Most Read

9 weeks ago, the FT reported Elliott Management had a stake in Mitsui Fudosan (8801 JP) and had asked them to sell cross-holdings and do a ¥1trln buyback.
The stock popped 7% the next day to ¥1302, on the highest volume since the covid crash, hesitated a day, then powered almost 20% higher through the end of March.
Today, Mitsui Fudosan responded with an Amendment to their Plan out to 2030. It has a higher dividend, a share buyback, higher EPS target growth, and higher ROE target. But…

S&P/ASX Index Rebalance Preview: Potential Changes from Now to June

With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.

CGN New Energy (1811 HK): Evaluating a Potential Privatisation

Bloomberg reports that CGN, the parent and largest shareholder, is reconsidering taking CGN New Energy Holdings (1811 HK) private.
CGN New Energy shares have underperformed the median peer’s shares since the announcement of CGN’s previous aborted privatisation attempt (2 March 2020) and on the last twelve-month basis.
The probability of an offer is high as CGN, an SOE has access to financing, and CGN New Energy’s valuation is low. We estimate a potential offer range of HK$2.80-4.30.

Fast Retailing(9983) | Not So Fast

Fast Retail missed analyst estimates for Q2 sales and operating profit. Revenue growth slowed to 5% YoY
Full year operating profit guidance maintained at Y450 billion, just slightly below the street
The stock is trading at 27x EV/EBIT, in-line with historical averages, but still expensive in absolute terms and versus global peers

CGN New Energy (1811 HK): Takeover Rumours

Another week, another rumoured (from Bloomberg) takeover. This time it’s for clean energy play CGN New Energy Holdings (1811 HK).
Back in 2020, CGN was subject to a potential privatisation from its SOE-parent – see CGN New Energy: The Latest SOE Clean Energy Play – but it failed to materialise.
A couple of years back, a “valuation system with Chinese characteristics” had the media discussing whether this implied a premium for SOEs and companies aligned with national goals.

NIFTY Bank Index Rebalance Preview: Canara Bank Still Cheap; Double Deletion for Bandhan?

Canara Bank (CBK IN) should replace Bandhan Bank Ltd (BANDHAN IN) in the NSE Nifty Bank Index (NSEBANK INDEX) at the September rebalance.
Passive trackers will need to buy nearly 2 days of ADV in Canara Bank (CBK IN) while selling over 1 day of ADV in Bandhan Bank Ltd (BANDHAN IN).
Canara Bank (CBK IN) is one of the best performing banking stocks while Bandhan Bank Ltd (BANDHAN IN) has been the worst performer over the last two years.

StubWorld: Melco Gains As Lawrence Ho Buys

Melco International (200 HK) gains as Lawrence Ho increases his position. Melco and 51.1%-held Melco Resorts (MLCO US) are the two worst performing gaming stocks over the past year.
Preceding my comments on Melco 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%.

Boral Backs Seven’s “Enhanced” Offer

After Boral (BLD AU) rejected Seven Group (SVW AU)‘s cash/scrip Offer, Seven slammed the Independent Expert’s report, calling the Target Statement “unbalanced, selective and risks fundamentally misleading Boral minority shareholders“.
Seven has now waived certain tendering thresholds, increasing the cash terms to A$1.70/share from A$1.50/share. Boral will also pay a fully-franked dividend of A$0.26/share, providing A$0.11/share of franking credits.
The IE now considers the Offer to be reasonable. Boral’s board recommends shareholders to accept. This is done.

Keepers Holdings (KEEPR PM) FY23: 30% YoY, Net Cash, Growth 6.8x PE, And A 7.6% Dividend Yield

By Sameer Taneja

The Keepers Holdings (KEEPR PM) demonstrated a 5-year CAGR of 16%/25% revenue/profit growth with an ROE averaging 20%.
FY23 surpassed our expectations with 17%/30% revenue and net profit growth. 4Q 2023 high season revenue and profit growth was an astounding 21%/75% YoY.
The stocks trades at 6.9x/6.2x PE FY23/FY24e with a 7.5% dividend yield (assuming ten centavos/dividend based on FY23 earnings for FY24 and a 50% payout ratio).

Updated TOPIX Big April Basket Flows; More Big Flows and ¥270bn a Side

Several days ago I published a piece showing the data for TOPIX flows for April month-end.
This is an update reflecting new data companies have reported to regulators, one large correction to a data provider’s data, and one Very Large Flow.
I believe that the revised data is more accurate. And there is more flow. With a spreadsheet attached.

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Apr 12

Most Read: Socionext, Mitsui Fudosan, Sompo Holdings, Alibaba Group Holding , Bank of Communications , CGN New Energy Holdings, Fast Retailing, Bharti Hexacom, Melco International Development and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Mar24 Nikkei 225 Rebal – Socionext, Disco, Zozo IN; US$4bn One-Way; More Impactful Than It Looks
JAPAN ACTIVISM: Mitsui Fudosan (8801) Responds to Elliott with Buyback, Amended Long-Term Plan
Sompo Holdings Cross-Shareholding – At Least US$8bn of Cross-Shareholding to Sell
Spending on Customers Precedes Customer Spending
EM Watch: China is preparing something BIG!
SSE50 Index Rebalance Preview: 5 Changes and US$2.7bn Round-Trip Trade
CGN New Energy (1811 HK): Evaluating a Potential Privatisation
Fast Retailing(9983) | Not So Fast
Bharti Hexacom IPO: Index Inclusion Timeline
StubWorld: Melco Gains As Lawrence Ho Buys

Mar24 Nikkei 225 Rebal – Socionext, Disco, Zozo IN; US$4bn One-Way; More Impactful Than It Looks

The changes to the Nikkei 225 Average for the March 2024 Review were announced today after the close. A little earlier than I expected.
Socionext, Disco, Zozo IN; Takara Hldgs, Sumi Osaka Cement, Pacific Metals OUT. Nitori PAF increase. US$4bn+ to trade one way on 29Mar close. One interesting surprise.
Overall more impactful than it looks. And it changes the front-end arithmetic on Fast Retailing (9983 JP). There may be fun on the DELETEs.

JAPAN ACTIVISM: Mitsui Fudosan (8801) Responds to Elliott with Buyback, Amended Long-Term Plan

9 weeks ago, the FT reported Elliott Management had a stake in Mitsui Fudosan (8801 JP) and had asked them to sell cross-holdings and do a ¥1trln buyback.
The stock popped 7% the next day to ¥1302, on the highest volume since the covid crash, hesitated a day, then powered almost 20% higher through the end of March.
Today, Mitsui Fudosan responded with an Amendment to their Plan out to 2030. It has a higher dividend, a share buyback, higher EPS target growth, and higher ROE target. But…

Sompo Holdings Cross-Shareholding – At Least US$8bn of Cross-Shareholding to Sell

By Sumeet Singh

The Japanese Financial Services Agency has asked the general insurers to reduce/eliminate their cross-shareholdings.
Sompo Holdings (8630 JP) had a stake over US$100m in at least 16 listed Japanese stocks, amounting to a total of around US$6bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

Spending on Customers Precedes Customer Spending

By Ying Pan

We expect Alibaba to report CY1Q24 top-line, non-GAAP EBITA and non-GAAP net income in-line, (14.2%) and (7.4%) vs. consensus. We cut non-GAAP EBITA by 10% and kept topline unchanged;
BABA is prioritizing growth of both AliCloud and cross-border ecommerce (AliExpress), which will weaken profitability in the near-term but is the right thing to do.
BABA is transforming itself into Chinese Microsoft with hopes of e-commerce mainly pinned on overseas. We maintain BUY and US$ 85 TP, implying 9.5x CY24 P/E.

