Most Read

Today after the close we got news that after a year-plus of Hamamatsu Photonics Kk (6965 JP)‘s sliding stock price, Toyota Motor (7203 JP) is selling their 5+% stake.
The offering is standard. Probably prices 9 Sep 2024. HP’s amended buyback program and probable index upweights offset most of the offering size over the next several months.
So investors have to decide whether they want to catch the falling knife.

Sanrio (8136 JP) – Kitty Behaving Badly

Sanrio (8136 JP) announced a deal last week which I discussed in Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon. Next day it fell sharply.
There was shorting involved, and since then the stock has rallied 18% to clear the undisturbed price which itself was an all-time high, up 5% in the previous two days.
There is some LO buying, some HF covering, but a LOT of day-traders. In five days the stock has traded 903% of its Maximum Real World Float. That’s a lot.

Goodman Group (GMG AU) Placement: Limited Index Flows

China Investment Corp owns 7.84% of Goodman Group (GMG AU) and is looking to sell 50.4m shares (2.64% of shares out) at a price range of A$37.55-37.6/share, a tiny discount.
Goodman Group (GMG AU) has run away from its peers over the last couple of years and there could be a move lower in the stock following the placement.
There will be limited passive buying in the short-term coinciding with the placement. There will be some more passive buying in February.

7&I (3382 JP) – Ito-San MBO Plan Includes 7-Eleven US IPO… Which LeadsTo A Modest Proposal

A Bloomberg article late in the trading session today said the Seven & I Holdings (3382 JP) MBO proposal by Ito family scion Ito Junro includes a US assets IPO.
The idea? IPO proceeds would help pay down MBO debt to Japanese banks. Seven & i would retain a stake. This is not dissimilar to Berkshire Hathaway buying a stake.
But more directly, this leads us back to 7&I (3382) – What If… A Modest Proposal. Possible strategic mistake by Ito-san here. ACT should act on this.

Auckland Airport (AIA NZ) Placement: Potential Index Flows

Auckland City Council is looking to sell 163.23m shares of Auckland Intl Airport (AIA NZ) in a clean-up trade. This is big at NZ$1.3bn and 64 days of ADV.
The placement was expected by the market and the stock has run up despite that. The stock is in a trading halt and should open lower.
There will be passive buying at the time of settlement of the placement shares and that will mop up around 15% of the offering.

Latest Scoop on President Yoon’s Impeachment Motion and How to Play It in the Market

The key point is Saturday—watch if eight ruling party lawmakers defect. Hahn Dong-hoon may push for an early election, with 15 loyalists backing him, so it’s definitely possible.
I’d bet on the ruling party leader pivoting, accepting impeachment, and pushing for an early election. Time to scout beneficiaries and set up an aggressive trading play.
Short-Term, I’m eyeing Kakao affiliates, under-the-radar IT stocks, and those likely to benefit from corporate governance changes. Low birth rate-related sectors are also set for strong upside.

ESR Group (1821 HK): Consortium’s Scheme Cash/Scrip Privatisation Offer

ESR Group (1821 HK)’s preconditional scheme offer from the consortium is either cash (HK$13.00), scrip or a combination of cash/scrip. The offer is final.
The precondition relates to several regulatory approvals. The precondition satisfaction does not carry the same risk as the China Traditional Chinese Medicine (570 HK) deal break.
The irrevocable (31.03% of outstanding shares) ensure that shareholders with blocking or close to blocking stakes are supportive. This is a done deal, with timing the key risk.

Ecopro BM (247540 KS): Index Implications as KOSPI Transfer Nears

Eight months after shareholders approved the transfer from the KOSDAQ to the KOSPI market, Ecopro BM (247540 KS) has submitted the application for section transfer to the KRX.
Given historical precedent, the transfer could take place in February. Ecopro BM‘s deletion will mean an inclusion to the KOSDAQ150 Index to maintain the number of index constituents at 150.
Ecopro BM (247540 KS) will be deleted from the KOSDAQ 150 Index leading to passive selling and some short covering. Then will come the inclusion to the KOSPI 200 Index.

Auckland Airport Placement – NZ$1.3bn (US$770m) Cleanup Sale Will Remove the Overhang

By Clarence Chu

Auckland Council is looking to raise NZ$1.3bn (US$772m) from selling its entire stake in Auckland Intl Airport (AIA NZ).
Overall, the selldown will be a large one for the stock to digest at 10% of shares outstanding and 62 days of three month ADV.
In this note, we run the deal through our ECM framework and comment on deal dynamics.

ESR (1821 HK): HK$13.00/Share Offer

HK$13.00/Share (deemed final). That’s the key takeaway here as the Starwood/Warburg Pincus Consortium (finally) tables a firm offer, by way of a pre-conditional Scheme.
Pre-Conditions are extensive, with a long stop date of the 4th September 2025.
HK$13.00 is below prior expectations of a HK$14+ handle. But with irrevocables of 30.79% of the register (and 51.24% of Scheme shares), this is done. A scrip option is afforded.

💡 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

Dec 04

Most Read: Kioxia Holdings , Korea Stock Exchange Kospi Index, Sanrio, Phison Electronics, Persistent Systems, Goodman Group, HKBN Ltd, Meituan, Auckland Intl Airport and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Kioxia (285A) IPO: Index Entry Timeline & Overhang from Plans to Increase Float
Breaking: Korea Drops Martial Law, Local Markets in Turmoil—What’s the Short-Term Trade Play Here?
Sanrio (8136 JP) – Kitty Behaving Badly
TIP Customized Taiwan Select High Div Index Rebalance Preview: US$2.8bn Trade as Adds Outperform
NIFTY200 Momentum30 Index Rebalance Preview: 65% One-Way Turnover and US$1.6bn Trade
Goodman Group (GMG AU) Placement: Limited Index Flows
Goodman Group Placement – Large Shareholder Looking to Raise US$1.2bn but Discount Is Tight
HKBN (1310 HK): China Mobile’s “Fair” Tendering Offer
HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$3.4bn of Flows Post Capping (Dec 2024)
Auckland Airport (AIA NZ) Placement: Potential Index Flows

Kioxia (285A) IPO: Index Entry Timeline & Overhang from Plans to Increase Float

Kioxia Holdings (285A JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 18 December.
At the mid-point of the IPO price range of JPY 1390-1520/share, Kioxia Holdings (285A JP) will be valued at JPY 784bn (US$5.24bn).
TOPIX inclusion will take place in January while inclusion in global indices is likely to take place in May and June. Selling stock to increase float will be an overhang.

Breaking: Korea Drops Martial Law, Local Markets in Turmoil—What’s the Short-Term Trade Play Here?

Martial law has been declared 11 times since 1945, but this is the first since Korea’s post-‘90 democratization.
The Martial Law Command’s first proclamation blocks parliament, raising legal questions about its constitutionality and making any immediate attempt to end martial law uncertain.
Defense and telecom stocks could outperform short-term due to martial law, making them strong trading targets to watch.

