Most Read

KKR raised around US$730m via selling some stake in Kokusai Electric (6525 JP) Japan IPO in Sep 2023. Its remaining stake will be released from its IPO linked lockup soon.
KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

KKR To Sell a 20-22% Stake in Kokusai Electric (6525)?

Today, a Reuters article came out saying that KKR would sell down half its 43% stake in Kokusai Electric (6525 JP) according to “two people familiar with the matter.”
The article also said Kokusai Electric would buy back shares. Kokusai responded with a TDNET release saying “we did not release this info but we are considering various capital policies.
It pays to look at the Shareholder Structure as it stands. This is bigger than it looks.

Toyota Group Cross-Holding Structure Primer – Holdings, Unwind Progress, Buyback Policies, Etc

Last September in the release of its new Mid-Term Management Plan, Toyota Group member Aisin (7259 JP) announced a plan to cut cross-holdings to zero. JTEKT Corp (6473 JP) followed suit.
It started with a selldown of Denso Corp (6902 JP), then Toyota Industries (6201 JP), now Aisin. Last FY, Toyota Group cos reduced crossholdings by ¥870bn. This year will be more.
Attached below is a general breakdown of Toyota Group cross-holdings, discussion of cross-holding policies, and analysis of what is next, and what is not.

Recruit (6098 JP) – BIG Headline Buyback But Disappointing if That Is Best Use Of Cash

Last December, Recruit Holdings (6098 JP) announced a ¥200bn buyback which sounded big but with lots of cross-holders, wasn’t huge. The stock is up 80% in 6+ months since.
Today, the company announced a new buyback of ¥600bn. This is very aggressive, and at 25x EBITDA and 40x PER, is probably due to demand to sell.
Crossholders now hold ¥2trln which is three-plus times this buyback. And if the price were to rise 10% a year for 3yrs, it would be four times.

StubWorld: Hanwha Corp’s Steep Discount & Tender Offer

With Hanwha Corporation (000880 KS) trading around a one-year low NAV discount, the Hanwha Group has made a Tender Offer for 8% of shares outstanding at ₩30,000/share.
Preceding my comments on Hanwha 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%.

Asia Cement China (743.HK) – Investors Are Facing the Dilemma of Low-Priced Privatization

Many minority shareholders have lodged complaints against ACC with the SFC, since unfair privatization price damages the ecology of the entire market.It depends on whether the SFC will take action.
The failure of privatization does not necessarily mean better returns for investors. On the contrary, it may result in greater losses. ACC can have other ways “hollow out” the Company.
Arbitrageurs can choose to bet on a second privatization (with higher Offer Price) and also on the potential dividends, but the prerequisite is that the management choose to “act honorably”.

Nikkei 225 Index Rebalance Preview (Sep 2024): Potential Adds/Deletes, Capping & Funding Changes

The review period for the Nikkei 225 Index September rebalance ends in three weeks. There could be three changes at the rebalance with sector balance used for the additions.
Depending on the changes, passive trackers will need to buy between 3-57x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-8.4x ADV on the deletions.
Fast Retailing (9983 JP)‘s index weight is currently higher than 10% and that will result in capping in September. Passives will need to sell 6x ADV in the stock.

Kelun-Biotech IPO Lock-Up Expiry – Strong Performance Leaves Pre-IPO Investors with Large Gains

Kelun Biotech (KB) raised around US$170m in its IPO in July 2023, the lockup on its pre-IPO shareholders is set to expire soon.
KB is a China-based integrated innovative biopharmaceutical company. It has accumulated more than ten years of experience in antibody drug conjugates (ADC) development.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

Kokusai Electric (6525 JP): Rumoured KKR US$1.8 Billion Secondary Offering

Reuters reported that KKR & Co (KKR US), the largest Kokusai Electric (6525 JP) shareholder, plans to sell about half of its 43% stake, worth around JPY300 billion.
As Kokusai’s shares are trading at 3.2x the IPO price of JPY1,840, KKR would be tempted to reduce its stake further. The 180-day IPO lock-up period expired on 22 April.
Kokusai anticipates a return to growth and margin improvement. However, Kokusai trades at a material premium to peer multiples and is fully priced.

Details of Block Deal Pre-Disclosure Rule Disclosed: Cancellation Risk from 30% Price Correction

Today’s press release unveils details on new flow trading events in Korea’s local market from the second half of this year, highlighting two key points.
Firstly, the disclosure rule starts with block deals from August 23rd. Secondly, a 30% or greater stock price correction on disclosure day may cancel the transaction plan.
This highlights the need to consider cancellation risks in pre-disclosure positions and design setups with consideration for the potential for reverse flows as stock prices approach 30% corrections.

💡 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

Jul 09

Most Read: China Traditional Chinese Medicine, Zip , Shanghai Henlius Biotech , Clio Cosmetics, Softbank Corp, GoodWe Technologies , Kakao Games , Honda Motor, China Resources Pharmaceutical, MD Pictures Tbk PT and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Merger Arb Mondays (08 Jul) – China TCM, L’Occitane, A8 Media, GA Pack, Asia Cement, Hollysys, MMA
S&P/ASX 100/200 Index Adhoc Rebalance: Potential Replacements for Altium (ALU AU)
Shanghai Henlius Biotech Update (2696.HK) – The Story Behind Privatization
KOSDAQ150 Index Rebalance Preview: For Now, A Dozen Changes in December
Softbank Corp (9434) – Accounting for the Accounting Is Complicated Redux – So Be Bearish
STAR100 Index Rebalance Preview: Outright Adds Outperforming Outright Deletes
Exploring the Kakao Corp and Krafton Deal Potential for Kakao Games
Honda (7267) : Offering’s Underwhelming Global Index Implications
Quiddity Leaderboard for Hang Seng Index Sep 24: New Economy? Clean Energy? or Shipping?
LQ45 Index Rebalance Preview (July): Identifying Potential Index Changes

Merger Arb Mondays (08 Jul) – China TCM, L’Occitane, A8 Media, GA Pack, Asia Cement, Hollysys, MMA

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), A8 New Media (800 HK), Greatview Aseptic Packaging (468 HK), Asia Cement China (743 HK).
Lowest spreads: Fancl Corp (4921 JP), Great Eastern Holdings (GE SP), Chilled & Frozen Logistics Holdings (9099 JP), Tatsuta Electric Wire & Cable (5809 JP), Kfc Holdings Japan (9873 JP).

S&P/ASX 100/200 Index Adhoc Rebalance: Potential Replacements for Altium (ALU AU)

With all regulatory approvals received, the Scheme Meeting for Renesas Electronics (6723 JP)‘ acquisition of Altium Ltd (ALU AU) will take place on 12 July.
If approved at the Scheme Meeting and at the Second Court Hearing, Altium Ltd (ALU AU) will stop trading from the close on 19 July.
The replacements for Altium Ltd (ALU AU) in the ASX100/200 indices could be announced late this week with implementation at the close on 19 July.

