Most Read

• MOG Holdings (1942 HK) has been skyrocketing in price since the start of the year. Remarkably, there is little change in the number of shares that trade daily.
• MOG Holdings (1942 HK) has a market cap of US$6.44bn and trades at a modest Price/Sales ratio of 75x and an equally modest Price to Book Value of 89.5x.
• Liquidity has improved to the point where the stock could be added to some indices. However, there is a precedent of stocks not being added following market participant feedback.

• The JIP Tender Offer for Toshiba Corp (6502 JP) closes today. I expect that we will see results announced as early as late tonight, but by law, by latest tomorrow.
• There will be at least three major index downweights, and possibly deletions, most likely in the following five trading days.
• This shows the approximate maximum share and dollar amounts to be sold, and approximate dates. 

• Back in February, Newmont Proposes Taking Newcrest Back Into The Fold. Newmont bumped, there was due dili, then Newcrest Backs Newmont’s US$19bn Offer in May.
• More recently, we have Newcrest: Shareholder Vote On 13th Oct, with a prescribed schedule. That makes things fun. 
• There will be considerable movement of shares, and that will mean opportunity. Both up and down. I see US$3bn to buy, then A$1.5bn or more to sell a bit later.

• Kokusai Electric (6525 JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 25 October.
• At the reported indicative IPO price of JPY 1890/share, Kokusai Electric (6525 JP) will be valued at JPY 435bn (US$2.94bn).
• The stock should be added to the TPX INDEX at the close on 29 November where trackers will need to buy over 14% of the stock issued in the IPO.

• Nippon Active Value Fund PLC (NAVF LN)’s jointly-held shareholding in Intage Holdings (4326 JP) has declined from 11.28% to 9.52% of outstanding shares (disclosed on 20 September).
• NAVF wants to take as much money off the table as possible as NTT (Nippon Telegraph & Telephone) (9432 JP)’s partial offer price represents an all-time high.
• Our revised minimum proration is 53.31%. NAVF’s action suggests that the minimum acceptance condition, which requires a 20% minority acceptance rate, should be satisfied.

• Midea Group Co Ltd A (000333 CH), one of the world’s largest home appliance producers, aims to raise up to  US$5bn in its H-share listing.
• Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

• In addition to full market cap and trading value, float-adjusted market cap will be added as a quantitative screening tool. 
• Regarding extreme price increases, KRX plans to utilize the deviation between the average daily market capitalizations for two, three, and six months leading up to the screening base date.
• We should consider designing trading setups that target stocks with relatively low free-float rates and high price volatility in recent months.

• Our NAV analysis of LG Corp suggests an implied market cap of 16.9 trillion won or 107,217 won per share which is 28.4% higher than current share price. 
• We believe that LG Corp could announce another share buybacks representing 2-3% of outstanding shares in the next 6-12 months. 
• Another reason that could result in LG Corp’s shares outperforming other major LG related shares is due to the value investors increasing capital allocation to higher dividend paying LG Corp.

• On the 18 September, Costa Group Holdings (CGC AU) announced A$3.20/share best and final Offer from Paine Schwartz Partners (PSP) down from the A$3.50/share NBIO in July.
• Costa’s shares wobbled – would they, won’t they be supportive? A break price beyond the undisturbed price loomed. Vanguard kicked out a chunk of shares below A$3.
• This morning Costa and PSP entered into a Scheme Implementation Deed. The transaction is expected to close in 1Q24. Key conditions are Costa’s shareholder vote and FIRB/SAMR/EU approval. 

• Costa Group Holdings (CGC AU) has entered a scheme implementation deed with Paine Schwartz Partners (PSP) led consortium at A$3.20 per share. 
• The key conditions are regulatory and shareholder approval. China SAMR regulatory approval poses a risk, primarily related to timing. Costa anticipates completion in 1Q24.
• The headcount test related to the retail vote remains a risk. The risk/reward is unfavourable as the deal break downside (10%+) outweighs the offer’s upside (3.6% at last close).  

• The JIP Tender Offer for Toshiba Corp (6502 JP) closes today. I expect that we will see results announced as early as late tonight, but by law, by latest tomorrow.
• There will be at least three major index downweights, and possibly deletions, most likely in the following five trading days.
• This shows the approximate maximum share and dollar amounts to be sold, and approximate dates. 

• Back in February, Newmont Proposes Taking Newcrest Back Into The Fold. Newmont bumped, there was due dili, then Newcrest Backs Newmont’s US$19bn Offer in May.
• More recently, we have Newcrest: Shareholder Vote On 13th Oct, with a prescribed schedule. That makes things fun. 
• There will be considerable movement of shares, and that will mean opportunity. Both up and down. I see US$3bn to buy, then A$1.5bn or more to sell a bit later.