Sanrio (8136 JP) – Kitty Behaving Badly

Sanrio (8136 JP) announced a deal last week which I discussed in Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon. Next day it fell sharply.
There was shorting involved, and since then the stock has rallied 18% to clear the undisturbed price which itself was an all-time high, up 5% in the previous two days.
There is some LO buying, some HF covering, but a LOT of day-traders. In five days the stock has traded 903% of its Maximum Real World Float. That’s a lot.

TIP Customized Taiwan Select High Div Index Rebalance Preview: US$2.8bn Trade as Adds Outperform

The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 285bn (US$8.75bn).
We forecast 8 changes a side at the December rebalance with an estimated one-way turnover of around 16% and a round-trip trade of around US$2.8bn.
An equal weighted basket of potential inclusions has outperformed an equal weighted basket of potential deletions since the start of July with most of the outperformance coming from September.

NIFTY200 Momentum30 Index Rebalance Preview: 65% One-Way Turnover and US$1.6bn Trade

There could be 19 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 30 December. There are some stocks from the new F&O inclusions.
If all changes are on expected lines, one-way turnover is estimated at 65.2% and that will result in a one-way trade of INR 71bn (US$837m).
The potential inclusions have outperformed the potential deletions since the start of July. The pace picked up over the last month as we neared the end of the review period.

Goodman Group (GMG AU) Placement: Limited Index Flows

China Investment Corp owns 7.84% of Goodman Group (GMG AU) and is looking to sell 50.4m shares (2.64% of shares out) at a price range of A$37.55-37.6/share, a tiny discount.
Goodman Group (GMG AU) has run away from its peers over the last couple of years and there could be a move lower in the stock following the placement.
There will be limited passive buying in the short-term coinciding with the placement. There will be some more passive buying in February.

Goodman Group Placement – Large Shareholder Looking to Raise US$1.2bn but Discount Is Tight

By Sumeet Singh

CIC is looking to raise around US$1.2bn, via selling around 2.6% of its stake in Goodman Group (GMG AU) , via a block trade.
Goodman’s shares have performed exceptionally well over the past year, driven by its pivot towards data centers.
In this note, we will talk about the placement and run the deal through our ECM framework.

HKBN (1310 HK): China Mobile’s “Fair” Tendering Offer

China Mobile (941 HK) was a logical suitor for HKBN Ltd (1310 HK). A non-PRC (or government-affiliated) corporation taking over a media/broadband/telco in Hong Kong is probably a non-starter.
China Mobile has a made a pre-conditional voluntary Offer at HK$5.23/share, a 40.97% premium to undisturbed. The price is final.
Pre-Cons are the usual suspects (NDRC, Mofcom & SASAC). The Offer itself conditional on a 50% acceptance hurdle, with 24.96% in the bag. The intention is to maintain HKBN’s listing.

HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$3.4bn of Flows Post Capping (Dec 2024)

The December rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
The round-trip trade across all stocks across the four indices is estimated at HK$26.14bn (US$3.4bn).
Alibaba, Tencent, Midea Group, Kuaishou Technology, NIO, HSBC Holdings and New Oriental Education & Techn are the largest buys. Meituan, Xiaomi, JD.com, AIA Group and NetEase are the largest sells.

Auckland Airport (AIA NZ) Placement: Potential Index Flows

Auckland City Council is looking to sell 163.23m shares of Auckland Intl Airport (AIA NZ) in a clean-up trade. This is big at NZ$1.3bn and 64 days of ADV.
The placement was expected by the market and the stock has run up despite that. The stock is in a trading halt and should open lower.
There will be passive buying at the time of settlement of the placement shares and that will mop up around 15% of the offering.

💡 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

Dec 03

Most Read: Seven & I Holdings, Sieyuan Electric Co Ltd A, Northern Star Resources, HKBN Ltd, TSE Tokyo Price Index TOPIX, Jiangsu Hoperun Software, Kioxia Holdings , Hwatsing Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

7 & I (3382) – York Holdings Sale Process, Timeline, Nuances
CSI300/CSI500/CSI1000 Index Rebalance: US$9bn Round-Trip Trade
Northern Star (NST AU) To Acquire De Grey Mining (DEG AU): Offer Details & Index Flow
HKBN (1310 HK): China Mobile’s Half-Baked Preconditional VGO
Circumstances and GPIF Noises Could Mean Higher Equity Allocations In March 2025
ChiNext/ChiNext 50 Index Rebalance: US$1.7bn Round-Trip Trade
Kioxia (285A JP) IPO: Valuation Insights
CNI Semiconductor Chips Index Rebalance: One Change with Big Flow
Kioxia IPO – Should Price at the Top, Though Peers Are Still Correcting
Kioxia (285A) IPO: Index Entry Timeline & Overhang from Plans to Increase Float

7 & I (3382) – York Holdings Sale Process, Timeline, Nuances

The sale process of Seven & I Holdings (3382 JP) “unit” York Holdings, with 31 sub-units, has started. 7+ bidders bid in Round 1. Due dili follows then Round 2.
I expect SST+support ops get sold, and the specialty stores get carved out. I expect the deal to get decided by end-Feb 2025. Noises about real estate enhancement are encouraging.
This is still all to the good, so I include a Gratuitous Chart Showing 7&i’s Up-And-To-The-Rightness

CSI300/CSI500/CSI1000 Index Rebalance: US$9bn Round-Trip Trade

There are 16 changes for the CSI 300 Index, 50 changes for the CSI 500 Index and 100 changes for the CSI1000 Index that will be implemented on 13 December.
There are 257 unique names that are adds or deletes and the round-trip trade across all 3 indices is close to US$9bn.
Stocks with the largest inflows and impact have outperformed stocks with the largest outflows and impact over the last few weeks. That could continue for the next couple of weeks.

Northern Star (NST AU) To Acquire De Grey Mining (DEG AU): Offer Details & Index Flow

Northern Star Resources (NST AU) has agreed to acquire De Grey Mining (DEG AU) by way of a Scheme of Arrangement in an all-stock deal.
De Grey Mining (DEG AU) shareholders will receive 0.119 Northern Star Resources (NST AU) shares for each De Grey share held. That implies a 37.1% premium to the last close.
There will be passive buying in Northern Star Resources (NST AU) at the time of merger completion, though there could be selling from some existing De Grey Mining (DEG) shareholders.

HKBN (1310 HK): China Mobile’s Half-Baked Preconditional VGO

HKBN Ltd (1310 HK)‘s preconditional voluntary conditional offer from China Mobile (941 HK) is HK$5.23. Including the HK$0.165 dividend, the total offer is HK$5.395, an 11.0% premium to last close.
The offer seems rushed and a reaction to a potential competing offer from I Squared. The lack of privatisation through a scheme and MBK’s irrevocable suggest the offer is light.
An unattractive offer, a lengthy precondition long-stop date and the irrevocable competing offer clause invite I Squared to enter the fray.