Shanghai Henlius Biotech Update (2696.HK) – The Story Behind Privatization

Fosun’s preferred arrangement for Henlius is to list the Company in A-shares.Since IPO in A-shares failed and Henlius has begun to generate profits, Fosun finally feels the need for privatization.
Due to its “flaws”, undervaluation of Henlius in the Hong Kong stock market is difficult to fundamentally change. So, for conservative/cautious investors, Fosun’s one-time acquisition at a 30% premium is attractive.
The Potential Share Alternative Offer seems a good option, but it is uncertain whether investors are still willing to believe in Fosun’s “good story” – the future re-listing is uncertain.

KOSDAQ150 Index Rebalance Preview: For Now, A Dozen Changes in December

With just over a third of the review period complete, there could be 12 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the December rebalance.
Even with 12 potential changes, there is sector balance with over half the changes in the Information Technology sector. Passive trading impact varies from 0.04-4.1x ADV.
The potential adds have outperformed the potential deletes and the KOSDAQ 150 Index (KOSDQ150 INDEX) since the start of the year with a big move higher since mid-May.

Softbank Corp (9434) – Accounting for the Accounting Is Complicated Redux – So Be Bearish

Telecom companies are traditionally “easy” to value. They have assets, debt, depreciation, earnings, cashflow. Lots of people like to use EV/EBITDA to measure.
In comparing Japan’s telcos, I believe when Softbank Corp (9434 JP) is in the mix, one has to use forward PERs. EV/EBITDA is too fraught with complications.
Softbank is currently at its most expensive multiple since listing on a Price to Forward Earnings basis, and relative to its major Peers. And KDDI has a big buyback now.

STAR100 Index Rebalance Preview: Outright Adds Outperforming Outright Deletes

The review period for the September rebalance ends 30 July. We expect the changes to be announced 30 August with the implementation taking place after the close on 13 September.
We forecast 6 changes for the index, including migrations between the STAR 100 Index and the SSE STAR50 (STAR50 INDEX).
Excluding the migrations, the potential adds have outperformed the potential deletes since the start of the calendar year and there could be further outperformance over the next few weeks.

Exploring the Kakao Corp and Krafton Deal Potential for Kakao Games

Kakao has begun talks with potential buyers for Kakao Games, with Krafton leading discussions directly using its own investment team.
Despite official denials, it’s viewed as procedural. Local markets anticipate the deal due to no direct refutation beyond formal announcements.
A three-month compliance period from disclosure makes this quarter challenging, but completion announcement potential exists by Q4 this year.

Honda (7267) : Offering’s Underwhelming Global Index Implications

By Dimitris Ioannidis

Despite the significant offering size, passive fund demand is unlikely to materialize due to non-strategic selling shareholders.
Company’s number of shares and free float in the main global indices are forecasted to remain the same before and after the offering.
Upcoming buybacks can lead to a decrease in float shares which can even cause passive fund supply at a subsequent quarterly review.

Quiddity Leaderboard for Hang Seng Index Sep 24: New Economy? Clean Energy? or Shipping?

By Janaghan Jeyakumar, CFA

In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes for the Hang Seng Index in September 2024.
The index changes for the September 2024 index rebal will be announced on 16th August 2024.
The HSI selection process is highly subjective and does not follow clear-cut rules. This insight is simply an attempt to provide readers with an overall understanding of the possible scenarios.

LQ45 Index Rebalance Preview (July): Identifying Potential Index Changes

The review period for the LQ45 Index July rebalance ended 30 June. The changes should be announced the last week of July, becoming effective after the close on 31 July.
Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
For a change, the impact on the potential inclusions will be higher since they will join the index with higher weights compared to the potential deletions.

💡 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

Jul 08

Most Read: Mitsui Matsushima, Aisin , TSE Tokyo Price Index TOPIX, Canvest Environmental Protection Group, Honda Motor, China Traditional Chinese Medicine, Zip , Timee Inc, ICBC (H) and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JAPAN ACTIVISM: Murakami Target Mitsui Matsushima Cleans Up
Aisin (7259 JP): The Current Playbook
Fy23 GPIF Results and Portfolio Changes – Outlook for FY24
Canvest Environmental (1381 HK): Possible Privatisation at HK$4.90
Last Week in Event SPACE: Barito Renewables, Honda, Raffles Medical, Daidoh, Hanwha Corp
Merger Arb Mondays (08 Jul) – China TCM, L’Occitane, A8 Media, GA Pack, Asia Cement, Hollysys, MMA
S&P/ASX 100/200 Index Adhoc Rebalance: Potential Replacements for Altium (ALU AU)
Timee (215A JP) IPO: Valuation Insights
Timee Pre-IPO – Thoughts on Valuation – Primed for a Decent Upside at the Current Range
HK Connect SOUTHBOUND Flows (To 5 Jul 2024); SOE Bank and SOE Petro-Energy Flows Dominate

JAPAN ACTIVISM: Murakami Target Mitsui Matsushima Cleans Up

On 20 May, I wrote that Japanese activist MURAKAMI Yoshiaki and relations/affiliates had gone from 5% to 20% of Mitsui Matsushima (1518 JP) in 5 trading days.
I wondered if it was real, or a pump & dump, but they went to near 30% in following days. THEN they drifted off as Murakami-Fille sold while Murakami-Père bought.
The reasoning was not clear, but the story had real potential. Still does. Today, shareholders got more good news.

Aisin (7259 JP): The Current Playbook

Since the US$1.1 billion secondary placement announcement, Aisin (7259 JP)’s shares are up 2.5% from the undisturbed price of JPY5,243 per share (27 June).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Aisin’s shares have deviated from the pattern of previous large placements.
The offering will likely be priced on 8 July. Investors who have participated in previous large Japanese placements tend to secure positive returns.

Fy23 GPIF Results and Portfolio Changes – Outlook for FY24

Last year, the GPIF as a whole returned 22.67% in yen terms. As a whole, GPIF outperformed its benchmarks by 0.04% after paying 0.02% in fees and costs.
GPIF traded ¥30trln of assets – relatively high turnover for a fund which espouses very low turnover – but there’s a reason for that. There were also sharp active/passive moves.
This year is the last year in the “cycle” of the “old” Policy Allocation Framework. A new one is likely to be introduced this year.

Canvest Environmental (1381 HK): Possible Privatisation at HK$4.90

Grandblue Environment Co A (600323 CH) disclosed a potential pre-conditional privatisation of Canvest Environmental Protection Group (1381 HK) at HK$4.90 per share, a 20.7% premium to the last close price.
Completing the capital injection from SOE entities into the offeror is a precondition. Grandblue also proposes that the controlling shareholder roll over 7.23% of its effective 44.75% stake.
While not a knockout bid, the offer is reasonable. Shareholders with blocking stakes should support a binding proposal. Timing is the key risk.