• Metro Pacific Investments Co (MPI PM) has announced that the public float of the stock will drop to 2.78% following the Tender Offer.
• Metro Pacific Investments Co (MPI PM) shares are expected to be suspended from 26 September. That could see Bloomberry Resorts (BLOOM PM) added to the PCOMP INDEX on 25 September.
• There will be large passive inflows to Bloomberry Resorts (BLOOM PM) as well as flows from active managers that track the PCOMP INDEX.

• Kokusai Electric (6525 JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 25 October.
• At the reported indicative IPO price of JPY 1890/share, Kokusai Electric (6525 JP) will be valued at JPY 435bn (US$2.94bn).
• The stock should be added to the TPX INDEX at the close on 29 November where trackers will need to buy over 14% of the stock issued in the IPO.

• In this insight, we provide an updated valuation analysis of SK Square (402340 KS) amid a potential sale of 11st to Alibaba (ADR) (BABA US).
• Our NAV analysis of SK Square suggests NAV of 9.2 trillion won or NAV per share of 65,069 won, representing a 55% upside from current levels.
• If SK Square is able to sell its stake in 11st to Alibaba, the capital inflow from the sale could be used to raise dividends and complete more share buybacks. 

• Midea Group Co Ltd A (000333 CH), one of the world’s largest home appliance producers, aims to raise up to  US$5bn in its H-share listing.
• Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
• In this note, we look at its past performance and other deal dynamics that might impact the listing.

• Nippon Active Value Fund PLC (NAVF LN)’s jointly-held shareholding in Intage Holdings (4326 JP) has declined from 11.28% to 9.52% of outstanding shares (disclosed on 20 September).
• NAVF wants to take as much money off the table as possible as NTT (Nippon Telegraph & Telephone) (9432 JP)’s partial offer price represents an all-time high.
• Our revised minimum proration is 53.31%. NAVF’s action suggests that the minimum acceptance condition, which requires a 20% minority acceptance rate, should be satisfied.

• We need to focus on the top 2 candidates among the Mid→Large candidates in the screening table mentioned above and the bottom 4 candidates among the Large→Mid candidates.
• Since they are relatively far from the borderline, there is a significant likelihood that their classification will change. So, flow trading timing on these candidates could be brought forward.
• Monitoring Doosan Robotics’s market cap potentially nearing ₩3T and keeping an eye on the listing date of Ecopro Materials, we should make changes to the Mid→Large candidates from early December.

• Our NAV analysis of LG Corp suggests an implied market cap of 16.9 trillion won or 107,217 won per share which is 28.4% higher than current share price. 
• We believe that LG Corp could announce another share buybacks representing 2-3% of outstanding shares in the next 6-12 months. 
• Another reason that could result in LG Corp’s shares outperforming other major LG related shares is due to the value investors increasing capital allocation to higher dividend paying LG Corp.

• In addition to full market cap and trading value, float-adjusted market cap will be added as a quantitative screening tool. 
• Regarding extreme price increases, KRX plans to utilize the deviation between the average daily market capitalizations for two, three, and six months leading up to the screening base date.
• We should consider designing trading setups that target stocks with relatively low free-float rates and high price volatility in recent months.

• The JIP Tender Offer for Toshiba Corp (6502 JP) closes today. I expect that we will see results announced as early as late tonight, but by law, by latest tomorrow.
• There will be at least three major index downweights, and possibly deletions, most likely in the following five trading days.
• This shows the approximate maximum share and dollar amounts to be sold, and approximate dates. 

• The move from 80 index constituents to 100 could take most of next year (and possibly even the year after that) to manage turnover and add profitable companies.
• Foreign companies will be eligible for inclusion in the index from the December rebalance. That makes Samsonite (1910 HK) a high probability inclusion candidate.
• We highlight 8 potential inclusions to the index with passive trading impact varying from 1.6-4.3 days of ADV. There are large shorts on some of the stocks.

• In August, Itochu Corp (8001 JP) launched a Tender offer on Itochu Techno Solutions (4739 JP) to buy out minorities. 
• That tender offer ended last week, with Itochu and the acquirer vehicle owning 85+%. 
• Interestingly, there are near-term flow events as a result. Worth watching.

• Metro Pacific Investments Co (MPI PM) has announced that the public float of the stock will drop to 2.78% following the Tender Offer.
• Metro Pacific Investments Co (MPI PM) shares are expected to be suspended from 26 September. That could see Bloomberry Resorts (BLOOM PM) added to the PCOMP INDEX on 25 September.
• There will be large passive inflows to Bloomberry Resorts (BLOOM PM) as well as flows from active managers that track the PCOMP INDEX.

• Tata Motors DVR (TTMT/A IN) now trades at a 32.9% discount to Tata Motors Ltd (TTMT IN) and there is another 4.4% in the trade following the scheme of arrangement.
• Tata Motors DVR (TTMT/A IN) could be added to global indices in November and that will bring significant inflows to the stock.
• The pre-positioning and passive buying could lead to the DVR discount narrowing further and provide trading opportunities for the next few weeks.

