Smartkarma Daily Briefs

Last week, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May, and the Circular on 26 June.
The company applied, got CSRC approval on 5 Nov, announced the issuance on 6 Nov, and shares went ex- on 10 November. It’s probably unneeded, but it’s there.
The stock is cheap. The company will boost its payout ratio. And it isn’t that “heavy” a deal. The Rights Trading Dynamics may be interesting.

Sanyo Trading (3176 JP) – Transitioning onto the Next Stage

Impressive progress to date – Q1-4 FY9/2023 results were at record highs for the company, demonstrating a sustained track record of above-average profitability and disciplined capital allocation via M&A.
Business diversification to life sciences has led to sales mix improvement and a more resilient business in our view.
Company guidance for FY9/2024 indicates a decrease in earnings YoY, attributed to the accumulation of strategic upfront investments for business development.

Adani Ports – Earnings Flash – H1 FY 2023-24 Results – Lucror Analytics

By Leonard Law, CFA

Adani Ports and Special Economic Zone’s (APSEZ) H1/23-24 results came in slightly above expectations, with revenue growth of 26% y-o-y exceeding management’s full-year guidance for a 15-20% increase. EBITDA (excluding FX losses) rose by 17%, at the higher end of the 13-17% guidance. Net adjusted leverage improved to 3.4x (FY 2022-23: 4.0x). We expect the company’s leverage to continue improving in FY 2023-24, in line with management’s guidance.

In our view, there remains a small degree of regulatory overhang and negative headline risk facing the broader Adani Group, which may affect group entities’ financing access in the offshore bond market (particularly on an unsecured basis). That said, the group’s access to onshore and bank financing remains intact.

Separately, we note that the Supreme Court hearing regarding the Securities and Exchange Board of India’s (SEBI) investigation on Adani Group has been repeatedly deferred. The Supreme Court requested on November 6th that all parties file final submissions regarding the case by November 8th. We believe the regulatory overhang may only be resolved by the eventual outcome of SEBI’s investigation and the Supreme Court’s judgement.

Japan Elevator Service Holdings (6544 JP) – Game-Changer Continuing to Excel

Success of disruptive innovation – we believe Q1-2 FY3/2024 results were ahead of the run-rate for FY guidance, driven by 1) sustained growth in maintenance and repair service contracts, and
2) stronger than expected demand for modernization services, resulting in gross margin improvement QoQ in Q2 FY3/2024 via amplified proposal effectiveness and increases in pricing.
We expect to see JES continue to successfully disrupt the market via innovation, driven by secular growth as building owners convert to reputable independent providers for cost management and structural demand from aging elevators requiring modernization.

CaiNiao Smart Logistics Pre-IPO Part 5 | For Better or Worse, J&T IPO Will Impact CaiNiao Valuation

J&T debuted with a rich valuation, but little investor enthusiasm to date
Focusing on J&T’s valuation alone could be a boon to CaiNiao’s valuation…
…but, with few other comps, J&T’s lackluster early performance could be a drag

Q323 Another Tough Quarter for Kerry Express Thailand (KEX) | Negative Read-Through for J&T Global

KEX’s EBIT margin fell to -38% in Q323, but showed Q/Q improvement vs Q223
Q/Q progress on margin most likely due to KEX initiatives, not market recovery
Ongoing weakness in Thai domestic express market marginally negative for J&T

Carr’s Group – A new team to take the group forward

Carr’s Group has announced a fully refreshed executive team, none having been in-situ at the start of 2023. This will enable the executives to have an uninhibited view of the operations, enabling the development and implementation of a strategy reflecting the different opportunities and challenges facing the Engineering and Speciality Agriculture divisions.

