In today’s briefing:
- Toei Animation (4816 JP) – This Offering Could Be Heavy; the NEXT Offering Is More Interesting
- KOSPI Size Indices – Potential Migrations as Focus Is on Price to Book
- Final Flows for Hang Seng, HSCEI, HS Tech on 1 March Rebal
- Rakuten’s New “Bond-Type Share” Issuance – Quite Quirky to Quantulate Rakuten’s Quisquous New Quoz
- HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Mar 2024)
- Outsourcing (2427) MBO Arrives! Bain Launches Cheeky, Opportunistic, Low(Priced) TOB
- Samsonite (1910 HK): Leader Of The Pack
- Ecopro BM KOSPI Transfer Listing Disclosure
- Block Deal Sale of 5% Stake In SFA Engineering by Samsung Display
- Outsourcing (2427 JP): Relief as Bain Launches Tender at Unchanged Terms
Toei Animation (4816 JP) – This Offering Could Be Heavy; the NEXT Offering Is More Interesting
- On 14 February, Sony Corp (6758 JP) and Bandai Namco Holdings (7832 JP) announced an equity offering of nearly 4.5mm shares of Toei Animation (4816 JP).
- Float on Toei Animation (4816 JP) has been low. This would raise it to meet the minimum standard to stay listed on the TSE Standard market section.
- To get to TSE Prime, it needs another offering. And there are lots of cross-holders to go.
KOSPI Size Indices – Potential Migrations as Focus Is on Price to Book
- The review period for the March rebalance of the KOSPI Size Indices started 1 December and will end 29 February. The changes will be implemented at the close 14 March.
- We see 3 migrations from MidCap to LargeCap, 4 new adds to LargeCap, 7 migrations from LargeCap to MidCap, and 11 migrations from SmallCap to MidCap.
- On average, stocks migrating from SmallCap to MidCap have the lowest price to book value and have historically outperformed stocks migrating between other categories.
Final Flows for Hang Seng, HSCEI, HS Tech on 1 March Rebal
- The Hang Seng Index, HSCEI, and HS Tech rebals were announced on 16 Feb. Janaghan Jeyakumar, CFA had expected GDS out, Tongcheng Travel in on HSTECH, along with the…
- …deletion of Zhongsheng Group (881 HK) in HSCEI, with a low conviction replacement of Zijin Mining, which turned out to be an add of China Unicom Hong Kong (762 HK).
- No changes to the main HSI Index, which means evolution is further delayed. Today was the day to recap the caps. Mar1 Flow estimates are included below for all three.
Rakuten’s New “Bond-Type Share” Issuance – Quite Quirky to Quantulate Rakuten’s Quisquous New Quoz
- Today, Rakuten Group (4755 JP) announced it would propose an amendment to its Articles at the AGM (28 March) to issue “Bond-Type Class Shares.” First reaction: You wot, mate?
- The company states it wants to “strengthen its financial base through reducing interesting-bearing debt by equity-related financings and conduct proactive control of debt maturity schedule, etc.”
- Now it wants to issue listed bond-type shares. Dividends not interest. The last Japanese issuer of something similar was NEC in 2001. Few will remember, so we study the situation.
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Mar 2024)
- The March rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
- Tencent (700 HK), Meituan (3690 HK) and Tongcheng Travel (780 HK) are the biggest buys while Alibaba (9988 HK), Li Auto (2015 HK), HSBC (5 HK) are the biggest sells.
- The round-trip trade across all stocks across the four indices is estimated at HK$16.16bn (US$2.06bn).
Outsourcing (2427) MBO Arrives! Bain Launches Cheeky, Opportunistic, Low(Priced) TOB
- After an extension due to a European Foreign Subsidies Review filing, and a small ‘accident’ regarding the earnings release, we have a deal.
- The earnings release itself seemed more innocuous than articles and rumour suggested show the causes of impairments and so it seemed like there was little cause to walk/declare MAC.
- Now it will be done in 20 days. I still think this is cheeky, opportunistic, and low, and it is up to the float to decide what to do.
Samsonite (1910 HK): Leader Of The Pack
- Luggage maker Samsonite (1910 HK) is up 11.8% today, as I type, after Bloomberg reported it is working with advisers as it studies possibilities, including going private.
- With the reopening of China and the ongoing recovery in travel globally, Samsonite’s net sales improved markedly across all regions. 1H23 profit gained 185.3% versus 1H22.
- FY23 figures should be out in the middle of next month.
Ecopro BM KOSPI Transfer Listing Disclosure
- The schedule includes submitting the transfer listing application post-EGM on March 26th. KRX approval expected in 4-6 weeks due to Ecopro BM’s financial soundness. KOSPI listing follows in 2-3 weeks.
- As for KOSDAQ 150 ad-hoc change, it will be replaced with the top reserved issue. The anticipated timing for this ad-hoc change is around mid or late May.
- Following Feb 7 disclosure, stock surged over 10% in 2 days. Precedents show rallies pre-shareholder meetings, but KOSPI listing brings corrections. Today’s resolution could boost Ecopro BM short term.
Block Deal Sale of 5% Stake In SFA Engineering by Samsung Display
- After the market close on 27 February, Samsung Display announced that it will sell its 4.95% stake in Sfa Engineering (056190 KS) in a block deal sale.
- We would take the trade. We like the relatively large block deal sale discount as well as the company’s attractive valuations.
- SFA Engineering is trading at P/E of 8.3x, EV/EBITDA of 2.7x, and P/B of 0.7x in 2024, which are much lower than historical valuations.
Outsourcing (2427 JP): Relief as Bain Launches Tender at Unchanged Terms
- Outsourcing Inc (2427 JP) announced that the pre-condition was satisfied, and Bain’s tender offer remains unchanged at JPY1,755 per share, a 52.1% premium to the undisturbed (8 December).
- Shareholders will breathe a sigh of relief as the weak 4Q and significant impairments have raised concerns that Bain would cut its offer or walk away.
- The offer attractiveness has increased partly due to lower consensus. At the last close and for a 3 April payment, the gross/annualised spread is 2.0%/22.8%.
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