Daily Briefs

After the close today, Rakuten Group (4755 JP) announced the sale of 25.5mm shares of Rakuten Bank (5838 JP), right as the IPO lockup was reaching its expiry. Expected.
Pricing is 6-7 Dec (pre-Tokyo open 7 Dec), delivery 11 Dec 2023. Indicative price range is 8.5-12.5% discount for a deal of US$425mm or so.
In an interesting technical detail, this will take Rakuten below 50%. There is some near-term index demand, some in April, some next October. Rheos could be more overhang.

Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback

Yesterday afternoon, Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK) announced a new buyback program. The last one was announced August 2022 and ran until the AGM.
That was HK$4bn. In the meantime the company paid an HK$8.12 special div on the Swire As (14%) in September (on top of the HK$1.20 regular div).
Now they have announced a new HK$6bn buyback buying both A Shares and B shares. Details, index impact, historical B/A trading patterns, etc, below.

Rakuten Bank Placement – Was Expected at Some Point, Current Timing Seems Opportunistic

Rakuten Group (4755 JP) aims to raise US$430m via selling around 14.6% of Rakuten Bank (5838 JP).
RB is the largest internet bank in Japan, by number of accounts. As of Sep 23, it had 14.3m deposit accounts with a total deposit base of JPY9.5tn.
In this note, we will talk about the deal dynamics and updates since our last note.

StubWorld: Swire’s Latest Buyback

Yesterday afternoon (5th Dec), Swire Pacific (A) (19 HK) (and Swire Pacific (B) (87 HK)) announced a large (HK$6bn) buyback.
The response this morning sees Swire A up 14.4% (as I type), and 11.8% for Swire Bs.
I still like the idea of buying Swire A and Swire B outright here.

Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock

Rakuten Group (4755 JP) is looking to sell 25.5m shares of Rakuten Bank (5838 JP) via a secondary offering at a discount of between 8.7%-12.3%.
The offering will raise a maximum of US$433m and Rakuten Group (4755 JP) will use the funds to reduce its interest-bearing debt by the early repayment of its bonds.
There will be limited passive buying at the time of settlement of the stock but there is an index inclusion coming up that will result in passives buying.

Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV.

Yesterday, Tokyo Rakutenchi (8842 JP)‘s #1 shareholder Toho Co Ltd (9602 JP) agreed to buy out the rest of Tokyo Rakutenchi from its #2 and #3 shareholders and minorities.
The Takeover Price is a 51% premium. Which is nice. But the asset is a real estate portfolio, and it was sold as a company, not a real estate portfolio.
The revaluation surplus to market value for the real estate assets is more than net equity, so Takeover PBR >1.0, but Price/NAV of the takeover is 0.7x, without synergies included.

WHSP’s Non-Binding Indicative Offer for Perpetual Turned Down

On 21 November, Washington H. Soul Pattinson and Co. Ltd (SOL AU) submitted a non-binding, indicative offer to acquire Perpetual Ltd (PPT AU) at ~A$27/share.
A few hours ago, that offer was rejected by Perpetual Ltd (PPT AU)‘s Board citing a material undervaluation, conditional on demerger of the Asset Management business and execution risk.
If the deal goes through, there will be small passive buying in Washington H. Soul Pattinson and Co. Ltd (SOL AU). No major index changes expected.

Tokyo Rakutenchi (8842 JP): Toho’s Tender Offer at JPY6,720

Tokyo Rakutenchi (8842 JP) has recommended Toho Co Ltd (9602 JP)’s tender offer of JPY6,720 per share, a 51.5% premium to the undisturbed (6 December).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 24.29% ownership ratio.
Based on the irrevocables, the minimum acceptance condition requires a 30.2% minority acceptance rate. This acceptance rate is doable as the offer represents a ten-year high.

Sunshine Insurance Group IPO Lock-Up – US$5.3bn Lockup Release Tomorrow, with No Liquidity

Sunshine Insurance Group (6963 HK) (SIG), a life, health and P&C insurance company, raised around US$850m in its HK IPO in Dec 2022. Its IPO linked lockup will expire tomorrow.
SIG is an integrated insurance provider which offers both life and health (L&H) and property and casualty (P&C) insurance in China
In this note, we will talk about the lock-up dynamics and updates since our last note.