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Nov 14

Daily Brief Health Care: e-Therapeutics PLC, Lonza Group , TSE Tokyo Price Index TOPIX and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

e-therapeutics – More to come in RNAi therapy discovery
Lonza Group (LONN SW): Customer Driven Events Are Impacting Near-Term Performance
The ％ of Female Board Members Exceeding 30% Shows Whether the Company Is Truly Pursuing Diversity

e-therapeutics – More to come in RNAi therapy discovery

e-therapeutics reported H1 FY24 results (to end-July 2023), reaffirming its commitment to integrating its computational and hepatocyte biology expertise to develop short interfering RNA (siRNA) therapies. The key half-year development was the proof-of-concept (PoC) data for two preclinical assets for the treatment of cardiometabolic disease and haemophilia, with further updates forthcoming. We view these pipeline updates, especially in segments with increased interest, as positive. Management continues to strengthen its intellectual property (IP) position and has filed new patent applications to protect 11 inventions relating to its novel targets and siRNA constructs. In our view, the company’s cost-effective and flexible approach is a key differentiator, especially in light of the challenging funding environment for drug discovery. In H1 FY24, R&D spend was £5.3m, and the company expects an increase in H2 FY24 with further development of its AI capabilities and progression of its in-house preclinical pipeline. At end-July 2023, e therapeutics had a net cash position of £24.8m.

Lonza Group (LONN SW): Customer Driven Events Are Impacting Near-Term Performance

By Tina Banerjee

In 1H23, biologics division of Lonza Group (LONN SW) reported revenue decline of 1% YoY to CHF1.6B, due to low mRNA sales dragged by lower demand for the COVID-19 vaccines.
Reflecting slower-than-expected growth in early-stage services and continued weak demand for nutraceutical capsules, Lonza has reduced 2023 sales growth expectation and cut core EBITDA margin guidance to 28–29%.
Growth in 2024 will be impacted by high base, the subsequent mRNA revenue loss, and trial setback faced by small biotech client. Lonza anticipates 2024 margin in the high twenties.

The ％ of Female Board Members Exceeding 30% Shows Whether the Company Is Truly Pursuing Diversity

By Aki Matsumoto

30% female board member set by TSE isn’t surprising, as it’s level within reach, but the fact that TSE set explicit target that companies can’t excuses is a first step.
To ensure that a female board member isn’t isolated from other board members, multiple female board members should be elected. In this sense, 30% female board members goal makes sense.
In fact, the most interesting question is how many more companies will approach 50% after achieving a 30% of female board members.

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Nov 14

Daily Brief Industrials: Zhejiang Expressway Co H, Sanyo Trading, Adani Ports & Special Economic Zone, Japan Elevator Service Holding, Cainiao Smart Logistics Network, J&T Global Express , Carr’s Group PLC and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting
Sanyo Trading (3176 JP) – Transitioning onto the Next Stage
Adani Ports – Earnings Flash – H1 FY 2023-24 Results – Lucror Analytics
Japan Elevator Service Holdings (6544 JP) – Game-Changer Continuing to Excel
CaiNiao Smart Logistics Pre-IPO Part 5 | For Better or Worse, J&T IPO Will Impact CaiNiao Valuation
Q323 Another Tough Quarter for Kerry Express Thailand (KEX) | Negative Read-Through for J&T Global
Carr’s Group – A new team to take the group forward

Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting

Last week, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May, and the Circular on 26 June.
The company applied, got CSRC approval on 5 Nov, announced the issuance on 6 Nov, and shares went ex- on 10 November. It’s probably unneeded, but it’s there.
The stock is cheap. The company will boost its payout ratio. And it isn’t that “heavy” a deal. The Rights Trading Dynamics may be interesting.

Sanyo Trading (3176 JP) – Transitioning onto the Next Stage

Impressive progress to date – Q1-4 FY9/2023 results were at record highs for the company, demonstrating a sustained track record of above-average profitability and disciplined capital allocation via M&A.
Business diversification to life sciences has led to sales mix improvement and a more resilient business in our view.
Company guidance for FY9/2024 indicates a decrease in earnings YoY, attributed to the accumulation of strategic upfront investments for business development.