EM Watch: China is preparing something BIG!

By Andreas Steno

The below chart of ours have made the rounds in recent days and weeks as China seems to be preparing for something big given the heavy restocking efforts in Copper space.
As the price trends are diverging in copper versus steel and iron ore, the strategic initiatives of China are becoming increasingly evident in price action across the commodity complex, but we are yet to fully understand and accept the ramifications for global rates.
We have read plenty of bad takes on why China is building up copper reserves and the most obvious reason seems to be neglected by many.

SSE50 Index Rebalance Preview: 5 Changes and US$2.7bn Round-Trip Trade

With the review period nearing completion, 6 stocks are in inclusion zone and 8 are in deletion zone. However, there can be a maximum of 5 changes at a review.
We estimate a one-way turnover of 7% at the June rebalance leading to a one-way trade of CNY 9.7bn (US$1.34bn). Index arb balances could increase the impact on the stocks.
The inflows into mainland China ETFs have further increased the flow and impact on the potential changes. The potential adds have continued to outperform the potential deletes.

CGN New Energy (1811 HK): Evaluating a Potential Privatisation

Bloomberg reports that CGN, the parent and largest shareholder, is reconsidering taking CGN New Energy Holdings (1811 HK) private.
CGN New Energy shares have underperformed the median peer’s shares since the announcement of CGN’s previous aborted privatisation attempt (2 March 2020) and on the last twelve-month basis.
The probability of an offer is high as CGN, an SOE has access to financing, and CGN New Energy’s valuation is low. We estimate a potential offer range of HK$2.80-4.30.

Fast Retailing(9983) | Not So Fast

Fast Retail missed analyst estimates for Q2 sales and operating profit. Revenue growth slowed to 5% YoY
Full year operating profit guidance maintained at Y450 billion, just slightly below the street
The stock is trading at 27x EV/EBIT, in-line with historical averages, but still expensive in absolute terms and versus global peers

Bharti Hexacom IPO: Index Inclusion Timeline

Telecommunications Consultants India Limited (TCIL) raised US$513m by selling 15% of the shares outstanding in Bharti Hexacom (6597372Z IN). Post the sale, they still hold 15% of the company.
Bharti Hexacom (6597372Z IN) will start trading on 12 April and the grey market indicates the stock will open at INR 664/share, 16.5% higher than the IPO price.
Bharti Hexacom should be added to one smallcap index in August and another smallcap index in December. A move above INR 700/share could result in midcap inclusion in December.

StubWorld: Melco Gains As Lawrence Ho Buys

Melco International (200 HK) gains as Lawrence Ho increases his position. Melco and 51.1%-held Melco Resorts (MLCO US) are the two worst performing gaming stocks over the past year.
Preceding my comments on Melco 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%.

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Apr 11

Most Read: China Traditional Chinese Medicine, Deep Yellow Ltd, HD Hyundai Marine Solution , KT Corp, Aozora Bank Ltd, 3peak , Chilled & Frozen Logistics Holdings, Bank of Communications and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China TCM (570.HK) – Latest Updates on Privatization and the Potential Merger with Taiji Group
Let’s Talk Aussie Franking Credits
S&P/ASX Index Rebalance Preview: Potential Changes from Now to June
HD Hyundai Marine Solution IPO Valuation Analysis
Early Sign of AI GPU Market Inflection Point?
KT’s Foreign Room Below 7.5%, Weight Down-Adjustment Expected in May, Resulting in 3x ADTV Outflow
JAPAN ACTIVISM: Murakami’s Aozora Bet Not Going Anywhere, But No Sales Yet
Quiddity Leaderboard STAR 50 Jun 24: 3 ADDs/DELs Possible but Should Be Monitored Closely
Chilled & Frozen Logistics (9099 JP): Pass The🍿as the Board Responds to AZ-COM Maruwa (9090 JP)
SSE50 Index Rebalance Preview: 5 Changes and US$2.7bn Round-Trip Trade

China TCM (570.HK) – Latest Updates on Privatization and the Potential Merger with Taiji Group

By Xinyao (Criss) Wang

Since “no dividend was proposed for the year ended 31 December 2023”, the privatization is highly likely to succeed. It may not be wise for investors to bet against privatization.
The recent high-level personnel changes in Taiji is “thought-provoking”, which seems to be preparing for the next step of integrating with China TCM. Spin-offs and integrations are expected within Taiji.
We analyzed possible playbook. In this way, CNPGC is able to solve the problem of horizontal competition. China TCM could also relist in A-share to gain higher valuations/better liquidity.

Let’s Talk Aussie Franking Credits

To an Australian individual investor, franking credits simply recognise tax already paid by a company on their earnings. These credits may reduce tax you would otherwise pay on dividend income.
This dividend imputation system prevents double taxation and essentially treats company tax paid as a prepayment of shareholder tax.
The system makes a lot of sense. It’s a curious thing so few countries have adopted a similar corporate tax structure.

S&P/ASX Index Rebalance Preview: Potential Changes from Now to June

With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.

HD Hyundai Marine Solution IPO Valuation Analysis

Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, representing an 18% upside from the high end of the IPO price range.
The company’s ROE averaged 67% in 2022 and 2023. In comparison, the comps’ ROE averaged 10.6% in the same period. [HD Hyundai Marine Solution > Comps]
Our base case valuation is based on 24.7x P/E (comps’ average) using our estimated net profit of 178.7 billion won for the company in 2024.

Early Sign of AI GPU Market Inflection Point?

By Andrew Lu

Taiwan Dell said “AI GPU shortage issue has been resolved. The lead time has been cut from 40 weeks by the end of 2023 to 8-12 weeks or less now.
We see this news short term positive but medium term negative to AI GPU supply chain vendors but need more information to confirm if this is an inflection point.
1. Taiwan Dell got priority supply? 2. Earlier overbooking over? 3. Lead time cut by supply upside? 4. Cooling company said the same; 5. Will lead time continue to shrink?