• Back in February, Newmont Proposes Taking Newcrest Back Into The Fold. Newmont bumped, there was due dili, then Newcrest Backs Newmont’s US$19bn Offer in May.
• More recently, we have Newcrest: Shareholder Vote On 13th Oct, with a prescribed schedule. That makes things fun. 
• There will be considerable movement of shares, and that will mean opportunity. Both up and down. I see US$3bn to buy, then A$1.5bn or more to sell a bit later.

• Today, regenerative medicine service provider CellSource (4880 JP) announced a forecast revision lower for the year ending 31 October. It also announced a new dividend policy and dividend payout.
• It also announced an equity offering of up to 3.542mm shares, increasing float by 60% followed by a move from the TSE Growth segment to TSE Prime. 
• The dynamics of shareholder structure and flow mean one can wait this one out.

• Through all the upheavals in discretionary product distribution in the last decade, Itochu Corp (8001 JP)’s Itochu Textile subsidiary has managed to maintain huge power in the channel.
• While the trading firm has traditionally focused on premium fashion brands, in the last few years it has invested heavily in the sports market, including its growing investment in Descente.
• The move is part of wider plans to take lead share in sports, footwear and department store brands.

• The recent share price pullback sees PTT PCL (PTT TB) trading below its long-term averages, and with respect to peers. 
• Preceding my comments on PTT are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Early on Monday morning, Naspers and Prosus announced the immediate resignation of CEO Bob van Dijk. Management hosted an investor call shortly after. Key takeaways are included below.
• Ervin Tu, Group Chief Investment Officer, will take over as Interim CEO. Tu is a strong candidate for the permanent position.
• After an initial bounce at the open, both counters sold off, widening the discounts by more than 1 percentage point intra-day.

• Midea Group Co Ltd A (000333 CH) could raise between HK$35-54bn (US$4.5-6.9bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
• The H-shares could get Fast Entry to some global indices depending on the number of shares that are allotted to cornerstone and/or strategic investors.
• The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.

• There have only been 7 new listings on the HKEX (388 HK) in the third quarter of the year so far.
• Of those stocks, only Keep Inc (3650 HK) has a chance of being added to the Hang Seng Composite Index in December and then into Southbound Stock Connect.
• Keep Inc (3650 HK) is the largest online fitness platform in China and the name recognition could bring in substantial flows via Southbound Stock Connect.

• Privatisations could lead to two/three S&P/ASX 200 (AS51 INDEX) constituents being delisted in October/November and that means ad hoc inclusions to maintain the number of constituents at 200.
• Then there could be one change for the S&P/ASX 20 Index and two changes for the S&P/ASX 200 (AS51 INDEX) at the regular rebalance in December.
• The impact on the potential adds/deletes for the S&P/ASX 200 (AS51 INDEX) is high at between 7.5-23 days of ADV to trade from passive trackers.

• The proposal to increase NPS’s annual target investment return rate by 1%p by 2028. A rough mathematical estimate suggests the necessity of an additional investment of nearly ₩60T until 2028.
• It augments the overall investment volume in local stocks to ₩200T. This projection implies an annual net purchase of approximately ₩12T from the forthcoming year through 2028.
• Consequently, this matter is currently among the most captivating topics in the Korean local market, and efforts are underway to identify the sectors and stocks that stand to benefit.

• Bob van Dijk, CEO of both Naspers (NPN SJ) and Prosus NV (PRX NA), has stepped down, effective 18 September. 
• Van Dijk was instrumental in the 2019 listing of Prosus and the creation (and subsequent unwinding) of the highly-criticised Prosus/Naspers cross-holding structure. 
• His departure should have minimal impact. Everything else basically stays the same. Continue to be long Prosus vs. NAV – that is, Prosus vs. Tencent (700 HK).

• The move from 80 index constituents to 100 could take most of next year (and possibly even the year after that) to manage turnover and add profitable companies.
• Foreign companies will be eligible for inclusion in the index from the December rebalance. That makes Samsonite (1910 HK) a high probability inclusion candidate.
• We highlight 8 potential inclusions to the index with passive trading impact varying from 1.6-4.3 days of ADV. There are large shorts on some of the stocks.

• Doosan Robotics (454910 KS) reported excellent IPO book building results. The IPO price has been finalized at 26,000 won (upper end of the IPO price range). 
• A total of 1,920 institutional investors participated in the IPO demand forecast survey and the demand ratio was 272 to 1. 
• The trading strategy on the first day of IPO is to take some profits (25%-50% of total) if the share price shoots much higher than the IPO price by 70-100%+.

• Integral Corporation (5842 JP) raised around US$123m in its Japan IPO.
• Integral is a private equity management company advising funds that invest in both listed and unlisted companies in Japan, with a focus on mid-sized companies.
• In our previous notes, we looked at the company’s past performance and valuation. In this note, we talk about the trading dynamics.

• Seibu Giken (6223 JP) (SG) is looking to raise around US$93m in its Japan IPO via selling a mix of primary and secondary shares.
• SG sells desiccant dehumidifiers and VOC concentrators in over fifty countries globally. Its two main products accounted for over 90% of its revenue in 2022.
• In our previous note, we looked at the company’s past performance. In this note, we talk about valuations.