Adani Ports – Earnings Flash – H1 FY 2023-24 Results – Lucror Analytics

By Leonard Law, CFA

Japan Elevator Service Holdings (6544 JP) – Game-Changer Continuing to Excel

Success of disruptive innovation – we believe Q1-2 FY3/2024 results were ahead of the run-rate for FY guidance, driven by 1) sustained growth in maintenance and repair service contracts, and
2) stronger than expected demand for modernization services, resulting in gross margin improvement QoQ in Q2 FY3/2024 via amplified proposal effectiveness and increases in pricing.
We expect to see JES continue to successfully disrupt the market via innovation, driven by secular growth as building owners convert to reputable independent providers for cost management and structural demand from aging elevators requiring modernization.

CaiNiao Smart Logistics Pre-IPO Part 5 | For Better or Worse, J&T IPO Will Impact CaiNiao Valuation

J&T debuted with a rich valuation, but little investor enthusiasm to date
Focusing on J&T’s valuation alone could be a boon to CaiNiao’s valuation…
…but, with few other comps, J&T’s lackluster early performance could be a drag

Q323 Another Tough Quarter for Kerry Express Thailand (KEX) | Negative Read-Through for J&T Global

KEX’s EBIT margin fell to -38% in Q323, but showed Q/Q improvement vs Q223
Q/Q progress on margin most likely due to KEX initiatives, not market recovery
Ongoing weakness in Thai domestic express market marginally negative for J&T

Carr’s Group – A new team to take the group forward

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Nov 14

Daily Brief TMT/Internet: Hygon Information Technology C, Taiwan Semiconductor (TSMC) – ADR, Sea , Appier Group, Himax Technologies Inc Adr, EQS Group AG, Centralnic and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

CSI300 Index Rebalance Preview: 13 Potential Changes in December
Taiwan Dual Listings Monitor: TSMC ADR Spread at Decent Short Level; UMC ADR Short Interest Soaring
Sea Ltd: Potential for a Short Squeeze
Appier (4180) | Key Drivers Behind Strong Q3 Performance
Himax Vs. Novatek Long/Short: Display Industry Inventory Normalized, Growth Expected for 2024E
EQS Group – New customer numbers ramp up
Team Internet Group – Diversity delivering resilience

CSI300 Index Rebalance Preview: 13 Potential Changes in December

With the review period for the December rebalance of the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) complete, there could be 13 changes for the index.
We estimate one-way turnover of 1.94% at the December rebalance leading to a one-way trade of CNY 6.98bn. There are a lot of stocks with over 1x ADV to trade.
Over the last 6 months, the potential adds and potential deletes have tracked each other and underperformed the index. Positioning has led to outperformance in the last week.

Taiwan Dual Listings Monitor: TSMC ADR Spread at Decent Short Level; UMC ADR Short Interest Soaring

By Vincent Fernando, CFA

TSMC’s ADR premium is 10.4%, this is a decent level to short it based on the historical trading range.
UMC’s ADR premium is near a good level to short the spread but one should wait for it to rise above 1.5% in our view.
UMC ADR short interest continues to trend higher; TSMC ADR short interest continues to fall.

Sea Ltd: Potential for a Short Squeeze

By Oshadhi Kumarasiri

We suspect that the recent strength in Sea (SE US)‘s price performance is likely due to short covering, with shorts incentivized to cover after a nearly 38% gain.
As earnings approach, short positions have been increasing since late October, likely anticipating another earnings disappointment from Sea Ltd’s Q3 report on November 14, 2023.
Consensus estimates for Sea Ltd are at their lowest since its inception. A modest outperformance could lead to a squeeze in short interest.

Appier (4180) | Key Drivers Behind Strong Q3 Performance

By Mark Chadwick

Appier’s Q3 demonstrated a 39% YoY revenue increase, reaching a record JPY7.1B. This was driven by substantial growth in the US/EMEA markets (117% YoY), customer expansion, and Digital Content growth.
Appier’s gross margin expanded from 51.3% to 52.6% and the operating margin reached a historical high of 4.4%. Despite ongoing investments, EBITDA margins hit12.1%, showcasing strong operating leverage.
Appier’s revised full-year outlook, with increased revenue target (JPY 26.2B), operating income (JPY0.70B), and EBITDA (JPY2.6B), exceeds consensus expectations by 1%, 11%, and 8%, respectively.