Last Week in Event SPACE: Barito Renewables, Honda, Raffles Medical, Daidoh, Hanwha Corp

It’s just a question of when, not if, the bubble bursts for Barito Renewables Energy (BREN IJ), which is up 1,200% since it October 2023 IPO.
A Reuters article suggests a ¥500bn secondary offering for Honda Motor (7267 JP). Honda has since said there is smoke. And we can assume there is fire.
Loo Choon Yong, Raffles Medical Group (RFMD SP)‘s founder and major shareholder, continues to chip away at minorities, and now holds 54.944%,

Merger Arb Mondays (08 Jul) – China TCM, L’Occitane, A8 Media, GA Pack, Asia Cement, Hollysys, MMA

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), A8 New Media (800 HK), Greatview Aseptic Packaging (468 HK), Asia Cement China (743 HK).
Lowest spreads: Fancl Corp (4921 JP), Great Eastern Holdings (GE SP), Chilled & Frozen Logistics Holdings (9099 JP), Tatsuta Electric Wire & Cable (5809 JP), Kfc Holdings Japan (9873 JP).

S&P/ASX 100/200 Index Adhoc Rebalance: Potential Replacements for Altium (ALU AU)

With all regulatory approvals received, the Scheme Meeting for Renesas Electronics (6723 JP)‘ acquisition of Altium Ltd (ALU AU) will take place on 12 July.
If approved at the Scheme Meeting and at the Second Court Hearing, Altium Ltd (ALU AU) will stop trading from the close on 19 July.
The replacements for Altium Ltd (ALU AU) in the ASX100/200 indices could be announced late this week with implementation at the close on 19 July.

Timee (215A JP) IPO: Valuation Insights

Timee Inc (215A JP), a leading part-time job platform in Japan, is seeking to raise up to US$286 million. Book-building runs from 9 to 23 July.
We previously discussed the IPO in Timee (215A JP) IPO: The Bull Case and Timee (215A JP) IPO: The Bear Case.
In this note, we discuss valuation. Our analysis suggests that Timee is attractively valued at the IPO price range in the context of the forecasted growth.

Timee Pre-IPO – Thoughts on Valuation – Primed for a Decent Upside at the Current Range

By Clarence Chu

Timee Inc (215A JP) is looking to raise US$290m in its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
In an earlier note, we looked at the firm’s past performance and peer comparison. In this note, we discuss our thoughts on valuation.

HK Connect SOUTHBOUND Flows (To 5 Jul 2024); SOE Bank and SOE Petro-Energy Flows Dominate

SOUTHBOUND was again a net buyer, for HK$10.9bn this week, on smallish two-way volumes. Banks were a big buy.
The more I watch, the more I think the last few months have had serious national team buying of banks and energy, perhaps ahead of shareholder return policy changes.
But valuations are acceptable. Flows are good. Policy changes are afoot. SOUTHBOUND may continue to see inflows – national team and otherwise.

💡 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

Jul 07

Most Read: Hanwha Aerospace, Hanwha Corporation, Aisin , Mitsui Matsushima, Korea Stock Exchange Kospi Index, Tesla , Hang Seng Index, L’Occitane, ASM Pacific Technology, Shift Up and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

What Did NPS Buy and Sell in Korean Stock Market in 2Q 2024?
Hanwha Corp Tender Offer Details & Arbitrage Trading Assessment
Aisin (7259 JP): The Current Playbook
JAPAN ACTIVISM: Murakami Target Mitsui Matsushima Cleans Up
Impact of Kim Byung-Hwan’s Appointment as Korea FSC Chairman on Value-Up Policy
Outpacing Delivery Expectations Sends Shares Soaring. Is Tesla the Most Undervalued AI Name?
EQD | Will the HSI Keep Falling In July?
(Mostly) Asia-Pac M&A: Sermsuk, L’Occitane, Shinko Electric, MMA Offshore, Hollysys
Quiddity Leaderboard HSTECH Sep 24: Reference Period Over; One Change Likely; US$733mn One-Way
Shift Up IPO: Final Allocation Results, Lockup Release Schedule, & Index Float Rates

What Did NPS Buy and Sell in Korean Stock Market in 2Q 2024?

On 4 July, NPS disclosed the details of the ownership changes for 112 listed companies in Korea, of which 87 were listed in KOSPI and 25 in KOSDAQ.
In 2Q 2024, the NPS reduced its investments in defense and military stocks and increased investments in cosmetics, shipbuilding, and food companies in Korea.
NPS reduced its capital allocation to the military & defense sector. NPS reduced its stake in LIG Nex1 (-2.32%), Poongsan Corp (-2.24%), and Hanwha Aerospace (-1.02%).

Hanwha Corp Tender Offer Details & Arbitrage Trading Assessment

Hanwha Energy, wholly owned by the Hanwha Group’s owning family, announced a tender offer for an 8% stake in Hanwha Corp at ₩30,000. The tender period is until July 24.
Hanwha Energy will buy all shares if tendered less than planned, otherwise pro-rata. Payment in cash eliminates cancellation risk but poses allocation risk.
Approximately 10-15% of shares are likely to be the potential ceiling for tendering, minimizing allocation risk for the 8% target. A widening spread of 2-3% could offer arbitrage opportunities.

Aisin (7259 JP): The Current Playbook

Since the US$1.1 billion secondary placement announcement, Aisin (7259 JP)’s shares are up 2.5% from the undisturbed price of JPY5,243 per share (27 June).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Aisin’s shares have deviated from the pattern of previous large placements.
The offering will likely be priced on 8 July. Investors who have participated in previous large Japanese placements tend to secure positive returns.

JAPAN ACTIVISM: Murakami Target Mitsui Matsushima Cleans Up

On 20 May, I wrote that Japanese activist MURAKAMI Yoshiaki and relations/affiliates had gone from 5% to 20% of Mitsui Matsushima (1518 JP) in 5 trading days.
I wondered if it was real, or a pump & dump, but they went to near 30% in following days. THEN they drifted off as Murakami-Fille sold while Murakami-Père bought.
The reasoning was not clear, but the story had real potential. Still does. Today, shareholders got more good news.

Impact of Kim Byung-Hwan’s Appointment as Korea FSC Chairman on Value-Up Policy

Kim Byung-hwan addressed criticism of weak incentives in tax support for the value-up policy, emphasizing boosting dividends. His background suggests effective advocacy for tax reforms in his new role.
He prioritized abolishing the FIIT in the National Assembly, citing its hindrance to capital market liquidity and investment promotion, indicating a robust approach to the value-up policy.
Kim’s appointment as FSC Chairman signals the government’s commitment to advancing the value-up policy. He emphasizes boosting dividends and aligning tax policies accordingly, shaping trading strategies toward dividend-expanding companies.

Outpacing Delivery Expectations Sends Shares Soaring. Is Tesla the Most Undervalued AI Name?

By Uttkarsh Kohli

Tesla delivered 443,956 vehicles in Q2 with production of 410,831 vehicles. It deployed a quarterly record of 9.4 GW hours of battery storage, its best quarter ever.
Tesla delivered 443,956 vehicles in Q2 with production of 410,831 vehicles. It deployed a quarterly record of 9.4 GW hours of battery storage, its best quarter ever.
Future remains uncertain for Tesla and its investors. Tesla shares are pricing in the launch of a lower priced model and Tesla’s Robotaxi on 8/8.

EQD | Will the HSI Keep Falling In July?