Circumstances and GPIF Noises Could Mean Higher Equity Allocations In March 2025

A Bloomberg article mid-day suggested Japan’s Ministry of Health, Labour and Welfare proposed a new “wage growth +1.9%” (vs 1.7% now) return bogey for the US$1.7trln Government Pension Investment Fund.
The GPIF is conducting its quinquennial review to assess markets, long-term prospects, correlations, etc, to set a CAPM asset allocation mix to meet the bogey.
The combination of higher USDJPY, Japan inflation, wider valuation spreads, and the prospect of higher yen rates suggests the review might result in lower yen bond allocs, higher equity allocs.

ChiNext/ChiNext 50 Index Rebalance: US$1.7bn Round-Trip Trade

There are 7 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index at the December rebalance.
We correctly forecast 4/7 and 7/7 for the Chinext Index adds/deletes and were 3/5 and 5/5 for the Chinext50 Index adds/deletes.
Based on the estimated passive tracking AUM, the round-trip trade across both indices is estimated to be CNY 12.24bn (US$1.69bn).

Kioxia (285A JP) IPO: Valuation Insights

Kioxia Holdings (285A JP) is a leading player in the NAND flash memory market. It will list on 18 December and seek to raise up to US$727 million.
We previously discussed the IPO in Kioxia (285A JP) IPO: The Bull Case and Kioxia (285A JP) IPO: The Bear Case.
Our valuation analysis suggests that the IPO price range of JPY1,390-1,520 per share is attractive. Therefore, we would participate in the IPO.

CNI Semiconductor Chips Index Rebalance: One Change with Big Flow

There is 1 change for the CNI Semiconductor Chips Index that will be implemented at the close on 13 December.
Passive trackers are estimated to buy 0.9x ADV in Hwatsing Technology (688120 CH) and sell 0.5x ADV in StarPower Semiconductor (603290 CH).
The add has outperformed the delete, but not by a lot. There could be more outperformance over the next couple of weeks.

Kioxia IPO – Should Price at the Top, Though Peers Are Still Correcting

By Sumeet Singh

Kioxia Holdings (285A JP) is aiming to raise around US$840m (including over-allocation) in its Japan IPO.
It was the world’s largest pure-play NAND flash memory supplier, in terms of both revenue and unit shipments in 2023, according to TechInsights.
We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.

Kioxia (285A) IPO: Index Entry Timeline & Overhang from Plans to Increase Float

Kioxia Holdings (285A JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 18 December.
At the mid-point of the IPO price range of JPY 1390-1520/share, Kioxia Holdings (285A JP) will be valued at JPY 784bn (US$5.24bn).
TOPIX inclusion will take place in January while inclusion in global indices is likely to take place in May and June. Selling stock to increase float will be an overhang.

💡 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

Dec 02

Most Read: Korea Zinc, Sieyuan Electric Co Ltd A, Hainan Jinpan Smart Technology, Cloud Village, Seres Group , Shanxi Xinghuacun Fen Wine Factory Co, Seven & I Holdings, Inner Mongolia Furui Medical Scie, Kioxia Holdings , Espressif Systems Shanghai and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Korea Zinc Saga Turning into a Comedy Show: MBK’s Speculative Move & How It’s Shaping Our Trades
CSI300/CSI500/CSI1000 Index Rebalance: US$9bn Round-Trip Trade
STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100
KWEB Index Rebalance: 1 Add & 4 Deletes in December
SSE50/SSE180 Index Rebalance: Couple of Surprises; Seres Group’s Multiple Inclusions; US$3.2bn Trade
CSI Liquor/ Alcoholic Drink Index Rebalance: Capping to Drive Larger Flows
7 & I (3382) – York Holdings Sale Process, Timeline, Nuances
CSI Medical Service Index Rebalance: Three Changes; Brutal Underperformance Could Reverse
Kioxia (285A JP) IPO: The Bear Case
STAR Chip Index Rebalance: 3 Changes; US$413m Round-Trip Trade

Korea Zinc Saga Turning into a Comedy Show: MBK’s Speculative Move & How It’s Shaping Our Trades

Lee Bok-hyun, head of the Financial Supervisory Service, unexpectedly voiced concerns about MBK winning Korea Zinc’s management battle, catching everyone off guard.
The key question is how Michael ByungJu Kim will handle government pressure, with MBK possibly aligning with the opposition if the Democratic Party pushes for commercial law reform.
Korea Zinc now becomes a proxy war over governance reform. Watch MBK’s political stance, as it could drive the stock higher, especially if Michael teams up with the opposition.

CSI300/CSI500/CSI1000 Index Rebalance: US$9bn Round-Trip Trade

There are 16 changes for the CSI 300 Index, 50 changes for the CSI 500 Index and 100 changes for the CSI1000 Index that will be implemented on 13 December.
There are 257 unique names that are adds or deletes and the round-trip trade across all 3 indices is close to US$9bn.
Stocks with the largest inflows and impact have outperformed stocks with the largest outflows and impact over the last few weeks. That could continue for the next couple of weeks.

STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100

As forecast, there are no changes for the SSE STAR50 (STAR50 INDEX) in December while there are 4 changes for the STAR100 Index.
There will be big outflows for Semiconductor Manufacturing International Corporation (SMIC) (688981 CH) due to SSE STAR50 (STAR50 INDEX) capping. There will be selling from other index trackers too.
Hainan Jinpan Smart Technology (688676 CH) had been ignored by the index committee at the September rebalance, so this inclusion in the STAR100 Index could come as a surprise.

KWEB Index Rebalance: 1 Add & 4 Deletes in December

The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 13 December.
Cloud Village (9899 HK) is an add while Lufax Holding (LU US), Ping An Healthcare and Technology (1833 HK), ZX (9890 HK) and YSB (9885 HK) are deletes.
The deletions of Ping An Healthcare (1833 HK), ZX (9890 HK) and YSB (9885 HK) were forecast and there will be positioning in the stocks. Lufax was a close delete.

SSE50/SSE180 Index Rebalance: Couple of Surprises; Seres Group’s Multiple Inclusions; US$3.2bn Trade

There are 5 changes for the SSE50 Index (SSE50 INDEX) and 18 changes for the SSE180 Index that will be implemented at the close on 13 December.
Seres Group (601127 CH) is an add to both indices, plus the CSI 300 Index, and passive trackers will need to buy over US$900m of the stock.
The adds have outperformed the deletes with a lot of the outperformance coming in the last couple of months. Trim positions in the expected adds/deletes and build positions in surprises.

CSI Liquor/ Alcoholic Drink Index Rebalance: Capping to Drive Larger Flows

There is 1 add/ 2 deletions for the CSI Alcoholic Drink Index and no constituent changes for the CSI Liquor Index.
The largest flows arise as a result of capping of constituents to 15% of the index weight. Impact on the stocks varies from 0.2-0.6 days of ADV.
WeiLong Grape Wine outperformed the deletes in early October, but the deletes moved higher and closed the gap. The gap has started to open up again in the last week.