Himax Vs. Novatek Long/Short: Display Industry Inventory Normalized, Growth Expected for 2024E

By Vincent Fernando, CFA

Both Himax and Novatek reported their results last week; both delivered gross margins at the high-end or above their previous guidance.
Both companies showed a continued decline in inventory levels. Himax is trading at one of the cheapest levels relative to Novatek in history.
Novatek sees industry inventory levels as normalized and expects 2024E to be an industry growth year. We rate both stocks as Structural Longs.

EQS Group – New customer numbers ramp up

As anticipated, now that the German whistleblower protection laws are in place, EQS is recruiting substantial numbers of new customers and is set for a strong fourth quarter, with good momentum into FY24. Once these new customers convert, they become a pipeline of warm leads for other EQS products and services, including more recent additions such as those for ESG monitoring and reporting. Q323 revenues were up 14% on the prior year and newly won annual recurring revenue (ARR), which precedes reported revenue, was up 50%. The rating remains well below that of peers and the value indicated by a discounted cash flow (DCF).

Team Internet Group – Diversity delivering resilience

Team Internet’s results for the nine months to 30 September 2023 (9M23) showed good, continued progress, with revenue, adjusted EBITDA and adjusted EPS growing 16%, 11% and 28% y-o-y. Online Presence continued its return to form, with 20% growth over the period. While the weak advertising market and a strong comparative period was reflected in a moderation in growth in Online Marketing (15%), this still implies outperformance of the overall market. Management expects full year results to be at least in line with consensus. We make no material changes to our P&L estimates and continue to see scope for upside. We have increased our year end net debt forecast (previously below consensus) to reflect higher capital investment in content and software development, acquisition costs and working capital than previously modelled. In our view, the company’s value P/E rating of 7.1x FY23 dropping to 6.1x in FY24 is in stark contrast the company’s growth track record and prospects.

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Nov 14

Daily Brief Financials: WuXi XDC Cayman , Bank Of Baroda, Life Insurance of India, BlackRock Latin American Inves, China Jinmao Holdings, Draper Esprit and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

WuXi XDC (2268 HK): Index Inclusion Possibility & Timelines
Indian Banks Screener: Stick with Bank of Baroda and HDFC Bank
Life Insurance of India (LICI IN) 2Q24 Review: Poor Performance; No Signs of Turnaround. Sell.
BlackRock Latin American Inv. Trust – Last man standing Ã¢ÂÂ€ÂÂ“ committed to the region
Morning Views Asia: China Jinmao Holdings
Molten Ventures – NAV down c 6% in the first half of FY24

WuXi XDC (2268 HK): Index Inclusion Possibility & Timelines

WuXi XDC Cayman (1877628D HK) is looking to raise up to HK$4.07bn (US$521m) in its IPO by selling 197.6m shares at HK$20.6/share, valuing the company at HK$24.67bn (US$3.16bn).
WuXi XDC Cayman (1877628D HK) will not get Fast Entry to any indices but should be added to the HSCI and to Southbound Stock Connect in March.
Inclusion in other indices will take longer with the highest probability of index inclusion starting in September 2024.

Indian Banks Screener: Stick with Bank of Baroda and HDFC Bank

By Victor Galliano

We retain Bank of Baroda as the deep value Indian bank from our peer group, for its modest valuations, healthy ROE and further improvements in pre- and post-provision returns
The market seems unconvinced by HDFC Bank but we retain it as our quality bank pick, with its potential for savings from the HDFC merger and its strong balance sheet
Axis bank stays on our watchlist, but its premium valuations are the challenge; we remain negative on State Bank of India for its delinquency risks and limited progress on returns

Life Insurance of India (LICI IN) 2Q24 Review: Poor Performance; No Signs of Turnaround. Sell.

