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Most Read

Jul 15
0

Most Read: Foxconn Industrial Internet, HDFC Bank, Plus Alpha Consulting, Ecopro Co Ltd, Fast Retailing, Canon Inc, IMAX China Holding, Kum Yang, ALT Semicon and more

By | Daily Briefs, Most Read

In today’s briefing:

  • SSE50 Index Rebalance Preview: Potential Adds Powering Higher
  • Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex
  • Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion
  • Korea – A Look at Ecopro, Kumyang & JYP Entertainment
  • Fast Retailing UPs Forecasts, Which Creates A Sell/Short Opportunity
  • Canon (7751) Buyback Almost Done, TPX Selldown to Come = Trade Vs Ricoh or Basket
  • IMAX China (1970 HK): IMAX Corp’s Privatisation Offer
  • KRX’s Revised CFD Oversight Guidelines & Ongoing Suspicious Incidents
  • A Deep Dive on China Macro – The RMB
  • ALT Co IPO Bookbuilding Results Analysis

SSE50 Index Rebalance Preview: Potential Adds Powering Higher

By Brian Freitas

  • Two thirds of the way through the review period, we see 10 potential adds/8 potential deletes in December. However, there can be a maximum of 5 changes at a review.
  • We estimate a one-way turnover of 5.8% at the December rebalance leading to a one-way trade of CNY 4.67bn. Index arb balances could increase the impact on the stocks.
  • The potential adds have outperformed the potential deletes over the last six months and there has been renewed outperformance over the last month.

Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex

By Brian Freitas

Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion

By Travis Lundy

  • Plus Alpha Consulting (4071 JP) listed on TSE Growth at end-June 2021 at ¥2300/share, which was 90x the trailing fiscal year’s earnings. but only about 65x then-current year earnings.
  • The stock popped 20+% on Day 1 to close ¥2803. Last Friday, two years and 13% higher at ¥3185/share, the company announced a Secondary Offering and move to TSE Prime.
  • It’s a big offering. It’s a smaller TOPIX inclusion event. Next spring we’ll see more upweights.  

Korea – A Look at Ecopro, Kumyang & JYP Entertainment

By Brian Freitas

Fast Retailing UPs Forecasts, Which Creates A Sell/Short Opportunity

By Travis Lundy

  • Fast Retailing (9983 JP) investors are in a conundrum. The stock is doing well. With one quarter to go, the company just raised its full-year EPS target by 8.3%.
  • It also raised its H2 dividend by 20+% so the full-year div will be more than 20% higher than previously forecast and up 35+% since last year. All good. 
  • Except for the selling. Potentially lots of selling. And more outperformance begets more selling. Then even more selling in 2024. And 2025? What about 2025? More outperformance begets more selling.

Canon (7751) Buyback Almost Done, TPX Selldown to Come = Trade Vs Ricoh or Basket

By Travis Lundy

  • Canon Inc (7751 JP) announced a second buyback this fiscal year on 15 June. As discussed here previously, Canon buybacks are short, sharp, and sweet. 
  • The recent one should be done imminently (15 May start ended 13 July). 16 June start? (Note: Canon reports buyback results at 3pm local time, and did not report today).
  • This time we have a double-setup with buyback ending and a large TOPIX sell on Canon on 28 July. 

IMAX China (1970 HK): IMAX Corp’s Privatisation Offer

By Arun George

  • IMAX China Holding (1970 HK) disclosed a scheme privatisation offer from IMAX Corp (IMAX US) at HK$10.00 per share, a 39.5% premium to the undisturbed price (HK$7.17 on 10 July).
  • 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. 
  • The offer price is final. While the offer price is light compared to peer multiples and historical share prices, the deal will likely succeed. 

KRX’s Revised CFD Oversight Guidelines & Ongoing Suspicious Incidents

By Sanghyun Park

  • The important point is that the regulations also incorporate a provision mandating the disclosure of the actual end traders’ identities when brokerages engage in CFD transactions disguised as proprietary trading.
  • Recent suspicious incidents raise concerns because they are carried out through brokerages’ proprietary trading practices, making them relatively more difficult for local regulatory authorities to detect and monitor.
  • We need to closely monitor the market’s abnormal volatility following the strengthened new rules on CFDs and carefully consider the setup for responding to these changes.

A Deep Dive on China Macro – The RMB

By Jacob Cheng

  • The RMB has undergone significant changes in its history, evolving into a currency with increasing influence on global financial markets
  • RMB has significant impact on China’s economy, mainly through the trade balance (export/import) and its impact on outbound tourism
  • China has made key steps regarding internationalization of the currency, however, full internationalization is dependent on further financial market liberalization and opening up of the capital account.

ALT Co IPO Bookbuilding Results Analysis

By Douglas Kim

  • ALT’s IPO price has been determined a 25,000 won, which is 22% higher than the high end of the IPO price range.
  • A total of 1,937 institutional investors participated in the IPO offering with a competition demand ratio of 1,836 to 1.
  • Our base case valuation of ALT is market cap of 299 billion won or 33,365 won per share, which represents 33% higher than the IPO price range of 25,000 won.

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Jul 14
0

Most Read: Celltrion Inc, Rakuten Group , Ecopro Co Ltd, Canon Inc, IMAX China Holding, Fast Retailing, Patanjali Foods, Tryt Inc and more

By | Daily Briefs, Most Read

In today’s briefing:

  • The Fast Retailing (9983) Selldown Conundrum – Not Now, But Soon… Then For A Long Time
  • Celltrion Merger Announcement in July: Trading Angles Utilizing Appraisal Rights Exercise Dynamics
  • July TOPIX FFW Rebal – Bigger Than Expected
  • Korea – A Look at Ecopro, Kumyang & JYP Entertainment
  • Canon (7751) Buyback Almost Done, TPX Selldown to Come = Trade Vs Ricoh or Basket
  • IMAX China (1970 HK): Parent Privatisation
  • Fast Retailing UPs Forecasts, Which Creates A Sell/Short Opportunity
  • Patanjali Foods FPO – Very Well Flagged with a Decent Discount
  • Ohayo Japan| Lower Rates, Higher Stocks; Crypto Optimism; NUGGET: Hydrogen Future – KHI(7012)Revisit
  • TRYT IPO: Valuation Updates

The Fast Retailing (9983) Selldown Conundrum – Not Now, But Soon… Then For A Long Time

By Travis Lundy

  • Fast Retailing (9983 JP) announced Q2 earnings two weeks ago. Revenues were good. OP was good. And the company raised full-year forecasts for Sales, OP, Pre-tax, and Net Profit.
  • The stock popped sharply. It isn’t “cheap” but it is under-owned, actively. And revenues up 20%yoy is a very good look.  
  • The Conundrum: the more active investors decide they like it, the more there is to sell. That creates interesting opportunities.

