Most Read

After 18mos of hints, and two rights recapitalisations at Sembcorp Marine (SMM SP), SMM and Keppel Corp (KEP SP) announced a deal to merge their O&M businesses at end-April.
Keppel shareholders would receive ~18 shares of SMM per share of Keppel owned, Keppel spins out the equity of its legacy rig assets and leaves the O&M biz clean.
The structure announced lets us examine “forward KEP”, and anticipate interest and valuations post-spin, which is “supposed to” happen in Q4. We’re in Q4 now, and Keppel is interesting here.

Thinking Strategically About a Shinsei Position – Things To Do NOW

SBI Holdings (8473 JP)‘s subsidiary has reportedly filed its application to become a Bank Holding Company, the definition being a company holding a 50% or greater stake in a bank.
The day after I last wrote, Shinsei announced it had received approval to change its name to SBI Shinsei Bank as of 4 January 2023.
My expectation is the move above 50% happens sooner rather than later. And in that case, investors should think about their approach. Get your cowbells ready.

KOSDAQ150 Index Rebalance Preview: Moving in the Right Direction

With 85% of the review period complete, we see 10 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
There are a few stocks that are close adds/deletes on market cap and liquidity and could make it into the final list depending on price/volume over the next few weeks.
The potential adds have outperformed the potential deletes over the last month and pre-positioning could continue till the end of the review period.

Kakao Pay: Downsized Rights Offering of Kakao Pay Securities & Potential Selling by Alipay

The lack of minority shareholders participation in Kakao Pay Securities rights offering is likely to be viewed negatively by many investors since Kakao Pay may need to inject more capital.
On 8 June 2022, Alipay sold 5 million shares of Kakao Pay and Alipay put a lockup on its remaining 46 million shares in Kakao Pay for another 120 days.
All in all, we continue to have a Negative view of Kakao Pay.

KOSDAQ 150 Rebalancing: 7 Regular Changes + 2 Special Entries

KOSDAQ 150’s December rebalancing will feature seven regular changes and two special entries.
Among the additions, we should focus on Dear U and ISC, which have a balanced level of liquidity and flow, rather than those theme stocks with high volatility.
As for Nature Holdings, Eoflow, and Nextin, I suggest a more aggressive entry point due to low trading volume. Then, I’d basket-trade the deletions on equal weight.

JCNC Is Overstretched Vs. Astra

Jardine Cycle & Carriage (JCNC SP) is currently trading at a ~9% discount to NAV, around the narrowest since the post-Covid nadir in April 2020.
JCNC’s recent results highlighted a marked improvement in its unlisted Vietnamese automotive ops.
Weakness in the Indonesian rupiah has taken some of the shine off Astra International (ASII IJ)‘s strong sales growth.

Fu Shou Yuan (1448 HK): An Everlasting Growth Business

By Osbert Tang, CFA

The volatile market environment prompted us to seek for companies with secured demand, high earnings quality and solid financial position – Fu Shou Yuan International (1448 HK) fits these criteria.
It has established earnings record, favourable demographic environment, good reserve for growth and upside from geographical expansion. We like its emphasis on shareholder return through rising payout and share buyback.
Its net cash position, which amounted to 20% of the market capitalisation, adds further comfort to us. Meanwhile, valuations are not stretched relative to international peers.

EQD | HSBA Vs ICBC (5 HK,1398 HK): Trade a Relative Value Vol Spread

By Simon Harris

We looked at HSBC and ICBC to consider relative vol surfaces
We evaluate relative risks of credit deterioration in China on both stocks
We suggest a relative value vol trade that offers good risk reward in various scenarios

Seven & I – The US Is About to Hit the Brakes

By Oshadhi Kumarasiri

With OP up by 22% YoY to beat the consensus estimate by ¥2.0bn, Seven & I turned in a strong 2QFY23 along with a considerable upgrade to FY23 guidance.
However, the post-earnings price reaction seems to suggest that the market is a bit worried about the short-term performance of Seven & I Holdings (3382 JP)’s US convenience store business.
In addition, the struggling non-core businesses whose future remains undecided could also be weighing in on Seven & I’s price performance.

Shanghai/Shenzhen Northbound Connect: Weekly Moves (7 October 2022)

Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
Overall, net outflow over the past week was ~US$0.15bn, split between Shanghai (+US$0.05bn) and Shenzhen (-US$0.20bn).
The largest inflows were into Kweichow Moutai (600519 CH) and Zhejiang Huayou Cobalt (603799 CH). The largest outflows were in LONGi Green Energy Technology (601012 CH) and CATL (300750 CH).

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 06

Most Read: Li Auto, Taiwan Glass Industry, Shinsei Bank, CALB, Rakuten Inc, Link Administration, CanariaBio, PICC Property & Casualty H and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSI Index Rebalance Preview: Small Step or Giant Leap?
FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Market Consultation Driven Changes
Thinking Strategically About a Shinsei Position – Things To Do NOW
CALB IPO Trading – Last of the Lot with the Least Demand of the Lot
Rakuten – Sale of Stake in Securities Business Eases Funding Pressure
Link’s Ongoing Overtures from DND Underscore Its Value
CALB IPO: Trading Debut
StubWorld: Link And D&D Continue Negotiations On Unlisted Ops
KOSDAQ 150 Rebalancing: 7 Regular Changes + 2 Special Entries
FTSE China 50 Index Rebalance Preview: One Change Could Increase to Three

HSI Index Rebalance Preview: Small Step or Giant Leap?

Currently at 69 index members, we just could reach 80 constituents at the December rebalance. That would leave the index committee to plan the move to 100 constituents in 2023.
We list 10 potential inclusions to the index in December. One-way turnover is just under 4% and inclusions of all stocks will increase index market cap coverage significantly.
Shorts are more than 3% of free float on five of the potential inclusions and these stocks could see some short covering ahead of the announcement of the changes.

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Market Consultation Driven Changes

A market consultation could result in an increase in the number of index constituents for the FTSE TWSE Taiwan Dividend+ Index from 30 to 50.
As of the close on 4 October, we see 23 potential inclusions and 2 potential deletions in December. That could change to +24/-3 depending on the rank cutoff thresholds.
FTSE plans to implement the changes in a single step at the December rebalance. That could lead to one-way turnover of TWD 62bn (US$1.97bn).

Thinking Strategically About a Shinsei Position – Things To Do NOW

SBI Holdings (8473 JP)‘s subsidiary has reportedly filed its application to become a Bank Holding Company, the definition being a company holding a 50% or greater stake in a bank.
The day after I last wrote, Shinsei announced it had received approval to change its name to SBI Shinsei Bank as of 4 January 2023.
My expectation is the move above 50% happens sooner rather than later. And in that case, investors should think about their approach. Get your cowbells ready.