• Tata Motors DVR (TTMT/A IN) now trades at a 32.9% discount to Tata Motors Ltd (TTMT IN) and there is another 4.4% in the trade following the scheme of arrangement.
• Tata Motors DVR (TTMT/A IN) could be added to global indices in November and that will bring significant inflows to the stock.
• The pre-positioning and passive buying could lead to the DVR discount narrowing further and provide trading opportunities for the next few weeks.

• Four years after Itochu got to 40.0% of votes in Descente (8114) in a hostile Tender Offer, Descente partner ANTA, which supported Itochu at the time started selling its stake.
• A few months later, Itochu started buying shares of Descente in the market. As of 7 Sep, Itochu had bought Descente shares 81 days straight (9.7% of ADV).
• This begs the question: Is Itochu ensuring they maintain voting control as ANTA sells? Or are they buying to lift their stake prior to another bid?

• Improved liquidity and a higher stock price could see passive trackers buying Wharf Holdings (4 HK) within the next couple of months.
• Wharf Holdings (4 HK) trades cheaper than the average and median of its peers on EV/Sales, EV/EBITDA and price to book value.
• Wharf Holdings (4 HK) has already started to move higher and there could be a bigger move in the stock over the next month.

• The Brand-Spanking New (6 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
• We used to do it and decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 41 Trade Recommendations.
• The last five weeks (since the instantiation of the new Monitor and Portfolio 6 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%.

• Foreign room in SK Telecom (017670 KS) increased above 15% in July and is currently just above 16%. Foreign investors have resumed buying again and foreign room is moving lower.
• Foreign room staying above 15% for another month could result in passive buying at the end of November. SK Telecom (017670 KS) has outperformed peers over the last few weeks.
• Foreign buying over the next month could lead to foreign room dropping below 15% in which case there will be no passive inflows. But the stock could be higher.

• Back on the 23 June, SOE-backed Poly Group tabled an HK$8.88 bid per Poly Culture Group (3636 HK) H Share and RMB8.17386240 per Domestic Share. Terms were declared final.
• This Merger by Absorption Offer incorporates a Scheme-like vote. There is no tendering condition. The premium to last close is 77.6%; and a 112.5% premium to the five-day closing average.
• The Composite Doc is out. Independent H-shareholders get to vote on the transaction on the 3rd of November. Payment is expected on or before the 23 November. I’d get involved. 

• The Poly Culture Group Corp H (3636 HK) H Shareholders’ class meeting is scheduled for 3 November. The IFA considers the HK$8.88 per H share offer fair and reasonable.
• The key condition is approval by at least 75% independent H Shareholders (<10% of all independent H Shareholders rejection). No independent H Shareholder holds a blocking stake.
• The offer’s 77.6% premium to the undisturbed price and shareholder structure helps the vote. At the current price and for the 23 November payment, the gross/annualised spread is 3.3%/19.2%.

• Specialty prescription drug manufacturer Lansen Pharmaceutical Holdings Co, Ltd. (503 HK) has been a perennial takeover target. And now we have an Offer.
• Wu Zhen Tao, NED and Chairman of Lansen, has made an Offer for shares not indirectly held, of HK$1.80/share, by way of a Scheme, a 26.76% premium to last close.   
• This looks done. Get involved if small-cap illiquid arbs are your thing. 

• Back on the 4 July, Paine Schwartz Partners (PSP) made an A$3.50/share NBIO for Costa Group (CGC AU) by way of a Scheme.  PSP held 14.84% at the time.
• The due diligence period came and went, or so it appeared, but Costa said it remained ongoing.  Rumours circulated that PSP had gone cold. 1H23 results were also delayed. 
• Costa has now announced this morning that PSP has returned with a $3.20/share Offer – best and final – reduced for any permitted dividend of up to A$0.04, if declared. 

• As of last Friday, SKT has utilized 86.2 billion won out of the allotted 300 billion won for share buybacks, resulting in the acquisition of 1,810,242 shares.
• If there are indications of the foreign room potentially falling to a risky level, SKT will likely proceed with an aggressive buyback, targeting 20-30% of the daily trading volume.
• Another particularly intriguing observation is the absence of local retail flow directed towards SKT. This indicates there is still potential momentum for an upward price movement at this juncture.

• There have only been 7 new listings on the HKEX (388 HK) in the third quarter of the year so far.
• Of those stocks, only Keep Inc (3650 HK) has a chance of being added to the Hang Seng Composite Index in December and then into Southbound Stock Connect.
• Keep Inc (3650 HK) is the largest online fitness platform in China and the name recognition could bring in substantial flows via Southbound Stock Connect.

• Maeil Business Daily reported that Alibaba Group Holding (9988 HK) is considering on acquiring a controlling stake in 11st, which is a leading e-commerce platform owned by SK Square
• In 2018, 11st was valued at 2.7 trillion won by financial investors. However, the current valuation of 11st is estimated to have declined to about 1 trillion won (US$760 million).
• We estimate that the probability of Alibaba acquiring 11st is about 60-70%. 