By Nico Rosti

After an explosive rally in April, the Hang Seng Index has been in a downtrend since mid-May, many are wondering where the index is headed next.
July 2024, based on our seasonal pattern analysis, does not have a great chance to close higher (it could, but the odds are not good).
If the index goes down in the next 2 weeks, buy the 17600-17300 price area.

(Mostly) Asia-Pac M&A: Sermsuk, L’Occitane, Shinko Electric, MMA Offshore, Hollysys

I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Just one new deal was discussed this week on Smartkarma: Sermsuk PCL (SSC TB)‘s Delisting Offer. There are also rumours of an Offer for Raffles Medical Group (RFMD SP).
Key updates took place on: L’Occitane (973 HK), Shinko Electric Industries (6967 JP), MMA Offshore (MRM AU), and Hollysys Automation Technologies (HOLI US).

Quiddity Leaderboard HSTECH Sep 24: Reference Period Over; One Change Likely; US$733mn One-Way

By Janaghan Jeyakumar, CFA

The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
The reference period for the September 2024 index rebal event is now complete. In this insight, we take a look at our final expectations for index changes.
Our current estimates suggest one-way flows due to index changes and capping could be around US$733mn but that could change by early September 2024.

Shift Up IPO: Final Allocation Results, Lockup Release Schedule, & Index Float Rates

Notably, local hedge funds receive significant allocation, nearly 10%, unusual for KOSPI IPOs this size, differing from HD Hyundai Marine Solution.
KOSPI 200’s initial float rate is 14%, rising to 58% in six months. MSCI starts at 8%, reaching 12% in six months and 25% in a year.
Differences from HD Hyundai Marine Solution include high short-term strategies among institutions. Unlike before, local pension funds receive substantial allocation, potentially affecting stock price post-listing.

💡 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

Jul 06

Most Read: Honda Motor, Robosense Technology, Korea Stock Exchange KOSPI 200, Hanwha Corporation, Aisin , Mitsui Matsushima, Korea Stock Exchange Kospi Index, SHEIN, J&T Global Express and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Big ¥500bn Honda (7267) Offering Is Small
Robosense IPO Lock-Up Expiry – US$2.8bn Lockup Expiry for 99% of the Stock, CCASS Movement
A Practical Guide to Create A Workable Electronic File for KOSPI 200 Rebalancing Simulation
Hanwha Corp Tender Offer Details & Arbitrage Trading Assessment
Aisin (7259 JP): The Current Playbook
Aisin Corp Placement – Follow Up – Could Fall into a Similar Fate as past Large JP Secondary Deals
JAPAN ACTIVISM: Murakami Target Mitsui Matsushima Cleans Up
Impact of Kim Byung-Hwan’s Appointment as Korea FSC Chairman on Value-Up Policy
SHEIN: Teaming up with Reliance Retail to Re-Enter India. A Win-Win Move
HK CEO & Director Dealings (5th Jul 2024): J&T Global Express, Flat Glass, Lifetech Scientific, PCCW

Big ¥500bn Honda (7267) Offering Is Small

Just pre-close on 2 July, Reuters carried an article suggesting a ¥500bn secondary offering in Honda Motor (7267 JP) as insurers sold. The stock fell 4% in minutes.
Honda semi-confirmed but it took two days to get to the details, now out. The stock climbed in the meantime.
At launch, this deal is two-thirds covered by buyback + passive demand but the supply is heavily-weighted to retail. Cheaper than it looks, lots of moving parts. Read the details!

Robosense IPO Lock-Up Expiry – US$2.8bn Lockup Expiry for 99% of the Stock, CCASS Movement

Robosense Technology (2498 HK) raised around US$126m in its Hong Kong IPO in Jan 2024. The lockup on its shareholders will expire soon.
The company provides LiDAR and perception solutions to its customers. As of March 2024, it had design wins for mass production of LiDAR products with 22 automotive OEMs and suppliers.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

A Practical Guide to Create A Workable Electronic File for KOSPI 200 Rebalancing Simulation

Predicting KOSPI 200 rebalancing is straightforward, focusing on quantitative screening rather than qualitative factors, unlike other indices.
Accurate simulation of KOSPI 200 requires daily data on shares, volume, and prices for six months, typically sourced from KOSCOM due to limitations in free data access.
I plan to share a practical KOSPI 200 simulation file with Smartkarma readers, leveraging freely available data from Google Finance.

Hanwha Corp Tender Offer Details & Arbitrage Trading Assessment

Hanwha Energy, wholly owned by the Hanwha Group’s owning family, announced a tender offer for an 8% stake in Hanwha Corp at ₩30,000. The tender period is until July 24.
Hanwha Energy will buy all shares if tendered less than planned, otherwise pro-rata. Payment in cash eliminates cancellation risk but poses allocation risk.
Approximately 10-15% of shares are likely to be the potential ceiling for tendering, minimizing allocation risk for the 8% target. A widening spread of 2-3% could offer arbitrage opportunities.

Aisin (7259 JP): The Current Playbook

Since the US$1.1 billion secondary placement announcement, Aisin (7259 JP)’s shares are up 2.5% from the undisturbed price of JPY5,243 per share (27 June).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Aisin’s shares have deviated from the pattern of previous large placements.
The offering will likely be priced on 8 July. Investors who have participated in previous large Japanese placements tend to secure positive returns.

Aisin Corp Placement – Follow Up – Could Fall into a Similar Fate as past Large JP Secondary Deals

By Clarence Chu

Denso Corp (6902 JP), Toyota Motor (7203 JP) and Toyota Industries (6201 JP) are looking to raise US$1.1bn from selling some of their stakes in Aisin (7259 JP).
We have covered the background of the deal in our earlier note, Aisin Corp Placement – US$1.1bn Selldown by Toyota and DENSO.
In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.

JAPAN ACTIVISM: Murakami Target Mitsui Matsushima Cleans Up

On 20 May, I wrote that Japanese activist MURAKAMI Yoshiaki and relations/affiliates had gone from 5% to 20% of Mitsui Matsushima (1518 JP) in 5 trading days.
I wondered if it was real, or a pump & dump, but they went to near 30% in following days. THEN they drifted off as Murakami-Fille sold while Murakami-Père bought.
The reasoning was not clear, but the story had real potential. Still does. Today, shareholders got more good news.

Impact of Kim Byung-Hwan’s Appointment as Korea FSC Chairman on Value-Up Policy

Kim Byung-hwan addressed criticism of weak incentives in tax support for the value-up policy, emphasizing boosting dividends. His background suggests effective advocacy for tax reforms in his new role.
He prioritized abolishing the FIIT in the National Assembly, citing its hindrance to capital market liquidity and investment promotion, indicating a robust approach to the value-up policy.
Kim’s appointment as FSC Chairman signals the government’s commitment to advancing the value-up policy. He emphasizes boosting dividends and aligning tax policies accordingly, shaping trading strategies toward dividend-expanding companies.

