In today’s briefing:
- KWEB Index Rebalance: Few Changes at the Close Today
- KRX New Deal Index Rebalance Preview: A Change for Each Index
- Toshiba – Tendering Now Recommended
- China E-Commerce: Is Still a Dead Cat
- Toshiba’s Board Buckles Under – As Things Stand, Board Supports and Recommends JIP Offer
- Toshiba (6502 JP): Risk/Reward as Board Unconvincingly Recommends JIP’s Offer
- Trading Plays for the Unexpected Tender Offer to Lutronic Corp Shareholders
- Kotak Placement – Has Sold Before, Stock Has Run-Up Recently but It Has Still Underperformed
- StubWorld: Tian An In AGL’s Crosshairs
- Details of the Lutronic Tender Offer M&A by Hahn & Company
KWEB Index Rebalance: Few Changes at the Close Today
- The June rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading today.
- There are a couple of deletions and one inclusion. Plus there will be capping changes on the other stocks, but the impact of those changes is not large.
- The stocks have already been moving in the right direction during the day and the pre-positions could be flipped to the ETF at the close.
KRX New Deal Index Rebalance Preview: A Change for Each Index
- The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
- There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. Large stock price moves mean no changes for the BBIG Index currently.
- Douzone Bizon (012510 KS) has flipped from a passive sell to a passive buy over the last month and the stock could move higher from here.
Toshiba – Tendering Now Recommended
- Toshiba announced today that its board had shifted stance on JIP’s upcoming tender and would recommend shareholders tender.
- The special committee will review its opinion on the tender offer and based on that the company will offer another opinion when the tender commences.
- Despite peers rising 13-30% since April an offer price increase still looks unlikely.
China E-Commerce: Is Still a Dead Cat
- Positive surprises in profitability during Q1 2023 failed to reverse the long-term decline of Chinese e-commerce, possibly due to market recognition of the temporary impact of cost-cutting and monetization efforts.
- In our opinion, robust growth in GMV is fundamentally essential to reverse the long-term downward trend of the Chinese e-commerce sector.
- Chinese e-commerce sector no longer discloses GMV, but Express delivery volume indicates a 20% decline in parcel volumes compared to 2021, potentially reflecting a decrease in GMV.
Toshiba’s Board Buckles Under – As Things Stand, Board Supports and Recommends JIP Offer
- In March, when the JIP Offer for Toshiba Corp (6502 JP) was announced, the Toshiba Board supported the Offer but declined, at the time, to recommend it to shareholders.
- “[The price] has clearly not reached the level at which it is possible to recommend to general shareholders that they tender their shares at this time.” That was then.
- 10 weeks later and the Board has a Revised Opinion. It has recommended the Offer for reasons which smack of resignation rather than appropriate deliberation. Investors beware.
Toshiba (6502 JP): Risk/Reward as Board Unconvincingly Recommends JIP’s Offer
- Toshiba Corp (6502 JP) Board now recommends shareholders accept Japan Industrial Partners (JIP)’s pre-conditional tender offer of JPY4,620 per share. The Board also effectively rules out a bump.
- The Board unconvincingly recommends the offer in part on the premise that the IFA’s DCF valuation is unrealistic due to punchy forecasts and positive feedback from stakeholders.
- The Board fails to consider that the peers have materially re-rated, the offer’s price ratio remains unattractive and the declining premium of the offer’s implied multiple vs peers’ multiples.
Trading Plays for the Unexpected Tender Offer to Lutronic Corp Shareholders
- Retail investors hold the majority of shares at 60%, and they may be interested in participating in the second tender offer based on their accumulated learning effect.
- Based on the observed behavior of Hahn & Co, it’s unlikely that they will walk away from the delisting plan.
- We need to consider going long on the potential upward adjustment of the second tendering price. This play can be viewed as a call option with a floor at ₩36,700.
Kotak Placement – Has Sold Before, Stock Has Run-Up Recently but It Has Still Underperformed
- CPPIB aims to raise around US$750m via selling a 1.6% stake in Kotak Mahindra Bank (KMB IN).
- This is not the first time that CPPIB will be selling down some of its stake, the previous deal held up well.
- In this note, we will talk about the placement and run the deal through our ECM framework.
StubWorld: Tian An In AGL’s Crosshairs
- Allied (373 HK) took Allied Properties (H.K.) (56 HK) private in 2020, followed by SHK Hong Kong Industries (666 HK) in 2021. Now it’s Tian An China (28 HK)‘s turn.
- Preceding my comments on Tian An and AGL 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%.
Details of the Lutronic Tender Offer M&A by Hahn & Company
- In this insight, we provide details of the Lutronic tender offer M&A by Hahn & Company.
- We believe that Hahn & Co is likely to successfully complete this M&A tender offer of Lutronic.
- In our view, most of the shareholders of Lutronic are likely to tender their shares, given the sharp share price appreciation and reasonable tender offer premium.
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