KT’s Foreign Room Below 7.5%, Weight Down-Adjustment Expected in May, Resulting in 3x ADTV Outflow

KT’s foreign ownership declined since January, below 7.5% by last month. If it remains, the adjustment factor halves to 0.25, impacting KT’s Global Index weight.
With the May review screening date estimated for April 17th, swift reversal of foreign inflows seems improbable. Thus, KT’s adjustment factor dropping to 0.25 is likely.
This could lead to an outflow of 1.6M shares, approximately 3x ADTV. Given the prolonged price impact on telcos, exploring a long-short setup with SKT might be prudent.

JAPAN ACTIVISM: Murakami’s Aozora Bet Not Going Anywhere, But No Sales Yet

Just under 6 weeks ago, Japanese activist Murakami-san’s company and daughter reported a 5+% stake in Aozora Bank Ltd (8304 JP). They bought after a sharp dip caused CRE-related writedowns.
As is normal, they bought more (now 8.92%) post-5%-filing-trigger, but before the actual first filing. And as is normal these days, the stock popped on the first filing.
Then it fell, and hasn’t recovered much. So far, on a weighted basis, they are up 1% vs TOPIX Banks Index.

Quiddity Leaderboard STAR 50 Jun 24: 3 ADDs/DELs Possible but Should Be Monitored Closely

By Janaghan Jeyakumar, CFA

STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the June 2024 index rebal event.
I currently expect three changes resulting in a one-way flow of around US$531mn but there is still room for the expectations to change.

Chilled & Frozen Logistics (9099 JP): Pass The🍿as the Board Responds to AZ-COM Maruwa (9090 JP)

The Chilled & Frozen Logistics Holdings (9099 JP) Board has responded with several questions regarding AZ-Com Maruwa Holdings (9090 JP)’s pre-conditional hostile offer of JPY3,000 per share.
The Board questions the transaction’s schedule, terms and potential synergies. The Board has also used the ruse that due diligence access would justify a higher offer price.
Expect several rounds of Q&A and a delay to the tender start. If shares continue trading through terms ahead of the tender start, AZ-COM Maruwa will likely have to bump.

SSE50 Index Rebalance Preview: 5 Changes and US$2.7bn Round-Trip Trade

With the review period nearing completion, 6 stocks are in inclusion zone and 8 are in deletion zone. However, there can be a maximum of 5 changes at a review.
We estimate a one-way turnover of 7% at the June rebalance leading to a one-way trade of CNY 9.7bn (US$1.34bn). Index arb balances could increase the impact on the stocks.
The inflows into mainland China ETFs have further increased the flow and impact on the potential changes. The potential adds have continued to outperform the potential deletes.

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Apr 10

Most Read: L’Occitane, Ryohin Keikaku, Riso Kyoiku, Aichi Financial Group , Hainan Jinpan Smart Technology, Bangchak Corporation, Shanghai Electric Group Company, HD Hyundai Marine Solution , WT Microelectronics, Deep Yellow Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

L’Occitane (973 HK): Blackstone Pondering an Offer
Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is
Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51%
The TOPIX Big April Basket Flows: ¥200bn a Side Including Many Multi-ADV Flows
STAR100 Index Rebalance Preview: 10 Changes as Potential Adds Outperform
SET50 Index Rebalance Preview: Three Potential Changes in June
Quiddity Leaderboard CSI 300/500 Jun 24: SHORTs Down 11% Vs Index Since Mid-Feb; Change the Hedge
HD Hyundai Marine Solution IPO Valuation Analysis
WT Micro Placement – Another Well-Flagged Taiwan GDR Offering, This One Is Easier to Digest
S&P/ASX Index Rebalance Preview: Potential Changes from Now to June

L’Occitane (973 HK): Blackstone Pondering an Offer

Bloomberg reports that L’Occitane (973 HK) draws takeover interest from Blackstone (BX US), which is considering partnering with Chairman and largest shareholder Reinold Geiger.
Blackstone needs an attractive takeover premium due to the presence of significant disinterested shareholders (Mr. Geiger and Acatis KVG).
Shareholders will be wary of the latest rumour due to Mr Geiger’s aborted offer on 4 September 2023. Nevertheless, the valuation is undemanding compared to peer multiples.

Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is

The March 2024 rebal is done and dusted. When announced, there were 2 prospective DELETEs for Sep 2024. Now there is only one expected DELETE, Nippon Paper Industries (3863 JP).
The one likely inclusion is therefore Ryohin Keikaku (7453 JP). But there is more fun afoot with Fast Retailing (9983 JP) and Tokyo Electron (8035 JP).
The two stocks – of totally different sectors – interact somewhat, both in determining Nikkei 225 direction, and their relative potential selldowns.

Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51%

Today, cram school operator Riso Kyoiku (4714 JP) and 20% owner real estate developer Hulic Co Ltd (3003 JP) amended their Capital and Business Alliance agreement.
Hulic will buy 25.5% of shares out in a Partial Offer at +43.5% vs last. Then post-tender, they will buy shares at last from the company to go to 51.%
The founder will sell his 10%. The rest is interesting. It’s a high ROE high div stock. Some own it from higher. Pro-ration is tough to estimate. But we try.

The TOPIX Big April Basket Flows: ¥200bn a Side Including Many Multi-ADV Flows

Every year in April there is an interesting phenomenon with TOPIX. It is what Janaghan Jeyakumar, CFA calls “The Big April Basket.” The TSE re-assesses Liquidity Factor Coefficients.
It also does a FFW change, and this year it has Phased Weight Reductions for those slowly leaving TOPIX and PWR re-inclusions for those identified last October as going back.
Janaghan had 18 “High Conviction” LF removals. All were hits. They are upweights. Then there are 34 changes to FFW coefficients.

STAR100 Index Rebalance Preview: 10 Changes as Potential Adds Outperform

The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
We forecast 10 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX).
Excluding the migrations, the potential adds have outperformed the potential deletes over the last few months and that could continue as we head to the end of the review period.

SET50 Index Rebalance Preview: Three Potential Changes in June

Nearing the halfway mark in the review period, we see 3 potential changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the June rebalance.
Passive trackers will need to buy between 1.2-4.5 days of ADV on the inclusions and sell 0.9-1.3 days of ADV on the deletions.
Berli Jucker (BJC TB) continues to be a close add on liquidity while Gulf Energy Development (GULF TB) and Intouch Holdings (INTUCH TB) continue to be close deletes.

Quiddity Leaderboard CSI 300/500 Jun 24: SHORTs Down 11% Vs Index Since Mid-Feb; Change the Hedge

By Janaghan Jeyakumar, CFA

CSI 300 represents the 300 largest stocks by marketcap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500. There is subjectivity.
Here we look at potential ADDs/DELs for the CSI 300/500 rebalance in June 2024. With 93% of time passed, I expect 11 changes for CSI300, 50 for CSI 500.
Some names have changed since my last insight, but the long/short trades recommended eight weeks ago gained 11.26% since. We make small changes this time.

