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Today after the close, KDDI Corp (9433 JP) and Gree Inc (3632 JP) announced that KDDI would offer its 8,000,000 shares in Gree in an international offering through Mizuho Intl.
The deal comes at a decently large discount and the stock is quite downtrodden. Especially when compared to its venture assets and cash, assuming invested amount is remotely viable.
The problem is that too much of revenue isn’t earning much, so this sits in a Value Trap category. Shareholder structure makes it difficult to do buybacks.

China Traditional Chinese Medicine (570.HK) – New Information on Privatization

By Xinyao (Criss) Wang

Since China TCM doesn’t deny the rumors so far after the trading halt, privatization is becoming likely this time.Rumor said formal negotiations may not begin until after the Lantern Festival.
CNPGC may not want to pay high prices on privatization.Weak sentiment/share price may help with the negotiations.But the key is to obtain the consent of other shareholders, especially Ping An.
There’s underlying logic for Taiji Group to drive this privatization. A price of higher than HKD5.1 is possible. If the price could reach HKD6 (or higher), it has exceeded expectations.

Korea NPS Abruptly Joins Corporate Value Up Program: According to Document Obtained from NPS

NPS abruptly joins ‘Corporate Value Up Program’, plans to select three asset managers. Deadline: this month’s 29th; results: March 19th, possibly linked to Korea Premium Index ETF launch in mid-May.
The document outlines guidelines, allocating 90-100% to value stocks, with KOSDAQ under 20%. While benchmarked to the internally-built index, it will likely focus on Korea Premium Index and KOSDAQ Global.
The fund size is crucial. NPS will disclose details later. But still, there is considerable room to this year’s ceiling for local equity; a significant amount could flow into this.

Azure Minerals (AZS AU): MinRes Selling Out Paves the Way for the Scheme

The AFR reports that JPMorgan is selling 14.5% of Azure Minerals (AZS AU) shares at A$3.42. The primary seller is said to be Mineral Resources (MIN AU), seeking to exit.
MinRes’ decision to sell out a discount rather than accept the scheme A$3.70 offer reflects the cost of securing a say on Andover and the opportunity cost of capital.
The transaction booklet will be despatched in early March. At the last close and for an early May scheme payment, the gross/annualised spread is 2.5%/13.4%.

Itoki (7972 JP) – Worth Thinking About Post Mega ToSTNeT-3 Buyback

As discussed in Itoki (7972) Mammoth Buyback Coming Imminently After 35% Jump, the company was going to do a mega ToSTNeT-3 buyback between then and end-Feb. That happened this morning.
The company bought back 7.966mm shares (13.96%) for ¥15.9bn. That should have cleared out the bulk of the risk of the original warrant holders who bought in 2020. But…
The dilution/accretion don’t offset perfectly, and there is a clause suggesting how this might play out from here. But we can infer things from other data we now have.

Azure (AZS AU): MinRes’ Discounted Exit

JPMorgan is placing MinRes (MIN AU)‘s 14.5% stake in Azure Minerals (AZS AU) at A$3.42/share, a 5% discount to last close and a 7.6% discount to the A$3.70/share Scheme price.
It was reported last month that MinRes, who paid up to ~A$4.00/share for some of its stake, was looking to exit. But cash now vs. ~8% more in two months?
Given the recent rout in lithium and nickel prices, one wonders if a MAC landmine lurks. Or, quite simply, MinRes just needs the cash. Expect Azure to fall tomorrow.

Union Bank of India (UNBK IN) Placement: Using Index Inclusion Well

Union Bank Of India (UNBK IN) is looking to raise up to INR 30bn (US$362m) with the floor price set at INR 142.78/share and a maximum discount of 5%.
The stock has run up a lot and with index inclusion around the corner, this is as good a time as any to issue stock.
Union Bank Of India (UNBK IN) trades cheaper than peers and could continue to outperform over the near-term.

NPS Plans to Select Three Asset Management Companies For “Corporate Value Up” Program

On 21 February, NPS announced that it will select three domestic asset management companies to manage funds that will be allocated to the “corporate value up” program.
NPS plans to accept proposals from the local asset management and investment advisory companies from 21 to 29 February. NPS is likely to finalize the selected candidates sometime in March.
We provide a list of 34 companies where the NPS has at least 5% ownership stake, with PBR of 0.5x or less, and included in KOSPI 200.

China Traditional Chinese Medicine (570 HK): Sinopharm-Led Pre-Conditional Offer at HK$4.60

China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
The pre-condition relates to various Chinese regulatory approvals. As SOE entities own the offeror, regulatory approvals will be a formality. The offer price is final.
Ping An Insurance (H) (2318 HK), which holds a blocking stake, will be supportive. The offer is fair when the previously (higher) rumoured offers are adjusted for the market downturn.

TCM (570 HK): Sinopharm’s $4.60/Share Offer

$4.60/Share. That’s the number – by way of a Scheme – that only matters. Below the recently rumoured $6/share, and $5.10/share a little over three years ago. Terms are final.
As widely expected, the Offeror is SASAC-managed China National Pharmaceutical Group Corporation (CNPGC), indirectly owning 32.46% in China Traditional Chinese Medicine (570 HK) (TCM) via Sinopharm Group Hongkong,
Optically, the Offer price appears light. But this should still get up. TCM is trading rich to peers. No other competing bidder will emerge. Expect regulatory pre-cons to be fast-tracked.

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Feb 21

Most Read: SENKO Group Holdings Co., Ltd., Bizlink Holding, Yankuang Energy Group, Naver Corp, Snow Peak Inc, Royal Gold Inc, Cosco International Holdings, CIMC Vehicle Group Co Ltd, Taihan Electric Wire, Trial Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Senko Group (9069 JP) Offering – Banks and Insurers Unwinding Cross-Holdings in Offering
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: One Deletion & Capping Changes
FXI Rebalance Preview: Three Potential Changes as Big Moves Unfold
Initial Thoughts on the Webtoon Entertainment IPO
Snow Peak (7816) – Bain Deal at ¥1,250 – 46% Premium Is Nice, Not A Home Run
Quiddity Leaderboard MV J-Gold Miners Mar 24: One High-Conviction DEL and More Low-Conviction Cases
COSCO Shipping (517 HK) Is Still Cheap
CIMC (1839 HK): Justification For Unjust Offer Price?
Monitoring LG Display’s Stock Rights Trading
Trial Holdings Pre-IPO – Refiling Updates – Margin Uptick, More Golf Courses

Senko Group (9069 JP) Offering – Banks and Insurers Unwinding Cross-Holdings in Offering

SENKO Group Holdings Co., Ltd. (9069 JP) today announced large financial institutional cross-holders would sell shares in a Secondary Offering. There’s a buyback on the back end.
Cross-Holding unwinding is the subject of the moment. It will continue to be so. It will involve selldowns, and buybacks. Study the model of what companies must do what.
In this case, Senko has a LOT of cross-holders and minimal excess cash. So investors buy more shares. But there is a buyback and index demand to come.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: One Deletion & Capping Changes

Bizlink Holding (3665 TT) should be deleted from the Yuanta/P-Shares Taiwan Dividend Plus ETF in March and that will trigger selling of over 8 days of ADV.
There will be capping and funding flows due to the higher AUM and passive trackers will need to trade over 0.4x ADV in 5 stocks.
Shorts have covered positions in Bizlink Holding (3665 TT) but there has been a recent uptick that could be linked to positioning for the rebalance.

