSCI, HSIII and global indices.
- The review period for the March rebalance of the S&P/ASX 200 and related indices ends on 16 February. The announcement of the changes will come couple of weeks later.
- There were HUGE inflows to mainland China ETFs for yet another week as Central Huijin indicated that they would continue to buy/create ETFs units.
Southeast Asia EM: Potential Passive Flows in February
- There could be large passive flows for stocks in Malaysia and Thailand in the next few weeks. Impact is especially high where there could be passive outflows.
- YTL Corp (YTL MK) and YTL Power International (YTLP MK) are likely to have passive inflows.
- Dialog Group (DLG MK), Berli Jucker (BJC TB), Osotspa Public Company Limited (OSP TB) and Banpu Public (BANPU TB) could have outflows.
Korea: Surging Share Cancellations in 2024
- We discuss the surging share cancellations in Korea in 2024. As of 8 February 2024, Korean companies have announced 3.3 trillion won worth of shares to be completed this year.
- At current blistering pace, it is likely that the share cancellations in Korea could jump at least 100% YoY to jump more than 10 trillion won in 2024.
- Some of the leading Korean companies including Samsung C&T and KT&G that have announced share cancellations this year continue to outperform the market on average.
Exploring Prioritized Buyback/Cancellation of Samsung Electronics & Hyundai Motor Prefs
- Samsung Elec & Hyundai Motor’s high proportion of preferred stocks leads to their unusually high cost of capital, making themselves prime targets for the govt’s Corporate Value Up policy.
- Policy likely focuses on aggressive share buybacks, especially preferred stock repurchase, to improve PBR. Pension funds may invest heavily in ETFs, offsetting dilution effects.
- Hyundai Motor may pursue more aggressive shareholder returns due to the India listing, possibly prioritizing preferred share repurchases as it introduces risks of value transfer controversies within Korea.
Softbank (9984 JP): Relying on Arm Strength and JPY Weakness
- We believe that Arm is now valued as a “growth at any price” stock; with nearly half of SoftBank group’s equity value reliant on Arm, NAV downside risk is rising
- The risk of JPY appreciation is real, whilst SVF2 remains very exposed to financing costs, with 85% of its equity value in private companies
- Softbank shares trade at a 55%+ discount to the estimated NAV; yet the downside risks to Arm’s valuation, along with the potential JPY appreciation, should keep the discount wide
A/H Premium Tracker (To 9 Feb 2024): Liquid AH Premia Near Multi-Yr Wides, Narrow AH Premia Wider
- The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND and NORTHBOUND flows net positive. AH premia on average rose so Hs underperformed As by 1.75%. Narrow premia pairs saw AH premia rise most.
- Watch the SOE stock price KPI space. Wouldn’t be short SOEs vs Privates on H/A basis. Low-hanging fruit with some SOEs having large cash balances.
Recruit: HR Tech Top Line Further Declines; No Big Impact From Indeed Plus in the Near Term
- Recruit Holdings (6098 JP) reported 3QFY03/2024 results on Friday. Revenues decreased YoY due to decline in HR Tech revenues, while Adj. EBITDA for the quarter increased YoY. Both Beat consensus estimates.
- Weakening of labour markets and new pricing model have impacted HR Tech revenues, while cut down on investments have helped improve HR Tech margins.
- The company has launched Indeed Plus to help improve earnings, which we don’t expect to have a major impact on Recruit Holdings (6098 JP) ’s earnings in the near term.
Quiddity HSTECH Mar 24 Flow Expectations: US$415mn One-Way if the Low-Conviction Change Takes Place
- The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
- The index changes for HSTECH index for the March 2024 index rebal event will be announced on 16th February 2024.
- In this insight, we take a final look at the expected index changes and our latest flow expectations.
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