In today’s briefing:
- Tokyo Gas (9531 JP) Mega Buyback Announced
- A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea
- HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
- The Fast Retailing (9983) Selldown Conundrum – Not Now, But Soon… Then For A Long Time
- Activision Blizzard – An Unsightly Mess
- SSE50 Index Rebalance Preview: Five Changes Coming Up in June
- Kirin Looks To Take Blackmores Private
- PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
- One Unnoticed Addition to KOSDAQ 150: Yunsung F&C Through Special Inclusion
- AAG Energy (2686 HK): Adjourned Scheme Meeting Points to a Close Vote
Tokyo Gas (9531 JP) Mega Buyback Announced
- Five days ago, Tokyo Gas (9531 JP) announced a revision to earnings for the year to 31 March 2023. Today they reported results, and announced March 2024 guidance.
- The company also announced a buyback programme to spend up to ¥113 billion to repurchase up to 53mm shares (12.2% of TSO). ¥113 billion is a very specific number.
- With the price where it is, ¥113bn is “only” 9.6% of shares out but this is very interesting indeed.
A Crash in 8 Korean Stocks Related to CFD Derivatives: Margin Call in Korea
- The biggest story in the Korean stock market in the past three days has been the crash in 8 stocks related to CFD derivatives.
- As a result of the CFD related margin call selling, the following are the major impact on the 8 related stocks and the overall Korean stock market in our view.
- They include a) overshooting on the downside on 8 related names, b) negative impact on the major rechargeable battery names, and c) negative impact on the overall Korean stock market.
HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
- Hang Seng Indexes has started a consultation on the eligibility of Foreign Companies in the Hang Seng Index, a review of the seven Industry Groups and number of HK constituents.
- We agree that foreign companies should be added to the index, no change needed to the Industry Groups, and the cap on the number of HK constituents should be removed.
- There are a few potential adds due to the removal of the cap on HK companies, while there are potential foreign company additions later this year or in 2024.
The Fast Retailing (9983) Selldown Conundrum – Not Now, But Soon… Then For A Long Time
- Fast Retailing (9983 JP) announced Q2 earnings two weeks ago. Revenues were good. OP was good. And the company raised full-year forecasts for Sales, OP, Pre-tax, and Net Profit.
- The stock popped sharply. It isn’t “cheap” but it is under-owned, actively. And revenues up 20%yoy is a very good look.
- The Conundrum: the more active investors decide they like it, the more there is to sell. That creates interesting opportunities.
Activision Blizzard – An Unsightly Mess
- Last night the CMA chose to block the merger between Microsoft and Activision Blizzard in the UK on the grounds that it would harm competition in cloud gaming.
- The merits of that position are highly debatable in our view but that does not mean that the decision is bad for consumers.
- It also does not mean that the decision is bad for Microsoft in our view.
SSE50 Index Rebalance Preview: Five Changes Coming Up in June
- With 2 trading days left in the review period, we see 7 potential adds/5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
- We estimate one-way turnover of 5.58% at the June rebalance leading to a one-way trade of CNY 4.22bn. Index arb balances could increase the impact on the stocks.
- The potential adds have outperformed the potential deletes over the last couple of months and have underperformed over the last week.
Kirin Looks To Take Blackmores Private
- Japan’s Kirin Holdings (2503 JP) has proposed taking Aussie vitamin play Blackmores Ltd (BKL AU) private by way of a Scheme at A$95/share.
- That’s a 23.7% premium to last close, and represents 23.1x LTM December 2022 EBITDA.
- Irrevocables are 18% of shares out. This Scheme requires clearance from ACCC, FIRB – and China’s SAMR.
PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
- Based on data to the close on 27 April, we do not expect any changes to the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the August rebalance.
- However, the Metro Pacific Investments Co (MPI PM) tender offer and voluntary delisting will open up an index spot that will need to be filled.
- At the current time, Bloomberry Resorts (BLOOM PM) is the highest ranked non-index constituent and is the most likely replacement.
One Unnoticed Addition to KOSDAQ 150: Yunsung F&C Through Special Inclusion
- Due to the matched order fraud incident in recent days, there has been a significant change in the KOSDAQ top 50 rankings, presenting a great opportunity for Yunsung F&C.
- The estimated size of the passive inflow that it is likely to receive is approximately 0.5-0.8x ADTV for ETFs alone, and 1.2-1.5x when expanded to all passive funds.
- We should note that the level of market exposure to inclusion possibility has been significantly low. Therefore, we can expect a significant price impact at the time of the announcement.
AAG Energy (2686 HK): Adjourned Scheme Meeting Points to a Close Vote
- The 27 April vote was adjourned as Aag Energy Holdings (2686 HK) Board was notified by “certain beneficial owners indicating that their latest voting instructions were not duly processed.”
- The meeting would not be adjourned if the YES vote was going to sail through. A delay helps the offeror as these owners will vote YES and deal fatigue sets in.
- Risk-Reward is still unfavourable at the last close. The deal break fair value range is HK$1.37-1.45 per share, with 16.0%-11.0% downside. This compares to the 13.5% upside from the offer.
💡 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