• Four years after Itochu got to 40.0% of votes in Descente (8114) in a hostile Tender Offer, Descente partner ANTA, which supported Itochu at the time started selling its stake.
• A few months later, Itochu started buying shares of Descente in the market. As of 7 Sep, Itochu had bought Descente shares 81 days straight (9.7% of ADV).
• This begs the question: Is Itochu ensuring they maintain voting control as ANTA sells? Or are they buying to lift their stake prior to another bid?

• The Brand-Spanking New (6 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
• We used to do it and decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 41 Trade Recommendations.
• The last five weeks (since the instantiation of the new Monitor and Portfolio 6 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%.

• It was a busy Friday with a bunch of indices rebalancing at the close and big volumes trading on a lot of stocks.
• Brilliance China Automotive (1114 HK) had a good week with the stock rallying on Thursday and Friday on huge volumes amid expectations of upcoming passive buying.
• A quiet week for ETFs with mainland China ETFs seeing some outflows after the huge inflows over the last couple of months.

• Foreign room in SK Telecom (017670 KS) increased above 15% in July and is currently just above 16%. Foreign investors have resumed buying again and foreign room is moving lower.
• Foreign room staying above 15% for another month could result in passive buying at the end of November. SK Telecom (017670 KS) has outperformed peers over the last few weeks.
• Foreign buying over the next month could lead to foreign room dropping below 15% in which case there will be no passive inflows. But the stock could be higher.

• Improved liquidity and a higher stock price could see passive trackers buying Wharf Holdings (4 HK) within the next couple of months.
• Wharf Holdings (4 HK) trades cheaper than the average and median of its peers on EV/Sales, EV/EBITDA and price to book value.
• Wharf Holdings (4 HK) has already started to move higher and there could be a bigger move in the stock over the next month.

• The Japan Post Holdings (6178 JP)/ Japan Post Bank (7182 JP) ratio looks more attractive as JPB climbs with other banks as the possibility of Offering-induced retail overhang increases. 
• The ACCC has until 28 September 2023 to make its decision on Origin Energy (ORG AU). Expect ACCC to be supportive – they haven’t built a strong “against” case.
• There should be more for the Kenedix REIT complex on a fundamental basis, a future equity capital raise accretion basis, and because of significant net buying for index purposes.

• 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 – 111 Inc (YI US), Eoflow (294090 KS), Symbio Holdings (SYM AU), Costa Group Holdings (CGC AU), Orecorp Ltd (ORR AU), Mason Group Holdings (273 HK), JSR.
• Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Pacific Current (PAC AU), Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP). 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• In the IPO space, ARM’s IPO seems to have set the ball rolling for the traditionally busy year end across the region.
• In the placement space, finally a Hong Kong placement mangaed to hold up, even as a large Aussie one gave way.

• There could be two changes for the SET50 INDEX with JMT Network Services (JMT TB) and I-TAIL (ITC TB) replacing Srisawad Power (SAWAD TB) and Ngern Tid Lor (TIDLOR TB). 
• With no further inclusions on the Market Surveillance Measure list, Delta Electronics Thai (DELTA TB) should be safe at the December rebalance.
• There are a couple of stocks that are close to passing/failing the liquidity tests and that could result in further changes to the index.

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Providers, Pranav Bhavsar and Nitin Mangal. They will be sharing with us their Top Stock Picks in India. From trends, current opportunities, and insights on their picks, join us as we get the full picture from Pranav and Nitin.

The webinar will be hosted on Wednesday, 12 July 2023, 17:00 SGT/HKT.

Pranav Bhavsar is the Founder of ASA Capital Management, focusing on research on consumer themes and companies operating in India or global companies that have significant exposure to India or the Indian economy.

Nitin Mangal is a SEBI registered Research Analyst with more than 10 years of experience in Indian equities. He is Pioneer of Corporate Governance and Accounting Research in Indian Market and has successfully developed a product for Institutional Investors named as “Analysis Beyond Consensus” during his association with Edelweiss Securities Ltd, Mumbai. 

• Over 85% of the way through the review period for the December rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 9.4% at the December rebalance resulting in a one-way trade of CNY 7.22bn.
• With the market being stabilised through the ETF route, the index constituents have outperformed the non-index constituents over the last 6-7 weeks. That could reverse over the near term.

• With no stocks in inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December.
• Capping changes will result in a one-way turnover of a touch below 1% and that will result in a round-trip trade of US$255m.
• The impact on the stocks is relatively small for now but that could increase till the end of November when the stocks will be capped.

• Value Added Technologies (043150 KS) will replace Lutronic Corp (085370 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 14 September.
• Passive trackers will need to buy over 1.5x ADV on Value Added Technologies (043150 KS). The impact is higher on Lutronic Corp (085370 KS) but the arbs will provide liquidity.
• Value Added Technologies (043150 KS) appears to trade cheaper than its peers on all valuation parameters and there could be a re-rating following the index inclusion.