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Dec 07

Daily Brief Health Care: Eoflow, Jiangxi Rimag Group, Torrent Pharmaceuticals and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Eoflow Vs Insulet: Round II
Pre-IPO Jiangxi Rimag Group – Unclear Profit Model, Uncertain Future Expansion, and Worrying Outlook
Torrent Pharmaceuticals (TRP IN): Q2FY24 Result- Domestic Business Continued Solid Growth Path

Eoflow Vs Insulet: Round II

By Douglas Kim

This insight provides a detailed analysis of Eoflow’s appellant brief (released on 4 December) on Insulet Corp (PODD US)’s lawsuit.
We provide the following three major reasons why we believe Eoflow will win versus Insulet in this lawsuit.
One of the most important arguments on Eoflow’s appellant brief is the DTSA three years statute of limitations.

Pre-IPO Jiangxi Rimag Group – Unclear Profit Model, Uncertain Future Expansion, and Worrying Outlook

By Xinyao (Criss) Wang

People think that third-party medical imaging service providers targeting the grassroots market would have considerable development potential.However, even overseas leading players haven’t formed large profit scale after decades of establishment.
Different types of competitors would enter this market, and the consortium formed by public hospitals in grassroots market will be the biggest game changer. Potential legal risks also worth attention.
The profit model is still unclear. It’s uncertain whether the anticipated sizeable scale will eventually materialise. There’s still a long way to explore the third-party imaging industry in China.

Torrent Pharmaceuticals (TRP IN): Q2FY24 Result- Domestic Business Continued Solid Growth Path

By Tina Banerjee

Torrent Pharmaceuticals (TRP IN) reported 16% YoY revenue growth to INR26.6B in Q2FY24. Strong performance in India, Brazil, and Germany is partially offset by the revenue decline in the U.S.
EBITDA increased 22% YoY to INR8.3, leading to 138bps YoY expansion in margin to 31%, due to cost optimization and discontinuation of the low margin business in the U.S.
Initial bull thesis on the company regarding its domestic market strength is still intact. Further upside will be driven by superior performance in India and Brazil businesses and margin improvements.

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Dec 07

Daily Brief Consumer: BYD, REPT BATTERO Energy, Allwyn Entertainment AG, Denso Corp, Miniso and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

BYD (1211 HK): Largest Producer in Dramatically Expanding Market
Rept Battero IPO: The Bull Case
Allwyn (Formerly Sazka) – ESG Report – Lucror Analytics
Denso Corp Placement – Not Quite Shaping up for a Win Yet
[Miniso Group (MNSO US, BUY, TP US$31) Company Update]: Management Reassured Future Growth Prospects
Rept Battero IPO (PHIP Updates): Margin Sustainability Is Concerning

BYD (1211 HK): Largest Producer in Dramatically Expanding Market

By Ming Lu

China NEV market grew by 35% YoY in first ten months and by 39% YoY in October 2023.
BYD’s production is significantly larger than other NEV producers in China.
We believe the stock has an upside of 80% and a price target of HKD387. Buy.

Rept Battero IPO: The Bull Case

REPT BATTERO Energy (1998104D CH), a leading EV battery manufacturer, is premarketing a US$300 million HKEx IPO, according to press reports.
According to Frost & Sullivan, in 1H23, Rept was the tenth-largest lithium-ion battery manufacturer globally for annual installations for new energy applications.
The bull case rests on rapid ESS revenue growth, reducing customer concentration risks, ambitious capacity expansion plans, promising margin trajectory and improving cash collection cycle.

Allwyn (Formerly Sazka) – ESG Report – Lucror Analytics

By Charles Macgregor

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Allwyn’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.
Allwyn (formerly Sazka) is one of the largest pan-European lottery operators, and is active in all major EU countries where lotteries have been privatised (Czech Republic, Cyprus, Austria, Greece and Italy).

Denso Corp Placement – Not Quite Shaping up for a Win Yet

By Shifara Samsudeen, ACMA, CGMA

On 28th Nov 2023, Toyota (7203 JP) announced that it would sell around 9.4% of Denso (6902 JP) in order to reduce its cross-shareholding.
Since then the shares haven’t corrected by much, as compared to prior large secondary deals.
We have covered the deal background in our earlier notes. In this note, we talk about deal dynamics, as compared to prior deals.

