Most Read

The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn).

Nintendo (7974) | Game Over for Switch

By Mark Chadwick

Nintendo reported operating profit of 190b yen (-8% YoY), falling far short of Street expectations
The Nintendo Switch is now a six-year old console and demand is exhausted. A normalization of chip/supply chain issues benefits the newer PS5
Our thesis is that the hardware cycle has peaked and that the share price will head lower in tandem with the dwindling top line

Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps

Itochu Corp (8001 JP) today announced it had agreed with 61%-owned Itochu Techno Solutions (4739 JP) sub to take over CTC and squeeze out minorities.
The stock released earnings mid-day, somehow, but not on TDNet until post-close. The stock jumped in the last two hours. The Tender Offer is at a 10% premium to close.
Growth will be up, and there are lots of financial assets and net receivables so this is 8+x March 2025. Itochu is not overpaying. But there will be no counter.

SBI Affiliate To Buy 45-49% of E-Guardian (6050) In Partial Tender Offer

Today, Change Inc (3962 JP) (30%-owned by SBI Holdings (8473 JP)) announced a Tender Offer to buy 32-36.9% of E-Guardian, followed by a third-party placement to get them to 45-49%.
Small cap E-Guardian does internet services support, ad processing, cyber security (their fastest growing segment) and top line has been growing.
The partial offer is big enough to matter, and up 50%. It is worth a look for people who like small cap special sits.

Nippon Yusen (9101) BIG Buyback Announced

In March, NYK announced a new Mid-Term Management Plan discussed in Nippon Yusen – New MidTermPlan = New Shareholder Return Policy. They promised a full Shareholder Return Policy in May.
There was limited new SRP discussion in the 9 May earnings announcement. The MTMP suggested ¥200bn over 2yrs. The (Japanese) earnings announcement did too. Then May ended.
Now the Buyback Plan is out. ¥200bn over 9mos. That is different. This could move.

KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue

Today, Kawasaki Kisen Kaisha (9107 JP) announced Q1 earnings. As expected, net was WAY down on weak container business. But the company revised up H1 and Full-Year.
KLINE increased its FY2023 payout, upping its expected buyback plan from ¥50bn to ¥60bn. This is still cheap at 8.5x and 0.7x book, and there is non-container growth.
The structure of the buyback deserves attention. It may deserve a very short-term trade. The buyback construct has the possibility of “fun and games.”

SF Holding (002352 CH): H-Share Listing & Index Implications

S.F. Holding (002352 CH) could raise between HK$26-33bn (US$3.4-4.2bn) 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 certain indices and regular entry to others 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.

Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach

On 28 July, Toshiba Corp (6502 JP) disclosed that JIP delayed the tender start to “sometime in August 2023” vs the target “in the last ten days of July 2023.”
Toshiba reports 1Q results on 7 August. A solid 1Q will undermine the Board’s recommendation of the offer in part on the premise that the IFA’s DCF valuation is unrealistic.
The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip away at the offer’s attractiveness.

StubWorld: Takara Holdings Trading “Rich”

On an implied stub and simple ratio, Takara Holdings (2531 JP) is trading rich to 60.9%-held Takara Bio Inc (4974 JP).
Preceding my comments on Takara 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%.

Preparing for ATS Arrival in Korea: Strategies to Adapt to Changing Intraday Flow Patterns

Nextrade aims to secure the business permit within the next year’s second half. They intend to launch their services by the end of next year or early the following year.
All eyes are focused on the proposal to be operational from 8:30 AM to 11:59 PM, with the afternoon call auction session running from 3:00 PM to 6:00 PM.
It would be crucial to observe how the elongation of the time period for specific issues to be reflected in prices could potentially lead to changes in intraday flow patterns.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Aug 03

Most Read: Lasertec Corp, NARI Technology Co Ltd A, Itochu Techno Solutions, Sekisui Jushi, Ecopro BM , Water Oasis, Kawasaki Kisen Kaisha, E Guardian Inc, CapitaLand Ascott Trust and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
Offshore China ETFs Rebalance Preview: Two Changes in September
Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps
Huge Change at Sekisui Jushi (4212) – 20% Buyback from Erstwhile Controlling Shareholder
Insiders Selling at Ecopro BM and Kum Yang
Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – August 2023
ITOCHU Techno-Solutions (4739 JP): ITOCHU’s JPY4,325 Tender Offer
KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue
E-Guardian (6050 JP): CHANGE Holdings’ Partial Tender Offer
Capitaland Ascott Trust – Another One to Add to Its Latest Spree of Acquisitions

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends

The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn).

Offshore China ETFs Rebalance Preview: Two Changes in September

As of 1 August, there could be two changes for the iShares A50 China (2823 HK)/ CSOP A50 (2822 HK) in September.
There should be over 1x ADV to buy on NARI Technology Co Ltd A (600406 CH) and over 1x ADV to sell on Shaanxi Coal Industry (601225 CH).
There are a few stocks bunched around similar market caps among the potential adds and there could be changes to the list over the next few weeks.

Itochu To Take Over Itochu Techno Solutions (CTC (4739 JP)) Just As Growth Jumps

Itochu Corp (8001 JP) today announced it had agreed with 61%-owned Itochu Techno Solutions (4739 JP) sub to take over CTC and squeeze out minorities.
The stock released earnings mid-day, somehow, but not on TDNet until post-close. The stock jumped in the last two hours. The Tender Offer is at a 10% premium to close.
Growth will be up, and there are lots of financial assets and net receivables so this is 8+x March 2025. Itochu is not overpaying. But there will be no counter.

Huge Change at Sekisui Jushi (4212) – 20% Buyback from Erstwhile Controlling Shareholder

In April, Sekisui Jushi (4212 JP) announced lackluster earnings and unsurprising guidance after a year marked by higher costs. It also announced a small (2.5%) buyback, likely for cross-holdings.
Yesterday, the company announced Q1 results, and a revision to their buyback programme (to buy 20.2% of shares out). This morning their 22+% (#1) shareholder Sekisui Chemical sold 18%.
Forward PER dropped nearly 20%. The stock is still outrageously cash/securities-rich and if “re-levered” to zero net leverage would get a high 20s ROE. Hmmm…

Insiders Selling at Ecopro BM and Kum Yang

Ecopro BM (247540 KS) and Kum Yang (001570 KS)’s shares are down 2.5% and 4.5%, respectively today, driven by news of insiders at these companies selling their shares.
It is estimated that the total amount of Ecopro BM shares sold by insiders and related parties was about 20 billion won in July by more than 12 insiders/related parties.
We are increasingly concerned about insiders selling at Ecopro BM and Kum Yang. Coupled with lofty valuations, we think there is a higher probability of downside risk on these names.

Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety – August 2023

By Sameer Taneja

We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
We expand our list coverage into Multi Bintang Indonesia (MLBI IJ), Delta Djakarta (DLTA IJ), and Sheng Siong (SSG SP) as quality high ROCE names worth looking at.

ITOCHU Techno-Solutions (4739 JP): ITOCHU’s JPY4,325 Tender Offer

Itochu Techno Solutions (4739 JP) has recommended Itochu Corp (8001 JP)’s tender offer of JPY4,325 per share, an 18.7% premium to the undisturbed price (1 August).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 5.43% ownership ratio.
The minimum acceptance condition requires a 14% minority acceptance rate. This is doable as the tender price is attractive and equals the 20-year share price high.

KLINE (9107) Ups Shareholder Return – Fun & Games May Ensue

Today, Kawasaki Kisen Kaisha (9107 JP) announced Q1 earnings. As expected, net was WAY down on weak container business. But the company revised up H1 and Full-Year.
KLINE increased its FY2023 payout, upping its expected buyback plan from ¥50bn to ¥60bn. This is still cheap at 8.5x and 0.7x book, and there is non-container growth.
The structure of the buyback deserves attention. It may deserve a very short-term trade. The buyback construct has the possibility of “fun and games.”

E-Guardian (6050 JP): CHANGE Holdings’ Partial Tender Offer

E Guardian Inc (6050 JP) has announced a partial tender offer and third-party allotment with Change Inc (3962 JP). CHANGE will subscribe for 1.5 million shares at JPY2,099 per share.
The tender offer is for a minimum of 3.7 million and a maximum of 4.3 million shares at JPY3,000 per share, a 42.9% premium to the undisturbed price.
The tender offer is reasonable. The minimum acceptance condition requires a 37% minority acceptance rate. A 100% minority participation rate implies a minimum proration is 42.39%.

Capitaland Ascott Trust – Another One to Add to Its Latest Spree of Acquisitions

By Clarence Chu

CapitaLand Ascott Trust (CLAS SP) is looking to raise around S$200m from its primary follow-on. Included in the deal is another S$100m preferential offering to existing shareholders.
Proceeds will be used towards acquiring three new properties, and for asset enhancement initiatives.
The deal would be a relatively large one for the REIT to digest, at 31.6 days of three month ADV.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Aug 02

Most Read: Lasertec Corp, JS Global Lifestyle , Zydus Lifesciences Ltd, Nice Information Service Co, Sekisui Jushi, Ecopro BM , NARI Technology Co Ltd A, Symbio Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
JAPAN PASSIVE: Who Owns What 2023?
JS Global (1691 HK)’s SharkNinja Spin-Off
NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented
KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190)
Huge Change at Sekisui Jushi (4212) – 20% Buyback from Erstwhile Controlling Shareholder
Insiders Selling at Ecopro BM and Kum Yang
Offshore China ETFs Rebalance Preview: Two Changes in September
Superloop/Symbio’s Indicative Merger
Symbio (SYM AU): Superloop’s Indicative Offer

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends

The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn).

JAPAN PASSIVE: Who Owns What 2023?

The 2023 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each.
Even if you do not “play” index changes, understanding impact is important. Advantest is up 100% in 3mos. Existing passive ownership and new passive buying were crucial to that performance.
Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks in Japan.

JS Global (1691 HK)’s SharkNinja Spin-Off

Back on the 23 February, household appliance maker JS Global Lifestyle (1691 HK) proposed spinning off SharkNinja’s ex-Asia Pac ops in the U.S.
This spin-off would be undertaken as a distribution in-specie, creating a parallel listing structure for SharkNinja and the remaining operations.
Shareholders of JSG will vote on the separate listing at the EGM on the 26 June, with the last day cum-entitlement on the 27 June.

NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented

Using the current index methodology throws up 5 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be BIG.
Using the proposed index methodology throws up 11 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be HUGE.
The market consultation being put on hold could indicate pushback from index users or the possibility of F&O contracts being introduced on some of the non-F&O index constituents.

KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190)

The KRX has approved Nice Information Service Co (030190 KS)‘s transfer from the KOSDAQ Board to the KOSPI Board. The transfer could take place in the next two weeks.
Hydro Lithium (101670 KS) was the highest ranked non-constituent from the Industrials sector at the June rebalance and could replace Nice Information Service (030190 KS) in the KOSDAQ 150 Index.
Nice Information Service Co (030190 KS) has no chance of inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) and will not be short sell eligible post section transfer.

Huge Change at Sekisui Jushi (4212) – 20% Buyback from Erstwhile Controlling Shareholder

In April, Sekisui Jushi (4212 JP) announced lackluster earnings and unsurprising guidance after a year marked by higher costs. It also announced a small (2.5%) buyback, likely for cross-holdings.
Yesterday, the company announced Q1 results, and a revision to their buyback programme (to buy 20.2% of shares out). This morning their 22+% (#1) shareholder Sekisui Chemical sold 18%.
Forward PER dropped nearly 20%. The stock is still outrageously cash/securities-rich and if “re-levered” to zero net leverage would get a high 20s ROE. Hmmm…

Insiders Selling at Ecopro BM and Kum Yang

Ecopro BM (247540 KS) and Kum Yang (001570 KS)’s shares are down 2.5% and 4.5%, respectively today, driven by news of insiders at these companies selling their shares.
It is estimated that the total amount of Ecopro BM shares sold by insiders and related parties was about 20 billion won in July by more than 12 insiders/related parties.
We are increasingly concerned about insiders selling at Ecopro BM and Kum Yang. Coupled with lofty valuations, we think there is a higher probability of downside risk on these names.

Offshore China ETFs Rebalance Preview: Two Changes in September

As of 1 August, there could be two changes for the iShares A50 China (2823 HK)/ CSOP A50 (2822 HK) in September.
There should be over 1x ADV to buy on NARI Technology Co Ltd A (600406 CH) and over 1x ADV to sell on Shaanxi Coal Industry (601225 CH).
There are a few stocks bunched around similar market caps among the potential adds and there could be changes to the list over the next few weeks.

Superloop/Symbio’s Indicative Merger

Broadband provider Superloop Ltd (SLC AU) has made an indicative Offer, by way of a Scheme, for cloud communication software outfit Symbio Holdings (SYM AU).
Under the proposal, Symbio shareholders would receive A$1.425 (cash) and 2.14 new Superloop shares for each Symbio share held, for an implied price of A$2.85/share, a 20% premium to undisturbed.
A four-week period of reciprocal exclusivity has been agreed to further progress the proposal.

