In today’s briefing:
- China’s [Maybe] Biggish [Quasi?] Bazooka
- Tech: Japan’s Biggest IPO in 6 Years, Kioxia, Is Off. Here Is the Likely Reason
- Korea Exchange Announces The Korea Value Up Index
- Huafa Props (982 HK): A Quick Word On Voting
- Crunching Passive Impact Numbers for KRX Value-Up Index Names, Based on KRX’s Free-Float Rate Data
- MBK Raises Tender Prices: ₩750,000 for Korea Zinc & ₩25,000 for Young Poong Precision
- Tokyo Metro IPO – The Positives – Quasi-Monopoly Status
- MBK Raises Tender Offer Price on Korea Zinc by 13.6% to 750,000 Won
- Tohokushinsha (2329 JP) To 3D – “Not Today”; 3D May Go To The Mattresses
- Tokyo Metro (9023 JP) IPO: The Bear Case
China’s [Maybe] Biggish [Quasi?] Bazooka
- Today, in a press conference held jointly by the Governor of the PBOC, the Director of the Financial Regulatory Bureau, and Chairman of the CSRC, China announced market stimulus measures.
- The PBOC will cut RRR 50bp, the 7-day repo rate 20bp, guide effective mortgage rate cuts, and lower minimum down payments on second homes. There are other commercial RE measures.
- Three major stock market measures were announced. A RMB500bn collateral swap programme, PBOC backing RMB300bn bank loans for corps to buy stocks, and a Plan to increase Central Huijin investments.
Tech: Japan’s Biggest IPO in 6 Years, Kioxia, Is Off. Here Is the Likely Reason
- Significant peer price performance declines leaves IPO valuation stretched, the desired discount multiple to attract interest has suddenly become a premium
- Investor interest in memory semiconductors, AI derivative stocks has cooled
- Peer price sell-offs are extreme but could quickly change, reflecting the highly cyclical nature of the sector
Korea Exchange Announces The Korea Value Up Index
- Korea Exchange announced the long awaited Korea Value Up Index (“K Value Up Index”) (composed of 100 stocks) today.
- Korea Exchange used a 5-step screening process to select the 100 companies in this index including market cap, profitability, shareholder returns, market evaluation, and capital efficiency.
- This Value Up index is part of the bigger “Corporate Value Up ” program in Korea. These efforts to improve Korea’s corporate governance policies is a marathon, not a sprint.
Huafa Props (982 HK): A Quick Word On Voting
- Huafa Property (982 HK) shareholders overwhelmingly approved (99.52% [of shares present and/or via proxy] FOR; 0.48% AGAINST) the Scheme yesterday. This part was expected. The headcount test was less certain.
- The final headcount tally, on a look-through basis into HKSCC Nominees by CCASS Participants, was 111 FOR, 14 AGAINST. Again, a pretty clear pass.
- Normally a Scheme Vote, if approved, wouldn’t warrant a full note. But when the headcount test is involved, it is worthwhile understanding the mechanics.
Crunching Passive Impact Numbers for KRX Value-Up Index Names, Based on KRX’s Free-Float Rate Data
- KRX 300 hit 1 trillion won AUM fast, but with local pensions more aggressive, the value-up’s early AUM could top 1 trillion, hitting up to 3 trillion in six months.
- Hanjin KAL, S1 Corp, Hyundai Elevator, Nice Info, and Huchems are set for strong price action. The financial sector also stands out, seeing the biggest impact compared to other sectors.
- Small caps under 1 trillion won see little passive impact, but solid plays exist under 3 trillion, so splitting large and small caps won’t limit target options much.
MBK Raises Tender Prices: ₩750,000 for Korea Zinc & ₩25,000 for Young Poong Precision
- Hankyung reports MBK will raise Korea Zinc’s tender offer to ₩750,000 (14%) and Young Poong Precision’s to ₩25,000 (25%) before today’s market opens.
- Hankyung and Maeil are top sources for market scoops, so it’s almost certain MBK leaked the tender price hike ahead of today’s trading.
- MBK leaves Choi just five trading days to respond. Korea Zinc plans to raise ₩400 billion, but it’s still not enough for a counter-bid.
Tokyo Metro IPO – The Positives – Quasi-Monopoly Status
- Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.3bn in its upcoming Japan IPO.
- Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
- In this note, we talk about the positive aspects of the deal.
MBK Raises Tender Offer Price on Korea Zinc by 13.6% to 750,000 Won
- MBK announced that it will raise the tender offer prices on Korea Zinc by 13.6% to 750,000 won and Young Poong Precision by 25% to 25,000 won.
- If 100% of the 3,024,881 shares of Korea Zinc tender offer is completed, at the revised tender offer price of 750,000 won, this would be 2.27 trillion won in amount.
- In term of probabilities, we would put a 80-85% probability that MBK/Jang family successfully completes the tender offers and takes over the controlling stakes of these two companies.
Tohokushinsha (2329 JP) To 3D – “Not Today”; 3D May Go To The Mattresses
- 3D Investment Partners bought 5% of Tohokushinsha Film (2329 JP) by Mar-2023. A year later they had 17+%. 3D proposed changes. In July, 3D proposed a takeover, asking for DD.
- Tohokushinsha responded to the proposals, then offered due diligence to 3D based on terms set by a Special Committee. 3D did not want those strict DD terms.
- Yesterday, Tohokushinsha said “Fine.” The stock today fell 10% today. This is not a stalemate, but it means 3D may start to play harder.
Tokyo Metro (9023 JP) IPO: The Bear Case
- Tokyo Metro (9023 JP), a mass transit operator, is seeking to raise up to US$2.3 billion. Pricing is on 15 October, and the listing is on 23 October.
- In Tokyo Metro (9023 JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on mid-tier revenue growth, low revenue diversification, the highest leverage among peers and a sizeable post-IPO share overhang.
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