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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

By Mark Chadwick

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)

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

On 3 April, it was reported that Hyundai G.F. Holdings will be conducting a tender offer of 3 million shares of Hyundai Home Shopping (25% of outstanding shares).
The tender offer price is 64,200 won. The main reason for this tender offer is to meet the regulatory requirement of a holding company by 2025.
We are positive on the tender offer of a 25% stake in Hyundai Home Shopping by Hyundai G.F. Holdings.

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Apr 03

Most Read: Toyota Industries, JSR Corp, Rakuten, HYBE , CELSYS, SK Square , HD Hyundai Marine Solution , IntelliCentrics Global Holding, Austal Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Denso’s Big Multi-Year Toyota Industries (6201) Selldown
JSR (4185 JP) – Activist Murakami-San Goes to 5+%! Bumpitrage? Appraisal Rights? A Technicality?
If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated
JSR Corporation (4185 JP): Murakami Becomes a Substantial Shareholder
KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents
TOPIX Inclusions: Who Is Ready (Apr 2024)
SK Square: Higher NAV Driven by Its Holding in SK Hynix
HD Hyundai Marine Solutions IPO: Valuation Insights
IntelliCentrics (6819 HK): 18th April “Scheme” Vote
What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene

Denso’s Big Multi-Year Toyota Industries (6201) Selldown

We knew this was coming. We did not know HOW it was coming. The news today has to be seen as a bit of a disappointment.
Why is it a disappointment? Toyota Industries (6201 JP) is not buying back a big chunk, and there is no offering to oblige new investors to take a look.
This is long, slow, leakage on a company which is not overwhelmingly cheap, where it requires good governance to get out well, and even then…

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.”

If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated

A couple of years ago, Rakuten (4755 JP) – burning through cash to start its mobile business – announced it would its Bank and Securities units. Bank listed. Securities didn’t.
Mizuho ended up buying 49% of Securities. Today, it was announced there would be discussions to put Bank, Securities, Card, and Insurance in a new listed Holdco.
How this works will end up being complicated. More complicated than it should be. But the complexity would make this more of a win-win for everyone.

JSR Corporation (4185 JP): Murakami Becomes a Substantial Shareholder

Murakami’s City Index Eleventh entity reported a 5.11% position in JSR Corp (4185 JP). The share purchases started on 19 March, the day of the tender start.
Murakami’s average buy-in price of JPY4,346.22 per share is broadly in line with the JPY4,350 tender offer.
Murakami’s disclosure suggests two possibilities: starting an activist campaign for a bump or pursuing the appraisal process to determine a fair value. We think the latter is likely.

KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents

KRX limits individual stock weight to 20% in ETFs with few constituents. KRX confirms working on it, with an official announcement expected soon.
Excludes index ETFs like KOSPI 200. KRX hasn’t finalized criteria for constituent number but expected to involve fewer than 30 stocks.
This could open new passive trading opportunities. Sector ETF cap at 30%, large AUM ones offer noteworthy trading potential.

TOPIX Inclusions: Who Is Ready (Apr 2024)

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.

SK Square: Higher NAV Driven by Its Holding in SK Hynix

SK Square owns a 20.07% stake in SK Hynix which is now worth 27.2 trillion won. SK Square’s market cap is only 39% of SK Square’s stake in SK Hynix.
SK Square has benefited from increased capital allocation to low P/B stocks in Korea due to the Corporate Value Up program. SK Square is trading at P/B of 0.7x.
Amid the tremendous demand for Nvidia’s AI related chips, this has also benefited several Korean companies including SK Hynix and SK Square.

HD Hyundai Marine Solutions IPO: Valuation Insights

HD Hyundai Marine Solution (443060 KS), the ship after-service subsidiary of HD Hyundai (267250 KS), aims to raise up to US$550 million.
We previously discussed the IPO in HD Hyundai Marine Solutions IPO: The Investment Case.
We examine the syndicate’s valuation methodology. Our analysis suggests that the HMS is, at best, fairly valued at the IPO price range. We would pass on the IPO.

IntelliCentrics (6819 HK): 18th April “Scheme” Vote

Soon-To-Be ex-healthcare technology platform play IntelliCentrics Global Holding (6819 HK) is a pseudo risk arb.
IntelliCentrics is selling its key ops, declaring a special dividend from the sale proceeds, subsequently being wound up, then delisted.
Shareholders have the option of voting on a raft of resolutions on the 18th April. Irrevocables total 72.1%. This is done. Just the final dividend amount needs to be confirmed.

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.