• The changes at the Nikkei 225 September rebalance were announced on 4 September. The rebalance of the HSI, HSCEI, HSTECH and HSCI was implemented on the same day.
• The changes to the MVIS indices were announced on 8 September and will be implemented at the close on 15 September. The S&P/ASX family will also rebalance on 15 September.
• After a month and a half of big inflows to onshore China ETFs, there were small outflows from a lot of ETFs during the week.

• The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of over US$1bn.
• We currently forecast one potential change at the next rebalance in December. There is another set of changes that could also take place.
• There has been a big increase in short interest on a couple of stocks while the rise has been more gradual on the other stocks.

• Zhongsheng Group (881 HK) is a potential deletion in December and that could result in China Unicom Hong Kong (762 HK) being added to the index.
• Estimated one-way turnover at the rebalance is 1.36% resulting in a one-way trade of HK$845m. Passives will need to trade over 1x ADV on both stocks.
• There is a very small impact on the fair value of the HSCEI 2023 dividend futures but there will be a larger impact on the dividend futures expiring in 2024.

• The review period for the December rebalance ends 31 October. We expect the changes to be announced 24 November with the implementation taking place after the close on 8 December.
• We expect the index committee to continue using a 6-month minimum listing history resulting in one change to the index.
• One way turnover is estimated at 1.6% resulting in a one-way trade of CNY 2,259m. The impact on the deletion will be much larger than that on the inclusion.

• Nine months ago I first wrote on Anycolor (5032 JP). I thought the guidance growth pattern and valuations remarkable. Results handily beat guidance. Now we’re in Year 2 of guidance.
• After the first full year listed, FY2024 guidance was for +30% in revenue to ¥33bn, and +35% growth in OP. For Q1, reported yesterday, actual results were +51% and +91%.
• The stock is popping this AM, but it is still cheap vs growth rates and margins. There are, notably, still “context issues” here. They merit some consideration (and investigation).

• We think by adopting the new strategy to unbind vehicle sales with battery swapping, NIO could broaden its customer base to non-Yangtze-Delta regions and regain price competitiveness.
• We upgrade to BUY and raise TP to US$ 10.5, due to 1) recovered growth outlook brought by widened customer base, more competitive pricing and intact model cycle
• And 2) smaller-than-feared margin pressure. Our TP implies 2x PS. 

• Brilliance China Automotive (1114 HK) was deleted from local and global indices following its prolonged trading suspension from April 2021 to September 2022.
• Following the resumption of trading, Brilliance China Automotive (1114 HK) was added to the HSCI in March and subsequently to Southbound Stock Connect.
• The stock should be bought by global passive trackers over the next few months and there should be substantial passive inflows.

• Now that the September 2023 Nikkei 225 Rebal is announced, we look at the March 2024 rebal and its possibilities. 
• Socionext (6526 JP) is the only automatic ADD, but it might not be. ZOZO Inc (3092 JP) and Ryohin Keikaku (7453 JP) would be sector balance ADDs.
• Fast Retailing (9983 JP) could get capped if it outperforms Nikkei 225 by ~10%+ to 31Jan2024. And Nitori Holdings (9843 JP) will see an add of ~14 days of ADV.

• The Brand-Spanking New (three weeks old) A-H Monitor has tables, charts, measures galore.
• New stimulus measures appear to be triggering FOMO on real estate stocks, but a foreshortened week, yet again, makes one wonder. There IS money being applied though.
• I expect more measures and more buying. I am not sure I would want to be short any Hs with a deep discount to the A the next few months.

• Toyota Group autoparts maker Aisin Seiki (7259 JP) today announced a new Medium-Term Plan. They plan to shift their business away from “entrusted” business, towards BEV, Brakes, and “Safe/Comfort Entry”
• They aim to grow revenues 25% from 2021 to 2025 and an additional 10-20% by 2030. 
• They also aim to improve investment and capital efficiency, and that’s where we can look at the interesting possibilities.

• In mid-June, three months ago yesterday, Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) announced a three-way merger for Nov1.
• All three popped in price, and peaked three weeks later, both outright and vs Peers. Then it fell sharply back. 
• It is worth looking at the new Combined “KDX” entity on a pro-forma basis. There should be more to go.

• Maeil Business Daily reported that Alibaba Group Holding (9988 HK) is considering on acquiring a controlling stake in 11st, which is a leading e-commerce platform owned by SK Square
• In 2018, 11st was valued at 2.7 trillion won by financial investors. However, the current valuation of 11st is estimated to have declined to about 1 trillion won (US$760 million).
• We estimate that the probability of Alibaba acquiring 11st is about 60-70%. 

• Considering the progress of the legislative process at this juncture, the effective date could be as early as the end of this year or, at the latest, early next year.
• Ilooda (164060 KS) will likely become the first case. A tender offer at ₩11,000 (a 30% premium to the current price) per share for 14%+1 share may greet us.
• There is sufficient value in monitoring the interaction between the offer structure and stock price movement in the context of the first application of a mandatory tender offer in Korea.

