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• I am not a tax advisor and I do not play one on TV but it is a subject of interest in Australia, as an AFR article from June 2022 shows.
• The general gist: retail investors in Australia will take gains on stocks which run up in price, or get taken over, then look for losses to offset.
• Below I present a study using data from 2012-2023 and this year’s portfolio.

• Of utmost importance in these guidelines will be the framework for Value-up disclosure. Local authorities aim to encourage proactive disclosure, starting with companies that are well-prepared.
• Two companies are being closely watched as potential candidates for the first Value-up disclosure: CJ Cheiljedang (097950 KS) and Koh Young Technology (098460 KS).
• The rationale for us to actively engage in alpha trading with these two names stems from the strong probability that they will emerge as cornerstone constituents of the Value-up index

• Yesterday, West Japan Railway Co (9021 JP) announced FY23 earnings, a higher dividend, an update to the Medium-Term Management Plan (p10~), and a Buyback.
• Short & Sweet:  Revenues were +17.2%yoy, OP +114.1%, NP +1.6%. OPM was 11.0% and ROE 9.2% (both best since FY18). Guidance is Revenue up, OP down, NP tiny up.
• The new FY25 (Mar26) OP guide in the MTMP is the old Mar28 target (mostly inbound tourism-driven). The Buyback is biggish. It is worth looking at the details. 

• In this insight, we discuss the alpha generation through companies that announced share buybacks in Korea in March and April 2024.
• We provide a list of 30 stocks in the Korean stock market that have announced share buyback programs in the past two months.
• Major companies that have announced share buybacks in Korea in the past two months include Krafton (259960 KS), Celltrion Inc (068270 KS), and Woori Financial Group (316140 KS).

• For the month of April 2024, 7 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$4bn. 
• The average premium for the new transactions announced (or first discussed) in April was ~55%. The average premium YTD is ~42%. 
• 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.

• The Discounts to NAV of covered holdcos mainly widened during April. Discounts to NAV: C.F.Alba, 49.1% (vs. 47.3%); GBL, 39% (vs. 38.1%); Heineken Holding, 17.3% (vs 16.7%); 
• Industrivärden C, 4.7% (vs. 1.4%); Investor B, 8.3% (vs. 6.1%); Porsche Automobile Holding, 41.1% (vs. 45.4%). Rio DLC spread tightened to 22.5% (vs. to 24.9%).
• What seems interesting: Porsche SE vs. listed assets and the Rio DLC (long RIO LN/short RIO AU).

• Chilled & Frozen Logistics Holdings (9099 JP) had been sending out questions, and trying to get AZ-Com Maruwa Holdings (9090 JP) to delay the start until at least late-May.
• AZ-Com Maruwa answered questions (first and second set) and on the 24th, C&F asked AZ-Com to extend. They did not extend. AZ-Com announced the Tender Offer at ¥3,000 today.
• C&F responded today saying the TOB is launched without C&F Board approval. Then they said some other things that might be disclosed when C&F’s Board presents its Target Opinion.

• AZ-Com Maruwa Holdings (9090 JP) has satisfied the precondition for its hostile Chilled & Frozen Logistics Holdings (9099 JP) JPY3,000 offer. The offer closes on 17 June (31 business days).
• AZ-COM Maruwa has called the Board’s bluff by providing sufficient time (extending the offer period from 20 to 31 business days) for a white knight to lob a competing bidder.
• While a bump is probable, the shares already factor in a significant bumpitrage premium. A potential bump has a good chance of being lower than the last close.

• With the review period complete, there could be up to 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
• Even with 15 changes, there is some sector balance among the potential adds and deletes with big churn in the Information Technology sector.
• The potential adds have outperformed the potential deletes and the KOSDAQ 150 Index (KOSDQ150 INDEX) since the start of the review period but performance has flattened over the last month.

• With the review period complete, there could be up to 5 changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance.
• Hahn&Co now own over 96% of the shares in Ssangyong Cement Industrial (003410 KS) and there could be another change at or before the June rebalance.
• Passive trackers will need to trade between 0.5-15x ADV on the index changes. There are big shorts in L&F (066970 KS) and Lotte Tour Development Co, Ltd. (032350 KS). 

• There are 2 constituent changes for the LQ45 Index and 6 constituent changes for the IDX80 Index at the rebalance to be implemented at the close on 30 April.
• The largest passive inflows are expected in Amman Mineral Internasional (AMMN IJ), Indosat Tbk PT (ISAT IJ), Bank Rakyat Indonesia (BBRI IJ) and Merdeka Copper Gold Tbk PT (MDKA IJ). 
• With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.

