In today’s briefing:
- Softbank Confirms BABA Selldown – Big Changes on Softie’s Balance Sheet and BABA Index Implications
- Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome
- MSCI August 2022 Index Rebalance: The Last QIR Throws Up One Big Surprise
- Swire Pacific (19 HK/87 HK) Buyback: Bigger Than It Appears
- Swire A/B (19 HK / 87 HK) Buyback Programme – It’s REALLY BIG
- STI Index Rebalance Preview (Sep): Close to the Cutoffs
- Japan Post Insurance (7181 JP) – Reading Between The Lines
- Toyo Tecnica (8151) – BIG Buyback
- Past A/H Listings Performance – Most of the Deals Haven’t Done Much
- True/DTAC: Merger Support Increasingly Tenuous
Softbank Confirms BABA Selldown – Big Changes on Softie’s Balance Sheet and BABA Index Implications
- Softbank today confirmed that the stories circulating about Softbank having hedged a decent portion – 200+mm shares – of its BABA position were true.
- The market expectation had been that these pre-paid forwards would be held for another two years. The announcement today is that they will be physically settled early.
- This means the entire accounting effect – worth ¥4.6trln – will hit the income statement (and balance sheet) in the current quarter. There are investment and index implications
Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome
- Softbank will settle all of its forward derivative contracts on Alibaba by the end of September, representing 242mn ADRs. Some had years to run so this is truly surprising
- We estimate Softbank Group (9984 JP) raised $35b selling BABA-linked derivatives since mid-2020, which would imply average proceeds per ADR of $145 versus the $91 it trades at now
- But early settlement also has us wondering when the other show will drop and if that is related to global tech, China or Alibaba specifically
MSCI August 2022 Index Rebalance: The Last QIR Throws Up One Big Surprise
- As announced, there are 8 adds and 3 deletes for the MSCI Standard indices in Asia Pacific. To trade, there are 8 adds and 2 deletes.
- Most of the changes are inline with what we forecast. The non-inclusion of Gcl Poly Energy Holdings Limited (3800 HK) is the big surprise, though that could change.
- All the adds in China are potential inclusions to the FTSE All-World Index in September and that will add to the passive inflows on the stocks.
Swire Pacific (19 HK/87 HK) Buyback: Bigger Than It Appears
- Swire Pacific (A) (19 HK)/Swire Pacific Ltd-Cl B (87 HK) has announced a HK$4bn buyback. While that is 6.5% of shares out, it is over 15% of real float.
- Swire Pacific (A) (19 HK) was trading at a 50% discount to NAV and near the widest level over the last few years.
- There will be passive selling once the buyback is complete, but the stocks should run up prior to that.
Swire A/B (19 HK / 87 HK) Buyback Programme – It’s REALLY BIG
- Today Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced earnings, and they announced a large (HK$4bn) buyback.
- Details are somewhat thin, but there are a bunch of possibilities, and all of them should have non-negligible impact on Swire and Swire vs Peers.
- The immediate market response was to send them up 10% on the day. That puts both at somewhere near one-year highs, but the discount to NAV is still big.
STI Index Rebalance Preview (Sep): Close to the Cutoffs
- Emperador (EMI SP) currently is just outside the inclusion zone for the FTSE Straits Times Index (STI) (STI INDEX) and a small price bump is needed for index inclusion.
- If Emperador (EMI SP) is added to the index, Comfortdelgro Corp (CD SP) could be deleted as the lowest ranked index constituent.
- Emperador (EMP PM) is a high probability inclusion to the FTSE All-World Index at the September SAIR and the stock could move higher over the next couple of weeks.
Japan Post Insurance (7181 JP) – Reading Between The Lines
- Japan Post Insurance (7181 JP) reported soft Q1 Tuesday on negative existing policy premium growth and higher (covid-related) underwriting claims costs. Guidance was unchanged but JPI also announced a buyback.
- The buyback structure is designed to keep Japan Post Holdings (6178 JP) under 50% to continue to abide by the strictures and goals of the Japan Postal Privatisation Act.
- 50% or more will be done in a ToSTNeT-3 buyback Thursday morning 12 August. The rest will be bought on market. Impact is non-negligible. And JPI is cheap cheap cheap.
Toyo Tecnica (8151) – BIG Buyback
- Toyo Corp (8151 JP) is a smallcap electronics firm specialising in sensors/testers/loggers for industrial and data system processes, large scale antennae systems, high tech medical equipment, remote sensing equipment, etc.
- They have seen their (extraordinarily seasonal) revenues go mostly nowhere over the past ten years, but they have, until recently, accumulated cash and securities.
- On 10 August, the company announced a LARGE buyback of up to 8.44% of shares out. The details suggest
Past A/H Listings Performance – Most of the Deals Haven’t Done Much
- China Tourism Group Duty Free Corporation Limited (CDF) is gearing up to launch Hong Kong’s largest listing so far this year, with a reported deal size of around US$2-3bn.
- Prior to the deal launch, we’ve had a quick look at the A/H premium, subscription and past performance of some of the earlier A/H listings.
- Overall, most of the recent A/H listings haven’t done much over the first month.
True/DTAC: Merger Support Increasingly Tenuous
- Reportedly, the board of the National Broadcasting and Telecommunications Commission (NBTC), Thailand’s telco regulator, has called for a more detailed analysis of the deal’s impact on competition, consumers and industry.
- This follows recent calls by Thailand’s opposition Move Forward party urging the NBTC to block Total Access Communication (DTAC TB) / True Corp Pcl (TRUE TB)‘s merger.
- Both DTAC and True are trading tight to terms – especially True. Time to take down borrow.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
