Most Read

The September 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$18.1bn (US$2.3bn).
Kuaishou, ASM Pacific Technology, JD.com, J&T Global, Sunny Optical and New Oriental Education are the largest buys while Alibaba, Tencent, Meituan, Xiaomi and HSBC Holdings are the biggest sells.

Mar25 Nikkei 225 Rebal Predictions: Likely 2 IN, 2 OUT, Again; Minimal Surprise Factor

The Sep24 Nikkei 225 Review Results are out, discussed in Sep24 Nikkei 225 Review Results: A Slightly Baffling 2 IN, 2 OUT.
That lets us move to Mar25 Nikkei 225 Rebal predictions. For the moment, I see 2 IN and 2 OUT, again.
And at the moment, another Fast Retailing capping exercise looks likely, for roughly US$3bn a side to trade.

Australia/NZ Real Estate: Stocks With (Large) Passive Flows

There will be passive buying in Nextdc Ltd (NXT AU) and Charter Hall (CHC AU) and selling in Vital Healthcare Property Trust (VHP NZ) at the close on 20 September.
Charter Hall (CHC AU)‘s stock price jumped following announcement of results and that was accompanied by big short covering. There should still be more positioning here.
Nextdc Ltd (NXT AU)‘s increase in cumulative excess volume came on a drop in the stock price. There could be some covering here as positioning builds up.

Quiddity Leaderboard S&P 500 Sep 24 Rebal (Final): 2 Changes Possible

By Shifara Samsudeen, ACMA, CGMA

The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
The rankings used for the September 2024 index rebal event will be based on yesterday’s (4th September 2024) opening prices.
In this insight, we take a final look at the potential ADDs and DELs leading the rankings for the upcoming review.

Midea: Thoughts on HK Listing and Valuation

Chinese appliance maker Midea’s application to list its shares on the HKEx has been approved and the company plans to list up to 10% of its shares to raise $4bn.
Midea Group Co Ltd A (000333 CH) has a diversified product portfolio, well-balanced exposure to domestic as well as overseas markets and M&A’s that have helped significantly grow its business.
Our analysis on previous secondary listings of Chinese-listed companies on HKEx shows that the HK listings were priced at a significant discount to their A-Shares.

We Need To Talk About New World (17 HK)

0.08x P/B. That’s where New World Development (17 HK) is currently trading. Less than half the P/B of the next comparable real estate peer.
So, what’s going on? Announcing an expected HK$19-20bn loss for FY24 last week didn’t help matters. Shares are down 14% this week and 85% since Covid.
Landlords need to drastically cut rents to jumpstart the retail sector. That translates to further impairment losses for property developers.

KOSPI Size Index Reshuffle Results Out Late Today: Early Positioning Delivered Big Gains

For this September reshuffle, fewer factors affected price impact, so outlier chances were low. Biggest price moves typically occur 30 days before the effective date, especially during LARGE↔MID transitions.
Early positioning for this reshuffle paid off. Past trends suggest price action fades before the effective date, so consider exiting positions by tomorrow or early next week.
Small→Mid migrants historically show weak price impacts, with no clear correlation observed in this September reshuffle either. I’m avoiding those plays targeting the effective date for now.

Jardine Matheson (JM SP): Squeezing More Life Out Of The NAV

After publishing my insight (Jardine Matheson (JM SP): Trading “Cheap”) last week, my NAV calcs were called into question by some readers, when compared to street estimates.
Which is cool. I’m big enough to admit mistakes, where needed. So I’ve done some digging, including a back and forth with Jardine Matheson Holdings (JM SP).
The upshot? I have not lead you astray. You’ve been coming to the right place.

The Born Korea IPO Preview

The Born Korea is getting ready to complete its IPO in Korea in November. The total IPO offering is expected to range from 69 billion won to 84 billion won.
Based on the bankers’ valuation, the expected market cap of the company ranges from 357 billion won to 419 billion won.
The Born Korea was founded by Baek Jong-Won, the most famous celebrity chef in Korea.

Key Flow Trading Opportunities After KRX Suddenly Added POSCO Holdings to the BBIG Battery Mix

Got surprised by KRX adding POSCO Holdings to the Battery Index. Normally predictable rebalancing went off-script with this unexpected move.
POSCO Holdings, not Posco Future M, replaced Ecopro BM. Plus, Alteogen Inc is replacing SK Biopharmaceuticals in the BBIG, driving notable flow.
Consider a day trading long POSCO Holdings and short Ecopro BM. Also, a long-short futures basket could be worth exploring for names with big passive flows.

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Sep 06

Most Read: Seven & I Holdings, Fuji Soft Inc, Kuaishou Technology, Midea Group Co Ltd A, Fast Retailing, China Traditional Chinese Medicine, Workday Inc Class A, New World Development, Kangwon Land and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…
Fuji Soft (9749) – KKR Launches Early to Stymy Bain Who Has a Founding Family Tailwind
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Sep 2024)
Midea Group H Share Listing: AH Discount Views
Mar25 Nikkei 225 Rebal Predictions: Likely 2 IN, 2 OUT, Again; Minimal Surprise Factor
China TCM (570.HK) Privatization Update- Pre-Conditions Won’t Be “An Obstacle” to the Entire Process
Quiddity Leaderboard S&P 500 Sep 24 Rebal (Final): 2 Changes Possible
Ohayo Japan | Bracing for Jobs Data
We Need To Talk About New World (17 HK)
KOSPI Size Index Reshuffle Results Out Late Today: Early Positioning Delivered Big Gains

Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…

On 30 August, 7&i shareholder Artisan Partners (holder since 2019, now at 1%) wrote an open letter to the Board of Directors of Seven & I Holdings (3382 JP)
There are several comments in bold. “It is imperative that the board of directors negotiate with ACT immediately to achieve the best possible outcome for shareholders” is one.
The letter is a bit preachy, a bit fluffy, and a bit misleading in parts. But it requests the Company brief shareholders on the negotiations by 19 September 2024.

Fuji Soft (9749) – KKR Launches Early to Stymy Bain Who Has a Founding Family Tailwind

KKR has launched its deal early to make life difficult for Bain, who has Founding Family support, due diligence, and another hearing with the company to make a Binding Bid.
The combination of Bain’s PR on 3 September and the new documents out late last night from KKR and Fuji Soft show a picture of KKR/3D somehow acting coercively.
This is something of a mess. It should become a case study for lawyers/advisors of what NOT to do when a large PE firm approaches you. Expect a bun fight.

HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Sep 2024)

The September 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$18.1bn (US$2.3bn).
Kuaishou, ASM Pacific Technology, JD.com, J&T Global, Sunny Optical and New Oriental Education are the largest buys while Alibaba, Tencent, Meituan, Xiaomi and HSBC Holdings are the biggest sells.

