In today’s briefing:
- Toppan Printing (7911) Accelerates Buyback Pace and Amount; But Crossholder Sales Lurk
- Tencent Q1 FY24 Results Due, a Look into What Is Priced
- CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains
- YUUUGE Modec (6269) Offering To Stay Listed in TSE Prime – Effectively a Re-IPO
- Key Timing Window for a Surge in Block Deals Before Pre-Disclosure Takes Effect in July
- Another HUGE Ushio (6925) Buyback After A HUGE Buyback Last Year
- MODEC (6296 JP): A US$535 Million Secondary Offering
- Japan – Another Big Round of Passive Selling
- Modec Placement – Deal Seems a Little Opportunistic but Not Particularly Expensive
- Great Eastern (GE SP): Getting Technical
Toppan Printing (7911) Accelerates Buyback Pace and Amount; But Crossholder Sales Lurk
- Toppan Printing (7911 JP) established a new Medium-Term Management Plan with targets in May 2023. 8% ROE, PBR >1.0x. More DX business. More management modernisation. More ESG. Mooooarrrrr!
- They also promised capital measures: ¥100bn of buybacks over three years. Total shareholder return of 50%+ over three years. More progress in selling down cross-holdings.
- Today the company reported better-than expected full-year revenues, OP, and Net Profit, added more to the buybacks, and shortened the buyback period to two years. Details matter.
Tencent Q1 FY24 Results Due, a Look into What Is Priced
- Tencent is due to release Q1 FY24 results today. The earnings call is scheduled for 14:00 SAST
- In this note, we unpack what is priced and how Tencent has performed relative to constituents in the HSTECH index since our last update (29 April).
- We also provide an update on how the discounts of Naspers and Prosus have traded.
CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains
- The review period ended on 30 April, there are just over 2 weeks to announcement of the changes, and implementation will be done at the close on 14 June.
- We forecast 5 potential changes for the index in June where there could be buying of 1.6-2.6x ADV on the adds and selling of 0.7-2.6x ADV on the deletes.
- At the December 2023 rebalance, the adds outperformed the deletes in the weeks prior to announcement of the changes and then spiked post-announcement. Repeat this time?
YUUUGE Modec (6269) Offering To Stay Listed in TSE Prime – Effectively a Re-IPO
- In March, Modec Inc (6269 JP) announced the TSE had said Modec at 29.3% (end-Dec-23) was below the required 35% tradable shares level required for continued listing on TSE Prime.
- It announced a “Basic Plan” to comply with the criteria which involved convincing one of the three major corporate holders to sell some. They needed to sell about 6%.
- Mitsui E&S has announced it will sell 32%, and 37% including greenshoe. This is overdoing it in a huge way. Mitsui E&S is getting out. This is a re-IPO.
Key Timing Window for a Surge in Block Deals Before Pre-Disclosure Takes Effect in July
- Anticipation grows for increased block deals before July 24th’s pre-announcement rule takes effect, emerging as a key investment focus in the local market.
- The local market expects heightened activity in the three weeks post-May 15th, following first-quarter earnings announcements, a strategic move to mitigate insider trading controversies.
- Local traders eagerly await which companies will capitalize on the post-first-quarter earnings window, with a highly anticipated block deal involving SK Innovation selling a portion of its stake in SKIET.
Another HUGE Ushio (6925) Buyback After A HUGE Buyback Last Year
- Last year with earnings, Ushio Inc (6925 JP) announced a HUUUGE buyback discussed in HUUUGE Ushio (6925) Buyback. The headline was 17% of shares out. They ended up buying 13.2%.
- Last year the stock popped on the news. Then shares went sideways for months. Then they went up on stable (bad) earnings guidance in H2. Today they beat Q3-updated guidance.
- But today they announced a “new growth strategy” to 2030, and guided to a SHARP (-60%) drop in OP and NP to March 2025, and announced a HUUUGE Buyback. Again.
MODEC (6296 JP): A US$535 Million Secondary Offering
- Modec Inc (6269 JP) has announced a secondary offering of up to 25.2 million shares (including overallotment). The largest shareholder, Mitsui E&S Holdings (7003 JP), is the seller.
- MODEC’s goal with the secondary offering is to reconfigure its shareholder mix to have a diverse base of shareholders who support its long-term strategies and a better tradable share ratio.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will likely fall between 22 and 28 May (likely 22 May).
Japan – Another Big Round of Passive Selling
- There are 15 stocks in Japan that will be sold by passive trackers at the close on 31 May.
- Short interest has been increasing in these stocks over the last few months and there will be covering on implementation date.
- Cumulative excess volume on all stocks has risen in the last couple of months though the pace of the increase has varied.
Modec Placement – Deal Seems a Little Opportunistic but Not Particularly Expensive
- Mitsui E&S Holdings (7003 JP) is looking to raise approximately US$451m through a secondary follow-on offering, via selling approximately 21.9m shares (32% of TSO) of Modec Inc (6269 JP)’s stock.
- The deal is a large one to digest at 81 days of three month ADV.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Great Eastern (GE SP): Getting Technical
- Great Eastern Holdings (GE SP) has consistently traded through OCBC (OCBC SP)‘s Offer terms from the onset.
- OCBC did not declare its S$25.60 cash Offer final. And someone appears to be accumulating a stake to block an Exit/Delisting Offer, presumably towards negotiating a bump in terms.
- But what happens if GE’s free float falls <10% at the close of the Offer and GE is suspended? And OCBC has no intention of restoring the float?
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