In today’s briefing:
- NTT and NTT Data Reshuffle the Deckchairs and Everyone “Wins”
- Trading Opportunity Coming on SK Telecom ADR Premium
- MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Potential Adds & Capping Flows
- AGL Energy’s Demerger Booklet Provides an Underwhelming Justification
- Mindtree-LTI: Merger Announced to Form India’s 5th Largest IT Services Player
- Canon (7751) – Buyback Looks Small But Shareholder Structure Matters
NTT and NTT Data Reshuffle the Deckchairs and Everyone “Wins”
- NTT (Nippon Telegraph & Telephone) (9432 JP) and NTT Data Corp (9613 JP) this morning announced a 1pm joint presser. Imaginations ran wild and NTT went up 12+%.
- The reality is more subdued (as it should have been for a during-market-hours-presser) and it involves a restructuring of a small NTT subsidiary which happens to own NTT Data shares.
- But it is still positive. It is something of a win-win for both parties.
Trading Opportunity Coming on SK Telecom ADR Premium
- ADRs are traded at a significant premium when the foreign room for underlying shares is exhausted. This is the pattern that KT showed in 2018.
- SKT’s foreign room is currently 1.85%. That is, the burnout rate is 98.15%. Only about 2M shares need to be burned to hit bottom. This is 0.91% of SO.
- The shortage of SKT ADRs is likely to intensify, which in turn suggests that the ADR premium may rise further.
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Potential Adds & Capping Flows
- Core Lithium Ltd (CXO AU) could be added to the MVIS Global Rare Earth/Strategic Metals Index in June. Lake Resources Nl (LKE AU) is the next highest ranked non-index constituent.
- Irrespective of whether there are inclusions, there will be passive selling on ioneer Ltd (INR AU) and Australian Strategic Materials (ASM AU) due to capping changes to the index constituents.
- Inclusions to the index jump post announcement. The review cutoff date is 31 May, so weakness in the potential inclusions could be used to pre-position (if they outperform index constituents).
AGL Energy’s Demerger Booklet Provides an Underwhelming Justification
- The IFA supported the demerger by stating that “in the absence of a fully priced takeover offer from a third party, the demerger is the most attractive course of action.”
- IFA concedes that “it is not possible to form a definitive view” if the demerger will generate higher shareholder returns. The report is light on qualitative analysis.
- Mike Cannon-Brookes continues to gain retail support for a NO vote at AGL Energy Ltd (AGL AU)‘s 15 June scheme meeting. Our SoTP points to upside absent a demerger.
Mindtree-LTI: Merger Announced to Form India’s 5th Largest IT Services Player
- On 6th May 2022, Larsen & Toubro (LT IN)‘s publicly-listed subsidiaries Mindtree Ltd (MTCL IN) and Larsen & Toubro Infotech (LTI IN) announced plans to merge.
- I discussed this situation previously in Mindtree-LTI: A Potential US$20bn+ Indian Tech Merger; Mindtree Could Outperform LTI when the ratio was 0.66, expecting a scrip ratio north of 0.70.
- Below is a closer look at the details of the transaction and the outlook for the combined entity.
Canon (7751) – Buyback Looks Small But Shareholder Structure Matters
- Canon Inc (7751 JP) on Monday announced a share buyback programme.
- It isn’t very big. But it bears consideration because of other things going on.
- Shareholder structure is of much more importance than many investors appreciate. Here even more so.
Before it’s here, it’s on Smartkarma