Midea Group H Share Listing: AH Discount Views

Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, is premarketing an H Share listing to raise US$3 billion.
In Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health, we noted that Midea is in good health, with strong growth, margins, and cash generation.
In this note, we examine the likely discount that Midea will offer its H Shares compared to the A Shares.

Mar25 Nikkei 225 Rebal Predictions: Likely 2 IN, 2 OUT, Again; Minimal Surprise Factor

The Sep24 Nikkei 225 Review Results are out, discussed in Sep24 Nikkei 225 Review Results: A Slightly Baffling 2 IN, 2 OUT.
That lets us move to Mar25 Nikkei 225 Rebal predictions. For the moment, I see 2 IN and 2 OUT, again.
And at the moment, another Fast Retailing capping exercise looks likely, for roughly US$3bn a side to trade.

China TCM (570.HK) Privatization Update- Pre-Conditions Won’t Be “An Obstacle” to the Entire Process

By Xinyao (Criss) Wang

We have seen positive progress of the privatization of China TCM, which is still considered an important project on the agenda. CNPGC’s new leadership is very supportive of the deal.
The SAMR process has begun. There should be no problem to meet the Pre-Conditions. If the approval process takes more time, Long Stop Date would be extended.
Considering China Resources has decided to acquire Tasly, we think the integration of TCM business by CNPGC is expected to accelerate. We remain optimistic and this deal will get up.

Quiddity Leaderboard S&P 500 Sep 24 Rebal (Final): 2 Changes Possible

The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
The rankings used for the September 2024 index rebal event will be based on yesterday’s (4th September 2024) opening prices.
In this insight, we take a final look at the potential ADDs and DELs leading the rankings for the upcoming review.

Ohayo Japan | Bracing for Jobs Data

By Mark Chadwick

Wall Street is bracing for Friday’s crucial jobs report, expected to influence Federal Reserve policy. Nonfarm payrolls are forecast to grow by 161,000 in August
Seven & i Holdings will reject Alimentation Couche-Tard’s $40 billion takeover offer, deeming the price too low
Effissimo Capital Management, an activist investment fund, has increased its stake in Teijin from 6.03% to 7.67%

We Need To Talk About New World (17 HK)

0.08x P/B. That’s where New World Development (17 HK) is currently trading. Less than half the P/B of the next comparable real estate peer.
So, what’s going on? Announcing an expected HK$19-20bn loss for FY24 last week didn’t help matters. Shares are down 14% this week and 85% since Covid.
Landlords need to drastically cut rents to jumpstart the retail sector. That translates to further impairment losses for property developers.

KOSPI Size Index Reshuffle Results Out Late Today: Early Positioning Delivered Big Gains

For this September reshuffle, fewer factors affected price impact, so outlier chances were low. Biggest price moves typically occur 30 days before the effective date, especially during LARGE↔MID transitions.
Early positioning for this reshuffle paid off. Past trends suggest price action fades before the effective date, so consider exiting positions by tomorrow or early next week.
Small→Mid migrants historically show weak price impacts, with no clear correlation observed in this September reshuffle either. I’m avoiding those plays targeting the effective date for now.

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Sep 05

Most Read: Ryohin Keikaku, Nomura Research Institute, Fuji Soft Inc, Seven & I Holdings, Midea Group Co Ltd A, CPMC Holdings, Ecopro HN, Nextdc Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Sep24 Nikkei 225 Review Results: A Slightly Baffling 2 IN, 2 OUT
Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped
Fuji Soft (9749 JP) – Bain Bids More, The Market Goes Even Higher
Fuji Soft (9749 JP): KKR’s Cop-Out as It Launches at Unchanged Terms, Next Move Bain
For Long-Term Investors, Seven & I Is the Better Bet
Midea A/H Listing – Thoughts on A/H Premium and past A/H Listings
CPMC (906 HK): Champion Holdings Walks
Key Things to Watch in Ecopro HN’s Big Rights Offering
Midea Group H Share Listing: AH Discount Views
Australia/NZ Real Estate: Stocks With (Large) Passive Flows

Sep24 Nikkei 225 Review Results: A Slightly Baffling 2 IN, 2 OUT

Today, the Nikkei Index Committee decided to delete Nippon Paper (3863) for low liquidity, and DIC (4631) for sector over-representation, and added Nomura Research Institute (4307) and Ryohin Keikaku (7453).
The only auto-delete was Nippon Paper. The DIC delete was “discretionary.” But they could have done a third. Why did they not do a third change? I do not know.
The whole shebang should be ¥350-375bn a side. At current price, Fast Retailing is set for another capping (selling) event in March 2025. And there is one shoo-in then too.

Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped

Nomura Research Institute (4307 JP) and Ryohin Keikaku (7453 JP) will replace Nippon Paper Industries Co L (3863 JP) and Dic Corp (4631 JP) in the Nikkei 225 (NKY INDEX).
Fast Retailing (9983 JP)‘s CPAF will drop from 3 to 2.7 and there will be further selling in March 2025 as the CPAF drops to 2.4 (or possibly even 2.1!)
Passives will need to buy 7-15x ADV (13-14% of real float) in the adds and sell 2.7-6.5x ADV in the deletes. There is a big reverse funding trade too.

Fuji Soft (9749 JP) – Bain Bids More, The Market Goes Even Higher

The original Target Opinion Statement for KKR’s bid at ¥8,800/share offered a glimpse at a non-binding, questionably feasible offer at a slightly higher price, which 3DIP might have rejected.
That was apparently Bain, and now we know Bain has consistently had the higher price. Fuji Soft Inc (9749 JP) handled this whole process badly, perhaps cowed by 3DIP.
Now the cat is amongst the pigeons. This is less hostile than it looks IMO. The market thinks it will be a bun fight.

Fuji Soft (9749 JP): KKR’s Cop-Out as It Launches at Unchanged Terms, Next Move Bain

In response to the potential Bain competing offer for Fuji Soft Inc (9749 JP), KKR has waived the precondition and launched its offer at unchanged JPY8,800 per share.
Bain’s due diligence ends on 20 September, and it aims to submit a binding proposal in October. This timeline will thwart KKR’s offer, which closes on 21 October.
KKR’s offer launch at unchanged terms is delaying the inevitable and will have to bump to succeed. A potential bidding war is likely to push the offer price to JPY10,500.

For Long-Term Investors, Seven & I Is the Better Bet

By Michael Causton

The Couche-Tard “friendly bid” raises more questions than it answers: Is it real? What does CT really want? Can it afford it? Will the Japanese government let it through?
We remain sceptical about a bid – if it happens – succeeding. Either way, Seven & Eleven Japan looks to be the much better retailer.
It has been selling 25-40% more than competitors in the world’s toughest CVS market and looks set to extract more value in Japan/overseas than anyone else could so why sell?