Celltrion Merger Announcement in July: Trading Angles Utilizing Appraisal Rights Exercise Dynamics

By Sanghyun Park

  • According to Invest Chosun, Celltrion plans to submit a merger registration statement to the KRX in July, with Mirae Asset Securities acting as the lead underwriter.
  • Given that the approximate timing of the merger registration statement submission has already been exposed to the market, we can track the difference between the spot and exercise prices.
  • Celltrion Inc will likely attempt to minimize the appraisal rights price. We can consider capitalizing on this possibility by shorting Celltrion Inc while going long on the other two companies.

July TOPIX FFW Rebal – Bigger Than Expected

By Travis Lundy

  • Last Friday, the FFW changes for the TOPIX July Free Float Weight Review were announced. There have also been other recent announcements creating flows on 30 July.
  • Some of these other recent announcements represent a possible change in ad hoc methodology.
  • Total Flow for 30 July is ~$3.3bn a side driven by selling flows (3/4 of the buy flows are reverse funding). $2.1bn of selling is > 3 days ADV.

Korea – A Look at Ecopro, Kumyang & JYP Entertainment

By Brian Freitas

Canon (7751) Buyback Almost Done, TPX Selldown to Come = Trade Vs Ricoh or Basket

By Travis Lundy

  • Canon Inc (7751 JP) announced a second buyback this fiscal year on 15 June. As discussed here previously, Canon buybacks are short, sharp, and sweet. 
  • The recent one should be done imminently (15 May start ended 13 July). 16 June start? (Note: Canon reports buyback results at 3pm local time, and did not report today).
  • This time we have a double-setup with buyback ending and a large TOPIX sell on Canon on 28 July. 

IMAX China (1970 HK): Parent Privatisation

By David Blennerhassett

  • This morning (13 July), IMAX China Holding (1970 HK) announced a take-private transaction from its parent IMAX Corp (IMAX US) at HK$10/share.
  • The Offer price is a 9.65% premium to last close but a 39.47% premium over the closing price on the last full trading day. Evidently, there was news leakage.
  • IMAX US holds  71.63% in IMAX China, therefore the blocking stake at the Schene Meeting is 2.837% of shares out. 

Fast Retailing UPs Forecasts, Which Creates A Sell/Short Opportunity

By Travis Lundy

  • Fast Retailing (9983 JP) investors are in a conundrum. The stock is doing well. With one quarter to go, the company just raised its full-year EPS target by 8.3%.
  • It also raised its H2 dividend by 20+% so the full-year div will be more than 20% higher than previously forecast and up 35+% since last year. All good. 
  • Except for the selling. Potentially lots of selling. And more outperformance begets more selling. Then even more selling in 2024. And 2025? What about 2025? More outperformance begets more selling.

Patanjali Foods FPO – Very Well Flagged with a Decent Discount

By Sumeet Singh

  • The promoters of Patanjali Foods aim to sell up to 9% of the company via an FPO. 
  • The sale is being done so as to increase the firm’s public shareholding to the minimum required 25% imposed by SEBI.
  • We have looked at the background of the deal in our earlier note, in this note we talk about the recent update and run the deal through our ECM framework.

Ohayo Japan| Lower Rates, Higher Stocks; Crypto Optimism; NUGGET: Hydrogen Future – KHI(7012)Revisit

By Mark Chadwick

  • OVERSEAS.  Disinflation Trade on as US PPI provides more tailwinds; Rates, USD Fall; Equites rally, More China Stimulus Coming ? Ripple resolution spurs Crypto bid; AI Wars: Meta Updates BARD
  • JAPAN. Nikkei Futures +1% vs Cash; USDJPY 138; Set for Beta bid in Stocks; Blow out Fast Retailing numbers; Barclays see Sept BOJ tweek; Bullish Bank Initiations from UBS
  • NUGGET.  Hydrogen is a key part of JP Govt carbon zero strategy. We see KHI(7012) as a Hydrogen winner and see the recent pullback as a good entry opportunity

TRYT IPO: Valuation Updates

By Shifara Samsudeen, ACMA, CGMA

  • TRYT has priced its IPO at ¥1,200 per share, at the midpoint of the indicative IPO price range, at a market capitalisation and post-money EV of ¥120bn and ¥151.6bn respectively.
  • In our previous insight, we compared the company’s implied trailing multiples with peer trailing multiples and concluded that TRYT’s IPO is overvalued at the above price range.
  • In this insight, we have discussed our forecasts for Tryt Inc (9164 JP) and updated our valuation for the company.

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Jul 13
0

Most Read: JSR Corp, Celltrion Inc, Liontown Resources, Cameco Corp, Plus Alpha Consulting, Rakuten Group , Shougang Fushan Resources, Genda Inc, Ecopro Co Ltd and more

By | Daily Briefs, Most Read

In today’s briefing:

  • JSR (4185 JP) Takeover – Why So Wide? FUD and Flows
  • Celltrion Group Merger Announcement in July & Oversold Post Disappointing Exclusion by OptumRX?
  • S&P/​​​​​​​​ASX Index Rebalance Preview: Potential Changes in September
  • Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes
  • Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion
  • July TOPIX FFW Rebal – Bigger Than Expected
  • Shougang Fushan Resources (639 HK): Partial Offer at HK$2.40
  • Genda IPO – Dreams of Reviving the Domestic Arcade Industry with a Roadmap of Doing so as Well
  • Korea – A Look at Ecopro, Kumyang & JYP Entertainment
  • Ohayo Japan| Fed Job Done-Inflation Over, Stocks Rally; NUGGET: BayCurrent – To Leap from DX to AI ?