• Back on the 13 July, IMAX China Holding (1970 HK) announced a take-private transaction from its parent IMAX Corp (IMAX US) at HK$10/share. Terms have been declared final.
• The price is a 9.65% premium to last close but a 39.47% premium over the closing price on the last full trading day, suggesting apparent news leakage.
• The Scheme Doc is out and independent shareholders get to vote on the transaction on the 10th October. This vote could – should – be close. Only for the brave.

• Tuhu Car (2007986D HK), a leading integrated online and offline platform for automotive service in China, has launched its HKEx IPO at a price range of HK$28.00-31.00 per share.
• In TUHU Car IPO: The Investment Case, we highlighted the key elements of the investment case. In this note, we present our forecasts and discuss valuation.
• Our valuation analysis suggests that Tuhu is reasonably priced at the IPO price range. We would participate in the IPO. 

• Nine months ago I first wrote on Anycolor (5032 JP). I thought the guidance growth pattern and valuations remarkable. Results handily beat guidance. Now we’re in Year 2 of guidance.
• After the first full year listed, FY2024 guidance was for +30% in revenue to ¥33bn, and +35% growth in OP. For Q1, reported yesterday, actual results were +51% and +91%.
• The stock is popping this AM, but it is still cheap vs growth rates and margins. There are, notably, still “context issues” here. They merit some consideration (and investigation).

• Today, somewhat earlier than expected), the Nikkei Index Team announced the changes to the Nikkei 225.
• Lasertec Corp (6920 JP), Mercari (4385 JP), and Nitori Holdings (9843 JP) are added. Nippon Sheet Glass (5202 JP), Mitsui E&S Holdings (7003 JP), and Matsui Securities (8628 JP) removed.
• That triggers flows of about ¥480bn a side, and some big, big changes. The announcement helps understand new process better.

• Last week I wrote about NTT’s Partial Offer for Marketing Consultant Intage (4326) – (with a spurious hyphen at the end). 
• In the last couple of days, there have apparently been a few blocks printed on the tape. I have received questions about pricing and pro-ration. 
• So here I provide a set of 11 possible pro-ration cases, and suggest ways for traders and investors to think about the risks and possibilities.

• The review period for the December rebalance ends 31 October. We expect the changes to be announced 24 November with the implementation taking place after the close on 8 December.
• We expect the index committee to continue using a 6-month minimum listing history resulting in one change to the index.
• One way turnover is estimated at 1.6% resulting in a one-way trade of CNY 2,259m. The impact on the deletion will be much larger than that on the inclusion.

• Nippon Active Value Fund/Michael 1925/Dalton has increased their T&K Toka Co Ltd (4636 JP) shareholding from 22.23% to 23.77% of outstanding shares (22.25% to 23.79% of ownership ratio including share options).
• T&K Toka shares have traded above Bain’s JPY1,400 pre-conditional offer, fuelling speculation of a bump. A rival proposal at least 5% above triggers the “Counter Tender Offer” clause.
• The four possible scenarios with declining probabilities are: Bain calls Dalton’s bluff, Bain marginally bumps, Dalton launches a rival offer or Dalton rollovers its stake into a privatised T&K Toka.

• Softbank Group (9984 JP) raised around US$4.9bn via selling some of its stake in ARM Holdings (ARM US)‘ US IPO.
• ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
• In our previous notes, we looked at the company’s past performance and valuation. In this note, we talk about the trading dynamics.

• ARM Holdings (ARM US) has priced its IPO at US$51.00 per ADS, at the top end of the price range. Softbank Group (9984 JP) will raise gross proceeds of US$4.9bn.
• We previously discussed the IPO in ARM Holdings IPO: The Bull Case, ARM Holdings IPO: The Bear Case and ARM Holdings IPO: Unattractive Price Range. 
• The ARM IPO is structurally set up for a first-day pop. Beyond the first-day euphoria, ARM will face the daunting task of delivering bullish estimates to justify the IPO price.

• In mid-June, three months ago yesterday, Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) announced a three-way merger for Nov1.
• All three popped in price, and peaked three weeks later, both outright and vs Peers. Then it fell sharply back. 
• It is worth looking at the new Combined “KDX” entity on a pro-forma basis. There should be more to go.

• On the 26 July, Geo Energy Resources (GERL SP) announced an agreement to acquire a majority stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
• Via an S&P, GEO intends to buy a 58.7% stake in Golden Eagle from Indonesian conglomerate Rajawali Group for US$154.1mn.
• The completion of the S&P, which is subject to Indonesia’s OJK and Geo shareholder approval, will trigger an MTO at IDR 1,255/share.