By Raj Saya, CA, CFA

Life Insurance of India (LICI IN) reported its 1H24 earnings which are a continuation of the poor performance of the largest life insurer in India.
Total sales were down -10% (individual sales – flat y-o-y); VNB margins falling; outlook not positive. Not positive shifts in product mix or distribution trends.
We value LIC at 0.5x FY25e P/EV, implying a -15% downside from the current price, reflecting poor sales growth, loss of market-share and its failure to turn-around the business model.

BlackRock Latin American Inv. Trust – Last man standing Ã¢ÂÂ€ÂÂ“ committed to the region

BlackRock Latin American Investment Trust (BRLA) has two managers, Sam Vecht (lead) and Christoph Brinkmann (deputy). They highlight that Latin America has been overlooked by investors and the trust is now the only fund in the AIC Latin America sector. The managers are finding interesting opportunities in the region in their search for companies offering a niche product or service, which have long-term growth potential and are reasonably priced. BRLA offers a broad exposure to Latin America, with around 60% of the fund invested in Brazil, the largest country in the region. The Brazilian central bank was proactive in raising interest rates to combat higher inflation, real interest rates remain relatively high and the economy should benefit now that interest rates are coming down.

Morning Views Asia: China Jinmao Holdings

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

China Jinmao Holdings

Molten Ventures – NAV down c 6% in the first half of FY24

Molten Ventures released its H124 trading update (to end-September 2023), with management expecting its NAV per share at c 735p, a c 5.7% decline from the end-March 2023 level as a result of a 3.6% negative fair value movement (excluding fx) across its portfolio. That said, management highlighted that the valuation environment is stabilising and that Molten’s portfolio performance remains resilient, with a good balance between growth (even if at a slower pace) and capital efficiency (with very limited exceptions). Molten’s shares currently trade at a 66% discount to NAV.

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Nov 14

Daily Brief Consumer: Japan Best Rescue System Co, Ajinomoto Co, Shidax Corp, Vinda International, Takara Holdings, Hyundai Home Shopping Network, KT&G Corporation, Zeekr, China Feihe and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Japan Best Rescue (2453) MBO at ¥1,000; High Premium, Low Multiple, No Money For Synergies or Growth
Ajinomoto (2802) Secondary Offering (Cross-Holder Unwind) Matched Against Large Buyback
Shidax (4837) – Mgmt Lowers F’casts So Family Can MBO Minorities Cheap. Offensive Governance.
Vinda International (3331 HK): Essity’s Stake Attracts More Potential Bidders
StubWorld: Takara Trading “Rich” As Bio Cuts Forecast Earnings
KOSPI200 Rebalance in December 2023 Highlighted by Locals
KT&G: A New Shareholder Return Policy Worth 2.8 Trillion Won Over Next 3 Years
Zeekr Pre-IPO – The Positives – Has Been Growing Very Fast While Meeting Its Targets
China Feihe (6186 HK): Year-Of-The-Dragon Trade
Japan Best Rescue System (2453 JP): MBK Partners Backed MBO Tender Offer at JPY1,000

Japan Best Rescue (2453) MBO at ¥1,000; High Premium, Low Multiple, No Money For Synergies or Growth

This MBO by MBK is a strong premium because of a low recent price, but it pays a low P/FCF multiple for growth, and no synergies counted.
Yet another MBO where insiders and friends take advantage of structural inferiority of minority shareholders. Something Should Be Done.
What do Minority Shareholders in Japan Say When They Meet Death? “OK, Today it is then.” (with apologies to Game Of Thrones).

Ajinomoto (2802) Secondary Offering (Cross-Holder Unwind) Matched Against Large Buyback

Today after the close, Ajinomoto Co (2802 JP) announced a large secondary offering of 14.3mm shares (2.75% of shs out). At last price that is ¥82bn.
At the same time, they announced a 10mm share (1.92%) ¥40bn buyback to be conducted from the delivery date of the Offering through 31 March 2024.
Over time, there would be some index upweight as float increases. On a net basis, this is a small deal on a low vol stock with a semiconductor story lurking.