CALB IPO Trading – Last of the Lot with the Least Demand of the Lot

CALB raised around US$1.2bn in its Hong Kong IPO, after pricing its offering at the low-end.
CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products.
In this note, we will talk about the demand for the deal and other trading dynamics.

Rakuten – Sale of Stake in Securities Business Eases Funding Pressure

By Kirk Boodry

Rakuten is reportedly selling a stake in its Securities unit for ¥80bn, which probably means a near-term IPO of that business is off the table
It may also give Rakuten greater flexibility on the timing of a Rakuten Bank IPO should pricing for that be problematic
In terms of surfacing the value of Rakuten’s fintech assets this is good news but it is mobile losses that have held the shares back. We remain at Neutral.

Link’s Ongoing Overtures from DND Underscore Its Value

Dye & Durham/DND is a persistent bidder and returned with a A$1.27 billion bid for Link Administration (LNK AU)’s CM and BCM businesses. The Board will update next week.
The latest offer is attractive but curiously, contradicts DND’s previous comments that the FCA would make it challenging to distribute any part sale proceeds.
Despite the overhang from the FCA fine, DND’s ongoing persistence and the Board’s potential in-specie distribution of the PEXA Group (PXA AU) stake highlight the underlying value.

CALB IPO: Trading Debut

CALB (3931 HK) priced its H Share at HK$38.00 per share to raise net proceeds of HK$9.9 billion (US$1.3 billion). The H Share will start trading tomorrow.
Grey market prices across various platforms show the shares last traded at HK$37.30-38.00 per share i.e., -2% down to unchanged compared to the IPO price.
Despite peer multiple derating, the IPO price continues to imply a discount to the median peer CY2023 EV/EBITDA multiple. CALB should be, at least, valued in line with peer multiples.

StubWorld: Link And D&D Continue Negotiations On Unlisted Ops

In a Musk/Twitter-like on/off/on-again situation, Link Administration (LNK AU) announced it received an improved offer for its corporate markets and Banking & Credit Management (BCM) businesses from Dye & Durham.
Separately, Link is working with the Australian Tax Office on the in-specie distribution of a minimum of 80% of Link’s holding into PEXA Group (PXA AU).
Preceding my comments on Link 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%.

KOSDAQ 150 Rebalancing: 7 Regular Changes + 2 Special Entries

KOSDAQ 150’s December rebalancing will feature seven regular changes and two special entries.
Among the additions, we should focus on Dear U and ISC, which have a balanced level of liquidity and flow, rather than those theme stocks with high volatility.
As for Nature Holdings, Eoflow, and Nextin, I suggest a more aggressive entry point due to low trading volume. Then, I’d basket-trade the deletions on equal weight.

FTSE China 50 Index Rebalance Preview: One Change Could Increase to Three

PICC Property & Casualty H (2328 HK) is a potential replacement for XPeng (9868 HK) at the December rebalance of the FTSE China 50 Index.
There are a couple of index constituents that are close to the deletion threshold rank and that could drive two more changes. The review cutoff date is 21 November.
Tianqi Lithium (9696 HK) will be eligible for index inclusion if it is added to the FTSE All-World Index in December – we have that as a high probability event.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 05

Most Read: Tencent, Kakao Pay, Hitachi Transport System, Appier Group, Li Auto, Hanwha Aerospace, PEXA Group, Samyang Foods, Toshiba Corp, Taiwan Glass Industry and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

EQD | Tencent (700 HK): Time to Take off Hedges and Leverage up Using Options
Kakao Pay Placement Lockup Expiry – Alipay Is Soon Going to Be Free to Shed Its US$1.6bn Stake
Hitachi Transport (9086) – Delay Doesn’t Mean Ditched
TOPIX Inclusions: Who Is Ready (Oct 2022)
HSI Index Rebalance Preview: Small Step or Giant Leap?
KOSPI Size Index Migration: 10-Year Backtesting
Link Admin’s In-Specie Distribution of PEXA: Potential ASX200 Inclusion
KOSPI 200 Rebalance in December Highlighted by Locals
MBK Partners Joins JIC Consortium to Acquire Toshiba
FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Market Consultation Driven Changes

EQD | Tencent (700 HK): Time to Take off Hedges and Leverage up Using Options

By Simon Harris

Stock has fallen 17% since Sep 15th, and implied vols have picked up
The fundamentals remain strong and tech momentum may be shifting
We suggest two directional trades using options to play earnings

Kakao Pay Placement Lockup Expiry – Alipay Is Soon Going to Be Free to Shed Its US$1.6bn Stake

In early Jun 2022, Alipay raised around US$386m via selling 3.3% of outstanding shares of Kakao Pay (377300 KS). That was the first selldown by Alipay (Alibaba (ADR) (BABA US)).
Despite pricing the shares at an enticing 11.8% discount to last close, the stock failed to hold the deal price and hasn’t looked back since.
In this note, we will talk about the previous deal and the upcoming lockup expiry.

Hitachi Transport (9086) – Delay Doesn’t Mean Ditched

The KKR consortium which was to buy Hitachi Transport System (9086 JP) has encountered a delay. What was to start in September is now scheduled for November.
On the 29th, HTS released a document saying KKR still had a couple of approvals or lapses of waiting periods needed.
The HTS announcement suggested the start of the Tender Offer would be early November rather than end-September.

TOPIX Inclusions: Who Is Ready (Oct 2022)

By Janaghan Jeyakumar, CFA

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
This insight is a follow-up to TOPIX Inclusions: Who Is Ready (Aug 2022)
At present, there are 53 names that satisfy all of these conditions and there are more names that are close to being in that group.

HSI Index Rebalance Preview: Small Step or Giant Leap?

Currently at 69 index members, we just could reach 80 constituents at the December rebalance. That would leave the index committee to plan the move to 100 constituents in 2023.
We list 10 potential inclusions to the index in December. One-way turnover is just under 4% and inclusions of all stocks will increase index market cap coverage significantly.
Shorts are more than 3% of free float on five of the potential inclusions and these stocks could see some short covering ahead of the announcement of the changes.

KOSPI Size Index Migration: 10-Year Backtesting

Price adjustment by passive flow started one month before the effective date. The LONG/SHORT basket set a month towards the effective dates provided a higher yield than seven days ahead.
The yield tended to be relatively low when the overall market was in a bearish phase. We see a positive correlation between the yields and the market direction.
Overall, the LONG/SHORT basket trading on this event over the past decade has shown a fairly high persistence and winning rate, substantial enough for us to have a careful look.

