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Just post-close, the Nikkei reported Toshiba’s Board had agreed a JIP deal at “around ¥2trln.” Toshiba confirmed HOURS later indicating language was still being hashed out. And the dividend cancelled.
Toshiba “supports” the deal because it aligns a single shareholder with management goals. They cannot recommend to general shareholders because it is too low. But JIP was the only bidder.
It raises the question of whether activists will submit to “Toshiba Fatigue” at what the Board admits is too low a price, or whether there is still fight left.

Rakuten Bank (5838 JP) – Another Net-Bank IPO, This One With TOPIX and Other Index Inclusions

Today, Rakuten (4755 JP) and Rakuten Bank (5838 JP) announced that Rakuten Bank had received TSE approval to list (English) on TSE Prime, with expected listing date 21 April 2023.
This had been in the works since July 2022, and they selected advisors in September 2022. The low end of the offer price range seems attractive. More diligence needed.
There will be index inclusions. Unlike SBI Sumishin Net Bank (7163 JP) which is going to TSE Standard, Rakuten Bank is going to Prime.

Toshiba – The End… Hopefully

By Mio Kato

The Nikkei reported today that Toshiba’s board had chosen to accept JIP’s buyout offer.
The purported pricing of ¥2trn is a relatively modest premium but is not a surprise and no surprise is a positive here in our view.
All that remains is shareholder approval and while we doubt there will be too many celebrations on that front, there is likely to be relief.

Rakuten Bank (5838 JP) IPO: Listing in April, TPX Inclusion in May, MSCI SC in August

Rakuten Bank (EBANKZ JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 21 April.
News reports indicate a raise of US$800mn (JPY 106.8bn) at the mid-point of the IPO range, valuing the company at JPY 305bn (US$2.3bn).
The stock should be added to the TPX INDEX at the close on 30 May where trackers will need to buy over 14% of the stock issued in the IPO.

Toshiba (6502 JP): JIP’s JPY4,620 Tender Offer, Now for the Really Hard Part

Toshiba Corp (6502 JP) announced a pre-conditional tender offer by Japan Industrial Partners (JIP), the preferred bidder at JPY4,620 per share, a 9.7% premium to the last close price.
The special committee opines that the offer is the best price that can be expected today, which sounds like we are recommending the offer as it is the only one.
The offer has several negatives: a 14% price reduction during the process, below the undisturbed price, below the mid-point IFA DCF range and no serious effort on Plan B.

Hindustan Aeronautics (HNAL IN) Offer for Sale: Buy Ahead of Potential MSCI Inclusion

The Government of India is looking to sell up to 3.5% of Hindustan Aeronautics Ltd (HNAL) to meet the minimum public shareholding and will raise US$350m at the floor price.
Hindustan Aeronautics Ltd (HNAL IN) is a potential inclusion to the MSCI India Index at the May QCIR and there will be buyers at the placement.
Hindustan Aeronautics Ltd (HNAL IN) trades cheaper than its peers and there could be a move higher over the next few weeks.

KOSPI 200 Flow Trading: Those Subject to a Significant Float Rate Change

Samsung SDS and Meritz Financial will welcome a 6%p and 30%p increase, respectively, in the upcoming rebalancing in June.
Assuming a K200 tracking fund size of 65 trillion won, they are expected to receive 2.69x and 5.47x ADTVs, respectively. This is enough for us to consider a preemptive position.
However, in the case of Samsung SDS, we need to consider potential price correction by the scheduled block deal (1.95%) and develop a multi-phased approach to minimize timing conflicts.

NIFTY NEXT50 / NIFTY100 Index Rebalance: Flows Change as Index Capping Methodology Changes

On 17 February, NSE Indices announced the results of the March index review for the Nifty Next 50 Index (NIFTYJR INDEX). There are 5 adds and 5 deletes.
Last evening, NSE Indices announced a change in the index methodology where the cumulative weight of non-F&O stocks in the index will be capped at 10% (down from 15% earlier).
This changes the flows at the March rebalance that will be implemented at the close of trading on 29 March.

KOSDAQ150 Ad Hoc Index Rebalance: EM-Tech (091120 KS) To Replace SBW Life (151910 KS)

Following Nanos Co Ltd (151910 KS)‘s designation as an Investment Attention Issue, the stock will be deleted from the KOSDAQ150 Index and replaced with Em Tech Co Ltd (091120 KS).
Passive trackers are estimated to buy 1.3 days of ADV on Em Tech Co (091120 KS) while they will need to sell 1.1 days of ADV on Nanos (151910 KS).
Em Tech Co Ltd (091120 KS) was up yesterday but the stock is still way off its highs. The stock should trade higher over the next few days.

Rakuten Bank IPO – Recent Filings Updates and Quick Thoughts on Valuation

By Sumeet Singh

Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$900m in its Japan listing in April 2023.
RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
In our earlier notes, we have looked at the company’s past performance. In this note, we talk about the updates from its recent filings.

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Mar 23

Most Read: Tokyo Stock Exchange Tokyo Price Index Topix, S.M.Entertainment Co, Bellevue Gold, Rakuten, Indus Towers, Rakuten Bank, Sumitomo Mitsui Financial Group, Osstem Implant, ASICS Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

The BIG March 2023 “Wednesday Thursday Trade”
S.M. Entertainment: Proration Musings
S&P/ASX Index Rebalance Preview: Changes from Now to June
Rakuten Bank (5838 JP) IPO: Listing in April, TPX Inclusion in May, MSCI SC in August
India: AMFI Stock Reclassification Preview (June 2023)
Rakuten Bank (5838 JP) – Another Net-Bank IPO, This One With TOPIX and Other Index Inclusions
Japan Banks: Markets Overreact to SVB’s Collapse
MBK/Unison Launch ANOTHER Tender on Osstem Implant (048260 KS) To Squeeze Out Minorities
MBK/Unison Capital Announces a Second Tender Offer for Osstem Implant to Take It Private
ASICS (7936) | Running Is Recession Proof

The BIG March 2023 “Wednesday Thursday Trade”

Every year it’s the same trade. But it isn’t really. But it kinda is. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
But, ceteris paribus, it is still possibly a ¥1,580,876,450,407 buying spree to take place on one day into the close later this month. Or something close to it.
And for a two-day period, over the last ten years, the average return is 1.60% on these two days with a 9:1 win ratio. Lots of angles here.

S.M. Entertainment: Proration Musings

After HYBE (352820 KS) conceded to Kakao Corp (035720 KS) earlier this month, S.M.Entertainment Co (041510 KS)‘s shares have declined 23%.
Kakao’s Partial Offer of ₩150,000/share closes on the 26 March.
Unadjusted proration is 36.8%, conservatively rising to 48.5%. It may settle at 61% if HYBE maintains its position – but that is probably a tad optimistic.

S&P/ASX Index Rebalance Preview: Changes from Now to June

There could be an addition to the S&P/ASX 100 Index and S&P/ASX 200 (AS51 INDEX) in April following OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU).
Then there could be another change for the S&P/ASX 200 (AS51 INDEX) at the regular rebalance in June.
Passive trackers will need to trade between 4.5-18 days of ADV on the potential adds/ deletes. Short interest has started to increase on a couple of stocks.