Shidax (4837) – Mgmt Lowers F’casts So Family Can MBO Minorities Cheap. Offensive Governance.

Shidax had a Good Governance Moment last year. The stock is up 40-odd% since last year’s GGM, but now the Board, so good last year, has tripped up.
The family and main shareholder – part of last year’s GGM – have decided to bully the Board into accepting an MBO at the wrong price.
Management lowers forecasts without telling anyone. Bidders say “Synergies LaLaLa!” Board says “Ohh la la!” Nobody counts the synergies. Bidder buys at low multiple of newly lowered forecasts. Minorities Lose.

Vinda International (3331 HK): Essity’s Stake Attracts More Potential Bidders

Bloomberg reported Asia Pulp & Paper is the latest party to have expressed interest in acquiring Essity (ESSITYB SS)’s controlling Vinda International (3331 HK) stake at more than HK$20 per share.
Vinda has three substantial shareholders. We think the most likely structure is a bidder acquiring Essity’s stake, which would trigger a mandatory general offer.
Vinda’s recent update points to improving growth and margins. Peers and historical multiples imply a fair price range of HK$21-26 per share, a 7-32% premium to the last close.

StubWorld: Takara Trading “Rich” As Bio Cuts Forecast Earnings

By David Blennerhassett

On an implied stub and simple ratio, Takara Holdings (2531 JP) is at a decade-plus high to 60.9%-held Takara Bio Inc (4974 JP).
Preceding my comments on Takara are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

KOSPI200 Rebalance in December 2023 Highlighted by Locals

By Douglas Kim

This article discusses the potential inclusions and exclusions of KOSPI200 rebalance inDecember 2023 (especially those that are highlighted by the locals).
Stocks that are expected to be added to the KOSPI200 index include Posco DX, HD Hyundai Electric, Sam-A Aluminum, TCC Steel, and Dentium.
Stocks that are expected to be excluded in the KOSPI200 index Include Zinus, Handsome, Cuckoo Homesys, Taekwang Industrial, and Hyundai Home Shopping.

KT&G: A New Shareholder Return Policy Worth 2.8 Trillion Won Over Next 3 Years

By Douglas Kim

KT&G announced a new shareholder return policy worth 2.8 trillion won (including dividend payout of 1.8 trillion won and treasury shares purchase/cancellation of 1.0 trillion won) over next three years.
In addition, the company plans to cancel about 7.5% of the company’s existing treasury shares which represents about 142 billion won (1.2% of outstanding shares).
Although this 2.8 trillion won in shareholder return policy is large, the company could have announced even larger shareholder return policy, including cancellation of its entire treasury shares.

Zeekr Pre-IPO – The Positives – Has Been Growing Very Fast While Meeting Its Targets

By Sumeet Singh

Zeekr, a premium EV brand by Geely Auto (175 HK) , aims to raise around US$500m in its US listing.
Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
In this note, we talk about the positive aspects of the deal.

China Feihe (6186 HK): Year-Of-The-Dragon Trade

By Steve Zhou, CFA

China Feihe (6186 HK) saw major derating (from around 20x PE to the current high-single-digit PE) coupled with sizable earnings drop (-28% yoy in 2022/-25% yoy in 1H23) since 2022.
The investment thesis or trade thesis here is a play on the rise of new born babies in 2024, the year of the dragon in China.
The margin of safety here is also high given a 7% forward dividend yield (Feihe has pledged to increase dividend payout ratio going forward).

Japan Best Rescue System (2453 JP): MBK Partners Backed MBO Tender Offer at JPY1,000

Japan Best Rescue System Co (2453 JP)/JBR has recommended an MBK Partners-backed MBO tender offer of JPY1,000 per share, a 53.8% premium to the undisturbed price (13 November).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
Irrevocables to accept the offer represent a 53.62% ownership ratio. The minimum acceptance condition requires a 28.1% minority acceptance rate, which is helped by the significant premium.