Link Admin’s In-Specie Distribution of PEXA: Potential ASX200 Inclusion

Following the termination of the proposed scheme with Dye & Durham, Link Administration (LNK AU) is working towards a potential in-specie distribution of PEXA Group (PXA AU) shares.
Link Administration (LNK AU) owns 42.8% of PEXA Group (PXA AU) and intends to distribute at least 80% of its holding following ATO tax roll-over relief.
The increased float will put PEXA Group (PXA AU) firmly in the running for S&P/ASX 200 (AS51 INDEX) membership where passive trackers will need to buy a lot of stock.

KOSPI 200 Rebalance in December Highlighted by Locals

This article discusses the potential inclusions and exclusions of KOSPI 200 rebalance in December 2022 (especially those that are highlighted by the locals).
Stocks that are expected to be included in the KOSPI 200 index include Samyang Foods (003230 KS) and Lotte Confectionery (280360 KS).
Stocks that are expected to be excluded in the KOSPI 200 index include Samyang Holdings (000070 KS) and Boryung Pharmaceutical (003850 KS).

MBK Partners Joins JIC Consortium to Acquire Toshiba

It was announced today that MBK Partners will join a consortium led by Japan Investment Corporation (JIC) to acquire Toshiba Corp (6502 JP).
The sharp appreciation of the USD vs JPY could make a stronger case for JIC consortium (now backed by both Bain Capital and MBK Partners) to become the main bidder.
Including the premium for management rights, the acquisition price of Toshiba is expected to reach about 3 trillion JPY (US$21 billion).

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Market Consultation Driven Changes

A market consultation could result in an increase in the number of index constituents for the FTSE TWSE Taiwan Dividend+ Index from 30 to 50.
As of the close on 4 October, we see 23 potential inclusions and 2 potential deletions in December. That could change to +24/-3 depending on the rank cutoff thresholds.
FTSE plans to implement the changes in a single step at the December rebalance. That could lead to one-way turnover of TWD 62bn (US$1.97bn).

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 04

Most Read: Shinsei Bank, Leapmotor, Toshiba Corp, Toyo Construction, Toa Oil Co Ltd, Monadelphous, Tianqi Lithium, Nexon, Lionheart Studio and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

SBI Applies for Bank Holdco License for Shinsei Stake. Aims to Go Above 50%. It’s Coming.
HSCI Index Rebalance and Stock Connect: Potential Changes in December & March (There’s a Lot!)
A Coming Crash: The Law of Conservation of Financial Volatility?
Two Bits of Non-Bullish Toshiba News
Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases
BREAKING! Dog Loses To Mangalore – Idemitsu Kosan Does Its Deal for Toa Oil (5008)
Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB
FTSE All-World/All-Cap Index Rebalance Preview (Dec): Quieter Than Usual as IPOs Dry Up
Saudi Arabia Gaming: Plans to Invest $38 Billion in Global Game Industry
Lionheart Studio IPO Valuation Analysis

SBI Applies for Bank Holdco License for Shinsei Stake. Aims to Go Above 50%. It’s Coming.

Last Friday most of the way through the afternoon session, media reports ran a story saying SBI Holdings (8473 JP) had applied for a Bank Holding Company authorisation.
That is a filing with the FSA one makes when one wants to acquire >50% of voting rights in an entity with a Banking license. Shares popped, and fell back.
They probably didn’t pop enough. There is a BIG sell flow coming, but the timing is giri-giri on eventiness, and confident traders could take the whole trade.

HSCI Index Rebalance and Stock Connect: Potential Changes in December & March (There’s a Lot!)

We see three new listings as potential inclusions to the HSCI in December. One is already in Stock Connect, one will be added to Stock Connect while one will not.
Given the large market moves, there will be many changes to the HSCI in March 2023. Quite a few stocks could remain in the HSCI but drop out of Connect.
Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

A Coming Crash: The Law of Conservation of Financial Volatility?

By Michael J. Howell

Volatility is sequential and the turbulence and illiquidity in forex and bond markets will inevitably spread to equities? A CRASH could be coming!
VIX has already moved up, but this barely acknowledges volatility elsewhere. The VIX always sees greater volatility because it includes the effects of economic volatility as the business cycle breaks
Upcoming World recession seems set to force the VIX above 50 index points. Stay ‘risk-off’ and choose ‘carry’ at the front-end of yield curves

Two Bits of Non-Bullish Toshiba News

On Friday, Toshiba investors got two bits of news which have been taken as non-bullish.
Affiliate and former subsidiary Kioxia (6600 JP) announced it would cut wafer input volume by 30% starting in October, and Toshiba’s announcement on the Privatisation process status implied some delay.
Today the shares are getting hit vs Peers. It’s still a problem of lots of moving parts.

Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases

On Friday, post-close, there was a flurry of excitement as YFO put out a press release amending the start date of the planned Tender Offer to early November.
Not long after, there was another release by Toyo Construction (1890 JP) itself.
You have to read both for what they are. And as they say…. Get your programs here!

BREAKING! Dog Loses To Mangalore – Idemitsu Kosan Does Its Deal for Toa Oil (5008)

Friday post-close, Idemitsu Kosan (5019 JP) announced a deal to buy out subsidiary Toa Oil Co Ltd (5008 JP). Cornwall has agreed to tender, so it’s a done deal.
This is at ¥3,150/share, which is nearly 30% higher than the bid 21 months ago, where Cornwall bought enough to block, but it is a disappointing outcome for governance.
A clearly problematic tolling agreement with the parent, and what could be ¥100bn of excess land value are ignored. Minority investors get hosed. One of the problems of minority investments.

Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB

Last week we had the implementation of the first two tranches of the Nikkei 225 (NKY INDEX) rebalance with the third tranche to be implemented at the close on Monday.
Thursday saw the NIFTY indices implementation while Friday marked the end of the review period for the December rebalance of the Hang Seng family of indices.
There were large inflows to China, Taiwan, Korea and Hong Kong ETFs during the week while there were some outflows from Japan.

FTSE All-World/All-Cap Index Rebalance Preview (Dec): Quieter Than Usual as IPOs Dry Up

We see 4 potential inclusions to the FTSE All-World and All-Cap indices that will be implemented at the close of trading on 16 December.
There are a couple of other recent listings that are close to the investable market cap threshold and could be added to the All-Cap index.
Given the lack of IPO in the April to August period, the rebalance will be quieter than usual though lock-up expiries will keep things interesting.