Rakuten Bank (5838 JP) IPO: Listing in April, TPX Inclusion in May, MSCI SC in August

Rakuten Bank (EBANKZ JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 21 April.
News reports indicate a raise of US$800mn (JPY 106.8bn) at the mid-point of the IPO range, valuing the company at JPY 305bn (US$2.3bn).
The stock should be added to the TPX INDEX at the close on 30 May where trackers will need to buy over 14% of the stock issued in the IPO.

India: AMFI Stock Reclassification Preview (June 2023)

Nearly halfway through the review period, we see 10 stocks moving from MidCap to LargeCap and vice versa, and 9 stocks moving from SmallCap to MidCap and vice versa.
Financials are poised to be the biggest gainers in the reshuffle with 6 stocks moving from MidCap to LargeCap and 5 stocks moving from SmallCap to MidCap.
Over the last 6 months, stocks expected to migrate upward have outperformed stocks that are expected to migrate downward., though there has been a downward drift this year.

Rakuten Bank (5838 JP) – Another Net-Bank IPO, This One With TOPIX and Other Index Inclusions

Today, Rakuten (4755 JP) and Rakuten Bank (5838 JP) announced that Rakuten Bank had received TSE approval to list (English) on TSE Prime, with expected listing date 21 April 2023.
This had been in the works since July 2022, and they selected advisors in September 2022. The low end of the offer price range seems attractive. More diligence needed.
There will be index inclusions. Unlike SBI Sumishin Net Bank (7163 JP) which is going to TSE Standard, Rakuten Bank is going to Prime.

Japan Banks: Markets Overreact to SVB’s Collapse

By Oshadhi Kumarasiri

Following the collapse of SVB and Signature Bank last week, Japan’s big four banks have fallen by around 15% due to their exposure to US government bonds.
However, the Japanese banks have managed the interest rate risk far better than the collapsed US banks and therefore, we feel the price drop is unwarranted.
With Japan likely to scrap its zero rates policy, we think this could be a rather intriguing opportunity to make generous gains on the long side in Japan’s banking sector.

MBK/Unison Launch ANOTHER Tender on Osstem Implant (048260 KS) To Squeeze Out Minorities

As discussed in MBK/Unison Capital Korea Do a Deal for Osstem Implant (048260 KS) Thwarting Activist KCGI, at end-Jan, they launched a deal to get a minimum of 15.4%.
They ended up getting 61.16%. That left 10.6% of shares out in unaffiliated hands.
Now they have launched another tender offer to buy the remaining at the same KRW 190k price. There is no minimum. Straight simple risk arb.

MBK/Unison Capital Announces a Second Tender Offer for Osstem Implant to Take It Private

MBK/Unison Capital consortium announced a second tender offer for Osstem Implant (048260 KS) today in order to take the company private.
The tender offer price is 190,000 won per share, which is the same price as the first tender offer price.
The number of shares for the tender offer is 1,654,916, accounting for 10.62% of the outstanding shares.

ASICS (7936) | Running Is Recession Proof

Good news from Nike’s Q3 report, which bodes well for Asics March quarter
Why was Nike’s stock down? Margins were down 330bps on inventory mark downs
Running is recession proof according to the footwear makers themselves

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Mar 22

Most Read: Meituan, Tokyo Stock Exchange Tokyo Price Index Topix, Hanwha Aerospace, Seoul Broadcasting System, China Telecom, S.M.Entertainment Co, Bellevue Gold, Ace Technologies, PT Trimegah Bangun Persada Tbk (Harita Nickel) and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week
The BIG March 2023 “Wednesday Thursday Trade”
MSCI Korea May QCIR: Potential Changes, Impact, Positioning & Short Interest
Korean Government’s Official Statement on Foreign Ownership Limits & The Names Still to Watch
SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month
S.M. Entertainment: Proration Musings
S&P/ASX Index Rebalance Preview: Changes from Now to June
Potential Inclusions & Exclusions in KOSDAQ 150 Rebalance in May 2023
Harita Nickel IPO Valuation – Capacity Ramp Ups Will Pay Dividends in the Long Run
Good Morning Japan |SPX Reclaims 4000! NUGGET: Asahi Kasei-M&A Gone Bad, Writedown, Struggles Remain

Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week

In early 2022, Tencent (700 HK) made clear it was on a divestment path – disposing of investments able to support themselves – possibly “obliged” after 2021’s China internet mess.
In August, Reuters suggested Meituan (3690 HK) was next. Tencent denied it, but in November with Q3 earnings, announced a January 2023 distribution with March 2023 settlement.
US$16bn of Meituan shares get delivered on 24 March 2023 – this Friday. That’s a lot. But this time is different than last time.

The BIG March 2023 “Wednesday Thursday Trade”

Every year it’s the same trade. But it isn’t really. But it kinda is. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
But, ceteris paribus, it is still possibly a ¥1,580,876,450,407 buying spree to take place on one day into the close later this month. Or something close to it.
And for a two-day period, over the last ten years, the average return is 1.60% on these two days with a 9:1 win ratio. Lots of angles here.

MSCI Korea May QCIR: Potential Changes, Impact, Positioning & Short Interest

We currently forecast 2 potential inclusions and 3 potential deletions for the MSCI Korea Index at the May QCIR. That will change over the next few weeks till cutoff date.
Passive trackers are estimated to buy between 0.6-3.3 days of ADV on the potential inclusions while selling between 6.9-14.2 days of ADV on the potential deletions.
Short interest on the potential deletions has moved significantly higher in the last few weeks and there will be pre-positioning on the stocks.

Korean Government’s Official Statement on Foreign Ownership Limits & The Names Still to Watch

Hankyung exclusively reported that the Korean regulators were considering abolishing the foreign ownership limit. This morning, the Ministry of Economy and Finance released a statement that this report is untrue.
Nevertheless, circumstantially, given the current government’s all-out effort to make it to MSCI Developed Market status, there is a high possibility that it will resurface not too far from now.
Four out of the 33 foreign ownership-restricted stocks will likely be immediately affected: SKT, KT, and Korea Gas (MSCI inclusion) and SBS (flow improvement).

SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month

Nearly 90% through the review period, we see 6 potential adds and 5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
We estimate a one-way turnover of 5.07% at the June rebalance leading to a one-way trade of CNY 3.97bn. Index arb activity could add to the impact on the stocks.
The potential adds have outperformed the potential deletes by 17% over the last month and by 21% over the last two months.

S.M. Entertainment: Proration Musings

After HYBE (352820 KS) conceded to Kakao Corp (035720 KS) earlier this month, S.M.Entertainment Co (041510 KS)‘s shares have declined 23%.
Kakao’s Partial Offer of ₩150,000/share closes on the 26 March.
Unadjusted proration is 36.8%, conservatively rising to 48.5%. It may settle at 61% if HYBE maintains its position – but that is probably a tad optimistic.

S&P/ASX Index Rebalance Preview: Changes from Now to June

There could be an addition to the S&P/ASX 100 Index and S&P/ASX 200 (AS51 INDEX) in April following OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU).
Then there could be another change for the S&P/ASX 200 (AS51 INDEX) at the regular rebalance in June.
Passive trackers will need to trade between 4.5-18 days of ADV on the potential adds/ deletes. Short interest has started to increase on a couple of stocks.

