In today’s briefing:
- JFE Holdings (5411) Stock+CB Offering
- NTT’s Partial Offer for Marketing Consultant Intage (4326) –
- Metro Pacific’s Tender Offer Kicks Off
- CSI300 Index Rebalance Preview: 14 Potential Changes in December
- KRX BBIG K-New Deal Rebalancing: Official Results & Passive Flow Impacts
- Japan Tobacco High Conviction Call: No Price Hikes This Year, But Profits Poised to Soar
- Aquila Acquisition Corp (7836 HK): ZG Group’s Punchy Valuation
- SoftBank Group (9984 JP); Arm IPO, Priced for Disappointment
- JMDC (4483 JP): Omron’s Partial Tender Offer
- Newcrest: Shareholder Vote On 13th Oct
JFE Holdings (5411) Stock+CB Offering
- Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
- ¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
- This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.
NTT’s Partial Offer for Marketing Consultant Intage (4326) –
- Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP).
- Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%.
- The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership.
Metro Pacific’s Tender Offer Kicks Off
- Back on the 26 April, First Pacific (142 HK) and three other entities, proposed delisting Metro Pacific Investments (MPI PM) at PHP 4.63/share. This was subsequently bumped to PHP 5.20.
- A Special Stockholders’ Meeting was held on August 8, and MPI stakeholders approved all the resolutions. An SGM for independent First Pac shareholders will be held on the 24 August.
- The Tender Offer is now open and closes on the 7 September, with (expected) settlement on 19 September – provided the Tender Offer delisting conditions are met.
CSI300 Index Rebalance Preview: 14 Potential Changes in December
- Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
- We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
- The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.
KRX BBIG K-New Deal Rebalancing: Official Results & Passive Flow Impacts
- After results were transitioned to non-public information, it has been observed that results are reflected in prices significantly later, with substantial price impact occurring close to the rebalancing trading day.
- Even though the AUMs have recently decreased, the passive impact size is quite substantial, considering a recent pattern of price impact concentrating within a maximum of about two trading days.
- A heavy Long-Short setup on these pairs, DearU / Douzone Bizon and SK Biopharmaceuticals / SK Bioscience (302440 KS), is something we should very actively consider.
Japan Tobacco High Conviction Call: No Price Hikes This Year, But Profits Poised to Soar
- Combustible tobacco is declining globally, but Japan Tobacco (2914 JP) is defying the odds by outperforming the industry significantly through capturing market share from competitors.
- Also in Heated Tobacco, Japan Tobacco is slowly but steadily capturing market share from IQOS and other heated tobacco makers.
- There will be no price hikes this year, but we think that there’s enough spillover from the price hikes in the past 3-4 years to maintain JT’s OP growth momentum.
Aquila Acquisition Corp (7836 HK): ZG Group’s Punchy Valuation
- Aquila Acquisition Corporation (7836 HK) agreed to a De-SPAC transaction with ZG Group (formerly Zhaogang.com), the world’s largest digital platform for third-party steel transactions.
- ZG has a questionable business model, struggling to generate profits or underlying FCF. This dynamic suggests that ZG has not established a sustainable competitive advantage.
- The negotiated value of ZG in the De-SPAC transaction is HK$10,004 million (US$1,277 million). Our valuation analysis suggests that this negotiated value is unrealistic.
SoftBank Group (9984 JP); Arm IPO, Priced for Disappointment
- SoftBank’s internal transaction acquiring the 25% Arm stake held by SVF1 valued Arm at USD64bn; the IPO valuation range is from USD48bn to USD52bn
- This valuation range implies an Nvidia-like price to prospective 2024E sales multiple range of 22x-25x; the prospectus reveals risks with Arm China, and confirms its lacklustre revenue and earnings growth
- Given SoftBank’s largely negative track record on the after-market performance of its investee companies IPOs and SPOs; we expect further downside to SoftBank’s share price
JMDC (4483 JP): Omron’s Partial Tender Offer
- JMDC (4483 JP) announced a partial tender offer for Omron Corp (6645 JP), the largest shareholder. Omron aims to make JMDC a consolidated subsidiary.
- The offer is for a minimum of 12.0m shares (18.52% ownership ratio) and a maximum of 15.0m shares (23.08%) at JPY5,700 per share, a 22.4% premium to the undisturbed price.
- Irrevocables (Noritsu Koki (7744 JP)) represent a 13.63% ownership ratio. While the offer is light, it will likely succeed as the minimum acceptance condition requires a 7.1% minority acceptance rate.
Newcrest: Shareholder Vote On 13th Oct
- After being granted due diligence, Newmont (NEM US) firmed an all-scrip Offer on the 15 May for Newcrest (NCM AU) at 0.400 new Newmont shares for each Newcrest share held.
- The Offer, by way of a Scheme, permits Newcrest to pay a special franked dividend of up to $US1.10/share on top of the Offer terms.
- The Scheme Booklet has now been lodged with ASIC. Newcrest shareholders vote on the transaction on the 13 October. The record date for the special dividend is the 19 October.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Analytics and News
- ✓ Events & Webinars
