This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. 7&I (3382 JP) – A York Holdings Deal And Warren Buffett?
- The Seven & I Holdings (3382 JP) to rid itself of control of the Ito-Yokado, York Benimaru, Akachan Hompo, and Denny’s Japan businesses in York Holdings proceeds apace.
- The First Round of bids is due tomorrow, apparently, and all manner of bidders have assembled.
- This leads to the question of a deal for the rest of 7&i. If a TradingCo is a natural co-investor for the Ito family (or ACT), so is Berkshire Hathaway.
2. Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics
- Overnight, Sanrio (8136 JP) announced a placement of 25.87m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 3.88m shares.
- There will be limited passive buying in the short-term and the shares offered is a large percentage of real float of the stock.
- However, Sanrio (8136 JP) is the highest ranked non-constituent stock in a global index universe and a drop in the stock price could be used to accumulate positions.
3. Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes
- There are now new changes forecast for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December for a total of 8 inclusions and 7 deletions.
- Constituent changes along with capping changes will lead to a one-way turnover of 21.8% and in a one-way trade of TWD 75.8bn (US$2.33bn).
- The potential changes had a big one-day move yesterday and we expect similar moves over the next couple of days.
4. Kansai Electric Power (9503 JP) – Huge Offering Is Smaller Now; Reward/Risk Skews Upwards
- On 13 November, Kansai Electric Power (9503 JP) announced an equity offering to raise capital for capex expenditures over the next several years. It is significantly dilutive.
- The shares responded by falling 23% to 8-months lows of ¥1,850 last Thursday and Friday. That puts the stock at the same forward PER post-offering as it was pre-offering.
- That’s probably not an awful place to own now that the stock will have been slightly de-risked/de-levered.
5. Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Big Shift in Divs Leads to Last Minute Changes
- Using data from the close on 25 November, there could be 6 adds and 5 deletes for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
- There will also be capping and funding flows that will lead to a one-way turnover of 17.3% and a one-way trade of TWD 60.6bn (US$1.86bn).
- On average, the forecast adds have started to outperform the forecast deletes. Positioning should continue in stocks that have large flow/impact or have recently joined the list of forecast adds/deletes.
6. [JAPAN ACTIVISM] Keisei Elec (9009) – Murakami Stake Causes Pop But the Oppty Is Still Unconvincing
- 13mos ago, activist investor Palliser Capital spoke at a conference about the value offered by Keisei Electric Railway Co (9009 JP) due to its large stake in Oriental Land (4661).
- Keisei outperformed OLC by 30% over 3.5mos. Then it fell all the way back, and more, over the next five months. Asset sale, buyback, AGM proposals. Meh.
- Nov 25th, Toyo Keizai wrote activist Murakami-san had acquired stakes of <5% in Keikyu Corp (9006 JP) and <1% in Keisei Electric Railway Co (9009 JP). Shares in both jumped.
7. Taiwan Top 50 ETF Rebalance Preview: Double Inclusion for Yang Ming Marine (2609 TT)
- Yang Ming Marine Transport (2609 TT) is forecast to be added to the Yuanta/P-Shares Taiwan Top 50 ETF in December, replacing Airtac International (1590 TT).
- Yang Ming Marine Transport (2609 TT) is also expected to be added to the Yuanta/P-shares Dividend Plus ETF in December, so there will be buying from multiple trackers.
- Shorts are near their lows in Yang Ming Marine Transport (2609 TT) while there has been covering in Airtac International (1590 TT) after an increase in the last few months.
8. HSTECH Index Rebalance: Midea (300 HK) Replaces Weibo (9898 HK); US$1.5bn Round-Trip Trade
- In a surprise, Midea Group (300 HK) will replace Weibo (9898 HK) in the Hang Seng TECH Index (HSTECH INDEX) after the close of trading on 6 December.
- Estimated one-way turnover at the rebalance is 4.5% resulting in a round-trip trade of HK$11.72bn (US$1.51bn). Passives need to buy 9x ADV in Midea Group (300 HK).
- The Midea Group Co Ltd A (000333 CH) / Midea Group (300 HK) premium could drop due to the index inclusion providing an entry point into an AH expansion trade.
9. NTT (9432 JP) And SBI Sumishin NetBank (7163 JP)? Maybe. Maybe Not. Seven Bank A Better Idea
- An article in Japanese weekly magazine Bunshun this morning sent shares inSBI Sumishin Net Bank (7163 JP) limit up +17% with a headline that NTT Docomo was interested to buy.
- Without access to the article, I can’t go deep, but the base concept is that NTT Docomo is “worried” about KDDI (which has a bank, as does Softbank Corp)
- It is not clear how serious it is, SBI Sumishin is super-expensive, and buying a bank isn’t the same as buying a company. Hmmm…
10. Seven & I Holdings (3382 JP): Implications from the YORK Holdings Stake Sale
- NHK reports that Seven & I Holdings (3382 JP)‘s first bidding round for a YORK Holdings stake ends on 28 November. The sale provides a third-party valuation benchmark for the asset.
- It is an incremental positive for the founding family MBO as it supports the post-privatisation strategy and assists in securing bank financing.
- This is an incremental negative for Alimentation Couche-Tard (ATD CN) as it shows that the Board believes the restructuring plan will increase shareholder corporate value.