Potential Inclusions & Exclusions in KOSDAQ 150 Rebalance in May 2023

In this insight, we discuss the potential inclusions and exclusions of the upcoming KOSDAQ 150 rebalance in May 2023.
The next round of KOSDAQ 150 rebalance will be announced in May and it will be effective as of end of May 2023.
Typically, the potential inclusions and exclusions to KOSDAQ 150 make their biggest moves in the one to three months prior to the rebalance announcements.

Harita Nickel IPO Valuation – Capacity Ramp Ups Will Pay Dividends in the Long Run

By Clarence Chu

PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) is looking to raise about US$650m in its Indonesian IPO.
PT Trimegah Bangun Persada Tbk (Harita Nickel, HN) is a vertically integrated pure-play nickel company operating on Obi Island, Indonesia.
In this note, we will look at our earnings assumptions, and share our thoughts on valuation.

Good Morning Japan |SPX Reclaims 4000! NUGGET: Asahi Kasei-M&A Gone Bad, Writedown, Struggles Remain

OVERSEAS. SPX reclaims 4000 level with 2nd day of gains; 8/11 SPX sectors up as VIX collapses; Fed Decision Day on Wed-Expect No surprises; INTEL headwinds on China curbs
JAPAN. NKY Futs +0.6% vs Cash; USDJPY 132. 4; Japan set to rally after the Spring transition break;US accepts Japan’s EV subsidy appeal=+ve auto parts; More inflation support from govt.
NUGGET. Asahi Kasai – M&A Gone Bad, Writedown, Struggles Remain. Future profitability of the LiB Separator business in question.

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Mar 21

Most Read: Meituan, Seoul Broadcasting System, China Telecom, SK Telecom, Kakao Pay, Toshiba Corp, Healius, Golden Energy & Resources, Hanwha Aerospace, Empyrean Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week
Korean Government’s Official Statement on Foreign Ownership Limits & The Names Still to Watch
SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month
Korean Government Reviews Rules to Ease Foreign Ownership Limits
Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8
Merger Arb Mondays (20 Mar) – Toshiba, AAG Energy, Tyro, Newcrest, InvoCare, Pushpay, Golden Energy
Australian Clinical Labs (ACL) Lowballs an All-Stock Offer for Healius (HLS)
Golden Energy: Offer Bumped. Still Insulting
MSCI Korea May QCIR: Potential Changes, Impact, Positioning & Short Interest
ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Recent Outperformance

Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week

In early 2022, Tencent (700 HK) made clear it was on a divestment path – disposing of investments able to support themselves – possibly “obliged” after 2021’s China internet mess.
In August, Reuters suggested Meituan (3690 HK) was next. Tencent denied it, but in November with Q3 earnings, announced a January 2023 distribution with March 2023 settlement.
US$16bn of Meituan shares get delivered on 24 March 2023 – this Friday. That’s a lot. But this time is different than last time.

Korean Government’s Official Statement on Foreign Ownership Limits & The Names Still to Watch

Hankyung exclusively reported that the Korean regulators were considering abolishing the foreign ownership limit. This morning, the Ministry of Economy and Finance released a statement that this report is untrue.
Nevertheless, circumstantially, given the current government’s all-out effort to make it to MSCI Developed Market status, there is a high possibility that it will resurface not too far from now.
Four out of the 33 foreign ownership-restricted stocks will likely be immediately affected: SKT, KT, and Korea Gas (MSCI inclusion) and SBS (flow improvement).

SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month

Nearly 90% through the review period, we see 6 potential adds and 5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
We estimate a one-way turnover of 5.07% at the June rebalance leading to a one-way trade of CNY 3.97bn. Index arb activity could add to the impact on the stocks.
The potential adds have outperformed the potential deletes by 17% over the last month and by 21% over the last two months.

Korean Government Reviews Rules to Ease Foreign Ownership Limits

In recent days, the Korean government announced that it is reviewing foreign ownership limit rules.
The main reasons are to align South Korea’s financial policies in line with the global standards and improve the chances of South Korea becoming included in MSCI Developed country status.
Key companies that could benefit from potential raise of foreign ownership limit include SK Telecom, KT Corp, and SBS.

Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8

Kakao Pay’s GICS sector movement from IT to FINANCIALS creates flow trading opportunities due to the subsequent transfer between KOSPI 200’s sector sub-indices.
An outflow of ₩24.6B or 410K shares will occur. This is 0.6x ADTV. Given that the recent trading volume has further decreased, the actual impact will likely exceed 1.0x DTV.
It will be a concentrated flow in a single trading day by a single ETF, which gives us plenty of reasons for preemptively designing a short position targeting this.

Merger Arb Mondays (20 Mar) – Toshiba, AAG Energy, Tyro, Newcrest, InvoCare, Pushpay, Golden Energy

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 21Vianet Group (VNET US), 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Genesis Minerals (GMD AU), Newcrest Mining (NCM AU), Aag Energy Holdings (2686 HK).
Lowest spreads – Nitro Software Ltd (NTO AU),Norwest Energy NL (NWE AU), GK Goh Holdings (GKG SP), Boustead Projects (BOCJ SP), Nippon Steel Trading Corporation (9810 JP), Nissin Electric.

Australian Clinical Labs (ACL) Lowballs an All-Stock Offer for Healius (HLS)

Australian Clinical Labs (ACL AU) has announced its intention to make an off-market takeover for Healius (HLS AU) offering 0.74 ACL shares for each Healius share.
The offer represents a nil-premium merger and if successful will result in current Healius (HLS AU) shareholders owning 68% of the merged company.
The offer is a big discount to longer-term VWAPs. We don’t expect shareholders will tender and Australian Clinical Labs (ACL AU) will need to sweeten the offer.

Golden Energy: Offer Bumped. Still Insulting

The Widjaja family has responded to criticism from various quarters over its low-balled Offer for Golden Energy & Resources (GER SP) and revised terms.
The all-cash payout for the 62.5% stake in Golden Energy Mines (GEMS IJ) is now 15.5% higher at S$0.792/share. The exit offer is 13% higher at S$0.18.1.
No matter how you slice it, the bump is petty. GEAR’s “rump” is currently worth at least S$0.63/share.

MSCI Korea May QCIR: Potential Changes, Impact, Positioning & Short Interest

We currently forecast 2 potential inclusions and 3 potential deletions for the MSCI Korea Index at the May QCIR. That will change over the next few weeks till cutoff date.
Passive trackers are estimated to buy between 0.6-3.3 days of ADV on the potential inclusions while selling between 6.9-14.2 days of ADV on the potential deletions.
Short interest on the potential deletions has moved significantly higher in the last few weeks and there will be pre-positioning on the stocks.

ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Recent Outperformance

Three quarters of the way through the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. On average, the impact on the potential deletions is higher.
The potential adds have outperformed the potential deletes over the last six months, and there has been a sharp widening of the gap over the last few weeks.

