Global Materials | Industrials | Commodities

Rahul Jain

Equity Bottom-Up

<ul>
<li>Kobelco has delivered ~20–25% returns over the past three months, reflecting investor interest in stable domestic steel demand and growing overseas engineering orders.</li>
<li>Q1–Q2 FY2025 showed steady operational performance with stable steel margins and moderate growth in engineering and construction segments, supporting management’s guidance for the full year.</li>
<li>Stock trades at a modest forward P/E of ~7× with an attractive dividend yield (~4%), though risks include steel margin volatility, global semi-cycle fluctuations, and potential project execution delays.</li>
</ul>


Kobelco has delivered ~20–25% returns over the past three months, reflecting investor interest in stable domestic steel demand and growing overseas engineering orders.
Q1–Q2 FY2025 showed steady operational performance with stable steel margins and moderate growth in engineering and construction segments, supporting management’s guidance for the full year.
Stock trades at a modest forward P/E of ~7× with an attractive dividend yield (~4%), though risks include steel margin volatility, global semi-cycle fluctuations, and potential project execution delays.


Kobelco (5406.T) – Diversified Japanese Industrial with Stable Steel and Engineering Exposure

<ul>
<li>Earnings stable over 3 years as machinery and power offset weak steel margins; ROIC gradually improving.</li>
<li>Focus on KOBEMAG®, machinery expansion, and carbon-neutral projects with disciplined capex.</li>
<li>Trades at ~5x P/E due to low ROIC, past governance issues, and misperception as a pure steel cyclical.</li>
</ul>


Earnings stable over 3 years as machinery and power offset weak steel margins; ROIC gradually improving.
Focus on KOBEMAG®, machinery expansion, and carbon-neutral projects with disciplined capex.
Trades at ~5x P/E due to low ROIC, past governance issues, and misperception as a pure steel cyclical.


Kobelco (5406.T) – Diversified Industrial at Deep Value

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>There are 44 adds/41 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.</li>
<li>Based on the adds, deletes and capping changes, we estimate one way turnover of 7.9% and a round-trip trade of JPY 880bn (US$6bn).</li>
<li>The adds have outperformed the deletes over the last year though that has been faded over the last couple of months. Breaking with history, there could be outperformance near-term.</li>
</ul>


There are 44 adds/41 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
Based on the adds, deletes and capping changes, we estimate one way turnover of 7.9% and a round-trip trade of JPY 880bn (US$6bn).
The adds have outperformed the deletes over the last year though that has been faded over the last couple of months. Breaking with history, there could be outperformance near-term.


JPX Nikkei 400 Index Rebalance: A Bunch of Chunky Adds & US$6bn Trade

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven


For the month of August, 10 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$39bn, buoyed by the massive Afterpay Touch (APT AU) transaction.



Clicking on the company name in the table below will take you to the entity page where you can read the initial insight(s) written by Smartkarma contributors on these new deals and follow-up discussions, or simply click on the insight link(s) below the name.







New Deals


Industry


Size (US$bn)


Type


Premium




Australia




1300 Smiles Ltd (ONT AU) 
Dental
0.2
Scheme
14%


1300Smiles (ONT AU): BGH Sinks Its Teeth In



Afterpay (APT AU) 
Payment facilitator
29.0
Scheme
30.6%


Afterpay Ltd (APT AU): All Squared Away



Huon Aquaculture (HUO AU) 
Fisheries
0.3
Scheme
61%



JBS Nets Huon Agriculture (ASX: HUO) Huon Ag (Huo AU): Twiggy Went To Market




Hong Kong




Golden Throat Holdings (6896 HK) 
Cough medicine
0.3
Scheme
55.8%


Golden Throat (6896 HK): Affirma and Founder Group Cough Up



Suchuang Gas Corp (1430 HK) 
Gas transmission
0.1
Scheme
2.9%


Suchuang Gas (1430 HK): Delisting Proposal From CR Gas



Japan




GCA Corporation (2174 JP) 
Finance
0.6
Tender Offer
31.3%


Houlihan Lokey To Take Out GCA :  Light But Likely Done



Kobe Steel Ltd (5406 JP) / Kobelco Eco Solutions (6299 JP)