Saudi Arabia Gaming: Plans to Invest $38 Billion in Global Game Industry

Saudi Arabia’s Savvy Games Group has a grand ambition to invest in the global gaming industry. It recently announced that it will invest US$37.8 billion in the global gaming industry.
There has been a sharp appreciation of the USD and Riyal versus JPY which could help to accelerate more M&As of Japanese game companies by SGG.
Saudi Arabia’s aggressive push to expand into the global gaming industry could aid this sector in the coming months as it could result in further major M&As in this sector.

Lionheart Studio IPO Valuation Analysis

Our base case valuation of Lionheart Studio is a target price of 19,362 won per share, which is 46% lower than the low end of the IPO price range.
Our IPO valuation assumes a 7.2x EV/EBITDA (comps’ average) using 2023 estimated EBITDA of 145 billion won for the company.
All in all, we believe there is a strong probability of Lionheart Studio being forced to lower its IPO price range in order to attract more investors.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 03

Most Read: Shinsei Bank, Leapmotor, Toa Oil Co Ltd, Toyo Construction, EVOC Intelligent Technology Company Limited H, Swire Pacific (A), Swire Pacific (B), Tencent, Monadelphous and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

SBI Applies for Bank Holdco License for Shinsei Stake. Aims to Go Above 50%. It’s Coming.
HSCI Index Rebalance and Stock Connect: Potential Changes in December & March (There’s a Lot!)
BREAKING! Dog Loses To Mangalore – Idemitsu Kosan Does Its Deal for Toa Oil (5008)
Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases
A Coming Crash: The Law of Conservation of Financial Volatility?
EVOC (2308 HK): 19 October H-Class Meeting. IFA Says Fair & Reasonable
Last Week in Event SPACE: Swire Pacific, SATS/WFS, Hitachi Metal, Jinke Smart, Porsche
Hong Kong CEO & Director Dealings: 30th Sept – Swire Pac’s Bs, Joinn Laboratories, Techtronic
ECM Weekly (2nd Oct 2022) – Onewo, Leapmotor, CALB, Socionext, WCP, Oyo, Ixigo, Tencent, Taiwan Cemt
Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB

SBI Applies for Bank Holdco License for Shinsei Stake. Aims to Go Above 50%. It’s Coming.

Last Friday most of the way through the afternoon session, media reports ran a story saying SBI Holdings (8473 JP) had applied for a Bank Holding Company authorisation.
That is a filing with the FSA one makes when one wants to acquire >50% of voting rights in an entity with a Banking license. Shares popped, and fell back.
They probably didn’t pop enough. There is a BIG sell flow coming, but the timing is giri-giri on eventiness, and confident traders could take the whole trade.

HSCI Index Rebalance and Stock Connect: Potential Changes in December & March (There’s a Lot!)

We see three new listings as potential inclusions to the HSCI in December. One is already in Stock Connect, one will be added to Stock Connect while one will not.
Given the large market moves, there will be many changes to the HSCI in March 2023. Quite a few stocks could remain in the HSCI but drop out of Connect.
Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

BREAKING! Dog Loses To Mangalore – Idemitsu Kosan Does Its Deal for Toa Oil (5008)

Friday post-close, Idemitsu Kosan (5019 JP) announced a deal to buy out subsidiary Toa Oil Co Ltd (5008 JP). Cornwall has agreed to tender, so it’s a done deal.
This is at ¥3,150/share, which is nearly 30% higher than the bid 21 months ago, where Cornwall bought enough to block, but it is a disappointing outcome for governance.
A clearly problematic tolling agreement with the parent, and what could be ¥100bn of excess land value are ignored. Minority investors get hosed. One of the problems of minority investments.

Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases

On Friday, post-close, there was a flurry of excitement as YFO put out a press release amending the start date of the planned Tender Offer to early November.
Not long after, there was another release by Toyo Construction (1890 JP) itself.
You have to read both for what they are. And as they say…. Get your programs here!

A Coming Crash: The Law of Conservation of Financial Volatility?

By Michael J. Howell

Volatility is sequential and the turbulence and illiquidity in forex and bond markets will inevitably spread to equities? A CRASH could be coming!
VIX has already moved up, but this barely acknowledges volatility elsewhere. The VIX always sees greater volatility because it includes the effects of economic volatility as the business cycle breaks
Upcoming World recession seems set to force the VIX above 50 index points. Stay ‘risk-off’ and choose ‘carry’ at the front-end of yield curves

EVOC (2308 HK): 19 October H-Class Meeting. IFA Says Fair & Reasonable

The Composite Document for electronics play and property developer EVOC Intelligent Technology Company (2308 HK), has been dispatched. The EM and H-Class meeting will be held on the 19 October.
The Offer Price is HK$1.75/share. It will not be increased. No further dividends will be added.
This is done. Trading at a gross/annualised spread of 2.9%/34%.

Last Week in Event SPACE: Swire Pacific, SATS/WFS, Hitachi Metal, Jinke Smart, Porsche

Historically, when Swire (B) (87 HK) / Swire (A) (19 HK) gets more than 6% from 3mo Avg VWAP Ratio, there is statistically significant reversion. We are now at 6.8%.
The SATS (SATS SP) / WFS transaction appears all stitched up with major shareholder Temasek backing the deal. The acquisition is expected to close in 1Q23, subject to regulatory clearance.
We had the heads up days (or a week plus) ago, and now it is official. Bain has now launched its Tender Offer for Hitachi Metals (5486 JP) at ¥2,181/share.

Hong Kong CEO & Director Dealings: 30th Sept – Swire Pac’s Bs, Joinn Laboratories, Techtronic

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
These insights may also flag those companies where shares have been pledged. Stocks mentioned include Swire Pacific (B) (87 HK), Joinn Laboratories (H) (6127 HK), and Techtronic Industries (669 HK).

ECM Weekly (2nd Oct 2022) – Onewo, Leapmotor, CALB, Socionext, WCP, Oyo, Ixigo, Tencent, Taiwan Cemt

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, all listing this week failed to impress which means that the HK and Korean markets are probably in for a slow end of the year.
Taiwan Cement (1101 TT) and Embassy Office Parks REIT (EMBASSY IN) were the two large placements this week. We also looked at possible Tencent (700 HK) linked blocks.

Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB

Last week we had the implementation of the first two tranches of the Nikkei 225 (NKY INDEX) rebalance with the third tranche to be implemented at the close on Monday.
Thursday saw the NIFTY indices implementation while Friday marked the end of the review period for the December rebalance of the Hang Seng family of indices.
There were large inflows to China, Taiwan, Korea and Hong Kong ETFs during the week while there were some outflows from Japan.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 02

Most Read: SBI Holdings, CALB, Lionheart Studios, Taiwan Semiconductor (TSMC), EVOC Intelligent Technology Company Limited H, Toa Oil Co Ltd, Monadelphous, Toyo Construction and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

CALB IPO – Low-End Appears Reasonable but Will Still Need Some Charging Support
JPX-Nikkei 400 Rebal 2023: End-Sep 2022
CALB IPO: First Day Trading Strategy Amid Market Turmoil
Lionheart Studio IPO Preview
Intel Vs. TSMC/UMC Long/Short Monitor: Post Conference Take Aways, Intel Performance Reverts
EVOC’s H Share Class Meeting on 19 October
BREAKING! Dog Loses To Mangalore – Idemitsu Kosan Does Its Deal for Toa Oil (5008)
Japan Weekly | Mazda, Mit Motors, Subaru
Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB
Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases

CALB IPO – Low-End Appears Reasonable but Will Still Need Some Charging Support

CALB aims to raise up to US$1.7bn in its Hong Kong IPO.
CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products.
In this note, we will run the deal through our ECM framework and talk about IPO pricing.

JPX-Nikkei 400 Rebal 2023: End-Sep 2022

By Janaghan Jeyakumar, CFA

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-September 2022.

CALB IPO: First Day Trading Strategy Amid Market Turmoil

In this insight, we discuss the first day trading strategy of CALB (3931 HK) amid market turmoil.
CALB priced its IPO at HK$38 per share, which is at the low end of the IPO price range. CALB raised US$1.3 billion in this IPO.
Unlike recent disappointing IPOs for Leapmotor and Onewo, we believe CALB’s IPO could perform better in its IPO debut.

Lionheart Studio IPO Preview

Lionheart Studio is getting ready to complete its IPO in November 2022. Lionheart Studios is the second largest IPO in Korea after LG Energy Solution (373220 KS) in 2022.
The IPO offering amount is 410 billion won to 604 billion won. This would also suggest implied market cap of 3.1 trillion won and 4.5 trillion won.
A key investment risk for the company is its excessive reliance on one game (Odin: Valhalla Rising) for its revenue and profits.

Intel Vs. TSMC/UMC Long/Short Monitor: Post Conference Take Aways, Intel Performance Reverts

By Vincent Fernando, CFA

Intel’s CEO has clearly put NVIDIA Corp (NVDA US) in the cross-hairs with his conference comments and the unveiling of new graphics chips.
Separate reports are that Apple is cutting back iPhone 14 production volumes, negatively impacting TSMC and the Apple supply chain.
Intel is now slightly outperforming TSMC & UMC, however has a lot of room to catch up in our view given its large underperformance over the last six months.

EVOC’s H Share Class Meeting on 19 October

EVOC Intelligent Technology Company Limited H (2308 HK)‘s H Shareholders’ class meeting is scheduled for 19 October. The IFA considers the offer to be fair and reasonable.
The key conditions are approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders’ rejection). There is no minimum acceptance condition.
The offer is attractive and should gain approval. At last close and for a 7 November payment, the gross and annualised spread to the offer is 2.9% and 26.0%, respectively.

BREAKING! Dog Loses To Mangalore – Idemitsu Kosan Does Its Deal for Toa Oil (5008)

Friday post-close, Idemitsu Kosan (5019 JP) announced a deal to buy out subsidiary Toa Oil Co Ltd (5008 JP). Cornwall has agreed to tender, so it’s a done deal.
This is at ¥3,150/share, which is nearly 30% higher than the bid 21 months ago, where Cornwall bought enough to block, but it is a disappointing outcome for governance.
A clearly problematic tolling agreement with the parent, and what could be ¥100bn of excess land value are ignored. Minority investors get hosed. One of the problems of minority investments.

Japan Weekly | Mazda, Mit Motors, Subaru

By Mark Chadwick

Topix down 4.2% on persistent concerns about surging inflation, rising interest rates and a highly uncertain global economic outlook
The Nikkei index shed 7.7% in September, its biggest monthly decline since March 2020.
Disappointing commentary from NIKE, APPLE and automakers not helping sentiment

Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB

Last week we had the implementation of the first two tranches of the Nikkei 225 (NKY INDEX) rebalance with the third tranche to be implemented at the close on Monday.
Thursday saw the NIFTY indices implementation while Friday marked the end of the review period for the December rebalance of the Hang Seng family of indices.
There were large inflows to China, Taiwan, Korea and Hong Kong ETFs during the week while there were some outflows from Japan.

Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases

On Friday, post-close, there was a flurry of excitement as YFO put out a press release amending the start date of the planned Tender Offer to early November.
Not long after, there was another release by Toyo Construction (1890 JP) itself.
You have to read both for what they are. And as they say…. Get your programs here!

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Oct 01

Most Read: Shinsei Bank, Bilibili, ALBERT Inc, Samyang Foods, CALB, Softbank Group, Jinke Smart Services, Indian Energy Exchange Ltd, Lionheart Studios and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

The October TOPIX FFW Review and Shinsei Bank (8303)’s Future Float
Bilibili (9626 HK): Implications of Dual Primary Listing
Accenture Japan Bids a 120% Premium for Datascience Company ALBERT (3906)
KOSPI 200 Rebalancing: Recent Changes in the Race
CALB IPO: First Day Trading Strategy Amid Market Turmoil
Softbank Group – Vision Fund Losses Accelerate into Quarter End
(Mostly) Asia M&A: September 2022 Roundup
Indian Energy Exchange (IEX IN): Immense Value at Current Levels
End of Mandatory Lock-Up Periods for 42 Companies in Korea in October 2022
Lionheart Studio IPO Preview

The October TOPIX FFW Review and Shinsei Bank (8303)’s Future Float

This is a hybrid insight on the upcoming TOPIX FFW Review to be announced 7 October, and the situation around Shinsei Bank (8303 JP).
Shinsei Bank is in “limbo” post control-acquisition by SBI Holdings (8473 JP) and an attempt to go over 50% should be in the works. When is not known.
The TOPIX FFW Review should see ¥2.0-2.2trln of one-way flow, and amongst that flow, a large sell on Shinsei to increase Real World Float by 60+% and 25d of ADV.