JSR (4185 JP) Takeover – Why So Wide? FUD and Flows

By Travis Lundy

  • In the last week of June, Japanese government-affiliated Japan Investment Corp (“JIC”) announced it would take over JSR Corp (4185 JP). A “surprise” but perhaps not totally. 
  • It traded tight, then it traded back out. Then worse. Then worse again. There were good reasons for this. There were perhaps less good reasons too. 
  • FUD and Flows mean that it is likely to continue to trade wide for the near future.

Celltrion Group Merger Announcement in July & Oversold Post Disappointing Exclusion by OptumRX?

By Douglas Kim

  • Invest Chosun recently reported that the three Celltrion Group companies including Celltrion Inc, Celltrion Healthcare, and Celltrion Pharm are close to announcing a merger in July.
  • Although Celltrion was not included this time as suppliers of Humira biosimilar products by OptumRX, there is still a potential for Cigna Express Scripts to include Celltrion’s product this year.
  • We think Celltrion Inc and Celltrion Healthcare’s share prices are oversold. 

S&P/​​​​​​​​ASX Index Rebalance Preview: Potential Changes in September

By Brian Freitas

  • We forecast 22 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
  • Some of the changes are high probability while others are close to cutoffs. The impact of passive trading will be pretty large on a lot of stocks.
  • Short interest on the potential deletes indicates some pre-positioning but there should still be a fair bit more to do.

Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes

By Brian Freitas

  • Based on prices and turnover from 10 July, there could be one deletion from the index in July. Plus there will be capping and float changes.
  • There are four stocks that meet the inclusion criteria but all are non-pure play companies and the index is already at the limit of 15 non-pure play companies.
  • There will be a large impact on a lot of stocks but the flows are not very large due to the limited assets tracking the index.

Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion

By Travis Lundy

  • Plus Alpha Consulting (4071 JP) listed on TSE Growth at end-June 2021 at ¥2300/share, which was 90x the trailing fiscal year’s earnings. but only about 65x then-current year earnings.
  • The stock popped 20+% on Day 1 to close ¥2803. Last Friday, two years and 13% higher at ¥3185/share, the company announced a Secondary Offering and move to TSE Prime.
  • It’s a big offering. It’s a smaller TOPIX inclusion event. Next spring we’ll see more upweights.  

July TOPIX FFW Rebal – Bigger Than Expected

By Travis Lundy

  • Last Friday, the FFW changes for the TOPIX July Free Float Weight Review were announced. There have also been other recent announcements creating flows on 30 July.
  • Some of these other recent announcements represent a possible change in ad hoc methodology.
  • Total Flow for 30 July is ~$3.3bn a side driven by selling flows (3/4 of the buy flows are reverse funding). $2.1bn of selling is > 3 days ADV.

Shougang Fushan Resources (639 HK): Partial Offer at HK$2.40

By Arun George

  • Shougang Fushan Resources (639 HK) has launched a partial offer to acquire a maximum of 125.0m shares (2.47% of outstanding) at HK$2.40 per share, a 17.6% premium to the undisturbed price.
  • The partial offer is conditional on approval by more than 50% of disinterested shares and the shareholder approval of the whitewash waiver. There is no minimum acceptance condition.
  • The 2020 partial offer, which was at a 9.3% premium to the undisturbed price and -17% below the current offer, was overwhelmingly approved. Therefore, the current offer should be approved.  

Genda IPO – Dreams of Reviving the Domestic Arcade Industry with a Roadmap of Doing so as Well

By Clarence Chu

  • Genda Inc (9166 JP) is looking to raise around US$100m in its Japan IPO.
  • Genda develops and operates amusement facilities in Japan, primarily operating under its Genda GiGO Entertainment subsidiary.
  • As of Apr 23, the firm operated 250 amusement facilities domestically and four facilities in Taiwan. 

Korea – A Look at Ecopro, Kumyang & JYP Entertainment

By Brian Freitas

Ohayo Japan| Fed Job Done-Inflation Over, Stocks Rally; NUGGET: BayCurrent – To Leap from DX to AI ?

By Mark Chadwick

  • OVERSEAS.  Fed job done; Inflation over- Stocks, Bonds Rally, USD falls; China new June new Credit growth accelerates- spurs Resources; Musk launches xAI ; Big Broker Upgrade to Euro Semi
  • JAPAN. NKY Futures +0.3% vs Cash; USDJPY 138.5; US CPI print drives yen strength – headwind to stocks; PayPay to list in US ?  GS Ups Sony to Conviction BUY
  • NUGGET. DX Consultant BayCurrent to report on Friday – Generative AI boom the next driver ?

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Jul 12
0

Most Read: JSR Corp, Socionext, LG Energy Solution, Liontown Resources, Plus Alpha Consulting, Cameco Corp, Chindata Group and more

By | Daily Briefs, Most Read

In today’s briefing:

  • LG Chem: Considering a Block Deal Sale of About 2 Trillion Won of LG Energy Solution: A Big Overhang
  • JSR (4185 JP) Takeover – Why So Wide? FUD and Flows
  • Socionext (6526 JP): The Current Playbook
  • LG Energy – Quick Thoughts on US$2bn EB Offering by Parent
  • S&P/​​​​​​​​ASX Index Rebalance Preview: Potential Changes in September
  • LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion
  • LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations
  • Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion
  • Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes
  • Chindata: Bain’s Move Spurs China Merchants Into Action

LG Chem: Considering a Block Deal Sale of About 2 Trillion Won of LG Energy Solution: A Big Overhang

By Douglas Kim

  • After the market close on 16 June, it was reported in the local media that LG Chem is close to selling about 2 trillion won worth of LG Energy Solution.
  • This block deal sale is likely to pose overhang on more stake sales of LG Energy Solution (about 10% stake) in the next 3-5 years.
  • Our NAV valuation analysis of LG Chem suggests an implied price of 1,057,770 won per share, which is 41% higher than current share price.

