In today’s briefing:
- Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out
- KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap
- Alteogen: Block Deal Sale of About 3% of Shares
- Koito Mfg (7276) – New Medium Term Plan, BIG Buyback, Even Bigger Shareholder Returns Planned
- CPMC (906 HK): Shares Retrace As Clock Ticks On ORG’s Bid
- Local Color on HD Hyundai Marine Solution’s Excessive IPO Valuation
- SciClone Pharma (6600 HK): GL Capital’s Scheme Offer at HK$18.80
- Quiddity JPX-Nikkei 400 Rebal 2024: End-Mar 2024 Estimates and Another Trade Reco
- HD Hyundai Marine Solution IPO – Strong Profitability Growth but Lacking in Disclosures
- Ohayo Japan | S&P Hits Record: Japan Passes Budget
Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out
- DISCO (6146 JP), Socionext (6526 JP) and ZOZO (3092 JP) will replace Takara Holdings (2531 JP), Sumitomo Osaka Cement (5232 JP) and Pacific Metals (5541 JP) in the Nikkei 225.
- Nitori Holdings (9843 JP)‘s PAF will increase from 0.3 to 0.5, and surprisingly there is no PAF adjustment for ZOZO Inc (3092 JP).
- Passive trackers need to buy between 1-18 days of ADV on the adds while selling between 2.7-28 days of ADV on the deletes. There is a big funding trade too.
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.
Koito Mfg (7276) – New Medium Term Plan, BIG Buyback, Even Bigger Shareholder Returns Planned
- Koito Manufacturing (7276 JP) is a $4bn marketcap (~$6bn sales) Toyota Group auto parts manufacturer specialising in lighting parts, famous for being a T.Boone Pickens target in the 1980s.
- As Toyota Group’s leaders restructure their cross-holdings and try to get to 1.0x PBR and a high enough ROE to sustain it, capital efficiency is on the block.
- Koito today announced a revised Mid-Term Management Plan, a change in KPIs (higher), a large shareholder return plan, and a large buyback. As always, the fun is in the details.
CPMC (906 HK): Shares Retrace As Clock Ticks On ORG’s Bid
- On the 6th Dec 2023, packaging play CPMC Holdings (906 HK) announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China (NCSSF).
- A decent premium (32.1%), presumed rubber-stamped regulatory approvals, and a 50% acceptance condition with 29.7% in the bag – this Offer looked done. Then ORG announced a possible competing proposal.
- Nearly four months have elapsed and details on ORG’s Offer remain unknown. SASAC/NCSSF chip away at reg approvals. Shares are down 2.6% from its recent peak. That makes sense.
Local Color on HD Hyundai Marine Solution’s Excessive IPO Valuation
- Valuation controversy arises from comparing HD Hyundai Marine Solution, a ship AS specialist, with diverse global companies, leading to a target market cap of ₩5T.
- HD KSOE’s inclusion worsens the valuation controversy. Applying HD KSOE’s last year PER without adjusting for a significant one-off profit seems to inflate HD Hyundai Marine Solution’s PER.
- Currently, major local IPO funds see HD Hyundai Marine’s valuation nearing ₩4T as excessive, despite the industry’s revival and potential growth in eco-friendly ship conversions, impacting the upcoming bookbuilding process.
SciClone Pharma (6600 HK): GL Capital’s Scheme Offer at HK$18.80
- Sciclone Pharmaceuticals (6600 HK) disclosed a scheme privatisation offer from GL Capital at HK$18.80 per share, a 33.9% premium to the undisturbed price (HK$14.04 on 15 March).
- The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). The Bank of China, which holds a blocking stake, should be supportive.
- The offer price has been declared final. It is reasonable, aligning with the all-time high and the IPO price. This is a done deal.
Quiddity JPX-Nikkei 400 Rebal 2024: End-Mar 2024 Estimates and Another Trade Reco
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents, adjusted every year in August.
- We look at the rankings of the potential ADDs/DELs every month for the next rebal, based on most recent trading data.
- Every month we provide trade suggestions. The last three months have seen market-neutral returns of +3.0%, +6.5%, +3.2% respectively for the one-month periods. A new trade is suggested below.
HD Hyundai Marine Solution IPO – Strong Profitability Growth but Lacking in Disclosures
- HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$555m in its Korean IPO.
- HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
- In this note, we talk about the company’s historical performance.
Ohayo Japan | S&P Hits Record: Japan Passes Budget
- US Market Wrap: S&P 500 hits record, Dow inches higher; tech stocks lag.
- Japan Budget: Parliament passes ¥112 trillion budget, emphasizing defense spending, inflation mitigation, and earthquake recovery.
- Stocks Update: Mercari introduces Eco Mercari Delivery; Kubota’s construction equipment business grows; Mitsubishi Electric expands digital workforce.
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