• May 17th, all eyes on EcoPro Materials for a buzzed-about lockup release. BRV Capital holds 24.5% stake, 17M shares. Lockup ends May 16th; they’re free to sell off without constraints.
• Apparently, they’re eager to cash out, with a profit margin around 30 times and 7 years invested. Many at Yeouido bet they’ll sell out once the lockup’s over.
• We might start building a shorting position with futures targeting this lockup release from April 22nd. This could stir up some weird backwardation, which could give us another trading opportunity.

• After nearly six years of conjecture, rumour – plus the key shareholder (holding 72.63% of shares out) contemplating a takeover – we finally have an Offer for L’Occitane (973 HK).
• The price? $34/share, a 30.77% premium to undisturbed, and a figure a shade below the  HK$35/share flagged by Reuters last August deemed “false and without basis“. The price is final. 
• This takeover is a Voluntary General Offer. The key condition is securing 90% of disinterested shareholders holding 27.36%. 9.6% of that number have provided irrevocable undertakings or letters of support.  

• Dar Al-Handasah has sold 19% of WorleyParsons Ltd (WOR AU) overnight at A$14.35/share, a 12% discount to the last close, to raise A$1.44bn (US$943m).
• This reduces Dar’s stake in WorleyParsons Ltd (WOR AU) to 4.5% and will trigger upweights from index providers in the next few days.
• The stake sale could also lead to a re-rating of the stock with a large blocking stake off the share register.

• I am not a tax advisor and I do not play one on TV but it is a subject of interest in Australia, as an AFR article from June 2022 shows.
• The general gist: retail investors in Australia will take gains on stocks which run up in price, or get taken over, then look for losses to offset.
• Below I present a study using data from 2012-2023 and this year’s portfolio.

• Seven Group Holdings (SVW AU)‘s holding in Boral Ltd (BLD AU) continues to increase and that could lead to an index change at the June rebalance, if not earlier.
• The Silver Lake Resources (SLR AU)/ Red 5 Ltd (RED AU) merger could lead to an index change early June.
• Cie De Saint-Gobain (SGO FP)‘s acquisition of CSR Ltd (CSR AU) could lead to another index change just ahead of the regular June rebalance.

• Woolworths Ltd (WOW AU) is looking to raise A$468m (US$305m) from selling its stake in Endeavour Group /Australia (EDV AU).
• Endeavour Group was demerged from Woolworths in Jun 2021 and it runs the drinks and hospitality business of Woolworths.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• China Resources Beverage is looking to raise US$1bn in its upcoming Hong Kong IPO.
• China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
• In this note, we talk about the positive aspects of the deal.

• Of utmost importance in these guidelines will be the framework for Value-up disclosure. Local authorities aim to encourage proactive disclosure, starting with companies that are well-prepared.
• Two companies are being closely watched as potential candidates for the first Value-up disclosure: CJ Cheiljedang (097950 KS) and Koh Young Technology (098460 KS).
• The rationale for us to actively engage in alpha trading with these two names stems from the strong probability that they will emerge as cornerstone constituents of the Value-up index

• The activist investor is back and has demanded further action to unlock value from Keisei Electric Railway Co (9009 JP)  management.
• Operational numbers are still healthy, but growth is not as large due to the high base.
• Immediate pressure to divest Oriental Land thus short Oriental Land (4661 JP)  and long Keisei.

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

• Companies in India have disclosed their shareholding pattern as of end-March in April. There are companies with significant float changes from end-September and/or end-December.
• The changes in free float could be reflected in domestic and global indices over the next few weeks and months resulting in action from passive trackers.
• Depending on the date that the shareholding was published, there could be 14 stocks with passive inflows from global trackers while 7 could see passive outflows in May.

• L’Occitane (973 HK) disclosed a conditional voluntary offer from Reinold Geiger at HK$34.00, a 15.3% premium to the last close and a 30.8% premium to the undisturbed price (5 February).
• The minimum acceptance condition is that the offeror holds at least 90% of the shares held by disinterested shareholders, which enables the offeror to exercise compulsory acquisition rights.
• Irrevocable and letters of support to accept represent 37.96% of disinterested shares. An attractive offer (representing an all-time high) should facilitate the offer being declared unconditional.

• On 28 Feb, the Nikkei reported (an article I missed) Mitsubishi Corp (8058 JP) would seek to unload its 35% stake in Kfc Holdings Japan (9873 JP) 
• The stock popped, then continued to rise further. After the close Friday, the Nikkei reported MitCorp was close to a deal with Carlyle. A deal is apparently expected imminently.
• I expect this could be a “Split Price Deal” (like Hitachi Transport and Pasona).