JSR (4185 JP) Takeover – Why So Wide? FUD and Flows

By Travis Lundy

  • In the last week of June, Japanese government-affiliated Japan Investment Corp (“JIC”) announced it would take over JSR Corp (4185 JP). A “surprise” but perhaps not totally. 
  • It traded tight, then it traded back out. Then worse. Then worse again. There were good reasons for this. There were perhaps less good reasons too. 
  • FUD and Flows mean that it is likely to continue to trade wide for the near future.

Socionext (6526 JP): The Current Playbook

By Arun George

  • Since the announcement of the US$1.9 billion secondary placement, Socionext (6526 JP)’s shares are down -25.0% from the undisturbed price of JPY21,950 per share (5 July).
  • So far, Socionext’s shares have mostly followed the pattern of previous large placements. Investors participating in previous large Japanese placements tend to secure positive returns.
  • The offering will likely be priced on 11 July. Due to the steep share price decline, Socionext is trading at an undemanding multiple compared to global SoC peers.  

LG Energy – Quick Thoughts on US$2bn EB Offering by Parent

By Sumeet Singh

  • LG Chem Ltd (051910 KS) aims to raise around US$2bn via offering 2028 and 2030 puttable USD exchangeable bonds for LG Energy Solution (373220 KS) shares.
  • LG Chem (LGC) had been rumoured to sell down some of its stake in LG Energy Solutions (LGES), hence, this deal will remove the overhang on LGES.
  • In this note, we have a quick look at the deal and provide our thoughts on the structure.

S&P/​​​​​​​​ASX Index Rebalance Preview: Potential Changes in September

By Brian Freitas

  • We forecast 22 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
  • Some of the changes are high probability while others are close to cutoffs. The impact of passive trading will be pretty large on a lot of stocks.
  • Short interest on the potential deletes indicates some pre-positioning but there should still be a fair bit more to do.

LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion

By Douglas Kim

  • On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion to raise funs to expansion into its rechargeable battery materials. 
  • Investors in LG Energy Solution will likely have a more positive view of this EB issue rather than a block sale of common shares, because of lack of price discount.
  • We believe LG Chem is not done in selling its shares of LGES as we think LG Chem is likely to sell additional 5-10% stake in LGES in 3-5 years. 

LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations

By Sanghyun Park

  • The exchange prices are ₩687,500 and ₩715,000 at a premium of 25-30% to the closing price of LG Energy Solution today.
  • The commencement date for both the 5-year and 7-year bonds’ exchange is August 28th.
  • We should design a strategic setup that targets a band play within the current price range and the low ₩700,000 range.

Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion

By Travis Lundy

  • Plus Alpha Consulting (4071 JP) listed on TSE Growth at end-June 2021 at ¥2300/share, which was 90x the trailing fiscal year’s earnings. but only about 65x then-current year earnings.
  • The stock popped 20+% on Day 1 to close ¥2803. Last Friday, two years and 13% higher at ¥3185/share, the company announced a Secondary Offering and move to TSE Prime.
  • It’s a big offering. It’s a smaller TOPIX inclusion event. Next spring we’ll see more upweights.  

Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes

By Brian Freitas

  • Based on prices and turnover from 10 July, there could be one deletion from the index in July. Plus there will be capping and float changes.
  • There are four stocks that meet the inclusion criteria but all are non-pure play companies and the index is already at the limit of 15 non-pure play companies.
  • There will be a large impact on a lot of stocks but the flows are not very large due to the limited assets tracking the index.

Chindata: Bain’s Move Spurs China Merchants Into Action

By David Blennerhassett

  • My read of Bain’s Offer last month, was a tactic to flesh out a competing Offer.  It seemed unlikely Bain would get the regulatory approval to take Chindata (CD US) private. 
  • Now state-backed China Merchants Capital Holdings International Ltd. has made a non-binding offer of $9.20/ADS, compared to $8/ADS from Bain.
  • This Offer is indicative. But an SOE taking over data centres makes a lot of sense. 

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Jul 11
0

Most Read: HDFC Bank, Socionext, Alibaba Group Holding , Plus Alpha Consulting, Eoptolink Technology Inc Ltd, JSR Corp, Kelun Biotech, Liontown Resources and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Socionext Placement – Valuation More Reasonable but past Secondary Offerings Have a Mixed Record
  • Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex
  • Socionext (6526 JP): The Current Playbook
  • Ant Group’s $6.0bn Buyback Move Casts Doubt on IPO Prospects
  • Plus Alpha Consulting Placement – Pulling Out All Stops for Deal Success as Insiders Are Selling
  • ChiNext/​​​ChiNext50 Index Rebalance Preview: Potential Changes & Basket Performance
  • TOPIX Inclusions: Who Is Ready (Jul 2023)
  • JSR (4185 JP) Takeover – Why So Wide? FUD and Flows
  • Kelun-Biotech (科伦博泰) IPO Trading: Lukewarm Demand but Peers Have Done Well Recently
  • S&P/​​​​​​​​ASX Index Rebalance Preview: Potential Changes in September

Socionext Placement – Valuation More Reasonable but past Secondary Offerings Have a Mixed Record

By Sumeet Singh

Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex

By Brian Freitas

Socionext (6526 JP): The Current Playbook

By Arun George

  • Since the announcement of the US$1.9 billion secondary placement, Socionext (6526 JP)’s shares are down -25.0% from the undisturbed price of JPY21,950 per share (5 July).
  • So far, Socionext’s shares have mostly followed the pattern of previous large placements. Investors participating in previous large Japanese placements tend to secure positive returns.
  • The offering will likely be priced on 11 July. Due to the steep share price decline, Socionext is trading at an undemanding multiple compared to global SoC peers.  

Ant Group’s $6.0bn Buyback Move Casts Doubt on IPO Prospects

By Oshadhi Kumarasiri

  • China’s regulators on Friday imposed Ant Financial Services Group (6688 HK) with a fine of RMB 7.12bn. A day later, Ant Group unveiled a share buyback program worth $6bn.
  • The last time media created a positive narrative around Ant Group was in January 2023 when Jack Ma relinquished control of the company.
  • However, the media excitement was short-lived as Alibaba Group Holding (9988 HK)‘s share price quickly resumed a downward trend after rising by around 22%.