SHEIN: Teaming up with Reliance Retail to Re-Enter India. A Win-Win Move

By Devi Subhakesan

SHEIN’s fast-fashion apparel is set to hit India through Reliance Retail’s platforms, marking a major comeback after the 2020 ban.
This partnership could be a win-win, tapping into India’s booming fashion demand and offering Shein access to the world’s largest youth market, ahead of its proposed IPO.
With Shein’s affordable styles and Reliance’s extensive network, this alliance targets the youth market, challenging brands like Tata Group’s Trent Ltd (TRENT IN) owned Zudio.

HK CEO & Director Dealings (5th Jul 2024): J&T Global Express, Flat Glass, Lifetech Scientific, PCCW

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
The key stocks mentioned in this regular insight include: J&T Global Express (1519 HK), Flat Glass (6865 HK), Lifetech Scientific (1302 HK), and PCCW Ltd (8 HK).

💡 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

Jul 05

Most Read: China Traditional Chinese Medicine, Honda Motor, Toyota Motor, Daidoh Ltd, Douyu International Holdings, SUNWELS Co, Yangzijiang Shipbuilding, Korea Stock Exchange KOSPI 200 and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress
Big ¥500bn Honda (7267) Offering Is Small
Japan Cross-Shareholding – Summary Matrix – Over US$100bn of Selling in 118 Companies
JAPAN ACTIVISM: Strategic Capital Target Daido (3205) Now A Murakami Target Too
Screening For The Next Douyu (DOYU US)
Sunwels Co (9229) – Nursing Care Operator Offering and TOPIX Inclusion
Honda (7267 JP): A US$3.3 Billion Secondary Offering
Yangzijiang Shipbuilding (YZJSGD SP): Cheaper than Peers with Index Inclusion Kicker
Honda Motor Placement – Large in Size, Relatively Small in Other Terms
A Practical Guide to Create A Workable Electronic File for KOSPI 200 Rebalancing Simulation

China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress

The slow progress of privatization is related to recent high-level changes in CNPGC. Decisions on SOE deals with “strategic purpose” require careful considerations, not based on “one leader’s personal preferences”.
Based on public information, we cannot find convincing reason to prove that CNPGC has changed its mind.There’re rumors that China TCM’s privatization is still considered important project on the agenda.
China TCM’s has strong fundamentals to support valuation. If there is no announcement, the privatization process is expected to proceed as usual, and we continue to wait for the voting.

Big ¥500bn Honda (7267) Offering Is Small

Just pre-close on 2 July, Reuters carried an article suggesting a ¥500bn secondary offering in Honda Motor (7267 JP) as insurers sold. The stock fell 4% in minutes.
Honda semi-confirmed but it took two days to get to the details, now out. The stock climbed in the meantime.
At launch, this deal is two-thirds covered by buyback + passive demand but the supply is heavily-weighted to retail. Cheaper than it looks, lots of moving parts. Read the details!

Japan Cross-Shareholding – Summary Matrix – Over US$100bn of Selling in 118 Companies

Following up on our earlier cross-shareholding work, in this note we look to summarize our work so far by looking at where most of the selling will likely come.
Of the seven companies that we have looked at so far, collectively they have around US$102bn worth of shares to sell in 118 companies.
Of these, they have a combined stake of over US$1bn in 23 companies.

JAPAN ACTIVISM: Strategic Capital Target Daido (3205) Now A Murakami Target Too

Small cap Japanese manufacturer and purveyor of apparel Daidoh Ltd (3205 JP) has consistently been a target for value investors. In late 2022, Strategic Capital went over 5%.
They have bought more, and as of end-March, they declared 24.85% of TSO (28% of voting rights), but they have 33%. They made proposals for the AGM. They won one.
Now Murakami-san has bought in, going over 5%. This gets interesting. Together they have 39.4% as of last week, and probably more now. That should get them 50+% next AGM/EGM.

Screening For The Next Douyu (DOYU US)

In a particularly altruistic move, live-streaming game platform play Douyu International Holdings (DOYU US) announced a special cash dividend of US$9.76/share, vs. a last price of US$12.59.
The cash outlay is roughly US$308mn, and Douyu had cash (as at 1Q24) of US$936.6mn. And no debt. Founder/chairman/CEO Shaojie Chen (17.2% shareholder) will pocket a tidy ~US$53mn.
An outlier; or should we expect more of the same for other cash-rich US-listed China plays?

Sunwels Co (9229) – Nursing Care Operator Offering and TOPIX Inclusion

On 2 July 2024, nursing care operator SUNWELS Co (9229 JP) announced a sale of Treasury shares and newly-issued shares, and with it, a move to TSE Prime (therefore TOPIX)
The stock, of course, popped. The stock starts with VERY low float because the CEO and his company own 64% of shares out ex-treasury.
The offering is much larger than the TOPIX inclusion, so this is really more about the growth story.

Honda (7267 JP): A US$3.3 Billion Secondary Offering

Honda Motor (7267 JP) has announced a secondary offering of up to 298.9 million shares (including overallotment). At the close, the offer, including overallotment, is worth JPY535 billion (US$3.3 million).
The offering is another sign that the unwinding of cross-shareholdings is catching pace as part of Japan’s corporate governance reforms.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 17 and 22 July (likely 17 July).

Yangzijiang Shipbuilding (YZJSGD SP): Cheaper than Peers with Index Inclusion Kicker

The rally in Yangzijiang Shipbuilding (YZJSGD SP) over the last month should result in the stock being added to global passive portfolios late next month.
Yangzijiang Shipbuilding (YZJSGD SP) trades cheaper than peers on forward PE but there has been a big rally in the stock over the last month.
There has been an increase in cumulative excess volume since mid-May and there will be positioning for the event, but there could be further gains in the stock.

Honda Motor Placement – Large in Size, Relatively Small in Other Terms

A group of shareholders aims to raise up to US$3.2bn via selling around 5% of Honda Motor (7267 JP) .
The possibility of such a selldown was flagged earlier in the week by Reuters. Thus, the deal is well flagged.
In this note, we will talk about the placement and run the deal through our ECM framework.

A Practical Guide to Create A Workable Electronic File for KOSPI 200 Rebalancing Simulation

Predicting KOSPI 200 rebalancing is straightforward, focusing on quantitative screening rather than qualitative factors, unlike other indices.
Accurate simulation of KOSPI 200 requires daily data on shares, volume, and prices for six months, typically sourced from KOSCOM due to limitations in free data access.
I plan to share a practical KOSPI 200 simulation file with Smartkarma readers, leveraging freely available data from Google Finance.

💡 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

Jul 04

Most Read: Honda Motor, HDFC Bank, China Traditional Chinese Medicine, Stella International, Timee Inc, ASM Pacific Technology, Shinko Electric Industries, ESR Group , Barito Renewables Energy and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

BIG ¥500bn Honda (7267) Offering Coming?
HDFC Bank (HDFCB IN): Foreign Room Crosses 25%; Index Implications & Positioning for US$5bn+ Buying
China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September
Timee (215A JP) IPO: The Bull Case
HSTECH Index Rebalance Preview: ASM Pacific (522) Could Replace Ping An Health (1833); US$1bn Trade
Shinko Electric (6967) – Break/Gap Risk Early July 2024 Update
ESR Group (1821 HK): Consortium’s Expansion Talks Suggest Progress
StubWorld: Barito Renewables (BREN IJ) – This Too Shall Pop
Korean Government Announces Corporate and Dividend Tax Incentives Under Corporate Value Up Program

BIG ¥500bn Honda (7267) Offering Coming?