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Apr 02

Most Read: Toyota Industries, Sciclone Pharmaceuticals, Samsung C&T, Rakuten, TSE Tokyo Price Index TOPIX, HYBE , Isetan Singapore, Amorepacific Corp, IntelliCentrics Global Holding, HDC Hyundai Development Co-Engineering & Construction and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Denso’s Big Multi-Year Toyota Industries (6201) Selldown
SciClone Pharma (6600 HK): Privatisation At IPO Price
Lee Seo-Hyun’s Unexpected Return: Implications for Samsung’s Conglomerate Dynamics
If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated
Updated Tool (31Mar24) & “Diff File Generator” For TSE “Mgmt Conscious of Capital Cost/Stock Price”
KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents
Isetan Singapore (ISET SP): Isetan Mitsukoshi (3099 JP)’s 154% Premium Scheme Offer
Gap Trades in Korean Prefs Vs Common Share Pairs in 2Q 2024
IntelliCentrics (6819 HK): Special Dividend Vote on 18 April
Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024

Denso’s Big Multi-Year Toyota Industries (6201) Selldown

We knew this was coming. We did not know HOW it was coming. The news today has to be seen as a bit of a disappointment.
Why is it a disappointment? Toyota Industries (6201 JP) is not buying back a big chunk, and there is no offering to oblige new investors to take a look.
This is long, slow, leakage on a company which is not overwhelmingly cheap, where it requires good governance to get out well, and even then…

SciClone Pharma (6600 HK): Privatisation At IPO Price

After Sciclone Pharmaceuticals (6600 HK) was suspended on the 19th March pursuant to the Takeovers Code, I speculated a Scheme at the March 2021 IPO Price. And that’s what unfolded.
Li Zhenfu (SciClone’s NED), Assicurazioni Generali (G IM) and concert parties (collectively controlling 36.61%) have made an Offer at $18.80/share, a 33.9% premium to last close. Terms are final.
The long stop date is the 31 October. That’s too conservative. This could be wrapped up late July.

Lee Seo-Hyun’s Unexpected Return: Implications for Samsung’s Conglomerate Dynamics

Today, Lee Seo-hyun returned as the top executive at Samsung C&T, which officially announced her as the head of its Strategic Planning Division.
Her return to Samsung C&T might not just be a simple comeback – it could be seen as a setup for some big changes within the company.
Considering Samsung C&T’s Value-up Momentum, aligning with Lee Seo-hyun’s return, we must position for potential price impact, focusing on portfolio streamlining.

If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated

A couple of years ago, Rakuten (4755 JP) – burning through cash to start its mobile business – announced it would its Bank and Securities units. Bank listed. Securities didn’t.
Mizuho ended up buying 49% of Securities. Today, it was announced there would be discussions to put Bank, Securities, Card, and Insurance in a new listed Holdco.
How this works will end up being complicated. More complicated than it should be. But the complexity would make this more of a win-win for everyone.

Updated Tool (31Mar24) & “Diff File Generator” For TSE “Mgmt Conscious of Capital Cost/Stock Price”

In mid-January, the TSE announced a “name-and-shame” list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】. But they did not actually shame.
The list shows which companies have disclosed a policy/consideration. But no data/links. We have the links, and we are weeks ahead of the TSE. Working to get months ahead.
We created a tool to name everyone, show their reports, provide links, and now a new tool. Put in a name, see the difference between the Old/New Reports.

KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents

KRX limits individual stock weight to 20% in ETFs with few constituents. KRX confirms working on it, with an official announcement expected soon.
Excludes index ETFs like KOSPI 200. KRX hasn’t finalized criteria for constituent number but expected to involve fewer than 30 stocks.
This could open new passive trading opportunities. Sector ETF cap at 30%, large AUM ones offer noteworthy trading potential.

Isetan Singapore (ISET SP): Isetan Mitsukoshi (3099 JP)’s 154% Premium Scheme Offer

Isetan Singapore (ISET SP) disclosed privatisation through a scheme of arrangement from Isetan Mitsukoshi Holdings Ltd (3099 JP) at S$7.20 per share, a 153.5% premium to the last close.
The high takeover premium reflects the fair value of investment properties of S$300.4 million, i.e., S$7.28 per share, marginally above the offer price.
The offer is attractive and 2.1% higher than the all-time high. The vote should comfortably get up. The scheme meeting is from early to mid-July.

Gap Trades in Korean Prefs Vs Common Share Pairs in 2Q 2024

In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 2Q 2024.
Although the discount on the preferred shares versus the common shares has been gradually narrowing in the past decade, this discount increased from end of 2021 to 1 April 2024.
On a longer timeframe (3-4 years), we believe this discount could narrow further to the 20-25% range, which provides additional opportunities for the Korean preferred shares to further make gains.