HD Hyundai Marine Solution IPO Valuation Analysis

Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, representing an 18% upside from the high end of the IPO price range.
The company’s ROE averaged 67% in 2022 and 2023. In comparison, the comps’ ROE averaged 10.6% in the same period. [HD Hyundai Marine Solution > Comps]
Our base case valuation is based on 24.7x P/E (comps’ average) using our estimated net profit of 178.7 billion won for the company in 2024.

WT Micro Placement – Another Well-Flagged Taiwan GDR Offering, This One Is Easier to Digest

By Clarence Chu

WT Microelectronics (3036 TT) is looking to raise US$341m in its GDR offering. The proceeds will be used to purchase raw materials overseas.
The deal is a very well flagged one, and will be a relatively small one to digest at just 4.8 days of the stock’s three month ADV.
In this note, we run the deal through our ECM framework and comment on the deal dynamics.

S&P/ASX Index Rebalance Preview: Potential Changes from Now to June

With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.

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Apr 09

Most Read: Riso Kyoiku, Zijin Mining Group Co Ltd H, Ryohin Keikaku, Azure Minerals, APM Human Services, Samsung Electronics and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Azure Min (AZS AU): Trading Wide Ahead Of 8th April Vote
Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51%
HSCEI Index Rebalance Preview: One Change or Two in June?
Riso Kyoiku (4714 JP): Hulic (3003 JP)’s Partial Tender Offer
Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is
Azure Minerals (AZS AU): FIRB Approval Concerns Are Overdone
APM (APM AU): Madison Dearborn’s “Disappointing” NBIO
Samsung Electronics: Block Deal Sale of 5.2 Million Shares by Lee Boo-Jin
Samsung Electronics Placement – Better Timing This Time Around
S-REITs: Climate Disclosures and Inclusion in ESG-Related Equity Indexes

Azure Min (AZS AU): Trading Wide Ahead Of 8th April Vote

Back on the 19th Dec, Sociedad Quimica y Minera (SQM/B CI)/Hancock offered Azure Minerals (AZS AU) shareholders A$3.70/share by way of a Scheme, a ~52% premium to the undisturbed price.
Creasy Group (12.64%) and Delphi Group (10.15%) gave irrevocables. Mineral Resources (MIN AU)‘s 14.5% stake was unclear; but they exited on the 21 Feb. “Arbitrageurs should arb. Corporations should Corp“.
The Transaction Booklet is now out with a Scheme Meeting on the 8th April. The IE says fair. Expected implementation on the 18 April.

Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51%

Today, cram school operator Riso Kyoiku (4714 JP) and 20% owner real estate developer Hulic Co Ltd (3003 JP) amended their Capital and Business Alliance agreement.
Hulic will buy 25.5% of shares out in a Partial Offer at +43.5% vs last. Then post-tender, they will buy shares at last from the company to go to 51.%
The founder will sell his 10%. The rest is interesting. It’s a high ROE high div stock. Some own it from higher. Pro-ration is tough to estimate. But we try.

HSCEI Index Rebalance Preview: One Change or Two in June?

SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.

Riso Kyoiku (4714 JP): Hulic (3003 JP)’s Partial Tender Offer

Riso Kyoiku (4714 JP) announced a partial tender offer and third-party allotment with Hulic Co Ltd (3003 JP), the largest shareholder. Hulic aims to make Riso Kyoiku a consolidated subsidiary.
The offer is for a maximum of 39.4 million shares (23.15% post-allotment ownership ratio) at JPY320 per share, a 46.8% premium to the undisturbed price (5 April).
Irrevocable (from the founder and Chairman) represents a 9.26% post-allotment ownership ratio. The offer is light, but there is no minimum acceptance condition.

Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is

The March 2024 rebal is done and dusted. When announced, there were 2 prospective DELETEs for Sep 2024. Now there is only one expected DELETE, Nippon Paper Industries (3863 JP).
The one likely inclusion is therefore Ryohin Keikaku (7453 JP). But there is more fun afoot with Fast Retailing (9983 JP) and Tokyo Electron (8035 JP).
The two stocks – of totally different sectors – interact somewhat, both in determining Nikkei 225 direction, and their relative potential selldowns.

Azure Minerals (AZS AU): FIRB Approval Concerns Are Overdone

Azure Minerals (AZS AU) shareholders have overwhelmingly approved the dual-track bid from Sociedad Quimica y Minera de Chile (SQM US) and Hancock. The scheme offer is A$3.70 per share.
The shares fell 7%, seemingly due to concerns about FIRB approval sparked by FIRB’s request for an extension on 3 April and today’s AFR article on China’s Australian lithium holdings.
FIRB approval should be forthcoming due to Tianqi Lithium (9696 HK) small indirect interest in Andover, Lithium Power International (LPI AU) precedent, and SQM and Tianqi’s strained relationship.

APM (APM AU): Madison Dearborn’s “Disappointing” NBIO

On the 28th Feb, PE-outfit CVC Asia Pacific bumped its NBIO to A$2.00/share, and was granted exclusive due diligence. On the 27th Mar, CVC said they were “unable to proceed“.
Today, the 8th April, Madison Dearborn Partners, holding ~29%, has pitched an non-indicative, non-binding Offer at A$1.40/share, in cash, by way of a Scheme. An unlisted scrip option is available.
A key condition is APM Human Services (APM AU)‘s executive-chair Megan Wynne, founding related parties, and key management, electing scrip. The Independent Board Committee reckons the Offer Price is disappointing.

Samsung Electronics: Block Deal Sale of 5.2 Million Shares by Lee Boo-Jin

After the market close on 8 April, it was reported that Lee Boo-Jin will sell 5,247,140 shares of Samsung Electronics in a block deal (up to 443 billion won).
The expected block deal sale price is 83,700 to 84,500 won per share, which represents a discount rate of up to 0.95% compared to the closing price on 8 April.
We are positive on this block deal sale and on Samsung Electronics. We would take the deal.

Samsung Electronics Placement – Better Timing This Time Around

By Sumeet Singh

KEB Hana Bank, on behalf of Lee Boo-Jin, is looking to raise up to US$325m via selling 0.1% of Samsung Electronics (005930 KS).
The deal appears to be somewhat well flagged and the company recently reported better operating numbers for 1Q24.
In this note, we will run the deal through our ECM framework and talk about the recent updates.

S-REITs: Climate Disclosures and Inclusion in ESG-Related Equity Indexes

By Kyle Rudden

New SGX climate-related disclosure requirements based on ISSB’s standards are more stringent than current requirements, most notably regarding mandatory Scope 3 emissions reporting.
The implications for S-REITs are significant. Real Estate is one of the most emissions-intensive sectors, and Scope 3 emissions comprise 85-95% of total emissions for real estate companies.
Motivated by a strong “business case” for best-in-class climate performance and transparency, many S-REITs are ahead of the curve, evidenced by prominence in climate-related indexes.

