In today’s briefing:
- 7&I (3382) – A Starting Point for the Standalone Plan – The Good, The Bad, The Ugly
- Korea Zinc: Cross Shareholding Limitation System Loophole
- Japan Post Bank US$4bn Deal Updates – Needs to Correct More. Discount Vs Deal Performance Analysis
- Select Sector Indices and S&P Equal Weight Rebalance Preview: Capping Changes & US$13bn Trade
- Japan Post Bank (7182 JP): The Current Playbook
- DN Solutions IPO Might Skip OC—A Unique Trading Opportunity
- ECB: Meaningfully Less Restrictive
- Coforge’s $1.56 Billion Bet: A Game-Changer or a Risky Move?
- Naigai Trans Line (9384 JP): IA Partners’ JPY4,065 Tender Offer
- HEW: Political Blunderbuss
7&I (3382) – A Starting Point for the Standalone Plan – The Good, The Bad, The Ugly
- Today, partway through the day, we got a Bloomberg article suggesting a large-scale buyback was to come. Post-close, we got the full details.
- “Seven & i Holdings Announces Plan to Unlock Shareholder Value Through Leadership Changes and Transformational Capital and Business Initiatives”.
- Sale of York. Management change. Update on Special Committee work with ACT. Commitment to return ¥2trln to shareholders via buybacks by FY2030. Higher divs. IPO of 7-Eleven Inc (US).
Korea Zinc: Cross Shareholding Limitation System Loophole
- The proxy battle at the EGM for the control of Korea Zinc (010130 KS) is scheduled for 23 January.
- One day prior to the EGM, Korea Zinc’s Chairman Choi is trying to capitalize on the “cross-shareholding limitation system” in order to retain control of the company.
- In our view, it appears that the legal case regarding the cross shareholding limitation system is in favor of MBK/Young Poong alliance.
Japan Post Bank US$4bn Deal Updates – Needs to Correct More. Discount Vs Deal Performance Analysis
- Japan Post Holdings (6178 JP) (JPH) aims to sell around US$4bn worth of Japan Post Bank (7182 JP) (JPB), trimming its stake to below 50%.
- JPH had last sold around US$9bn worth of JPB shares in Mar 2023. That deal had a similar structure and it didn’t end up performing well.
- We have looked at the deal dynamics in our previous notes. In this note, we talk about updates and look at discounts vs performance for past secondary deals.
Select Sector Indices and S&P Equal Weight Rebalance Preview: Capping Changes & US$13bn Trade
- Constituent changes to the S&P 500 INDEX (SPX INDEX), S&P Midcap400 Index and S&P SmallCap600 Index for the March rebalance will be announced after market close on Friday.
- There will also be capping changes for the Select Sector indices that will result in a round-trip trade of US$13.1bn. Constituent changes will add to that flow.
- The largest inflows will be in Amazon.com, Tesla, Microsoft, NVIDIA, Alphabet (GOOGL US) and Electronic Arts. Largest outflows are from Broadcom, Meta Platforms, Linde, Mcdonald’s Corp and Take Two Interactive.
Japan Post Bank (7182 JP): The Current Playbook
- Since the offer announcement, Japan Post Bank (7182 JP)/JPB’s shares have declined by 2.5%. On 3 March, JPB completed the ToSTNeT-3 buyback by acquiring 13.3 million shares for JPY20 billion.
- To understand JPB’s trading pattern, it is instructive to examine its 2023 offering, Japan Post Insurance (7181 JP)/JPI’s 2019 offering, and Japan Post Holdings (6178 JP)/ JPH’s 2021 offering.
- JPB’s shares follow the trading pattern playbook of its 2023 and JPH’s 2021 offerings, in which investors buying the offer were rewarded with positive returns at the payment date.
DN Solutions IPO Might Skip OC—A Unique Trading Opportunity
- With cautious foreign interest, DN Solutions’ big IPO deal might skip the OC and go full local for bookbuilding, setting a new trend in Korean IPOs.
- If foreign anchor orders drop, local players gain more negotiating power, leading to aggressive bidding and potentially a way more conservative IPO price.
- Offshore funds passing investment review without an OC could grab more volume, benefiting from local-led down-pricing without lock-up restrictions.
ECB: Meaningfully Less Restrictive
- The ECB’s sixth 25bp deposit rate cut to 2.5% was unsurprising, and its characterisation of policy as meaningfully less restrictive leaned towards our relatively hawkish view.
- Policy rates may already be close to neutral. Looser fiscal policy plans also pressure monetary policy to follow a tighter path than would otherwise have been necessary.
- We still expect the ECB to hold rates in April, which is no longer a controversial call. A final 25bp ECB cut in June remains in our outlook (BoE cuts in May and Fed on hold).
Coforge’s $1.56 Billion Bet: A Game-Changer or a Risky Move?
- Coforge (COFORGE IN)‘s $1.56 billion deal with Sabre positions it as a major player in travel technology, but concerns over Sabre’s financial stability create potential risks for long-term execution.
- Acquisitions of Rythmos and TMLabs align with Coforge’s strategy to enhance cloud, data, and enterprise IT capabilities, strengthening its market position in airline and ServiceNow implementation services.
- While analysts recognize strong revenue visibility, Sabre’s $5.1 billion debt and negative net worth raise cash flow concerns, leading to a divided outlook on Coforge’s future profitability and risk exposure.
Naigai Trans Line (9384 JP): IA Partners’ JPY4,065 Tender Offer
- Naigai Trans Line (9384 JP) has recommended a tender offer from IA Partners at JPY4,065 per share, a 62.3% premium to the last close.
- Despite being below the midpoint of the target IFA’s DCF valuation range, the offer is attractive compared to historical trading ranges and represents an all-time high.
- Given that the offer is reasonable, the required minority acceptance rate is attainable. The offer is from 10 March to 21 April, with payment on 28 April.
HEW: Political Blunderbuss
- Shot from Trump’s blunderbuss is hitting sentiment and risk appetite yet the hard data remain resilient. Europe waking up on defence punched markets more in hope than reality, but hawkish inflation and ECB news helped create room to close our bullish call.
- Next week’s US inflation data are the scheduled global highlight, along with the Bank of Canada likely pausing its cutting cycle. We also await UK GDP data confirming resilience inconsistent with the dovish panic at February’s BoE meeting.
- Note: Smartkarma is now the sole distributor of our research, so clients will only receive all other research from Smartkarma (queries to transition@smartkarma.com).
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