Bilibili (9626 HK): Implications of Dual Primary Listing

Earlier today, Bilibili (9626 HK) announced the voluntary conversion of its Secondary Listing on the HKEX (388 HK) to a Dual Primary Listing effective 3 October.
Though the timing is tricky, this could result in the stock not being deleted from the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance.
This could also lead to inflows at the December rebalance from Hang Seng China Enterprises Index (HSCEI INDEX) and Hang Seng Tech Index (HSTECH INDEX) trackers.

Accenture Japan Bids a 120% Premium for Datascience Company ALBERT (3906)

Accenture Japan has just bid a 120% premium for fast-growing smallcap ALBERT Inc (3906 JP) which provides data science solutions to a focused client base.
Revenues are growing fast. EBIT is growing faster. EBIT is expected to be 300% higher in 3 years.
This is 50+% corporate-held. Retail decides the rest. This is probably a done deal.

KOSPI 200 Rebalancing: Recent Changes in the Race

In addition to Lotte Confectionery, Samyang Foods is also in the inclusion zone. As for deletions, Samyang Holdings and Boryung are the most likely deletes at this point.
Samyang Foods and Boryung have a small passive impact but have way more liquidity than Lotte and Samyang Holdings. We should approach them differently depending on the target trading window.
Samyang Foods is in a tight situation, and Boryung’s fate depends on Samyang Foods. But given the recent price trends, Samyang Foods appears to have a good shot.

CALB IPO: First Day Trading Strategy Amid Market Turmoil

In this insight, we discuss the first day trading strategy of CALB (3931 HK) amid market turmoil.
CALB priced its IPO at HK$38 per share, which is at the low end of the IPO price range. CALB raised US$1.3 billion in this IPO.
Unlike recent disappointing IPOs for Leapmotor and Onewo, we believe CALB’s IPO could perform better in its IPO debut.

Softbank Group – Vision Fund Losses Accelerate into Quarter End

By Kirk Boodry

Valuation losses in the Vision Fund public portfolio are now approaching $5bn as the end of the quarter looms versus break-even as recently as 13 September
That may have influenced the level of VF staff reductions which press reports ut at 30% versus expectations of 20% last month
The discount remains elevated on tech weakness and that is unlikely to change

(Mostly) Asia M&A: September 2022 Roundup

For the month of September, 11 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$3bn.
The average premium for the new deals announced (or first discussed) in September was ~40%, and a year-to-date average of 39%.
This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

Indian Energy Exchange (IEX IN): Immense Value at Current Levels

By Gauri Anand

IEX is a play on digital infrastructure (hedge against inflation), electricity reforms, decarbonisation and energy transition
An opportunity that offers virtuous growth, minimalistic capital needs and presents a scalable business model (addressing INR 8trn electricity market)
India will see an average power consumption growth of 5% over the foreseeable period. Power Exchanges should outgrow this meaningfully

End of Mandatory Lock-Up Periods for 42 Companies in Korea in October 2022

We discuss end of the mandatory lock-up periods for 42 stocks in Korea in October 2022, among which 7 are in KOSPI and 35 are in KOSDAQ.
These 42 stocks on average could be subject to further selling pressures in October and could underperform relative to the market.
Among these 42 stocks, the top 3 market cap stocks include NH Investment & Securities, Sungeel Hitech, and Dongwon Systems. They could be exposed to greater selling pressures in October.

Lionheart Studio IPO Preview

Lionheart Studio is getting ready to complete its IPO in November 2022. Lionheart Studios is the second largest IPO in Korea after LG Energy Solution (373220 KS) in 2022.
The IPO offering amount is 410 billion won to 604 billion won. This would also suggest implied market cap of 3.1 trillion won and 4.5 trillion won.
A key investment risk for the company is its excessive reliance on one game (Odin: Valhalla Rising) for its revenue and profits.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Sep 30

Most Read: Socionext, Bilibili, SATS, ALBERT Inc, Leapmotor, SBI Holdings, WCP, Samyang Foods, CALB and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Socionext IPO – Ample Upside Even After Discount
Bilibili (9626 HK): Implications of Dual Primary Listing
SATS to Buy Worldwide Flight Services (WFS) As Private Equity Exits
SATS/WFS: The Future Is Cargo
Accenture Japan Bids a 120% Premium for Datascience Company ALBERT (3906)
Leapmotor IPO: Thoughts on First Day Trading
JPX-Nikkei 400 Rebal 2023: End-Sep 2022
WCP IPO Trading – Peer Correction Means Price Cut Still Wasn’t Enough
KOSPI 200 Rebalancing: Recent Changes in the Race
CALB IPO: First Day Trading Strategy Amid Market Turmoil

Socionext IPO – Ample Upside Even After Discount

By Clarence Chu

Socionext (6526 JP) is looking to raise up to US$463m in its Japan IPO.
Socionext is a fabless semiconductor provider which commenced operations after integrating the system on a chip (SoC) businesses of Fujitsu Semiconductor Limited and Panasonic Holding Corporation.
In this note, we will look at the updated deal dynamics, our earlier assumptions, and share our thoughts on valuation.

Bilibili (9626 HK): Implications of Dual Primary Listing

Earlier today, Bilibili (9626 HK) announced the voluntary conversion of its Secondary Listing on the HKEX (388 HK) to a Dual Primary Listing effective 3 October.
Though the timing is tricky, this could result in the stock not being deleted from the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance.
This could also lead to inflows at the December rebalance from Hang Seng China Enterprises Index (HSCEI INDEX) and Hang Seng Tech Index (HSTECH INDEX) trackers.

SATS to Buy Worldwide Flight Services (WFS) As Private Equity Exits

SATS (SATS SP) has announced that it is buying Worldwide Flight Services (WFS) from an affiliate of Cerberus Capital Management at an Enterprise Value of €2.25bn (S$3.107bn).
The cash consideration is €1.187bn (S$1.639bn) and will likely be financed by an equity fund raising. This could be a rights issue and could be combined with a private placement.
Expect the stock to drop once it resumes trading. A significant drop from current levels could provide a buying opportunity as the rights issue could be backstopped.

SATS/WFS: The Future Is Cargo

Last week, SATS (SATS SP), a leading inflight catering and gateway service provider in Asia, confirmed media reports it was in talks to buy Cerberus Capital Management-backed Worldwide Flight Services.
Yesterday, SATS announced it will acquire WFS, the world’s largest air cargo handler, for €1.187bn or S$1.639bn (9.7x EV/EBITDA). Funding is to be primarily sourced from a S$1.7bn equity fundraising.
The transaction appears all stitched up with SATS’ 40% shareholder Temasek backing the deal. The acquisition is expected to close in March 2023, subject to regulatory clearance.

