
In today’s briefing:
- Toshiba – 3D Stake Reduction Reduces and Increases Risk
- Nikkei 225 March 2023 Rebal Tomorrow
- Rakuten Bank IPO – Thoughts on Valuation
- Quiddity Leaderboard JPX-Nikkei 400: End-Mar 2023
- Risk Taking by Managers Is Key, Weather Changing the Game or Creating a New Business
Toshiba – 3D Stake Reduction Reduces and Increases Risk
- An EDINET filing yesterday revealed that 3D Investment Partners had reduced their stake in Toshiba from 7.2% to 4.9%.
- This significantly derisks the possibility of 3D becoming a forced seller and alters the risk reward here.
- Nevertheless, it is still difficult to be especially bullish here given uncertainty regarding the tender vote is now a little higher.
Nikkei 225 March 2023 Rebal Tomorrow
- The Nikkei 225 March 2023 Rebalance is 31 March at the close. There is about US$1.75bn of funding to sell against US$1.85bn of 3 names to buy.
- The impact on the Buy Side is middling at 3, 6.4, and 6.9 days of ADV to buy. The three DELETES are larger on average but they are all smallcaps.
- One trade – long an ADD vs a Peer – is still worth doing. Indexers buy the stock, it goes into a dark closet, and never comes out.
Rakuten Bank IPO – Thoughts on Valuation
- Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$900m in its Japan listing in April 2023.
- RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
- In our earlier notes, we have looked at the company’s past performance and undertook a peer comparison. In this note, we provide our thoughts on valuation.
Quiddity Leaderboard JPX-Nikkei 400: End-Mar 2023
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-March 2023.
Risk Taking by Managers Is Key, Weather Changing the Game or Creating a New Business
- Since listed companies have abundant cash reserves even if interest rates rise, they will use their cash to pay down debt but they are unlikely to use it for investments.
- Cash is piling up on balance-sheet resulting from the inability to invest in growth and get out of the game of sharing the pie of the existing stable domestic market.
- In order to raise profit margins significantly, a manager may find growth and invest in non-existing businesses or introduce game-changing products that disrupt the stability of the market.
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