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Mar 20

Most Read: Japan Post Bank, Meituan, China Shenhua Energy Co H, Toshiba Corp, PT Trimegah Bangun Persada Tbk (Harita Nickel), Kakao Pay, Meritz Financial Group, SK Telecom and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan Post Bank (7182) – The Flow Calendar
Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week
Index Rebalance & ETF Flow Recap: STAR50, HSCEI, CSI300, KOSDAQ150, Japan Post Bank
Last Week in Event SPACE: Japan Post Bank, S.M Entertainment, Toshiba, Link REIT
Macro Watch: The Banking Crisis Is Likely to Accelerate in Coming Weeks
Harita Nickel IPO Peer Comparison – Seems to Be More Reliant on Lygend, than Vice Versa
Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8
Meritz Financial Group: A Large Share Buyback Amid Global Financials Uncertainties
Korean Government Reviews Rules to Ease Foreign Ownership Limits
Good Morning Japan |UBScs – Wedding Vows Sealed; NUGGET: MOL-Diversification Can’t Come Fast Enough

Japan Post Bank (7182) – The Flow Calendar

The near-term Supply/Demand Balance is helped or hurt – depending on how well the deal has been placed to retail, by overseas bank turmoil.
Quality of placement to retail is tough to know from outside. We have near-term offsets with both index demand and dividend looming.
The biggest near-term differentiator in possible supply/demand outcomes is, of course, in the hands of the TSE Index team. And we just don’t know.

Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week

In early 2022, Tencent (700 HK) made clear it was on a divestment path – disposing of investments able to support themselves – possibly “obliged” after 2021’s China internet mess.
In August, Reuters suggested Meituan (3690 HK) was next. Tencent denied it, but in November with Q3 earnings, announced a January 2023 distribution with March 2023 settlement.
US$16bn of Meituan shares get delivered on 24 March 2023 – this Friday. That’s a lot. But this time is different than last time.

Index Rebalance & ETF Flow Recap: STAR50, HSCEI, CSI300, KOSDAQ150, Japan Post Bank

There were a bunch of rebalances on Friday across Asia resulting in big flows across multiple stocks and countries.
The coming week is quieter with no scheduled rebalances – though the KOSDAQ 150 Index rebalance could take place dependent on Kuk Il Paper Mfg (078130 KS)‘s trading resumption.
Inflows to China and Taiwan ETFs while Korean ETFs had outflows. Market volatility resulted in redemptions from iShares MSCI Emerging Markets (EEM) and IShares MSCI Min Vol Emerging Markets (EEMV).

Last Week in Event SPACE: Japan Post Bank, S.M Entertainment, Toshiba, Link REIT

Medium-Term, Japan Post Bank (7182 JP) is not in great shape fundamentally compared to others We still know nothing about TOPIX. And we may just not hear.
Kakao Corp (035720 KS) to take control of S.M.Entertainment Co (041510 KS) after HYBE (352820 KS) throws in the towel.
The world is quite volatile now, and funding is probably more precious today than yesterday. But a bid for Toshiba Corp (6502 JP) is too.

Macro Watch: The Banking Crisis Is Likely to Accelerate in Coming Weeks

By Andreas Steno

The banking crisis will continue to rage until the Fed and the ECB accept the underlying reason for the deposit flight
Banks cannot cope with an über-inverted yield curve, why cuts are needed asap to contain the situation
It will likely get worse before it gets better consequently

Harita Nickel IPO Peer Comparison – Seems to Be More Reliant on Lygend, than Vice Versa

By Clarence Chu

PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) is looking to raise about US$650m in its Indonesian IPO.
Harita Nickel is a vertically integrated pure-play nickel company operating on Obi Island, Indonesia.
For our peer comparison exercise, we looked at international nickel mining companies and also included downstream players in the nickel value chain such as Huayou Cobalt and Lygend Group.

Shorting Kakao Pay on K200 Sector Index Passive Outflow Due to GICS Change on June 8

Kakao Pay’s GICS sector movement from IT to FINANCIALS creates flow trading opportunities due to the subsequent transfer between KOSPI 200’s sector sub-indices.
An outflow of ₩24.6B or 410K shares will occur. This is 0.6x ADTV. Given that the recent trading volume has further decreased, the actual impact will likely exceed 1.0x DTV.
It will be a concentrated flow in a single trading day by a single ETF, which gives us plenty of reasons for preemptively designing a short position targeting this.

Meritz Financial Group: A Large Share Buyback Amid Global Financials Uncertainties

On 17 March (after market close), Meritz Financial Group (138040 KS) announced a share buyback program worth 400 billion won, which represents 5.4% of its market cap.
Given the relative large size of this deal, it should have a positive impact on its share price, especially on a relative basis against its competitors.
The collapse of SVB Financial and uncertain investors’ reactions on the purchase of Credit Suisse by UBS will likely add to the global investors’ negative sentiment on the financial sector.

Korean Government Reviews Rules to Ease Foreign Ownership Limits

In recent days, the Korean government announced that it is reviewing foreign ownership limit rules.
The main reasons are to align South Korea’s financial policies in line with the global standards and improve the chances of South Korea becoming included in MSCI Developed country status.
Key companies that could benefit from potential raise of foreign ownership limit include SK Telecom, KT Corp, and SBS.

Good Morning Japan |UBScs – Wedding Vows Sealed; NUGGET: MOL-Diversification Can’t Come Fast Enough

OVERSEAS. Equities Sell-off on Pending Demise of Credit Suisse; Flight to Safety Trade resumes; SNB engineer Shotgun Wedding – deal closed with UBS $3.25 billion. The end of an era.
JAPAN. On Friday, NKY Futs -2.3% vs Cash as Contagion Fears around Credit Suisse prompted Flight to Safety; With CS Rescue, expect strong open; JP Shippers Container Profits looks shaky
NUGGET. As Mitsui OSK approaches ex-div, we think the share price will see headwinds given the expected earnings decline on ONE’s earning collapse = (MUCH) lower dividends next year.

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Mar 19

Most Read: China Shenhua Energy Co H, Douzone Bizon, Harvey Norman Holdings, Harmony Gold Mining Co Ltd, Sayona Mining, HomeCo Daily Needs REIT, Kuk Il Paper Mfg, China Merchants Energy A, 3P Learning, Hong Kong Hang Seng Index and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSCEI Index Rebalance Preview: China Shenhua (1088) Could Replace Country Garden (2007); Div Impact
Index Rebalance & ETF Flow Recap: MSCI China, S&P/ASX, KOSDAQ150, KOSPI, CPSE/Bharat22, YES, OZL
MVIS Australia Equal Weight Index Rebalance: One Deletion & Other Changes
MVIS Global Junior Gold Miners Index Rebalance: Three Deletions & Float Changes
MVIS Global Rare Earth/Strategic Metals Index Rebalance: Float & Capping Changes on Friday
MVIS Australia A-REITs Index Rebalance: Float/Capping Changes
KOSDAQ150 Ad Hoc Index Rebalance: Lake Materials (281740) To Replace Kuk Il Paper (078130)
CSI300 Index Rebalance Preview: Narrowing the Gap
3P Learning (3PL): Rare Listed EdTech, Offering Exposure to the Growth in Digital Instruction
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

HSCEI Index Rebalance Preview: China Shenhua (1088) Could Replace Country Garden (2007); Div Impact

China Shenhua Energy Co H (1088 HK) could replace Country Garden Holdings Co (2007 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the June rebalance.
Short interest on China Shenhua Energy Co H (1088 HK) is pretty small while the short interest on Country Garden Holdings Co (2007 HK) is large and possibly getting bigger.
The change could result in a big increase in the fair value for the HSCEI 2023 dividend futures. Currently, we estimate an increase of up to 9 DIPS.