Materials
0.4
Merger
N/A



New Zealand




Z Energy Ltd (ZEL NZ) 
Petrol Stations
1.3
Scheme
22%


Z Energy (ZEL NZ) Tentatively Backs Ampol's Approach



Taiwan








China Development Financial (2883 TT) / China Life Insurance (2823 TT)

Insurance
4.8
Merger
N/A


CDFHC - China Life Insurance: US$2bn+ Cash &amp; Scrip Deal to Reach the Finish Line



Thailand




Siam Future Development (SF TB) 
Malls
0.8
MGO
8%


Siam Future Development (SF TB): Central Pattana MGO As MAJOR Cineplex Exits



US




New Frontier Health Corp (NFH US) 
Hospitals
1.6
Merger
27.9%


New Frontier (NYSE: NFH): Healthcare Homecoming


Source: Smartkarma Insights





The average premium for the new deals announced (or first discussed) in August was ~28%, with a year-to-date average of ~33% (112 deals &amp; total deal size of US$234bn). This compares to the average premium for all deals in 2020 (158 deals) and 2019 (145 deals) of 31% and 31.5% respectively.
The above does not include the possible US$5.5bn deal for between IGO Ltd (IGO AU) &amp; Western Areas (WSA AU) (IGO/Western Areas: Battery Mineral Grab); ESR Cayman (1821 HK) acquiring unlisted ARA Asset Management for US$5.2bn (ESR Cayman (1821 HK) Takes Out ARA Asset Management),; or the rumoured US$7.8bn takeover of JOYY (YY US) (JOYY (JOYY US): Rumoured Privatisation). 

Offer Premium Summary


     




2019


2020


2021 YTD



Australia
33.0%
32.4%
35.2%


Hong Kong
25.2%
34.7%
33.9%


Japan
44.0%
35.2%
28.6%


ROW
29.1%
24.2%
34.6%


Average
31.5%
31.1%
33.0%



Source: Smartkarma Insights






Summary of News in August of Arb Situations On Smartkarma's Radar
(Again, click on the company names to take to you to the insights and/or discussion posts for a more comprehensive read-through on each situation)




Australia


Comments (with links to announcements &amp; insights)




5G Networks Ltd/Australia (5GN AU) / Webcentral (WCG AU) 

No August update




Australian Pharmaceutical Industries (API AU) 

No August update




Crown Resorts (CWN AU) 

No August update




Empired Ltd (EPD AU) 

24-Aug. Capgemini has received OIO approval.




Hansen Technologies (HSN AU) 

26-Aug: Hansen Technologies (HSN AU) said today BGH needs further time to complete its DD, but that it has confirmed to Hansen it remains willing to proceeds with a transaction substantially on the terms of its original proposal.  BGH's DD extended to the 10 September. That's a worrying long DD period. 




iCar Asia Ltd (ICQ AU) 

13-Aug: iCar Asia Ltd (ICQ AU) and Carsome obtained ASIC joint bid relief. 




Iress Ltd (IRE AU) 

11-Aug: Iress Ltd (IRE AU)' board has now backed a revised Offer from EQT - but at $15.91/share, just 3.3% above the previous proposal. Iress (IRE AU) Accepts EQT's Latest Proposal




Japara Healthcare (JHC AU) 

30-Aug: FY21 results




Mainstream Group Holdings Ltd (MAI AU) 
27-Aug: FY21 results




Milton Corp Ltd (MLT AU) 

12-Aug: The Magnality of the Marvelous Milton Merger Makes a Moribund March To Metaphysis (It's Mirific!) 25-Aug: Marvelous Milton Making Its Move - New 30yr Highs On Both Stocks




Oil Search Ltd (OSH AU) 

2-Aug: Santos and Oil Search Agree on Terms 24-Aug: Oil Search Ltd (OSH AU) posted a net profit of US$139mn in FY21.