• DAR Group is looking to raise A$1.5bn (US$983m) from selling the majority of its stake in WorleyParsons Ltd (WOR AU).
• DAR had attempted to privatize Worley in late 2016. Failing that attempt, it has been adding to its stake over the years.
• As the deal isn’t a cleanup, there will be an overhang post-deal, although its a relatively small one at just 4.5% of DAR’s remaining stake; locked up for 30 days

• The Nikkei reports that Carlyle is in the final stages of buying Mitsubishi Corp (8058 JP)’s 35% stake in Kfc Holdings Japan (9873 JP), which will result in a tender offer. 
• The structure will likely be similar to the KDDI Corp (9433 JP)/ Lawson Inc (2651 JP) tender, where MitCorp provides an irrevocable NOT to accept but vote for share consolidation.
• The shares have been up 33.6% since Nikkei flagged the sale on 28 February. KFC Japan will trade in line with peers’ multiples at a JPY5,700 offer.  

• Dar Al-Handasah has sold 19% of WorleyParsons Ltd (WOR AU) overnight at A$14.35/share, a 12% discount to the last close, to raise A$1.44bn (US$943m).
• This reduces Dar’s stake in WorleyParsons Ltd (WOR AU) to 4.5% and will trigger upweights from index providers in the next few days.
• The stake sale could also lead to a re-rating of the stock with a large blocking stake off the share register.

• After nearly six years of conjecture, rumour – plus the key shareholder (holding 72.63% of shares out) contemplating a takeover – we finally have an Offer for L’Occitane (973 HK).
• The price? $34/share, a 30.77% premium to undisturbed, and a figure a shade below the  HK$35/share flagged by Reuters last August deemed “false and without basis“. The price is final. 
• This takeover is a Voluntary General Offer. The key condition is securing 90% of disinterested shareholders holding 27.36%. 9.6% of that number have provided irrevocable undertakings or letters of support.  

• Mimasu Semiconductor Industry (8155 JP) recommended a pre-conditional tender offer from Shin Etsu Chemical (4063 JP) at JPY3,700, a 14.4% and 35.4% premium to the last close and undisturbed price, respectively. 
• The pre-condition, which cannot be waived, is approval under the competition laws of Japan and Taiwan. The tender offer is expected to start in late July.
• While the offer is below the mid-point of the IFA DCF valuation range and the requested price, it is 7.7% higher than the all-time high of JPY3,435. This is done. 

• Japanese instant noodle manufacturer Toyo Suisan Kaisha (2875 JP) has become the newest target for activist investors in Japan.
• Nihon Global Growth Partners Management, Inc argues that Toyo Suisan’s investments are overly concentrated in its legacy businesses, despite these ventures yielding low returns.
• Therefore, they are recommending that Toyo Suisan exit its legacy businesses, increase the payout ratio to 40%, and use some of its excess cash for a share buyback of ¥20bn.

• Chosun reports Korean financial authorities advance Value-up plan guidelines to May 2nd, citing momentum decline post-election. Chosun’s credibility enhances report validity.
• Companies will commence Value-up-related disclosures in alignment with the guidelines within May. A dedicated Value-up website is set to launch in May.
• The May 2nd guideline release date is crucial for Value-up momentum trading. Anticipate heightened volatility in Value-up stocks approaching this date.

• HD Hyundai Marine Solution (443060 KS) is looking to raise KRW 742bn (US$540m) in its IPO, valuing the company at KRW 3,707bn (US$2.69bn). Listing is expected to be in early-May.
• Competition for the shares has been fierce with institutional investors indicating demand for 201x the number of shares on offer at prices higher than the top end of the range.
• Barring a doubling of the stock price, the earliest that the stock will be added to major indices is December 2024. So, no passive buying in the short-term.

• 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: Qantm Intellectual Property (QIP AU), Azure Minerals (AZS AU), Hollysys Automation Technologies (HOLI US), Probiotec Ltd (PBP AU), Southern Cross Media (SXL AU), China TCM.
• Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Roland DG Corp (6789 JP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU), Newmark Property REIT (NPR AU).

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. 20 days straight net buying. NORTHBOUND saw big inflows Friday. A record day I believe.
• HK stocks bounced VERY hard. Seemed like big allocation trade. HSCEI +8.7% vs CSI300 +1.2%. In H/A Pairs, liquid pairs saw Hs outperform their A by 4+% on average.