Index Rebalance & ETF Flow Recap: MSCI China, S&P/ASX, KOSDAQ150, KOSPI, CPSE/Bharat22, YES, OZL

Some KOSPI indices rebalanced at the close on Thursday while the Hang Seng family of indices and the SSE STAR50 (STAR50 INDEX) rebalanced at the close on Friday.
The S&P/ASX family, MVIS family and a bunch of other indices will rebalance at the close on coming Friday.
After seeing big inflows over the last couple of years, outflows from Samsung KODEX Secondary Battery ETF (305720) and Mirae Asset TIGER Secondary Cell ETF (305540) have started to pick up.

MVIS Australia Equal Weight Index Rebalance: One Deletion & Other Changes

Harvey Norman Holdings (HVN AU) will be deleted from the MVIS Australia Equal Weight Index at the close of trading on 17 March.
One way turnover is 3.9% resulting in a one-way trade of A$68m. Only Harvey Norman Holdings (HVN AU) has more than 1 day of ADV to sell from passive trackers.
Harvey Norman Holdings (HVN AU) has underperformed Myer Holdings (MYR AU) significantly over the recent past and the index deletion could provide an entry point into a trade.

MVIS Global Junior Gold Miners Index Rebalance: Three Deletions & Float Changes

Dacian Gold Ltd (DCN AU), Gold Resource (GORO US) and Wallbridge Mining Co (WM CN) will be deleted from the index at the close on 17 March.
One way turnover is estimated at 2.8% resulting in a one-way trade of US$96m. There is over 1 day of ADV to trade on 22 stocks.
The largest inflows are on Triple Flag Precious Metals (TFPM US), Osisko Gold Royalties, Zhaojin Mining Industry, New Found Gold (NFG CN), Yamana Gold, IAMGOLD and First Majestic Silver.

MVIS Global Rare Earth/Strategic Metals Index Rebalance: Float & Capping Changes on Friday

There are no constituent changes for the MVIS Global Rare Earth/Strategic Metals Index at the March rebalance. There are free float and capping changes though.
One way turnover is estimated at 3.1% and will result in a one-way trade of US$19m. Flows are relatively small with no impact over 1x ADV on any stock.
The June rebalance should have constituent changes with an increase in the number of stocks in the index universe.

MVIS Australia A-REITs Index Rebalance: Float/Capping Changes

The upcoming rebalance of the MVIS Australia A-REIT Index will be implemented at the close on 17 March. There are no constituent changes, but there are float and capping changes.
Estimated one-way turnover at the rebalance is 1.8% resulting in a one-way trade of A$11.1m. There is limited impact on the index constituents.
The largest inflows are on Stockland, HomeCo Daily Needs REIT, Gpt Group and Charter Hall, while the largest outflows are on Goodman Group, Vicinity Centres, Dexus Property and Scentre Group.

KOSDAQ150 Ad Hoc Index Rebalance: Lake Materials (281740) To Replace Kuk Il Paper (078130)

Following Kuk Il Paper Mfg (078130 KS)‘s designation as an Administrative Issue, the stock will be deleted from the KOSDAQ 150 Index and replaced with Lake Materials (281740 KS).
The timing of the index change is currently uncertain but will be implemented latest by the close of trading on 6 April.
Lake Materials (281740 KS) was up today and is nearing its highs. There could be another leg higher on the inclusion but we’d be wary of chasing the stock higher.

CSI300 Index Rebalance Preview: Narrowing the Gap

Over 85% of the way through the review period, we see 14 potential index changes at the June rebalance that will be implemented at the close on 9 June.
We estimate a one-way turnover of 2.28% at the June rebalance leading to a one-way trade of CNY 5.95bn.
The potential adds have outperformed the CSI 300 Index over the last two months but have underperformed the potential deletes. The gap has been narrowing recently.

3P Learning (3PL): Rare Listed EdTech, Offering Exposure to the Growth in Digital Instruction

By Anik Siwach

Addition of Writing Legends to existing maths and literacy apps will create more opportunities to upsell and cross-sell.
Brightpath, the recently acquired assessments technology provider, adds a new horizontal with the potential to reduce school customer churn
Competition is high from groups such as DreamBox, IXL, ABC Mouse, Khan Academy and BYJU’S . 3P Learning remains a significant player with a strong customer base and improving product portfolio.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

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Mar 18

Most Read: Japan Post Bank, China Shenhua Energy Co H, Douzone Bizon, China Merchants Energy A, LG Corp, Trial Holdings, Nikkei 225, Suntec REIT, Mirae Asset TIGER Secondary Cell ETF and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan Post Bank (7182) – The Flow Calendar
HSCEI Index Rebalance Preview: China Shenhua (1088) Could Replace Country Garden (2007); Div Impact
Index Rebalance & ETF Flow Recap: MSCI China, S&P/ASX, KOSDAQ150, KOSPI, CPSE/Bharat22, YES, OZL
CSI300 Index Rebalance Preview: Narrowing the Gap
An Increasing Probability of LG Corp Preferred Shares Cancellation
Trial Holdings IPO: Valuation Insights
Longs on Next Low
S-REITs: Investing In An Inflationary Environment
Good Morning Japan |VICTORY Declared as Bailouts Rule; NUGGET: ORIX-Riding the Zero-Carbon MegaTrend
Flow Trading Targeting Cap Reversion in TIGER Battery ETF Rebalancing on April 13

Japan Post Bank (7182) – The Flow Calendar

The near-term Supply/Demand Balance is helped or hurt – depending on how well the deal has been placed to retail, by overseas bank turmoil.
Quality of placement to retail is tough to know from outside. We have near-term offsets with both index demand and dividend looming.
The biggest near-term differentiator in possible supply/demand outcomes is, of course, in the hands of the TSE Index team. And we just don’t know.

HSCEI Index Rebalance Preview: China Shenhua (1088) Could Replace Country Garden (2007); Div Impact

China Shenhua Energy Co H (1088 HK) could replace Country Garden Holdings Co (2007 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the June rebalance.
Short interest on China Shenhua Energy Co H (1088 HK) is pretty small while the short interest on Country Garden Holdings Co (2007 HK) is large and possibly getting bigger.
The change could result in a big increase in the fair value for the HSCEI 2023 dividend futures. Currently, we estimate an increase of up to 9 DIPS.

Index Rebalance & ETF Flow Recap: MSCI China, S&P/ASX, KOSDAQ150, KOSPI, CPSE/Bharat22, YES, OZL

Some KOSPI indices rebalanced at the close on Thursday while the Hang Seng family of indices and the SSE STAR50 (STAR50 INDEX) rebalanced at the close on Friday.
The S&P/ASX family, MVIS family and a bunch of other indices will rebalance at the close on coming Friday.
After seeing big inflows over the last couple of years, outflows from Samsung KODEX Secondary Battery ETF (305720) and Mirae Asset TIGER Secondary Cell ETF (305540) have started to pick up.