Rhipe Ltd (RHP AU) 

No August update




Spark Infrastructure (SKI AU) 

23-Aug: A firm Offer for Spark Infrastructure (SKI AU) has now been tabled and a SID entered into with KKR, OTTPB, and PSP. The terms remain the same. Spark's board unanimously recommends the Offer. The Scheme Meeting is expected to be held by the end of 2021. Spark Infrastructure (SKI AU): KKR/OTPPB/PSP's Firm Offer




Sydney Airport (SYD AU) 

16-Aug: Sydney Airport (SYD AU) announced it had received a revised offer of $8.45 from the consortium on the 16 Aug. The Board also concluded the proposal was low-balled. That rejection comes as no surprise - this is just a 2.4% bump in terms.  I'm still disinclined to chase it here. I still think there is a chance of a "no deal".  Sydney Airports (SYD AU) Reject's Consortium's Revised Offer.




Think Childcare (TNK AU) 

18-Aug: Court meeting scheduled for the 29 September for Think Childcare (TNK AU).




Youfoodz Holdings (YFZ AU) 

13-Aug: Youfoodz Holdings (YFZ AU) enters into a SID with Hellofresh
24-Aug: Youfoodz Holdings (YFZ AU) posted a net loss of A$3.5mn in FY21.








Hong Kong


Comments (with links to announcements &amp; insights)




Beijing Capital Land Ltd H (2868 HK) 

19-Aug: Beijing Capital Land (2868 HK): Pre-Cons Satisfied. This Should Trade Tight 24-Aug: This will give the stock a bit of an extra push. The SFC does not consider GIC's Reco Pearl to be acting in concert with the Offeror for Beijing Capital Land Ltd H (2868 HK). In addition, Redo Pearl has given an irrevocable undertaking to vote in favour of the Scheme resolutions. Reco owns 181,194,000 H Shares, representing 4.15% of the issued shares and 11.83% of the H Shares held by the Independent H Shareholders.
27-Aug: Beijing Capital Land (2868 HK): EGM On The 23 Sept. IFA Says Fair




Bestway Global Holding (3358 HK) 

22-Aug: Scheme Doc dispatched. Court Meeting will be held on the 15 September with expected payment on or before the 19 October. 
Bestway Global (3358 HK): Scheme Doc Out. Court Meeting On Sept 15th




China Traditional Chinese Medicine (570 HK) 

11-Aug: And it's a deal break - Sinopharm has decided not "to proceed with the Possible Privatisation this time".




China Youzan Limited (8083 HK) 

30-Aug: Youzan Technology has re-filed its application with the Stock Exchange for the listing of the Youzan Technology Shares by way of an offering of new shares, instead of by way of introduction.




Chong Hing Bank (1111 HK) 

14-Aug: Chong Hing Bank Ltd have announced an interim dividend of HK$0.11 will be added to the cancellation price:   23-Aug: Irevocables received.  24-Aug: Chong Hing Bank (1111 HK) has announced Cosco Shipping, with 19,823,037 shares, representing approximately 2.04% of the issued shares, 8.14% of the Scheme Shares, and 12.68% of the Independent Scheme Shares, has given an irrevocable to vote for the Scheme. 



Kerry Logistics Network (636 HK)

3-Aug: Kerry Logistics Network (636 HK) announced NDRC and MoC approval has been received as to the partial offer. A number of pre-cons still remain outstanding, all of which are technically waivable, apart from the SFC consent. 
10-Aug: Kerry Logistics (636 HK): Pre-Cons Done. Partial Offer To Commence Next Week 14-Aug: Kerry Logistics (636 HK): Doc Out Early - Offer Now Open 30-Aug: Kerry Logistics (636 HK): Technicalities As Partial Draws To An End




Nature Home Holding Company (2083 HK) 
18-Aug: Nature Home Holding Company (2083 HK) has announced an (expected) delay in the dispatch of the Composite Doc so as to accommodate the interims, which are due out on the 31 August. The dispatch date is now expected on or before the 30 September compared to my earlier estimate of 27 September. 