• This insight is a book review of 주주 권리가 없는 나라 (A Country Without Shareholder Rights), which is one of the best books on the corporate governance in Korea.
• There are so much wisdom that are included in this book. The author really goes into details about numerous corporate governance problems in Korea and ways to fix them.
• This book was published in January 2024 and it was written by a famous Korean retail investor called Park Young-Ok.

• Companies in India have disclosed their shareholding pattern as of end-March in April. There are companies with significant float changes from end-September and/or end-December.
• The changes in free float could be reflected in domestic and global indices over the next few weeks and months resulting in action from passive trackers.
• Depending on the date that the shareholding was published, there could be 14 stocks with passive inflows from global trackers while 7 could see passive outflows in May.

• The CSRC has announced five capital market cooperation measures for the Hong Kong Southbound Connect programs including  RMB dual counters and REITs. 
• Jardine Cycle & Carriage (JCNC SP)‘s current implied stub value and simple ratio are both highly elevated.
• A simple Keisei Electric Railway Co (9009 JP)model says “this doesn’t present me with enough upside to warrant it unless I am also really bullish Oriental Land (4661 JP).”

• MBK Partners will launch a tender offer for ConnectWave from today to May 24th. The target volume is 16.6M shares (40% of SO) at ₩18,000 per share, a 15.6% premium.
• MBK commits to acquiring all tendered shares, regardless of subscription rates, in order to expedite the delisting process. So, there is no cancellation or allocation risk.
• ConnectWave’s retail investor base, with high entry prices, may hinder reaching 70% of the target volume. Absence of risks suggests considering buy positions for potential secondary tender offer.

• After the market close on 26 April, it was reported that MBK Partners has launched a tender offer of a 29.61% stake of Connectwave (119860 KS).
• The tender offer price is 18,000 won, which is 15.6% higher than the closing price (15,570 won) of the company on 26 April.
• The tender offer period is from 29 April to 24 May. The amount of the tender offer is about 300 billion won. 

• The SET has run a market consultation on relaxing liquidity thresholds for inclusion of stocks in the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) universe.
• The consultation is the result of an increase in Average Daily Trading Values and lower turnover ratios, especially for large cap stocks.
• Berli Jucker (BJC TB) is now a potential index inclusion in June and that could result in four constituent changes at the next rebalance.

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

• There were only 12 new listings on the Main Board of the HKEX (388 HK) in the first quarter of the year. More than half the listings were in March.
• Of those stocks, we only see Robosense Technology (2498 HK) having a chance of being added to the HSCI in June and then into Southbound Stock Connect.
• There is a big lock-up expiry for Robosense Technology (2498 HK) in July and that should keep the stock under pressure.

• Chosun reports Korean financial authorities advance Value-up plan guidelines to May 2nd, citing momentum decline post-election. Chosun’s credibility enhances report validity.
• Companies will commence Value-up-related disclosures in alignment with the guidelines within May. A dedicated Value-up website is set to launch in May.
• The May 2nd guideline release date is crucial for Value-up momentum trading. Anticipate heightened volatility in Value-up stocks approaching this date.

• Originally, Brother Industries (6448 JP) wanted to buy Roland DG Corp (6789 JP).  Roland invited others to bid, didn’t tell Brother, then said Taiyo Pacific’s ¥5,035 bid won.
• That was low. Weeks later, Brother lobbed a ¥5,200 overbid. They are going through the approvals process but it isn’t clear Brother is negotiating.
• Taiyo has extended and extended and shown up in interviews. Now it has overbid at ¥5,370.

• Roland DG Corp (6789 JP) has re-recommended Taiyo’s revised offer of JPY5,370, which is 6.7% higher than its previous JPY5,035 offer and 3.3% higher than Brother Industries (6448 JP)’s JPY5,200 offer.
• The Board articulates a compelling case on Brother’s offer dis-synergies, which will help swing some shareholder opinion towards Taiyo (irrespective of the price). 
• Brother could bump, but it would not address the issue of satisfying the condition precedent (non-completion of Taiyo offer) and securing the Board’s recommendation.  

• A shares were up small on the week, largely due to a big rally on Friday (led by record Northbound buying). HK Stocks had a HUGE week. 
• Net SOUTHBOUND buying was +HK10.3bn. Net buys every day and now 20 days straight, but buying was foreign-led.
• Little market news. More geopolitical news. Big SOE bank H-shares see relentless buying. HSTECH +13.4%, HSI +8.8%, HSCEI +9.1%.