CSI300 Index Rebalance Preview: Narrowing the Gap

Over 85% of the way through the review period, we see 14 potential index changes at the June rebalance that will be implemented at the close on 9 June.
We estimate a one-way turnover of 2.28% at the June rebalance leading to a one-way trade of CNY 5.95bn.
The potential adds have outperformed the CSI 300 Index over the last two months but have underperformed the potential deletes. The gap has been narrowing recently.

An Increasing Probability of LG Corp Preferred Shares Cancellation

In this insight, we discuss an increasing probability of the cancellation of LG Corp preferred shares.
We provide five major reasons as to why LG Corp should cancel its entire preferred shares and how this could have a positive impact on LG Corp’s share price.
We believe a 5-10% buyback and cancellation of LG Corp’s preferred shares in the next 1-2 years is a higher probability.

Trial Holdings IPO: Valuation Insights

Trial Holdings (5882 JP), a discount store operator in Japan, is seeking to raise US$380 million at the IPO reference price of JPY2,000. Pricing on 26 March.
We previously discussed the IPO in Trial Holdings IPO: The Bull Case and Trial Holdings IPO: The Bear Case.
In this note, we discuss valuation. Our analysis suggests that Trial is attractively valued at the IPO reference price of JPY2,000. We would participate in the IPO.

Longs on Next Low

By Thomas Schroeder

SPX and NKY top short picks near term but new low attempts will see the immediate down leg exhaust. Yield decline is exhausting.
Increasing oversold readings set the stage for some key low on weakness. Euro bank range is 92 to 108.
Taiwan remains our top long in Asia. Trading bounce lows in ASX, Korea and Europe look attractive/viable.

S-REITs: Investing In An Inflationary Environment

For the better part of two decades, Singaporean real estate investment trusts (REITs) have provided an efficient and popular exposure to quality large-scale commercial properties.
Yet as global central banks hike interest rates to address inflationary pressures, can REITs retain their attractiveness?
SREITs have corrected as Singaporean interest rates have increased. The question is whether higher interest rates are baked in, and which SREITs will hold up; and which ones will not?

Good Morning Japan |VICTORY Declared as Bailouts Rule; NUGGET: ORIX-Riding the Zero-Carbon MegaTrend

OVERSEAS. Crisis Over !Bailouts from US to Europe, Stocks rally as Contagion fears wane; Major Banks rescue First Republic Bank; Swiss Central Bank protects Credit Suisse; ECB raises by 50bps
JAPAN. NKY Futs flat vs Cash; USDJPY 133.8; Expect Japan Equities to start the road to recovery with macro fears subsiding; Japan-Korea move fwd on trade/security.
NUGGET. Orix – one of the Biggest Renewables Plays in Japan. Riding the Decarbonization MegaTrend

Flow Trading Targeting Cap Reversion in TIGER Battery ETF Rebalancing on April 13

There seems to be no constituent change this time. However, opportunities from cap reversion are likely to lead to noteworthy passive flows.
Ecopro BM and Ecopro Co will experience a weight movement of -4.35% and -3.68%p. On the other hand, SK Innovation will enjoy the most pleasant passive impact.
At KODEX Battery’s March rebalancing, the Long SK Innovation Short Ecopro BM position setup provided a return of more than 10% with a similar level of impact x ADTV.

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Mar 17

Most Read: Link REIT, Japan Post Bank, Toshiba Corp, Kuk Il Paper Mfg, Anycolor, China Merchants Energy A, LG Corp, Pushpay Holdings, PT Trimegah Bangun Persada Tbk (Harita Nickel), DPC Dash and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Link REIT (823) – Anchors Aweigh! Fair Weather Sailing Ahead
Japan Post Bank (7182) – The Flow Calendar
Toshiba (6502) – Funding Possibly Re-Secured, Deal Possibly In Play,
KOSDAQ150 Ad Hoc Index Rebalance: Lake Materials (281740) To Replace Kuk Il Paper (078130)
Anycolor (5032 JP) Shows Its Colours – Great Quarter Guys! and TOPIX-Bound
CSI300 Index Rebalance Preview: Narrowing the Gap
An Increasing Probability of LG Corp Preferred Shares Cancellation
Pushpay: Large & “Sophisticated Shareholders” Back Pegasus’ Revised Offer
Harita Nickel IPO – The Negatives – Reliant on JVs and with Lygend Group. Market Is About to Shift
DPC Dash IPO – Might Be Worth a Small Slice

Link REIT (823) – Anchors Aweigh! Fair Weather Sailing Ahead

The Link REIT (823 HK) rights offering caused some upset amongst investors. They got dilution where they did not need it, and de-leveraging from a REIT wanting to invest.
The units fell in price, then fell some more. Then the rights started trading.
Last week in Link REIT (823) – Nil Paid Rights Start Trading Tomorrow – The Trades I said strategy was to be long by Tuesday or Wednesday. It’s Wednesday.

Japan Post Bank (7182) – The Flow Calendar

The near-term Supply/Demand Balance is helped or hurt – depending on how well the deal has been placed to retail, by overseas bank turmoil.
Quality of placement to retail is tough to know from outside. We have near-term offsets with both index demand and dividend looming.
The biggest near-term differentiator in possible supply/demand outcomes is, of course, in the hands of the TSE Index team. And we just don’t know.

Toshiba (6502) – Funding Possibly Re-Secured, Deal Possibly In Play,

Bloomberg has an article today after the close saying Toshiba Corp (6502 JP)‘s board will meet tomorrow to discuss the JIP bid, and the Special Committee will give its recommendations.
The article suggests the Board may proceed with a vote. If they do, an announced bid could come as early as the afternoon.
The world is quite volatile now, and funding is probably more precious today than yesterday. But a bid is too. All in all, I see no reason for a position.

KOSDAQ150 Ad Hoc Index Rebalance: Lake Materials (281740) To Replace Kuk Il Paper (078130)

Following Kuk Il Paper Mfg (078130 KS)‘s designation as an Administrative Issue, the stock will be deleted from the KOSDAQ 150 Index and replaced with Lake Materials (281740 KS).
The timing of the index change is currently uncertain but will be implemented latest by the close of trading on 6 April.
Lake Materials (281740 KS) was up today and is nearing its highs. There could be another leg higher on the inclusion but we’d be wary of chasing the stock higher.

Anycolor (5032 JP) Shows Its Colours – Great Quarter Guys! and TOPIX-Bound

Anycolor (5032 JP) reported Q3 results today. 9mo Revenue is now above the lower end of original forecasts for the full-year. 9mo OP is 25% higher than the original mid-range.
The net profit forecast is now up 51% from the original mid-range, and up 128% on the year. The stock has cratered. Badly.
It is now 19x April 2023 earnings for 90% revenue growth and 150% Net Profit growth and 40% OPM in the last quarter. Go figure.