Plus Alpha Consulting Placement – Pulling Out All Stops for Deal Success as Insiders Are Selling

By Sumeet Singh

  • Three shareholders of Plus Alpha Consulting (4071 JP) (PAC) aim to raise around US$230m via selling over 26% of the company.
  • PAC was listed in 2021 and after a somewhat tepid initial performance it has been doing well over the past year.
  • In this note, we talk about the deal dynamics and run the deal through our ECM framework

ChiNext/​​​ChiNext50 Index Rebalance Preview: Potential Changes & Basket Performance

By Brian Freitas

  • One third of the way through the review period, we forecast 10 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in December.
  • Passive trackers are estimated to trade around +/-0.5 days ADV on most of the potential adds/deletes, though there are some deletes that will have over 1 day ADV to sell.
  • The potential inclusion to one or both indices have outperformed the potential deletes by a huge margin in the 5 months. We’d wait for a pullback to re-enter positions.

TOPIX Inclusions: Who Is Ready (Jul 2023)

By Janaghan Jeyakumar, CFA

  • Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
  • Anycolor (5032 JP) and Lifedrink (2585 JP) have already confirmed their moves to the Prime Market and are expected to have TOPIX Inclusion Events at the end of July 2023.
  • More recently, Plus Alpha Consulting (4071 JP) announced their move to the Prime Market and are likely to have a TOPIX Inclusion Event at the end of August 2023.

JSR (4185 JP) Takeover – Why So Wide? FUD and Flows

By Travis Lundy

  • In the last week of June, Japanese government-affiliated Japan Investment Corp (“JIC”) announced it would take over JSR Corp (4185 JP). A “surprise” but perhaps not totally. 
  • It traded tight, then it traded back out. Then worse. Then worse again. There were good reasons for this. There were perhaps less good reasons too. 
  • FUD and Flows mean that it is likely to continue to trade wide for the near future.

Kelun-Biotech (科伦博泰) IPO Trading: Lukewarm Demand but Peers Have Done Well Recently

By Ke Yan, CFA, FRM

  • Kelun-Biotech raised HKD 1,259m (USD 161m) from its global offering and will list on the Hong Kong Stock Exchange on Tuesday, July 10th.
  • In our previous note, we looked at the company’s business lines of ADC products. We were of the view that the IPO is fairly priced, at best.
  • In this note, we provide an update for the IPO before trading debut.

S&P/​​​​​​​​ASX Index Rebalance Preview: Potential Changes in September

By Brian Freitas

  • We forecast 22 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
  • Some of the changes are high probability while others are close to cutoffs. The impact of passive trading will be pretty large on a lot of stocks.
  • Short interest on the potential deletes indicates some pre-positioning but there should still be a fair bit more to do.

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Jul 10
0

Most Read: Samsonite, Li Auto, Socionext, HDFC Bank, Alibaba Group Holding , JSR Corp and more

By | Daily Briefs, Most Read

In today’s briefing:

  • HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
  • Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?
  • Socionext Placement – Valuation More Reasonable but past Secondary Offerings Have a Mixed Record
  • Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex
  • Semiconductor Events Deserving Your Attention @ 9/7/23
  • Ant Group’s $6.0bn Buyback Move Casts Doubt on IPO Prospects
  • Ohayo Japan | Weak Payrolls=Lower Rates; Weaker USD; NUGGET:Heat Pumps-The Future of Cooling/Heating
  • Merger Arb Mondays (10 Jul) – JSR, Yachiyo, InvoCare, Costa, Musgrave, Metro Pacific, Healthway
  • ECM Weekly (9th July 2023) – Socionext, Yongtai, Tryt, Redox, S.F. Holding, Lalatech, Fadu, Amman
  • Japan Screen | Nikkei Dividend Stocks

HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies

By Brian Freitas

  • Hang Seng Indexes has started a consultation on the eligibility of Foreign Companies in the Hang Seng Index, a review of the seven Industry Groups and number of HK constituents.
  • We agree that foreign companies should be added to the index, no change needed to the Industry Groups, and the cap on the number of HK constituents should be removed.
  • There are a few potential adds due to the removal of the cap on HK companies, while there are potential foreign company additions later this year or in 2024.

Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?

By Brian Freitas

  • We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
  • The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
  • We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.

Socionext Placement – Valuation More Reasonable but past Secondary Offerings Have a Mixed Record

By Sumeet Singh

Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex

By Brian Freitas

Semiconductor Events Deserving Your Attention @ 9/7/23

By William Keating

  • Global semiconductor sales amounted to $40.7 billion in May’23. This represented an increase of 1.7% MoM and a 21.1% decline on a year-ago basis
  • Samsung pre-announces Q2’23 sales and operating profit slightly down sequentially
  • HMB3 standard launched. SK Hynix wins a critical HMB3 design win at NVIDIA

Ant Group’s $6.0bn Buyback Move Casts Doubt on IPO Prospects

By Oshadhi Kumarasiri

  • China’s regulators on Friday imposed Ant Financial Services Group (6688 HK) with a fine of RMB 7.12bn. A day later, Ant Group unveiled a share buyback program worth $6bn.
  • The last time media created a positive narrative around Ant Group was in January 2023 when Jack Ma relinquished control of the company.
  • However, the media excitement was short-lived as Alibaba Group Holding (9988 HK)‘s share price quickly resumed a downward trend after rising by around 22%.

Ohayo Japan | Weak Payrolls=Lower Rates; Weaker USD; NUGGET:Heat Pumps-The Future of Cooling/Heating

By Mark Chadwick

  • OVERSEAS.  SPX -0.3% and down WoW; Weak Payrolls numbers lead to fall in US 2Yr to 4.95%, USD weakness;  This week – packed schedule with CPI; Watch Bank earnings
  • JAPAN. NKY Futs flat vs Cash; USDJPY 142.2, on weaker US payrolls;   JP companies struggle to lift ROE due to expanding Equity Base (=more buybacks?); Kishida to reshuffle cabinet
  • NUGGET. Heat Pumps – A Big Deal for Daikin(6367)/Melco(6503).  A large addressable, and growing market, and great for the environment. Yes, you should get excited!