[Miniso Group (MNSO US, BUY, TP US$31) Company Update]: Management Reassured Future Growth Prospects

By Eric Wen

MNSO management hosted a conference call today which reiterated normal operation of business, guided C4Q23 revenue above consensus, gross margin up QoQ, and non-GAAP net profit margin stable;
MNSO management refuted short seller’s thesis, commented distributor inventory levels at healthy levels and provided backgrounds on disclosed insider share sales;
We welcome MNSO management’s timely communication and believe its business model to be solid. We reiterate BUY and TP.

Rept Battero IPO (PHIP Updates): Margin Sustainability Is Concerning

REPT BATTERO Energy (1998104D CH) is a lithium-ion battery manufacturer focusing EV and ESS battery products. The company’s application for a HKEx IPO has been approved.
Though the company had reported strong growth in revenue over the last 3-4 years, the company has been struggling to make profits.
Rept Battero has started to generate GPM, however, our analysis suggests that there is very little room for GPM to improve.

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Dec 07

Most Read: Rakuten Bank , Ryohin Keikaku, Swire Pacific (B), Harmonic Drive Systems, Swire Pacific (A), Tokyo Rakutenchi and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Rakuten Bank IPO Lock-Up – Parent and Company Will Come Out of Lockup
Rakuten Bank (5838 JP) Overnight Offering at a Fat Discount
Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes
Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback
Toyota To Sell Harmonic Drive (6324 JP) Shares in Overseas Offering
Rakuten Bank Placement – Was Expected at Some Point, Current Timing Seems Opportunistic
Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock
StubWorld: Swire’s Latest Buyback
Harmonic Drive Placement – Cleanup Share Sale Will Remove the Overhang
Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV.

Rakuten Bank IPO Lock-Up – Parent and Company Will Come Out of Lockup

Rakuten Bank (5838 JP) (RB), the online banking arm of Rakuten Group (4755 JP), raised around US$630m in its Japan IPO. Its IPO linked lockup will expire soon.
RB is the largest internet bank in Japan, by number of accounts. As of Jun 23, it had 14.0m deposit accounts with a total deposit base of JPY9.4tn.
In this note, we will talk about the lock-up dynamics and updates since our last note.

Rakuten Bank (5838 JP) Overnight Offering at a Fat Discount

After the close today, Rakuten Group (4755 JP) announced the sale of 25.5mm shares of Rakuten Bank (5838 JP), right as the IPO lockup was reaching its expiry. Expected.
Pricing is 6-7 Dec (pre-Tokyo open 7 Dec), delivery 11 Dec 2023. Indicative price range is 8.5-12.5% discount for a deal of US$425mm or so.
In an interesting technical detail, this will take Rakuten below 50%. There is some near-term index demand, some in April, some next October. Rheos could be more overhang.

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

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passives trackers will need to buy 2.4-22.5x ADV (10-24% of real float) on the inclusions and sell between 3.5-42.5x ADV on the deletions.
Fast Retailing (9983 JP) capping, Nitori Holdings (9843 JP) increase in PAF, a big funding trade, and potentially new stocks being added in two-steps.

Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback

Yesterday afternoon, Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK) announced a new buyback program. The last one was announced August 2022 and ran until the AGM.
That was HK$4bn. In the meantime the company paid an HK$8.12 special div on the Swire As (14%) in September (on top of the HK$1.20 regular div).
Now they have announced a new HK$6bn buyback buying both A Shares and B shares. Details, index impact, historical B/A trading patterns, etc, below.

Toyota To Sell Harmonic Drive (6324 JP) Shares in Overseas Offering

Today, Toyota Motor (7203 JP) announced it would sell 4.379mm shares (4.55%) of Harmonic Drive Systems (6324 JP) in an overseas placement.
This is not so big as it is emblematic, adding to the recent news on Toyota unwinds.
Harmonic Drive is heavily held by foreign institutions. This is a foreigners-only deal. But it will need to be absorbed by that group too.