CSI300 Index Rebalance Preview: Narrowing the Gap

Over 85% of the way through the review period, we see 14 potential index changes at the June rebalance that will be implemented at the close on 9 June.
We estimate a one-way turnover of 2.28% at the June rebalance leading to a one-way trade of CNY 5.95bn.
The potential adds have outperformed the CSI 300 Index over the last two months but have underperformed the potential deletes. The gap has been narrowing recently.

An Increasing Probability of LG Corp Preferred Shares Cancellation

In this insight, we discuss an increasing probability of the cancellation of LG Corp preferred shares.
We provide five major reasons as to why LG Corp should cancel its entire preferred shares and how this could have a positive impact on LG Corp’s share price.
We believe a 5-10% buyback and cancellation of LG Corp’s preferred shares in the next 1-2 years is a higher probability.

Pushpay: Large & “Sophisticated Shareholders” Back Pegasus’ Revised Offer

Aussie PE outfit BGH Capital and consortium partner Sixth Street have increased their offer for NZ church donations group Pushpay Holdings (PPH NZ), gaining the support of its major shareholders.
The consortium, Pegasus Bidco, will pay $NZ1.42/share, an 6% increase over the previous Offer which failed to muster investor support at the 3 March Scheme Meeting.
The revised Offer is around the mid-point of the independent expert’s assessed valuation range of $NZ1.33 to $NZ1.53/share.

Harita Nickel IPO – The Negatives – Reliant on JVs and with Lygend Group. Market Is About to Shift

By Clarence Chu

PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) is looking to raise about US$650m in its Indonesian IPO.
PT Trimegah Bangun Persada Tbk (Harita Nickel, HN) is a vertically integrated pure-play nickel company operating on Obi Island, Indonesia.
In this note, we will talk about the not so positive aspects of the deal.

DPC Dash IPO – Might Be Worth a Small Slice

By Sumeet Singh

DPC Dash (1405 HK) is now looking to raise up to US$90m, after having shelved its last attempt to raise around US$75m in its Hong Kong IPO in December.
The company is the exclusive master franchisee for Domino’s Pizza in China, HK and Macau. DPC operated 604 stores across 17 cities, as of Feb 2023.
In this note, we run the deal through our ECM framework and talk about valuations.

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Mar 16

Most Read: China Shenhua Energy Co H, Link REIT, S.M.Entertainment Co, Toshiba Corp, Anycolor, Aag Energy Holdings, Kuk Il Paper Mfg, Japan Post Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan Post Bank (7182 JP): Offering Price Decided; Buyback & Passive Flow Coming Up
HSCEI Index Rebalance Preview: China Shenhua (1088) Could Replace Country Garden (2007); Div Impact
Link REIT (823) – Anchors Aweigh! Fair Weather Sailing Ahead
SM Entertainment: Kakao’s Tender Offer Proration Analysis
SM Ent Tendering P&L & Allocation Risk for a 30% Spread Opening
Toshiba (6502) – Funding Possibly Re-Secured, Deal Possibly In Play,
Anycolor (5032 JP) Shows Its Colours – Great Quarter Guys! and TOPIX-Bound
AAG Energy (2686 HK): Full-Year Results Lay Bare Xinjiang Xintai’s Low-Balled Offer
KOSDAQ150 Ad Hoc Index Rebalance: Lake Materials (281740) To Replace Kuk Il Paper (078130)
Japan Post Bank (7182) – The Flow Calendar

Japan Post Bank (7182 JP): Offering Price Decided; Buyback & Passive Flow Coming Up

Japan Post Bank (7182 JP) has announced that the offering price has been set at JPY 1131/share, a 2.08% discount to the closing price. Settlement is on 20 March.
The buyback will run from 22 March to 12 May and at last prices will mop up 1.85% of shares outstanding or 4.62% of post-offering float.
In the short-term, we expect buying from Topix (TPX INDEX), MSCI and other global trackers to support the stock price.

HSCEI Index Rebalance Preview: China Shenhua (1088) Could Replace Country Garden (2007); Div Impact

China Shenhua Energy Co H (1088 HK) could replace Country Garden Holdings Co (2007 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the June rebalance.
Short interest on China Shenhua Energy Co H (1088 HK) is pretty small while the short interest on Country Garden Holdings Co (2007 HK) is large and possibly getting bigger.
The change could result in a big increase in the fair value for the HSCEI 2023 dividend futures. Currently, we estimate an increase of up to 9 DIPS.

Link REIT (823) – Anchors Aweigh! Fair Weather Sailing Ahead

The Link REIT (823 HK) rights offering caused some upset amongst investors. They got dilution where they did not need it, and de-leveraging from a REIT wanting to invest.
The units fell in price, then fell some more. Then the rights started trading.
Last week in Link REIT (823) – Nil Paid Rights Start Trading Tomorrow – The Trades I said strategy was to be long by Tuesday or Wednesday. It’s Wednesday.

SM Entertainment: Kakao’s Tender Offer Proration Analysis

In this insight, we provide a proration analysis of the S.M.Entertainment Co (041510 KS) tender offer by Kakao Corp (035720 KS).
Our base case assumes 71.4% of outstanding shares will participate in the tender offer, including HYBE, NPS, KB Asset Mgmt, Com2Us, and 70% of the remaining local and overseas investors.
There is a very high probability of a successful tender offer of SM Entertainment shares by Kakao. Post end of tender offer, its share price could fall about 5-10%, however.

SM Ent Tendering P&L & Allocation Risk for a 30% Spread Opening

The target volume is 47.6% of the nominally estimated tendering pool size. It may go up due to retail investors’ typically low participation in tendering.
Other factors MAY OFFSET this. Most notable is the tendering possibility of HYBE (18.45%) and Lee Soo-man (4.96%). Combining these, the allocation rate will likely be between 50% and 60%.
Using this 50-60% band as a reference point, we should assess the risk of mismatching between the degree of post-tendering price correction and our loss buffer range for non-tendered shares.

Toshiba (6502) – Funding Possibly Re-Secured, Deal Possibly In Play,

Bloomberg has an article today after the close saying Toshiba Corp (6502 JP)‘s board will meet tomorrow to discuss the JIP bid, and the Special Committee will give its recommendations.
The article suggests the Board may proceed with a vote. If they do, an announced bid could come as early as the afternoon.
The world is quite volatile now, and funding is probably more precious today than yesterday. But a bid is too. All in all, I see no reason for a position.

Anycolor (5032 JP) Shows Its Colours – Great Quarter Guys! and TOPIX-Bound

Anycolor (5032 JP) reported Q3 results today. 9mo Revenue is now above the lower end of original forecasts for the full-year. 9mo OP is 25% higher than the original mid-range.
The net profit forecast is now up 51% from the original mid-range, and up 128% on the year. The stock has cratered. Badly.
It is now 19x April 2023 earnings for 90% revenue growth and 150% Net Profit growth and 40% OPM in the last quarter. Go figure.

AAG Energy (2686 HK): Full-Year Results Lay Bare Xinjiang Xintai’s Low-Balled Offer

On the 17 February, AAG Energy Holdings (2686 HK) announced an Offer of HK$1.85/share (declared final) by way of a Scheme from major shareholder Xinjiang Xintai Natural Gas (603393 CH).
At a 10.1% premium to undisturbed and just a 2.2% premium over the highest closing price of HK$1.81/share in the past year, the Consideration price was unreasonable.
FY22 numbers are now out, which further illustrates the Offer price’s inadequacy. AAG’s trailing PER and EV/EBITDA are 3.6x and 1.4x. Net cash accounts for 41% of AAG’s market cap.

