In today’s briefing:
- Toshiba (6502) – Funding Deadline Risk Was Known 6+ Weeks Ago
- Mitsui & Co (8031) Buyback – Big Profit, Big Div, Big Buyback, Some Index Selling
- MSCI SEA EM Nov SAIR: High Impact Deletions Expected
- Toshiba (6502 JP): JIP Lobs a Lower-Than-Expected Offer
- MSCI Korea November SAIR: Potential Changes, Impact, Short Interest & Pre-Positioning
- MSCI Australia Nov SAIR: Significant Pre-Positioning on the Potential Deletes
- MSCI India November SAIR: Potential Changes & Higher Foreign Holding
- China Internet Weekly (7Nov2022): Tencent, Alibaba, Kuaishou, JD.com, Autohome, China Unicom
- KLine (Kawasaki Kisen (9107)) – ToSTNeT-3 For All The Marbles
- BliBli IPO Trading – Upsized, Priced near Top-End but Should Be Trading at Least 50% Lower
Toshiba (6502) – Funding Deadline Risk Was Known 6+ Weeks Ago
- There are several bits of news in the past few weeks indicating financing commitments might not meet the 7 Nov deadline. Principal among them the JIC/JIP split many weeks ago.
- That suggested the 30 Sep and subsequent deadlines would be delayed. And it appears we now have the reason for it, and that is another cause of financing commitment delay.
- This development suggests activists have another quiver in their arrow should privatisation not succeed. Toshiba has cheapened in the meantime.
Mitsui & Co (8031) Buyback – Big Profit, Big Div, Big Buyback, Some Index Selling
- Mitsui & Co Ltd (8031 JP) on 1 November reported its results for H1 2022. H1 Revenue +37.1%yoy, OP+27.2%yoy, NP+33.2%yoy to ¥539bn. Full-year NP forecast +22.5% to ¥980bn.
- Mitsui raised its dividend forecast (previously scheduled to rise from ¥105/share to ¥120/share) to ¥130/share and announced a ¥140bn buyback, adding to the ¥100bn announced in May completed in September.
- The first ¥58.6bn was done in a ToSTNeT-3 buyback. Now there is another ¥79.4bn to go. There’s also a fair bit of index selling the next 6mos.
MSCI SEA EM Nov SAIR: High Impact Deletions Expected
- There should be quite a few deletions for South East Asia Emerging Markets. The number of potential inclusions is smaller and have a smaller probability of being added.
- While the passive flow on the potential deletions is not massive, the impact in terms of days of ADV to trade is very high in most cases.
- There has been a steady increase in cumulative excess volume on a few of the potential deletions and there will be unwinding against the passive flow.
Toshiba (6502 JP): JIP Lobs a Lower-Than-Expected Offer
- The Nikkei Asia reports that JIP has submitted a formal proposal to privatise Toshiba Corp (6502 JP) for about JPY2.2 trillion (US$15 billion) based on “Toshiba’s current share price.”
- JIP’s offer is below expectations of around a JPY6,000 bid which is likely driven by the inability to secure sufficient debt financing. JIP remains in negotiations with banks.
- While there is a risk that JIP will be unable to improve its offer to secure Board approval, the downside is low as Toshiba/peers’ current price ratio is attractive.
MSCI Korea November SAIR: Potential Changes, Impact, Short Interest & Pre-Positioning
- We see 1 potential inclusion and 12 potential deletions for the MSCI Korea Index at the November SAIR. The final changes will depend on what day MSCI uses.
- Nearly all the stocks have over 4 days of ADV to trade from passive trackers. There have been big moves on short interest and excess volume on some stocks.
- The announcement will be made Friday morning pre-market open and there could be some big moves in the stocks this week.
MSCI Australia Nov SAIR: Significant Pre-Positioning on the Potential Deletes
- We see two inclusions and two exclusions for the MSCI Australia Index at the November SAIR. Passive trackers will need to trade between 5-8x ADV on the stocks.
- Cumulative excess volume on the stocks has been increasing steadily over the last few months, indicating a fair amount of pre-positioning.
- Short interest on the potential deletions has spiked over the last couple of months and pre-positioning could be close to (or larger than) the estimated passive selling.
MSCI India November SAIR: Potential Changes & Higher Foreign Holding
- Post the end of the review period, we see 7 potential adds and 2 potential deletes for the MSCI India Index at the November SAIR.
- Inclusion in the index will require passive trackers to buy 6-21 days of ADV on the stocks. That increases to 16-45 days of delivery volume.
- Cumulative excess volume indicates pre-positioning on most potential adds. Foreign Portfolio Investors (FPI) have increased their holding on all potential adds over the July-September quarter.
China Internet Weekly (7Nov2022): Tencent, Alibaba, Kuaishou, JD.com, Autohome, China Unicom
- Tencent and Alibaba are rumored to be acquired by state-owned companies.
- Tencent charges for originally free function and JD.com re-organized to cut cost.
- Autohome’s revenue stopped declining in 3Q22 and it is time to accumulate.
KLine (Kawasaki Kisen (9107)) – ToSTNeT-3 For All The Marbles
- On Thursday, Kawasaki Kisen Kaisha (9107 JP) announced earnings, lower-than-consensus guidance and a ¥100bn buyback via ToSTNeT-3 this week, and on market if not filled via ToSTNeT-3.
- The stock fell 5+%. I wrote I thought it was a buy and that the buyback was “game-able.” It rose 10+% from then til now.
- That was the fun. Now we get the games. Positioning strategy matters.
BliBli IPO Trading – Upsized, Priced near Top-End but Should Be Trading at Least 50% Lower
- PT Global Digital (BliBli) raised around US$517m in its Indonesian IPO, after using the upsize option and pricing its deal just below the top-end.
- BliBli provides e-commerce services across Indonesia to both retail consumers and institutions.
- In our previous notes, we have looked at the company’s past performance. In this note, we will talk about the trading dynamics.
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