Rakuten Bank Placement – Was Expected at Some Point, Current Timing Seems Opportunistic

Rakuten Group (4755 JP) aims to raise US$430m via selling around 14.6% of Rakuten Bank (5838 JP).
RB is the largest internet bank in Japan, by number of accounts. As of Sep 23, it had 14.3m deposit accounts with a total deposit base of JPY9.5tn.
In this note, we will talk about the deal dynamics and updates since our last note.

Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock

Rakuten Group (4755 JP) is looking to sell 25.5m shares of Rakuten Bank (5838 JP) via a secondary offering at a discount of between 8.7%-12.3%.
The offering will raise a maximum of US$433m and Rakuten Group (4755 JP) will use the funds to reduce its interest-bearing debt by the early repayment of its bonds.
There will be limited passive buying at the time of settlement of the stock but there is an index inclusion coming up that will result in passives buying.

StubWorld: Swire’s Latest Buyback

Yesterday afternoon (5th Dec), Swire Pacific (A) (19 HK) (and Swire Pacific (B) (87 HK)) announced a large (HK$6bn) buyback.
The response this morning sees Swire A up 14.4% (as I type), and 11.8% for Swire Bs.
I still like the idea of buying Swire A and Swire B outright here.

Harmonic Drive Placement – Cleanup Share Sale Will Remove the Overhang

By Clarence Chu

Toyota Motor (7203 JP) is looking to raise US$116m from selling its entire stake in Harmonic Drive Systems (6324 JP).
Toyota Motors has indicated over the past one-two weeks that it will be looking to sell/trim its stakes in various entities as part of its exit from its multiple cross-holdings.
While the deal would be a relatively large one to digest at 10 days of ADV, Toyota Motors will be selling its entire stake, clearing the overhang.

Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV.

Yesterday, Tokyo Rakutenchi (8842 JP)‘s #1 shareholder Toho Co Ltd (9602 JP) agreed to buy out the rest of Tokyo Rakutenchi from its #2 and #3 shareholders and minorities.
The Takeover Price is a 51% premium. Which is nice. But the asset is a real estate portfolio, and it was sold as a company, not a real estate portfolio.
The revaluation surplus to market value for the real estate assets is more than net equity, so Takeover PBR >1.0, but Price/NAV of the takeover is 0.7x, without synergies included.

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Dec 07

Daily Brief Australia: Perpetual Ltd, Boss Energy, Empire Energy and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

WHSP’s Non-Binding Indicative Offer for Perpetual Turned Down
Boss Energy Placement – Heavy Dilution and Doesn’t Appear Well Flagged
Empire Energy Group Ltd – A Gas Plant with Intrinsic Growth Opportunity

WHSP’s Non-Binding Indicative Offer for Perpetual Turned Down

By Research as a Service (RaaS)

On 21 November, Washington H. Soul Pattinson and Co. Ltd (SOL AU) submitted a non-binding, indicative offer to acquire Perpetual Ltd (PPT AU) at ~A$27/share.
A few hours ago, that offer was rejected by Perpetual Ltd (PPT AU)‘s Board citing a material undervaluation, conditional on demerger of the Asset Management business and execution risk.
If the deal goes through, there will be small passive buying in Washington H. Soul Pattinson and Co. Ltd (SOL AU). No major index changes expected.

Boss Energy Placement – Heavy Dilution and Doesn’t Appear Well Flagged

By Ethan Aw

Boss Energy (BOE AU) is looking to raise up to A$205m (US$135m) through its primary placement. The proceeds will be used to fund an acquisition and replenish working capital.
The deal will be a large one to digest, at 19.7 days of three month ADV and 14% dilution.
In this note, we will talk about the placement and run the deal through our ECM framework.

Empire Energy Group Ltd – A Gas Plant with Intrinsic Growth Opportunity

Empire Energy Group Limited (ASX:EEG) is an oil and gas producer/developer, with onshore Northern Territory (NT) and US oil/gas production assets.
EEG has the largest tenement position in the highly prospective Greater McArthur Basin, which includes the Beetaloo Sub-basin.
The investment case is building further with the acquisition of the Rosalind Park Gas Plant to provide an immediate, low-capital and operating-cost processing option with nameplate capacity above the Carpentaria Stage I development model.