7 & I (3382) – York Holdings Sale Process, Timeline, Nuances

The sale process of Seven & I Holdings (3382 JP) “unit” York Holdings, with 31 sub-units, has started. 7+ bidders bid in Round 1. Due dili follows then Round 2.
I expect SST+support ops get sold, and the specialty stores get carved out. I expect the deal to get decided by end-Feb 2025. Noises about real estate enhancement are encouraging.
This is still all to the good, so I include a Gratuitous Chart Showing 7&i’s Up-And-To-The-Rightness

CSI Medical Service Index Rebalance: Three Changes; Brutal Underperformance Could Reverse

CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
There are 3 changes for the index and we estimate passive buying of 0.7-1.4x ADV in the adds and selling of between 0.2-1x ADV in the deletes.
Trade performance has been horrible as the adds have moved sideways over the last two months and the deletes have skyrocketed – that could change in the next two weeks.

Kioxia (285A JP) IPO: The Bear Case

Kioxia Holdings (285A JP) is a leading player in the NAND flash memory market. It will list on 18 December and seek to raise up to US$740 million.
In Kioxia (285A JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on unrealistic long-term financial model assumptions, market share losses, high customer concentration risk, volatile gross margin due to JV and weak FCF profile.

STAR Chip Index Rebalance: 3 Changes; US$413m Round-Trip Trade

CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
There are 3 changes for the index and we estimate passive buying of 0.3-0.65x ADV in the adds and selling of between 0.4-0.6x ADV in the deletes.
On average, the adds to the index have outperformed the deletes over the last 5 weeks with the adds moving higher and the deletes trending lows.

💡 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

Dec 01

Most Read: Teco Electric & Machinery, Hulic Co Ltd, Lynas Corp Ltd, Hainan Jinpan Smart Technology, Alibaba Group Holding , Dai Nippon Printing, Cloud Village, Sichuan Biokin Pharmaceutical, WealthNavi and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes
Hulic Co (3003 JP) Placement: One Big Price Drop Could Lead to Another
MV Australia Equal Weight Index Rebalance Preview: 1 Close Add & 3 Deletions
STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100
Japan Funds: Extreme Stocks
Six Hang Seng Index Family Indices: Flows for Dec 6 Rebal
Dai Nippon Placement – Share Buyback Should Aid Deal Performance
KWEB Index Rebalance: 1 Add & 4 Deletes in December
Quiddity CSI 300/500 Dec 24 Results: ~90% Hit Rate; Positive Start for the Trade
WealthNavi (7342 JP): MUFG (8306 JP)’s Opportunistic Tender Offer

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes

There are now new changes forecast for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December for a total of 8 inclusions and 7 deletions.
Constituent changes along with capping changes will lead to a one-way turnover of 21.8% and in a one-way trade of TWD 75.8bn (US$2.33bn).
The potential changes had a big one-day move yesterday and we expect similar moves over the next couple of days.

Hulic Co (3003 JP) Placement: One Big Price Drop Could Lead to Another

Overnight, Hulic Co Ltd (3003 JP) announced a placement of 85.37m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 12.8m shares.
There will be limited passive buying in the short-term and the number of shares offered is a very large percentage of real float of the stock.
A price drop of 20% or more puts Hulic Co Ltd (3003 JP) at risk of deletion from a global index and could lead to a further price drop.

MV Australia Equal Weight Index Rebalance Preview: 1 Close Add & 3 Deletions

With 4 days left to review cutoff, there is 1 close add and 3 potential deletions for the MV Australia Equal Weight Index at the December rebalance.
Even if there are no constituent changes, capping changes will lead to one-way turnover of 4.6% and a round-trip trade of A$243m.
The final list of inclusions/exclusions will depend on price movements till Friday and whether the index provider makes any significant changes to the free float of stocks in the universe.

STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100

As forecast, there are no changes for the SSE STAR50 (STAR50 INDEX) in December while there are 4 changes for the STAR100 Index.
There will be big outflows for Semiconductor Manufacturing International Corporation (SMIC) (688981 CH) due to SSE STAR50 (STAR50 INDEX) capping. There will be selling from other index trackers too.
Hainan Jinpan Smart Technology (688676 CH) had been ignored by the index committee at the September rebalance, so this inclusion in the STAR100 Index could come as a surprise.

Japan Funds: Extreme Stocks

By Steven Holden

We screen for Japanese companies at the extreme ends of their positioning or momentum ranges among active Japan equity funds.
Low Positioning coupled with Negative Momentum: Nissan Motor Corp and Misumi Group
High Positioning coupled with High Momentum: ASICS Corp and Kyushu Railway

Six Hang Seng Index Family Indices: Flows for Dec 6 Rebal

In this insight, we present the flows to buy and sell for each of the top 6 Hang Seng Index Family indices based on estimated tracking AUM.
The indices: Hang Seng Index (HSI), HS Tech Index (HSTECH), HS China Enterprise Index (HSCEI), HS HK Biotech (HSHKBIO), HS Internet & Infotech (HSIII), and HS Healthcare Index (HSHCI).
By Quiddity calculations based on prices of 29 November’s close, there is one-way flow across these six indices of HK$15,894,690,433.49 to trade on 6 December. Roughly speaking.

Dai Nippon Placement – Share Buyback Should Aid Deal Performance

By Clarence Chu

A group of shareholders are looking to raise US$214m from selling their respective stakes in Dai Nippon Printing (7912 JP).
While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
In this note, we will talk about the placement and run the deal through our ECM framework.

KWEB Index Rebalance: 1 Add & 4 Deletes in December

The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 13 December.
Cloud Village (9899 HK) is an add while Lufax Holding (LU US), Ping An Healthcare and Technology (1833 HK), ZX (9890 HK) and YSB (9885 HK) are deletes.
The deletions of Ping An Healthcare (1833 HK), ZX (9890 HK) and YSB (9885 HK) were forecast and there will be positioning in the stocks. Lufax was a close delete.

Quiddity CSI 300/500 Dec 24 Results: ~90% Hit Rate; Positive Start for the Trade

By Janaghan Jeyakumar, CFA

The December 2024 index review results for China’s CSI 300 and CSI 500 indices were announced after market close on Friday 29th November 2024.
There will be 16 ADDs/DELs for CSI 300 and 50 ADDs/DELs for CSI 500.
The CSI 300 and CSI 500 index rebal events could trigger US$4.5bn and US$3.8bn in one-way flows respectively.

WealthNavi (7342 JP): MUFG (8306 JP)’s Opportunistic Tender Offer

In response to a Nikkei article, WealthNavi (7342 JP) disclosed Mitsubishi UFJ Financial (MUFG) (8306 JP)’s tender offer at JPY1,950 per share, an 84.3% premium to the undisturbed price.
The high premium reflects WealthNavi’s steep 46% YTD share price decline, i.e., the timing is opportunistic. The offer is below the Board’s requested price.
While the irrevocable has a competing offer clause, a competing proposal is unlikely due to MUFG’s stake. However, a bump is possible if activist(s) take around a 15% stake.

