In today’s briefing:
- 7&I (3382 JP) – Dippity Doo Dah – Irrational Fears, Earnings Vol, But Restructuring Proceeding Apace
- LG CNS: Updated IPO Valuation Analysis
- Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Up to 5 Changes in March
- Southeast Asia: The Passive Axe Hangs as Positioning Increases
- Haitong Securities (6837 HK)/GTJA (2611 HK) Merger: The Home Stretch
- Bloks (325 HK): Global Index Inclusion Following IPO Lock-Up Expiry
- [Quiddity Index Jan25] KOSPI 200 Leaderboard Jun25: Up to 6 Changes Possible
- Suntec REIT (SUN SP): Tang’s Curious Bump
- Fuji Soft (9749 JP): KKR Extends Again, Delaying the Inevitable Bump
- Ohayo Japan | Diverging Results for Fast & Seven
7&I (3382 JP) – Dippity Doo Dah – Irrational Fears, Earnings Vol, But Restructuring Proceeding Apace
- Recent news on the Seven & I Holdings (3382 JP) situation includes better-than-expected possible sale of the SST business, a little headline fear-mongering on national security, and earnings.
- Earnings this year will be volatile vs expectations. Timing (and magnitude) of kitchen-sinking matters. But neither ACT nor you should be buying it based on trough earnings expectations.
- The call transcript is worth listening to. The math on the takeover maths well. This is a buy on dip. Again.
LG CNS: Updated IPO Valuation Analysis
- According to our updated valuation analysis of LG CNS, it suggests a base case implied market cap of 7.4 trillion won, representing target price of 76,383 won per share.
- Our base case valuation target price of 76,383 won is 23% higher than the high end of the IPO price range.
- We lowered our target price by 6%, mainly due to greater political risks arising from the recent cancelled martial law and ongoing impeachment of President Yoon.
Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Up to 5 Changes in March
- The review cutoff date for the March rebalance of the HSIII was 31 December. The changes will be announced on 21 February and become effective after the close 7 March.
- There could be 5 changes to the index with some inclusions driven by potential addition to the Hang Seng Composite Index. That could lead to buying via Southbound Stock Connect.
- Horizon Robotics (9660 HK) is a potential inclusion to the HSCI and the Hang Seng TECH Index (HSTECH INDEX) in March.
Southeast Asia: The Passive Axe Hangs as Positioning Increases
- There are 8 stocks listed in Indonesia, Malaysia, Thailand and Philippines that could be deleted from passive portfolios in February.
- There is a fair bit to sell in the stocks with over US$50m flow and between 3.5-64x ADV. Positioning is not very high in a lot of the stocks.
- Stocks could avoid deletion if they move higher in the next week or two. But increased positioning could keep a lid on that.
Haitong Securities (6837 HK)/GTJA (2611 HK) Merger: The Home Stretch
- The exchange ratio for the merger between Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) is 0.62x.
- The merger closing is subject to several effectiveness and implementation conditions. The latest update suggests that the remaining conditions are CSRC and HKEx approvals.
- The satisfaction of the remaining conditions is a formality. At the last close and for an end February payment, the gross/annualised spread is 3.2%/26.4%.
Bloks (325 HK): Global Index Inclusion Following IPO Lock-Up Expiry
- Bloks (325 HK) is expected to be assigned an index nationality of Hong Kong instead of China due to its incorporation in the Cayman Islands.
- The security is expected to be added at the September 2025 review following the 6-month IPO lock-up expiry which increases the fcap above the APAC threshold.
- The security is ineligible for the other global index until January 2026 because of the free float being below the minimum threshold of 15%.
[Quiddity Index Jan25] KOSPI 200 Leaderboard Jun25: Up to 6 Changes Possible
- KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX).
- In this insight, we take a look at the names leading the race to become ADDs and DELs during the upcoming semiannual review in June 2025.
- We expect six ADDs and six DELs for the KOSPI 200 index during this index rebal event based on the latest available data.
Suntec REIT (SUN SP): Tang’s Curious Bump
- Back on the 5th December, Gordan Tang (& his wife Celine) acquired a 2.14% stake in Suntec REIT (SUN SP), lifting their stake to 31.45% from 29.31%, triggering a MGO.
- This had all the hallmarks of a technical Offer. The Offer price was S$1.16/share compared to the S$1.17/share undisturbed price. The IFA opined the Offer was not fair nor reasonable.
- The Tangs have now bumped to S$1.19/share. Terms are not final. The IFA viewpoint won’t budge. This is an opportunistic move from the Tangs. But why not roll the dice?
Fuji Soft (9749 JP): KKR Extends Again, Delaying the Inevitable Bump
- KKR has extended the close date of the Fuji Soft Inc (9749 JP) second tender offer period from 9 to 24 January. All other terms remain unchanged.
- KKR unconvincingly tries to criticize the Bain offer and unsurprisingly believes there will not be a tender offer by Bain that investors can tender into.
- Despite KKR’s gamesmanship, it has not declared its offer final. A bump remains necessary as Bain remains resolute in launching its offer. The final winning offer could be around JPY10,000.
Ohayo Japan | Diverging Results for Fast & Seven
- The US equity markets were closed on Thursday in honour of the national day of mourning following the passing of former President Jimmy Carter.
- Fast Retailing, Uniqlo’s parent company, reported a 7.4% rise in quarterly operating profit to ¥157.6bn
- Seven & i Holdings reported a 65% drop in nine-month net profit to ¥63.6bn, citing difficulties in North American operations
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