This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. [Japan ECM] Kokusai Elec (6525) – ANOTHER Applied Materials Selldown
- In early October, Applied Materials (AMAT US) sold down a US$330mm stake in Kokusai Electric (6525 JP). Today post-close they return for another 12mm shares.
- The last two offerings went well. This one feels a bit more like the first, not the second and third, but it’s a different world now.
- There are some index upweights in the next couple of months. There are likely some big ones 8-9mos down the line.
2. [Japan ECM] Shin-Etsu Chem (4063) Secondary Selldown by Financial Crossholders
- Today after the close, Shin Etsu Chemical (4063 JP) announced a selldown of 27.23mm shares (including greenshoe) by eight crossholders.
- The offering is US$900mm or so if the stock falls a bit. That is 4.2x ADV and 3% of Max Real World Float. There is minimal index impact.
- But there is a follow-on buyback. Earnings has been less salutary than the guidance was but the buyback continues apace, and this offering is 70% covered by end-April.
3. [Japan ECM] TEPCO Selling Kandenko (1942) Shares – Earnings Surprised But Narrative Violation?
- Today during the day, Kandenko Co Ltd (1942 JP) announced a sharp upward revision to its full-year guidance. Revs+4.6%, OP+27%, NP +32%. It was good. The stock popped.
- After the close, major owner (46%) Tokyo Electric Power Co (9501 JP) announced a selldown of 12.8% of shares out or 23x ADV.
- There is a buyback to cover not quite a quarter of it, and index buying will help with another 10%, but the narrative may have changed here.
4. Shin Etsu Chemical (4063 JP): A US$1.0 Billion Secondary Offering
- Shin Etsu Chemical (4063 JP) has announced a secondary offering of up to 23.7 million shares (27.2 million including overallotment), worth around US$0.8 billion (US$1.0 billion including overallotment).
- The goal of the secondary offering seems to be to facilitate the exits of several shareholders and improve liquidity.
- The offering as a percentage of outstanding shares and ADV is small compared to recent large placements. An ongoing JPY100 billion share buyback will further mitigate the impact.
5. Aequitas: Kokusai Electric Placement – Last Deal Did Ok, but the Stock Has Done Very Well Since
- Applied Materials (AMAT US) (AM) is looking to raise approximately US$510m through an accelerated secondary offering for around 5% of Kokusai Electric (6525 JP)’s (KE) stock.
- KE had seen three selldown earlier, two from KKR and one from AM, with mixed results.
- In this note, we will talk about the placement and run the deal through our ECM framework.
6. Aequitas: Shin-Etsu Chemical Placement – A Relatively Small US$800m Deal
- A group of shareholders plan to raise around S$800m via selling some of their stake in Shin Etsu Chemical (4063 JP).
- This will be another large cross-shareholding unwind in Japan, although the shares haven’t done much recently.
- In this note, we talk about the deal dynamics and run the deal through our ECM framework.
7. Busy Ming Group (1768 HK) IPO – Thoughts on Valuation and the Outlook
- The IPO pricing of BUSY MING is attractive. P/E of 20-30x is an acceptable valuation range in the short term. The IPO pricing leaves certain upside potential for stock price.
- The profit situation of the franchisees is not optimistic. The rate of store closures is increasing. This makes us start to worry about the sustainability of BUSY MING’s franchise model.
- The current high growth may not be sustainable.BUSY MING clearly hopes to successfully IPO during the current peak period of performance, but investors may face performance decline in the future.
8. Aequitas: Shenzhen Han’s CNC Technology A/H Listing – Data Centre Beneficiary Offered At A Discount
- Shenzhen Han’s CNC Technology (301200 CH), a PCB production equipment solution provider, aims to raise around US$615m in its H-share listing.
- CNC Technology is a specialized Printed Circuit Board (PCB) production equipment solution provider in China, focused on the R&D and manufacturing of equipment used across key stages of PCB manufacturing.
- We have looked at the past performance and likely A/H premium in our previous note. In this note, we talk about the IPO pricing.
9. Aequitas: Muyuan Foods A/H Listing – Decent Pricing, Weak Momentum
- Muyuan Foodstuff Co Ltd A (002714 CH) , a leader in the hog farming industry, aims to raise around US$1.4bn in its H-share listing.
- MF is a leading pork company with over 30 years of expertise in the hog farming industry.
- We have looked at the past performance and likely A/H premium in our previous note. In this note, we talk about the IPO pricing.
10. Eastroc Beverage Hong Kong IPO Preview
- Eastroc Beverage Group (9980 HK) is getting ready to complete its IPO in Hong Kong next week. The company is selling 40.9 million shares for HK$248 each
- The company plans to raise up to HK$10.1 billion (US$1.3 billion). This would suggest a market cap of about US$21 billion.
- Eastroc Beverage is one of the largest functional beverage companies in China and the dominant domestic energy drink producer, with its Eastroc Special Drink product having displaced Red Bull product.
