Daily Brief Industrials: Adani Enterprises, Toshiba Corp, AGC Inc, Ihara Science, Adani Ports & Special Economic Zone and more

• In an unprecedent step, MSCI will reassess the float and likely lower the FIF of the Adani Group companies at the February QCIR. There will be BIG passive selling.
• The affected securities will be further reviewed as part of the scheduled Full Country Float Review during the May QCIR. There could be some index deletions and BIGGER passive selling.
• Expect active selling before the passive selling and the rally in the Adani Group stocks over the last couple of days should come to a grinding halt today.

• As mentioned yesterday here and more clearly by Mio Kato in Toshiba – Good News?, the Nikkei was strangely silent over the fact that loan details were agreed. 
• The Nikkei comes out with a surprise article this morning saying they hear the Commitment Letter has been handed over. It also says the “Final Bid” is “about ¥2trln.”
• Toshiba shares quickly reacted badly quickly. The article deserves parsing and I try to clarify the arguments.

• AGC Inc (5201 JP) today announced Q4 earnings where revenues were great, OP was slightly disappointing, and Net Profits were awful because of significant impairments.
• The company, however, announced a large buyback – its first in 5 years and equivalent to all the buybacks in the previous five years. 
• The buyback should have impact on what is an interesting name with broad institutional ownership and not overwhelming liquidity.

• Ihara Science (5999 JP) announced an MBO by the chairman. 
• It’s at an all-time high, but it is not especially attractive. The register is also really interesting.
• This is a smallcap but i would not be surprised to see a bumpitrage effort. In fact, I’d be surprised if we didn’t.

Adani Ports and Special Economic Zone’s 9M/22-23 results were broadly stable. The main takeaway was management’s commitment to reduce debt by INR 50 bn using FCF in FY 2023-24, supported by lower capex and limiting new acquisitions. This would cover the INR 16 bn in repayments for onshore bonds maturing in H1/23-24, as well as the prepayment of certain bank debt. Management expects the company to generate the same amount of FCF in FY 2024-25, which would be channelled to repay the USD 650 mn ADSEZ 3.375 24 due in July 2024.

• Ihara Science (5999 JP) has recommended an MBO tender offer (Chairman and Toku Corporation) of JPY2,980 per share, a 31.3% premium to the undisturbed price (7 February).
• 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 66.25% ownership ratio.
• While the tender price represents an all-time share price, it is light in comparison to peer and historical multiples. This suggests deal risk. The offer runs from 9 Feb-24 Mar.