FXI Rebalance Preview: Three Potential Changes as Big Moves Unfold

With the review period complete, there could be 3 changes for the iShares China Large-Cap (FXI) (FXI US) in March.
CGN Power (1816 HK), Yankuang Energy (1171 HK) and China Coal Energy (1898 HK) could replace Wuxi Biologics (2269 HK), China Resources Beer (291 HK) and China Vanke (2202 HK).
Short interest on China Vanke (H) (2202 HK) and Yankuang Energy Group (1171 HK) is higher than the other stocks and there could be covering on implementation day.

Initial Thoughts on the Webtoon Entertainment IPO

Naver Corp (035420 KS) is trying to complete the IPO of its affiliate Webtoon Entertainment in the US stock market as early as June 2024.
The expected value of Webtoon Entertainment (post IPO) is about US$3 billion to US$4 billion. Webtoon Entertainment is seeking to raise about US$500 million in this IPO.
The IPO of Webtoon Entertainment in the US is likely to have a positive impact on Naver Corp (035420 KS).

Snow Peak (7816) – Bain Deal at ¥1,250 – 46% Premium Is Nice, Not A Home Run

The possibility/likelihood of a “¥50bn MBO” for Snow Peak Inc (7816 JP) was leaked in a Nikkei article last Friday. It went limit up two days in a row.
That TOB price is more than 70% off its three-year high. That will certainly disappoint some. Separately, the price seems a bit low given growth.
The family and friends own ~42% so if someone gets upset, or uppity, there could be a challenge. Just because an MBO exists doesn’t mean people have to tender in.

Quiddity Leaderboard MV J-Gold Miners Mar 24: One High-Conviction DEL and More Low-Conviction Cases

The MV J-Gold Miners index represents the performance small-cap gold and silver mining companies listed around the world.
This index is reviewed semi-annually in March and September. During these reviews, names can be added or deleted from the index.
In this insight, we take a look at the potential ADDs and DELs and our flow expectations for the index rebal event in March 2024.

COSCO Shipping (517 HK) Is Still Cheap

In More Hong Kong Stocks Priced For Liquidation, I flagged thirteen stocks the market is all-but implying are priced for liquidation.
One of the cut-off points in that analysis was a requirement for stocks to trade at least US$1mn/day. Removing that constraint uncovers shipping services play COSCO International Holdings (517 HK) (CSI).
CSI’s market cap accounts for ~86% of its 1H23 net cash position. Earlier this month, CSI announced another positive profit warning. Those numbers should be out late-March.

CIMC (1839 HK): Justification For Unjust Offer Price?

On the 28 November 2023, SOE-backed CIMC Vehicle Group Co Ltd (1839 HK) announced a conditional H-share buyback at a $7.00/H-share, a forgettable 8.6% premium to last close.
This Voluntary Offer followed by a Merger by Absorption requires shareholder approval and SAFE signing off. The SAFE condition was satisfied on the 26th Jan.
Last night, CIMC announced the CBP investigation into the evasion of U.S. anti-dumping and countervailing duties was extended. There is no mentioned in interim accounts or HKEx of this investigation.

Monitoring LG Display’s Stock Rights Trading

LG Display’s tight stock rights trading prompts a need to assess potential trading opportunities. Taihan Electric Wire’s concurrent capital increase warrants close observation.
Watch for a potentially wider spread in Taihan Electric Wire’s stock rights trading from the 22nd, given local institutional demand focus on LG Display may create a buying vacuum.
Observers speculate on a CJ CGV-like pattern at LG Display. With no current market movements, predicting such a scenario is difficult. Nonetheless, I’ll monitor closely and share any developments.

Trial Holdings Pre-IPO – Refiling Updates – Margin Uptick, More Golf Courses

By Sumeet Singh

Trial Holdings (5882 JP) (TH) is now looking to raise around US$234m in its Japan IPO, after having canceled its prior listing attempt last year.
TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
We have looked at the past performance in our previous notes. In this note, we talk about the updates from its recent filings.

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Feb 20

Most Read: MS&AD Insurance, UBTech Robotics, Tongcheng Travel Holdings , East Buy Holding , SENKO Group Holdings Co., Ltd., Boral Ltd, Outsourcing Inc, Heiwado Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

[Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming
HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect
HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn
Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise
Senko Group (9069 JP) Offering – Banks and Insurers Unwinding Cross-Holdings in Offering
Boral (BLD AU): Seven Group (SVW AU)’s Best & Final Offer
Outsourcing (2427 JP) – Earnings Out, With a Bigger Impairment, But Not Clearly A MAC
Heiwado (8276 JP) – Banks and Insurers Unwinding Cross-Holdings In Offering
Outsourcing (2427 JP): The Weak 4Q Unlikely to Deter Bain
Seven Group Reloads On Boral (BLD AU)

[Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming

There has been a recent non-life insurer price-fixing scandal. The JFTC and FSA investigated. Last December, the FSA issued Business Improvement Orders to the four majors.
There was a Bigmotor scandal last summer and Sompo Japan got a Business Improvement Order last month. All four insurers have to respond to a BIO for the price-fixing scandal.
9 Feb post-close, Jiji/Nikkei had articles saying the FSA had urged four major non-lifes subject to the first BIO to accelerate sales of ¥6.5trln+ of 5,900 Cross-Holdings. That’s big.

HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect

There are 25 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents down to 514.
We expect 21 of the 25 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.
Since the start of the year, shares held though Southbound Connect have increased on 22 of the 29 HSCI deletions and there could be some unwinding in the weeks ahead.

HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn

As expected, Tongcheng Travel Holdings (780 HK) will replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 March.
Estimated one-way turnover is 3.9% leading to a round-trip trade of HK$7.74bn (US$988m). There is nearly 14x ADV to buy in Tongcheng Travel Holdings (780 HK).
Positioning in Tongcheng Travel (780 HK) does not appear to be very high, while positioning in GDS Holdings (9698 HK) is very high with a couple of deletions coming up.

Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise

There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the March rebalance. There are some surprises.
Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.
There is huge short interest on East Buy Holding (1797 HK) and there could be some short covering ahead of the inclusion of the stock in the index.

Senko Group (9069 JP) Offering – Banks and Insurers Unwinding Cross-Holdings in Offering

SENKO Group Holdings Co., Ltd. (9069 JP) today announced large financial institutional cross-holders would sell shares in a Secondary Offering. There’s a buyback on the back end.
Cross-Holding unwinding is the subject of the moment. It will continue to be so. It will involve selldowns, and buybacks. Study the model of what companies must do what.
In this case, Senko has a LOT of cross-holders and minimal excess cash. So investors buy more shares. But there is a buyback and index demand to come.