• SK Reports Massive Margin Rebound; Nanya Tech’s Financial Performance Appears Relatively Weak in Perspective
• AI Applications Now Translating Into Rising Solid-State Memory (SSD) Demand
• SK Povided Positive Color for Taiwan PC Names; New TSMC Collaboration Highlights TSMC Strength vs. Samsung

• Tally 50 – 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 deals was discussed on Smartkarma this week, being Mimasu Semiconductor Industry (8155 JP)‘s Tender Offer. There’s also BHP Group (BHP AU)‘s unsolicited Offer for Anglo American (NGLOY US).
• Key updates took place on: Tietto Minerals Ltd (TIE AU), CSR Ltd (CSR AU), CPMC Holdings (906 HK), Roland DG Corp (6789 JP), and iClick Interactive Asia Group (ICLK US).

• Fanuc was up 4.7% this past week as the market reacted to a slight uptick in orders and transparently conservative guidance.
• The book-to-bill ratio remained below 1.0 in 4Q of FY Mar-24, but was up from 3Q, which appears to have been the low point in the cycle.
• Inflation and ongoing inventory adjustments indicate a slow recovery, but demand for automation  from traditional markets and new opportunities in aerospace and other industries should support long-term growth.

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. 20 days straight net buying. NORTHBOUND saw big inflows Friday. A record day I believe.
• HK stocks bounced VERY hard. Seemed like big allocation trade. HSCEI +8.7% vs CSI300 +1.2%. In H/A Pairs, liquid pairs saw Hs outperform their A by 4+% on average.

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

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

• Last October, activist Palliser Capital launched a campaign (presentation) on well-known “stub trade” Keisei Electric Railway Co (9009 JP) with a stake of about 1.6%. 
• The proposal? Monetise a decent stake in Oriental Land (4661 JP), repurchase shares, and invest for growth. Keisei responded 6-8 weeks ago with a buyback and 1% OLC stake sale.
• I thought that was time to bail. That was it. But now, Palliser has re-engaged. Today a press release (Japanese/English) and a Letter to the Board.

• There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in May.
• The deletion from passive portfolios will lead to a liquidity event at the end of May where passive trackers will need to sell multiple days of ADV.
• Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.

• Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), has announced a Tender Offer to take out minorities in Mimasu. 
• This is not surprising. They bought in 19 years ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. But it’s too cheap. 
• Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 52%. Then they need a bit to get them to 67% but it should be straightforward.

• BHP (BHP AU)‘s all-scrip unsolicited Offer for Anglo American (AAL LN), zeroes in on AAL’s copper assets as demand for the metal increases for use in EVs and renewable power.
• The proposal has been labelled highly opportunistic by some shareholders and South African politicians. And that the value of AAL’s Chilian/Peruvian copper mines are obscured by its sprawling business interests.
• The Offer remains conditional and non-binding. A transaction hinges off AAL spinning off its South African iron ore and platinum businesses. Expect AAL to reject terms, but remain engaged. 

• Chosun reports Korean financial authorities advance Value-up plan guidelines to May 2nd, citing momentum decline post-election. Chosun’s credibility enhances report validity.
• Companies will commence Value-up-related disclosures in alignment with the guidelines within May. A dedicated Value-up website is set to launch in May.
• The May 2nd guideline release date is crucial for Value-up momentum trading. Anticipate heightened volatility in Value-up stocks approaching this date.

• Eagle Nice International Holdings’ dividend yield averaged 9.2% from FY 2019 to FY 2023. Its annual dividend payout averaged 72.2% in the same period.
• Eagle Nice (Intl) Hldgs is mainly engaged in the design and manufacture of sportswear for adults and children on an OEM basis. Yue Yuen Industrial Holdings is the largest shareholder.
• Eagle Nice Holdings also has attractive valuations and consistent growth in sales and profits. 

• Originally, Brother Industries (6448 JP) wanted to buy Roland DG Corp (6789 JP).  Roland invited others to bid, didn’t tell Brother, then said Taiyo Pacific’s ¥5,035 bid won.
• That was low. Weeks later, Brother lobbed a ¥5,200 overbid. They are going through the approvals process but it isn’t clear Brother is negotiating.
• Taiyo has extended and extended and shown up in interviews. Now it has overbid at ¥5,370.

• The ES50 Index is one of the most highly-tracked and followed indices in Europe and the annual index review takes place in September every year.
• This annual index rebal event usually results in some of the most significant index flow events in Europe every year, typically amounting to billions of dollars of flows.
• In this insight, we take a look the names leading the race to become ADDs/DELs for the upcoming index review in September 2024.