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Nov 13

Most Read: Renesas Electronics, Benesse Holdings, GMO Payment Gateway, Tencent, Hyundai Electric & Energy, Ps Mitsubishi Construction, Softbank Group, Shidax Corp, IJTT Co., Ltd. and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Renesas Clean-Up Block Trade – Overhang Out of The Way And Time To Own Again
Benesse (9783) MBO – ¥2600/Share Is Up 40+% But It Is Still the Wrong Price
Japan – Increase in Shorts on Some Interesting*** Stocks
Index Rebalance & ETF Flow Recap: SSE50, Chinext/50, Renesas, Tencent, Amman Mineral
KOSPI 200 December Rebalancing: Rule Change Clarifications & Possible Delay in Price Impact
Taisei Corp (1801) Partial Tender for PS Mitsubishi Construction (1871)
Softbank (9984 JP): WeWork Hangover and Other Challenges
Shidax Corporation (4837 JP): MBO Tender Offer at JPY800
ECM Weekly (12th Nov 2023)-Renesas, Bajaj, Alchip, Hybe, Will, Wuxi, ChaPanda, Chenqi, Cello, Honasa
IJTT (7315 JP): SPARX Group’s Tender Offer at JPY812

Renesas Clean-Up Block Trade – Overhang Out of The Way And Time To Own Again

INCJ made a lot of money on Renesas Electronics (6723 JP) over the years and arguably did a great job helping the firm change direction. Now they are out.
Last night they launched a block sale through JPM and Bof A for 130.2317mm shares. They priced the heavily-oversubscribed deal at a discount of 8% or ¥2143/share.
That’s a big discount (so bad broking) for such oversubscription on a clearly-flagged deal but now they are out.

Benesse (9783) MBO – ¥2600/Share Is Up 40+% But It Is Still the Wrong Price

Just before the close Friday, the Nikkei reported Benesse Holdings (9783 JP) would be the subject of an MBO in order to restructure the flagging private shinken-zemi business. And grow.
It turns out it is EQT and the Fukutake family at ¥2600/share – a 2-year high. Wow. It is also a ridiculously cheap price given the assets and money flows.
I expect this may get some people upset as the valuation methodology is dodgy and the artful (hehehe) Balance Sheet has some easter eggs, and spotted pumpkins… or something.

Japan – Increase in Shorts on Some Interesting*** Stocks

Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent Inc, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp have underperformed the Nikkei 225 recently.
The underperformance could lead to selling from global passive trackers and liquidity events on some of the stocks at month-end.
There has been an increase in short interest on most stocks over the last week as positioning for the liquidity event ramps up.

Index Rebalance & ETF Flow Recap: SSE50, Chinext/50, Renesas, Tencent, Amman Mineral

Wednesday will be a busy day as positions are put on and unwound following announcement of the changes to the MSC indices.
Friday will end the review cutoff for the ASX indices and Hang Seng Indexes will announce the December changes for the HSI, HSCEI, HSTECH and HSCI post market close.
Another week of large outflows for China focused ETFs with redemptions across all the major indices.

KOSPI 200 December Rebalancing: Rule Change Clarifications & Possible Delay in Price Impact

By Sanghyun Park

Although not explicitly outlined, it appears practical to interpret that we should filter out stocks that have entered a trading suspension among those receiving a WARNING designation.
The dynamics of KOSPI 200 flow trading have become notably tumultuous due to the abrupt short selling ban and additional liquidity halts imposed on market makers in the futures market.
The manifestation of price impact due to passive flows may be significantly delayed. So, we should prepare for this week’s announcement day setup targeting the delayed impact of passive flows.