Boral (BLD AU): Seven Group (SVW AU)’s Best & Final Offer

Seven Group Holdings (SVW AU) holds 71.59% in Boral Ltd (BLD AU) and is looking to acquire the remaining shares at A$6.05/share via a mix of SVW stock and cash.
The offer consideration ratchets higher to A$6.15/share if SVW’s aggregate shareholding reaches 80% and to A$6.25/share if SVW’s aggregate shareholding reaches 90.6%.
Seven Group Holdings (SVW AU) is an addition to a global index at the end of the month and a drop in the stock post inclusion will affect Boral Ltd.

Outsourcing (2427 JP) – Earnings Out, With a Bigger Impairment, But Not Clearly A MAC

Outsourcing Inc (2427 JP) delayed its earnings from 14 February to 19 February on tardiness in calculating impairment losses. That caused a short sharp shock in share price.
An article came out suggesting it was a small number, and domestic biz EAS-related. Results today do not suggest EAS-related, and half is overseas. But no suggestion of precondition breach.
For that, I think this probably goes through, and the EC FSR review period should end on 20 Feb so a deal announcement by Friday is eminently possible.

Heiwado (8276 JP) – Banks and Insurers Unwinding Cross-Holdings In Offering

Heiwado Co Ltd (8276 JP) today announced a Secondary Offering sell-down by cross-holders, combined with a buyback post-offering to mitigate some of the effects of overhang.
Banks and insurers are selling, and that will leave the stock with a lot of cross-holders left, but investors should look at the model given he zeitgeist.
Companies with lots of cross-holders have to be “fair” to them. Those without copious cash have to spread it around so this transaction model looks likely to be continued.

Outsourcing (2427 JP): The Weak 4Q Unlikely to Deter Bain

Outsourcing Inc (2427 JP) has disclosed a weak 4Q materially below guidance due to cost overruns and JPY6,875 million in impairments. The results did not provide an update on Bain’s tender.
The weak 4Q has raised concerns that Bain would reconsider terms. Our take is that the results will not warrant a change in the DCF valuation or breach a pre-condition.
Bain is likely to consider the results a reflection of near-term industry weakness rather than company-specific issues. The annualised spread for a March-end completion is 9.8%.

Seven Group Reloads On Boral (BLD AU)

After Boral (BLD AU) rejected Seven Group (SVW AU)‘s $6.50/share Offer in 9 June 2021, Seven bumped to $7.30 cash if they got to 29.5%, and $7.40 if 34.5%.
Seven reached 29.5% by July 1, 34.5% less than a week later, then 52.65% on the 15 July, and at the close of the Offer (29 July 2021), held 69.6%.
Seven, now holding 71.6%, has made a cash/scrip Offer for shares not owned, with certain tendering thresholds triggering more cash. Terms are best & final.

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Feb 19

Most Read: MS&AD Insurance, UBTech Robotics, Snow Peak Inc, China Unicom Hong Kong, Tongcheng Travel Holdings , SCREEN Holdings, Outsourcing Inc, Korea Stock Exchange KOSPI 200, East Buy Holding and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

[Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming
HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect
Snow Peak (7816) – Nikkei Says Bain to Launch ¥50bn MBO
HSCEI Index Rebalance: Third Time Unlucky for Zhongsheng (881 HK) As China Unicom (762 HK) In
HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn
Index Rebalance & ETF Flow Recap: HSI, Screen Holdings, GMRI, SEA EM, MVIS, SET50, JP Positioning
Snow Peak (7816 JP): Bain Contemplating Backing an MBO at JPY1,200
Last Week in Event SPACE: Outsourcing Ltd, MGM China, JSR Corp, Dissentient Blues
What We’ve Gathered Thus Far Regarding KOREA PREMIUM INDEX: Schedule, Methodology, & NPS
Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise

[Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming

There has been a recent non-life insurer price-fixing scandal. The JFTC and FSA investigated. Last December, the FSA issued Business Improvement Orders to the four majors.
There was a Bigmotor scandal last summer and Sompo Japan got a Business Improvement Order last month. All four insurers have
9 Feb post-close, Jiji/Nikkei had articles saying the FSA had urged four major non-lifes subject to the first BIO to accelerate sales of ¥6.5trln+ of 5,900 Cross-Holdings. That’s big.

HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect

There are 25 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents down to 514.
We expect 21 of the 25 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.
Since the start of the year, shares held though Southbound Connect have increased on 22 of the 29 HSCI deletions and there could be some unwinding in the weeks ahead.

Snow Peak (7816) – Nikkei Says Bain to Launch ¥50bn MBO

Apparently, MergerMarket had an article out Friday saying once-higher-flying outdoor/sporting goods retailer Snow Peak Inc (7816 JP) was considering going private. The company said(J) late they were considering multiple options.
A Nikkei article (J) Saturday said it was Bain would launch an MBO/Tender Offer as early as this week paying ¥50bn.
This will probably go limit up Monday. I’d expect an announcement post-close Monday. Long-suffering long-only investors who have already sold will be disappointed. Those who were late to sell? Happy.

HSCEI Index Rebalance: Third Time Unlucky for Zhongsheng (881 HK) As China Unicom (762 HK) In

After narrowly avoiding deletion at the last two index reviews, Zhongsheng Group will be deleted from the HSCEI INDEX in March and replaced with China Unicom (762 HK).
Zhongsheng Group (881 HK) is down 25% for the year while China Unicom Hong Kong (762 HK) is up 10%.
There appears to be positioning on both stocks though the increase in shorts and jump in cumulative excess volume on Zhongsheng Group (881 HK) point to higher positioning.

HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn

As expected, Tongcheng Travel Holdings (780 HK) will replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 March.
Estimated one-way turnover is 3.9% leading to a round-trip trade of HK$7.74bn (US$988m). There is nearly 14x ADV to buy in Tongcheng Travel Holdings (780 HK).
Positioning in Tongcheng Travel (780 HK) does not appear to be very high, while positioning in GDS Holdings (9698 HK) is very high with a couple of deletions coming up.

Index Rebalance & ETF Flow Recap: HSI, Screen Holdings, GMRI, SEA EM, MVIS, SET50, JP Positioning

There were index review announcements for the HSI, HSCEI INDEX, HSTECH, HSCI, HSIII and some global indices last week.
There are a bunch of review cutoffs early in the coming week followed by announcements for the STAR50 INDEX and STAR100 Index later in the week.
Another week of outflows for Tracker Fund of Hong Kong (2800 HK) and Hang Seng H Share ETF (2828 HK) as inflows to iShares Emerging Markets ex-China (EMXC US) continue.

Snow Peak (7816 JP): Bain Contemplating Backing an MBO at JPY1,200

The Nikkei reports that Snow Peak Inc (7816 JP) is set to disclose a Bain-sponsored MBO this week “in the range of 1,200 yen per share.”
Mergermarket first disclosed a potential MBO on Friday. Snow Peak responded that while it is true that we are considering going private, no decision has been made at this time.
The rumoured JPY1,200 offer price is light vs historical trading ranges but attractive vs peer and historical multiples. The probability of an offer materialising is high.