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

• There are 2 constituent changes for the LQ45 Index and 6 constituent changes for the IDX80 Index at the rebalance to be implemented at the close on 30 April.
• The largest passive inflows are expected in Amman Mineral Internasional (AMMN IJ), Indosat Tbk PT (ISAT IJ), Bank Rakyat Indonesia (BBRI IJ) and Merdeka Copper Gold Tbk PT (MDKA IJ). 
• With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.

• Last October, activist Palliser Capital launched a campaign (presentation) on well-known “stub trade” Keisei Electric Railway Co (9009 JP) with a stake of about 1.6%. 
• The proposal? Monetise a decent stake in Oriental Land (4661 JP), repurchase shares, and invest for growth. Keisei responded 6-8 weeks ago with a buyback and 1% OLC stake sale.
• I thought that was time to bail. That was it. But now, Palliser has re-engaged. Today a press release (Japanese/English) and a Letter to the Board.

• In this insight, we review the share price performances of the top 13 IPOs (in terms of market cap) in Korea in the past 8 months. 
• We review the the share price performances over different time periods (1 day, 1 week,  and 1 month). We also analyze the demand ratios and lock-up periods of the IPOs. 
• On average, 12.7% of the IPO shares are under lockup periods for the 13 companies listed below. HD Hyundai Marine Solution IPO has 45.8% of shares under lock-up.

• Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), has announced a Tender Offer to take out minorities in Mimasu. 
• This is not surprising. They bought in 19 years ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. But it’s too cheap. 
• Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 52%. Then they need a bit to get them to 67% but it should be straightforward.

• There were only 12 new listings on the Main Board of the HKEX (388 HK) in the first quarter of the year. More than half the listings were in March.
• Of those stocks, we only see Robosense Technology (2498 HK) having a chance of being added to the HSCI in June and then into Southbound Stock Connect.
• There is a big lock-up expiry for Robosense Technology (2498 HK) in July and that should keep the stock under pressure.

• There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in May.
• The deletion from passive portfolios will lead to a liquidity event at the end of May where passive trackers will need to sell multiple days of ADV.
• Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.

• Today’s reveal includes two main parts: first, setting up internal balance management for investors; second, building the detection system to block naked short-selling.
• FSC and FSS haven’t provided a set date for system completion but suggest it may start late this year or early next year. Uncertainty remains on overseas investor participation.
• A decision on short selling is due in June, but no confirmation was given today. However, the local market anticipates short selling resuming before this system is fully operational.

• Four years ago, almost to the day, Bloomberg ran an article, “China Merchants Group Ltd. is exploring taking China Merchants Port Holdings private“. China Merchants Ports (144 HK) popped 23%.
• CMP gave back (most) of that gain a month later. Shares are up just ~10% since. 
• CMP’s implied stub is bouncing around a multi-year low; and the simple ratio (CMP/ Shanghai International Port Group (600018 CH)) is around an all-time low.

• With the rise in Coupang’s market cap, it’s imperative to evaluate if the Korea Index can attain eligibility to include foreign-listed companies.
• Coupang’s 45% YTD surge nears a $41B market cap, with a 65% free-float rate equating to $27B. Yet, to meet Korea Index eligibility, an additional $23B is needed.
• Aside from Coupang, more companies are preparing for overseas listings. Also, potential stock price increases for Coupang should be considered. The combined market cap approaches the US$50B threshold.

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

• Again, Tesla reports a 1Q24 sales with 4% miss but post market share price up more than 10% for 6 reasons. 1. Gross margin was stable on 15% sales drop;
• 2. ASP was stable; 3. Affordable EV on track for 2025; 4. Factory expansion to slow; 5. Optimus to sell end of 2025; 6. 2024 EV shipment higher than 2023.
• Near term risks to remain: 1. When will margin trough? 2. Why bother to buy EV if 2nd hand market collapsing? 3. Will Robotaxi/FSD bring in meaningful sales/profits soon?

• HD Hyundai Marine Solution’s IPO price has been determined at 83,400 won per share, which is at the high end of the IPO price range. 
• A total of 2,021 institutional investors participated in this IPO book building. The demand ratio was 201 to 1. HD Hyundai Marine Solution will start trading on 8 May 2024.
• Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, which represents an upside of 18% from the IPO price.