Today just before the close, Reuters came out with an article saying Japan’s four major insurers and some financial institutions would offer ¥500bn of shares in a secondary offering.
That implies about 275-280mm shares (insurers hold ~195mm). In May, Honda announced a ¥300bn buyback with earnings, with nothing done so far.
The supply/demand dynamics here are key. There are a lot of moving parts over time. Honda is cheaper than it looks but there are moving parts there too.

HDFC Bank (HDFCB IN): Foreign Room Crosses 25%; Index Implications & Positioning for US$5bn+ Buying

Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 54.83% and that results in foreign room crossing the ‘magical’ 25% mark.
The increase in foreign room could lead to passive trackers of a global index needing to buy 256m shares (US$5.3bn; 11.5x ADV) at the end of August.
There will definitely be positioning in the stock but there should still be upside in the stock. The HDFC Bank (ADR) (HDB US) line was up 4.5% overnight.

China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress

The slow progress of privatization is related to recent high-level changes in CNPGC. Decisions on SOE deals with “strategic purpose” require careful considerations, not based on “one leader’s personal preferences”.
Based on public information, we cannot find convincing reason to prove that CNPGC has changed its mind.There’re rumors that China TCM’s privatization is still considered important project on the agenda.
China TCM’s has strong fundamentals to support valuation. If there is no announcement, the privatization process is expected to proceed as usual, and we continue to wait for the voting.

HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September

We see 37 potential adds (including plenty of new listings) and 25 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in September.
We expect 32 stocks to be added to Southbound Stock Connect following the rebalance while 24 stocks could be deleted from the trading link and become Sell-only.
There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

Timee (215A JP) IPO: The Bull Case

Timee Inc (215A JP), a leading part-time job platform in Japan, is seeking to raise up to US$286 million. Book-building runs from 9 to 23 July.
Timee’s app allows users to work shifts as short as one hour at restaurants, convenience stores, and hotels, with quick payment for their work.
The bull case rests on favourable market trends, best-in-class revenue growth, good retention rates, credible growth drivers, and top-quartile EBITDA margins.

HSTECH Index Rebalance Preview: ASM Pacific (522) Could Replace Ping An Health (1833); US$1bn Trade

ASM Pacific Technology (522 HK) is expected to replace Ping An Healthcare and Technol (1833 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the September rebalance.
Constituent changes and capping changes will result in a one-way turnover of 3.7% and that will result in a round-trip trade of HK$7.8bn (US$1bn).
Short interest is near the lows on both stocks but there has been a recent tick higher for ASM Pacific Technology (522 HK).

Shinko Electric (6967) – Break/Gap Risk Early July 2024 Update

When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
Nearly 6mos ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 16+wks ago, recommended taking profits.
Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Gross spread is now 4.6% but time is shorter so annualised is 10+% even out to December launch.

ESR Group (1821 HK): Consortium’s Expansion Talks Suggest Progress

Bloomberg reports that the bidding consortium is in talks to bring in other partners, such as QIA, PIF, and CPP Investment Board, to aid in privatising ESR Group (1821 HK).
Warburg Pincus and OMERS have blocking stakes for a Cayman scheme. Warburg Pincus is seemingly supportive, and the consortium’s expansion talks suggest confidence in meeting OMERS’ price expectations.
Our best guess is that an offer is around HK$14.00. ESR’s current valuation is undemanding, with its forward EV/EBITDA multiple at a 40% discount compared to the median peers’ multiple.

StubWorld: Barito Renewables (BREN IJ) – This Too Shall Pop

Barito Pacific (BRPT IJ)‘s 64.7% stake in Barito Renewables Energy (BREN IJ) (now Indonesia’s largest company by market cap), is worth 8x its market cap. That’s unsustainable.
Preceding my comments on the Barito complex 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%.

Korean Government Announces Corporate and Dividend Tax Incentives Under Corporate Value Up Program

The Korean government announced corporate tax incentives for companies that actively increase capital returns to shareholders and also dividend tax incentives and as part of the Corporate Value Up program.
For companies that provide shareholder returns, a 5% corporate tax amount on the increase will be deducted and the tax burden on increased dividends of the company will be reduced.
For dividends under 20mn won, the tax rate will be reduced from 14% to 9%. Investor can choose lower rate (25% or comprehensive tax rate) for dividends exceeding 20mn won.

💡 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

Jul 03

Most Read: Honda Motor, SenseTime Group , MS&AD Insurance, L’Occitane, Hyundai Mobis, CPMC Holdings, Robosense Technology, HDFC Bank, China Traditional Chinese Medicine, Stella International and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

BIG ¥500bn Honda (7267) Offering Coming?
HSCEI Index Rebalance Preview: Two Changes Likely in September
Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Jul24)
L’Occitane (973 HK): Tendering Now Open
Korean Holdcos Vs Opcos Gap Trading Opportunities in 3Q 2024
CPMC Holdings (906.HK) Privatization – Some New Information Worth the Attention
Robosense IPO Lock-Up Expiry – US$2.8bn Lockup Expiry for 99% of the Stock, CCASS Movement
HDFC Bank (HDFCB IN): Foreign Room Crosses 25%; Index Implications & Positioning for US$5bn+ Buying
China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September

BIG ¥500bn Honda (7267) Offering Coming?

Today just before the close, Reuters came out with an article saying Japan’s four major insurers and some financial institutions would offer ¥500bn of shares in a secondary offering.
That implies about 275-280mm shares (insurers hold ~195mm). In May, Honda announced a ¥300bn buyback with earnings, with nothing done so far.
The supply/demand dynamics here are key. There are a lot of moving parts over time. Honda is cheaper than it looks but there are moving parts there too.

HSCEI Index Rebalance Preview: Two Changes Likely in September

SenseTime Group (20 HK) and JD Logistics (2618 HK) are potential deletions while PICC Property & Casualty (2328 HK) and New Oriental Education & Techn (9901 HK) are potential adds.
Estimated one-way turnover at the rebalance is 1.8% resulting in a one-way trade of HK$950m. Official capping will be based off the close of trading on 3 September.
There will be 1-2x ADV to buy on the adds and over 2x ADV to sell in JD Logistics. The impact on SenseTime is lower given the recent surge in volume.

Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Jul24)

This month (June) saw 1,673 Corporate Governance Reports filed and 5 new “Mgmt Conscious of Capital Cost/Stock Price” policies filed.
We created a tool show every report, provide links to every document, and now a new diff file tool. Put in a name, see the difference between the Old/New Reports.
We hope this took will help. It is designed to be a shelf reference. We update the tool once a month, a couple of weeks ahead of the TSE.

L’Occitane (973 HK): Tendering Now Open

Exactly two weeks after the scrip alternative was announced, L’Occitane (973 HK)‘s Composite Document has been issued. The Offer is now open for acceptances.
The IFA (Somerley) considers terms to be fair & reasonable. A lifetime high coupled with a scrip option – yes, this is fair.
Keep an eye on CCASS moves prior to the first closing date, the 23rd July. I have a call with the FA tomorrow. Hit me up with any questions.