Last Week in Event SPACE: Outsourcing Ltd, MGM China, JSR Corp, Dissentient Blues

Nobody “named” having >5.0% in Outsourcing (2427 JP); no public noise, the stock down; people won’t be fighting for a bump unless the delay and impairment are truly meaningless.
Stay long MGM China Holdings (2282 HK) as its FY23 top line surpasses pre-Covid levels.
Investors and risk arbitrageurs who are worried about the potential loss of the case to RF SUNY should simply avoid, or sell then avoid JSR Corp (4185 JP) shares.

What We’ve Gathered Thus Far Regarding KOREA PREMIUM INDEX: Schedule, Methodology, & NPS

The Feb 26th announcement introduces the Corporate Value Up Program and unveils the Korea Premium Index direction. Methodology finalization expected by mid-March; ETFs launch by mid-May.
Similar to JPX Prime 150, KRX aims to target enhancing equity spread and PBR trends (+1.0x) while also integrating dividend growth rate. KOSDAQ stocks may be omitted.
NPS’s role is vital for the Korea Premium Index, yet aligning its passive strategy with this index faces challenges. Ongoing discussions aim to adjust regulations for this index investment.

Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise

There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the March rebalance. There are some surprises.
Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.
There is huge short interest on East Buy Holding (1797 HK) and there could be some short covering ahead of the inclusion of the stock in the index.

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Feb 18

Most Read: DISCO Corp, Hainan Jinpan Smart Technology, Infosys Ltd, Abacus Storage King, HSBC Holdings, Snow Peak Inc, Hang Seng Index, MS&AD Insurance, Altium Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Index Rebalance & ETF Flow Recap: N225, ASX, STAR50, NIFTY50, KRX New Deal, UOL SP, Korea Passive
STAR100 Index Rebalance Preview: High Risk/Return Trade Setup
Index Rebalance & ETF Flow Recap: STAR100, NEXT50, LowVol30, KOSPI200, TW50, NWD, ITC, India Float
MVIS Australia A-REITs Index Rebalance Preview: ASK Looks Like a Delete
Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest
Snow Peak (7816) – Nikkei Says Bain to Launch ¥50bn MBO
EQD | HSI Rally: Possible Brief Stop This Week
[Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming
Japan Weekly | Rakuten, Asics, Ebara, Tokyo Electron Chalk up Big Gains
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Altium, Ansarada, Roland DG, Welbe, Orecorp, Vinda

Index Rebalance & ETF Flow Recap: N225, ASX, STAR50, NIFTY50, KRX New Deal, UOL SP, Korea Passive

The review period for a global index and a bunch of local indices ended last week. The announcement of the changes will be made in 1 week to 4 weeks.
Strike Energy (STX AU) will replace Costa Group Holdings (CGC AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 8 February.
The inflows to mainland China ETFs continue for another week. There were big inflows to iShares India ETF (INDA US) and Ishares India Small-Cap (SMIN US).

STAR100 Index Rebalance Preview: High Risk/Return Trade Setup

The review period for the March rebalance ended 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
There are 10 stocks in inclusion zone and 11 in deletion zone. There should be 10 changes since that is the cap for the maximum changes at a single rebalance.
The potential adds and deletes are down between 37-47% over the last 6 months and a long/short trade could provide superior risk-adjusted returns.

Index Rebalance & ETF Flow Recap: STAR100, NEXT50, LowVol30, KOSPI200, TW50, NWD, ITC, India Float

There will be a bunch of rebalance announcements towards the start and at the end of the coming week. This includes the HSI, HSCEI, HSTECH, HSCI, HSIII and global indices.
The review period for the March rebalance of the S&P/ASX 200 and related indices ends on 16 February. The announcement of the changes will come couple of weeks later.
There were HUGE inflows to mainland China ETFs for yet another week as Central Huijin indicated that they would continue to buy/create ETFs units.

MVIS Australia A-REITs Index Rebalance Preview: ASK Looks Like a Delete

The review period for the March rebalance ends in a couple of weeks. There could be one deletion from the index and a bunch of capping changes.
The index changes will lead to a one-way turnover of 2.2% resulting in a one-way trade of A$13m. There are two stocks with over A$3m to trade.
With market participants expecting lower interest rates, there has been short covering on a lot of the REITs in the last few months.

Hang Seng Index (HSI) Rebalance: Idling at 82 Members; 100 Members in 2025 at the Earliest

In a surprise, the Hang Seng index committee has decided not to make any constituent changes to the Hang Seng Index (HSI INDEX) at the March rebalance.
We now see the index reaching its 100-member target in 2025 at the earliest, though we would not be surprised to see it spill into 2026 as well.
Free float and capping changes will result in one-way turnover of 1.2% resulting in a round trip trade of HK$4.54bn. HSBC Holdings (5 HK) is the biggest sell.

Snow Peak (7816) – Nikkei Says Bain to Launch ¥50bn MBO

Apparently, MergerMarket had an article out Friday saying once-higher-flying outdoor/sporting goods retailer Snow Peak Inc (7816 JP) was considering going private. The company said(J) late they were considering multiple options.
A Nikkei article (J) Saturday said it was Bain would launch an MBO/Tender Offer as early as this week paying ¥50bn.
This will probably go limit up Monday. I’d expect an announcement post-close Monday. Long-suffering long-only investors who have already sold will be disappointed. Those who were late to sell? Happy.

EQD | HSI Rally: Possible Brief Stop This Week

By Nico Rosti

The Hang Seng Index is rallying as anticipated in a previous insight, but it could stop this week and pullback a bit.
3 possible trades available: go SHORT and hold to profit from a re-start of the downtrend, go SHORT and close after 1 week, wait the pullback and go LONG.
It’s unclear at the moment if the index will go lower or rebound after the upcoming pullback.

[Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming

There has been a recent non-life insurer price-fixing scandal. The JFTC and FSA investigated. Last December, the FSA issued Business Improvement Orders to the four majors.
There was a Bigmotor scandal last summer and Sompo Japan got a Business Improvement Order last month. All four insurers have
9 Feb post-close, Jiji/Nikkei had articles saying the FSA had urged four major non-lifes subject to the first BIO to accelerate sales of ¥6.5trln+ of 5,900 Cross-Holdings. That’s big.