IntelliCentrics (6819 HK): Special Dividend Vote on 18 April

The IntelliCentrics Global Holding (6819 HK) IFA considers the terms for the disposal of assets to symplr software as fair and reasonable. The EGM vote is on 18 April.
The consideration will be distributed to shareholders as a special dividend with a minimum and maximum of US$0.52 (HK$4.07) and US$0.55 (HK$4.30), respectively.
Irrevocables ensure that the EGM vote will pass. At the last close and for a 7 May payment, the gross and annualised spread of the minimum dividend is 2.8%/33.6%.

Korean Holdcos Vs Opcos Gap Trading Opportunities in 2Q 2024

In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 2Q 2024.
Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.
These pairs could generate trading opportunities in terms of their pricing gaps closing reversal. [CJ Corp vs CJ Cheiljedang & Hanjin KAL Corp vs Korean Air Lines].

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Apr 01

Most Read: Toyota Industries, Samsung C&T, Koito Manufacturing, Samsonite, Zhuzhou CRRC Times Electric Co., Ltd., HD Hyundai Marine Solution , Taiwan Semiconductor (TSMC) – ADR, TSE Tokyo Price Index TOPIX, Sciclone Pharmaceuticals and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Denso’s Big Multi-Year Toyota Industries (6201) Selldown
Lee Seo-Hyun’s Unexpected Return: Implications for Samsung’s Conglomerate Dynamics
Koito Mfg – Stock Over-Pops on New MTMP/Buyback; There Will Be Overhang
Last Week in Event SPACE: Lawson, Samsonite, Socionext, ZOZO
Samsung C&T: Why Is Lee Seo-Hyun Returning as the President?
A/H Premium Tracker (To 28 Mar 2024): Liquid AH Premia Still Very Wide
HD Hyundai Marine Solutions IPO: The Investment Case
Taiwan Dual-Listings Monitor: TSMC Continues Falling from Extreme Level; CHT at Unusual Discount
Updated Tool (31Mar24) & “Diff File Generator” For TSE “Mgmt Conscious of Capital Cost/Stock Price”
Merger Arb Mondays (01 Apr) – SciClone, IntelliCentrics, CIMC Vehicles, Lawson, Roland DG, MMA

Denso’s Big Multi-Year Toyota Industries (6201) Selldown

We knew this was coming. We did not know HOW it was coming. The news today has to be seen as a bit of a disappointment.
Why is it a disappointment? Toyota Industries (6201 JP) is not buying back a big chunk, and there is no offering to oblige new investors to take a look.
This is long, slow, leakage on a company which is not overwhelmingly cheap, where it requires good governance to get out well, and even then…

Lee Seo-Hyun’s Unexpected Return: Implications for Samsung’s Conglomerate Dynamics

Today, Lee Seo-hyun returned as the top executive at Samsung C&T, which officially announced her as the head of its Strategic Planning Division.
Her return to Samsung C&T might not just be a simple comeback – it could be seen as a setup for some big changes within the company.
Considering Samsung C&T’s Value-up Momentum, aligning with Lee Seo-hyun’s return, we must position for potential price impact, focusing on portfolio streamlining.

Koito Mfg – Stock Over-Pops on New MTMP/Buyback; There Will Be Overhang

With a new Medium-Term Management Plan and a buyback, the stock was cheap as of Thursday’s close. It was less cheap after it went limit up +25% on Friday.
That put it in the camp of “it may go up more but probably not a lot”. It has told you about big divs and buybacks.
But model it up and they need to do more buybacks. Both to meet share price gains and the needs of legions of potential cross-holders looking to sell.

Last Week in Event SPACE: Lawson, Samsonite, Socionext, ZOZO

Lawson Inc (2651 JP)‘s Tender Offer is still too cheap. It is also a somewhat non-transparent and unfair process. And it does not adhere to the METI Fair M&A Guidelines.
Samsonite (1910 HK)‘s pursuit of a dual listing (primary or secondary?) appears to be put the buyout on the backburner. For now.
Socionext (6526 JP) and ZOZO Inc (3092 JP) have a large part of the Max Real World Float to displace. Neither of those two names are outlandishly expensive.

Samsung C&T: Why Is Lee Seo-Hyun Returning as the President?

On 29 March, it was reported that Lee Seo-Hyun has been appointed as the President of Samsung C&T (028260 KS), returning to the company after more than five years.
Lee Seo-Hyun is the third child of the late Samsung Chairman Lee Kun-Hee. She will be in charge of the overall strategic planning of Samsung C&T.
Many investors will likely to question this move, since they may question her ability to make strategic decisions that are in the best interests of all the minority investors.