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Apr 08

Most Read: Lalatech Holdings Co Ltd, J&T Global Express , Rakuten, Jastec Co Ltd, Zijin Mining Group Co Ltd H, GS Holdings, JSR Corp, Hanmi Semiconductor, Adani Enterprises, APT Medical and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

TRACKING TRAFFIC/Lalatech IPO: Attractive Segment | ‘Unbelievable’ Cost Control | Hidden Competition
J&T Global Express (1519 HK): The US$9.9 Billion Lock up Expiry
Last Week in Event SPACE: JSR, Austal, Rakuten, Hyundai Home Shopping, Hanmi Science
NTT Data’s ¥1,940/Share Deal For Jastec (9717) – Not Enough But Probably Enough
HSCEI Index Rebalance Preview: One Change or Two in June?
Observations on Post-Election Flows of Value-Up Stocks, Based on Recent Local Institutional Trades
Merger Arb Mondays (08 Apr) – JSR, Jastec, Shinko, Azure, Genex, Best World, Isetan
KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High
SENSEX Index Rebalance Preview: Wipro Deletion to Bring Sector Balance into Play
STAR50 Index Rebalance Preview: APT Medical Moving Higher

TRACKING TRAFFIC/Lalatech IPO: Attractive Segment | ‘Unbelievable’ Cost Control | Hidden Competition

By Daniel Hellberg

Lalatech’s largest segment by revenue — Chinese intra-city on-demand freight — features many of the attributes that are attractive to online logistics intermediaries
At the top of the list of red flags in its prospectus is Lalatech’s company’s dramatic 71% Y/Y reduction in Sales and Marketing expenses last year
Although Lalatech appears to be the leading platform for Chinese intra-city on-demand freight matching, the company faces ‘hidden’ competition from several larger groups

J&T Global Express (1519 HK): The US$9.9 Billion Lock up Expiry

J&T Global Express (1519 HK)’s 180-day IPO lock-up period for 88% of outstanding shares expires on 24 April. The shares exiting the lock-up period are worth US$9.9 billion.
The likely sellers will be the Series pre-A1, pre-A2, A and B investors as are they are materially in the money at the last close price.
J&T has returned to organic growth with a shift to profits and declining cash burn. While the last close is 17% below the IPO price, the shares are fairly valued.

Last Week in Event SPACE: JSR, Austal, Rakuten, Hyundai Home Shopping, Hanmi Science

Murakami to tender stake in JSR Corp (4185 JP)? Maybe the “double arb”: i.e. short on swap, long on cash, will tender the cash, remain short the back end.
Austal Ltd (ASB AU) rejected (for now) Hanwha Ocean (042660 KS)‘s bid based on regulatory concerns. Hanwha reckons these should not be an issue.
If you can tolerate owning the mobile biz, buy Rakuten (4755 JP) on dips. If not, avoid Rakuten Group and Rakuten Bank short-term; buy Rakuten Bank on larger dips.

NTT Data’s ¥1,940/Share Deal For Jastec (9717) – Not Enough But Probably Enough

NTT Data Corp (9613 JP) on Friday announced a Tender Offer to take over small custom software developer and system integrator Jastec Co Ltd (9717 JP).
It’s at a premium. But for a growing company ahead of “The 2025 Problem” where synergies are expected, you’d want to get a premium vs where comps trade. You don’t.
But this gets to near 50% just from friendlies. Someone who wanted to interfere would have to be publicly noisy. I expect this gets done.

HSCEI Index Rebalance Preview: One Change or Two in June?

SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.

Observations on Post-Election Flows of Value-Up Stocks, Based on Recent Local Institutional Trades

Opposition’s probable win in the election sparks concerns about Value-up initiative’s momentum. However, market sentiment doesn’t universally echo these worries.
Value-Up stocks’ recent corrections likely stem from Q4 dividend arbitrage liquidation, rather than election result concerns.
Post-Election, even if the opposition wins, the left-leaning Value-up program might continue, limiting the opposition’s influence, as seen in recent National Pension Service flows.

Merger Arb Mondays (08 Apr) – JSR, Jastec, Shinko, Azure, Genex, Best World, Isetan

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Jastec Co Ltd (9717 JP), Qantm Intellectual Property (QIP AU), Southern Cross Media (SXL AU), Genex Power Ltd (GNX AU), QV Equities Ltd (QVE AU), China TCM.
Lowest spreads: Roland DG Corp (6789 JP), Tietto Minerals Ltd (TIE AU), Newmark Property REIT (NPR AU), Mma Offshore (MRM AU), CPMC Holdings (906 HK), Pact Group Holdings (PGH AU).

KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High

Around 85% of the way through the review period, we see four changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance.
The impact on the potential inclusions ranges from 0.4-8 days of ADV while the impact on the potential deletions varies from 1-13 days of ADV.
Hanmi Semiconductor (042700 KS) is up 72% in the last two months following its appearance on the list of potential Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusions in June.

SENSEX Index Rebalance Preview: Wipro Deletion to Bring Sector Balance into Play

Nearly 90% of the way through the review period of the June rebalance, we see one potential index change with Wipro Ltd (WPRO IN) in deletion zone.
Oil & Natural Gas Corp (ONGC IN), Coal India Ltd (COAL IN) and Adani Enterprises (ADE IN) are potential replacements with sector balance likely to come into play.
Passive trackers will need to trade over 13 days of delivery volume on the potential index changes.

STAR50 Index Rebalance Preview: APT Medical Moving Higher

The review period for the June rebalance ends 30 April. We expect the changes to be announced 31 May with the implementation taking place after the close on 14 June.
We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.
With a big jump in tracking AUM over the last few months, passives will need to trade a lot of stock on implementation date.

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Apr 07

Most Read: Shenzhen New Industries Biomedical Engineering-A, ZOZO Inc, Li Auto , Hanwha Aerospace, Kokusai Electric , Hanmi Science, Citic Resources Holdings, JSR Corp, Talgo SA and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
Index Rebalance & ETF Flow Recap: NKY, ASX, CSI300, A50, STTF, LowVol30, Value Up
HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June
Hanwha Aerospace: Spin Off of Semiconductor Equipment and Video Surveillance Units
Weekly Deals Digest (07 Apr) – Kokusai Electric, HD Hyundai Marine, Langham, Jastec, JSR, Best World
Hanmi Science: If Talks With Mum and Sister Break Down, Then KKR May Provide a Partial Tender Offer
Citic Resource Holdings (1205.HK) – A Play on Oil and Coal Demand
(Mostly) Asia-Pac M&A: Austal, Best World, Isetan Singapore, Langham Hospitality, Azure, Genex Power
Japan Weekly | Stocks Lower but Global Economy Remains Strong
Ganz-Mavag/Talgo: Request for Offer Authorisation

CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows

With 85% of the review period complete, we see 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in June.
We estimate one-way turnover of 1.2% at the rebalance leading to a one-way trade of CNY 7.3bn (US$1bn). There are a lot of stocks with multiple days ADV to trade.
The potential adds have outperformed the potential deletes despite large flows from the National Team into ETFs tracking the CSI 300 Index. That support for the potential deletes will reverse.