Japan Weekly | Rakuten, Asics, Ebara, Tokyo Electron Chalk up Big Gains

By Mark Chadwick

The Nikkei hasn’t been this high since the Berlin Wall came toppling down. The Nikkei was up over 4% on the week and stands 15% higher YTD.
There were plenty of reasons not to be higher. US stocks closed marginally lower; AI stocks like SMCI crashed on Friday;
Japanese stocks were higher but that hides significant divergence between the winners and losers after a heavy week of earnings releases. Perhaps a pause for breath next week.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Altium, Ansarada, Roland DG, Welbe, Orecorp, Vinda

I tally 53 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals discussed this week on Smartkarma: Altium Ltd (ALU AU), Ansarada Group Ltd (AND AU), Roland DG Corp (6789 JP), and Welbe Inc (6556 JP).
Key updates took place on JSR Corp (4185 JP) and Outsourcing Inc (2427 JP)

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Feb 17

Most Read: Samsonite, Outsourcing Inc, Newmont , Tosoh Corp, Hyundai Motor India , Itoki Corp, ISC Co Ltd, Industrial & Infrastructure Fund Investment, Trend Micro Inc, Korea Stock Exchange Kospi Index and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March
Outsourcing (2427) MBO Situation – Checking, and Thinking, and Noodling, and Speculating
S&P/ASX Index Rebalance Preview: Newmont Still Has Nearly A$1bn to Sell
Japan – Shorts & Positioning on Passive Sells
Initial Thoughts on Hyundai Motor India IPO
Itoki (7972) Mammoth Buyback Coming Imminently After 35% Jump
Sector ETF Rebalancing with Remarkable Price Impact History: ISC In, Wonik IPS Out
Industrial & Infrastructure Investment Corp Placement – Back to the Markets for the 12th Time
Trend Micro (4704) – In-Line Announcement Causes Selloff – Hopium Meets Reason
Emerging Korean Investment Theme: Potential Corporate Defense Mechanisms for Share Cancellations

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March

At 82 index constituents currently, we expect the index committee to progress towards reaching 100 constituents. We are (highly) unlikely to reach the target this calendar year though.
We highlight nine stocks that have a decent chance at being added to the index over the next couple of rebalances. All companies are profitable and meet inclusion requirements.
The market consultation on proposed changes to the Hang Seng Industry Classification System (HSICS) could lead to more inclusions from the Information Technology sector from the June rebalance.

Outsourcing (2427) MBO Situation – Checking, and Thinking, and Noodling, and Speculating

I got a bunch of questions about my Outsourcing comments yesterday in Outsourcing (2427) – Earnings Delay Causes Consternation.
This piece is intended to clarify what I know (still limited), put parameters around what it might be, and draw lines in the sand which I might later erase.
This may be nothing. But it may not be. I will try to answer the questions I received in a kind of Q&A format, and I hope that helps.

S&P/ASX Index Rebalance Preview: Newmont Still Has Nearly A$1bn to Sell

With two days left in the review period, there could be 28 adds/deletes across the S&P/ASX family of indices in March.
There is nearly A$1bn to sell in Newmont (NEM AU) due to the potential S&P/ASX 20 Index deletion and a large decrease in the number of shares held in Australia.
There could be 2-41 days of ADV to buy in the index inclusions while the impact on the deletions will range between 0.7-24 days of ADV.

Japan – Shorts & Positioning on Passive Sells

BayCurrent Consulting, Open House, Sumitomo Chemical, Koei Tecmo Holdings, Kose Corp, Oji Holdings, Daiwa House Reit Investment and Tosoh Corp will have passive selling at the close on 29 February.
Short interest has increased on all these stocks over the last few weeks and there has been big underperformance versus the Nikkei 225 Index and TOPIX Index.
Cumulative excess volume has increased on the stocks and there will be short covering in the last week of the month.

Initial Thoughts on Hyundai Motor India IPO

Hyundai Motor India has been taking initial steps for an IPO. We believe this IPO could be completed sometime in 4Q 2024.
Hyundai Motor India Limited (HMIL) IPO offering size is estimated to be at least US$3 billion, which would be one of the largest in India and the world this year.
If HMIL is valued at US$25 billion and HMC sells a 15% stake, its remaining 85% stake would be worth US$21 billion, representing 55% of HMC’s market cap.

Itoki (7972) Mammoth Buyback Coming Imminently After 35% Jump

Two days ago, Japanese manufacturer of ubiquitous office furniture Itoki Corp (7972 JP) announced salutary earnings/presentation(J) results, new MTMP(E) outlines, new shareholder return policy(J), yutai program(J), div hike(J), and buyback(J).
It was a big day. The stock went limit up on 14 Feb and is +12% today. +25% in two days.
No single holder holds that much BUT the parameters tell you how this gets done. It’s interesting, but it is important to read the fine print below!

Sector ETF Rebalancing with Remarkable Price Impact History: ISC In, Wonik IPS Out

Will there be changes in April’s rebalancing? With two weeks left, two names are likely. Wonik IPS may be replaced by ISC Co Ltd, given a ₩150B market cap difference.
In the previous rebalancing, constituent changes had a notable price impact. Despite a passive flow impact of +1.0x ADTV, HPSP and EO Technics saw about a 15% 3-day return.
Wonik IPS is estimated to receive -4.0x ADTV, while ISC is expected to receive +1.0x ADTV. This is also quite similar to the previous rebalancing.

Industrial & Infrastructure Investment Corp Placement – Back to the Markets for the 12th Time

By Ethan Aw

Industrial & Infrastructure Fund Investment (3249 JP) is looking to raise around US$341m in its primary follow-on offering to acquire 28 properties and an equity interest in a silent partnership.
The deal is a somewhat large one to digest, at 83 days of three month ADV and 16.2% dilution.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Trend Micro (4704) – In-Line Announcement Causes Selloff – Hopium Meets Reason

Last November, Trend Micro Inc (4704 JP) announced a second change to Shareholder Return Policy in 9 months. Activist ValueAct had been pushing. This was their big win.
I discussed, bullishly, in Trend Micro BIG Bonanza But Shareholder AND Balance Sheet Structure Matter. N225 Divs Get a Fillip.
Yesterday, with 2024 earnings, we got the promised special dividend and 2024 buyback, and in-line forecasts. No surprises. But the stock is down hard as yesterday’s hopium met today’s reason.

Emerging Korean Investment Theme: Potential Corporate Defense Mechanisms for Share Cancellations

Local sources confirm government’s focus on strengthening stock market for April election. Market expects aggressive policies for share cancellations, including corporate defense mechanisms.
Chosun Ilbo, a government-friendly and influential media outlet, advocates for corporate defense mechanisms to boost share cancellations, shaping a political atmosphere.
This theme is likely to emerge in Korea’s market. We must consider political dynamics and screen companies with high treasury shares for potential stock boosts.

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Feb 16

Most Read: Thai Beverage, Toei Animation, Altium Ltd, Newmont , Outsourcing Inc, Itoki Corp, Hyundai Motor India , ISC Co Ltd, Tosoh Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Thai Beverage (THBEV SP): Cheaper than Peers with an Upcoming Catalyst
Toei Animation (4816) – Shareholder Selldown To Meet Listing Hurdles – Bigly, Heavy, More to Come
Renesas (6723 JP) To Acquire Altium (ALU AU) In a A$9.1bn Deal
Renesas’ Transformative Offer For Altium
S&P/ASX Index Rebalance Preview: Newmont Still Has Nearly A$1bn to Sell
Outsourcing (2427) MBO Situation – Checking, and Thinking, and Noodling, and Speculating
Itoki (7972) Mammoth Buyback Coming Imminently After 35% Jump
Initial Thoughts on Hyundai Motor India IPO
Sector ETF Rebalancing with Remarkable Price Impact History: ISC In, Wonik IPS Out
Japan – Shorts & Positioning on Passive Sells

Thai Beverage (THBEV SP): Cheaper than Peers with an Upcoming Catalyst

Thai Beverage (THBEV SP) has trended lower over the last couple of years and the stock is trading very close to its lows.
There has been a contraction in multiples and Thai Beverage (THBEV SP) trades cheaper than a lot of its Asia listed peers.
A potential index inclusion could bring in significant passive inflows and result in a rerating of the stock.