Merger Arb Mondays (10 Jul) – JSR, Yachiyo, InvoCare, Costa, Musgrave, Metro Pacific, Healthway

By Arun George

ECM Weekly (9th July 2023) – Socionext, Yongtai, Tryt, Redox, S.F. Holding, Lalatech, Fadu, Amman

By Sumeet Singh

  • 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, Tryt Inc (9164 JP) announced a somewhat reasonable pricing range, while Fadu (440110 KS) looks to open up the Korean market for larger IPOs again.
  • On the placement front,  Socionext (6526 JP) found itself in the eye of a storm after its stupendous 6x increase since listing.

Japan Screen | Nikkei Dividend Stocks

By Mark Chadwick

  • The Nikkei has recently launched two new equity indices for investors that are focused on dividends.
  • We highlight some similarities and differences with the well-known US S&P 500 Dividend Aristocrats Index
  • We carry out a quick and simple screen of the Nikkei constituents to find the best dividend stocks to buy

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Jul 09
0

Most Read: Socionext, Samsonite, Li Auto, BeiGene Ltd, Shanghai United Imaging Healthcare, Eoptolink Technology Inc Ltd, Foxconn Industrial Internet, ALT Semicon, HDFC Bank and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float
  • HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
  • Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?
  • HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
  • CSI300 Index Rebalance Preview: Early Look at Potential Changes in December
  • CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes
  • SSE50 Index Rebalance Preview: Potential Adds Powering Higher
  • Japan Weekly | Kawasaki Kisen, Z Holdings, Rakuten, Uniqlo, Yaskawa
  • ALT Co IPO Valuation Analysis
  • Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex

Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float

By Travis Lundy

  • Today after the close, SoC and market darling Socionext (6526 JP) announced that DBJ, Fujitsu, and Panasonic would offer the remaining shares they in a US$1.8bn secondary offering.
  • Pshaw…. that’s only 2.5 days of 20-day ADV… Not a lot. But in fact, that is a LOT of stock. 
  • I harp on understanding shareholder structure. I think it worthwhile. Here it matters too.

HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies

By Brian Freitas

  • Hang Seng Indexes has started a consultation on the eligibility of Foreign Companies in the Hang Seng Index, a review of the seven Industry Groups and number of HK constituents.
  • We agree that foreign companies should be added to the index, no change needed to the Industry Groups, and the cap on the number of HK constituents should be removed.
  • There are a few potential adds due to the removal of the cap on HK companies, while there are potential foreign company additions later this year or in 2024.

Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?

By Brian Freitas

  • We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
  • The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
  • We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.

HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds

By Brian Freitas

CSI300 Index Rebalance Preview: Early Look at Potential Changes in December

By Brian Freitas

  • Two thirds of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
  • We estimate a one-way turnover of 1.98% at the December rebalance leading to a one-way trade of CNY 5.32bn.
  • The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last five months, though there is some near-term underperformance.

CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes

By Brian Freitas

  • Two thirds of the way through the review period for the June 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 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.
  • The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.

SSE50 Index Rebalance Preview: Potential Adds Powering Higher

By Brian Freitas

  • Two thirds of the way through the review period, we see 10 potential adds/8 potential deletes in December. However, there can be a maximum of 5 changes at a review.
  • We estimate a one-way turnover of 5.8% at the December rebalance leading to a one-way trade of CNY 4.67bn. Index arb balances could increase the impact on the stocks.
  • The potential adds have outperformed the potential deletes over the last six months and there has been renewed outperformance over the last month.

Japan Weekly | Kawasaki Kisen, Z Holdings, Rakuten, Uniqlo, Yaskawa

By Mark Chadwick

  • Japanese stocks headed lower this week, tracking weaker US stocks. 
  • With a bout of profit-taking, we are also seeing some rotation out of high-valuation, strong momentum stocks into “cheap” laggards. 
  • Marine transportation stocks the big winners this week. Investors love those high dividends and low PBs

ALT Co IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of ALT is 33,365 won per share, which represents 63% higher than the high end of the IPO price range of 20,500 won.
  • We estimate the company to generate sales of 69.7 billion won (up 57.3% YoY) in 2023 and 92.2 billion won (up 32.3% YoY) in 2024.
  • ALT’s main business is in the testing of non-memory semiconductor value chain products including Display Drive IC, CMOS image sensor, and Power Management IC.

Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex

By Brian Freitas

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Jul 08
0

Most Read: Socionext, Li Auto, S.F. Holding, BeiGene Ltd, Samsung Heavy Industries Pref, Hyundai Green Food, LG Uplus Corp and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float
  • Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?
  • Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains
  • HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
  • SF Holdings A/H Listing – Early Look – Front Running
  • Quiddity Leaderboard for Hang Seng Index Sep 23: Beigene Vs Peers An Interesting Trade
  • Delisting of 5 Korean Preferred Stocks on 17 July
  • Hyundai G.F. Holdings’ Stock Swap with Hyundai Green Food & Hyundai Dept Store
  • The Rise of the Fourth Telco in Korea – Breaking the Oligopoly
  • Hong Kong Buybacks Weekly (Jul 7th): Tencent, AIA, Kuaishou Technology

Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float

By Travis Lundy

  • Today after the close, SoC and market darling Socionext (6526 JP) announced that DBJ, Fujitsu, and Panasonic would offer the remaining shares they in a US$1.8bn secondary offering.
  • Pshaw…. that’s only 2.5 days of 20-day ADV… Not a lot. But in fact, that is a LOT of stock. 
  • I harp on understanding shareholder structure. I think it worthwhile. Here it matters too.

Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?

By Brian Freitas

  • We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
  • The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
  • We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.

Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains

By Sumeet Singh

  • Three shareholders of Socionext (6526 JP) aim to raise around US$1.8bn via selling all of their shares in Socionext.
  • Socionext was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup expired in Apr 2023. Its shares are up 6x since listing.
  • In this note, we talk about the deal dynamics and run the deal through our ECM framework.

HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds

By Brian Freitas

SF Holdings A/H Listing – Early Look – Front Running

By Sumeet Singh

  • S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, aims to raise around US$2-3bn in its H-share listing in Hong Kong.
  • SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017
  • In this note, we look at its past performance and other deal dynamics that might impact the listing.