• Toyota Group autoparts maker Aisin Seiki (7259 JP) today announced a new Medium-Term Plan. They plan to shift their business away from “entrusted” business, towards BEV, Brakes, and “Safe/Comfort Entry”
• They aim to grow revenues 25% from 2021 to 2025 and an additional 10-20% by 2030. 
• They also aim to improve investment and capital efficiency, and that’s where we can look at the interesting possibilities.

• IMAX China Holding (1970 HK)‘s scheme document is out, with the court meeting scheduled for 10 October. The IFA considers IMAX Corp (IMAX US)‘s HK$10.00 offer fair and reasonable.
• The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake. 
• A recovering box office, early indications of an effort to rally retail NO votes and a high minority participation rate in AGMs pose a risk. The risk/reward profile is unfavourable. 

• In March 2023, Japan Post Holdings (6178 JP) sold ¥1.1trln of shares in Japan Post Bank (7182 JP), lowering its stake considerably, raising float. There will be a TOPIX upweight. 
• In May, with earnings, they announced their intention to buy back ¥300bn of shares or up to 10% of shares out. Today, they announced the details. ¥300bn through March end.
• In a ¥300bn ToSTNeT-3 tomorrow, the govt will sell back ¥105.7bn. That leaves a residual worth examining. So we examine.

• With no stocks in inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December.
• Capping changes will result in a one-way turnover of a touch below 1% and that will result in a round-trip trade of US$255m.
• The impact on the stocks is relatively small for now but that could increase till the end of November when the stocks will be capped.

• Doosan Robotics (454910 KS) is looking to raise up to US$318m in its Korean IPO.
• Doosan Robotics (DR) manufactures and sells collaborative robots (Cobots). The firm’s product portfolio primarily includes different series of robot arms as well as its coffee module.
• In our previous notes, we assessed the company’s past performance, undertook a peer comparison and shared our thoughts on valuation. In this note, we share our updated thoughts on valuation.

• Last year, 20% owner Dalton approached T&K Toka Co Ltd (4636 JP) for an MBO, but walked when questioned. Then in January bid ¥1300 to double their stake to 44%.
• They were not successful. The firm held a beauty contest. Bain won at ¥1400 despite ¥1300 getting no response and markets up big since. It’s possible not everyone was invited. 
• Since the Bain deal announcement, the stock has mostly traded at/through terms. Now we find out Dalton has been buying (now 23.77%). This increases the chances of a bump.

• Zhongsheng Group (881 HK) is a potential deletion in December and that could result in China Unicom Hong Kong (762 HK) being added to the index.
• Estimated one-way turnover at the rebalance is 1.36% resulting in a one-way trade of HK$845m. Passives will need to trade over 1x ADV on both stocks.
• There is a very small impact on the fair value of the HSCEI 2023 dividend futures but there will be a larger impact on the dividend futures expiring in 2024.

• Nidec Corp (6594 JP) has had ambitions in machine tool space. They wanted to buy Takisawa Machine Tool (6121 JP) but Takisawa wouldn’t give them the time of day.
• So Nidec announced hostile intentions and a 60-day period to negotiate. That’s done, and today they announced a now-friendly deal. 
• This looks like an easy done deal. There is one major risk factor remaining, then another consideration when thinking about path. 

• After Sun Hung Kai Properties (16 HK) released its interim results, shares declined 12.7% intra-day this past Monday, touching a 14-year low, before closing down 9.5%. 
• The same day, the Kwok family increased their stake in the company, purchasing ~2.2mn shares for ~HK$175mn.  
• SHKP is currently trading a trailing P/B of 0.36x versus its five-year average of 0.54x, and the five-year average preceding Covid of 0.68x.

• On 13 September, SK Innovation announced that the subscription rate for the rights offering allocated to ESOA and existing shareholders was 87.66%.
• The rights offering price is 139,600 won, which is 12.7% lower than current price of 159,900 won. 
• There is likely to be a strong demand for the subscription of rights offering forfeited shares for the general investors scheduled to take place on 14 to 15 September.

• Youlchon Chemical’s CFD balance accounts for 3.54% of SO, with approximately 2x leverage trading. It is one of the few in the top CFD balance list that can be short-sold.
• Our primary concern should lie with the upcoming December rebalancing of the KOSPI 200 index. Youlchon Chemical finds itself perilously close to the borderline within the Materials sector.
• When proactive flow trading targeting KOSPI 200 is set to influence prices early October, we must remain vigilant regarding the potential trades aimed at exploiting a CFD balance squeeze.

• Nippon Active Value Fund/Michael 1925/Dalton has increased their T&K Toka Co Ltd (4636 JP) shareholding from 22.23% to 23.77% of outstanding shares (22.25% to 23.79% of ownership ratio including share options).
• T&K Toka shares have traded above Bain’s JPY1,400 pre-conditional offer, fuelling speculation of a bump. A rival proposal at least 5% above triggers the “Counter Tender Offer” clause.
• The four possible scenarios with declining probabilities are: Bain calls Dalton’s bluff, Bain marginally bumps, Dalton launches a rival offer or Dalton rollovers its stake into a privatised T&K Toka.