Toei Animation (4816) – Shareholder Selldown To Meet Listing Hurdles – Bigly, Heavy, More to Come

In December 2021, when companies were required to file statements with the TSE as to plans to meet continuing listing requirements, Toei Animation (4816 JP) had a Plan.
That plan? Get from a then-current 15.5% Tradable Shares level to 25.0% by 31 March 2025. That was “OK” though later, the TSE asked companies to speed it up.
Today, shareholders Sony and Bandai Namco announced an equity offering to sell down up to 4.48mm shares in a domestic+overseas offering. It’s big, heavy, and there is more to come.

Renesas (6723 JP) To Acquire Altium (ALU AU) In a A$9.1bn Deal

Renesas Electronics (6723 JP) has entered a Scheme Implementation Agreement to acquire Altium Ltd (ALU AU) at A$68.5/share implying an equity value of A$9.1bn and an Enterprise Value of A$8.8bn.
The offer price is a 33.6% premium to the last close and a larger premium to VWAPs ranging from 30 days to 180 days.
There will be ad hoc inclusions to the S&P/ASX 100 Index and the S&P/ASX 200 (AS51 INDEX) on Altium Ltd (ALU AU)‘s last trading day (expected second half of 2024).

Renesas’ Transformative Offer For Altium

Renesas Electronics (6723 JP), a supplier of advanced semiconductors, is offering Altium Ltd (ALU AU) shareholders A$68.50/share, in cash, a lifetime high, by way of a Scheme.
Back in June 2021, Altium rejected a A$38.50/share NBIO, then a A$40/share verbal Offer, from US engineering software giant Autodesk. This was discussed in Altium Ltd (ALU) Rebuffs Autodesk Offer
This is compelling Offer for Altium. For Renesas, this transaction is a paradigm shift away from its core semiconductors manufacturing ops.

S&P/ASX Index Rebalance Preview: Newmont Still Has Nearly A$1bn to Sell

With two days left in the review period, there could be 28 adds/deletes across the S&P/ASX family of indices in March.
There is nearly A$1bn to sell in Newmont (NEM AU) due to the potential S&P/ASX 20 Index deletion and a large decrease in the number of shares held in Australia.
There could be 2-41 days of ADV to buy in the index inclusions while the impact on the deletions will range between 0.7-24 days of ADV.

Outsourcing (2427) MBO Situation – Checking, and Thinking, and Noodling, and Speculating

I got a bunch of questions about my Outsourcing comments yesterday in Outsourcing (2427) – Earnings Delay Causes Consternation.
This piece is intended to clarify what I know (still limited), put parameters around what it might be, and draw lines in the sand which I might later erase.
This may be nothing. But it may not be. I will try to answer the questions I received in a kind of Q&A format, and I hope that helps.

Itoki (7972) Mammoth Buyback Coming Imminently After 35% Jump

Two days ago, Japanese manufacturer of ubiquitous office furniture Itoki Corp (7972 JP) announced salutary earnings/presentation(J) results, new MTMP(E) outlines, new shareholder return policy(J), yutai program(J), div hike(J), and buyback(J).
It was a big day. The stock went limit up on 14 Feb and is +12% today. +25% in two days.
No single holder holds that much BUT the parameters tell you how this gets done. It’s interesting, but it is important to read the fine print below!

Initial Thoughts on Hyundai Motor India IPO

Hyundai Motor India has been taking initial steps for an IPO. We believe this IPO could be completed sometime in 4Q 2024.
Hyundai Motor India Limited (HMIL) IPO offering size is estimated to be at least US$3 billion, which would be one of the largest in India and the world this year.
If HMIL is valued at US$25 billion and HMC sells a 15% stake, its remaining 85% stake would be worth US$21 billion, representing 55% of HMC’s market cap.

Sector ETF Rebalancing with Remarkable Price Impact History: ISC In, Wonik IPS Out

Will there be changes in April’s rebalancing? With two weeks left, two names are likely. Wonik IPS may be replaced by ISC Co Ltd, given a ₩150B market cap difference.
In the previous rebalancing, constituent changes had a notable price impact. Despite a passive flow impact of +1.0x ADTV, HPSP and EO Technics saw about a 15% 3-day return.
Wonik IPS is estimated to receive -4.0x ADTV, while ISC is expected to receive +1.0x ADTV. This is also quite similar to the previous rebalancing.

Japan – Shorts & Positioning on Passive Sells

BayCurrent Consulting, Open House, Sumitomo Chemical, Koei Tecmo Holdings, Kose Corp, Oji Holdings, Daiwa House Reit Investment and Tosoh Corp will have passive selling at the close on 29 February.
Short interest has increased on all these stocks over the last few weeks and there has been big underperformance versus the Nikkei 225 Index and TOPIX Index.
Cumulative excess volume has increased on the stocks and there will be short covering in the last week of the month.

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Feb 15

Most Read: Outsourcing Inc, Toei Animation, JSR Corp, IGO Ltd, I-TAIL , KB Financial and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Outsourcing (2427) – Earnings Delay Causes Consternation
Toei Animation (4816) – Shareholder Selldown To Meet Listing Hurdles – Bigly, Heavy, More to Come
JSR (4185) – Updated Information in SUNY Lawsuit, and Other Developments
MVIS Australia Equal Weight Index Rebalance Preview: Should I Stay or Should IGO?
Toei Animation Placement – Looks Ripe for a Correction
SET50 Index Rebalance Preview: Three Potential Changes in June
Musings On US-Listed China Plays
KB Financial Placement – Momentum Has Been Strong and the Last Clean-Up Sale Has Done Well
Outsourcing (2427 JP): Keep Calm or Worry About the Earnings Delay?
Toei Animation (4816 JP): A US$550 Million Secondary Offering

Outsourcing (2427) – Earnings Delay Causes Consternation

Originally, the MBO for Outsourcing Inc (2427 JP) was expected to get launched end-January 2024. A late-ish filing with regard to the EU’s Foreign Subsidies Regulation regime prompted a delay.
Yesterday Outsourcing announced a delay its earnings release by 3 business days, the delay “procedures related to impairment losses are continuing.”
Outsourcing shares are down hard on this. -1.5% as I write. I examine.

Toei Animation (4816) – Shareholder Selldown To Meet Listing Hurdles – Bigly, Heavy, More to Come

In December 2021, when companies were required to file statements with the TSE as to plans to meet continuing listing requirements, Toei Animation (4816 JP) had a Plan.
That plan? Get from a then-current 15.5% Tradable Shares level to 25.0% by 31 March 2025. That was “OK” though later, the TSE asked companies to speed it up.
Today, shareholders Sony and Bandai Namco announced an equity offering to sell down up to 4.48mm shares in a domestic+overseas offering. It’s big, heavy, and there is more to come.