💡 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

Nov 30

Most Read: Sieyuan Electric Co Ltd A, ESR Group , Sanrio, Teco Electric & Machinery, Capital Securities , Korea Zinc, WealthNavi, Dai Nippon Printing and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

CSI300 Index Rebalance Preview: Rising Markets and ETF Creations Take Round-Trip Trade to US$8.5bn
ESR (1821 HK): Sell First, Ask Questions Later
Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics
Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes
Quiddity Leaderboard CSI 300/500 Dec 24: Final-Minute Changes to Expectations; Time for a Trade
A Proxy Fight for Korea Zinc in January 2025
Korea Zinc Saga Turning into a Comedy Show: MBK’s Speculative Move & How It’s Shaping Our Trades
Nikkei: MUFG To Launch TOB on WealthNavi (7342)
Dai-Nippon Printing (7912) – The First Equity Offering by Cross-Holders – Small And Lots More To Go

CSI300 Index Rebalance Preview: Rising Markets and ETF Creations Take Round-Trip Trade to US$8.5bn

There could be 17 changes at the December rebalance with the Industrials and Materials sectors could gaining 2 spots each and the Information Technology sector losing 3 spots.
Estimated one-way turnover of 3% at the December rebalance leading to a one-way trade of CNY 30.2bn (US$4.3bn). There are 14 stocks with over 2x ADV to trade.
The forecast adds have outperformed the forecast deletes over the last month despite rising markets and a wall of money flowing into Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) ETFs.

ESR (1821 HK): Sell First, Ask Questions Later

Back on the 13th May 2024, ESR Group (1821 HK) announced a delisting proposal from a consortium of investors formed by Starwood Capital Operations, Sixth Street Partners, and SSW Partners.
The consortium initially controlled 15.7%. Warburg (~14%) and ESR founders (~7.4%) tipped in their stakes. As did Qatar (3%) earlier this month, bringing the collective total to 39.9%.
No terms have been made public. Yesterday a Bloomberg article flagging “an agreement also might not be reached” saw shares freefall. Plus Capital Group recently trimmed its stake.

Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics

Overnight, Sanrio (8136 JP) announced a placement of 25.87m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 3.88m shares.
There will be limited passive buying in the short-term and the shares offered is a large percentage of real float of the stock.
However, Sanrio (8136 JP) is the highest ranked non-constituent stock in a global index universe and a drop in the stock price could be used to accumulate positions.

Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon

Today, Sanrio (8136 JP) announced a large secondary offering where banks would sell down shares and the Tsuji family would sell a few shares at the margin.
The stock has been on a rocket for two years. It’s expensive. Growth slows next year. Will this cause momentum to turn? Maybe. The offering is 38% of Max RWF.
I think one could give this a pass, and even sell it if it opens down small.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes

There are now new changes forecast for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December for a total of 8 inclusions and 7 deletions.
Constituent changes along with capping changes will lead to a one-way turnover of 21.8% and in a one-way trade of TWD 75.8bn (US$2.33bn).
The potential changes had a big one-day move yesterday and we expect similar moves over the next couple of days.

Quiddity Leaderboard CSI 300/500 Dec 24: Final-Minute Changes to Expectations; Time for a Trade

By Janaghan Jeyakumar, CFA

CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.
The reference period for December 2024 index rebal event ended on 31st October 2024.
In this insight, we take a look at our final list of expected ADDs and DELs.

A Proxy Fight for Korea Zinc in January 2025

There is likely to be a proxy fight for the control of Korea Zinc (010130 KS) between MBK/Young Poong alliance and Chairman Choi/Bain Capital alliance in January 2025.
Young Poong Precision announced that it will acquire 39,254 shares of Korea Zinc. Post this purchase, Young Poong Precision will own a 2.11% stake in Korea Zinc (up from 1.92%).
FSS Governor Lee Bok-Hyun mentioned that the FSS is seriously reviewing a potential accounting issue related to environmental pollution at Young Poong.

Korea Zinc Saga Turning into a Comedy Show: MBK’s Speculative Move & How It’s Shaping Our Trades

Lee Bok-hyun, head of the Financial Supervisory Service, unexpectedly voiced concerns about MBK winning Korea Zinc’s management battle, catching everyone off guard.
The key question is how Michael ByungJu Kim will handle government pressure, with MBK possibly aligning with the opposition if the Democratic Party pushes for commercial law reform.
Korea Zinc now becomes a proxy war over governance reform. Watch MBK’s political stance, as it could drive the stock higher, especially if Michael teams up with the opposition.

Nikkei: MUFG To Launch TOB on WealthNavi (7342)

Early this morning, a Nikkei article said Mitsubishi UFJ Financial (MUFG) (8306 JP) would buy out the remaining 85% of WealthNavi (7342 JP). Expected to be completed by March.
MUFJ Bank and WealthNavi signed a Business Alliance in February. WealthNavi issued 9.11mm new shares to MUFJ at ¥1,718/share. That was a discount to market and shares are down ~40%.
WealthNavi’s AUM is growing (¥1.3trln at end-Oct) and the goal is to launch a money advisory platform by FY2026. Now they need to decide on the premium.

Dai-Nippon Printing (7912) – The First Equity Offering by Cross-Holders – Small And Lots More To Go

Today after the close Dai Nippon Printing (7912 JP) announced 16 corporate and financial entities would be selling cross-held shares in a ~US$240mm equity offering.
The stock has gotten shellacked (relatively speaking given structurally low volatility) since three weeks ago. There’s a reason for that. But it makes it cheaper.
This offering is only 10% of the cross-held total. There’s more to come. But there is more outbound cross-holding to sell too. There’s value here.

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

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

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

Nov 29

Most Read: ESR Group , Sanrio, Teco Electric & Machinery, SBI Sumishin Net Bank , Hulic Co Ltd, Korea Zinc, Seven & I Holdings, Kioxia Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

ESR (1821 HK): Sell First, Ask Questions Later
7&I (3382 JP) – A York Holdings Deal And Warren Buffett?
Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes
NTT (9432 JP) And SBI Sumishin NetBank (7163 JP)? Maybe. Maybe Not. Seven Bank A Better Idea
Hulic Co (3003 JP) Placement: One Big Price Drop Could Lead to Another
A Proxy Fight for Korea Zinc in January 2025
Seven&I (3382): Who Will Be the Greater Fool?
Korea Zinc Saga Turning into a Comedy Show: MBK’s Speculative Move & How It’s Shaping Our Trades
Kioxoa Pre-IPO – Peer Comparison

ESR (1821 HK): Sell First, Ask Questions Later

Back on the 13th May 2024, ESR Group (1821 HK) announced a delisting proposal from a consortium of investors formed by Starwood Capital Operations, Sixth Street Partners, and SSW Partners.
The consortium initially controlled 15.7%. Warburg (~14%) and ESR founders (~7.4%) tipped in their stakes. As did Qatar (3%) earlier this month, bringing the collective total to 39.9%.
No terms have been made public. Yesterday a Bloomberg article flagging “an agreement also might not be reached” saw shares freefall. Plus Capital Group recently trimmed its stake.

7&I (3382 JP) – A York Holdings Deal And Warren Buffett?

The Seven & I Holdings (3382 JP) to rid itself of control of the Ito-Yokado, York Benimaru, Akachan Hompo, and Denny’s Japan businesses in York Holdings proceeds apace.
The First Round of bids is due tomorrow, apparently, and all manner of bidders have assembled.
This leads to the question of a deal for the rest of 7&i. If a TradingCo is a natural co-investor for the Ito family (or ACT), so is Berkshire Hathaway.

Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics

Overnight, Sanrio (8136 JP) announced a placement of 25.87m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 3.88m shares.
There will be limited passive buying in the short-term and the shares offered is a large percentage of real float of the stock.
However, Sanrio (8136 JP) is the highest ranked non-constituent stock in a global index universe and a drop in the stock price could be used to accumulate positions.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes

There are now new changes forecast for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December for a total of 8 inclusions and 7 deletions.
Constituent changes along with capping changes will lead to a one-way turnover of 21.8% and in a one-way trade of TWD 75.8bn (US$2.33bn).
The potential changes had a big one-day move yesterday and we expect similar moves over the next couple of days.

NTT (9432 JP) And SBI Sumishin NetBank (7163 JP)? Maybe. Maybe Not. Seven Bank A Better Idea

An article in Japanese weekly magazine Bunshun this morning sent shares inSBI Sumishin Net Bank (7163 JP) limit up +17% with a headline that NTT Docomo was interested to buy.
Without access to the article, I can’t go deep, but the base concept is that NTT Docomo is “worried” about KDDI (which has a bank, as does Softbank Corp)
It is not clear how serious it is, SBI Sumishin is super-expensive, and buying a bank isn’t the same as buying a company. Hmmm…

Hulic Co (3003 JP) Placement: One Big Price Drop Could Lead to Another

Overnight, Hulic Co Ltd (3003 JP) announced a placement of 85.37m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 12.8m shares.
There will be limited passive buying in the short-term and the number of shares offered is a very large percentage of real float of the stock.
A price drop of 20% or more puts Hulic Co Ltd (3003 JP) at risk of deletion from a global index and could lead to a further price drop.

A Proxy Fight for Korea Zinc in January 2025

There is likely to be a proxy fight for the control of Korea Zinc (010130 KS) between MBK/Young Poong alliance and Chairman Choi/Bain Capital alliance in January 2025.
Young Poong Precision announced that it will acquire 39,254 shares of Korea Zinc. Post this purchase, Young Poong Precision will own a 2.11% stake in Korea Zinc (up from 1.92%).
FSS Governor Lee Bok-Hyun mentioned that the FSS is seriously reviewing a potential accounting issue related to environmental pollution at Young Poong.

Seven&I (3382): Who Will Be the Greater Fool?

By Michael Allen

7&I traded at less than 5x reported EV/EBITDA consistently for roughly 4 years straight, and no one seemed to care or notice.
Now that it trades close to 9x, there is an overflow of eager financiers and a mile-long line of analysts who will tell you that it is still undervalued.
This is the stock market equivalent of duct tape and a banana.

Korea Zinc Saga Turning into a Comedy Show: MBK’s Speculative Move & How It’s Shaping Our Trades

Lee Bok-hyun, head of the Financial Supervisory Service, unexpectedly voiced concerns about MBK winning Korea Zinc’s management battle, catching everyone off guard.
The key question is how Michael ByungJu Kim will handle government pressure, with MBK possibly aligning with the opposition if the Democratic Party pushes for commercial law reform.
Korea Zinc now becomes a proxy war over governance reform. Watch MBK’s political stance, as it could drive the stock higher, especially if Michael teams up with the opposition.

Kioxoa Pre-IPO – Peer Comparison

By Sumeet Singh

Kioxia Holdings (6600 JP) is aiming to raise around US$700m (including over-allocation) from its Japan IPO.
It was the world’s largest pure-play NAND flash memory supplier, in terms of both revenue and unit shipments in 2023, according to TechInsights.
We have looked at the company’s past performance in our earlier notes. In this note we undertake a peer comparison.

💡 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

Nov 28

Most Read: Seven & I Holdings, Sanrio, Yang Ming Marine Transport, Hulic Co Ltd, Vitasoy Intl Holdings, Teco Electric & Machinery, Shandong Hi-Speed New Energy G, Samsung KODEX 200 ETF and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

7&I (3382 JP) – A York Holdings Deal And Warren Buffett?
Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics
Taiwan Top 50 ETF Rebalance Preview: Double Inclusion for Yang Ming Marine (2609 TT)
HULIC (3003 JP) – Crossholders Show Up with a BIG (Relative) Secondary Offering
Vitasoy (345 HK): Trading Rich As Ng & Yeo Hiap Seng Up Their Exposure
Seven & I Holdings (3382 JP): Implications from the YORK Holdings Stake Sale
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes
Shandong Hi-Speed New Energy (1250 HK): Shandong Hi-Speed Holdings (412 HK) Possible MGO
Digging into the Year-End Divvy Arbitrage Game in Korea’s Market
Hulic (3033 JP): A US$800 Million Secondary Offering

7&I (3382 JP) – A York Holdings Deal And Warren Buffett?

The Seven & I Holdings (3382 JP) to rid itself of control of the Ito-Yokado, York Benimaru, Akachan Hompo, and Denny’s Japan businesses in York Holdings proceeds apace.
The First Round of bids is due tomorrow, apparently, and all manner of bidders have assembled.
This leads to the question of a deal for the rest of 7&i. If a TradingCo is a natural co-investor for the Ito family (or ACT), so is Berkshire Hathaway.

Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics

Overnight, Sanrio (8136 JP) announced a placement of 25.87m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 3.88m shares.
There will be limited passive buying in the short-term and the shares offered is a large percentage of real float of the stock.
However, Sanrio (8136 JP) is the highest ranked non-constituent stock in a global index universe and a drop in the stock price could be used to accumulate positions.

Taiwan Top 50 ETF Rebalance Preview: Double Inclusion for Yang Ming Marine (2609 TT)

Yang Ming Marine Transport (2609 TT) is forecast to be added to the Yuanta/P-Shares Taiwan Top 50 ETF in December, replacing Airtac International (1590 TT).
Yang Ming Marine Transport (2609 TT) is also expected to be added to the Yuanta/P-shares Dividend Plus ETF in December, so there will be buying from multiple trackers.
Shorts are near their lows in Yang Ming Marine Transport (2609 TT) while there has been covering in Airtac International (1590 TT) after an increase in the last few months.

HULIC (3003 JP) – Crossholders Show Up with a BIG (Relative) Secondary Offering

Today, Hulic Co Ltd (3003 JP) announced a large secondary offering where about a quarter of the crossholdings will sell down holdings. Some exit entirely. Some partially.
After this selldown, there is a fair bit more to go later, but more of that will be corporate. It’s a BIG offering: 55d of ADV and 55% of MRWF.
It is “only” about $800mm and retail gets 80% of it. The high div yield will be a selling point but there is a lot of debt.

