In today’s briefing:
- T-Gaia (3738 JP) – Potential Premium Takeout Story Turns To An Ugly Takeunder
- Mar25 Nikkei 225 Rebal: Considering Fast Retailing Capping…. Again…
- HSTECH Index Rebalance Preview: $800m Round-Trip Trade
- Tokyo Metro IPO – Thoughts on Valuation
- Choi Family Launches a Counter Tender Offer for Young Poong Precision
- HSCEI Index Rebalance Preview: High & Low Probability Changes
- Choi Drops a Counter-Tender for Young Poong Precision at ₩30,000 Before the Market Bell Tomorrow
- Tokyo Metro (9023 JP) IPO: Valuation Insights
- Namoi Cotton (NAM AU): Well Played LDC
- Rigaku Holdings (268A JP) IPO: The Bull Case
T-Gaia (3738 JP) – Potential Premium Takeout Story Turns To An Ugly Takeunder
- Today, just before the close, the Nikkei put out a scoop that Bain would buy T Gaia Corp (3738 JP) for ¥140bn. Sounds big. It was a 30% discount.
- There is a three Tender Offer process whereby minorities, who could be squeezed out regardless, are offered the opportunity to block the deal by not tendering at ¥2,670.
- This not-quite “majority of minority” of the super-minority is an interesting governance condition established by the Special Committee. It bears some study.
Mar25 Nikkei 225 Rebal: Considering Fast Retailing Capping…. Again…
- At end-September, the Nikkei 225 semi-annual review imposed a “cap” on Fast Retailing (9983 JP) in the Average, applying a 0.9 coefficient to the Price Adjustment Factor.
- At its current weight, Fast Retailing will be capped again in March 2025. If the stock outperforms Nikkei 225 by another 3% before 31 January 2025, it could be double-capped.
- And an additional 16% would mean ¥1.1trln of sales in March. But like last time, this is a rubber band which stretches. Too far, and selling pressure is obvious.
HSTECH Index Rebalance Preview: $800m Round-Trip Trade
- The review period for the December rebalance of the Hang Seng TECH Index (HSTECH INDEX) ended on 30 September.
- We do not forecast any constituent changes for the index. Capping changes will lead to a one-way turnover of 2.15% and a round-trip trade of HK$6.1bn (US$785m).
- If any stocks have outsized moves on expectations of being added to or deleted from the index, there could be opportunities to enter trades.
Tokyo Metro IPO – Thoughts on Valuation
- Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.3bn in its 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.
- We have looked at the company’s past performance in our previous notes. In this note, we will talk about valuations.
Choi Family Launches a Counter Tender Offer for Young Poong Precision
- Choi family has launched a counter tender offer for Young Poong Precision at the tender offer price of 30,000 won (20% higher than MBK’s 25,000 won tender offer price).
- The tender offer involves a plan to acquire 3,837,500 shares (24.36% of outstanding shares) of Young Poong Precision.
- All eyes are on the court’s decision on the injunction application for ‘prohibition of acquisition of treasury stocks by Korea Zinc’, which is expected to be announced on 2 October.
HSCEI Index Rebalance Preview: High & Low Probability Changes
- PICC Property & Casualty H (2328 HK) inclusion and Longfor Properties (960 HK) deletion are high probability changes for the Hang Seng China Enterprises Index (HSCEI INDEX) in December.
- There is a lower probability of China Resources Power (836 HK) being added and of Sino Biopharmaceutical (1177 HK) being deleted at the rebalance.
- There has been big short covering in PICC Property & Casualty (2328 HK) over the last couple of months while shorts would have covered Longfor Properties (960 HK) recently.
Choi Drops a Counter-Tender for Young Poong Precision at ₩30,000 Before the Market Bell Tomorrow
- Choi aims to acquire 3.84 million shares (24.36%) of Young Poong Precision at ₩30,000 each, with a tender period from October 2 to November 1, managed by Hana Securities.
- Seoul Economic Daily may not be as prominent, but they reliably scoop this type of news, making it likely Choi will announce their counter-tender for Young Poong Precision tomorrow.
- MBK targets the full 49.14% stake, while the Choi family seeks about half, creating proration risk, which may still make MBK’s lower offer more appealing to shareholders.
Tokyo Metro (9023 JP) IPO: Valuation Insights
- 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.
- We previously discussed the IPO in Tokyo Metro (9023 JP) IPO: The Bull Case and Tokyo Metro (9023 JP) IPO: The Bear Case.
- In this note, we discuss valuation. Our analysis suggests that Tokyo Metro is attractively valued at the IPO price compared to peer multiples.
Namoi Cotton (NAM AU): Well Played LDC
- A$0.77/Share. That’s Louis Dreyfus Company (LDC)’s revised unconditional bid. Plus it now holds 47.66% after Samuel Terry Asset Management, Namoi’s largest shareholder, tendered into the revised term.
- Expect Namoi Cotton Co Operative (NAM AU)‘s board to shortly back LDC’s Offer. LDC’s Offer is $0.02/share above Olam Agri’s conditional bid.
- After LDC first approached Namoi in November last year, this is now done. Expect Olam to tender its stake, and fold its tent.
Rigaku Holdings (268A JP) IPO: The Bull Case
- Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement and testing instruments. It is seeking to raise up to US$760 million.
- In Japan, Rigaku’s XRD (X-ray diffraction) has a high market share of 75%. Around 70% of its revenue is derived from customers outside Japan.
- The bull case rests on high customer switching costs, peer-leading revenue growth, top-quartile profitability, FCF generation, and low leverage.
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