Midea A/H Listing – Thoughts on A/H Premium and past A/H Listings

By Sumeet Singh

Midea Group Co Ltd A (000333 CH) aims to raise up to US$3bn in its H-share listing, as per media reports.
Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
We have covered the company and deal background in our previous notes. In this note, we talk about the past A/H listing and possible premiums.

CPMC (906 HK): Champion Holdings Walks

At the first close , SASAC/NCSSF-backed Champion Holdings failed to secure the 50% acceptance condition. No surprises there. What was a surprise was Champion Holdings letting the Offer lapse.
Champion Holdings could have extended the Offer to the 30th Sept, which would have achieved little. But they could have bumped terms. They did neither.
That leaves ORG Technology Co., Ltd. A (002701 CH) as the sole bidder for CPMC Holdings (906 HK) . And arguably, an unwilling bidder at that.

Key Things to Watch in Ecopro HN’s Big Rights Offering

Ecopro HN announced a ₩200 billion rights issue, offering 5.67 million shares (a 40% capital increase) with a stockholder allocation rate of 0.3 per share.
The extended timeline likely results from the issuer’s 20% discount push, with Daishin, an underdog banker, extending it to boost subscriptions despite risking price stability.
The strategy is to time entry when the stock rights and subscription costs create a solid spread versus the spot price, despite increased volatility making price predictions harder.

Midea Group H Share Listing: AH Discount Views

Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, is premarketing an H Share listing to raise US$3 billion.
In Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health, we noted that Midea is in good health, with strong growth, margins, and cash generation.
In this note, we examine the likely discount that Midea will offer its H Shares compared to the A Shares.

Australia/NZ Real Estate: Stocks With (Large) Passive Flows

There will be passive buying in Nextdc Ltd (NXT AU) and Charter Hall (CHC AU) and selling in Vital Healthcare Property Trust (VHP NZ) at the close on 20 September.
Charter Hall (CHC AU)‘s stock price jumped following announcement of results and that was accompanied by big short covering. There should still be more positioning here.
Nextdc Ltd (NXT AU)‘s increase in cumulative excess volume came on a drop in the stock price. There could be some covering here as positioning builds up.

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Sep 04

Most Read: Ryohin Keikaku, Seven & I Holdings, Fuji Soft Inc, Shanghai Shenzhen CSI 300 Inde, Exedy Corp, NVIDIA Corp, Jio Financial Services, Kuaishou Technology, Samsung Biologics and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Sep24 Nikkei 225 Rebal – Last Minute Thoughts and Change in Predictions
Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…
KKR ¥8,800 Takeover of Fuji Soft (9749) – Details and Arb Grid
China ETF Inflows & Implications: YTD Inflows Near US$100bn
[JAPAN ACTIVISM] Murakami Group Now 19+% on Exedy (7278) – LOTS of Room Left To Run
Select Sector Indices – Updated Flows as Round-Trip Trade Hits US$35bn
India: Index Implications of Additions to the F&O Segment
Fuji Soft (9749 JP): Bain’s Rumoured Counteroffer
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Sep 2024)
Trading Plays on Samsung C&T’s Holding Company Shift and Biologics Share Sell-Off

Sep24 Nikkei 225 Rebal – Last Minute Thoughts and Change in Predictions

The last two reviews have been announced on the second business day of the month of the review. The one before that on the third business day.
The review could be announced today or tomorrow. Wednesday would seem to be “late.”
There are still questions about implementation – thus “care” in previous insights. Here I explore the possibilities/probabilities/issues around the edges. And a Dark Horse which may be lighter than thought.

Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…

On 30 August, 7&i shareholder Artisan Partners (holder since 2019, now at 1%) wrote an open letter to the Board of Directors of Seven & I Holdings (3382 JP)
There are several comments in bold. “It is imperative that the board of directors negotiate with ACT immediately to achieve the best possible outcome for shareholders” is one.
The letter is a bit preachy, a bit fluffy, and a bit misleading in parts. But it requests the Company brief shareholders on the negotiations by 19 September 2024.

KKR ¥8,800 Takeover of Fuji Soft (9749) – Details and Arb Grid

KKR has announced its previously leaked takeover of Fuji Soft Inc (9749 JP). Two activists with 30+% between them have agreed to tender at ¥8,800.
Given what the founder, crossholders, and other arbs own, this gets done easily. Congrats on the win to the activists.
We will see more activism and more pressure on under-earning companies to go private to clean themselves up outside the public eye. Big opportunities for years.

China ETF Inflows & Implications: YTD Inflows Near US$100bn

Nearly US$100bn has flowed into mainland China listed ETFs year to date and could be driven by the National Team led by Central Huijin supporting the market.
Nearly all the net inflows have been focused on the CSI 300, CSI 1000, CSI 500, SSE50, ChiNext and STAR50 indices. Flows to sector ETFs have been mixed.
Over 70% of the net inflows have gone to the CSI 300 Index with another 18% going to the CSI 500 Index and CSI 1000 Index.

[JAPAN ACTIVISM] Murakami Group Now 19+% on Exedy (7278) – LOTS of Room Left To Run

In late May, Toyota Group member Aisin (7259 JP) announced it would sell its 37% stake in Exedy Corp (7278 JP) . The market dropped. But that was the opportunity.
On 30 May, I said “Buy the deal, buy in the market. It’s cheap and vulnerable.” It’s up 21.5% since (the day after). Peers are down 15-20%.
The company completed its buyback. Murakami Group bought more. The stock (pro-forma) is at 0.62x book, 0.54x book for the non-cash portion. There’s LOTS of cash left.

Select Sector Indices – Updated Flows as Round-Trip Trade Hits US$35bn

The changes to the S&P 500 INDEX (SPX INDEX), S&P400 Index and S&P600 Index will be announced after market close on Friday.
The conclusions of the market consultation to change the index weighting methodology for the Select Sector Indices to reduce concentration and avoid reverse turnover should also be announced.
Changes in the index weighting methodology will result in a round-trip trade of US$35bn across the Select Sector indices. The largest turnover is in the XLP and XLK.

India: Index Implications of Additions to the F&O Segment

Following SEBI’s review of eligibility criteria for entry/exit of stocks in the derivatives segment, there could be 18 deletions/79 inclusions in the F&O segment over the next 6 months.
The introduction of some stocks in the F&O segment could lead to their inclusion in the NIFTY, SENSEX, Nifty Bank and CNXIT indices and weight changes in the Nifty Next50.
The inclusion of stocks in indices with a fixed number of constituents will result in deletion of some stocks from these indices. There should be methodology changes too.

Fuji Soft (9749 JP): Bain’s Rumoured Counteroffer

Nikkei reports that Bain will launch a competing tender offer for Fuji Soft Inc (9749 JP) around JPY9,200-9,300 per share, around 5% higher than KKR’s offer.
The Board responded that Bain submitted a non-binding proposal on 26 July. The special committee will consider its feasibility if a binding proposal is submitted.
KKR has three options to respond to a higher Bain offer: revise it, launch a hostile offer at unchanged terms, or walk away. The first option is the most likely.

HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Sep 2024)

The September 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$18.1bn (US$2.3bn).
Kuaishou, ASM Pacific Technology, JD.com, J&T Global, Sunny Optical and New Oriental Education are the largest buys while Alibaba, Tencent, Meituan, Xiaomi and HSBC Holdings are the biggest sells.

Trading Plays on Samsung C&T’s Holding Company Shift and Biologics Share Sell-Off

Samsung C&T’s holding company ratio is closing in on 50%, driven by the Biologics rally, which has Samsung on high alert for a forced conversion.
Watch Samsung’s moves to avoid forced holding company status. The old Biologics-for-Electronics swap isn’t viable, so they’ll likely sell Biologics shares to lower the ratio.
Samsung C&T might sell Biologics shares at a ₩80T market cap. They’ve boosted construction to manage assets and the holding ratio, but beyond ₩80T, risks increase.

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Sep 03

Most Read: Ryohin Keikaku, Seven & I Holdings, Midea Group Co Ltd A, APT Medical , POSCO Holdings, Zomato, Shanghai Shenzhen CSI 300 Inde, Bajaj Housing Finance, MS&AD Insurance and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Sep24 Nikkei 225 Rebal – Last Minute Thoughts and Change in Predictions
Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…
Midea A/H Listing – 1H24 Updates – Strong Growth, Margins Uptick Continues
STAR50/STAR100 Index Rebalance: Adds Rally, Deletes Drop as Positioning Builds Up
Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health
Today’s Battery Rally Offers a Great Angle for Sector Pair Trading with Value-Up Stocks
India: Potential Adds/Deletes from F&O Segment
China ETF Inflows & Implications: YTD Inflows Near US$100bn
Bajaj Housing Finance IPO: Offering Details & Index Inclusion
Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Sep24)

Sep24 Nikkei 225 Rebal – Last Minute Thoughts and Change in Predictions

The last two reviews have been announced on the second business day of the month of the review. The one before that on the third business day.
The review could be announced today or tomorrow. Wednesday would seem to be “late.”
There are still questions about implementation – thus “care” in previous insights. Here I explore the possibilities/probabilities/issues around the edges. And a Dark Horse which may be lighter than thought.

Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…

On 30 August, 7&i shareholder Artisan Partners (holder since 2019, now at 1%) wrote an open letter to the Board of Directors of Seven & I Holdings (3382 JP)
There are several comments in bold. “It is imperative that the board of directors negotiate with ACT immediately to achieve the best possible outcome for shareholders” is one.
The letter is a bit preachy, a bit fluffy, and a bit misleading in parts. But it requests the Company brief shareholders on the negotiations by 19 September 2024.

Midea A/H Listing – 1H24 Updates – Strong Growth, Margins Uptick Continues

By Sumeet Singh

Midea Group Co Ltd A (000333 CH), recently filed its PHIP as it aims to raise up to US$3bn in its H-share listing, as per media reports.
Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
We have covered the company and deal background in our previous notes. In this note, we talk about the updates from its 1H24 results.

STAR50/STAR100 Index Rebalance: Adds Rally, Deletes Drop as Positioning Builds Up

There are 2 constituent changes for the STAR50 INDEX and 6 changes for the STAR100 Index at the September rebalance that will be implemented at the close on 13 September.
There are no surprises for the SSE STAR50 (STAR50 INDEX) while there are 3 surprise adds for the STAR100 Index with the profitability criterion being ignored.
The adds to the SSE STAR50 (STAR50 INDEX) have outperformed the deletes over the last month and positioning is larger in some stocks compared to others.

Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health

Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, is premarketing an H Share listing to raise US$3 billion.
Midea is the world’s largest home appliance company in sales volume and revenue in 2023. Its subsidiary, KUKA Group, is one of the world’s “big four” industrial robotics companies.
The PHIP update shows that the business is in good health, with accelerating growth, rising margins, and strong cash generation. Therefore, a premium multiple to peers is justified.

Today’s Battery Rally Offers a Great Angle for Sector Pair Trading with Value-Up Stocks

Today’s surge in Korean battery stocks stems from sector rotation and improved fundamentals, with SK On’s healthier balance sheet and Samsung SDI’s new U.S. plant fueling optimism.
But with POSCO affiliates showing standout performance relative to their peers., the value-up factor is once again shaking things up and driving those differences in relative performance.
Today’s price action suggests using the value-up factor for long-short strategies, especially with KRX hinting at sector quotas in the value-up index.

India: Potential Adds/Deletes from F&O Segment

Following SEBI’s review of eligibility criteria for entry/exit of stocks in the derivatives segment, there could be 18 deletions/79 inclusions in the F&O segment over the next 6 months.
The new framework could lead to mechanical entry and exit of stocks in the F&O segment with minimal intervention from SEBI.
The introduction of some large cap stocks in the F&O segment could lead to their inclusion in the NIFTY Index, SENSEX Index and other local indices.

China ETF Inflows & Implications: YTD Inflows Near US$100bn

Nearly US$100bn has flowed into mainland China listed ETFs year to date and could be driven by the National Team led by Central Huijin supporting the market.
Nearly all the net inflows have been focused on the CSI 300, CSI 1000, CSI 500, SSE50, ChiNext and STAR50 indices. Flows to sector ETFs have been mixed.
Over 70% of the net inflows have gone to the CSI 300 Index with another 18% going to the CSI 500 Index and CSI 1000 Index.

Bajaj Housing Finance IPO: Offering Details & Index Inclusion

Bajaj Housing Finance (BHF IN) is looking to list on the exchanges by selling INR 65.6bn of stock at a valuation rumoured to be between INR 560-590bn.
The anchor allocations will be completed later this week, and the stock is expected to start trading on 16 September.
Bajaj Housing Finance (BHF IN)‘s maximum float will be around 10% and that will limit inclusion to just one global index in the following 6 months.

Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Sep24)

June/July/August saw 1,673/825/202 new Corporate Governance Reports filed and 8/5/9 new “Mgmt Conscious of Capital Cost/Stock Price” policies filed, respectively. The TSE’s very simple tool comes in 15 days.
Our tools show every report, links to every document, and now a new diff file tool. input a name, see the difference between the Old/New Reports. We hope it helps.
This tool is designed to be a shelf reference. We update it once a month, and every CorpGovReport and new “Management Conscious” report updated since a CGR update is here.