A/H Premium Tracker (To 28 Mar 2024): Liquid AH Premia Still Very Wide

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s consecutive buying streak ended on Monday, and a new buying streak started Tuesday. NORTHBOUND net bought the dip. Last week’s (double long) choice Longyuan Power was up 5.24%.
Narrow AH premia narrowed some. Wider AH premia saw Hs outperform. There is a LOT of spread left in this market. 7 recommendations this week.

HD Hyundai Marine Solutions IPO: The Investment Case

HD Hyundai Marine Solution (443060 KS), the ship after-service subsidiary of HD Hyundai (267250 KS), aims to raise up to US$550 million.
The international book-building will run from 8 to 22 April, while the domestic book will open from 16 to 22 April. Pricing will be announced on 24 April.
The investment case rests on solid top-line growth, a healthy order book, rising margins, cash generation, and modest leverage.

Taiwan Dual-Listings Monitor: TSMC Continues Falling from Extreme Level; CHT at Unusual Discount

By Vincent Fernando, CFA

TSMC: +11.8% Premium — Falling Closer to Its Historical Range
ASE: +9.2% Premium; Further Breakdown Could Indicate Return to Previous Trading Range
CHT: -1.8% Discount — Good Level to Long the Spread

Updated Tool (31Mar24) & “Diff File Generator” For TSE “Mgmt Conscious of Capital Cost/Stock Price”

In mid-January, the TSE announced a “name-and-shame” list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】. But they did not actually shame.
The list shows which companies have disclosed a policy/consideration. But no data/links. We have the links, and we are weeks ahead of the TSE. Working to get months ahead.
We created a tool to name everyone, show their reports, provide links, and now a new tool. Put in a name, see the difference between the Old/New Reports.

Merger Arb Mondays (01 Apr) – SciClone, IntelliCentrics, CIMC Vehicles, Lawson, Roland DG, MMA

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: Sciclone Pharmaceuticals (6600 HK), Qantm Intellectual Property (QIP AU), Genex Power Ltd (GNX AU), Southern Cross Media (SXL AU), China Traditional Chinese Medicine (570 HK), QV Equities.
Lowest spreads: Tietto Minerals Ltd (TIE AU), Roland DG Corp (6789 JP), Chilled & Frozen Logistics Holdings (9099 JP), Pact Group Holdings (PGH AU), Mma Offshore (MRM AU).

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Mar 31

Most Read: ZOZO Inc, Shenzhen New Industries Biomedical Engineering-A, Samsung C&T, NIFTY Index, PDD Holdings, Lawson Inc, Roland DG Corp, Tencent, Toyota Industries and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out
CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
Index Rebalance & ETF Flow Recap: NKY, ASX, CSI300, A50, STTF, LowVol30, Value Up
Lee Seo-Hyun’s Unexpected Return: Implications for Samsung’s Conglomerate Dynamics
EQD | Is the NIFTY’s Rally Halting?
Asia Ex-Japan Funds: Extremes in Positioning & Momentum
(Mostly) Asia-Pac M&A:MMA, Boral, Orecorp, Probiotec, CPMC, CIMC Vehicle, Roland DG, Welbe, SciClone
Weekly Deals Digest (31 Mar) – Roland DG, Lawson, SciClone, Probiotec, MMA Offshore, Bharti Hexacom
HK Connect SOUTHBOUND Flows (To 28 Mar 2024); Strong Net Buying on Tencent, Telcos, and Energy
Denso’s Big Multi-Year Toyota Industries (6201) Selldown

Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out

DISCO (6146 JP), Socionext (6526 JP) and ZOZO (3092 JP) will replace Takara Holdings (2531 JP), Sumitomo Osaka Cement (5232 JP) and Pacific Metals (5541 JP) in the Nikkei 225.
Nitori Holdings (9843 JP)‘s PAF will increase from 0.3 to 0.5, and surprisingly there is no PAF adjustment for ZOZO Inc (3092 JP).
Passive trackers need to buy between 1-18 days of ADV on the adds while selling between 2.7-28 days of ADV on the deletes. There is a big funding trade too.

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).

Lee Seo-Hyun’s Unexpected Return: Implications for Samsung’s Conglomerate Dynamics

Today, Lee Seo-hyun returned as the top executive at Samsung C&T, which officially announced her as the head of its Strategic Planning Division.
Her return to Samsung C&T might not just be a simple comeback – it could be seen as a setup for some big changes within the company.
Considering Samsung C&T’s Value-up Momentum, aligning with Lee Seo-hyun’s return, we must position for potential price impact, focusing on portfolio streamlining.