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Dec 07

Daily Brief South Korea: Eoflow and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Eoflow Vs Insulet: Round II

Eoflow Vs Insulet: Round II

By Douglas Kim

This insight provides a detailed analysis of Eoflow’s appellant brief (released on 4 December) on Insulet Corp (PODD US)’s lawsuit.
We provide the following three major reasons why we believe Eoflow will win versus Insulet in this lawsuit.
One of the most important arguments on Eoflow’s appellant brief is the DTSA three years statute of limitations.

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Dec 07

Daily Brief India: China Oil And Gas, Torrent Pharmaceuticals and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

Morning Views Asia: China Jinmao Holdings, China Oil And Gas, Vedanta Resources
Torrent Pharmaceuticals (TRP IN): Q2FY24 Result- Domestic Business Continued Solid Growth Path

Morning Views Asia: China Jinmao Holdings, China Oil And Gas, Vedanta Resources

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

China Jinmao Holdings
China Oil And Gas
Vedanta Resources

Torrent Pharmaceuticals (TRP IN): Q2FY24 Result- Domestic Business Continued Solid Growth Path

By Tina Banerjee

Torrent Pharmaceuticals (TRP IN) reported 16% YoY revenue growth to INR26.6B in Q2FY24. Strong performance in India, Brazil, and Germany is partially offset by the revenue decline in the U.S.
EBITDA increased 22% YoY to INR8.3, leading to 138bps YoY expansion in margin to 31%, due to cost optimization and discontinuation of the low margin business in the U.S.
Initial bull thesis on the company regarding its domestic market strength is still intact. Further upside will be driven by superior performance in India and Brazil businesses and margin improvements.

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Dec 07

Daily Brief United States: Texas Pacific Land and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

TPL: The Land of Speculative Worry

TPL: The Land of Speculative Worry

By Hamed Khorsand

TPL has gone through a series of changes within its Board of Directors but that has not been enough to squash investor concerns
The Delaware Court deciding in favor of TPL in a shareholder lawsuit would allow the Board to increase the number of authorized shares of common stock
TPL’s Board now has ten members instead of nine last year. The Board has also seen three members turnover giving the Board a total of four fresh members

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Dec 07

Daily Brief Japan: Rakuten Bank , Harmonic Drive Systems, Tokyo Rakutenchi, Japan Airlines, Denso Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Rakuten Bank (5838 JP) Overnight Offering at a Fat Discount
Toyota To Sell Harmonic Drive (6324 JP) Shares in Overseas Offering
Rakuten Bank Placement – Was Expected at Some Point, Current Timing Seems Opportunistic
Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock
Harmonic Drive Placement – Cleanup Share Sale Will Remove the Overhang
Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV.
Tokyo Rakutenchi (8842 JP): Toho’s Tender Offer at JPY6,720
Japan Airlines (9201 JP, BUY, TP: JPY3150): Slow, Steady, Stable Recovery
Denso Corp Placement – Not Quite Shaping up for a Win Yet

Rakuten Bank (5838 JP) Overnight Offering at a Fat Discount

After the close today, Rakuten Group (4755 JP) announced the sale of 25.5mm shares of Rakuten Bank (5838 JP), right as the IPO lockup was reaching its expiry. Expected.
Pricing is 6-7 Dec (pre-Tokyo open 7 Dec), delivery 11 Dec 2023. Indicative price range is 8.5-12.5% discount for a deal of US$425mm or so.
In an interesting technical detail, this will take Rakuten below 50%. There is some near-term index demand, some in April, some next October. Rheos could be more overhang.

Toyota To Sell Harmonic Drive (6324 JP) Shares in Overseas Offering

Today, Toyota Motor (7203 JP) announced it would sell 4.379mm shares (4.55%) of Harmonic Drive Systems (6324 JP) in an overseas placement.
This is not so big as it is emblematic, adding to the recent news on Toyota unwinds.
Harmonic Drive is heavily held by foreign institutions. This is a foreigners-only deal. But it will need to be absorbed by that group too.