Quiddity Leaderboard for Hang Seng Index Sep 23: Beigene Vs Peers An Interesting Trade

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at some of the names with high likelihood of being involved in index changes for the Hang Seng Index in September 2023.
  • The index changes for the September 2023 rebalance could be announced in mid-August and implemented in early-September.
  • Although the index methodology is highly subjective and predicting index changes is extremely tricky, the HSI is an important index in the region and here are our thoughts for September. 

Delisting of 5 Korean Preferred Stocks on 17 July

By Douglas Kim

  • The Korea Exchange officially announced today that the following five preferred stocks will be delisted on 17 July.
  • These five stocks including Samsung Heavy Industries Pref, SK Networks Pref,  DB Hitek Pref, Hyundai BNG Steel Pref, and Heungkuk Fire & Marine Insurance Pref 2B fell sharply today.   
  • Despite the warning by the Korea Exchange since end of May, it was not until today that these five stocks dropped sharply. On average, these five stocks fell 44% today. 

Hyundai G.F. Holdings’ Stock Swap with Hyundai Green Food & Hyundai Dept Store

By Sanghyun Park

  • Hyundai G.F. Holdings will conduct a tender offer to Hyundai Green Food and Hyundai Dept Store shareholders. The tendering period is August 11-September 1.
  • The target volume is 10,125,700 (Hyundai Green Food) and 4,669,556 (Hyundai Dept Store), corresponding to 29.89% and 19.95% of the outstanding shares, respectively.
  • We should approach this event trading with caution, taking into account the risk of an unhedged setup while monitoring the potential widening of the spread opening during the tendering period.

The Rise of the Fourth Telco in Korea – Breaking the Oligopoly

By Douglas Kim

  • The Korean government announced today that it will allow a fourth telco in Korea in order to reduce the oligopoly structure dominated by the three existing telcos.
  • This decision to allow another telco in Korea will have a major negative impact on the existing three telcos in Korea.
  • On a relative basis, we think that this could have a worse impact than LG Uplus as compared to SK Telecom due to greater price sensitivity of LG Uplus’ customers.

Hong Kong Buybacks Weekly (Jul 7th): Tencent, AIA, Kuaishou Technology

By Ke Yan, CFA, FRM

  • We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Jul 7th based on HKEx daily reports.
  • In the past 7 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), AIA (1299 HK), Kuaishou Technology (1024 HK).
  • In the past 30 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), AIA (1299 HK), CK Asset (1113 HK).

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Jul 07
0

Most Read: Socionext, Yachiyo Industry, Samsung Heavy Industries Pref, BeiGene Ltd, Rakuten Group , JSW Steel Ltd, Tryt Inc, Hyundai Green Food and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float
  • Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains
  • Socionext (6526 JP): US$1.9bn Secondary Placement
  • And Now For Something Truly Offensive – Honda Pays <0.5x Book for Yachiyo
  • Delisting of 5 Korean Preferred Stocks on 17 July
  • Quiddity Leaderboard for Hang Seng Index Sep 23: Beigene Vs Peers An Interesting Trade
  • Rakuten Securities IPO: Promising Business with Valuation Caveats
  • SENSEX Ad Hoc Rebalance: JSW Steel Replaces HDFC
  • TRYT IPO: Revised IPO Price Range Remains Unattractive
  • Hyundai G.F. Holdings’ Stock Swap with Hyundai Green Food & Hyundai Dept Store

Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float

By Travis Lundy

  • Today after the close, SoC and market darling Socionext (6526 JP) announced that DBJ, Fujitsu, and Panasonic would offer the remaining shares they in a US$1.8bn secondary offering.
  • Pshaw…. that’s only 2.5 days of 20-day ADV… Not a lot. But in fact, that is a LOT of stock. 
  • I harp on understanding shareholder structure. I think it worthwhile. Here it matters too.

Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains

By Sumeet Singh

  • Three shareholders of Socionext (6526 JP) aim to raise around US$1.8bn via selling all of their shares in Socionext.
  • Socionext was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup expired in Apr 2023. Its shares are up 6x since listing.
  • In this note, we talk about the deal dynamics and run the deal through our ECM framework.

Socionext (6526 JP): US$1.9bn Secondary Placement

By Arun George

  • Socionext (6526 JP) announced a pure secondary offering of 12.6 million or 37.50% of outstanding shares. At the last close, the placement is worth JPY277 billion (US$1.9 billion)
  • The selling shareholders’ primary motivation for exiting their shareholding is to capitalise on the extraordinary share price. Socionext shares are up 6x from the IPO price of JPY3,650 per share.
  • We think looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 11 to 13 July (likely 11 July).

And Now For Something Truly Offensive – Honda Pays <0.5x Book for Yachiyo

By Travis Lundy

  • Every now and then, you get a tender offer proposal which is truly offensive. This is one. 
  • Yes, existing ICE-related autoparts makers are under the cosh as they face down obsolesence induced by competition from EVs. Fuel tank makers like Yachiyo are at risk. 
  • But this bid started at <0.3x book, and ended at <0.5x book, despite significant net financial assets and lots of unrecognised DTAs. 

Delisting of 5 Korean Preferred Stocks on 17 July

By Douglas Kim

  • The Korea Exchange officially announced today that the following five preferred stocks will be delisted on 17 July.
  • These five stocks including Samsung Heavy Industries Pref, SK Networks Pref,  DB Hitek Pref, Hyundai BNG Steel Pref, and Heungkuk Fire & Marine Insurance Pref 2B fell sharply today.   
  • Despite the warning by the Korea Exchange since end of May, it was not until today that these five stocks dropped sharply. On average, these five stocks fell 44% today. 

Quiddity Leaderboard for Hang Seng Index Sep 23: Beigene Vs Peers An Interesting Trade

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at some of the names with high likelihood of being involved in index changes for the Hang Seng Index in September 2023.
  • The index changes for the September 2023 rebalance could be announced in mid-August and implemented in early-September.
  • Although the index methodology is highly subjective and predicting index changes is extremely tricky, the HSI is an important index in the region and here are our thoughts for September. 