Symbio (SYM AU): Superloop’s Indicative Offer

Symbio Holdings (SYM AU) has disclosed a non-binding indicative proposal from Superloop Ltd (SLC AU) at A$1.425 cash per share and 2.14 SLC shares per SYM share.
The implied offer price of A$2.85 per share is a 19.7% premium to the undisturbed price of A$2.38 per share. A 4-week reciprocal exclusivity period starts on 1 August.
The offer is not close to being a knockout bid. Superloop states that it will progress the transaction on “a disciplined basis“, suggesting some risk towards a binding proposal.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Aug 01

Most Read: Ecopro Co Ltd, Wisdom Marine Lines, Zydus Lifesciences Ltd, Lasertec Corp, OCI Holdings , Piotech , OCI Co, CJ CGV Co Ltd, Macquarie Korea Infra Fund and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Korea – A Look at Ecopro, Kumyang & JYP Entertainment
Yuanta ETFs Rebalance Preview: Soaring Stocks, Rising Shorts; AI Beats Shipping
NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented
JAPAN PASSIVE: Who Owns What 2023?
OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play
STAR50 Index Rebalance Preview: Potential Changes Playing Catchup
Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
OCI Holdings Announces a Tender Offer to Buy 45% Stake in OCI Co
End of Mandatory Lock-Up Periods for 40 Companies in Korea in August 2023
Macquarie Korea Infra Fund Announces A Rights Offering Worth 361 Billion Won

Korea – A Look at Ecopro, Kumyang & JYP Entertainment

We take a look at Ecopro Co Ltd (086520 KS), Kum Yang (001570 KS) and Jyp Entertainment (035900 KS) since they appear to be on investor radars.
Foreign investors have been buyers while retail have been sellers in Ecopro Co and Kum Yang over the last month, while foreign investors have continued to buy Jyp Entertainment.
Short interest on all stocks has dropped over the last month, though there has been a recent tick up in shorts on Jyp Entertainment (035900 KS).

Yuanta ETFs Rebalance Preview: Soaring Stocks, Rising Shorts; AI Beats Shipping

Using data from the close on 19 July, there could be 5 changes to the Yuanta/P-Shares Taiwan Top 50 ETF and 2 deletions for the Yuanta/P-Shares Taiwan Dividend Plus ETF.
Stocks that are expected to benefit from the AI revolution could gain ETF inclusion while shipping stocks are the ones expected to be deleted from the ETF.
There has been a huge increase in shorts on some of the potential inclusions and on most of the potential deletions. That will affect how stocks trade near term.

NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented

Using the current index methodology throws up 5 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be BIG.
Using the proposed index methodology throws up 11 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be HUGE.
The market consultation being put on hold could indicate pushback from index users or the possibility of F&O contracts being introduced on some of the non-F&O index constituents.

JAPAN PASSIVE: Who Owns What 2023?

The 2023 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each.
Even if you do not “play” index changes, understanding impact is important. Advantest is up 100% in 3mos. Existing passive ownership and new passive buying were crucial to that performance.
Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks in Japan.

OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play

This is a classic swap arbitrage of shorting the acquirer and using the tendered shares to repay it. However, executing now would be meaningless as the swap ratio isn’t finalized.
Nevertheless, we should consider securing a long position in OCI Holdings in advance. The target (45%) is quite substantial, indicating that the practical allocation rate won’t plummet dangerously below 1.
Additionally, the likelihood of OCI Holdings’ swap price plummeting to completely nullify the 5.6% spread immediately after its determination appears to be low based on the current context.

STAR50 Index Rebalance Preview: Potential Changes Playing Catchup

The review period for the September rebalance ends today. The changes could be announced on 25 August with the implementation taking place after the close on 8 September.
The upcoming launch of the STAR100 Index could result in the index committee continuing to use a 6-month minimum listing history resulting in two changes to the index.
One way turnover is estimated at 2.3% resulting in a one-way trade of CNY 2,658m. The impact on the deletions will be much larger than that on the inclusions.

Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends

The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn).

OCI Holdings Announces a Tender Offer to Buy 45% Stake in OCI Co

On 28 July, OCI Holdings (010060 KS) announced that it plans to conduct a tender offer to purchase up to 45% stake in OCI Co (456040 KS).
The tender offer price of OCI Co is 139,000 won. The method of this tender offer is to issue new common shares of OCI Holdings.
In the short term (one month), we expect OCI Co’s shares to outperform OCI Holdings shares. This deal is structured to mainly benefit the OCI Group’s insiders.

End of Mandatory Lock-Up Periods for 40 Companies in Korea in August 2023

We discuss the end of the mandatory lock-up periods for 40 stocks in Korea in August 2023, among which 2 are in KOSPI and 38 are in KOSDAQ.
These 40 stocks on average could be subject to further selling pressures in August and could underperform relative to the market.
Among these 40 stocks, the top five market cap stocks include HK inno.N, PhilEnergy, CJ CGV Co Ltd, Sure Soft Tech, and CanariaBio.

Macquarie Korea Infra Fund Announces A Rights Offering Worth 361 Billion Won

On 28 July, Macquarie Korea Infra Fund (088980 KS) announced that it will conduct a rights offering worth 361 billion won, representing 7.4% of its current market cap.
The major uses of funds from the rights offering include acquisition of a city gas supplier (128 billion won) and investment in Incheon-Gimpo Expressway private investment project (128 billion won).
We have a positive view of this rights offering. We believe the acquisition of CN City Energy and the investment in Incheon-Gimpo Expressway will add additional value on the company.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jul 31

Most Read: Nomura Real Estate Master Fund,, KDDI Corp, Nice Information Service Co, Korea Stock Exchange Kospi Index, MOG Holdings, Zydus Lifesciences Ltd, JSR Corp, Eoflow , Piotech , Oci Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nomura Real Estate To Buy Nomura RE Master Fund Units
KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!)
KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190)
Finally, Korea Launches English Search Service for All Disclosures Starting July 31st
Index Rebalance & ETF Flow Recap: LQ45/IDX30, FXI, New Deal, KOSPI, KQ150, LG Energy, IN Float, TTMT
NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented
JSR Corporation (4185 JP): Tender Offer Risk/Reward
Merger Arb Mondays (31 Jul) – Eoflow, JSR, Toshiba, Pacific Current, Costa, Estia, Newcrest, Dali
STAR50 Index Rebalance Preview: Potential Changes Playing Catchup
OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play

Nomura Real Estate To Buy Nomura RE Master Fund Units

Today, Nomura Real Estate Master Fund, (3462 JP) – the largest REIT in the ‘Diversified REIT’ JREIT space – announced sponsor Nomura Real Estate (3231 JP) would up its stake.
They would lift their stake from 4.47% by 2.54% to 7.01%. There is a reason for this, just like there was last time with Japan Excellent (8987 JP).
Understanding the reason is how you understand the trade to do.

KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!)

Today, with Q1 earnings, which I found less than great, KDDI Corp (9433 JP) announced a Tender Offer Buyback to repurchase up to 64,102,500 shares for up to ¥250.03175bn.
The Tender Offer – at ¥3900/share vs Last at ¥4,271/share (designed for cross-holding unwinds) – goes from 31-July through 28-August. It fills the 83.3% of the buyback programme announced 11-May.
Toyota Motor (7203 JP) has announced it would sell ¥250bn of shares into this Tender Offer. This is less interesting than it looks. The whole thing is.

KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190)

The KRX has approved Nice Information Service Co (030190 KS)‘s transfer from the KOSDAQ Board to the KOSPI Board. The transfer could take place in the next two weeks.
Hydro Lithium (101670 KS) was the highest ranked non-constituent from the Industrials sector at the June rebalance and could replace Nice Information Service (030190 KS) in the KOSDAQ 150 Index.
Nice Information Service Co (030190 KS) has no chance of inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) and will not be short sell eligible post section transfer.

Finally, Korea Launches English Search Service for All Disclosures Starting July 31st

Starting Monday, July 31st, the FSS-operated disclosure website, DART (Data Analysis, Retrieval, and Transfer System), will provide an English search service for all disclosures.
This measure will open up possibilities for diverse position strategies that require timeliness and comparability for Korean local stocks, leading to a significant turning point.
This calls for a more comprehensive approach in identifying the overall market flow. We should be attentive to potential alterations in the structure of foreign flows.

Index Rebalance & ETF Flow Recap: LQ45/IDX30, FXI, New Deal, KOSPI, KQ150, LG Energy, IN Float, TTMT

The changes to the LQ45/IDX30 were announced last week and will be implemented Monday. The PSE also announced that there would be no changes for the PCOMP INDEX in August.
There are a bunch of review cutoffs on Monday, most notably for the Nikkei 225 (NKY INDEX), STAR50 INDEX, the NIFTY family of indices and the KRX New Deal indices.
There were inflows to China focused ETFs and outflows from Taiwan and Korea focused ETFs during the week.

NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented

Using the current index methodology throws up 5 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be BIG.
Using the proposed index methodology throws up 11 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be HUGE.
The market consultation being put on hold could indicate pushback from index users or the possibility of F&O contracts being introduced on some of the non-F&O index constituents.

JSR Corporation (4185 JP): Tender Offer Risk/Reward

JSR Corp (4185 JP)‘s pre-conditional tender offer from JIC is JPY4,350 per share. Since the deal announcement on 26 June, the gross spread has averaged 6.4%.
The wide gross spread reflects the risk in satisfying the pre-conditions related to country approvals, particularly in China. JIC, unusually can waive all or part of the conditions precedent.
The wild card is geopolitical developments. There are three China approval scenarios. The likely scenario is the deal approval under a normal procedure with a delay to the tender start.

Merger Arb Mondays (31 Jul) – Eoflow, JSR, Toshiba, Pacific Current, Costa, Estia, Newcrest, Dali

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), Chindata Group (CD US), Estia Health (EHE AU), ENM Holdings (128 HK), JSR Corp (4185 JP), Costa Group Holdings (CGC AU).
Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Toyo Construction (1890 JP), Penguin International (PBS SP), Kenedix Retail REIT (3453 JP), ARTERIA Networks Corp (4423 JP).

STAR50 Index Rebalance Preview: Potential Changes Playing Catchup

The review period for the September rebalance ends today. The changes could be announced on 25 August with the implementation taking place after the close on 8 September.
The upcoming launch of the STAR100 Index could result in the index committee continuing to use a 6-month minimum listing history resulting in two changes to the index.
One way turnover is estimated at 2.3% resulting in a one-way trade of CNY 2,658m. The impact on the deletions will be much larger than that on the inclusions.

OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play

This is a classic swap arbitrage of shorting the acquirer and using the tendered shares to repay it. However, executing now would be meaningless as the swap ratio isn’t finalized.
Nevertheless, we should consider securing a long position in OCI Holdings in advance. The target (45%) is quite substantial, indicating that the practical allocation rate won’t plummet dangerously below 1.
Additionally, the likelihood of OCI Holdings’ swap price plummeting to completely nullify the 5.6% spread immediately after its determination appears to be low based on the current context.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jul 30

Most Read: Data#3 Ltd, Mitra Adiperkasa, Wistron Corp, SK Biopharmaceuticals , Nomura Real Estate Master Fund,, Nice Information Service Co, BFI Finance Indonesia, Softbank Group, MOG Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P/ASX200 Ad Hoc Index Rebalance & Update to Potential Changes in September
LQ45 Index Rebalance: Two Changes in a Few Days
Index Rebalance & ETF Flow Recap: ASX, SK Telecom, Yuanta ETFs
KRX New Deal Index Rebalance Preview: Review Period Nearly Complete
Nomura Real Estate To Buy Nomura RE Master Fund Units
KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190)
Ohayo Japan| AI Bid; Strong GDP->more Hikes? Stocks Drop; NUGGET: Steel Decarb-Advantage Tokyo Steel
BFI Finance Indonesia (BFIN IJ) – Short-Term Blip Provides Opportunity
SoftBank Group (9984 JP) – Reasons to Be Careful
Index Rebalance & ETF Flow Recap: LQ45/IDX30, FXI, New Deal, KOSPI, KQ150, LG Energy, IN Float, TTMT

S&P/ASX200 Ad Hoc Index Rebalance & Update to Potential Changes in September

Ventia (VNT AU) will replace Blackmores Ltd (BKL AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 21 July.
The ad hoc change will lead to changes in the list of potential adds and deletes at the regular scheduled rebalance in September.
Weebit Nano Ltd (WBT AU) is now a potential add in September and could see some pre-positioning in the near future.

LQ45 Index Rebalance: Two Changes in a Few Days

Gudang Garam (GGRM IJ) and Mitra Adiperkasa (MAPI IJ) will replace Timah Persero (TINS IJ) and Japfa Comfeed Indonesia (JPFA IJ) in the LQ45 Index next week.
There are some large changes to free float plus capping changes for Bank Central Asia (BBCA IJ) and Bank Rakyat Indonesia (BBRI IJ).
There could be jumps in the stocks of the adds/deletes today, though there should be pre-positioning and a potential reversal later in the week.