Rakuten Bank Placement – Was Expected at Some Point, Current Timing Seems Opportunistic

Rakuten Group (4755 JP) aims to raise US$430m via selling around 14.6% of Rakuten Bank (5838 JP).
RB is the largest internet bank in Japan, by number of accounts. As of Sep 23, it had 14.3m deposit accounts with a total deposit base of JPY9.5tn.
In this note, we will talk about the deal dynamics and updates since our last note.

Rakuten Bank (5838 JP) Placement: Index Inclusion Will Absorb Some Stock

Rakuten Group (4755 JP) is looking to sell 25.5m shares of Rakuten Bank (5838 JP) via a secondary offering at a discount of between 8.7%-12.3%.
The offering will raise a maximum of US$433m and Rakuten Group (4755 JP) will use the funds to reduce its interest-bearing debt by the early repayment of its bonds.
There will be limited passive buying at the time of settlement of the stock but there is an index inclusion coming up that will result in passives buying.

Harmonic Drive Placement – Cleanup Share Sale Will Remove the Overhang

By Clarence Chu

Toyota Motor (7203 JP) is looking to raise US$116m from selling its entire stake in Harmonic Drive Systems (6324 JP).
Toyota Motors has indicated over the past one-two weeks that it will be looking to sell/trim its stakes in various entities as part of its exit from its multiple cross-holdings.
While the deal would be a relatively large one to digest at 10 days of ADV, Toyota Motors will be selling its entire stake, clearing the overhang.

Toho Takeout of Rakutenchi – Buying a Real Estate Portfolio at a 50% Premium but 0.7x NAV.

Yesterday, Tokyo Rakutenchi (8842 JP)‘s #1 shareholder Toho Co Ltd (9602 JP) agreed to buy out the rest of Tokyo Rakutenchi from its #2 and #3 shareholders and minorities.
The Takeover Price is a 51% premium. Which is nice. But the asset is a real estate portfolio, and it was sold as a company, not a real estate portfolio.
The revaluation surplus to market value for the real estate assets is more than net equity, so Takeover PBR >1.0, but Price/NAV of the takeover is 0.7x, without synergies included.

Tokyo Rakutenchi (8842 JP): Toho’s Tender Offer at JPY6,720

Tokyo Rakutenchi (8842 JP) has recommended Toho Co Ltd (9602 JP)’s tender offer of JPY6,720 per share, a 51.5% premium to the undisturbed (6 December).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 24.29% ownership ratio.
Based on the irrevocables, the minimum acceptance condition requires a 30.2% minority acceptance rate. This acceptance rate is doable as the offer represents a ten-year high.

Japan Airlines (9201 JP, BUY, TP: JPY3150): Slow, Steady, Stable Recovery

By Mohshin Aziz

Japan Airlines (9201 JP) (JAL) is making a positive recovery on strong domestic and international demand
Weak JPY is a big headwind and so is its 40% fuel hedge cover locked in at higher than-market price. These factors should reverse and unwind next year
Target price JPY3,150 based on 1.65x FY24 P/BV – one standard deviation above its mean. Borderline attractive with 12% UPSIDE, and 2.3% dividend yield

Denso Corp Placement – Not Quite Shaping up for a Win Yet

On 28th Nov 2023, Toyota (7203 JP) announced that it would sell around 9.4% of Denso (6902 JP) in order to reduce its cross-shareholding.
Since then the shares haven’t corrected by much, as compared to prior large secondary deals.
We have covered the deal background in our earlier notes. In this note, we talk about deal dynamics, as compared to prior deals.

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Dec 07

Daily Brief China: Swire Pacific (B), Tencent, Swire Pacific (A), CPMC Holdings, Hygon Information Technology C, BYD, SenseTime Group , REPT BATTERO Energy, Robosense Technology and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback
2024 High Conviction Idea – High Beta and Low Risk Recommendations
StubWorld: Swire’s Latest Buyback
CPMC Holdings (906 HK): Pre-Conditional Voluntary Offer at HK$6.87
China: Consolidated Flows at the Close Tomorrow
BYD (1211 HK): Largest Producer in Dramatically Expanding Market
Short-Seller Grizzly Accuses Chinese AI Software Firm SenseTime of Inflating Revenues
Rept Battero IPO: The Bull Case
Robosense Technology Pre-IPO – PHIP Updates – ADAS Sales Strong but Profitability Remains Distant
CPMC (906 HK): SASAC Takeover

Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback

Yesterday afternoon, Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK) announced a new buyback program. The last one was announced August 2022 and ran until the AGM.
That was HK$4bn. In the meantime the company paid an HK$8.12 special div on the Swire As (14%) in September (on top of the HK$1.20 regular div).
Now they have announced a new HK$6bn buyback buying both A Shares and B shares. Details, index impact, historical B/A trading patterns, etc, below.

