In today’s briefing:
- The Bigly March 2024 “Wednesday-Friday Trade” (Surprising Flows)
- Fast Retailing (9983) – Now At Double Downweight Levels
- CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
- TOPIX “Big April Basket” 2024 Expectations: More High-Conviction Names; Better Trade Ideas
- HD Hyundai Marine Solution IPO Preview
- KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap
- Alteogen: Block Deal Sale of About 3% of Shares
- Lawson (2651 JP): KDDI Corp (9433 JP) Tender Offer Launches
- Fast Retailing: Earnings Preview
- CIMC (1839 HK): 18th April Shareholder Vote
The Bigly March 2024 “Wednesday-Friday Trade” (Surprising Flows)
- Every year it’s the same trade. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
- But there may be ¥1.0-1.2trln+ to buy on one day into the close later this month, then ad hoc buys of ¥630bn and index sells of ~¥600bn 2 days later.
- Over the past ten years, the two day return on the March trade is great. This year the Nikkei funding trade makes things more complicated.
Fast Retailing (9983) – Now At Double Downweight Levels
- Fast Retailing (9983 JP) is the largest weight in the Nikkei 225. On Friday, it closed at 11.36% of the Nikkei 225, putting it well above the 10% cap level.
- If the stock is above 10% on a pro-forma basis on the base date of 31 July 2024, it will get a capping coefficient. 8.4mm shares (US$2.5bn) to sell.
- At Friday’s close, we were borderline above a double-downweight trigger. At Monday’s open, just below. 30mins later? Back well above. Lots of interesting issues and nuances here for a short.
CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
- With 85% of the review period complete, we see 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in June.
- We estimate one-way turnover of 1.2% at the rebalance leading to a one-way trade of CNY 7.3bn (US$1bn). There are a lot of stocks with multiple days ADV to trade.
- The potential adds have outperformed the potential deletes despite large flows from the National Team into ETFs tracking the CSI 300 Index. That support for the potential deletes will reverse.
TOPIX “Big April Basket” 2024 Expectations: More High-Conviction Names; Better Trade Ideas
- The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation.
- For companies with “low liquidity” the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation.
- Every April, the application of this liquidity factor is reviewed by the TSE. In this insight, we take an early look at what could happen in April 2024.
HD Hyundai Marine Solution IPO Preview
- HD Hyundai Marine Solution is getting ready to complete its IPO in KOSPI in May 2024. This will be one of the largest IPOs in Korea in 2024.
- The IPO price range is from 73,300 won to 83,400 won. The IPO offering amount is from 652.4 billion won to 742.3 billion won.
- A key beneficiary of HD Hyundai Marine Solution IPO is HD Hyundai (62% ownership). Our NAV analysis suggests implied price of 95,632 for HD Hyundai (40% higher than current price).
KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap
- KDDI has announced the launch tomorrow of its Tender Offer to buy out the minorities in Lawson Inc (2651 JP).
- It’s still too cheap. It is still a somewhat non-transparent and unfair process as far as I can tell. And it does not adhere to the METI Fair M&A Guidelines.
- There SHOULD BE some activist interest to get KDDI to bump but it is not clear that will show up.
Alteogen: Block Deal Sale of About 3% of Shares
- On 27 March, Alteogen announced that Jeong Hye-shin, former Alteogen Chief Strategy Officer (CSO), sold 1.6 million shares of Alteogen stock in after-hours trading in block deal sale.
- The block deal sale price was 197,770 won. Alteogen’s share price declined by 10.9% today to 195,600 won. Block deal sale amount was about 316 billion won.
- This block deal sale combined with the sharp recent, share price increase are likely to result in a near-term consolidation of its share price in the next several months.
Lawson (2651 JP): KDDI Corp (9433 JP) Tender Offer Launches
- Lawson Inc (2651 JP) has announced that the pre-condition for the KDDI Corp (9433 JP) tender offer is satisfied. The offer terms are unchanged at JPY10,360 per share.
- The offer is arguably light due to the market re-rating, does not reflect significant synergies and is below the midpoint of the IFA DCF valuation range.
- Nevertheless, the offer will likely succeed as it represents an all-time high, with no vocal opposition, an achievable 30.2% minority acceptance rate, and the shares never trading through terms.
Fast Retailing: Earnings Preview
- While domestic revenues may have slowed, Uniqlo’s domestic OP shows upside potential driven by upside to GM and a gradual reduction in SG&A expenditure.
- Simultaneously, Uniqlo International is exhibiting strong performance, with anticipated revenue and OP growth of 21% and 30% YoY respectively.
- Despite expecting a strong earnings beat, concerns over high valuations and index issues make us cautious about trading Fast Retailing (9983 JP) in the current earnings cycle.
CIMC (1839 HK): 18th April Shareholder Vote
- On the 11th March, SOE-backed CIMC Vehicle Group Co Ltd (1839 HK) announced a firm Offer at HK$7.50/H-share from its major shareholder, CIMC Group. Terms are final.
- CIMC Group holds 74.24% of the H-shares and will abstain from voting at the H-share class meeting. 14.21% of the remaining 25.76% H-shares have given irrevocables supporting the Offer.
- The Circular is now out. The shareholder vote is the 18th April. Payment is the 13th May, IF unconditional on the first close. This looks done.
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