Accenture Japan Bids a 120% Premium for Datascience Company ALBERT (3906)

By Shifara Samsudeen, ACMA, CGMA

Accenture Japan has just bid a 120% premium for fast-growing smallcap ALBERT Inc (3906 JP) which provides data science solutions to a focused client base.
Revenues are growing fast. EBIT is growing faster. EBIT is expected to be 300% higher in 3 years.
This is 50+% corporate-held. Retail decides the rest. This is probably a done deal.

Leapmotor IPO: Thoughts on First Day Trading

Leapmotor (9863 HK) has priced its IPO at HK$48 per share, at the lower end of the indicative IPO price range of HK$48-62 per share.
At the above price, the company raised net proceeds of approx. HK$6,057.4m at a market capitalisation of HK$54.9bn and a post-money EV of HK$45.9bn.
The HK offering was undersubscribed while the international offering was initially oversubscribed by 2.33x and the unsubscribed portion of the HK offering was later reallocated to international offering.

JPX-Nikkei 400 Rebal 2023: End-Sep 2022

By Janaghan Jeyakumar, CFA

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-September 2022.

WCP IPO Trading – Peer Correction Means Price Cut Still Wasn’t Enough

WCP raised around US$314m via selling a mix of primary and secondary shares in its Korean IPO.
WCP designs, manufactures, and sells separators, which are one of the four core materials for secondary Lithium-ion batteries.
In this note, we will talk about the demand for the deal and other trading dynamics.

KOSPI 200 Rebalancing: Recent Changes in the Race

In addition to Lotte Confectionery, Samyang Foods is also in the inclusion zone. As for deletions, Samyang Holdings and Boryung are the most likely deletes at this point.
Samyang Foods and Boryung have a small passive impact but have way more liquidity than Lotte and Samyang Holdings. We should approach them differently depending on the target trading window.
Samyang Foods is in a tight situation, and Boryung’s fate depends on Samyang Foods. But given the recent price trends, Samyang Foods appears to have a good shot.

CALB IPO: First Day Trading Strategy Amid Market Turmoil

In this insight, we discuss the first day trading strategy of CALB (3931 HK) amid market turmoil.
CALB priced its IPO at HK$38 per share, which is at the low end of the IPO price range. CALB raised US$1.3 billion in this IPO.
Unlike recent disappointing IPOs for Leapmotor and Onewo, we believe CALB’s IPO could perform better in its IPO debut.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Sep 29

Most Read: Nidec Corp, Swire Pacific (B), Leapmotor, SATS, Bilibili, Taiwan Cement, Poly Real Estate Group Co., Ltd, Onewo and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

About A Gajillion Yen of Index Flows At the Close
Swire B Vs A – Surprising on Regs, Surprising on Risk; Short-Tm Displacement Now in 99th Percentile
Leapmotor IPO – Weak Demand but Concentrated Allocation
SATS to Buy Worldwide Flight Services (WFS) As Private Equity Exits
Bilibili (9626 HK): Implications of Dual Primary Listing
Taiwan Cement Placement- Suffers from Weak Momentum but Deal Is Well Flagged and SI Has Been Growing
Onewo Space-Tech IPO Trading – Weak but Relatively Better Demand
FTSE China A50 Index Rebalance Preview: Tight Margins
Leapmotor IPO: Trading Debut
Onewo IPO: Trading Debut

About A Gajillion Yen of Index Flows At the Close

Today is a day which happens twice a year in Japan.
It is Day Before Divs Go Ex- Day. Which theoretically means a fair bit of buying.
Nikkei 225 is pretty neutral. But there is a Nikkei 225 buy of Nidec Corp (6594 JP). TOPIX and other float market cap indices are a buy on the close.

Swire B Vs A – Surprising on Regs, Surprising on Risk; Short-Tm Displacement Now in 99th Percentile

The Swire buyback has been impressive. In 27 trading days they have bought back 26.8% of teh HK$4bn promised. In that period, participation has been aggressive.
Swire has bought back As at a pace of 52% of pre-buyback one-year ADV. For Bs, it has been 105%. But Bs have dramatically underperformed As on “HK Re-opening” trades.
Historically, when B/A gets more than 6% from 3mo Avg VWAP Ratio, there is statistically significant reversion. We are now at 6.8%. I’d buy B vs A.

Leapmotor IPO – Weak Demand but Concentrated Allocation

Leapmotor (9863 HK) raised around US$800m in its Hong Kong IPO. LM is a smart EV company based in China, founded in 2015.
As of end Jun 22, it had delivered a total of 104,829 cars with most of its sales coming from its mini units, T03.
In this note, we will talk about the demand for the deal and other trading dynamics.

SATS to Buy Worldwide Flight Services (WFS) As Private Equity Exits

SATS (SATS SP) has announced that it is buying Worldwide Flight Services (WFS) from an affiliate of Cerberus Capital Management at an Enterprise Value of €2.25bn (S$3.107bn).
The cash consideration is €1.187bn (S$1.639bn) and will likely be financed by an equity fund raising. This could be a rights issue and could be combined with a private placement.
Expect the stock to drop once it resumes trading. A significant drop from current levels could provide a buying opportunity as the rights issue could be backstopped.

Bilibili (9626 HK): Implications of Dual Primary Listing

Earlier today, Bilibili (9626 HK) announced the voluntary conversion of its Secondary Listing on the HKEX (388 HK) to a Dual Primary Listing effective 3 October.
Though the timing is tricky, this could result in the stock not being deleted from the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance.
This could also lead to inflows at the December rebalance from Hang Seng China Enterprises Index (HSCEI INDEX) and Hang Seng Tech Index (HSTECH INDEX) trackers.

Taiwan Cement Placement- Suffers from Weak Momentum but Deal Is Well Flagged and SI Has Been Growing

By Clarence Chu

Taiwan Cement (1101 TT) is looking to raise US$437m from its GDS offering.
The firm is offering 84m GDSs, or 420m common shares (1:5 conversion), at a 5.1-7.8% discount to its last close.
While momentum hasn’t been the greatest, the deal is well flagged and short covering could support share price in the near term.

Onewo Space-Tech IPO Trading – Weak but Relatively Better Demand

Onewo (2602 HK) (OST) raised around US$733m in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke Co Ltd (H) (2202 HK) .
As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
In this note, we will talk about the demand for the deal and other trading dynamics.

FTSE China A50 Index Rebalance Preview: Tight Margins

Poly Real Estate Group Co., Ltd (600048 CH) sits at the edge of the inclusion zone for the FTSE China A50 Index (XIN9I INDEX) December rebalance.
That inclusion could result in the deletion of any one of four stocks since they are all clustered within 0.7% of each other on full market cap.
There are a few other stocks that are close to inclusion zone and a 5-10% rally in these stocks could result in more changes to the index in December.