Index Rebalance & ETF Flow Recap: ASX, SK Telecom, Yuanta ETFs

JFSL spun off from Reliance Industries (RIL IN) last week and Ventia (VNT AU) replaced Blackmores Ltd (BKL AU) in the S&P/ASX 200 (AS51 INDEX).
The IDX should announce the changes to the IDX30, LQ45 and IDX80 indices early in the coming week.
There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and Hang Seng H Share Index ETF (2828 HK) while Taiwan focused ETFs had outflows.

KRX New Deal Index Rebalance Preview: Review Period Nearly Complete

The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
There is one change currently for each of the Secondary Battery, Bio and Game indices. Then there are a couple of changes for the Internet and BBIG indices.
There are four stocks that will have over 2 days of ADV to trade from passive trackers and these stocks could move around announcement of the changes.

Nomura Real Estate To Buy Nomura RE Master Fund Units

Today, Nomura Real Estate Master Fund, (3462 JP) – the largest REIT in the ‘Diversified REIT’ JREIT space – announced sponsor Nomura Real Estate (3231 JP) would up its stake.
They would lift their stake from 4.47% by 2.54% to 7.01%. There is a reason for this, just like there was last time with Japan Excellent (8987 JP).
Understanding the reason is how you understand the trade to do.

KOSDAQ150 Ad Hoc Index Rebalance: Hydro Lithium (101670) Could Replace Nice Information (030190)

The KRX has approved Nice Information Service Co (030190 KS)‘s transfer from the KOSDAQ Board to the KOSPI Board. The transfer could take place in the next two weeks.
Hydro Lithium (101670 KS) was the highest ranked non-constituent from the Industrials sector at the June rebalance and could replace Nice Information Service (030190 KS) in the KOSDAQ 150 Index.
Nice Information Service Co (030190 KS) has no chance of inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) and will not be short sell eligible post section transfer.

Ohayo Japan| AI Bid; Strong GDP->more Hikes? Stocks Drop; NUGGET: Steel Decarb-Advantage Tokyo Steel

By Mark Chadwick

OVERSEAS. SOX 1.9% bid as Generative AI drives bid for semis/tech hardware; Booming US Economy as GDP prints 2.4% driving yields higher; But USD weaker vs Yen on BOJ.
JAPAN. NKY Futures -1% vs Cash; USDJPY 139. 5; Really all about the BOJ as the Nikkei broke news on potential YCC tweak; Earnings deluge: -ve Shin-etsu; Fujitsu.
NUGGET. Tokyo Steel has more advantages than meets the eye. No need for the massive capex in the crucial process that Nippon Steel or JFE needs to put out. Bullish.

BFI Finance Indonesia (BFIN IJ) – Short-Term Blip Provides Opportunity

By Angus Mackintosh

BFI Finance Indonesia (BFIN IJ) booked a solid set of 1H2023 results that were marred by an operational blip, with 2Q2023 impacted but this is likely to abate in 2H2023.
The company continues to stand out for its leading position in collateralized lending backed by 4W, 2W, heavy equipment, shophouses and property, with an accomplished 15-year track record
BFI Finance Indonesia remains the top pick to play the increasing growth from multi-finance in Indonesia. It trades on 2x FY2023E PBV, forecast to book an ROE over 20%.

SoftBank Group (9984 JP) – Reasons to Be Careful

By Victor Galliano

The SoftBank share price rally is, in our view, based on optimism around the Arm IPO, the Yen’s relative weakness and recovering share prices of public companies in the portfolio
Nvidia’s emergence as a potential anchor investor in the Arm IPO has boosted SoftBank shares, yet there is still a big disparity between groups in terms of Arm’s potential valuation
Aside from a recovery in public tech companies’ shares, Yen weakness has supported SoftBank’s asset values; monetary policy moves now indicate the prospect of a stronger Yen versus the USD

Index Rebalance & ETF Flow Recap: LQ45/IDX30, FXI, New Deal, KOSPI, KQ150, LG Energy, IN Float, TTMT

The changes to the LQ45/IDX30 were announced last week and will be implemented Monday. The PSE also announced that there would be no changes for the PCOMP INDEX in August.
There are a bunch of review cutoffs on Monday, most notably for the Nikkei 225 (NKY INDEX), STAR50 INDEX, the NIFTY family of indices and the KRX New Deal indices.
There were inflows to China focused ETFs and outflows from Taiwan and Korea focused ETFs during the week.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jul 29

Most Read: Mitra Adiperkasa, SK Biopharmaceuticals , Toshiba Corp, Nomura Real Estate Master Fund,, LG Uplus Corp, Eoflow , NVIDIA Corp, Shanghai United Imaging Health, LG Energy Solution and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

LQ45 Index Rebalance: Two Changes in a Few Days
KRX New Deal Index Rebalance Preview: Review Period Nearly Complete
Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed, But Toshiba Fatigue Is Strong
Nomura Real Estate To Buy Nomura RE Master Fund Units
A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback
EOFLOW/Medtronic Tender: Assessing the Wide Spread
NVIDIA: Global Funds Hit New Highs
Quiddity Leaderboard CSI 300/500 Dec 22: Massive Baskets, US$2.5bn One-Way
LGES: Slowing Sales in Europe & A Turning Point in Momentum for Korean Rechargeable Battery Sector?
Japan Watch: 1% with Added Flexibility – More or Less Printing from Here?

LQ45 Index Rebalance: Two Changes in a Few Days

Gudang Garam (GGRM IJ) and Mitra Adiperkasa (MAPI IJ) will replace Timah Persero (TINS IJ) and Japfa Comfeed Indonesia (JPFA IJ) in the LQ45 Index next week.
There are some large changes to free float plus capping changes for Bank Central Asia (BBCA IJ) and Bank Rakyat Indonesia (BBRI IJ).
There could be jumps in the stocks of the adds/deletes today, though there should be pre-positioning and a potential reversal later in the week.

KRX New Deal Index Rebalance Preview: Review Period Nearly Complete

The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
There is one change currently for each of the Secondary Battery, Bio and Game indices. Then there are a couple of changes for the Internet and BBIG indices.
There are four stocks that will have over 2 days of ADV to trade from passive trackers and these stocks could move around announcement of the changes.

Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed, But Toshiba Fatigue Is Strong

It has been four months since JIP officially announced their intention to launch a Tender Offer for Toshiba Corp (6502 JP) by end-July. 7 weeks since Toshiba’s Board supported it.
There’s been no material public griping. Peers are sharply higher. There have been news stories suggesting a Western Digital/Kioxia deal is close. That’s now extended. The Toshiba deal possibly too.
But huge outperformance by peers, and possible clarity from Kioxia deal terms are unlikely to move the Toshiba Board to demand more.