EQD | Is the NIFTY’s Rally Halting?

By Nico Rosti

The NIFTY Index has been rallying for months, but in the last few weeks there has been a considerable slow down in its rising pace.
Currently the index is at a point where it could pull back this coming week, based on our MRM patterns reading.
A possible alternative scenario would be a continuation of the rally for a total of 4-5 weeks up in a row.

Asia Ex-Japan Funds: Extremes in Positioning & Momentum

By Steven Holden

This report identifies stocks at the extremes of their positioning or momentum ranges within our Asia Ex-Japan fund universe.
We have pinpointed eight stocks either at their historical positioning extremes or undergoing significant changes in fund ownership, providing detailed ownership profiles for each.
Pinduoduo Inc and UltraTech Cement make gains, Sunny Optical sees ownership drift south, New Oriental Education moves off the lows.

(Mostly) Asia-Pac M&A:MMA, Boral, Orecorp, Probiotec, CPMC, CIMC Vehicle, Roland DG, Welbe, SciClone

I tally 53 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals were discussed this week on Smartkarma: MMA Offshore (MRM AU)‘s Scheme with Singapore’s Cyan Renewables; and Sciclone Pharmaceuticals (6600 HK)‘s Scheme.
Key updates took place on: Boral (BLD AU), Orecorp (ORR AU), Lawson Inc (2651 JP), CPMC (906 HK), CIMC Vehicle (1839 HK), Roland DG (6789 JP), and Welbe (6556 JP).

Weekly Deals Digest (31 Mar) – Roland DG, Lawson, SciClone, Probiotec, MMA Offshore, Bharti Hexacom

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: Bharti Hexacom (6597372Z IN) and Lianlian DigiTech (2104619D CH) IPOs.
Event-Driven developments: Lawson Inc (2651 JP), Roland DG Corp (6789 JP), Sciclone Pharmaceuticals (6600 HK), CIMC Vehicle Group Co Ltd (1839 HK), HKBN Ltd (1310 HK), Probiotec Ltd (PBP AU).

HK Connect SOUTHBOUND Flows (To 28 Mar 2024); Strong Net Buying on Tencent, Telcos, and Energy

A shares were down on the week, but rallied Thursday and Friday.
Net SOUTHBOUND buying was +HK8.5bn after $57bn the two weeks before. SOUTHBOUND ended its consecutive net daily buy streak Monday, then started buying again.
The flavour of SOUTHBOUND buying has been high-div SOEs for months and months. That is starting to change slightly. Tencent was the top net buy this week. Again.

Denso’s Big Multi-Year Toyota Industries (6201) Selldown

We knew this was coming. We did not know HOW it was coming. The news today has to be seen as a bit of a disappointment.
Why is it a disappointment? Toyota Industries (6201 JP) is not buying back a big chunk, and there is no offering to oblige new investors to take a look.
This is long, slow, leakage on a company which is not overwhelmingly cheap, where it requires good governance to get out well, and even then…

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Mar 30

Most Read: Shenzhen New Industries Biomedical Engineering-A, ZOZO Inc, Socionext, Fast Retailing, Rakuten Bank , Samsung C&T, Angel Robotics and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out
CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
Index Rebalance & ETF Flow Recap: NKY, ASX, CSI300, A50, STTF, LowVol30, Value Up
March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD
Fast Retailing: Earnings Preview
Rakuten Bank (5838 JP) Stands Out from the Other Asian Digital Banks
Lee Seo-Hyun’s Unexpected Return: Implications for Samsung’s Conglomerate Dynamics
Hong Kong Buybacks Weekly (Mar 29th): Tencent, Aia, CK Asset
Introducing a Data Source for Korean Local Institutions’ Interests
End of Mandatory Lock-Up Periods for 46 Companies in Korea in April 2024

Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out

DISCO (6146 JP), Socionext (6526 JP) and ZOZO (3092 JP) will replace Takara Holdings (2531 JP), Sumitomo Osaka Cement (5232 JP) and Pacific Metals (5541 JP) in the Nikkei 225.
Nitori Holdings (9843 JP)‘s PAF will increase from 0.3 to 0.5, and surprisingly there is no PAF adjustment for ZOZO Inc (3092 JP).
Passive trackers need to buy between 1-18 days of ADV on the adds while selling between 2.7-28 days of ADV on the deletes. There is a big funding trade too.

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).

