In today’s briefing:
- Fast Retailing (9983) Capping Decision This Week – Single or Double Dose?
- Fast Retailing (9983 JP): Double Capping & The Reverse Funding Trade
- Sigma Healthcare (SIG AU): Shareholders Approve Merger; Passives Could Start Buying in Two Weeks
- PCOMP Index Rebalance: AREIT, CBC to Replace NIKL, WLCON
- Global Foods Creators (7559) – Another Stupidly Cheap MBO With Rigged DCF
- Takeda Pharma (4502) – Strong Results
- SOL Shipbuilding Top 3 ETF Throws off Some Serious Flow Trading Plays with Plenty of Juice
- Taiwan Tech Weekly: How Apple Helped TSMC Become #1; Also Morris Chang Comments on TSMC ADR Premium
- Nippon Steal! Again. Parent Takes Out Sanyo Special Steel (5481) At Well Below Book
- Ascot Corp (3264 JP): Daito Trust Construction (1878 JP)’s Tender Offer a Done Deal
Fast Retailing (9983) Capping Decision This Week – Single or Double Dose?
- Unless Fast Retailing (9983) underperforms Nikkei 225 by 10% by Friday close, there will be a capping exercise at the next Nikkei 225 Rebalance at the end of March 2025.
- The evolution of tech stock movement in Japan in the next day or three is important to watch. There will be effects.
- The setup very near-term could be pretty interesting, and worth watching.
Fast Retailing (9983 JP): Double Capping & The Reverse Funding Trade
- With 3 days left in the review period, Fast Retailing (9983 JP) has a 11.29% weight in the Nikkei 225 (NKY INDEX). That means double capping in March.
- If Fast Retailing (9983 JP) underperforms the other index stocks by 1.8% from now to the close on 31 January, there will only be a single level of capping.
- Double capping will result in big selling on Fast Retailing (9983 JP) and big inflows into the other index constituents. Smaller impact for single level capping.
Sigma Healthcare (SIG AU): Shareholders Approve Merger; Passives Could Start Buying in Two Weeks
- Sigma Healthcare (SIG AU) and Chemist Warehouse (CWG) shareholders have approved the merger with 99.86% and 100% of the votes cast in favour.
- The Second Court Hearing is on 3 February and the merger will be implemented on 12 February, which is when the passive buying could commence.
- Sigma Healthcare has continued to trade higher on a record margin and sales expansion for CWG and expected passive buying that could top A$3bn over the next few months.
PCOMP Index Rebalance: AREIT, CBC to Replace NIKL, WLCON
- As forecast, Areit (AyalaLand REIT) (AREIT PM) and China Banking (CBC PM) will replace Nickel Asia (NIKL PM) and Wilcon Depot (WLCON PM) in the Philippines Stock Exchange PSEi Index.
- Passive trackers will need to buy between 14-44 days of ADV in the adds while selling between 17-54 days of ADV in the deletes.
- The stocks have already moved a lot over the last few months and positioning has built up over that period. There could still be outperformance ahead of the passives trading.
Global Foods Creators (7559) – Another Stupidly Cheap MBO With Rigged DCF
- Today after the close, Global Food Creators (7559 JP) announced that the CEO would sell his 1.23% of the company into an MBO by a company he set up.
- The family company which owns 27%, and he would fund the takeover of the other 73% with 1% equity taken from his share sale, and 99% bank loans.
- The TOB is at 0.65x book for a cash-rich company. Liquidate the cash and the rest is being taken over at 0.33x book. Aaaaargh.
Takeda Pharma (4502) – Strong Results
- Today Takeda Pharmaceutical (4502 JP) announced earnings which will mean last year was the trough, not this year. The pipeline looks OK too.
- The company also announced a ¥100bn buyback and a change of CEO. The buyback has a big number, but it isn’t particularly exciting.
- All in all, there’s positive news here, but it is all much of a muchness, but as it is a nine-figure buyback in 3mos, we take a look.
SOL Shipbuilding Top 3 ETF Throws off Some Serious Flow Trading Plays with Plenty of Juice
- This 20% reversion and 30% cap setup creates solid flow trades. With just 13 holdings, SOL ETF’s weight swings hard—Hanwha Ocean’s already pushing 27% post-rebal.
- Constituent changes drive the biggest dislocations—still the main setup. “The other 10” names are FICS-screened by market cap (May/Nov cut), making rotations fairly predictable.
- With AUM only ramping recently, this ETF is still in price discovery mode. Pre-positioning ahead of flows has juice, making it a prime target for aggressive flow trading.
Taiwan Tech Weekly: How Apple Helped TSMC Become #1; Also Morris Chang Comments on TSMC ADR Premium
- PC Monitor: Snapdragon’s Surge, AMD’s Gains, Intel’s Test; Long Asus & Dell
- Memory Monitor: Is DeepSeek a Problem for SK Hynix & Micron’s HBM DRAM Growth?
- TSMC (2330.TT; TSM.US): Earthquake Impact Limited; Setting Newest Production Line Not Viable in US.
Nippon Steal! Again. Parent Takes Out Sanyo Special Steel (5481) At Well Below Book
- 6-7 years ago Sanyo Special Steel (5481 JP) bought out a large foreign specialty steel company, and funded it by getting Nippon Steel to inject capital at below book.
- Now Nippon Steel is buying the rest of Sanyo Special Steel in a Tender Offer at 0.66x book, where most of book is Net Receivables, Inventory, WIP, and Materials.
- This is the second time in a decade where the Board has decided to sell control of itself at far below book value. They should be ashamed of themselves.
Ascot Corp (3264 JP): Daito Trust Construction (1878 JP)’s Tender Offer a Done Deal
- Ascot Corp (3264 JP) announced a tender offer from Daito Trust Construct (1878 JP) at JPY260 per share, a 20.4% premium to the last close.
- Ascot currently does not meet the 25% tradeable share ratio criterion. The offer is attractive compared to historical trading ranges but below the mid-point of the IFA DCF valuation range.
- This is a done deal, as irrevocables represent an 82.78% ownership ratio, well above the minimum acceptance condition (67.86% ownership ratio).
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