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Sep 02

Most Read: China Traditional Chinese Medicine, Zomato, Seven & I Holdings, Hamamatsu Photonics Kk, ESR Group , Ninebot , APT Medical , Bajaj Housing Finance, CPMC Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

TCM (570 HK): Profit Warning Is No Biggie
Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…
Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding
Weekly Deals Digest (01 Sep) – ESR, Canvest, China TCM, CPMC, Shinko, Silverlake, Terumo, Midea
Quiddity STAR 50/100 Sep 24 Rebalance: 100% Hit Rate; US$1bn+ One-Way Flows
STAR50/STAR100 Index Rebalance: Adds Rally, Deletes Drop as Positioning Builds Up
Hamamatsu Photonics Placement – Peculiar Timing
Bajaj Housing Finance IPO: Offering Details & Index Inclusion
CPMC Holdings (906.HK) Privatization Update – ORG Is Pushing Baosteel to Raise Its Offer

TCM (570 HK): Profit Warning Is No Biggie

China Traditional Chinese Medicine (570 HK) flagged a 60-70% drop in its 1H24E net profit versus 1H23, due to reduced sales/profit of TCM concentrate, bad debt provisions, and remedial taxes.
MAC triggers? No – Sinopharm won’t exercise such right, even if one was ostensibly triggered. I’d be surprised if Sinopharm wasn’t fully aware of TCM’s underlying operations.
Get involved on any dips today. Trading wide at a 11.7%/38.7% gross/annualised spread, assuming Dec-end payment.

Zomato: Index Inclusions & Passive Impact (Once Added to F&O)

Zomato (ZOMATO IN) has a market cap of over US$27bn but is not a member of the NIFTY Index and S&P BSE SENSEX Index since it is not an F&O member.
Once SEBI’s proposed and enhanced stock inclusion thresholds are implemented, Zomato (ZOMATO IN) should be added to the F&O segment of the market.
Passive NIFTY Index and S&P BSE SENSEX Index will have to buy a lot of Zomato stock at subsequent rebalances. The impact will be higher given the lower real float.

Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…

On 30 August, 7&i shareholder Artisan Partners (holder since 2019, now at 1%) wrote an open letter to the Board of Directors of Seven & I Holdings (3382 JP)
There are several comments in bold. “It is imperative that the board of directors negotiate with ACT immediately to achieve the best possible outcome for shareholders” is one.
The letter is a bit preachy, a bit fluffy, and a bit misleading in parts. But it requests the Company brief shareholders on the negotiations by 19 September 2024.

Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding

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.

Weekly Deals Digest (01 Sep) – ESR, Canvest, China TCM, CPMC, Shinko, Silverlake, Terumo, Midea

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: Midea Group Co Ltd A (000333 CH) premarketing its H Share listing, Terumo Corp (4543 JP) placement and 99 Speed Mart Retail Holdings (99SPD MK) US$530 million IPO.
Event-Driven developments: ESR Group (1821 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), CPMC Holdings (906 HK), Shinko Electric Industries (6967 JP).

Quiddity STAR 50/100 Sep 24 Rebalance: 100% Hit Rate; US$1bn+ One-Way Flows

By Janaghan Jeyakumar, CFA

The September 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 30th August 2024.
There will be 2 changes for the STAR 50 index and 6 changes for the STAR 100 index.
The STAR 50 and STAR 100 rebalances will collectively trigger one-way flows of more than US$1bn during the September 2024 index rebal event.

STAR50/STAR100 Index Rebalance: Adds Rally, Deletes Drop as Positioning Builds Up

There are 2 constituent changes for the STAR50 INDEX and 6 changes for the STAR100 Index at the September rebalance that will be implemented at the close on 13 September.
There are no surprises for the SSE STAR50 (STAR50 INDEX) while there are 3 surprise adds for the STAR100 Index with the profitability criterion being ignored.
The adds to the SSE STAR50 (STAR50 INDEX) have outperformed the deletes over the last month and positioning is larger in some stocks compared to others.

Hamamatsu Photonics Placement – Peculiar Timing

By Sumeet Singh

Toyota Motor (7203 JP) aims to raise around US$190m via selling over a 4% stake in Hamamatsu Photonics Kk (6965 JP).
This is another cross-shareholding unwind and hence, won’t be a huge surprise. Although given the recent share price weakness, the timing appears peculiar.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Bajaj Housing Finance IPO: Offering Details & Index Inclusion

Bajaj Housing Finance (BHF IN) is looking to list on the exchanges by selling INR 65.6bn of stock at a valuation rumoured to be between INR 560-590bn.
The anchor allocations will be completed later this week, and the stock is expected to start trading on 16 September.
Bajaj Housing Finance (BHF IN)‘s maximum float will be around 10% and that will limit inclusion to just one global index in the following 6 months.

CPMC Holdings (906.HK) Privatization Update – ORG Is Pushing Baosteel to Raise Its Offer

By Xinyao (Criss) Wang

Huarui Offer has been approved by SAMR, which marks a solid step forward.Meanwhile, ORG’s management stated that the reduction of Huangshan Novel shares is to raise funds to acquire CPMC.
While Baosteel may want to “test the waters”, the signals ORG is sending is it will make every effort to advance the acquisition of CPMC and is accelerating the process.
The return on Huarui Offer isn’t attractive.We recommend waiting for Baosteel to raise its Offer, or simply choosing to add more positions in China TCM, whose privatization is more lucrative.

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Sep 01

Most Read: Jardine Matheson Holdings, Hitachi Energy India, Pro Medicus Ltd, Hamamatsu Photonics Kk, Edelweiss Financial Services, Seven & I Holdings, Samsung C&T, SHEIN, ESR Group , LS Materials and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Jardine Matheson (JM SP): Trading “Cheap”
NIFTY MIDCAP150 Index Rebalance: 19 Changes a Side; Lots of Overlap with Other Index Flow
MV Australia Equal Weight Index Rebalance Preview: One Add & A Few Deletes
Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding
Edelweiss: Scaling Up Well | Value Unlocking Is Catalyzing Re-Rating
(Mostly) Asia-Pac M&A: Seven & I, Silverlake Axis, Shanghai Henlius, CPMC, Shinko Electric, Arvida
Keep an Eye on Samsung C&T & SK Square as the Next Hot Picks for Value-Up Announcements
SHEIN & Temu Updates: ‘De Minimis’ Threat | Chinese X-Border Slowdown | Plastics! | AMZN Project?
Weekly Deals Digest (01 Sep) – ESR, Canvest, China TCM, CPMC, Shinko, Silverlake, Terumo, Midea
End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2024

Jardine Matheson (JM SP): Trading “Cheap”

I see Jardine Matheson Holdings (JM SP)‘s discount to NAV and implied stub at 12-month lows.
Recent interim results were okay. Stripping out DFI Retail Group Holdings (DFI SP)‘s outperformance, the remainder of the Jardine stable delivered weaker numbers.
Further afield, the implied stub is marginally below the long-term average since the Jardine Strategic Holdings (JS SP) circularity was collapsed in April 2021.