March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD

In March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split I suggested Socionext (6526 JP) needed a stock split to get in.
Today after the close, Socionext reported H1, guided up full-year earnings (still too conservative), raised its div, and announced a 5:1 stock split for Jan1 2024.
DISCO Corp (6146 JP) is now likely to be a top 75, which leaves the question of which Consumer Goods stock would likely be added.

Fast Retailing: Earnings Preview

By Oshadhi Kumarasiri

While domestic revenues may have slowed, Uniqlo’s domestic OP shows upside potential driven by upside to GM and a gradual reduction in SG&A expenditure.
Simultaneously, Uniqlo International is exhibiting strong performance, with anticipated revenue and OP growth of 21% and 30% YoY respectively.
Despite expecting a strong earnings beat, concerns over high valuations and index issues make us cautious about trading Fast Retailing (9983 JP) in the current earnings cycle.

Rakuten Bank (5838 JP) Stands Out from the Other Asian Digital Banks

By Victor Galliano

Despite Rakuten Bank shares’ re-rating, we believe it remains attractive, with its strong balance sheet and its low cost base with undemanding valuations compared to its Asian digital banking peers
Rakuten Bank is well positioned to benefit from the negative interest rate policy exit in Japan, with its low LDR, high cash balances, growing loan book and healthy capital ratio
It continues to leverage off the Rakuten Group eco-system, as a low cost source of new customers; nearly a third of clients use Rakuten Bank as their primary Japanese bank

Lee Seo-Hyun’s Unexpected Return: Implications for Samsung’s Conglomerate Dynamics

Today, Lee Seo-hyun returned as the top executive at Samsung C&T, which officially announced her as the head of its Strategic Planning Division.
Her return to Samsung C&T might not just be a simple comeback – it could be seen as a setup for some big changes within the company.
Considering Samsung C&T’s Value-up Momentum, aligning with Lee Seo-hyun’s return, we must position for potential price impact, focusing on portfolio streamlining.

Hong Kong Buybacks Weekly (Mar 29th): Tencent, Aia, CK Asset

By Ke Yan, CFA, FRM

We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Mar 29th based on HKEx daily reports.
In the past 7 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), AIA (1299 HK), CK Asset (1113 HK).
In the past 30 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Dongyue (189 HK), AIA (1299 HK).

Introducing a Data Source for Korean Local Institutions’ Interests

Recent trends in the most viewed local brokerage research reports by Korean institutions, compiled by FnGuide, offer insights into current investor interests.
Notable resurgence in local institution interest in the semiconductor sector, especially with the temporal gap until May when the Value-up momentum materializes, notably evident in the AI semiconductor rally companies.
Local institutions typically follow stocks of their interest with a slight lag. This suggests potential positive flows in the listed semiconductor companies until the Value-up momentum solidifies in May.

End of Mandatory Lock-Up Periods for 46 Companies in Korea in April 2024

We discuss the end of the mandatory lock-up periods for 46 stocks in Korea in April 2024, among which 6 are in KOSPI and 40 are in KOSDAQ.
These 46 stocks on average could be subject to further selling pressures in April and could underperform relative to the market.
The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in April include APR, Angel Robotics, and Samhyun.

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✓ Events & Webinars

Mar 29

Most Read: ZOZO Inc, Lawson Inc, Alteogen Inc, Koito Manufacturing, CPMC Holdings, HD Hyundai Marine Solution , Sciclone Pharmaceuticals, RENOVA Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out
KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap
Alteogen: Block Deal Sale of About 3% of Shares
Koito Mfg (7276) – New Medium Term Plan, BIG Buyback, Even Bigger Shareholder Returns Planned
CPMC (906 HK): Shares Retrace As Clock Ticks On ORG’s Bid
Local Color on HD Hyundai Marine Solution’s Excessive IPO Valuation
SciClone Pharma (6600 HK): GL Capital’s Scheme Offer at HK$18.80
Quiddity JPX-Nikkei 400 Rebal 2024: End-Mar 2024 Estimates and Another Trade Reco
HD Hyundai Marine Solution IPO – Strong Profitability Growth but Lacking in Disclosures
Ohayo Japan | S&P Hits Record: Japan Passes Budget

Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out

DISCO (6146 JP), Socionext (6526 JP) and ZOZO (3092 JP) will replace Takara Holdings (2531 JP), Sumitomo Osaka Cement (5232 JP) and Pacific Metals (5541 JP) in the Nikkei 225.
Nitori Holdings (9843 JP)‘s PAF will increase from 0.3 to 0.5, and surprisingly there is no PAF adjustment for ZOZO Inc (3092 JP).
Passive trackers need to buy between 1-18 days of ADV on the adds while selling between 2.7-28 days of ADV on the deletes. There is a big funding trade too.

KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap

KDDI has announced the launch tomorrow of its Tender Offer to buy out the minorities in Lawson Inc (2651 JP).
It’s still too cheap. It is still a somewhat non-transparent and unfair process as far as I can tell. And it does not adhere to the METI Fair M&A Guidelines.
There SHOULD BE some activist interest to get KDDI to bump but it is not clear that will show up.

Alteogen: Block Deal Sale of About 3% of Shares

On 27 March, Alteogen announced that Jeong Hye-shin, former Alteogen Chief Strategy Officer (CSO), sold 1.6 million shares of Alteogen stock in after-hours trading in block deal sale.
The block deal sale price was 197,770 won. Alteogen’s share price declined by 10.9% today to 195,600 won. Block deal sale amount was about 316 billion won.
This block deal sale combined with the sharp recent, share price increase are likely to result in a near-term consolidation of its share price in the next several months.

Koito Mfg (7276) – New Medium Term Plan, BIG Buyback, Even Bigger Shareholder Returns Planned

Koito Manufacturing (7276 JP) is a $4bn marketcap (~$6bn sales) Toyota Group auto parts manufacturer specialising in lighting parts, famous for being a T.Boone Pickens target in the 1980s.
As Toyota Group’s leaders restructure their cross-holdings and try to get to 1.0x PBR and a high enough ROE to sustain it, capital efficiency is on the block.
Koito today announced a revised Mid-Term Management Plan, a change in KPIs (higher), a large shareholder return plan, and a large buyback. As always, the fun is in the details.

CPMC (906 HK): Shares Retrace As Clock Ticks On ORG’s Bid

On the 6th Dec 2023, packaging play CPMC Holdings (906 HK) announced a pre-conditional Offer from SASAC and the National Council for Social Security Fund of China (NCSSF).
A decent premium (32.1%), presumed rubber-stamped regulatory approvals, and a 50% acceptance condition with 29.7% in the bag – this Offer looked done. Then ORG announced a possible competing proposal.
Nearly four months have elapsed and details on ORG’s Offer remain unknown. SASAC/NCSSF chip away at reg approvals. Shares are down 2.6% from its recent peak. That makes sense.

Local Color on HD Hyundai Marine Solution’s Excessive IPO Valuation

Valuation controversy arises from comparing HD Hyundai Marine Solution, a ship AS specialist, with diverse global companies, leading to a target market cap of ₩5T.
HD KSOE’s inclusion worsens the valuation controversy. Applying HD KSOE’s last year PER without adjusting for a significant one-off profit seems to inflate HD Hyundai Marine Solution’s PER.
Currently, major local IPO funds see HD Hyundai Marine’s valuation nearing ₩4T as excessive, despite the industry’s revival and potential growth in eco-friendly ship conversions, impacting the upcoming bookbuilding process.

SciClone Pharma (6600 HK): GL Capital’s Scheme Offer at HK$18.80

Sciclone Pharmaceuticals (6600 HK) disclosed a scheme privatisation offer from GL Capital at HK$18.80 per share, a 33.9% premium to the undisturbed price (HK$14.04 on 15 March).
The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). The Bank of China, which holds a blocking stake, should be supportive.
The offer price has been declared final. It is reasonable, aligning with the all-time high and the IPO price. This is a done deal.

Quiddity JPX-Nikkei 400 Rebal 2024: End-Mar 2024 Estimates and Another Trade Reco

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, adjusted every year in August.
We look at the rankings of the potential ADDs/DELs every month for the next rebal, based on most recent trading data.
Every month we provide trade suggestions. The last three months have seen market-neutral returns of +3.0%, +6.5%, +3.2% respectively for the one-month periods. A new trade is suggested below.

HD Hyundai Marine Solution IPO – Strong Profitability Growth but Lacking in Disclosures

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 this note, we talk about the company’s historical performance.

Ohayo Japan | S&P Hits Record: Japan Passes Budget

By Mark Chadwick

US Market Wrap: S&P 500 hits record, Dow inches higher; tech stocks lag.
Japan Budget: Parliament passes ¥112 trillion budget, emphasizing defense spending, inflation mitigation, and earthquake recovery.
Stocks Update: Mercari introduces Eco Mercari Delivery; Kubota’s construction equipment business grows; Mitsubishi Electric expands digital workforce.

