In today’s briefing:
- 7&I Results and Plans – The Good, The Bad, The Ugly, The Respectable, Unfortunate, and Encouraging
- 7-Eleven Corporation: A Clear Strategy for Long-Term Value, Founding Family Return to Super-Stores
- Shin Kong and Taishin – There’s a Good Value Swap Trade To Do Here
- HSCI Index Rebalance Preview: Midea Group (300 HK) To Be Added in December; Stock Connect Next Week
- SENSEX Index Rebalance: And That’s a Googly
- Hyundai Motor India: Index Entry Timing for India’s Biggest IPO
- Quiddity Mar25 Nikkei 225 Rebal: Likely 2 IN, 2 OUT, Again; Minimal Surprise Factor
- TOPIX Inclusions: Who Is Ready (Oct 2024)
- Another Play to Consider: Spread Trading Korea Zinc Single-Stock Futures
- Hillhouse To Buy Out Minorities In Samty Holdings (187A) – Small Premium, High Leverage, Hmmm
7&I Results and Plans – The Good, The Bad, The Ugly, The Respectable, Unfortunate, and Encouraging
- H1 sales were GOOD. H1 earnings were BAD. New forecasts are UGLY. The CVS initiatives are RESPECTABLE, but US CVS market environment UNFORTUNATE. The creation of the new Holdco ENCOURAGING.
- The Couche-Tard Bid? That’s SEPARATE. Confidential. But three weeks after receiving the new proposal, it hasn’t been publicly rejected. So that’s a thing.
- 7&i is progressing with its Standalone Plan, as it should, because ACT’s bid is more a show of faith for discussions. The York Holdings structure is INTERESTING.
7-Eleven Corporation: A Clear Strategy for Long-Term Value, Founding Family Return to Super-Stores
- Seven & I released 1H24 earnings today as well as details on planned restructuring of its business. Results included some one-off items hitting operating profit as well as lower footfall.
- The bigger news was the plan to hive off the non-CVS retail operations into a new company, York Holdings, leaving a newly named 7-Eleven Corporation running CVS globally.
- Unusually, Seven also mentioned the possibility of new strategic partners investing in York, including even the “original founding families”, suggesting one way of holding on to control.
Shin Kong and Taishin – There’s a Good Value Swap Trade To Do Here
- Media reports indicate that the shareholder base of Shin Kong Financial Holding (2888 TT) and Taishin Financial Holding (2887 TT) have approved their merger.
- Shin Kong meeting results were public just before the market closed. The results from Taishin were known earlier. The market and spread were un-moved. If anything, things widened a little.
- Next, the two companies try to get fair Trade Commission, FSC, and Exchange approval to join to become Taishin Shin Kong FHC. And there’s a good trade to do here.
HSCI Index Rebalance Preview: Midea Group (300 HK) To Be Added in December; Stock Connect Next Week
- There were only 13 new listings on the Main Board of the HKEX (388 HK) in the third quarter of the year.
- Of those stocks, we only see Midea Group (300 HK) having a chance of being added to the HSCI in December.
- Midea Group (300 HK) should be added to Southbound Stock Connect next week after the price stabilisation period has ended.
SENSEX Index Rebalance: And That’s a Googly
- Adani Ports & Special Economic Zone (ADSEZ IN) will replace Wipro Ltd (WPRO IN) in the S&P BSE SENSEX Index at the close on 21 June.
- Adani Ports & Special Economic Zone (ADSEZ IN)‘s inclusion is a big surprise and there should be a move higher in the stock in the short-term.
- Wipro Ltd (WPRO IN)‘s deletion was expected and there is positioning in the stock. But there is a lot that passives need to sell too.
Hyundai Motor India: Index Entry Timing for India’s Biggest IPO
- Hyundai Motor India (1342Z IN) is looking to list on the exchanges by selling up to INR 279bn (US$3.3bn) of stock at a valuation of up to INR 1,593bn (US$19bn).
- The anchor allocations will be completed early next week, and the stock is expected to start trading on 22 October.
- The stock will not get Fast Entry to global indices. Inclusion at regular rebalances should take place in February and June next year.
Quiddity Mar25 Nikkei 225 Rebal: Likely 2 IN, 2 OUT, Again; Minimal Surprise Factor
- The Sep24 Nikkei 225 Rebal was odd. They could have done 3. They did 2. For now, I see 2 IN and 2 OUT for the Mar25 Nikkei 225 Rebal.
- There is also a capping event for Fast Retailing which on mild outperformance could become a double-capping event.
- There is a bit of a tech bent to potential ADDs. Some Consumer Goods stocks need stock splits to get in. The Committee will regret not adding PPIH last time.
TOPIX Inclusions: Who Is Ready (Oct 2024)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- Our long-term pre-event candidate CELSYS (3663 JP) has moved to TSE Prime. There will be a TOPIX Inclusion event on 30-Oct-24. The stock has outperformed TOPIX by 43% since July.
- PKSHA Technology (3993 JP) and GENOVA (9341 JP) also moved to the TSE Prime market in September and will be having TOPIX Inclusion events at the end of October 2024.
Another Play to Consider: Spread Trading Korea Zinc Single-Stock Futures
- Another play is spread trading Korea Zinc single-stock futures: go long on the front-month and short on the farther-out contract to profit from price convergence.
- The key is when longer-dated futures’ volume will rise and if the basis difference with front-month futures will create arbitrage opportunities. November’s volume seems more for hedging than arbitrage.
- MBK is likely to launch a second tender offer, potentially extending the spread trading timeline and giving us more chances to hit sweet spots.
Hillhouse To Buy Out Minorities In Samty Holdings (187A) – Small Premium, High Leverage, Hmmm
- Today, Hillhouse announced it would buy the 63% of SAMTY HOLDINGS Co Ltd (187A JP) not owned by Daiwa Securities Group (8601 JP) at an 18% premium.
- It’s a highly-levered real estate company. Huge inventory. Decent margins on sale so embedded profit sitting in inventory. Not a very big premium, but an all-time high.
- Retail including some large former insiders and passive own the vast bulk of the float here. The former get this done. Or not.
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