Korean Holdcos Vs Opcos Gap Trading Opportunities in 3Q 2024

In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 3Q 2024.
Of the 38 pair trades, 21 of them involved holdcos outperforming opcos in the past six months, suggesting increased capital allocation to Korean holdcos relative to their opcos.
These pairs could generate trading opportunities in terms of their pricing gaps closing reversal (Doosan Corp vs. Doosan Enerbility; Hyundai Mobis vs Hyundai Motor).

CPMC Holdings (906.HK) Privatization – Some New Information Worth the Attention

ORG purchased 27% of CPMC’s shares at HK$6/share in 2015.After about eight years, Baosteel’s Offer Price was only HK$6.87/share. The annualized return rate was low, which obviously cannot satisfy ORG.
Baosteel and CPMC have been in talks for a long time – There may have been some “tacit agreement” between the two parties. The approval process is smooth so far.
For acquisitions/consolidation between SOEs, private enterprises usually have limited chances of winning.ORG has financial pressure and the approval process face uncertainties. There would be more negotiations among CPMC, ORG, Baosteel.

Robosense IPO Lock-Up Expiry – US$2.8bn Lockup Expiry for 99% of the Stock, CCASS Movement

Robosense Technology (2498 HK) raised around US$126m in its Hong Kong IPO in Jan 2024. The lockup on its shareholders will expire soon.
The company provides LiDAR and perception solutions to its customers. As of March 2024, it had design wins for mass production of LiDAR products with 22 automotive OEMs and suppliers.
In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.

HDFC Bank (HDFCB IN): Foreign Room Crosses 25%; Index Implications & Positioning for US$5bn+ Buying

Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 54.83% and that results in foreign room crossing the ‘magical’ 25% mark.
The increase in foreign room could lead to passive trackers of a global index needing to buy 256m shares (US$5.3bn; 11.5x ADV) at the end of August.
There will definitely be positioning in the stock but there should still be upside in the stock. The HDFC Bank (ADR) (HDB US) line was up 4.5% overnight.

China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress

The slow progress of privatization is related to recent high-level changes in CNPGC. Decisions on SOE deals with “strategic purpose” require careful considerations, not based on “one leader’s personal preferences”.
Based on public information, we cannot find convincing reason to prove that CNPGC has changed its mind.There’re rumors that China TCM’s privatization is still considered important project on the agenda.
China TCM’s has strong fundamentals to support valuation. If there is no announcement, the privatization process is expected to proceed as usual, and we continue to wait for the voting.

HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September

We see 37 potential adds (including plenty of new listings) and 25 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in September.
We expect 32 stocks to be added to Southbound Stock Connect following the rebalance while 24 stocks could be deleted from the trading link and become Sell-only.
There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

💡 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

Jul 02

Most Read: Vanguard Intl Semiconductor, Keisei Electric Railway Co, L’Occitane, Fancl Corp, Shift Up, Aisin , Toenec Corp, Hollysys Automation Technologies, SenseTime Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

TIP Taiwan Technology Dividend Highlight Index Rebalance: 12 Changes & US$4bn Round-Trip Trade
Keisei Electric Investor Activism Update: The Vote Count Could Shake Keisei’s Board
L’Occitane (973 HK): Conditional Offer Opens
(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio
Shift Up IPO Book Building Results Analysis
Aisin (7259) | Nine Months Ago
Toenec (1946 JP) Offering – Nearly $50mm on SmallCap Utility Infra Co as Chubu EPCO Sells Down
Hollysys (HOLI US): Ascendent Finally Obtains Regulatory Approvals
ECM Weekly (1st July 2024)-Aisin, Mitsui, Japan Hotel, Allied Blenders, Webtoon, Hyundai India
HSCEI Index Rebalance Preview: Two Changes Likely in September

TIP Taiwan Technology Dividend Highlight Index Rebalance: 12 Changes & US$4bn Round-Trip Trade

There are 12 changes for the TIP Taiwan Technology Dividend Highlight Index in June/July. The Fuh Hwa Taiwan Technology Dividend Highlight ETF (00929 TW) has an AUM of US$7.16bn.
One-Way turnover is estimated at 35% and that will result in a round-trip trade of TWD 134.7bn (US$4.1bn). There are 8 stocks that could have over 5x ADV to trade.
The ETF started rebalancing their portfolio on Friday and will continue to trade the stock over the next 7 trading days.

Keisei Electric Investor Activism Update: The Vote Count Could Shake Keisei’s Board

By Oshadhi Kumarasiri

Palliser’s proposal failed to meet the challenging two-thirds threshold at the AGM. Given the ownership landscape, this outcome was anticipated.
Palliser nearing 50% approval at Keisei’s AGM could signify a triumph, potentially leading to significant pressure on management and a positive shift in share price performance.
Keisei Electric Railway Co (9009 JP)‘s valuation, now attractively low post a 33% drop and with a potential OP guidance hike, presents minimal downside at a 26.0x EV/OP multiple.

L’Occitane (973 HK): Conditional Offer Opens

The L’Occitane (973 HK) IFA opines that Reinold Geiger’s conditional voluntary cash (HK$34.00) or scrip offer (10 rollover shares for each share, subject to a cap) is fair and reasonable.
Irrevocable/Letters of support have nudged lower from 49.83% (17 June) to 47.66% of disinterested shares due to Southeastern Asset Management selling its shares.
Nevertheless, the scrip option, an attractive offer and no vocal opposition should facilitate achieving the minimum acceptance condition. At the last close, the gross spread was 2.4%.

(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio

For the month of June 2024, 8 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$6bn.
The average premium for the new transactions announced (or first discussed) in June was ~52%. The average premium YTD is ~47%.
This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

Shift Up IPO Book Building Results Analysis

Shift Up reported solid IPO book building results. Shift Up’s IPO price has been determined at 60,000 won won, which is at the high end of the IPO price range.
According to Hankyung Business Daily, the demand ratio was 223 to 1. Shift Up will start trading on 11 July.
Our base case valuation of Shift Up is market cap of 5.7 trillion won or target price of 95,510 won (59% higher than the IPO price of 60,000 won).

Aisin (7259) | Nine Months Ago

By Mark Chadwick

Nine months have passed since Aisin announced a transformative MTP. Investors remain sceptical that it will deliver higher returns.
Improving margins on hybrid transmissions, new products for BEVs and better capital allocation could deliver 70% upside for investors.
The key risk is the assumption that operating margins can rise above 8% versus the historical average of 5%.

Toenec (1946 JP) Offering – Nearly $50mm on SmallCap Utility Infra Co as Chubu EPCO Sells Down

Today, Toenec Corp (1946 JP) – an integrated facilities company 50+% owned by Chubu Electric Power Co (9502 JP) announced Chubu EPCO would sell down 7.7% to go to 43%+.
This is surprising. It suggests there are more selldowns to come. It’s also “big” at 88 days of ADV and about 26% of Max Real World Float (85% retail).
This is an odd sell-down. Chubu EPCO obviously doesn’t want to buy it in. That means overhang for years.

