In today’s briefing:
- FTSE All-World/All-Cap Sep Index Rebalance Preview: Asia Ex Japan Ex China
- JAPAN PASSIVE – The GPIF in FY2021
- China Internet Weekly (4Jul2022): Tencent, Alibaba, NetEase, JD.com, Trip.com
- Link Admin Rejects Dye & Durham’s Revised Offer
- Link’s Statement Hints at a Willingness to Meet in the Middle
- PipeDo Holdings (3919) MBO – Advantest Again, This Time It’s a Stitch-Up
- GPIF Investment In Startup Funds Marks A Cultural Shift
- Kakao Entertainment: A Korean Entertainment Powerhouse
- Zigbang: Number One Proptech App in Korea
- Z Holdings (4689) | SOTP Reveals Huge Upside
FTSE All-World/All-Cap Sep Index Rebalance Preview: Asia Ex Japan Ex China
- The price review period for the FTSE All-World/All-Cap September 2022 SAIR ended on 30 June. The changes are expected to be announced on 19 August and implemented on 16 September.
- For Asia ex-Japan ex-China, we see 7 inclusions to All-World, 58 inclusions to All-Cap, 9 migrations from All-Cap to All-World, 5 migrations from All-World to All-Cap, and 20 deletions.
- There are quite a few names in Australia that could have same way flows from the S&P/ASX 200 and S&P/ASX 300 Index trackers on the same day as the FTSE trackers.
JAPAN PASSIVE – The GPIF in FY2021
- The GPIF reported its annual investment results for the FY to March 2022 last Friday. The investment report makes for interesting reading.
- The GPIF made 5.42% but alpha was negative 6bp vs time-weighted and money-weighted benchmarks.
- The re-allocations amongst asset classes now means more money tracks TOPIX, and it means active managers have their work cut out for them going forward.
China Internet Weekly (4Jul2022): Tencent, Alibaba, NetEase, JD.com, Trip.com
- Alibaba CEO’s article appeared on a government journal, which can be a positive signal to non-state-owned companies.
- Prosus sells shareholdings in Tencent and JD.com to repurchase its own shares.
- Tencent is trying to use game technologies in other fields.
Link Admin Rejects Dye & Durham’s Revised Offer
- Citing the Australian Competition and Consumer Commission’s concerns and challenging markets, Dye & Durham (D&D) reduced its Offer price for Link Administration (LNK AU) to $4.30/share, down from $5.50/share.
- Link has now announced it “does not believe it is able to recommend” the revised Offer.
- That tentative rejection, and the fact it remains in discussion with D&D, suggest a board-backed price is probably somewhere between the original bid price and the reduced Offer terms.
Link’s Statement Hints at a Willingness to Meet in the Middle
- The Link Administration (LNK AU) Board will not recommend Dye & Durham/DND’s proposed lower offer of A$4.30 per share due to shareholder feedback, the underlying value and alternative options.
- The statement suggests that the Board is willing to consider a lower but improved offer. Acquiring Link at a lower valuation through its attractive financing package continues to motivate DND.
- A price of A$4.70, which is the middle of the buyer’s and seller’s valuations will get a deal done. Downside risk is low as shares trade close to low-end valuation.
PipeDo Holdings (3919) MBO – Advantest Again, This Time It’s a Stitch-Up
- Last autumn, Advantage Partners launched an MBO on Pipedo HD Inc (3919 JP) where an activist/y presence threatened to be able to block it. Partway through, shares popped.
- The MBO was unsuccessful. Now they are back, at the same price, and now they have arranged a side deal with the activist-y holder. So now it is stitched up.
- There could easily be people unhappy with the structure of this deal, especially as book value is up 16%, and projected cashflows 8-10% higher than last time.
GPIF Investment In Startup Funds Marks A Cultural Shift
- The Nikkei reported today that the GPIF would be investing in a startup fund for the first time.
- The move is significant more for its signalling effect than the actual size of the investment which will do little to address the startup funding shortage in Japan.
- Nevertheless it is important as it marks a change in direction and while it may go quietly unnoticed now, the follow-through is likely to be moderate but consistent and lasting.
Kakao Entertainment: A Korean Entertainment Powerhouse
- Kakao Entertainment is one of the biggest entertainment companies in Korea. The company has a strong IP for webtoons, web novels, music, drama, movies, and other digital contents.
- Kakao Entertainment is a company that was formed from a merger of Kakao Page and Kakao M in March 2021.
- Kakao Corp (035720 KS) is the largest shareholder of Kakao Entertainment, followed by Anchor Equity Partners, and Tencent.
Zigbang: Number One Proptech App in Korea
- Zigbang is a leading property search platform in Korea. Zigbang’s strategy is to capitalize on the digitalization of living space, real estate transactions and smart home devices.
- In January 2022, Zigbang agreed to acquire Samsung SDS’ home internet of things (IoT) unit for about $85 million to further penetrate the smart home industry.
- In late June 2022, Zigbang received 100 billion won in investment from IMM Investment, KDB Bank, and Hana Financial Investment, valuing the company at 2.5 trillion won.
Z Holdings (4689) | SOTP Reveals Huge Upside
- Z HD’s stock has been heavily sold with other tech stocks amid a rising interest rate environment
- However, we believe that the 3 core business segments are all performing strongly and will continue to gain share
- Using global comps, we believe that Z HD has more than 100% upside and is the top pick in the online space in Japan
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