Leapmotor IPO: Trading Debut

Leapmotor (9863 HK) priced its H Share at HK$48.00 per share to raise net proceeds of HK$6,057.4 million (US$772 million). The H Share will start trading tomorrow.
The H Shares of peers posted no first-day gains and are currently below the listing prices. Market sentiment on peers has remained weak since the release of the prospectus.
Leapmotor, at best, should trade in line with median peer multiples. Leapmotor is fairly valued at the IPO price. We continue to remain on the sidelines.

Onewo IPO: Trading Debut

Onewo (2602 HK) priced its H Share at HK$49.35 per share to raise net proceeds of HK$5.6 billion (US$713 million). The H Share will start trading tomorrow.
Notwithstanding the industry headwinds, the H Shares of peers with financially sound parentco backgrounds are trading above the listing prices.
Despite peer multiple derating, the IPO price remains attractive compared to peers with financially sound parentco backgrounds.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Sep 28

Most Read: Nidec Corp, Shinsei Bank, Monadelphous, Tencent, Socionext, Jinke Smart Services, Delta Electronics Thai, Swire Pacific (B) and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Two Days Left Til Nikkei 225 Juggled Review Starts
The October TOPIX FFW Review and Shinsei Bank (8303)’s Future Float
S&P/ASX Index Rebalance Preview: A Few High Impact Adds
Tencent Investee Selldown – The US$120bn Global Overhang
Socionext IPO – Ample Upside Even After Discount
Jinke Smart (9666 HK)’s Low-Balled But Virtually Unconditional Offer
SET50 Index: Market Consultation & DTAC/TRUE Merger Impact
About A Gajillion Yen of Index Flows At the Close
Swire B Vs A – Surprising on Regs, Surprising on Risk; Short-Tm Displacement Now in 99th Percentile
Jinke Smart’s VGO of HK$12.00 from Boyu Capital

Two Days Left Til Nikkei 225 Juggled Review Starts

The Nikkei announced its Annual Nikkei 225 Average Review on 5 September. It was 3 OUT 3 IN as expected. Then they added Shizuoka Bank (8355 JP) to the mix.
ShizuGin will form a holding company, so out it goes on Wednesday. NIDEC (6594) goes in. Then SMC (6273) and (7741) replace Unitika (3103) and Oki Electric (6703) Friday.
Then ShizuGin goes back in Monday, and Maruha Nichiro (1333) is deleted. The “big trade” here? The ¥550bn+ funding trade. But the change in ADDs’ Real World Float is Real.

The October TOPIX FFW Review and Shinsei Bank (8303)’s Future Float

This is a hybrid insight on the upcoming TOPIX FFW Review to be announced 7 October, and the situation around Shinsei Bank (8303 JP).
Shinsei Bank is in “limbo” post control-acquisition by SBI Holdings (8473 JP) and an attempt to go over 50% should be in the works. When is not known.
The TOPIX FFW Review should see ¥2.0-2.2trln of one-way flow, and amongst that flow, a large sell on Shinsei to increase Real World Float by 60+% and 25d of ADV.

S&P/ASX Index Rebalance Preview: A Few High Impact Adds

At the December rebalance, we expect changes to the S&P/ASX 50 Index and S&P/ASX 200 (AS51 INDEX). Announcement is on 2 December with implementation on 16 December.
If added to the S&P/ASX 200 (AS51 INDEX), passive trackers will need to buy over 9 days of ADV on Monadelphous (MND AU) and ioneer Ltd (INR AU).
Shorts have dropped on nearly all potential adds and deletes over the last couple of months. With shorts at low levels, short covering will have limited impact at the rebalance.

Tencent Investee Selldown – The US$120bn Global Overhang

Multiple new agencies have been reporting that Tencent (700 HK) plans to trim its investment portfolio over the remainder of the year.
The reports have been coming in since the second half of the year and the company has been duly denying these rumors.
In this note, we look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how.

Socionext IPO – Ample Upside Even After Discount

By Clarence Chu

Socionext (6526 JP) is looking to raise up to US$463m in its Japan IPO.
Socionext is a fabless semiconductor provider which commenced operations after integrating the system on a chip (SoC) businesses of Fujitsu Semiconductor Limited and Panasonic Holding Corporation.
In this note, we will look at the updated deal dynamics, our earlier assumptions, and share our thoughts on valuation.

Jinke Smart (9666 HK)’s Low-Balled But Virtually Unconditional Offer

PRC-Incorporated property management play Jinke Smart Services (9666 HK) has announced a voluntary cash offer at HK$12/share, a 33.04% premium to last close.
The Offeror (Boyu) and concert parties collectively hold more than 50%. The Offer is contingent on regulatory approvals and 7.71% of shares out tendering. The tendering condition can be waived.
The Offer appears geared to bring Boyu’s stake in line with Jinke Property Group (000656 CH)‘s.

SET50 Index: Market Consultation & DTAC/TRUE Merger Impact

The SET has commenced a market consultation on lowering the turnover ratio level from 5% to 2% while selecting stocks to be added to and deleted from the SET50 INDEX.
The change to the turnover ratio level could lead to three changes in December that result in one-way turnover of 7.44% and in a one-way trade of THB 6.79bn.
Separately, the Total Access Communication (DTAC TB) / True Corp Pcl (TRUE TB) merger could result in an ad hoc inclusion prior to the regular rebalance in December.

About A Gajillion Yen of Index Flows At the Close

Today is a day which happens twice a year in Japan.
It is Day Before Divs Go Ex- Day. Which theoretically means a fair bit of buying.
Nikkei 225 is pretty neutral. But there is a Nikkei 225 buy of Nidec Corp (6594 JP). TOPIX and other float market cap indices are a buy on the close.

Swire B Vs A – Surprising on Regs, Surprising on Risk; Short-Tm Displacement Now in 99th Percentile

The Swire buyback has been impressive. In 27 trading days they have bought back 26.8% of teh HK$4bn promised. In that period, participation has been aggressive.
Swire has bought back As at a pace of 52% of pre-buyback one-year ADV. For Bs, it has been 105%. But Bs have dramatically underperformed As on “HK Re-opening” trades.
Historically, when B/A gets more than 6% from 3mo Avg VWAP Ratio, there is statistically significant reversion. We are now at 6.8%. I’d buy B vs A.

Jinke Smart’s VGO of HK$12.00 from Boyu Capital