In today’s briefing:
- Terumo (4543 JP) Secondary Offering – Smaller Than It Looks
- Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
- Jardine Matheson (JM SP): Trading “Cheap”
- NVIDIA’s >5x YoY “Singapore” Revenue Growth Is A Red Flag
- CPMC Holdings (906.HK) Privatization Update- Due to Risk Behind ORG’s Offer, Baosteel Is a Wiser Bet
- LG Corp Plans to Purchase 200 Billlion Won of LG Electronics and 300 Billion Won of LG Chem
- Doosan Group Cancels Plans to Merge Doosan Robotics and Doosan Bobcat
- CPMC (906 HK): SAMR Green Lights ORG’s Offer
- Finding Unusual Arbitrage Angles in Kumyang’s Effectively Pre-Announced Capital Increase
- Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding
Terumo (4543 JP) Secondary Offering – Smaller Than It Looks
- On Thursday 29 August, Terumo Corp (4543 JP) announced a secondary offering where 7 major cross-holders would sell just under 5% of the shares outstanding to international investors.
- In recent quarters, Terumo has seen better consensus EPS growth than Peers in recent quarters, and Peers have underperformed. Right now, Terumo isn’t ‘cheap’ but consensus growth is strong.
- This back-end demand in this case has enough moving parts that it bears a closer look.
Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
- Zomato (ZOMATO IN) has a market cap of over US$27bn but is not a member of the NIFTY Index and S&P BSE SENSEX Index since it is not an F&O member.
- Once SEBI’s proposed and enhanced stock inclusion thresholds are implemented, Zomato (ZOMATO IN) should be added to the F&O segment of the market.
- Passive NIFTY Index and S&P BSE SENSEX Index will have to buy a lot of Zomato stock at subsequent rebalances. The impact will be higher given the lower real float.
Jardine Matheson (JM SP): Trading “Cheap”
- I see Jardine Matheson Holdings (JM SP)‘s discount to NAV and implied stub at 12-month lows.
- Recent interim results were okay. Stripping out DFI Retail Group Holdings (DFI SP)‘s outperformance, the remainder of the Jardine stable delivered weaker numbers.
- Further afield, the implied stub is marginally below the long-term average since the Jardine Strategic Holdings (JS SP) circularity was collapsed in April 2021.
NVIDIA’s >5x YoY “Singapore” Revenue Growth Is A Red Flag
- NVIDIA delivered another blockbuster quarter with record revenues of $30 billion, blowing well past the guided $28 billion, up 15% QoQ and up 122% YoY.
- $5.6 billion in revenues were attributed to Singapore, making up more than 18% of overall revenues and up >5 times YoY
- What the heck is the city state doing with all of those GPUs?
CPMC Holdings (906.HK) Privatization Update- Due to Risk Behind ORG’s Offer, Baosteel Is a Wiser Bet
- Baosteel’s choice to maintain its original Offer may partly reflect its “confidence” in the deal. If investors bet that Huarui Offer will succeed, they need to bear some risks.
- If investors choose to arbitrage at HK$7.21/share, annualized return is 9% assuming privatization would be completed in mid-Jan 2025.Such return may not be attractive considering the uncertainties behind the deal.
- If investors are optimistic about Baosteel’s final acquisition of CPMC, they can consider buying Baosteel shares, as Baosteel will become the new industry leader, with greater upside potential for valuation.
LG Corp Plans to Purchase 200 Billlion Won of LG Electronics and 300 Billion Won of LG Chem
- On 29 August, LG Corp announced that it plans to purchase about 200 billion won worth of LG Electronics and about 300 billion won worth of LG Chem.
- After these share purchases, LG Corp’s stake in LG Electronics will increase from 30.47% to 31.59%, and its stake in LG Chem will increase from 30.06% to 31.29%.
- LG Corp plans to purchases these shares starting 1 November 2024. The share purchases will be conducted in two stages and will be completed by 31 March 2025.
Doosan Group Cancels Plans to Merge Doosan Robotics and Doosan Bobcat
- On 29 August, the Doosan Group announced that it is cancelling the merger between Doosan Robotics (454910 KS) and Doosan Bobcat Inc (241560 KS).
- However, the plan to split Doosan Enerbility into a newco and then merge Doosan Bobcat with the newco will remain in place.
- Doosan Group is still trying to complete the first two portions of reorganization (Split of Doosan Enerbility and Merger Swap Between Doosan Enerbility and Doosan Robotics), resulting in continued uncertainty.
CPMC (906 HK): SAMR Green Lights ORG’s Offer
- ORG Technology (002701 CH), via the Offeror Huarui Fengquan Development Limited, has announced SAMR has given its approval. ORG still requires MOFCOM, NDRC, and SAFE to sign off.
- Interestingly, SASAC/NCSSF-backed Champion Holdings, the competing/initial bidder for CPMC (906 HK), secured MOFCOM, NDRC, and SAFE before SAMR clearance. Champion’s regulatory pre-conditions took a little over seven months to secure.
- What now? SAMR is China’s primary antitrust regulator (overlapping with NDRC). So this is positive for ORG. However, I’d still stick to ORG’s pre-condition long stop in terms of timing.
Finding Unusual Arbitrage Angles in Kumyang’s Effectively Pre-Announced Capital Increase
- The arbitrage is clear: it’s the difference between stock rights/subscription costs and short hedge price. Kumyang’s high market interest and volatility amplify this, suggesting unusual trading angles.
- Kumyang’s futures also show extreme volatility, likely causing excessive backwardation around the ex-rights date and stock rights window, affecting futures-based short hedge positions.
- This opens up the possibility that, depending on entry points, our futures-based short hedge position might temporarily enter an unusual profitable zone relative to the stock rights and subscription costs.
Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding
- Today after the close we got news that after a year-plus of Hamamatsu Photonics Kk (6965 JP)‘s sliding stock price, Toyota Motor (7203 JP) is selling their 5+% stake.
- The offering is standard. Probably prices 9 Sep 2024. HP’s amended buyback program and probable index upweights offset most of the offering size over the next several months.
- So investors have to decide whether they want to catch the falling knife.
💡 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 Analytics and News
- ✓ Events & Webinars