Nomura Real Estate To Buy Nomura RE Master Fund Units

Today, Nomura Real Estate Master Fund, (3462 JP) – the largest REIT in the ‘Diversified REIT’ JREIT space – announced sponsor Nomura Real Estate (3231 JP) would up its stake.
They would lift their stake from 4.47% by 2.54% to 7.01%. There is a reason for this, just like there was last time with Japan Excellent (8987 JP).
Understanding the reason is how you understand the trade to do.

A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback

The chances of SKT’s inclusion in the August MSCI Review seem slim. SKT narrowly missed meeting the 15% threshold on both Day 1 and Day 2 during this review.
SK Telecom’s buyback completion can be accelerated to align with the MSCI November Review period, just like the previous case of KT Corp back in April.
The estimated size of passive funds flowing into SKT is approximately ₩160 billion, which is expected to be around 5.5 times the average daily trading volume (ADTV).

EOFLOW/Medtronic Tender: Assessing the Wide Spread

Medtronic Plc (MDT US) aims to acquire Eoflow (294090 KS) through share purchase agreements (SPA), a share subscription agreement (SSA) and a public tender offer at KRW30,000.
Since the deal announcement on 26 May, the spread has widened, reflecting deal risk around patent litigation risk, regulatory approvals and the minimum acceptance condition.
Our assessment of these risks suggests a low probability of a deal break. At the last close, the gross spread is an attractive 8.5%.

NVIDIA: Global Funds Hit New Highs

By Steven Holden

Global Fund exposure in NVIDIA Corp (NVDA US) has moved to record levels after a doubling of the share price this year.
New positions from UniNachhaltig Global, JP Morgan Global Focus and BNY Mellon Global Equity (3.36%) were among a total of 14 funds who opened exposure to NVIDIA Corp in 2023.
Growth and Aggressive Growth funds are at maximum levels of ownership, whilst Value managers are showing some hesitancy here.

Quiddity Leaderboard CSI 300/500 Dec 22: Massive Baskets, US$2.5bn One-Way

By Janaghan Jeyakumar, CFA

CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in December 2023.
I currently expect 13 ADDs/DELs for CSI 300 and 50 ADDs/DELs for CSI 500.

LGES: Slowing Sales in Europe & A Turning Point in Momentum for Korean Rechargeable Battery Sector?

LGES provided a lower sales guidance in 3Q 2023 due to slower sales in Europe. LGES expects its sales in 3Q 2023 to decline in a QoQ basis.
The share prices of the top 12 rechargeable battery names in Korea are down on average 13.9% in the past two trading days.
We believe that the overall sentiment on the rechargeable battery sector in Korea has started to turn sour which could have a further negative impact on companies such as LGES.

Japan Watch: 1% with Added Flexibility – More or Less Printing from Here?

By Andreas Steno

The Bank of Japan moved the needle on the 10yr YCC from an effective cap 0.5% to a new effective cap at 1% but with a larger flexibility being introduced to the setup.
This also means that JGBs are now effectively tradeable again and that two-way-traffic is introduced as the BoJ can decide to guide the 10yr point both higher and lower within the accepted range given incoming data on prices ahead.
This is very different from just communicating a new clear cap and the 10yr yield is trading around +56 bps on the screens by the time of writing.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jul 28

Most Read: Rakuten Group , Tata Motors DVR, Toshiba Corp, SK Telecom, Nomura Real Estate Master Fund,, Nexen Tire Corp, Eoflow , LG Uplus Corp, Pacific Current and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

July TOPIX FFW Rebal – Update With 2 Days To Go on $3bn a Side
Tata Motors (TTMT IN) – Goodbye to the DVR Arb
Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed, But Toshiba Fatigue Is Strong
SK Telecom – Major Share Buyback & Cancellation
Interpretation of China’s Politburo – The A-Share Bull Market Is Coming?
Nomura Real Estate To Buy Nomura RE Master Fund Units
KRX Autos Sept Rebalancing: Less Known, Still Juicy Trading Event with 4 Constituent Changes
EOFLOW/Medtronic Tender: Assessing the Wide Spread
A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback
GQG Mulls Offer As Pacific Current Balks At Regal’s NBIO

July TOPIX FFW Rebal – Update With 2 Days To Go on $3bn a Side

In the two weeks since the announcement, Large ADDs (>2d ADV, >$5mm) have outperformed Large DELs by 1.3%. Smaller ADDs vs DELs (>2d, >$2<$5mm) have outperformed by 1.3%.
Using only >$20mm >2d DELs vs Top 5 $amt >2d ADDs, that’s a bit better than 1%. And the really obvious large ones? Not so obvious.
There is still a large reverse funding trade, with some large sells.

Tata Motors (TTMT IN) – Goodbye to the DVR Arb

Tata Motors Ltd (TTMT IN) has announced a Scheme of Arrangement where all the Tata Motors DVR (TTMT/A IN) shares will be cancelled.
For every 10 shares of Tata Motors DVR (TTMT/A IN) held, shareholders will receive 7 shares of Tata Motors Ltd (TTMT IN).
The process is expected to take 12-15 months to complete and there will be passive buying in Tata Motors Ltd (TTMT IN) at the end of it.

Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed, But Toshiba Fatigue Is Strong

It has been four months since JIP officially announced their intention to launch a Tender Offer for Toshiba Corp (6502 JP) by end-July. 7 weeks since Toshiba’s Board supported it.
There’s been no material public griping. Peers are sharply higher. There have been news stories suggesting a Western Digital/Kioxia deal is close. That’s now extended. The Toshiba deal possibly too.
But huge outperformance by peers, and possible clarity from Kioxia deal terms are unlikely to move the Toshiba Board to demand more.

SK Telecom – Major Share Buyback & Cancellation

On 27 July, SK Telecom announced a sizeable share buyback worth 300 billion won (including shares cancellation of 200 billion won) and quarterly dividend of 181 billion won.
SK Telecom will pay a quarterly DPS of 830 won, which represents 1.8% of its current price of 45,900 won.
SK Telecom is trying to boost its share price which has been negatively impacted by the regulators’ pressure to cut telecom tariff rates and also increase competition.

Interpretation of China’s Politburo – The A-Share Bull Market Is Coming?