JSR (4185) – Updated Information in SUNY Lawsuit, and Other Developments

12 days ago, JSR Corp (4185 JP) announced that former research collaboration partner Research Foundation of the State University of New York had sued in an intellectual property ownership dispute.
I wrote about it here to the extent I could. Since then, more information has become available, or available to me. Some details on the case. Some on lawyers.
Since then JSR has reported earnings with unchanged forecast, and major pure play comp Tokyo Ohka Kogyo (4186 JP) today reported earnings; the stock popped 10+% to an all-time high.

MVIS Australia Equal Weight Index Rebalance Preview: Should I Stay or Should IGO?

The review period for the March rebalance of the MVIS Australia Equal Weight Index ends on 29 February with results announced on 8 March and implemented on 15 March.
Lendlease Group (LLC AU), IDP Education (IEL AU) and IGO Ltd (IGO AU) are very close to deletion zone and price moves over the next couple of weeks are important.
IGO Ltd (IGO AU) is also a deletion from a global index in February and a lower stock price could lead to deletion from this index too.

Toei Animation Placement – Looks Ripe for a Correction

By Sumeet Singh

Bandai Namco (7832 JP) and Sony Pictures are looking to raise up to US$525m via selling around 10.66% of Toei Animation (4816 JP) (TA).
The purpose of the placement is to unwind some of the cross-shareholding, as well as help TA to maintain its listing in the Standard Segment.
In this note, we will talk about the placement and run the deal through our ECM framework.

SET50 Index Rebalance Preview: Three Potential Changes in June

Early days, but there could be three changes for the Stock Exchange of Thailand SET 50 Index at the June rebalance. Two names are reversals of the December changes.
Passive trackers will need to buy between 1.5-3.6 days of ADV on the inclusions and sell 1.1-1.4 days of ADV on the deletions.
There are a couple of stocks that are close to passing/failing the liquidity tests and a couple close to cutoff ranks. That could result in further changes to the index.

Musings On US-Listed China Plays

Seeing as though it is Chinese New Year week, I thought it might be appropriate to conduct a brief analysis of US-listed China plays.
According to a recent US-China Economic and Security Review Commission report, 265 Chinese companies were listed on the NYSE, Nasdaq and NYSE American exchanges in January 2024 worth US$848bn.
That’s down from 252 companies worth US$1.03tn a year ago, a 17.5% decline. 91% of the total market capitalization of Chinese firms listed on U.S. exchanges use VIEs.

KB Financial Placement – Momentum Has Been Strong and the Last Clean-Up Sale Has Done Well

By Clarence Chu

The Carlyle Group / (CG US) via Kingsman Investment, is looking to raise US$244m from selling its entire stake in KB Financial (105560 KS).
Carlyle has been invested in the firm since mid-2020, where it then expressed that it would hold on to its stake for at least three and a half years.
The deal would be a small one to digest at just 3.8 days of KB Financial’s three month ADV, representing 1.2% of its current mcap.

Outsourcing (2427 JP): Keep Calm or Worry About the Earnings Delay?

Outsourcing Inc (2427 JP) has delayed the announcement of its 4QFY2023 results from 14 to 19 February as the impairment loss accounting is yet to be completed.
Outsourcing has a history of impairments, resulting in missed forecasts, which suggests a weak 4Q. The concern is that a weak 4Q could force Bain to trim its JPY1,755 offer.
Persol Holdings (2181 JP) guidance cut today suggests a weak 4Q reflects near-term industry weakness rather than company-specific issues. The weak 4Q is a valuable cover to justify the less-than-stellar offer.

Toei Animation (4816 JP): A US$550 Million Secondary Offering

Toei Animation (4816 JP) has announced a secondary offering of up to 4.5 million shares (including overallotment). Bandai Namco Holdings (7832 JP) and Sony Corp (6758 JP) are the sellers.
The offering will allow Toei Animation to maintain its listing in the TSE Standard Market and enable Bandai Namco and Sony to reduce and liquidate cross-shareholdings.
Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will likely fall between 27 February and 4 March (likely 27 February).

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Feb 14

Most Read: Fast Retailing, Socionext, Softbank Group, GMR Airports Infrastructure, Abacus Storage King, GDS Holdings , Top40 Index, IGO Ltd, Ansarada Group Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Fast Retailing
FINAL PREDICTIONS: March 2024 Nikkei 225 Rebal (Socionext, Disco, and 1 Consumer Goods Stock to ADD)
Softbank (9984 JP): Relying on Arm Strength and JPY Weakness
GMR Airports Infra (GMRI IN): Flying High
MVIS Australia A-REITs Index Rebalance Preview: ASK Looks Like a Delete
Quiddity HSTECH Mar 24 Flow Expectations: US$415mn One-Way if the Low-Conviction Change Takes Place
FEB 2024 REBALANCE Index Changes Announced, SA Constituents to Remain the Same
MVIS Australia Equal Weight Index Rebalance Preview: Should I Stay or Should IGO?
IKang Healthcare (KANG US): Another Setback For Dissenters
Ansarada Enters Scheme With Datasite

Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Fast Retailing

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends yesterday. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passive trackers will need to buy between 1.3-19x ADV (7.1-24% of real float) on the inclusions and sell between 3.5-47x ADV on the deletions.
Fast Retailing (9983 JP) avoids capping in March, passives will buy Nitori Holdings (9843 JP), and 25 stocks have over 0.5x ADV to sell as part of the funding trade.

FINAL PREDICTIONS: March 2024 Nikkei 225 Rebal (Socionext, Disco, and 1 Consumer Goods Stock to ADD)

The Nikkei 225 data for the March 2024 rebalance is a wrap. The names are the same as before but there is likely less DISCO Corp (6146 JP) to buy.
It’s still big, but smaller than before because of the difference between performance and the change in PAF required to be below 1%. A 4:1 share split would be optimal.
I recommend a few positioning changes from before, and the Fast Retailing trade loses one short-term option but the longer-term one stays in place.

Softbank (9984 JP): Relying on Arm Strength and JPY Weakness

By Victor Galliano

We believe that Arm is now valued as a “growth at any price” stock; with nearly half of SoftBank group’s equity value reliant on Arm, NAV downside risk is rising
The risk of JPY appreciation is real, whilst SVF2 remains very exposed to financing costs, with 85% of its equity value in private companies
Softbank shares trade at a 55%+ discount to the estimated NAV; yet the downside risks to Arm’s valuation, along with the potential JPY appreciation, should keep the discount wide

GMR Airports Infra (GMRI IN): Flying High

At the last close, GMR Airports Infrastructure (GMRI IN) has a market cap of US$6.23bn and a free float market cap of US$2.48bn.
Passive global trackers are estimated to need to buy 223.33m shares (US$230m; 4.4x ADV) of GMR Airports Infrastructure (GMRI IN) at the close on 29 February.
GQG Partners (GQG AU) has been a big buyer since December and holds 4.98% of the company. The stock could run up for a few more weeks.

MVIS Australia A-REITs Index Rebalance Preview: ASK Looks Like a Delete

The review period for the March rebalance ends in a couple of weeks. There could be one deletion from the index and a bunch of capping changes.
The index changes will lead to a one-way turnover of 2.2% resulting in a one-way trade of A$13m. There are two stocks with over A$3m to trade.
With market participants expecting lower interest rates, there has been short covering on a lot of the REITs in the last few months.