Rakuten Securities IPO: Promising Business with Valuation Caveats

By Oshadhi Kumarasiri

  • Yesterday, Rakuten Group (4755 JP) announced that its consolidated subsidiary, Rakuten Securities, has applied for a listing on the Tokyo Stock Exchange.
  • Rakuten Securities has long-term growth potential through leveraging Rakuten’s ecosystem for steady securities account growth and exploring cross-selling opportunities for related services.
  • While the business seems promising, there may be concerns regarding its valuation, given its previous high trailing PE of 43.0x.

SENSEX Ad Hoc Rebalance: JSW Steel Replaces HDFC

By Brian Freitas

TRYT IPO: Revised IPO Price Range Remains Unattractive

By Arun George

Hyundai G.F. Holdings’ Stock Swap with Hyundai Green Food & Hyundai Dept Store

By Sanghyun Park

  • Hyundai G.F. Holdings will conduct a tender offer to Hyundai Green Food and Hyundai Dept Store shareholders. The tendering period is August 11-September 1.
  • The target volume is 10,125,700 (Hyundai Green Food) and 4,669,556 (Hyundai Dept Store), corresponding to 29.89% and 19.95% of the outstanding shares, respectively.
  • We should approach this event trading with caution, taking into account the risk of an unhedged setup while monitoring the potential widening of the spread opening during the tendering period.

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Jul 06
0

Most Read: Li Auto, Socionext, HDFC Bank, Yachiyo Industry, Foxconn Industrial Internet, Tryt Inc, Mini Kospi 200 Futures and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Socionext Lock-Up – Up 2.67x Since IPO. US$930m Worth of Shares to Be Unlocked
  • Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?
  • Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float
  • HDFC/HDFC Bank Merger: Foreigners Sell HDFC; LTIM in NIFTY; JSP in NEXT50
  • Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains
  • And Now For Something Truly Offensive – Honda Pays <0.5x Book for Yachiyo
  • SSE50 Index Rebalance Preview: Potential Adds Powering Higher
  • Socionext (6526 JP): US$1.9bn Secondary Placement
  • Tryt IPO – Valuation Seems Digestible at the Bottom End, but the Firm Still Needs to Get a Lot Right
  • Impact of Allowing Negotiated Block Trades for Eight Futures Spreads, Incl. SSF SP

Socionext Lock-Up – Up 2.67x Since IPO. US$930m Worth of Shares to Be Unlocked

By Clarence Chu

  • Socionext (6526 JP) was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup will expire on 9th Apr 2023.
  • Socionext is a fabless semiconductor provider which commenced operations after integrating the system on a chip (SoC) businesses of Fujitsu Semiconductor Limited and Panasonic Holding Corporation in 2015.
  • Coming up for six-month lockup expiry are the Development Bank of Japan, Fujitsu and Panasonic, the trio had each trimmed their respective stakes in the IPO.

Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?

By Brian Freitas

  • We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
  • The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
  • We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.

Socionext (6526 JP) – Pre-IPO Lockup Expiry Offering Will Double Real World Float

By Travis Lundy

  • Today after the close, SoC and market darling Socionext (6526 JP) announced that DBJ, Fujitsu, and Panasonic would offer the remaining shares they in a US$1.8bn secondary offering.
  • Pshaw…. that’s only 2.5 days of 20-day ADV… Not a lot. But in fact, that is a LOT of stock. 
  • I harp on understanding shareholder structure. I think it worthwhile. Here it matters too.

HDFC/HDFC Bank Merger: Foreigners Sell HDFC; LTIM in NIFTY; JSP in NEXT50

By Brian Freitas

Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains

By Sumeet Singh

  • Three shareholders of Socionext (6526 JP) aim to raise around US$1.8bn via selling all of their shares in Socionext.
  • Socionext was listed on 12th Oct 2022, when it raised US$457m in its upsized Japan IPO. Its six-month lockup expired in Apr 2023. Its shares are up 6x since listing.
  • In this note, we talk about the deal dynamics and run the deal through our ECM framework.

And Now For Something Truly Offensive – Honda Pays <0.5x Book for Yachiyo

By Travis Lundy

  • Every now and then, you get a tender offer proposal which is truly offensive. This is one. 
  • Yes, existing ICE-related autoparts makers are under the cosh as they face down obsolesence induced by competition from EVs. Fuel tank makers like Yachiyo are at risk. 
  • But this bid started at <0.3x book, and ended at <0.5x book, despite significant net financial assets and lots of unrecognised DTAs. 

SSE50 Index Rebalance Preview: Potential Adds Powering Higher

By Brian Freitas

  • Two thirds of the way through the review period, we see 10 potential adds/8 potential deletes in December. However, there can be a maximum of 5 changes at a review.
  • We estimate a one-way turnover of 5.8% at the December rebalance leading to a one-way trade of CNY 4.67bn. Index arb balances could increase the impact on the stocks.
  • The potential adds have outperformed the potential deletes over the last six months and there has been renewed outperformance over the last month.

Socionext (6526 JP): US$1.9bn Secondary Placement

By Arun George

  • Socionext (6526 JP) announced a pure secondary offering of 12.6 million or 37.50% of outstanding shares. At the last close, the placement is worth JPY277 billion (US$1.9 billion)
  • The selling shareholders’ primary motivation for exiting their shareholding is to capitalise on the extraordinary share price. Socionext shares are up 6x from the IPO price of JPY3,650 per share.
  • We think looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 11 to 13 July (likely 11 July).

Tryt IPO – Valuation Seems Digestible at the Bottom End, but the Firm Still Needs to Get a Lot Right

By Clarence Chu

  • Tryt Inc (9164 JP) is looking to raise up to US$360m in its Japan IPO.
  • Tryt Inc (Tryt) offers employee placement services and temporary staffing services for the elderly care, nursing care and childcare workers segments.
  • In this note, we will revisit our earnings assumptions and share our thoughts on valuation at the final price range.

Impact of Allowing Negotiated Block Trades for Eight Futures Spreads, Incl. SSF SP

By Sanghyun Park

  • It is highly probable that SP trading will increase after July 31st, as this will provide a more conducive environment for the seamless rollover of large positions.
  • Considering the actual impact on the market, we may have to pay more attention to the potential surge in trading volume for single-stock futures SP.
  • We see a rise in aggressive position setups in event trading, including rights offerings. This may lead to a more substantial price impact by increasing the intensity of such trading.

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