Index Rebalance & ETF Flow Recap: NKY, ASX, CSI300, A50, STTF, LowVol30, Value Up

There were a few rebalance announcements in the last week and the SSE STAR50 (STAR50 INDEX) and STAR100 Index rebalances were implemented at the close on Friday.
There are a lot of rebalances that will be implemented at the close on the coming Thursday and Friday.
Another big week of inflows for onshore China ETFs with Central Huijin likely behind the big flows to ETFs tracking the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX).

HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June

With no stocks in outright inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June.
Capping changes will result in a one-way turnover of 5.3% leading to a round-trip trade of US$1.51bn.
Li Auto (2015 HK) is expected to be the largest buy in June following the stock being the largest sell at the March rebalance (also due to capping).

Hanwha Aerospace: Spin Off of Semiconductor Equipment and Video Surveillance Units

On 5 April, Hanwha Aerospace (012450 KS) formally announced that it will spin off its semiconductor equipment and video surveillance units which contributed to about 16% of its revenue.
We are Negative on Hanwha Aerospace mainly due to valuations. Its share price has risen so much in the past year that its valuations are no longer attractive.
Hanwha Aerospace is trading at premium valuation to Lockheed Martin on an EV/EBITDA basis. Despite its recent strong growth, Hanwha Aerospace is no Lockheed Martin.

Weekly Deals Digest (07 Apr) – Kokusai Electric, HD Hyundai Marine, Langham, Jastec, JSR, Best World

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: Kokusai Electric (6525 JP) lock-up expiry and HD Hyundai Marine Solution (443060 KS), Bharti Hexacom (6597372Z IN) IPOs.
Event-Driven developments: Langham Hospitality Inv Ss (1270 HK), IntelliCentrics Global Holding (6819 HK) Jastec Co Ltd (9717 JP), JSR Corp (4185 JP), Best World International (BEST SP), Isetan Singapore (ISET SP).

Hanmi Science: If Talks With Mum and Sister Break Down, Then KKR May Provide a Partial Tender Offer

The 2024 AGM of Hanmi Science is over and the two Lim brothers have control of the company. Nonetheless, the fight for the control of Hanmi Science is not over.
There is an increasingly probable scenario where the KKR private equity firm gets involved, joining hands with the Lim brothers.
If mum and sister do not sell their shares (which seems to be the higher likely scenario), then KKR may issue a tender offer to the remaining minority shareholders.

Citic Resource Holdings (1205.HK) – A Play on Oil and Coal Demand

By Rikki Malik

One of a basket of Hong Kong commodity stocks we like
One off issues in 2023 which should reverse in 2024
Can also be viewed as a tangential play on India’s industrial growth

(Mostly) Asia-Pac M&A: Austal, Best World, Isetan Singapore, Langham Hospitality, Azure, Genex Power

I tally 52 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals discussed on Smartkarma: Austal (ASB AU)‘s spurned Offer; Best World (BEST SP)‘s Exit Offer; Isetan Singapore (ISET SP)‘s parent Offer; and (maybe) Langham Hospitality (1270 HK)‘s privatisation.
Key updates took place on: Azure Minerals (AZS AU), Genex Power Ltd (GNX AU), IntelliCentrics Global Holding (6819 HK) and JSR Corp (4185 JP).

Japan Weekly | Stocks Lower but Global Economy Remains Strong

US stocks recovered on Friday after a blow-out US jobs report. However, US 10 year yields ended the week up 19bps at 4.4%
Japanese stocks sank for a second week as tech stocks came under selling pressure
The 10% move in Sumitomo Metal Mining on higher copper prices highlights strength in global economy and perhaps sign of renewed growth in China

Ganz-Mavag/Talgo: Request for Offer Authorisation

By Jesus Rodriguez Aguilar

Ganz Mavag, a public/private consortium, requests authorisation for its €5/share offer for 100% of Talgo SA (TLGO SM). It needs approvals from Spain and seven other EMEA regulators.
Yesterday’s close remains similar to the announcement date (7 March), gross spread of 11.3%, indicating uncertainty regarding timeline and development. The market is pricing a 48% probability of deal completion.
The Spanish Government will delay the authorization process. Vs. comparables and considering uncertainties regarding backlog execution, investing in the company seems somewhat risky. The risk/reward ratio is not particularly attractive.

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Apr 06

Most Read: Shenzhen New Industries Biomedical Engineering-A, Kokusai Electric , Li Auto , Suruga Bank Ltd, Hanwha Corporation, Hanmi Science, L’Occitane, Best World International, Jastec Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
Kokusai Electric (6525 JP): The US$4.8 Billion Lock up Expiry
HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June
Suruga Bank (8358 JP) – New Div, New Buyback, New KPIs, New 6yr High Price
Hanwha Group’s Restructuring to Positively Benefit Hanwha Corp but Negatively Impact Hanwha Ocean
Backstory on the Hanmi Science Showdown & KKR’s Likely Tender Offer
L’Occitane (973 HK): Two Good Moves, Though Rerating Has Been Fast And Furious
Best World (BEST SP): Exit Stage Left
Jastec (9717 JP): NTT Data (9613 JP)’s Tender Offer at JPY1,940
Global Emerging Markets: Reporting Season Summary, 1Q2024

CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows

With 85% of the review period complete, we see 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) in June.
We estimate one-way turnover of 1.2% at the rebalance leading to a one-way trade of CNY 7.3bn (US$1bn). There are a lot of stocks with multiple days ADV to trade.
The potential adds have outperformed the potential deletes despite large flows from the National Team into ETFs tracking the CSI 300 Index. That support for the potential deletes will reverse.

Kokusai Electric (6525 JP): The US$4.8 Billion Lock up Expiry

Kokusai Electric (6525 JP)’s 180-day IPO lock-up period for 71% of outstanding shares expires on 22 April. The shares exiting the lock-up period are worth US$4.8 billion.
The likely seller will be KKR & (KKR US) as it was the sole selling shareholder in the IPO. The shares are currently trading at 2.4x the IPO price.
Kokusai anticipates a return to growth and margin improvement in FY24. However, Kokusai trades at a material premium to peer multiples and is fully priced.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June

With no stocks in outright inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June.
Capping changes will result in a one-way turnover of 5.3% leading to a round-trip trade of US$1.51bn.
Li Auto (2015 HK) is expected to be the largest buy in June following the stock being the largest sell at the March rebalance (also due to capping).

Suruga Bank (8358 JP) – New Div, New Buyback, New KPIs, New 6yr High Price

10+ Months ago, Suruga Bank Ltd (8358 JP) announced it would sell a large chunk of its treasury shares to Credit Saison and would then buy back ¥22bn of stock.
I liked the odds in Suruga Bank (8358) To Sell, Then Buy Back 17% of the Bank, but HOW Is Key. They spent the ¥22bn. The stock rose a lot.
Today, we get a div hike for H2 (implying a div hike for this year too), another buyback, a huge share cancellation, and new KPIs. As always, details matter.