NIFTY MIDCAP150 Index Rebalance: 19 Changes a Side; Lots of Overlap with Other Index Flow

There are 19 changes a side for the NIFTY Midcap 150 Index at the September rebalance. There are many stocks with same-way flows from passive trackers of other indices.
Estimated one-way turnover is 9.8% resulting in a one-way trade of INR 8.2bn (US$98m). With US$40.1bn tracking the index actively, the impact on the stocks will be much larger.
The adds have outperformed the deletes this year, though near-term performance has been meh. There was a similar trend in March and the adds could outperform nearer to implementation.

MV Australia Equal Weight Index Rebalance Preview: One Add & A Few Deletes

With 2 days left to review cutoff, there could be 1 inclusion and 3 deletions for the index at the September rebalance.
Even if there are no constituent changes, capping changes will lead to one-way turnover of 4.4% and a round-trip trade of A$212m.
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.

Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding

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.

Edelweiss: Scaling Up Well | Value Unlocking Is Catalyzing Re-Rating

By Ankit Agrawal, CFA

Edelweiss Financial Services (“Edelweiss”) continues to scale up well its asset management and insurance businesses. The credit business has been also turning around led by the co-lending model.
In particular, the asset management business has been growing rapidly. The alternatives asset management AUM grew 17% YoY, of which fee-paying AUM grew 32% YoY.
With all its businesses now running independently, Edelweiss is focusing on unlocking value. It already demerged Nuvama and is now close to unlock value in its Alternative Asset management business.

(Mostly) Asia-Pac M&A: Seven & I, Silverlake Axis, Shanghai Henlius, CPMC, Shinko Electric, Arvida

I tally 42 – 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: the Taishin Financial Holding (2887 TT) / Shin Kong Financial Holding (2888 TT) merger; and Silverlake Axis (SILV SP)‘s hybrid Offer.
Key updates took place on Huafa Property Services (982 HK), Shanghai Henlius (2696 HK),CPMC (906 HK), Seven & I (3382 JP), Shinko Electric (6967 JP), and Arvida (ARV NZ).

Keep an Eye on Samsung C&T & SK Square as the Next Hot Picks for Value-Up Announcements

Construction and semiconductors are key targets due to their low value-up representation. For shareholder returns, keep an eye on Samsung C&T and SK Square.
Expect announcements before the mid-September value-up index, with early September releases mirroring LG Electronics’ prior notices and detailed plans arriving by Q4.
Even with prior notices, details will leak. Samsung C&T and SK Square are likely to prioritize short-term shareholder returns over long-term growth, potentially leading to a bigger price impact.

SHEIN & Temu Updates: ‘De Minimis’ Threat | Chinese X-Border Slowdown | Plastics! | AMZN Project?

By Daniel Hellberg

Draconian ‘de minimis’ reform proposal in the US has bipartisan support
In Q224 results, rampant signs of a Chinese X-border retail slowdown
Other news: plastics laws, new Amazon threat, SHEIN sustainability initiatives

Weekly Deals Digest (01 Sep) – ESR, Canvest, China TCM, CPMC, Shinko, Silverlake, Terumo, Midea

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: Midea Group Co Ltd A (000333 CH) premarketing its H Share listing, Terumo Corp (4543 JP) placement and 99 Speed Mart Retail Holdings (99SPD MK) US$530 million IPO.
Event-Driven developments: ESR Group (1821 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), CPMC Holdings (906 HK), Shinko Electric Industries (6967 JP).

End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2024

We discuss the end of the mandatory lock-up periods for 49 stocks in Korea in September 2024, among which 3 are in KOSPI and 46 are in KOSDAQ.
These 49 stocks on average could be subject to further selling pressures in September 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 September include LS Materials, CIS, and Kyobo Securities.

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Aug 31

Most Read: Terumo Corp, Zomato, Jardine Matheson Holdings, NVIDIA Corp, LG Chem Ltd, Doosan Robotics , CPMC Holdings, Kum Yang , Hamamatsu Photonics Kk and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Terumo (4543 JP) Secondary Offering – Smaller Than It Looks
Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
Jardine Matheson (JM SP): Trading “Cheap”
NVIDIA’s >5x YoY “Singapore” Revenue Growth Is A Red Flag
CPMC Holdings (906.HK) Privatization Update- Due to Risk Behind ORG’s Offer, Baosteel Is a Wiser Bet
LG Corp Plans to Purchase 200 Billlion Won of LG Electronics and 300 Billion Won of LG Chem
Doosan Group Cancels Plans to Merge Doosan Robotics and Doosan Bobcat
CPMC (906 HK): SAMR Green Lights ORG’s Offer
Finding Unusual Arbitrage Angles in Kumyang’s Effectively Pre-Announced Capital Increase
Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding

Terumo (4543 JP) Secondary Offering – Smaller Than It Looks

On Thursday 29 August, Terumo Corp (4543 JP) announced a secondary offering where 7 major cross-holders would sell just under 5% of the shares outstanding to international investors.
In recent quarters, Terumo has seen better consensus EPS growth than Peers in recent quarters, and Peers have underperformed. Right now, Terumo isn’t ‘cheap’ but consensus growth is strong.
This back-end demand in this case has enough moving parts that it bears a closer look.

Zomato: Index Inclusions & Passive Impact (Once Added to F&O)

Zomato (ZOMATO IN) has a market cap of over US$27bn but is not a member of the NIFTY Index and S&P BSE SENSEX Index since it is not an F&O member.
Once SEBI’s proposed and enhanced stock inclusion thresholds are implemented, Zomato (ZOMATO IN) should be added to the F&O segment of the market.
Passive NIFTY Index and S&P BSE SENSEX Index will have to buy a lot of Zomato stock at subsequent rebalances. The impact will be higher given the lower real float.

Jardine Matheson (JM SP): Trading “Cheap”

I see Jardine Matheson Holdings (JM SP)‘s discount to NAV and implied stub at 12-month lows.
Recent interim results were okay. Stripping out DFI Retail Group Holdings (DFI SP)‘s outperformance, the remainder of the Jardine stable delivered weaker numbers.
Further afield, the implied stub is marginally below the long-term average since the Jardine Strategic Holdings (JS SP) circularity was collapsed in April 2021.

NVIDIA’s >5x YoY “Singapore” Revenue Growth Is A Red Flag

By William Keating

NVIDIA delivered another blockbuster quarter with record revenues of $30 billion, blowing well past the guided $28 billion, up 15% QoQ and up 122% YoY.
$5.6 billion in revenues were attributed to Singapore, making up more than 18% of overall revenues and up >5 times YoY
What the heck is the city state doing with all of those GPUs?

