In today’s briefing:
- Japan – Another Big Round of Passive Selling
- YUUUGE Modec (6269) Offering To Stay Listed in TSE Prime – Effectively a Re-IPO
- Japan Post Holdings (6178) – Bigger Better Bullish Buyback With Caveats
- Modec Placement – Deal Seems a Little Opportunistic but Not Particularly Expensive
- Alibaba: Our Take on 4QFY24
- Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June
- Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
- Malaysia Airports (MAHB MK): Pre-Conditional Voluntary Offer at RM11.00
- S Line (9078 JP) TOB/MBO at 0.57x Book – Wrong Price by Far but Only AGGRESSIVE Activism Blocks It
- Lock & Lock: Second Tender Offer by Affinity Equity Partners
Japan – Another Big Round of Passive Selling
- There are 15 stocks in Japan that will be sold by passive trackers at the close on 31 May.
- Short interest has been increasing in these stocks over the last few months and there will be covering on implementation date.
- Cumulative excess volume on all stocks has risen in the last couple of months though the pace of the increase has varied.
YUUUGE Modec (6269) Offering To Stay Listed in TSE Prime – Effectively a Re-IPO
- In March, Modec Inc (6269 JP) announced the TSE had said Modec at 29.3% (end-Dec-23) was below the required 35% tradable shares level required for continued listing on TSE Prime.
- It announced a “Basic Plan” to comply with the criteria which involved convincing one of the three major corporate holders to sell some. They needed to sell about 6%.
- Mitsui E&S has announced it will sell 32%, and 37% including greenshoe. This is overdoing it in a huge way. Mitsui E&S is getting out. This is a re-IPO.
Japan Post Holdings (6178) – Bigger Better Bullish Buyback With Caveats
- Today, Japan Post Holdings (6178 JP) announced results (and Mar25 guidance) as did its subsidiaries Japan Post Insurance (7181 JP) and Japan Post Bank (7182 JP).
- There are a number of interesting things in all the announcements/presentations but the most interesting one for JPH holders is a big buyback. Another one.
- The company has announced a ¥350bn buyback. It is larger than last year’s (¥300bn) buyback and has another important difference.
Modec Placement – Deal Seems a Little Opportunistic but Not Particularly Expensive
- Mitsui E&S Holdings (7003 JP) is looking to raise approximately US$451m through a secondary follow-on offering, via selling approximately 21.9m shares (32% of TSO) of Modec Inc (6269 JP)’s stock.
- The deal is a large one to digest at 81 days of three month ADV.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Alibaba: Our Take on 4QFY24
- Alibaba Group Holding (BABA US)‘s FQ4 announcement portrays a resilient comeback to growth, suggesting the past four years’ challenges barely impacted its dominance in Chinese e-commerce.
- However, a closer look beyond the surface of Alibaba Group Holding (9988 HK)‘s FQ4 results announcement reveals that little has actually changed in recent months.
- Taobao and Tmall face challenges in a tough, stagnant market; AIDC’s growth largely covers for other Alibaba units’ failings, while AliExpress’s expansion cuts into margins.
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June
- Post market close tomorrow, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 7 June.
- There were no constituent changes to the index in March. We highlight ten profitable and eligible stocks that could be added to the index in June.
- Changes to the Hang Seng Industry Classification System (HSICS) could lead to inclusions for the Information Technology industry while there could also be inclusions for the underweighted Healthcare industry.
Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
- Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
- If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
- We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.
Malaysia Airports (MAHB MK): Pre-Conditional Voluntary Offer at RM11.00
- Malaysia Airports Holdings (MAHB MK)’s pre-conditional voluntary conditional offer from a four-member consortium is RM11.00, a 5.8% premium to the last close.
- Despite the offer representing an all-time high, the 90% minimum acceptance condition could be challenging due to the low takeover premium and discount to historical and peer multiples.
- The consortium can overcome issues satisfying the minimum acceptance condition by bumping the offer or lowering the acceptance condition.
S Line (9078 JP) TOB/MBO at 0.57x Book – Wrong Price by Far but Only AGGRESSIVE Activism Blocks It
- Today, S Line Co Ltd (9078 JP) announced its CEO would conduct a Tender Offer MBO to buy out the ¥50bn-target revenue logistics company, at 0.6x book.
- The company announced results with revenues up. But withdrew its existing MTMP which said revenues would be up 10% from here to March 2025 and ROE would be higher.
- This is the wrong price. It should engender some upset, but active investors own almost nothing it seems.
Lock & Lock: Second Tender Offer by Affinity Equity Partners
- On 15 May, it was reported in the local media that Affinity Equity Partners (AEP) is expected to launch a second tender offer for Lock & Lock (115390 KS).
- The tender offer price in this second tender offer is 8,750 won (same as the first tender offer). The second tender offer will last from 16 May to 5 June.
- In the first tender offer, only about half of the target was reached. There was a strong backlash from investors due to low tender offer price.
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