In today’s briefing:
- Tokyo Metro IPO – Thoughts on Valuation
- CPMC Holdings (906.HK) Privatization Update – Will ORG Withdraw Midway?
- WisdomTree Emerging Markets High Dividend Index Rebalance: US$2.5bn Round-Trip Trade
- 7&I (3382) – Asset Sale News Designed to Get Shareholder Attention to Future Value
- Korea Zinc: Breaking Down the Cancel Risk with Specific Legal Provisions for Both Camps
- Rio Tinto Taps Arcadium As Lithium Prices Sag
- USS (4732 JP) – Small Offering on ‘Growth Darling’ – Buyback Offsets 50%
- Zhejiang Expressway (576 HK): “Cheap” Access To Zheshang Securities
- Tokyo Metro IPO Valuation Analysis
- Korea Value-Up Index: Detailed Methodology, Weights, Float Rates, & Passive Impacts Obtained
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.
CPMC Holdings (906.HK) Privatization Update – Will ORG Withdraw Midway?
- Acquiring CPMC at low price is in line with Baosteel’s strategic goals and the new assessment indicators of Baowu Group. This explains why Baosteel didn’t choose to raise its Offer
- ORG intends to acquire 100% equity of CPMC. This means state-owned capital needs to withdraw completely from CPMC. So, would China Foods/COFCO (both SOEs) agree to be acquired by ORG?
- If ORG is “forced to” acquire CPMC due to Baosteel’s low Offer Price, will ORG change mind and choose to withdraw midway?Such “potential unwillingness” from ORG makes the deal “tricky”.
WisdomTree Emerging Markets High Dividend Index Rebalance: US$2.5bn Round-Trip Trade
- The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
- The changes at the October rebalance were announced after market close on 4 October with implementation scheduled at the close on 16 October.
- There are 241 adds and 208 deletes for the index with an estimated round-trip trade of US$2.5bn. There are many stocks with over 2x ADV to trade.
7&I (3382) – Asset Sale News Designed to Get Shareholder Attention to Future Value
- Seven & I Holdings (3382 JP) is currently “in limbo” as the initial Alimentation Couche-Tard (ATD CN) (“ACT”) has been rejected, some news is out, and we await earnings/presentations.
- The news last week was that 7&i might sell down a stake in Seven Bank Ltd (8410 JP) and could sell its retail/superstore business to PE rather than an IPO.
- Both selldowns mean the focus on CVS everyone seems to want. That’s good news. And the shares are trading at/below ACT terms which “grossly undervalued” the company. Bullish.
Korea Zinc: Breaking Down the Cancel Risk with Specific Legal Provisions for Both Camps
- MBK is unlikely to lower the tender price or cancel the offer due to legal constraints and potential regulatory hurdles, along with compensating investors.
- Just keep in mind that if you want to participate in MBK’s Korea Zinc offer, you’ll need to submit your bid to secure that compensation safety net.
- We can’t rule out the second injunction request being accepted on the 21st, leaving Choi’s camp in a tough position with tender offer cancellation risks compared to MBK.
Rio Tinto Taps Arcadium As Lithium Prices Sag
- Rio Tinto Ltd (RIO AU) has confirmed it has approached Arcadium Lithium (LTM AU)/(ALTM US) regarding a potential acquisition.
- No Offer Price has been announced; however a proposed bid with a 30%+ premium, on top of last week’s 11% bounce, has been rumoured. That implies a price of ~$6/share.
- Given shares were trading ~A$10/share in January this year, one Aussie-based fund reckons such an Offer would be highly opportunistic; and that a bid 2.5-3x higher is reasonable.
USS (4732 JP) – Small Offering on ‘Growth Darling’ – Buyback Offsets 50%
- Ubiquitous used car auction house USS Co Ltd (4732 JP) today announced MUFJ Bank’s Retirement Benefit Trust account would sell its 3.5% stake in an offering.
- Given how much cash the company has and how little cross-holding there is, this seems a bit odd, but they are doing a buyback for half the offer.
- Small offer. Low ADV count. Well-liked by numerous foreign active holders. This should get taken easily.
Zhejiang Expressway (576 HK): “Cheap” Access To Zheshang Securities
- Since Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) were suspended around a month ago, pending a merger, a basket of peers are up 37%.
- The Shanghai Composite is up 21%. Volumes are up, commissions are up. Citic Securities (600030 CH), the largest broker by market cap, is up 42% in the past month.
- Zhejiang Expressway (576 HK) is also up ~45% in recent weeks due to its 40.3% look-through stake in Zheshang Securities (601878 CH). The question: how much more in the tank?
Tokyo Metro IPO Valuation Analysis
- Tokyo Metro set the IPO price range at 1,100 to 1,200 Yen per share. At the top end of the range, Tokyo Metro would raise 349 billion yen ($2.35 billion).
- Our base case valuation of Tokyo Metro is implied target price of 1,178 yen per share. This is within the top end of the IPO price range (1,200 yen).
- Given the lack of upside relative to the IPO price range, we have a Negative view of this IPO.
Korea Value-Up Index: Detailed Methodology, Weights, Float Rates, & Passive Impacts Obtained
- This post dives into the official details of the Korea Value-Up Index methodology that I obtained from KRX. Plus, it has the official weights and free-float rates for each constituent.
- The 3rd and 4th Phases led to surprising stocks entering the index, causing drops for KB and Hana, while SK Hynix benefited from the Exception Application rule.
- The index’s straightforward methodology suggests low rebalancing uncertainty, but flexible Special Entry rules and upcoming December changes may add unpredictability, targeting bank stocks like KB, Hana, and JB.
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