💡 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 Analytics and News
✓ Events & Webinars

Mar 28

Most Read: ZOZO Inc, Fast Retailing, Shenzhen New Industries Biomedical Engineering-A, Kokusai Electric , HD Hyundai Marine Solution , Lawson Inc, Alteogen Inc, CIMC Vehicle Group Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

The Bigly March 2024 “Wednesday-Friday Trade” (Surprising Flows)
Fast Retailing (9983) – Now At Double Downweight Levels
CSI300 Index Rebalance Preview: Potential Adds Outperforming Despite ETF Inflows
TOPIX “Big April Basket” 2024 Expectations: More High-Conviction Names; Better Trade Ideas
HD Hyundai Marine Solution IPO Preview
KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap
Alteogen: Block Deal Sale of About 3% of Shares
Lawson (2651 JP): KDDI Corp (9433 JP) Tender Offer Launches
Fast Retailing: Earnings Preview
CIMC (1839 HK): 18th April Shareholder Vote

The Bigly March 2024 “Wednesday-Friday Trade” (Surprising Flows)

Every year it’s the same trade. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
But there may be ¥1.0-1.2trln+ to buy on one day into the close later this month, then ad hoc buys of ¥630bn and index sells of ~¥600bn 2 days later.
Over the past ten years, the two day return on the March trade is great. This year the Nikkei funding trade makes things more complicated.

Fast Retailing (9983) – Now At Double Downweight Levels

Fast Retailing (9983 JP) is the largest weight in the Nikkei 225. On Friday, it closed at 11.36% of the Nikkei 225, putting it well above the 10% cap level.
If the stock is above 10% on a pro-forma basis on the base date of 31 July 2024, it will get a capping coefficient. 8.4mm shares (US$2.5bn) to sell.
At Friday’s close, we were borderline above a double-downweight trigger. At Monday’s open, just below. 30mins later? Back well above. Lots of interesting issues and nuances here for a short.

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.

TOPIX “Big April Basket” 2024 Expectations: More High-Conviction Names; Better Trade Ideas

The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation.
For companies with “low liquidity” the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation.
Every April, the application of this liquidity factor is reviewed by the TSE. In this insight, we take an early look at what could happen in April 2024.

HD Hyundai Marine Solution IPO Preview

HD Hyundai Marine Solution is getting ready to complete its IPO in KOSPI in May 2024. This will be one of the largest IPOs in Korea in 2024.
The IPO price range is from 73,300 won to 83,400 won. The IPO offering amount is from 652.4 billion won to 742.3 billion won.
A key beneficiary of HD Hyundai Marine Solution IPO is HD Hyundai (62% ownership). Our NAV analysis suggests implied price of 95,632 for HD Hyundai (40% higher than current price).

KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap

KDDI has announced the launch tomorrow of its Tender Offer to buy out the minorities in Lawson Inc (2651 JP).
It’s still too cheap. It is still a somewhat non-transparent and unfair process as far as I can tell. And it does not adhere to the METI Fair M&A Guidelines.
There SHOULD BE some activist interest to get KDDI to bump but it is not clear that will show up.

Alteogen: Block Deal Sale of About 3% of Shares

On 27 March, Alteogen announced that Jeong Hye-shin, former Alteogen Chief Strategy Officer (CSO), sold 1.6 million shares of Alteogen stock in after-hours trading in block deal sale.
The block deal sale price was 197,770 won. Alteogen’s share price declined by 10.9% today to 195,600 won. Block deal sale amount was about 316 billion won.
This block deal sale combined with the sharp recent, share price increase are likely to result in a near-term consolidation of its share price in the next several months.

Lawson (2651 JP): KDDI Corp (9433 JP) Tender Offer Launches

Lawson Inc (2651 JP) has announced that the pre-condition for the KDDI Corp (9433 JP) tender offer is satisfied. The offer terms are unchanged at JPY10,360 per share.
The offer is arguably light due to the market re-rating, does not reflect significant synergies and is below the midpoint of the IFA DCF valuation range.
Nevertheless, the offer will likely succeed as it represents an all-time high, with no vocal opposition, an achievable 30.2% minority acceptance rate, and the shares never trading through terms.

Fast Retailing: Earnings Preview

By Oshadhi Kumarasiri

While domestic revenues may have slowed, Uniqlo’s domestic OP shows upside potential driven by upside to GM and a gradual reduction in SG&A expenditure.
Simultaneously, Uniqlo International is exhibiting strong performance, with anticipated revenue and OP growth of 21% and 30% YoY respectively.
Despite expecting a strong earnings beat, concerns over high valuations and index issues make us cautious about trading Fast Retailing (9983 JP) in the current earnings cycle.

CIMC (1839 HK): 18th April Shareholder Vote