Hollysys (HOLI US): Ascendent Finally Obtains Regulatory Approvals

Six months after announcing a binding proposal, Ascendent has obtained all the Chinese regulatory approvals for its US$26.50 Hollysys Automation Technologies (HOLI US) offer.
The gross spread was wide due to the information vacuum, which has resulted in various conspiracy theories and rumours circulating.
The two remaining conditions required for close are the maximum dissenting cap (should be waived) and minimum net cash condition (satisfied). At the last close, the gross spread was 22.5%.

ECM Weekly (1st July 2024)-Aisin, Mitsui, Japan Hotel, Allied Blenders, Webtoon, Hyundai India

Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
On the IPO front, we looked at the upcoming mega-listing for Hyundai Motor India.
On the placement front, the week was dominated by the cross-shareholding unwinds in Aisin (7259 JP) and Mitsui & Co Ltd (8031 JP).

HSCEI Index Rebalance Preview: Two Changes Likely in September

SenseTime Group (20 HK) and JD Logistics (2618 HK) are potential deletions while PICC Property & Casualty (2328 HK) and New Oriental Education & Techn (9901 HK) are potential adds.
Estimated one-way turnover at the rebalance is 1.8% resulting in a one-way trade of HK$950m. Official capping will be based off the close of trading on 3 September.
There will be 1-2x ADV to buy on the adds and over 2x ADV to sell in JD Logistics. The impact on SenseTime is lower given the recent surge in volume.

💡 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

Jul 01

Most Read: Keisei Electric Railway Co, Telix Pharmaceuticals, Lunit , China Traditional Chinese Medicine, Taiwan Semiconductor (TSMC) – ADR, Vanguard Intl Semiconductor, Shanghai Henlius Biotech , Fancl Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Last Week in Event SPACE: Keisei Electric, China Merchants, Great Eastern, Jardine Matheson/JCNC
Quiddity Leaderboard ASX Sep 24 Rebal: Altium to Trigger Two Intra-Review Replacements in July
End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024
Weekly Deals Digest (30 Jun) – China TCM, Henlius, Midea RE, MMG, Aisin, Sanil, Shift Up
(Mostly) Asia-Pac M&A: TCM, Henlius Bio, Mideal Real Estate, Malaysia Airports, S Line, Best World
Taiwan Dual-Listings Monitor: TSMC Premium Rangebound; UMC Hits Upper End of Range
Ohayo Japan | First Half Done
TIP Taiwan Technology Dividend Highlight Index Rebalance: 12 Changes & US$4bn Round-Trip Trade
Merger Arb Mondays (01 Jul) – Henlius, China TCM, GA Pack, CPMC, Asia Cement, Great Eastern
(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio

Last Week in Event SPACE: Keisei Electric, China Merchants, Great Eastern, Jardine Matheson/JCNC

No surprise: Keisei Electric Railway (9009 JP) shareholders voted down Palliser’s proposal. If the vote was close, Palliser may ups its rhetorical game, and takes a harder stance.
Argyle failed to boot one CMCDI (133 HK) director. They’ll next target the management agreement renewal; and agitate the company buy back 20% of shares outstanding at 90% of NAV.
The Offeror now has 90.16% in Great Eastern Holdings (GE SP) – so this will get suspended at the close of the Offer.

Quiddity Leaderboard ASX Sep 24 Rebal: Altium to Trigger Two Intra-Review Replacements in July

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run-up to the September 2024 index rebal event.
In July 2024, a couple of important Australian M&A deals could close and one of them could trigger intra-review additions for ASX 100 and ASX 200.
Separately, we see one ASX 100 change and one ASX 200 change during the September 2024 rebalance. For ASX 300, there could be 13 ADDs and 6 DELs.

End of Mandatory Lock-Up Periods for 55 Companies in Korea in July 2024

We discuss the end of the mandatory lock-up periods for 55 stocks in Korea in July 2024, among which 6 are in KOSPI and 49 are in KOSDAQ.
These 55 stocks on average could be subject to further selling pressures in July 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 July include Lunit, Mezzion Pharma, and DS Dansuk.

Weekly Deals Digest (30 Jun) – China TCM, Henlius, Midea RE, MMG, Aisin, Sanil, Shift Up

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: MMG (1208 HK) rights issue, Aisin (7259 JP) placement, Sanil Electric (062040 KS) IPO, and Shift Up (462870 KS) IPO.
Event-Driven developments: China Traditional Chinese Medicine (570 HK), Shanghai Henlius Biotech (2696 HK), Midea Real Estate Holding (3990 HK), Best World International (BEST SP).

(Mostly) Asia-Pac M&A: TCM, Henlius Bio, Mideal Real Estate, Malaysia Airports, S Line, Best World

I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One. new deal was discussed this week: Shanghai Henlius Biotech (2696 HK)‘s cash/scrip Offer. Midea Real Estate Holding (3990 HK) also fielded a “Partial Scheme”.
Key updates took place on: China Traditional Chinese Medicine (570 HK), Malaysia Airports Holdings (MAHB MK), S Line Co Ltd (9078 JP), Best World International (BEST SP) .

Taiwan Dual-Listings Monitor: TSMC Premium Rangebound; UMC Hits Upper End of Range

By Vincent Fernando, CFA

TSMC: +16.7% Premium, Has Remained Rangebound; Watching for Over 20% or Under 15%
UMC: +2% Premium, Upper End of Trading Range, Can Consider Shorting
ASE: +9.9% Premium; Spread Could Have Further Room to Bounce Higher

Ohayo Japan | First Half Done

By Mark Chadwick

U.S. stocks dipped on Friday as investors processed economic data signaling slowing inflation. Nike down 20%.
Japan’s Ministry of Internal Affairs and Communications and KDDI will collaborate on developing generative AI
NTT DATA plans to launch multiple satellites by 2026 to create a space-based observation network, enhancing disaster monitoring and national security

TIP Taiwan Technology Dividend Highlight Index Rebalance: 12 Changes & US$4bn Round-Trip Trade

There are 12 changes for the TIP Taiwan Technology Dividend Highlight Index in June/July. The Fuh Hwa Taiwan Technology Dividend Highlight ETF (00929 TW) has an AUM of US$7.16bn.
One-Way turnover is estimated at 35% and that will result in a round-trip trade of TWD 134.7bn (US$4.1bn). There are 8 stocks that could have over 5x ADV to trade.
The ETF started rebalancing their portfolio on Friday and will continue to trade the stock over the next 7 trading days.

Merger Arb Mondays (01 Jul) – Henlius, China TCM, GA Pack, CPMC, Asia Cement, Great Eastern

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Asia Cement China (743 HK).
Lowest spreads: Fancl Corp (4921 JP), Great Eastern Holdings (GE SP), Tatsuta Electric Wire & Cable (5809 JP), Infocom Corp (4348 JP), Kfc Holdings Japan (9873 JP).

(Mostly) Asia M&A, June 2024: Fancl, Capitol Health, Infocom,Jeisys Medical, Nagatanien, Henlius Bio