CPMC Holdings (906.HK) Privatization Update- Due to Risk Behind ORG’s Offer, Baosteel Is a Wiser Bet

By Xinyao (Criss) Wang

Baosteel’s choice to maintain its original Offer may partly reflect its “confidence” in the deal. If investors bet that Huarui Offer will succeed, they need to bear some risks.
If investors choose to arbitrage at HK$7.21/share, annualized return is 9% assuming privatization would be completed in mid-Jan 2025.Such return may not be attractive considering the uncertainties behind the deal.
If investors are optimistic about Baosteel’s final acquisition of CPMC, they can consider buying Baosteel shares, as Baosteel will become the new industry leader, with greater upside potential for valuation.

LG Corp Plans to Purchase 200 Billlion Won of LG Electronics and 300 Billion Won of LG Chem

On 29 August, LG Corp announced that it plans to purchase about 200 billion won worth of LG Electronics and about 300 billion won worth of LG Chem.
After these share purchases, LG Corp’s stake in LG Electronics will increase from 30.47% to 31.59%, and its stake in LG Chem will increase from 30.06% to 31.29%.
LG Corp plans to purchases these shares starting 1 November 2024. The share purchases will be conducted in two stages and will be completed by 31 March 2025.

Doosan Group Cancels Plans to Merge Doosan Robotics and Doosan Bobcat

On 29 August, the Doosan Group announced that it is cancelling the merger between Doosan Robotics (454910 KS) and Doosan Bobcat Inc (241560 KS).
However, the plan to split Doosan Enerbility into a newco and then merge Doosan Bobcat with the newco will remain in place.
Doosan Group is still trying to complete the first two portions of reorganization (Split of Doosan Enerbility and Merger Swap Between Doosan Enerbility and Doosan Robotics), resulting in continued uncertainty.

CPMC (906 HK): SAMR Green Lights ORG’s Offer

ORG Technology (002701 CH), via the Offeror Huarui Fengquan Development Limited, has announced SAMR has given its approval. ORG still requires MOFCOM, NDRC, and SAFE to sign off.
Interestingly, SASAC/NCSSF-backed Champion Holdings, the competing/initial bidder for CPMC (906 HK), secured MOFCOM, NDRC, and SAFE before SAMR clearance. Champion’s regulatory pre-conditions took a little over seven months to secure.
What now? SAMR is China’s primary antitrust regulator (overlapping with NDRC). So this is positive for ORG. However, I’d still stick to ORG’s pre-condition long stop in terms of timing.

Finding Unusual Arbitrage Angles in Kumyang’s Effectively Pre-Announced Capital Increase

The arbitrage is clear: it’s the difference between stock rights/subscription costs and short hedge price. Kumyang’s high market interest and volatility amplify this, suggesting unusual trading angles.
Kumyang’s futures also show extreme volatility, likely causing excessive backwardation around the ex-rights date and stock rights window, affecting futures-based short hedge positions.
This opens up the possibility that, depending on entry points, our futures-based short hedge position might temporarily enter an unusual profitable zone relative to the stock rights and subscription costs.

Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding

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.

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Aug 30

Most Read: Toyota Motor, Terumo Corp, Pro Medicus Ltd, LG Chem Ltd, Sino American Silicon Products, Hyundai Rotem Company, Doosan Robotics , Arvida and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Toyota Partial Offer Results – What Next?
Terumo (4543 JP) Secondary Offering – Smaller Than It Looks
MV Australia Equal Weight Index Rebalance Preview: One Add & A Few Deletes
Terumo Placement – US$1.4bn Secondary Selldown, Buyback Should Aid Deal Dynamics
Terumo (4543 JP): A US$1.4 Billion Secondary Offering
LG Corp Plans to Purchase 200 Billlion Won of LG Electronics and 300 Billion Won of LG Chem
Sino-American Silicon Early Look – Another Well Flagged GDR Offering in the Works
Notable Developments in the November Review of the Global Index Korea Standard
Doosan Mergers: One Canceled, One Still Moving Forward
Arvida (ARV NZ): 25th Sept Vote On Stonepeak’s Offer

Toyota Partial Offer Results – What Next?

Today after the close, Toyota Motor (7203 JP) reported the results of their ¥800bn Tender Offer Buyback, originally intended to repurchase 290.12mm shares from cross-holders.
In the end, 343.83mm shares were tendered (53.71mm shares more than originally expected, worth about ¥150bn at Tender Price). That creates back-end “issues” which must be considered.
The resulting supply/demand profile is mixed, but on balance, I expect sees positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.

Terumo (4543 JP) Secondary Offering – Smaller Than It Looks

On Thursday 29 August, Terumo Corp (4543 JP) announced a secondary offering where 7 major cross-holders would sell just under 5% of the shares outstanding to international investors.
In recent quarters, Terumo has seen better consensus EPS growth than Peers in recent quarters, and Peers have underperformed. Right now, Terumo isn’t ‘cheap’ but consensus growth is strong.
This back-end demand in this case has enough moving parts that it bears a closer look.

MV Australia Equal Weight Index Rebalance Preview: One Add & A Few Deletes

With 2 days left to review cutoff, there could be 1 inclusion and 3 deletions for the index at the September rebalance.
Even if there are no constituent changes, capping changes will lead to one-way turnover of 4.4% and a round-trip trade of A$212m.
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.

Terumo Placement – US$1.4bn Secondary Selldown, Buyback Should Aid Deal Dynamics

By Clarence Chu

A group of shareholders are looking to raise around US$1.36bn from selling ~5% stake in Terumo Corp (4543 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.

Terumo (4543 JP): A US$1.4 Billion Secondary Offering

Terumo Corp (4543 JP) has announced a secondary offering of up to 73.2 million shares, worth JPY203 billion (US$1.4 billion) at the last close.
The secondary offering facilitates the exit of large shareholders. Terumo also announced a buyback worth a maximum of JPY30 billion or 15 million shares.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 10 and 12 September (likely 10 September).

LG Corp Plans to Purchase 200 Billlion Won of LG Electronics and 300 Billion Won of LG Chem

On 29 August, LG Corp announced that it plans to purchase about 200 billion won worth of LG Electronics and about 300 billion won worth of LG Chem.
After these share purchases, LG Corp’s stake in LG Electronics will increase from 30.47% to 31.59%, and its stake in LG Chem will increase from 30.06% to 31.29%.
LG Corp plans to purchases these shares starting 1 November 2024. The share purchases will be conducted in two stages and will be completed by 31 March 2025.

Sino-American Silicon Early Look – Another Well Flagged GDR Offering in the Works

By Clarence Chu

Sino American Silicon Products (5483 TT) is looking to raise at least US$338m in its upcoming global depository receipts (GDRs) offering.
In late Feb 2024, Sino-American Silicon (SAS) announced its board’s resolution to issue up to 55m common shares via a GDR offering.
Similar to previous GDR listings, the deal is a long drawn out process with the firm required to jump through a number of board/shareholder/regulatory approval loops.