Soho China Ltd (410 HK) 

8-Aug: SOHO China (410 HK): Time To Buy




WH Group (288 HK) 

17-Aug: WH Group Partial Buyback Offer Now Unconditional
18-Aug: WH Group - Stock Plummets as Ousted Son Drags Pigs Into The Mud 30-Aug: WH Group Post-Tender Outlook - Index Selldown and Back-End Trading/Valuations On the 30th of August the company announced the results of the buyback offer with a pro-ration of 23.1%









India


Comments 




Adani Power (ADANI IN) 

No August update, though SEBI is said to be investigating the low indicative price.  And the stock is going into FTSE Large as of 17 September. 




Mphasis Ltd (MPHL IN) 

No August update









Japan


Comments (with links to announcements &amp; insights)




Hitachi Metals (5486 JP) 

No August update




Invesco Office J Reit (3298 JP) 

26-Aug: Invesco Office Index Deletion Monday 30 Aug




Sakai Ovex (3408 JP) 
No August update (City Index Eleventh reported on 3 August that as of 27 July they had lifted their stake to 8.01%); tender closes 8 Sep. 




Last Week in Event SPACE:  Afterpay, SPH, ESR Cayman, Prosus/Naspers, Kingsoft, Milton, SOHO China

Japan

Kobe Steel, Ltd. is a steelmaker, as well as a supplier of aluminum and copper products.  The products include steel plates and steel rods.  The Company also operates other businesses such as welding consumables, urban infrastructure, plant engineering, and industrial & construction machinery.  Kobe Steel has operating offices in the US, Europe, and Asia.

Price Gauge
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Kobe Steel Ltd (5406 JP)

Kobelco (5406.T) – Diversified Japanese Industrial with Stable Steel and Engineering Exposure

Kobelco's strong performance driven by stable steel demand and overseas orders, with potential risks in steel margin volatility and project delays.

Rahul Jain

Kobelco (5406.T) – Diversified Industrial at Deep Value

Company's stable earnings over 3 years are supported by machinery and power, with improving ROIC, despite low valuation due to past governance...

Rahul Jain

JPX Nikkei 400 Index Rebalance: A Bunch of Chunky Adds & US$6bn Trade

There are 44 adds/41 deletes for the JPX Nikkei 400 Index resulting in a one-way turnover of 7.9% and a round-trip trade of JPY 880bn (US$6bn)....

Brian Freitas

(Mostly) Asia M&A: August 2021 Roundup

The average premium for the new deals announced (or first discussed) in August was ~28%, with a year-to-date average of ~33%. The average premium...

David Blennerhassett

Last Week in Event SPACE: Afterpay, SPH, ESR Cayman, Prosus/Naspers, Kingsoft, Milton, SOHO China

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Kobelco (5406.T) – Diversified Japanese Industrial with Stable Steel and Engineering Exposure

​Kobelco's strong performance driven by stable steel demand and overseas orders, with potential risks in steel margin volatility and project delays.

Rahul Jain

Kobelco (5406.T) – Diversified Industrial at Deep Value

​Company's stable earnings over 3 years are supported by machinery and power, with improving ROIC, despite low valuation due to past governance...

Rahul Jain

JPX Nikkei 400 Index Rebalance: A Bunch of Chunky Adds & US$6bn Trade

There are 44 adds/41 deletes for the JPX Nikkei 400 Index resulting in a one-way turnover of 7.9% and a round-trip trade of JPY 880bn (US$6bn)....

Brian Freitas

(Mostly) Asia M&A: August 2021 Roundup

The average premium for the new deals announced (or first discussed) in August was ~28%, with a year-to-date average of ~33%. The average premium...

David Blennerhassett

Last Week in Event SPACE: Afterpay, SPH, ESR Cayman, Prosus/Naspers, Kingsoft, Milton, SOHO China

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Kobelco's strong performance driven by stable steel demand and overseas orders, with potential risks in steel margin volatility and project delays.

Company's stable earnings over 3 years are supported by machinery and power, with improving ROIC, despite low valuation due to past governance...