KOSDAQ150 Ad Hoc Index Rebalance: Lake Materials (281740) To Replace Kuk Il Paper (078130)

Following Kuk Il Paper Mfg (078130 KS)‘s designation as an Administrative Issue, the stock will be deleted from the KOSDAQ 150 Index and replaced with Lake Materials (281740 KS).
The timing of the index change is currently uncertain but will be implemented latest by the close of trading on 6 April.
Lake Materials (281740 KS) was up today and is nearing its highs. There could be another leg higher on the inclusion but we’d be wary of chasing the stock higher.

Japan Post Bank (7182) – The Flow Calendar

The near-term Supply/Demand Balance is helped or hurt – depending on how well the deal has been placed to retail, by overseas bank turmoil.
Quality of placement to retail is tough to know from outside. We have near-term offsets with both index demand and dividend looming.
The biggest near-term differentiator in possible supply/demand outcomes is, of course, in the hands of the TSE Index team. And we just don’t know.

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

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✓ Custom Watchlists
✓ Company Data and News
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Mar 15

Most Read: Japan Post Bank, S.M.Entertainment Co, K Car, China Shenhua Energy Co H, Hanwha Aerospace, SBI Sumishin Net Bank, Tokyo Broadcasting System and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan Post Bank (7182 JP): Offering Price Decided; Buyback & Passive Flow Coming Up
HYBE Gives Up the M&A Fight for SM Entertainment: Impact on Kakao’s Tender Offer
SM Entertainment: Kakao’s Tender Offer Proration Analysis
Names for a Preemptive Long Short Setup for KOSPI 200 June Rebalancing
HSCEI Index Rebalance Preview: China Shenhua (1088) Could Replace Country Garden (2007); Div Impact
MSCI Korea Potential Adds & Deletes in May 2023 Amid Heightened Market Volatility
SM Ent Tendering P&L & Allocation Risk for a 30% Spread Opening
SBI Sumishin Net Bank IPO: An IPO Price Range in the Wake of the Bank Share Sell-Off
TBS (9401) Selling Cross-Holdings But Don’t Hold Your Breath
Good Morning Japan | Equities Recoup (Some) Losses; NUGGET: ISpace to Rescue Japan’s Space Dreams

Japan Post Bank (7182 JP): Offering Price Decided; Buyback & Passive Flow Coming Up

Japan Post Bank (7182 JP) has announced that the offering price has been set at JPY 1131/share, a 2.08% discount to the closing price. Settlement is on 20 March.
The buyback will run from 22 March to 12 May and at last prices will mop up 1.85% of shares outstanding or 4.62% of post-offering float.
In the short-term, we expect buying from Topix (TPX INDEX), MSCI and other global trackers to support the stock price.

HYBE Gives Up the M&A Fight for SM Entertainment: Impact on Kakao’s Tender Offer

On 12 March, HYBE (352820 KS) announced that it is no longer pursuing S.M.Entertainment Co (041510 KS) in an M&A battle with Kakao Corp (035720 KS).
This will result in a very high probability of Kakao winning the M&A battle of SM Entertainment.
Many institutional investors are likely to have pushed back on HYBE’s capital raising efforts, which seems to have been the clincher of HYBE backing out of this M&A for SM.

SM Entertainment: Kakao’s Tender Offer Proration Analysis

In this insight, we provide a proration analysis of the S.M.Entertainment Co (041510 KS) tender offer by Kakao Corp (035720 KS).
Our base case assumes 71.4% of outstanding shares will participate in the tender offer, including HYBE, NPS, KB Asset Mgmt, Com2Us, and 70% of the remaining local and overseas investors.
There is a very high probability of a successful tender offer of SM Entertainment shares by Kakao. Post end of tender offer, its share price could fall about 5-10%, however.

Names for a Preemptive Long Short Setup for KOSPI 200 June Rebalancing

Kum Yang and Youlchon Chemical are within the borderline for inclusion, whereas Hwaseung Enterprise and K Car are in the deletion zone.
Since the review period has reached 75%, it seems reasonable to consider a somewhat aggressive buildup for them.
We can also consider setting up preemptive positions only for Kum Yang and Hwaseung Enterprise and then sequentially look for entry opportunities for Youlchon and K Car later on.

HSCEI Index Rebalance Preview: China Shenhua (1088) Could Replace Country Garden (2007); Div Impact

China Shenhua Energy Co H (1088 HK) could replace Country Garden Holdings Co (2007 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the June rebalance.
Short interest on China Shenhua Energy Co H (1088 HK) is pretty small while the short interest on Country Garden Holdings Co (2007 HK) is large and possibly getting bigger.
The change could result in a big increase in the fair value for the HSCEI 2023 dividend futures. Currently, we estimate an increase of up to 9 DIPS.

MSCI Korea Potential Adds & Deletes in May 2023 Amid Heightened Market Volatility

In this insight, we discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement in May 2023 amid heightened market volatility.
The potential inclusions (high probability) in the MSCI Korea index in May are Hanwha Aerospace and Ecopro. Potential adds (low probability) include POSCO International, Cosmo AM&T, and SM Entertainment.
The three most likely exclusions in the MSCI Korea index in May include Lotte Shopping, SD Biosensor, and S1 Corporation.

SM Ent Tendering P&L & Allocation Risk for a 30% Spread Opening

The target volume is 47.6% of the nominally estimated tendering pool size. It may go up due to retail investors’ typically low participation in tendering.
Other factors MAY OFFSET this. Most notable is the tendering possibility of HYBE (18.45%) and Lee Soo-man (4.96%). Combining these, the allocation rate will likely be between 50% and 60%.
Using this 50-60% band as a reference point, we should assess the risk of mismatching between the degree of post-tendering price correction and our loss buffer range for non-tendered shares.

SBI Sumishin Net Bank IPO: An IPO Price Range in the Wake of the Bank Share Sell-Off

SBI Sumishin Net Bank (7163 JP) has introduced a price range of JPY1,200-1,260 per share in the wake of a sell-off in bank shares. Offer shares and timelines are unchanged.
We previously discussed the IPO in SBI Sumishin Net Bank IPO: The Investment Case and SBI Sumishin Net Bank IPO: Valuation Insights. The shares will be listed on 29 March.
Our analysis suggests that SBI Sumishin Net Bank is fairly valued at the new IPO price range. We would participate in the IPO.

TBS (9401) Selling Cross-Holdings But Don’t Hold Your Breath

Three years ago I wrote a piece about the history of activism at Tokyo Broadcasting System (9401 JP), suggesting it was not expensive but activist gains might be hard won.
Yesterday, TBS announced it would sell strategic cross-holdings to raise cash for investment, as per its Medium-Term Management Plan 2023, and its full-year forecast Net Profit would rise 75%.
That tells you what you need to know, and it guides you to the value within.

Good Morning Japan | Equities Recoup (Some) Losses; NUGGET: ISpace to Rescue Japan’s Space Dreams