Hanwha Group’s Restructuring to Positively Benefit Hanwha Corp but Negatively Impact Hanwha Ocean

We believe the new restructuring plan of the Hanwha Group is likely to have a positive impact on Hanwha Corp but could negatively impact Hanwha Ocean.
Our NAV analysis of Hanwha Corp suggests NAV of 3.2 trillion won or NAV per share of 43,168 won, which is 50% higher than current share price.
The biggest component of the valuation is Hanwha Corp’s 34% stake in Hanwha Aerospace which is worth 4.1 trillion won. (187% of Hanwha Corp’s market cap).

Backstory on the Hanmi Science Showdown & KKR’s Likely Tender Offer

The victorious brothers plan to join forces with KKR to secure over 51% ownership of Hanmi Science. They aim to persuade the mother and daughter to part with their shares.
Should this negotiation fail, KKR is prepared to initiate a tender offer in the open market, intending to acquire an additional 10-15% of Hanmi Science’s shares.
KKR can target a maximum of 16%. With 10-15% aimed for, this tender offer will cause significant price impact.

L’Occitane (973 HK): Two Good Moves, Though Rerating Has Been Fast And Furious

By Steve Zhou, CFA

L’Occitane (973 HK) announced two solid moves this week: 1) Disposing the 70% stake in Grown Alchemist;
And 2) granting additional call options to Sol de Janeiro CEO Heela Yang of up to 7%.
The stock is trading at 19x FY25 PE (fiscal year ending March), up from just 14x six months ago.

Best World (BEST SP): Exit Stage Left

After flagging a proposed delisting exercise last month, direct seller Best World International (BEST SP) has announced an Exit Offer lead by Best World founders Dora Hoan and Doreen Tan.
The Offer Price is S$2.50/share, a 42.86% premium to undisturbed. The Offer requires approval from 75% of disinterested shareholders. Hoan, Tan and concert parties holding 65.12%, are required to abstain.
Best World shares resumed trading on November 2022 after 42 months of suspension, subsequent to media reports and a short seller raising regulatory concerns over its Chinese business model.

Jastec (9717 JP): NTT Data (9613 JP)’s Tender Offer at JPY1,940

Jastec Co Ltd (9717 JP) has recommended a tender offer from NTT Data Corp (9613 JP) at JPY1,940 per share, a 37.6% premium to the undisturbed price (5 April).
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.
Based on the irrevocables, the minimum acceptance condition requires a 56.4% minority acceptance rate. The acceptance condition is achievable as the offer represents a 22-year high.

Global Emerging Markets: Reporting Season Summary, 1Q2024

By Wium Malan, CFA

During 1Q2024, the 200 largest weighted companies in the GEM index reported average EPS growth of +8.7%y/y, down slightly from the +10.1% reported during 4Q2023.
Only 47% of companies delivered positive EPS surprises, and only 44% delivered positive Sales surprises, a sharp correction from the positive trend witnessed during 2023.
Historically, there has been a significant difference in relative share price performance between the largest positive versus negative surprise generators, for 3 months after the reporting date.

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Apr 05

Most Read: Kokusai Electric , Li Auto , Hyundai Home Shopping Network, Best World International, Suruga Bank Ltd, Langham Hospitality Inv Ss, Nidec Corp, Oriental Watch, HD Hyundai Marine Solution and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Kokusai Electric (6525 JP): The US$4.8 Billion Lock up Expiry
HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June
Langham Hospitality Investments (1270 HK): Great Eagle (41 HK)’s Possible Scheme Privatisation
Hyundai Home Shopping (057050 KS)’s Partial Offer
Best World (BEST SP): Not the Best Exit Offer
Suruga Bank (8358 JP) – New Div, New Buyback, New KPIs, New 6yr High Price
Great Eagle Seeks To Delist Langham Hospitality (1270 HK)
Nidec (6594) | Forget the EV Slump
Oriental Watch 398 HK: Slow 4Q FY24, Resting On A 14% Yield, With 70% of Mkt Cap in Cash
HD Hyundai Marine Solution IPO – Thoughts on Valuation

Kokusai Electric (6525 JP): The US$4.8 Billion Lock up Expiry

Kokusai Electric (6525 JP)’s 180-day IPO lock-up period for 71% of outstanding shares expires on 22 April. The shares exiting the lock-up period are worth US$4.8 billion.
The likely seller will be KKR & (KKR US) as it was the sole selling shareholder in the IPO. The shares are currently trading at 2.4x the IPO price.
Kokusai anticipates a return to growth and margin improvement in FY24. However, Kokusai trades at a material premium to peer multiples and is fully priced.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June

With no stocks in outright inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June.
Capping changes will result in a one-way turnover of 5.3% leading to a round-trip trade of US$1.51bn.
Li Auto (2015 HK) is expected to be the largest buy in June following the stock being the largest sell at the March rebalance (also due to capping).

Langham Hospitality Investments (1270 HK): Great Eagle (41 HK)’s Possible Scheme Privatisation

Langham Hospitality Inv Ss (1270 HK) received a notice from Great Eagle Holdings (41 HK), the largest unitholder, that it intends to present a detailed proposal for scheme privatisation.
The privatisation interest is unsurprising, as the unit price has declined by 43% over the last twelve months. A tough 2023 did not help the declining sentiment.
Our methodology for triangulating the potential offer price results in a range of HK$0.63-1.76. Our best guess is an offer of around HK$0.85, a 47% premium to the last close.

Hyundai Home Shopping (057050 KS)’s Partial Offer

Yesterday, the 3rd April, Hyundai G.F. Holdings (005440 KS) announced it would conduct a Tender Offer for 3mn shares, or 25% of Hyundai Home Shopping Network (057050 KS) (HHSN).
A successful Tender would lift Holdings stake to 50% from 25% currently, satisfying the 30% holding company threshold introduced in 2022.
Minimum proration is 33%. Shares popped 13.8% on the news. That looks a bit too aggressive.

Best World (BEST SP): Not the Best Exit Offer

Best World International (BEST SP) has disclosed an exit offer through selective capital raising and delisting. The offer of S$2.50 is a 42.9% premium to the undisturbed price of S$1.75.
The key conditions are approval for the selective capital reduction (at least 75% of eligible shareholders) and delisting resolution (a majority holding not less than 75% in value).
The headcount test is a risk. The offer is light as only 66.7% of retained earnings will be distributed and the consideration will be covered 1.6x by the net cash.

Suruga Bank (8358 JP) – New Div, New Buyback, New KPIs, New 6yr High Price

10+ Months ago, Suruga Bank Ltd (8358 JP) announced it would sell a large chunk of its treasury shares to Credit Saison and would then buy back ¥22bn of stock.
I liked the odds in Suruga Bank (8358) To Sell, Then Buy Back 17% of the Bank, but HOW Is Key. They spent the ¥22bn. The stock rose a lot.
Today, we get a div hike for H2 (implying a div hike for this year too), another buyback, a huge share cancellation, and new KPIs. As always, details matter.