Vitasoy (345 HK): Trading Rich As Ng & Yeo Hiap Seng Up Their Exposure

Yesterday, beverage maker Vitasoy Intl Holdings (345 HK) announced a 1H25E (Mar Y/E) net profit of HK$171mn, a 4.8% gain yoy. An interim dividend of HK$0.04/share (HK$0.014/share in 1H24), was declared.
What was absent from the announcement/briefing was any comment on Philip Ng Chee-tat’s and Yeo Hiap Seng (YHS SP)‘s recent buying in Vitasoy.
Ng, the younger brother of Sino Land (83 HK)‘s chairman Robert Ng Chee-siong, indirectly holds 12.26%, up from 5.22% on the 7th October. The share price is up 104% since.

Seven & I Holdings (3382 JP): Implications from the YORK Holdings Stake Sale

NHK reports that Seven & I Holdings (3382 JP)‘s first bidding round for a YORK Holdings stake ends on 28 November. The sale provides a third-party valuation benchmark for the asset.
It is an incremental positive for the founding family MBO as it supports the post-privatisation strategy and assists in securing bank financing.
This is an incremental negative for Alimentation Couche-Tard (ATD CN) as it shows that the Board believes the restructuring plan will increase shareholder corporate value.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes

There are now new changes forecast for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December for a total of 8 inclusions and 7 deletions.
Constituent changes along with capping changes will lead to a one-way turnover of 21.8% and in a one-way trade of TWD 75.8bn (US$2.33bn).
The potential changes had a big one-day move yesterday and we expect similar moves over the next couple of days.

Shandong Hi-Speed New Energy (1250 HK): Shandong Hi-Speed Holdings (412 HK) Possible MGO

Shandong Hi-Speed New Energy G (1250 HK) disclosed a possible mandatory unconditional offer from Shandong Hi-Speed Holdings Gro (412 HK) at HK$1.78, a 7.2% premium to the undisturbed price.
The offer is conditional on SDHS completing a sale and purchase agreement (SPA) to acquire CITIC Securities’ entire 13.52% stake at HK$1.78 per share.
The key precondition of the SPA is SDHS shareholder approval of an ordinary resolution relating to the SPA and the possible offer. The vote is a formality.

Digging into the Year-End Divvy Arbitrage Game in Korea’s Market

For March KOSPI 200 futures, expect a 0.95% to 1% yield for spot-futures arbitrage, with contango depending on year-end ex-div trends and passive inflows.
Passive inflows into the value-up index in January and spillover effects into K200 futures, potentially fueling year-end contango due to overlap with KOSPI 200.
Prop trader dynamics are cooling off: Tax-driven buying in December, selling in January likely to ease, reducing the past backwardation. Without it, expect higher volatility in K200 futures.

Hulic (3033 JP): A US$800 Million Secondary Offering

Hulic Co Ltd (3003 JP) has announced a secondary offering of up to 85.4 million shares (98.2 million including overallotment), worth around US$800 million (US$920 million including overallotment).
Unlike the 2021 offer, this is a pure secondary offering. It is smaller in terms of outstanding shares and 1-year ADV. The shares are hovering around all-time highs.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 10 and 12 December (likely 10 December).

💡 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

Nov 27

Most Read: Nec Networks & System Integr, Kansai Electric Power, Keisei Electric Railway Co, Sanrio, Hyundai Motor Securities and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

NEC Network (1973 JP) Tender Offer – The Landscape Has Fully Changed
Kansai Electric Power (9503 JP) – Huge Offering Is Smaller Now; Reward/Risk Skews Upwards
[JAPAN ACTIVISM] Keisei Elec (9009) – Murakami Stake Causes Pop But the Oppty Is Still Unconvincing
StubWorld: Keisei Electric’s Big Gain On Activist Stake News
Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon
Oriental Land ToSTNeT-3 Buyback From Keisei (9009) – It’s In the Plan And Looks Better Than It Is
Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics
Sanrio (8136 JP): A US$840 Million Secondary Offering
Sanrio Placement – Opportunistic >US$800m Selling at All-Time Highs
Hyundai Motor Securities Announces a Rights Offering Involving a 49% Shares Dilution

NEC Network (1973 JP) Tender Offer – The Landscape Has Fully Changed

On 29-October, NEC Corp (6701 JP) announced a low-ball TOB to buy out subsidiary Nec Networks & System Integr (1973 JP). It deserved activism, but finding an activist was tough.
On 7 November, it got an activist, and I wrote on 8-November the Landscape Had Changed that they might have bought 6mm shares more in 5 days. They bought 8.4mm.
The Landscape Has FULLY Changed. The details now matter quite a bit. NEC has two basic choices. Neither are that palatable. But Target Advisor DCF was ¥3,073-4,688 without synergies.

Kansai Electric Power (9503 JP) – Huge Offering Is Smaller Now; Reward/Risk Skews Upwards

On 13 November, Kansai Electric Power (9503 JP) announced an equity offering to raise capital for capex expenditures over the next several years. It is significantly dilutive.
The shares responded by falling 23% to 8-months lows of ¥1,850 last Thursday and Friday. That puts the stock at the same forward PER post-offering as it was pre-offering.
That’s probably not an awful place to own now that the stock will have been slightly de-risked/de-levered.

[JAPAN ACTIVISM] Keisei Elec (9009) – Murakami Stake Causes Pop But the Oppty Is Still Unconvincing

13mos ago, activist investor Palliser Capital spoke at a conference about the value offered by Keisei Electric Railway Co (9009 JP) due to its large stake in Oriental Land (4661).
Keisei outperformed OLC by 30% over 3.5mos. Then it fell all the way back, and more, over the next five months. Asset sale, buyback, AGM proposals. Meh.
Nov 25th, Toyo Keizai wrote activist Murakami-san had acquired stakes of <5% in Keikyu Corp (9006 JP) and <1% in Keisei Electric Railway Co (9009 JP). Shares in both jumped.

StubWorld: Keisei Electric’s Big Gain On Activist Stake News

Keisei Electric Railway Co (9009 JP) gained 13.8% yesterday on news that activist investor Murakami-san had acquired a stake.
Preceding my comments on Keisei Electric 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%.

Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon

Today, Sanrio (8136 JP) announced a large secondary offering where banks would sell down shares and the Tsuji family would sell a few shares at the margin.
The stock has been on a rocket for two years. It’s expensive. Growth slows next year. Will this cause momentum to turn? Maybe. The offering is 38% of Max RWF.
I think one could give this a pass, and even sell it if it opens down small.

Oriental Land ToSTNeT-3 Buyback From Keisei (9009) – It’s In the Plan And Looks Better Than It Is

In October 2023 and then in early 2024, activist Palliser Capital demanded that Keisei Electric Railway Co (9009 JP) sell down its stake in Oriental Land (4661 JP) to sub-15%.
Keisei in March sold 1% of OLC but in doing so, rejected the concept of removing equity affiliate status. They could go to a level just >15%, or just >20%.
Today, OLC announced a ToSTNeT-3 buyback of 18mm shares – the total for the 2yrs to Mar-26 announced (p19) in April. Keisei will sell and will stay above 20%.

Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics

Overnight, Sanrio (8136 JP) announced a placement of 25.87m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 3.88m shares.
There will be limited passive buying in the short-term and the shares offered is a large percentage of real float of the stock.
However, Sanrio (8136 JP) is the highest ranked non-constituent stock in a global index universe and a drop in the stock price could be used to accumulate positions.

