In today’s briefing:
- Nikkei 225 Index Rebalance: Mostly on Expected Lines
- Nikkei 225 Review Results: Nidec, SMC, Hoya IN
- JMDC Placement – Lots to like but past Deals Have Been Mixed and It Is Expensive
- KOSPI Size Index Migration: Official Results & Trading Approach Towards Implementation
- Giordano (709 HK): Cheng’s Have 44.98%. Offer Extended
- Nikkei 225 March 2023 Review Quiddity Leaderboard
- Initial Thoughts on the Porsche IPO
- CALB IPO: The Bull Case
- Selected European Holdcos and DLCs: August ‘22 Report
- Kintor Pharmaceutical (9939.HK) Placement – The Hidden Risks and the True Colors
Nikkei 225 Index Rebalance: Mostly on Expected Lines
- The Nikkei 225 (NKY INDEX) September rebalance will be done in three parts due to the delisting of Shizuoka Bank (8355 JP) and the relisting of Shizuoka Financial Group (5831).
- Nidec Corp (6594 JP), SMC Corp (6273 JP) and Hoya Corp (7741 JP) replace Unitika Ltd (3103 JP), Oki Electric Industry (6703 JP) and Maruha Nichiro (1333 JP).
- Passive trackers need to buy over 10 days ADV on the adds and there is a large impact of the funding trade given the add/delete size difference.
Nikkei 225 Review Results: Nidec, SMC, Hoya IN
- The Nikkei Index Team announced the Nikkei 225 Annual Review today, days earlier than I expected. Nidec Corp (6594 JP), SMC Corp (6273 JP), Hoya Corp (7741 JP) are IN.
- Unitika Ltd (3103 JP), Maruha Nichiro (1333 JP), and Oki Electric Industry (6703 JP) are OUT. They did not go for my subjective choices to improve sector balance. Next time.
- The inclusion/exclusion events are staggered over 3 days out of four because of the deletion and re-inclusion of Shizuoka Bank (8355 JP) due to its formation of a holding company.
JMDC Placement – Lots to like but past Deals Have Been Mixed and It Is Expensive
- JMDC Inc (4483 JP) aims to raise around US$235m, US$150m coming via an international offering and the rest via issuing shares to its largest shareholder, Omron Corp (6645 JP) .
- The company plans to use the proceeds to repay some of its debt that was taken on earlier to acquire other companies.
- In this note, we will talk about the placement and run the deal through our ECM framework.
KOSPI Size Index Migration: Official Results & Trading Approach Towards Implementation
- The results are pretty much in line with the predictions, except for Hanwha Aerospace which made it to LARGE instead of Hyundai Marine & Fire Insurance.
- Assuming that ten names, including Hyundai Marine, were traded in a LONG/SHORT basket with equal weight, the yield from August 17 to the last close would have been 4.6%.
- I would still approach with an equal-weighted basket trading until this Thursday. This flow trading usually loses its effect rapidly after rebalancing. So, I wouldn’t carry it beyond this Thursday.
Giordano (709 HK): Cheng’s Have 44.98%. Offer Extended
- Late last night, Giordano International (709 HK) announced the Offeror – the Cheng Family – had 44.98% in the bag after 20.41% of shares out had been tendered.
- The Offer has been extended for one week, until the 13 September.
- Whether investors receive the Offer consideration AND the interim divided is still up for debate.
Nikkei 225 March 2023 Review Quiddity Leaderboard
- The Sep 2022 Nikkei 225 Annual Review has been announced. This was discussed in Nikkei 225 Review Results: Nidec, SMC, Hoya IN.
- That means we can make early predictions for the March 2023 rebalance to be announced in six months. One way turnover would be about 1.4%.
- The top three adds are Oriental Land, Renesas, and JAL. The top 3 sells would be Toyobo, Toho Zinc, and Nippon Sheet Glass. There are some dark horses here too.
Initial Thoughts on the Porsche IPO
- Porsche is getting ready for an IPO to be completed by the end of this year. However, the final decision on the IPO is still subject to market conditions.
- The expected valuation of the Porsche IPO is 60 billion to 85 billion euros ($60 billion to $85 billion).
- Qatar Investment Authority has already committed to a 4.99% stake in the Porsche IPO.
CALB IPO: The Bull Case
- CALB (CALBLZ CH), a leading EV battery manufacturer, is seeking to raise US$2.0 billion through an HKEx IPO, according to press reports.
- According to Frost & Sullivan, in terms of installed capacity in 2021, CALB ranked seventh globally among EV battery companies with a 3.2% market share.
- The key elements of the bull case rest on a large and growing market, rising market share, explosive top-line growth and ambitious capacity expansion plans.
Selected European Holdcos and DLCs: August ‘22 Report
- Discounts to NAV of covered holdcos have mainly widened or stayed at the same level during August/beginning of September, in line with the loses in the main indexes.
- Discounts to NAV (5 September): Alba, 46.1%; GBL, 34.1%; Heineken Holdings 21.3%; Industrivärden C, 10.1%; Investor B, 18.9%; Porsche Automobile Holding 29.4%. The spread of Rio Tinto DLC tightened to 14.5%.
- Spreads tend to widen in bear markets but short-term recoveries provide opportunities on tightening discounts. Recommended trades are: Industrivärden C vs. listed assets, Porsche, Rio Tinto (DLC).
Kintor Pharmaceutical (9939.HK) Placement – The Hidden Risks and the True Colors
- Over the past year, we’ve seen the stock price of Kintor fluctuate largely, which was mainly driven by its COVID-19 drug proxalutamide. However, we are not optimistic about its outlook.
- There are big concerns about the credibility of management. The suspicion caused by mistrust leads us to suggest that investors directly enter the “show me the result” mode.
- Shares plunged after the announcement of the Placing. Obviously, Kintor Pharmaceutical (9939 HK) is short of money. Considering the potential risks behind, we are bearish on Kintor.
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