Great Eagle Seeks To Delist Langham Hospitality (1270 HK)

Hong Kong hotel-play Langham Hospitality (1270 HK) was spun-off from Great Eagle (41 HK) on the 30 May 2013. Now GE intends to take the company back into the fold.
Covid was devastating to the hospitality sector. As were the 2019 demonstrations. Langham’s share price never recovered, and is currently trading at a lifetime low and a P/B of 0.21x.
No price was mentioned in the announcement. Expect a healthy premium to undisturbed, should a firm Offer unfold. But I wouldn’t expect a knockout price.

Nidec (6594) | Forget the EV Slump

Nidec faces challenges amid global EV sales decline, with shares and valuations reflecting market pessimism.
Anticipated catalysts include forthcoming guidance, potential MTP reassessment, and a strategic acquisition opportunity.
At 18x EBIT, Nidec looks a compelling play on secular themes of electrification, automation, and energy efficiency.

Oriental Watch 398 HK: Slow 4Q FY24, Resting On A 14% Yield, With 70% of Mkt Cap in Cash

By Sameer Taneja

Oriental Watch (398 HK) has begun Q4 2024 slowly, with its SSSG dropping by double-digit levels in all its major markets (HK/China and Macau).
As the year almost draws to a close, we expect profits to drop 10-15% YoY for FY24 and the company to pay out 100%, resulting in a 14% dividend yield.
The company also has 1.2 bn HKD of net cash, representing 70% of its market capitalization. Additionally, it has 700 mn HKD of investment property.

HD Hyundai Marine Solution IPO – Thoughts on Valuation

By Ethan Aw

HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$551m in its Korean IPO.
HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
In our previous notes, we talked about the company’s historical performance and undertook a peer comparison. In this note, we share our thoughts on valuation.

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Apr 04

Most Read: JSR Corp, CELSYS, Kokusai Electric , Hyundai Home Shopping Network, Austal Ltd, Langham Hospitality Inv Ss, KT Corp, Li Auto , HD Hyundai Marine Solution and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JSR (4185 JP) – Activist Murakami-San Goes to 5+%! Bumpitrage? Appraisal Rights? A Technicality?
TOPIX Inclusions: Who Is Ready (Apr 2024)
Kokusai Electric (6525 JP): The US$4.8 Billion Lock up Expiry
Estimating Participation Rate for Hyundai HS Tender Offer, Currently at a 5% Spread
What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene
Langham Hospitality Investments (1270 HK): Great Eagle (41 HK)’s Possible Scheme Privatisation
Hyundai Motor Group Becomes the Largest Shareholder of KT Corp
HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June
HD Hyundai Marine Solution IPO – Peer Comparison – Not Particularly Exciting
Tender Offer of 25% of Hyundai Home Shopping Shares by Hyundai GF Holdings

JSR (4185 JP) – Activist Murakami-San Goes to 5+%! Bumpitrage? Appraisal Rights? A Technicality?

In what is a surprising move to me, Murakami-san has gone substantial on JSR Corp (4185 JP) with the vast majority of his stake purchased at a spread of <0.05%.
As suggested in JIC Launches a NOT-¥1trln Tender Offer for JSR (4185). Welcome? Yes. Overwhelming? Meh, the deal price was not overwhelming. It got less so as the market rose.
But this is an odd target. High float. No competition. Would take a lot to block or force the bumpitrage, which suggests appraisal rights or a “technicality.”

TOPIX Inclusions: Who Is Ready (Apr 2024)

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.
There were no Section Transfers announced in the last 3 months so currently there are no live TOPIX Inclusion events at present.
There are currently 79 names capable of satisfying all the key section transfer requirements. Our long-term pre-event candidate CELSYS (3663 JP) is one of them.

Kokusai Electric (6525 JP): The US$4.8 Billion Lock up Expiry

Kokusai Electric (6525 JP)’s 180-day IPO lock-up period for 71% of outstanding shares expires on 22 April. The shares exiting the lock-up period are worth US$4.8 billion.
The likely seller will be KKR & (KKR US) as it was the sole selling shareholder in the IPO. The shares are currently trading at 2.4x the IPO price.
Kokusai anticipates a return to growth and margin improvement in FY24. However, Kokusai trades at a material premium to peer multiples and is fully priced.

Estimating Participation Rate for Hyundai HS Tender Offer, Currently at a 5% Spread

It is somewhat unusual that there is still a spread of over 5%. This likely reflects concerns about the relatively high intensity of allocation risk.
Retail: 30%, Institutions: 16% of float shares (46%). Retailers may contribute 20%, institutions 10-15%. Total tender rate: 30-35%.
In that case, it means that roughly 70% of our holdings could be tendered. And at this level, it seems reasonable enough to target the current spread of 5%.

What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene

Hanwha received counsel indicating foreign regulators won’t oppose Austal’s acquisition. They admit it’s restricted to AUKUS countries but argue Korea’s ties ease opposition.
Hence, Hanwha Ocean is dropping some heavy hints that even though Austal has turned down the acquisition offer for now, there’s still a chance the deal could go through.
The pivotal factor lies in whether Hanwha Ocean can secure approval from the AUKUS countries. Should they succeed, it is anticipated that Austal would be inclined to accept the deal.

Langham Hospitality Investments (1270 HK): Great Eagle (41 HK)’s Possible Scheme Privatisation

Langham Hospitality Inv Ss (1270 HK) received a notice from Great Eagle Holdings (41 HK), the largest unitholder, that it intends to present a detailed proposal for scheme privatisation.
The privatisation interest is unsurprising, as the unit price has declined by 43% over the last twelve months. A tough 2023 did not help the declining sentiment.
Our methodology for triangulating the potential offer price results in a range of HK$0.63-1.76. Our best guess is an offer of around HK$0.85, a 47% premium to the last close.

Hyundai Motor Group Becomes the Largest Shareholder of KT Corp

Hyundai Motor Group has become the largest shareholder of KT Corp, as the National Pension Service has recently reduced its stake in KT from 8.53% previously to 7.51%.
Despite this recent change in the largest shareholder status of KT Corp, this requires the approval from the Korean Ministry of Science and ICT.
Although the Hyundai Motor Group (HMG) has become the largest owner in KT Corp, the most likely scenario is for HMG to remain a passive investor in KT.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June

With no stocks in outright inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June.
Capping changes will result in a one-way turnover of 5.3% leading to a round-trip trade of US$1.51bn.
Li Auto (2015 HK) is expected to be the largest buy in June following the stock being the largest sell at the March rebalance (also due to capping).

HD Hyundai Marine Solution IPO – Peer Comparison – Not Particularly Exciting

By Ethan Aw

HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$555m in its Korean IPO.
HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
In our previous note, we talked about the company’s historical performance. In this note, we talk about peer comparison.

Tender Offer of 25% of Hyundai Home Shopping Shares by Hyundai GF Holdings