2024 High Conviction Idea – High Beta and Low Risk Recommendations

By Ying Pan

We prepared high beta and low risk recommendations for 2024:
With 2024 YE as horizon, we recommend JD.com, JD Logistics, JDHealth, Tencent and Luckin.
With 1H24 as horizon, we recommend KE Holdings, NetEase and Kuaishou.

StubWorld: Swire’s Latest Buyback

Yesterday afternoon (5th Dec), Swire Pacific (A) (19 HK) (and Swire Pacific (B) (87 HK)) announced a large (HK$6bn) buyback.
The response this morning sees Swire A up 14.4% (as I type), and 11.8% for Swire Bs.
I still like the idea of buying Swire A and Swire B outright here.

CPMC Holdings (906 HK): Pre-Conditional Voluntary Offer at HK$6.87

CPMC Holdings (906 HK) has announced a pre-conditional voluntary offer from Changping Industrial at HK$6.87 per share, a 32.1% premium to the undisturbed price (16 August).
The pre-condition mainly relates to Chinese approvals. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights.
The 50% minimum acceptance condition should be met due to COFCO’s irrevocable and the second-largest shareholders’ past dealings with COFCO. At the last close, the gross spread was 6.0%.

China: Consolidated Flows at the Close Tomorrow

Local indices in China including the CSI 300 Index, CSI 500 Index, STAR50 Index and SSE50 Index will rebalance at the close tomorrow.
There are many changes for the indices and there are stocks that are adds and/or deletes from multiple indices which results in cumulative or offsetting flows.
We estimate turnover at the close tomorrow in China will be around US$7.5bn with big impact on a lot of stocks.

BYD (1211 HK): Largest Producer in Dramatically Expanding Market

By Ming Lu

China NEV market grew by 35% YoY in first ten months and by 39% YoY in October 2023.
BYD’s production is significantly larger than other NEV producers in China.
We believe the stock has an upside of 80% and a price target of HKD387. Buy.

Short-Seller Grizzly Accuses Chinese AI Software Firm SenseTime of Inflating Revenues

By Caixin Global

SenseTime Group Inc. shares plummeted nearly 5% Tuesday after U.S.-based short-seller Grizzly Research released a report accusing the Chinese AI software developer of inflating its revenues.
Grizzly’s report, citing court documents and social media posts, alleged that SenseTime engaged in what it called round-tripping, where it provided funds to customers who in turn used the money to purchase products from SenseTime that might never have been delivered.
Its Hong Kong-listed stock tumbled as much as 9.7% before closing 4.86% lower to HK$1.37 ($0.18), down 64% from its IPO price of HK$3.85.

Rept Battero IPO: The Bull Case

REPT BATTERO Energy (1998104D CH), a leading EV battery manufacturer, is premarketing a US$300 million HKEx IPO, according to press reports.
According to Frost & Sullivan, in 1H23, Rept was the tenth-largest lithium-ion battery manufacturer globally for annual installations for new energy applications.
The bull case rests on rapid ESS revenue growth, reducing customer concentration risks, ambitious capacity expansion plans, promising margin trajectory and improving cash collection cycle.

Robosense Technology Pre-IPO – PHIP Updates – ADAS Sales Strong but Profitability Remains Distant

Robosense Technology (ROBO HK) (RT) is now looking to raise up to US$150m in its upcoming Hong Kong IPO, down from US$300-400m earlier.
As of Mar 23, it had earned design wins for mass production of LiDAR for 52 vehicles with 21OEMs and Tier 1 suppliers, ranking No. 1 globally, according to CIC.
We looked at its past performance in our earlier notes. In this note, we talk about its PHIP updates.

CPMC (906 HK): SASAC Takeover