Notable Developments in the November Review of the Global Index Korea Standard

Hyundai Rotem is right on the edge for Small Cap→Standard, so it is the only one having a real chance of being included in the November review.
Doosan Robotics’ float rate will rise to 40% after issuing 20,219,376 new shares, making it a top candidate for inclusion among Outside IMI and comfortably surpassing the cutoff.
With high trading volume volatility, it’s early to predict passive impact. Watch for momentum buildup like LS Electric and monitor the trading volume of Hyundai Rotem and Robotics closely.

Doosan Mergers: One Canceled, One Still Moving Forward

Maekyung reported that Doosan Robotics and Bobcat will cancel their merger, but the merger between Robotics and Enerbility’s spun-off company will proceed.
The merger’s risks have been overblown in Robotics’ stock, which might rebound. Bobcat’s stock outlook is uncertain, with fading merger hopes potentially hurting short-term sentiment.
The Robotics-Enerbility merger might also be canceled under regulatory pressure, but this could hurt Enerbility’s stock due to debt concerns; forcing the merger may increase costs.

Arvida (ARV NZ): 25th Sept Vote On Stonepeak’s Offer

Back on the 22 July, Arvida (ARV NZ), a leading retirement living and aged care provider, announced a Scheme from Stonepeak at NZ$1.70/share, in cash, a 65% premium to undisturbed.
The Scheme Booklet is now out, with a Scheme Meeting to be held on the 25th September. Expected implementation on the 13th November.
The Scheme Consideration of NZ$1.70/share is within the Independent Adviser’s valuation range at NZ$1.63 to NZ$1.94/share. Arvida’s directors unanimously recommend shareholders to vote in favour of the Scheme.

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Aug 29

Most Read: Kansai Paint, Toyota Motor, Seven & I Holdings, Kioxia Holdings , Jardine Matheson Holdings, Home Consortium Ltd, KT Corp, Hyundai Motor, Huafa Property Services Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Kansai Paint (4613) – Going Hard with a BIG Buyback and More Capital Moves Beyond
Toyota Partial Offer Results – What Next?
Updates on The Couche-Tard Deal for 7&I (3382 JP)
Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October
Jardine Matheson (JM SP): Trading “Cheap”
MV Australia A-REITs Index Rebalance Preview: One Close Add & Capping Changes
KT Corp (030200 KS): Foreign Room Drops Below Critical Level; Passive Selling to Come
Hyundai Motor’s Value-Up Disclosure: Trading Implications from Release Timing & Pref-Skewed Buyback
Huafa Props (982 HK): A Quick Word On Voting
Seven & I (3382) | Strategic Refocus and Acquisition Interest Signal Major Upside Potential

Kansai Paint (4613) – Going Hard with a BIG Buyback and More Capital Moves Beyond

24mos ago, Kansai Paint (4613 JP) announced a new MTMP, a large buyback, and plans to unwind cross-holdings. Big. 15mos ago a large secondary offering kicked off the festivities.
Key was Toyota sold. Then KP could sell its Toyota shares – two-thirds of its cross-holdings. The offering was one to buy. A buyback followed. KP vs Nippon Paint doubled.
KP offered a CB recently with the delta hedge done by TN-3. Now there is a HUGE new buyback. Really big. This gets rid of more cross-holders. And there’s more.

Toyota Partial Offer Results – What Next?

Today after the close, Toyota Motor (7203 JP) reported the results of their ¥800bn Tender Offer Buyback, originally intended to repurchase 290.12mm shares from cross-holders.
In the end, 343.83mm shares were tendered (53.71mm shares more than originally expected, worth about ¥150bn at Tender Price). That creates back-end “issues” which must be considered.
The resulting supply/demand profile is mixed, but on balance, I expect sees positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.

Updates on The Couche-Tard Deal for 7&I (3382 JP)

Today saw the publication of three different articles regarding the Alimentation Couche-Tard (ATD CN) approach and offer to purchase all the shares of Seven & I Holdings (3382 JP)
The first in the Nikkei said ATD could push offer a high price, even up to ¥8 trillion. The second mentioned debt financing being feasible because of prodigious cash flow.
The third in Bloomberg noted that 7&i had requested the government upgrade its FEFTA status to “core”, which would lead to a more burdensome/restrictive government approval process.

Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October

By Dimitris Ioannidis

Kioxia and Tokyo Metro with valuations of ~$10bn and ~$4.6bn are expected to be listed in October 2024 and become the largest Japanese IPOs since Softbank Corp (9434 JP) in 2018.
Kioxia Holdings (6600 JP) is currently forecasted to fail fast entries of both Global indices due to low IPO free float.
Tokyo Metro is expected to be added via fast-entry in one Global Index because of higher IPO free float. Forecasted demand of ~$140m is expected on the fifth trading day.

Jardine Matheson (JM SP): Trading “Cheap”

I see Jardine Matheson Holdings (JM SP)‘s discount to NAV and implied stub at 12-month lows.
Recent interim results were okay. Stripping out DFI Retail Group Holdings (DFI SP)‘s outperformance, the remainder of the Jardine stable delivered weaker numbers.
Further afield, the implied stub is marginally below the long-term average since the Jardine Strategic Holdings (JS SP) circularity was collapsed in April 2021.

MV Australia A-REITs Index Rebalance Preview: One Close Add & Capping Changes

The review period for the September rebalance ends on 30 August. We do not see any constituent changes for the index but there will be capping changes.
Home Consortium Ltd (HMC AU) is just outside inclusion zone at the moment and outperformance over the rest of the week could result in inclusion.
Home Consortium Ltd (HMC AU)‘s inclusion and capping changes will result in a one-way turnover of 5% and in a round-trip trade of A$62m.

KT Corp (030200 KS): Foreign Room Drops Below Critical Level; Passive Selling to Come

Foreign investors have continued buying KT Corp (030200 KS) and the stock has outperformed SK Telecom (017670 KS), though not by a lot.
Foreign buying has pushed foreign room in KT Corp (030200 KS) below 3.75% and the stock could be deleted from a global index at the next rebalance.
There will be some interesting trading dynamics in KT Corp (030200 KS) over the next couple of months and there will be trading opportunities versus its peers.

Hyundai Motor’s Value-Up Disclosure: Trading Implications from Release Timing & Pref-Skewed Buyback

Hyundai’s TSR target is 35%+ (dividends plus buybacks), up 10 percentage points from previous years. They’ve also set a new annual dividend of ₩10,000, paid evenly quarterly.
Hyundai’s Value-Up targets may not fully meet market expectations, but the key is the timing. By aligning early with government policies, Hyundai has reduced risks and secured investment flow.
Hyundai plans a pref-skewed buyback, likely continuing this approach as retiring preferred shares first may boost ROE.

Huafa Props (982 HK): A Quick Word On Voting