Taisei Corp (1801) Partial Tender for PS Mitsubishi Construction (1871)

Last week, as Ps Mitsubishi Construction (1871 JP) reported earnings, Taisei Corp (1801 JP) announced a Partial Offer for PS Mitsubishi, buying out Ube Cement & Taiheiyo Cement stakes.
Partial offers have recently traded well before the close, and badly after the result. As we near year-end, this one could trade a bit softer, suggesting a lower back end.
Shareholder Structure, Pro-ration analysis, and back end calculation grids below.

Softbank (9984 JP): WeWork Hangover and Other Challenges

By Victor Galliano

Softbank’s exposure to WeWork continues to haunt it beyond the close of 2QFY23, due to its credit support agreements
Aside from WeWork, we continue to see risks to valuations supporting the NAV; in particular, Arm Holdings and SVF2 which accounted for 45% of group equity value
Softbank shares trade at a 45% discount to the stated NAV yet there is downside risk to Arm’s valuation along with questions over private company valuations at SVF1 and SVF2

Shidax Corporation (4837 JP): MBO Tender Offer at JPY800

Shidax Corp (4837 JP) has recommended an MBO tender offer of JPY800 per share, a 10.3% premium to the undisturbed price (9 November).
After the settlement of the tender offer, Oisix ra daichi (3182 JP) will acquire a 66.0% stake in the offeror by way of third-party allotment at the tender offer price.
Despite the skinny premium, the offer is just shy of the ten-year share price high. The minimum acceptance condition requires a 12.5% minority acceptance rate.

ECM Weekly (12th Nov 2023)-Renesas, Bajaj, Alchip, Hybe, Will, Wuxi, ChaPanda, Chenqi, Cello, Honasa

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
In the IPO space, WuXi XDC provided some rare rays of hope in Hong Kong, while Honasa Consumer, Cuscal (1229Z AU) and EcoPro Materials did the opposite.
This week was more about placement with two US$1bn+ deals, a cleanup in Renesas Electronics (6723 JP) and a QIP for Bajaj Finance Ltd (BAF IN).

IJTT (7315 JP): SPARX Group’s Tender Offer at JPY812

IJTT Co., Ltd. (7315 JP) has recommended Sparx Group (8739 JP)’s offer of JPY812 per share, an 18.5% and 16.0% premium to the undisturbed (9 November) and last close price, respectively.
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 23.48% ownership ratio.
Despite the modest premium, the offer represents a high five-year share price. The minimum acceptance condition requires a 41.3% minority acceptance rate.

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Nov 13

Daily Brief TMT/Internet: GMO Payment Gateway, Ohizumi Mfg, Tencent, NCSOFT Corp and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Japan – Increase in Shorts on Some Interesting*** Stocks
Oizumi Mfg (6618) Gets Takeout from Parent Ferrotec (6890) – Probably Cheap, Disappointing Process
HK Connect SOUTHBOUND (To 10 Nov 23); High-Div SOEs AGAIN See Outflows, Tencent and ETFs Big Buys
NCsoft: Launch of Highly Anticipated Throne and Liberty MMORPG Game

Japan – Increase in Shorts on Some Interesting*** Stocks

Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent Inc, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp have underperformed the Nikkei 225 recently.
The underperformance could lead to selling from global passive trackers and liquidity events on some of the stocks at month-end.
There has been an increase in short interest on most stocks over the last week as positioning for the liquidity event ramps up.

Oizumi Mfg (6618) Gets Takeout from Parent Ferrotec (6890) – Probably Cheap, Disappointing Process

Ferrotec Corp (6890 JP) on Friday announced a takeover for subsidiary Ohizumi Mfg (6618 JP) on Friday. There will be synergies and growth and corporate value increase.
The takeover price is not overly high, and includes no measure of synergies – not even the DCF value of delisting the company (no listing/filing/IR/legal fees/costs).
I think this gets done. It is too closely held, there are few foreigners in it, and it’s not large enough for an activist to care.

HK Connect SOUTHBOUND (To 10 Nov 23); High-Div SOEs AGAIN See Outflows, Tencent and ETFs Big Buys