Smartkarma Daily Briefs

• The Sep 2024 Nikkei 225 Review base date is here. As before, I see one ADD, one DELETE, one capping, and one Very Dark Horse.
• The rules are clear, but not. This causes confusion. There may be unwritten rules keeping the Very Dark Horse out til next time.
• The Nikkei Index Team announced Fast Retailing (9983 JP) would be capped. I didn’t expect that now. That means $2.2bn+ of selling 30Sep and a reverse funding trade.

• On 10 June, Sun Corp subsidiary Cellebrite DI (CLBT US)‘s SPAC sponsor True Wind Capital launched a Tender Offer for 19% of SunCorp at a premium but discount to NAV.
• The price was too low. CLBT shares rose. They lifted the TOB price by 8% to ¥4750. Still too low. It was trading there. Now they have lifted to ¥5500.
• Now a 49% premium to undisturbed, 29.4% premium to all-time high prior to the first tender. Changes in terms means this could get done. More bullish than it looks.

• True Wind has increased its partial offer for Sun Corp (6736 JP) to JPY5,500 and materially lowered the minimum number of shares to be purchased from 3.3m to 1.1m.  
• True Wind’s previous two offers were a non-starter due to an unattractive price and an onerous minimum acceptance threshold. The final offer addresses both these issues. 
• The offer will succeed due to the low minimum acceptance threshold and the 25% price uplift vs. the 19% value increase in the Cellebrite stake (since the offer announcement).

• Ola Electric is a vertically integrated pure EV player in India with both technology and manufacturing capabilities for EVs and EV components (including battery packs, motors and vehicle frames).
• The company’s much awaited IPO is opening for subscription on Friday, and this insight focuses on new data points from the company’s latest Red Herring document (RHD).
• Our analysis shows that the company’s top line has continued to expand driven by volume while there has been significant reduction in operating losses in FY03/2024.

• We discuss the end of the mandatory lock-up periods for 41 stocks in Korea in August 2024, among which 2 are in KOSPI and 39 are in KOSDAQ.
• These 41 stocks on average could be subject to further selling pressures in August and could underperform relative to the market.
• The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in August include APR, Fadu, and Kuk Il Paper.

• Today’s news indicates Hankook Tire found contingent liabilities in Hanon Systems’ finances, meeting conditions to break the May agreement and putting the deal on indefinite hold.
• Hankook Tire plans to adjust the new share price first, then the existing share price, while Hahn & Co, unable to delay its exit, will likely accept it.
• With Hahn & Co likely to accept Hankook Tire’s price adjustment request, consider a long-short setup: Hankook Tire may benefit from positive momentum, while Hanon Systems faces negative dilution.

• Samsonite is a global luggage leader with three major brands: Samsonite, Tumi, and American Tourister
• Despite challenges during COVID, Samsonite has successfully executed a turnaround by closing stores and improving sales and margins
• The stock is undervalued in Hong Kong, with plans for a secondary US or European listing in the near future, potentially offering a 100% upside opportunity.

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• India’s electric 2-wheeler sales nosedived after March 2024 as the government reduced incentives.
• The price gap between electric 2-wheelers and their ICE counterparts has widened significantly with lower incentives.
• Despite the overall slowdown, Ola Electric (1700674D IN) ‘s steep market share rise highlights its product prowess, competitive pricing capabilities, and strong brand.

• One of the biggest stories in the Korean e-commerce sector this week has been TMON and WeMakePrice filing for court receivership due to liquidity crisis. 
• Singapore’s Qoo10 is the controlling shareholder of TMON and WeMakePrice. Young-Bae Ku is the largest shareholder of Qoo10 with a 42.77% stake, followed by KKR with a 25.65% stake. 
• Competitors such as E-Mart and Coupang are most to benefit. PG companies such as KG Inicis and NHP KCP are negatively impacted. 

• We compile a list of ten high-yielding/net cash or low-net debt stocks in HK’s apparel/footwear value chain. HK is a pariah for investors, and trailing dividend yields are approaching 6-20%. 
• As in other insights, we don’t estimate future earnings for all companies, but we indicate if the company has quality by measuring long-term ROCE (average five years).
• By expanding outside of China, most of these companies have derisked themselves from the trade war ( to the extent they can) and are also ready for earnings inflection.