Sanrio (8136 JP): A US$840 Million Secondary Offering

Sanrio (8136 JP) has announced a secondary offering of up to 25.9 million shares (29.8 million including overallotment), worth around US$840 million (US$970 million including overallotment).
Sanrio’s goal with the secondary offering is (i) to reduce cross-shareholdings and (ii) to expand and diversify the shareholder base, which should further enhance liquidity.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 10 and 13 December (likely 10 December).

Sanrio Placement – Opportunistic >US$800m Selling at All-Time Highs

By Clarence Chu

A group of domestic financial institutions and the firm’s executives are looking to raise US$840m from trimming their stakes in Sanrio (8136 JP).
While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
In this note, we will talk about the placement and run the deal through our ECM framework.

Hyundai Motor Securities Announces a Rights Offering Involving a 49% Shares Dilution

Hyundai Motors Securities announced a rights offering worth nearly 200 billion won involving a 49% shares dilution.
The amount of shares dilution is excessive which is likely to result in a share price weakness in Hyundai Motor Securities in the coming weeks.
The expected rights offering price for now is 6,640 won per share which is 24.5% discount to the closing price on 26 November.

💡 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

Nov 26

Most Read: Kioxia Holdings , Kansai Electric Power, Midea Group, Kuaishou Technology, Shanghai Henlius Biotech , Keisei Electric Railway Co, FineToday Holdings Co Ltd, Highwealth Construction, Yang Ming Marine Transport and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Kioxia IPO Preview
Kansai Electric Power (9503 JP) – Huge Offering Is Smaller Now; Reward/Risk Skews Upwards
HSTECH Index Rebalance: Midea (300 HK) Replaces Weibo (9898 HK); US$1.5bn Round-Trip Trade
Hang Seng Index (HSI) Rebalance: Still Baby Steps to Get to 100 Members
Henlius (2696 HK): The Spread Should Narrow After NDRC Approval
Keisei Electric Jumps 14% on Reports of Murakami Stake
FineToday Holdings (289A JP) IPO: The Bear Case
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Big Shift in Divs Leads to Last Minute Changes
Kansai Electric Power (9503 JP): The Current Playbook
Taiwan Top 50 ETF Rebalance Preview: Double Inclusion for Yang Ming Marine (2609 TT)

Kioxia IPO Preview

Kioxia plans to complete its IPO on 18 December, valuing Kioxia at 750 billion yen ($4.8 billion), down nearly 50% from the initial market value estimates about 2-3 months ago.
Kioxia had revenue of 909.4 billion Yen (up 84.6% YoY) and EBITDA of 449.6 billion Yen in 1H FY24, driven by the recovering demand for data center and enterprise SSDs.
As of 2Q 2024, Samsung Electronics was the largest player in the global NAND Flash market with a 36.9% market, followed by SK Group (22.1%), and Kioxia (13.8%).

Kansai Electric Power (9503 JP) – Huge Offering Is Smaller Now; Reward/Risk Skews Upwards

On 13 November, Kansai Electric Power (9503 JP) announced an equity offering to raise capital for capex expenditures over the next several years. It is significantly dilutive.
The shares responded by falling 23% to 8-months lows of ¥1,850 last Thursday and Friday. That puts the stock at the same forward PER post-offering as it was pre-offering.
That’s probably not an awful place to own now that the stock will have been slightly de-risked/de-levered.

HSTECH Index Rebalance: Midea (300 HK) Replaces Weibo (9898 HK); US$1.5bn Round-Trip Trade

In a surprise, Midea Group (300 HK) will replace Weibo (9898 HK) in the Hang Seng TECH Index (HSTECH INDEX) after the close of trading on 6 December.
Estimated one-way turnover at the rebalance is 4.5% resulting in a round-trip trade of HK$11.72bn (US$1.51bn). Passives need to buy 9x ADV in Midea Group (300 HK).
The Midea Group Co Ltd A (000333 CH) / Midea Group (300 HK) premium could drop due to the index inclusion providing an entry point into an AH expansion trade.

Hang Seng Index (HSI) Rebalance: Still Baby Steps to Get to 100 Members

Kuaishou Technology (1024 HK) and New Oriental Education (9901 HK) will be added to the Hang Seng Index in December while New World Development (17 HK) will be deleted.
Estimated one-way turnover is 2.7% and the estimated round-trip trade is HK$10.89bn (US$1.4bn) with over 1 day of ADV to trade in the adds and the delete.
The index committee has net added 1 stock to the Hang Seng Index this year to go from 82 to 83 constituents. Reaching the 100-member target will drag into 2026.

Henlius (2696 HK): The Spread Should Narrow After NDRC Approval

On the 24th June, Fosun Pharmaceutical (2196 HK) made a HK$24.60/share Offer, in cash, for H-shares not held in Shanghai Henlius Biotech (2696 HK). A scrip alternative was subsequently afforded.
This is a pre-conditional Offer, subject to NDRC, Mofcom and SAFE – followed by a Scheme-like vote for independent H-shareholders. Henlius has announced that NDRC approval has now been secured.
Trading at a massive gross spread of ~21.5% compared to ~10% just prior to China Traditional Chinese Medicine (570 HK)‘s capitulation. This is excessive.

Keisei Electric Jumps 14% on Reports of Murakami Stake

By Oshadhi Kumarasiri

Keisei Electric Railway Co (9009 JP) rose 14% after reports that a fund linked to activist investor Murakami bought a stake, while Oriental Land also gained 2.9% in a volatile market.
Down 50% since February 2024, Keisei Electric seems to have limited downside risks. We believe its valuation could increase if Murakami’s stake leads to activism.
The long Keisei Electric, short Oriental Land (4661 JP) trade could work well too, especially if Murakami’s activism and the risks to Oriental Land’s guidance materialize.

FineToday Holdings (289A JP) IPO: The Bear Case

FineToday Holdings Co Ltd (289A JP) is a Japanese personal care business seeking to raise up to US$500 million. It will be listed on 17 December.
In FineToday Holdings (289A JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on the weak 3Q24 revenue performance, mid-tier revenue growth, leveraged balance sheet, share overhang and pre-IPO dividend.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Big Shift in Divs Leads to Last Minute Changes

Using data from the close on 25 November, there could be 6 adds and 5 deletes for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
There will also be capping and funding flows that will lead to a one-way turnover of 17.3% and a one-way trade of TWD 60.6bn (US$1.86bn).
On average, the forecast adds have started to outperform the forecast deletes. Positioning should continue in stocks that have large flow/impact or have recently joined the list of forecast adds/deletes.

Kansai Electric Power (9503 JP): The Current Playbook

Since the US$3.5 billion primary/secondary offering announcement, Kansai Electric Power (9503 JP)’s shares have been down 20.6% from the undisturbed price of JPY2,397 per share (13 November).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, KEPCO’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 26 November. The average large Japanese placement tends to generate positive returns.

Taiwan Top 50 ETF Rebalance Preview: Double Inclusion for Yang Ming Marine (2609 TT)