In today’s briefing:
- Japan Post Bank (7182 JP): Offering Price Decided; Buyback & Passive Flow Coming Up
- HYBE Gives Up the M&A Fight for SM Entertainment: Impact on Kakao’s Tender Offer
- SM Entertainment: Kakao’s Tender Offer Proration Analysis
- Names for a Preemptive Long Short Setup for KOSPI 200 June Rebalancing
- HSCEI Index Rebalance Preview: China Shenhua (1088) Could Replace Country Garden (2007); Div Impact
- MSCI Korea Potential Adds & Deletes in May 2023 Amid Heightened Market Volatility
- SM Ent Tendering P&L & Allocation Risk for a 30% Spread Opening
- SBI Sumishin Net Bank IPO: An IPO Price Range in the Wake of the Bank Share Sell-Off
- TBS (9401) Selling Cross-Holdings But Don’t Hold Your Breath
- Good Morning Japan | Equities Recoup (Some) Losses; NUGGET: ISpace to Rescue Japan’s Space Dreams
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.
HYBE Gives Up the M&A Fight for SM Entertainment: Impact on Kakao’s Tender Offer
- On 12 March, HYBE (352820 KS) announced that it is no longer pursuing S.M.Entertainment Co (041510 KS) in an M&A battle with Kakao Corp (035720 KS).
- This will result in a very high probability of Kakao winning the M&A battle of SM Entertainment.
- Many institutional investors are likely to have pushed back on HYBE’s capital raising efforts, which seems to have been the clincher of HYBE backing out of this M&A for SM.
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.
Names for a Preemptive Long Short Setup for KOSPI 200 June Rebalancing
- Kum Yang and Youlchon Chemical are within the borderline for inclusion, whereas Hwaseung Enterprise and K Car are in the deletion zone.
- Since the review period has reached 75%, it seems reasonable to consider a somewhat aggressive buildup for them.
- We can also consider setting up preemptive positions only for Kum Yang and Hwaseung Enterprise and then sequentially look for entry opportunities for Youlchon and K Car later on.
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.
MSCI Korea Potential Adds & Deletes in May 2023 Amid Heightened Market Volatility
- In this insight, we discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement in May 2023 amid heightened market volatility.
- The potential inclusions (high probability) in the MSCI Korea index in May are Hanwha Aerospace and Ecopro. Potential adds (low probability) include POSCO International, Cosmo AM&T, and SM Entertainment.
- The three most likely exclusions in the MSCI Korea index in May include Lotte Shopping, SD Biosensor, and S1 Corporation.
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.
SBI Sumishin Net Bank IPO: An IPO Price Range in the Wake of the Bank Share Sell-Off
- SBI Sumishin Net Bank (7163 JP) has introduced a price range of JPY1,200-1,260 per share in the wake of a sell-off in bank shares. Offer shares and timelines are unchanged.
- We previously discussed the IPO in SBI Sumishin Net Bank IPO: The Investment Case and SBI Sumishin Net Bank IPO: Valuation Insights. The shares will be listed on 29 March.
- Our analysis suggests that SBI Sumishin Net Bank is fairly valued at the new IPO price range. We would participate in the IPO.
TBS (9401) Selling Cross-Holdings But Don’t Hold Your Breath
- Three years ago I wrote a piece about the history of activism at Tokyo Broadcasting System (9401 JP), suggesting it was not expensive but activist gains might be hard won.
- Yesterday, TBS announced it would sell strategic cross-holdings to raise cash for investment, as per its Medium-Term Management Plan 2023, and its full-year forecast Net Profit would rise 75%.
- That tells you what you need to know, and it guides you to the value within.
Good Morning Japan | Equities Recoup (Some) Losses; NUGGET: ISpace to Rescue Japan’s Space Dreams
- OVERSEAS. SPX +1.7% as Regional Bank rebounded as Calmer heads prevailed; CPI Print at 6% provides a dose of reality; Meta Culls again; Another Big Boeing Order.
- JAPAN. NKY Futs flat vs Cash; USDJPY 134.2; Surprising JP Bank Sell -off yesterday to reverse; BOJ buys ETFs for 2nd Day; Companies hiking Wages better than expected.
- NUGGET. iSpace – Japan’s key hope to conquer space. IPO slated for early April, and a moon landing just after. Could be big.
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