By Xinyao (Criss) Wang

On China’s Politburo, we did see some rare expressions and highlights worthy of attention. Perhaps, avoiding short-term risks is so important that China needs to temporarily put aside long-term transformation.
Attitude change doesn’t mean returning to old model.Since “expanding domestic demand” is placed in a prominent position, we have reason to be optimistic about the prospects of private economy/A-share market.
The real A-share bull market may not come immediately, but we are optimistic about the performance of A-shares in 23Q4 and 2024. We recommend investors to get prepared in advance.

Nomura Real Estate To Buy Nomura RE Master Fund Units

Today, Nomura Real Estate Master Fund, (3462 JP) – the largest REIT in the ‘Diversified REIT’ JREIT space – announced sponsor Nomura Real Estate (3231 JP) would up its stake.
They would lift their stake from 4.47% by 2.54% to 7.01%. There is a reason for this, just like there was last time with Japan Excellent (8987 JP).
Understanding the reason is how you understand the trade to do.

KRX Autos Sept Rebalancing: Less Known, Still Juicy Trading Event with 4 Constituent Changes

At the current stage, with the three-month review period almost complete, there will likely be two additions and two deletions:
Additions: KG Mobility (003620 KS) & Nexen Tire Corp (002350 KS) Deletions: Sebang Global Battery (004490 KS) & Kumho HT Inc (214330 KS)
In the past few years, KRX Autos has shown a significant price impact for constituent changes on the rebalancing trading day. This pattern will likely repeat in the upcoming rebalancing.

EOFLOW/Medtronic Tender: Assessing the Wide Spread

Medtronic Plc (MDT US) aims to acquire Eoflow (294090 KS) through share purchase agreements (SPA), a share subscription agreement (SSA) and a public tender offer at KRW30,000.
Since the deal announcement on 26 May, the spread has widened, reflecting deal risk around patent litigation risk, regulatory approvals and the minimum acceptance condition.
Our assessment of these risks suggests a low probability of a deal break. At the last close, the gross spread is an attractive 8.5%.

A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback

The chances of SKT’s inclusion in the August MSCI Review seem slim. SKT narrowly missed meeting the 15% threshold on both Day 1 and Day 2 during this review.
SK Telecom’s buyback completion can be accelerated to align with the MSCI November Review period, just like the previous case of KT Corp back in April.
The estimated size of passive funds flowing into SKT is approximately ₩160 billion, which is expected to be around 5.5 times the average daily trading volume (ADTV).

GQG Mulls Offer As Pacific Current Balks At Regal’s NBIO

Yesterday (26 July), asset manager Pacific Current (PAC AU) announced a cash/scrip NBIO from Regal Partners (RPL AU).
Under Regal’s proposal, Pacific Current shareholders would receive an implied $10.77/share. Pacific Current considers the current share price doesn’t reflect the underlying value of its portfolio and business.
Now GQG Partners (GQG AU) has announced it intends to submit its own NBIO. No price was mentioned.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jul 27

Most Read: L’Occitane, Mitra Adiperkasa, UPL Ltd, SK Biopharmaceuticals , Rakuten Group , Eoflow , POSCO Holdings, Tata Motors DVR, BeiGene , Fadu and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

L’Occitane (973 HK): Controlling Shareholder Mulling a Bid?
LQ45 Index Rebalance: Two Changes in a Few Days
India – Potential Float Changes & Impact
KRX New Deal Index Rebalance Preview: Review Period Nearly Complete
July TOPIX FFW Rebal – Update With 2 Days To Go on $3bn a Side
An Update on Medtronic’s Tender Offer of Eoflow
KRX Latest Press Release: CFD Inspection Results & Immediate Impacts to Monitor
Tata Motors (TTMT IN) – Goodbye to the DVR Arb
Quiddity HSCEI Sep 23 Flow Expectations Update: US$367mn One-Way, Beigene Vs Peers Interesting
Fadu IPO Book Building Results Analysis

L’Occitane (973 HK): Controlling Shareholder Mulling a Bid?

L’Occitane (973 HK) is drawing takeover interest from Reinold Geiger, the Chairman and the largest shareholder, according to Bloomberg. Mr Geiger has been exploring financing options for the potential deal.
The presence of a significant disinterested shareholder, Acatis KVG, necessitates an attractive takeover premium. Acatis KVG trimmed its stake in July 2021 at HK$30.01 per share.
L’Occitane released a solid 1QFY2024 update today with constant currency growth of 24.5% YoY. Irrespective of a bid materialising, the valuation is undemanding compared to peer multiples.

LQ45 Index Rebalance: Two Changes in a Few Days

Gudang Garam (GGRM IJ) and Mitra Adiperkasa (MAPI IJ) will replace Timah Persero (TINS IJ) and Japfa Comfeed Indonesia (JPFA IJ) in the LQ45 Index next week.
There are some large changes to free float plus capping changes for Bank Central Asia (BBCA IJ) and Bank Rakyat Indonesia (BBRI IJ).
There could be jumps in the stocks of the adds/deletes today, though there should be pre-positioning and a potential reversal later in the week.

India – Potential Float Changes & Impact

Over the last few weeks, companies in India have been disclosing their shareholding pattern as of end-June. There are a few companies with significant float changes from end-March and/or end-December.
The changes in free float could be reflected in domestic and global indices over the next couple of months resulting in action from passive trackers.
We see 6 stocks where there could be passive inflows and 2 stocks that could have passive outflows – but there are caveats.

KRX New Deal Index Rebalance Preview: Review Period Nearly Complete

The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
There is one change currently for each of the Secondary Battery, Bio and Game indices. Then there are a couple of changes for the Internet and BBIG indices.
There are four stocks that will have over 2 days of ADV to trade from passive trackers and these stocks could move around announcement of the changes.

July TOPIX FFW Rebal – Update With 2 Days To Go on $3bn a Side

In the two weeks since the announcement, Large ADDs (>2d ADV, >$5mm) have outperformed Large DELs by 1.3%. Smaller ADDs vs DELs (>2d, >$2<$5mm) have outperformed by 1.3%.
Using only >$20mm >2d DELs vs Top 5 $amt >2d ADDs, that’s a bit better than 1%. And the really obvious large ones? Not so obvious.
There is still a large reverse funding trade, with some large sells.

An Update on Medtronic’s Tender Offer of Eoflow

In this insight, we provide an update of Medtronic’s tender offer of Eoflow.
The foreign ownership of Eoflow has surged in the past two months from 6.5% on 25 May to 33.2% as of 24 July.
We continue to believe that there is 95%+ probability of this M&A getting completed at the tender offer price of 30,000 won and Eoflow eventually becoming delisted in 2H 2023.