• Yesterday, post-close, Bloomberg reported a headline “*SILCHESTER REPORTS NIKON STAKE; MAY SEEK CAPITAL POLICY CHANGES“
• That was exciting. It was in all caps. It was activist-ish-y. Today the stock rose 10.3% and we got another article saying it was up because of Silchester’s filing.
• Beware the Bloomberg headline. Nuance is sometimes lost. They aren’t always designed to help investors invest. Often, the main purpose is clickbait.

• In this insight, we review the share price performances of the top 13 IPOs (in terms of market cap) in Korea in the past 8 months. 
• We review the the share price performances over different time periods (1 day, 1 week,  and 1 month). We also analyze the demand ratios and lock-up periods of the IPOs. 
• On average, 12.7% of the IPO shares are under lockup periods for the 13 companies listed below. HD Hyundai Marine Solution IPO has 45.8% of shares under lock-up.

• In RMB Dual Counter Trading Is Coming – This Changes AH Relationships, Travis Lundy discussed the forthcoming inclusion of RMB dual counters in the Hong Kong Southbound Connect programs.
• This is but one of the five capital market cooperation measures announced by the CSRC last Friday. 
• The other four measures include ETFs, improving mutual recognition of funds, increasing China IPOs in Hong Kong, and the inclusion of REITs. This insight discusses the latter.

• Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO. The bookrunners on the deal are GS, MS and China Securities.
• Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
• In this note, we talk about the not-so-positive aspects of the deal.

• There are 2 constituent changes for the LQ45 Index and 6 constituent changes for the IDX80 Index at the rebalance to be implemented at the close on 30 April.
• The largest passive inflows are expected in Amman Mineral Internasional (AMMN IJ), Indosat Tbk PT (ISAT IJ), Bank Rakyat Indonesia (BBRI IJ) and Merdeka Copper Gold Tbk PT (MDKA IJ). 
• With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.

• In this insight, we take a look at the potential ADDs/DELs for the DAX index and the MDAX index in the run up to the June 2024 index rebal event.
• I currently see no changes for the DAX index but there could be one change for the MDAX index.
• M&A candidate MorphoSys AG (MOR GR) could be deleted in the run up to the June 2024 review.

• There were only 12 new listings on the Main Board of the HKEX (388 HK) in the first quarter of the year. More than half the listings were in March.
• Of those stocks, we only see Robosense Technology (2498 HK) having a chance of being added to the HSCI in June and then into Southbound Stock Connect.
• There is a big lock-up expiry for Robosense Technology (2498 HK) in July and that should keep the stock under pressure.

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

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

• A week after the State Council issued “Several Opinions” (关于加强监管防范风险推动资本市场高质量发展的若干意见》), the CSRC announced Friday five capital market cooperation measures with HK Connect. The goals are to increase cross-border investor flows.
• They include: a broader range of ETFs in Connect, including REITs in both directions, include RMB counters in Southbound, improve mutual recognition of funds, increasing China IPOs in Hong Kong.
• RMB Dual Counters Southbound-eligible will take time. They have some homework, but it is on the “To Do” list “as soon as possible and smoothly.” Watch impact on H/A Pairs.

• In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the June 2024 index rebal event.
• Since my last insight, my index change expectations and flow expectations have changed significantly.
• My latest estimate for one-way flow in June 2024 is US$1.06bn (down from US$1.22bn a month ago).

• Sichuan Baicha Baidao Industrial (2555 HK) (SBBI) raised around US$330m in its HK IPO.
• SBBI sells new-style tea drinks through its ChaPanda stores. According to F&S, SBBI ranked third in China’s new-style tea shop market with a market share of 6.8% in FY23.
• We have looked at the company’s performance and valuations in our past note. In this note, we talk about the trading dynamics.

• In Smartkarma Corporate Webinar | Elite Commercial REIT: Essential Assets at an Attractive Yield we conducted a fireside chat with Elite Commercial REIT.
• Elite Commercial REIT is a Singapore real estate investment trust established with the investment strategy of principally investing, directly or indirectly, in commercial real-estate related assets in the United Kingdom.
• The company has recently expanded its strategy to look at other commercial assets in the UK, beyond its existing portfolio of assets rented by the UK government.

This Insight is part of the Smartkarma Corporate Webinar series, supported by SGX through the Investor Education Fund.

• Despite this pattern persisting for years, there has still been a significant price impact each time it surfaces. Therefore, we should pay attention to the upcoming CB conversion schedule.
• A consistent observation is that the price impact is most significant at the announcement of early redemption requests.
• The anticipated announcement dates for the forthcoming early redemption requests are: around May 20th (195th conversion), around September 20th (196th conversion), and around March 20th of next year (197th conversion).

