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.
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