Quiddity HSTECH Mar 24 Flow Expectations: US$415mn One-Way if the Low-Conviction Change Takes Place

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 index changes for HSTECH index for the March 2024 index rebal event will be announced on 16th February 2024.
In this insight, we take a final look at the expected index changes and our latest flow expectations.

FEB 2024 REBALANCE Index Changes Announced, SA Constituents to Remain the Same

By Charlotte van Tiddens, CFA

Indices will be rebalanced at the end of the month on Thursday the 29th of February.
The three largest additions to the World Index measured by full company market capitalization will be Samsara A (USA), Corebridge Financial (USA) and Applovin Corp A (USA)
The three largest additions to the Emerging Markets Index measured by full company market capitalization will be Midea Group Co A (HK-C) (China), Punjab National Bank (India) and Union Bank Of India (India)

MVIS Australia Equal Weight Index Rebalance Preview: Should I Stay or Should IGO?

The review period for the March rebalance of the MVIS Australia Equal Weight Index ends on 29 February with results announced on 8 March and implemented on 15 March.
Lendlease Group (LLC AU), IDP Education (IEL AU) and IGO Ltd (IGO AU) are very close to deletion zone and price moves over the next couple of weeks are important.
IGO Ltd (IGO AU) is also a deletion from a global index in February and a lower stock price could lead to deletion from this index too.

IKang Healthcare (KANG US): Another Setback For Dissenters

In officially decided cases concerning dissentient shareholders in privatised US-listed China plays, the uplift to the merger price versus time value of money and legal costs, is less than ideal.
The outcome for each case will turn on the underlying facts. But it would appear iKang Healthcare Group (ADR) (KANG US) is following a similar trend.
Reportedly the uplift to the iKang merger price is just 10%. Dissenters can still lodge an appeal.

Ansarada Enters Scheme With Datasite

Virtual room provider Ansarada Group Ltd (AND AU) has entered into a Scheme with Datasite, a leading global SaaS provider acquired by UK-based PE outfit CapVest Partners in 2020.
Datasite is offering A$2.50/share, in cash, a 19% premium to undisturbed and a lifetime high.
Apart from requiring Ansarada shareholder approval, the Scheme is conditional on FIRB and the carving out of certain assets to Ansarada’s CEO. This transaction should complete in early June.

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Feb 13

Most Read: SCREEN Holdings, Roland DG Corp, Infosys Ltd, YTL Corp, Samsung C&T, Hyundai Motor , Softbank Group, China Mobile, Recruit Holdings, GDS Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Screen Holdings (7735 JP): Positioning & Potential Passive Buying
Roland DG (6789) – Tender Offer by Taiyo Partners – Nice Premium But Too Cheap
Index Rebalance & ETF Flow Recap: STAR100, NEXT50, LowVol30, KOSPI200, TW50, NWD, ITC, India Float
Southeast Asia EM: Potential Passive Flows in February
Korea: Surging Share Cancellations in 2024
Exploring Prioritized Buyback/Cancellation of Samsung Electronics & Hyundai Motor Prefs
Softbank (9984 JP): Relying on Arm Strength and JPY Weakness
A/H Premium Tracker (To 9 Feb 2024): Liquid AH Premia Near Multi-Yr Wides, Narrow AH Premia Wider
Recruit: HR Tech Top Line Further Declines; No Big Impact From Indeed Plus in the Near Term
Quiddity HSTECH Mar 24 Flow Expectations: US$415mn One-Way if the Low-Conviction Change Takes Place

Screen Holdings (7735 JP): Positioning & Potential Passive Buying

SCREEN Holdings (7735 JP) could be added to a global index at the end of the month and there will be a lot of buying in the stock.
There is a fair bit of positioning for the potential passive buying and there will be supply in the stock.
However, the stock trades cheaper than its peers and a correction could provide an opportunity for long-term investors to enter the stock.

Roland DG (6789) – Tender Offer by Taiyo Partners – Nice Premium But Too Cheap

Taiyo Pacific Partners took the original parent company (Roland Corp (7944 JP) of Roland DG Corp (6789 JP) private in 2014. It was re-listed in 2020.
Roland DG is one of the world’s leading large format digital printer manufacturers. They also make some interesting medical devices and systemic tools, and 3D milling/printing/engraving/photo impact machines.
This TOB is at a 30.1% premium. Almost a 10yr high. But it is not expensive. And even if TPP has 20%, there is a LOT of float left over.

Index Rebalance & ETF Flow Recap: STAR100, NEXT50, LowVol30, KOSPI200, TW50, NWD, ITC, India Float

There will be a bunch of rebalance announcements towards the start and at the end of the coming week. This includes the HSI, HSCEI, HSTECH, HSCI, HSIII and global indices.
The review period for the March rebalance of the S&P/ASX 200 and related indices ends on 16 February. The announcement of the changes will come couple of weeks later.
There were HUGE inflows to mainland China ETFs for yet another week as Central Huijin indicated that they would continue to buy/create ETFs units.

Southeast Asia EM: Potential Passive Flows in February

There could be large passive flows for stocks in Malaysia and Thailand in the next few weeks. Impact is especially high where there could be passive outflows.
YTL Corp (YTL MK) and YTL Power International (YTLP MK) are likely to have passive inflows.
Dialog Group (DLG MK), Berli Jucker (BJC TB), Osotspa Public Company Limited (OSP TB) and Banpu Public (BANPU TB) could have outflows.

Korea: Surging Share Cancellations in 2024

We discuss the surging share cancellations in Korea in 2024. As of 8 February 2024, Korean companies have announced 3.3 trillion won worth of shares to be completed this year.
At current blistering pace, it is likely that the share cancellations in Korea could jump at least 100% YoY to jump more than 10 trillion won in 2024.
Some of the leading Korean companies including Samsung C&T and KT&G that have announced share cancellations this year continue to outperform the market on average.

Exploring Prioritized Buyback/Cancellation of Samsung Electronics & Hyundai Motor Prefs

Samsung Elec & Hyundai Motor’s high proportion of preferred stocks leads to their unusually high cost of capital, making themselves prime targets for the govt’s Corporate Value Up policy.
Policy likely focuses on aggressive share buybacks, especially preferred stock repurchase, to improve PBR. Pension funds may invest heavily in ETFs, offsetting dilution effects.
Hyundai Motor may pursue more aggressive shareholder returns due to the India listing, possibly prioritizing preferred share repurchases as it introduces risks of value transfer controversies within Korea.

Softbank (9984 JP): Relying on Arm Strength and JPY Weakness

By Victor Galliano

We believe that Arm is now valued as a “growth at any price” stock; with nearly half of SoftBank group’s equity value reliant on Arm, NAV downside risk is rising
The risk of JPY appreciation is real, whilst SVF2 remains very exposed to financing costs, with 85% of its equity value in private companies
Softbank shares trade at a 55%+ discount to the estimated NAV; yet the downside risks to Arm’s valuation, along with the potential JPY appreciation, should keep the discount wide

A/H Premium Tracker (To 9 Feb 2024): Liquid AH Premia Near Multi-Yr Wides, Narrow AH Premia Wider