• Postal price hike approved  swinging the Post business from a loss to a profit
• Cancellation of 7.36% of outstanding shares from the latest buyback
• Management Plan to be released in May will provide further details on improving ROE and PB

• Nidec reported a solid set of quarterly numbers, except for another huge structural loss in its EV business. 
• Nidec saw sales growth and operating profitability improvements in all other segments
• We continue to think that Nidec is attractively priced at under 20x EV/ EBIT given structural growth drivers

• In this analysis, we provide a back testing analysis of the end of mandatory lock-up periods monthly data in Korea in the past six months.
• All in all, this end of mandatory lock-up period monthly data continues to provide some alpha generating results.
• In the past six months, they have tended to work better in periods when KOSPI declines rather than in periods when KOSPI rises. 

• Q124 revenues of $18.87 billion, marginally above the high end of the guided range, up 12.9% YoY and down 3.8% QoQ. Guided Q224 +6% QoQ.  Maintained full year 2024 outlook
• Unnecessary, minor downward revisions for semi & foundry growth, combined with confusion about the reason triggered an allergic reaction on the markets. TSMC down ~8% since.
• SMCI plunged 23% by Friday close, ARM down 16.9%, NVIDIA down 10%, AMD & Micron down ~5% etc. Nice one, TSMC!

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

• SK Square is looking to raise around US$198m via selling 2.1% of Krafton (259960 KS).
• The stock has been doing well over the past few months and its earnings and price momentum remain strong.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• A week after the State Council issued “Several Opinions” (关于加强监管防范风险推动资本市场高质量发展的若干意见》), the CSRC announced Friday five capital market cooperation measures with HK Connect. The goals are to increase cross-border investor flows.
• They include: a broader range of ETFs in Connect, including REITs in both directions, include RMB counters in Southbound, improve mutual recognition of funds, increasing China IPOs in Hong Kong.
• RMB Dual Counters Southbound-eligible will take time. They have some homework, but it is on the “To Do” list “as soon as possible and smoothly.” Watch impact on H/A Pairs.

• Jardine Cycle & Carriage (JCNC SP)‘s current implied stub value is around its highest-ever level.
• The simple ratio of JCNC/Astra International (ASII IJ) is at its highest level outside the 2008 GFC.
• A weak Indonesian rupiah is likely a factor. Still, JCNC is trading rich to its NAV. A takeover from parent Jardine Matheson Holdings (JM SP) is idealistic.

• On 19 April, Taiyo Co-CEO Brian Heywood told Bloomberg and Reuters they were considering three options to Brother Industries (6448 JP)’s tender for Roland DG Corp (6789 JP). 
• Taiyo’s options are bumping its offer, walking away or tendering into the Brother’s offer if it bumps and alleviates dis-synergies concerns.
• All three options are likely a ruse. Taiyo’s primary play is to frustrate and pressure Brother to withdraw its bid if it cannot get the Board’s recommendation.

• Value Act’s recent statement might suggest that they have prevailed and Seven & I Holdings (3382 JP) has yielded to their demands. However, the reality might be less straightforward.
• Value Act sought new market expansion, but Seven & I is focused on reinforcing its presence in existing, well-established markets.
• Given Value Act’s impatience, their acceptance of Seven & I’s plan for a 2026 Super Stores IPO, contingent on a business transformation, is unexpected.

• After the market close on 22 April, it was reported that SK Square plans to sell 2.2% stake in Krafton in a block deal sale worth about 270 billion won. 
• The estimated block deal sales price range is from 243,000 won to 251,000 won, representing a 3.1% to 6.2% discount to the closing price of 259,000 won on 22 April.
• We would take the deal. The company’s valuations remain attractive and it has been successful in expanding its sales and profits. 

• A shares were up on the week, while Hs were down. BIG divergence among liquid names. 
• Net SOUTHBOUND buying was +HK32.1bn. SOUTHBOUND ended its consecutive post-CNY daily net buy streak on 25 March, then started a new one. No net sell days since.
• Little market news. More geopolitical news. SOE bank H-shares are seeing relentless net and gross buying, very very little selling.

• The Deputy Prime Minister Choi Sang Mok reaffirmed the Corporate Value Up program, pushing up the major value driven/low PBR stocks in Korea today.
• Deputy Prime Minister Choi emphasized that as part of Corporate Value Up program, corporate tax benefits to companies that have made efforts to strengthen shareholder return policy will be provided.
• The Korean government also plans to revise the law to separate taxation on the dividend income of shareholders of companies that expand dividends.