KRX Latest Press Release: CFD Inspection Results & Immediate Impacts to Monitor

KRX stated in this press release that they have identified the suspected stocks involved in illegal trading and have reported them to the financial authorities (Korea FSC and Korea FSS).
The primary concern in the short term seems to revolve around whether the battery stocks are among the ones suspected of illegal trading, as reported to the financial authorities.
We must remain vigilant and ready for the potential recurrence of CFD-related price plunges, as seen in the recent two instances, affecting specific stocks in the short term.

Tata Motors (TTMT IN) – Goodbye to the DVR Arb

Tata Motors Ltd (TTMT IN) has announced a Scheme of Arrangement where all the Tata Motors DVR (TTMT/A IN) shares will be cancelled.
For every 10 shares of Tata Motors DVR (TTMT/A IN) held, shareholders will receive 7 shares of Tata Motors Ltd (TTMT IN).
The process is expected to take 12-15 months to complete and there will be passive buying in Tata Motors Ltd (TTMT IN) at the end of it.

Quiddity HSCEI Sep 23 Flow Expectations Update: US$367mn One-Way, Beigene Vs Peers Interesting

By Janaghan Jeyakumar, CFA

In three more weeks, the index changes and the indicative capping changes for the September 2023 rebalance will be officially announced.
We first looked at the potential HSCEI index changes and the resultant capping flows for September 2023 in Quiddity HSCEI Sep 23 Flow Expectations: Two Changes Likely, US$276mn One-Way
In this insight, we take a look at Quiddity’s updated flow expectations which account for the changes in prices in the last ~1.5 months.

Fadu IPO Book Building Results Analysis

Fadu’s IPO price has been confirmed at 31,000 won (top end of the IPO valuation range). A total of 1,082 institutions participated, with a demand ratio of 362.9 to 1.
Fadu is one of the biggest IPOs in Korea so far in 2023.
Our base case valuation analysis suggests implied market cap of 2.2 trillion won or 43,676 won per share, which represents 41% higher than the IPO price.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Analytics and News
✓ Events & Webinars

Jul 26

Most Read: MOG Holdings, LG Energy Solution, ZTE Corp H, L’Occitane, Hanmi Semiconductor, NTT (Nippon Telegraph & Telephone), SK Biopharmaceuticals Co Ltd, UPL Ltd, Eoflow , Kum Yang and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MOG Digitech (1942 HK): What the Flow Is Going On?
LG Energy Solution (373220 KS) – Potential Float Increase Coming Up
FXI Rebalance Preview: One Potential Change in September
L’Occitane (973 HK): Controlling Shareholder Mulling a Bid?
KOSPI Size Indices – Plenty of Overlap With Other Index Flows
NTT (9432) – LDP Consideration of Full Sale Is Not Necessarily Overhang
KRX New Deal Index Rebalance Preview: Review Period Nearly Complete
India – Potential Float Changes & Impact
An Update on Medtronic’s Tender Offer of Eoflow
Seeking Clues for a Preemptive Position in the Korean Local Block Deal Market in H2

MOG Digitech (1942 HK): What the Flow Is Going On?

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.

LG Energy Solution (373220 KS) – Potential Float Increase Coming Up

Selling from the ESOP program in the first quarter could result in an increase in LG Energy Solution (373220 KS)‘s float in local and global indices.
The largest buying from passive trackers could take place next month with over 3% of the real float needing to be bought.
Short interest has increased in the last month and short covering could take the stock higher ahead of the passive buying.

FXI Rebalance Preview: One Potential Change in September

As of 24 July, there could be one set of changes for the iShares China Large-Cap (FXI) (FXI US) in September.
There should be less than 1x ADV to buy on ZTE Corp H (763 HK) while there will be nearly 2x ADV to sell on Anhui Conch Cement (914 HK).
Short interest has been inching higher on ZTE Corp H (763 HK) while it is barely moving on Anhui Conch Cement (914 HK) as the stock trades near its lows.

L’Occitane (973 HK): Controlling Shareholder Mulling a Bid?

L’Occitane (973 HK) is drawing takeover interest from Reinold Geiger, the Chairman and the largest shareholder, according to Bloomberg. Mr Geiger has been exploring financing options for the potential deal.
The presence of a significant disinterested shareholder, Acatis KVG, necessitates an attractive takeover premium. Acatis KVG trimmed its stake in July 2021 at HK$30.01 per share.
L’Occitane released a solid 1QFY2024 update today with constant currency growth of 24.5% YoY. Irrespective of a bid materialising, the valuation is undemanding compared to peer multiples.

KOSPI Size Indices – Plenty of Overlap With Other Index Flows

The review period for the September rebalance of the KOSPI Size Indices started 1 June and will end 31 August. The changes will be implemented at the close 7 September.
We see 8 migrations from MidCap to LargeCap, 7 migrations from LargeCap to MidCap, 6 new adds to MidCap, and 16 migrations from SmallCap to MidCap.
Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.

NTT (9432) – LDP Consideration of Full Sale Is Not Necessarily Overhang

Six weeks ago, LDP Policy Research Council chairman KAGIUDA led a discussion about full NTT privatisation to fund defence. Today he said serious deliberations begin in August. Shares fell today.
The LDP wants non-tax resources to increase defence/social spending. Selling would require a change in NTT Law, but the argument is that communications have changed/internationalised.
As discussed in NTT (9432 JP) – Would the Govt Sell All Its Shares? Why? How? How Long? Overhang?, there are questions on overhang. BUT… presumably there are mitigants.

KRX New Deal Index Rebalance Preview: Review Period Nearly Complete

The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
There is one change currently for each of the Secondary Battery, Bio and Game indices. Then there are a couple of changes for the Internet and BBIG indices.
There are four stocks that will have over 2 days of ADV to trade from passive trackers and these stocks could move around announcement of the changes.

India – Potential Float Changes & Impact

Over the last few weeks, companies in India have been disclosing their shareholding pattern as of end-June. There are a few companies with significant float changes from end-March and/or end-December.
The changes in free float could be reflected in domestic and global indices over the next couple of months resulting in action from passive trackers.
We see 6 stocks where there could be passive inflows and 2 stocks that could have passive outflows – but there are caveats.

An Update on Medtronic’s Tender Offer of Eoflow

In this insight, we provide an update of Medtronic’s tender offer of Eoflow.
The foreign ownership of Eoflow has surged in the past two months from 6.5% on 25 May to 33.2% as of 24 July.
We continue to believe that there is 95%+ probability of this M&A getting completed at the tender offer price of 30,000 won and Eoflow eventually becoming delisted in 2H 2023.

Seeking Clues for a Preemptive Position in the Korean Local Block Deal Market in H2