In today’s briefing:
- Kokusai Elec (6525) – The Much-Anticipated Lockup Expiry
- TSMC. How To Turn Chicken Salad Into Chicken Sh*t
- Significant Developments Emerged Today for Korea’s Value-Up
- Merger Arb Mondays (22 Apr) – Shinko, Inageya, C&F Logistics, Hollysys, Azure, Qantm IP, Tietto
- Last Week in Event SPACE: Pasona/Benefit One, Hang Lung Properties, Hollysys, Azure Minerals
- TSMC Just Provided Substantial Visibility into Their Long-Term Growth Estimate; ASML Adds Color
- Ohayo Japan | Nasdaq Falls over 2%
- JD.com (JD US / 9618 HK): Announced 2.8% Share Buyback In 1Q24 + My 1Q24 Preview
- EQD / NSE Volatility Update / 15-Apr-24 to 19-Apr-24
- Taiwan Dual-Listings Monitor: TSMC Breaks Down From Extreme, UMC Discount Near Historical Low
Kokusai Elec (6525) – The Much-Anticipated Lockup Expiry
- Last autumn, Kokusai Electric (6525 JP) was IPOed by KKR. The lockup expires next week, on 21 April 2024 (a Sunday). That frees up about 70% of the stock.
- KKR’s own stake is worth about US$2.8bn. It is not clear that Applied Materials, Qatar, or the Koch Strategic Platforms stakes would be for sale (now, or near-term).
- There is an interesting schedule of events between here and a likely offering date. It pays to pay attention to the details.
TSMC. How To Turn Chicken Salad Into Chicken Sh*t
- Q124 revenues of $18.87 billion, marginally above the high end of the guided range, up 12.9% YoY and down 3.8% QoQ. Guided Q224 +6% QoQ. Maintained full year 2024 outlook
- Unnecessary, minor downward revisions for semi & foundry growth, combined with confusion about the reason triggered an allergic reaction on the markets. TSMC down ~8% since.
- SMCI plunged 23% by Friday close, ARM down 16.9%, NVIDIA down 10%, AMD & Micron down ~5% etc. Nice one, TSMC!
Significant Developments Emerged Today for Korea’s Value-Up
- Deputy PM Choi Sang-mok commits to aggressively pursue separate taxation of dividend income, marking a shift towards concrete action for value-up policies.
- Ever since the introduction of the Value-up policy earlier this year, the primary incentive championed by the local capital market has been the separate taxation of dividend income.
- Hence, the government’s official commitment to this marks a crucial step in reshaping the Value-up momentum.
Merger Arb Mondays (22 Apr) – Shinko, Inageya, C&F Logistics, Hollysys, Azure, Qantm IP, Tietto
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Qantm Intellectual Property (QIP AU), Southern Cross Media (SXL AU), Azure Minerals (AZS AU), QV Equities Ltd (QVE AU), Hollysys Automation Technologies (HOLI US), Shinko Electric.
- Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Roland DG Corp (6789 JP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU), Newmark Property REIT (NPR AU), Lawson.
Last Week in Event SPACE: Pasona/Benefit One, Hang Lung Properties, Hollysys, Azure Minerals
- Pasona (2168 JP)will pay out 10-20% of the extraordinary gain from the Benefit One (2412 JP) sale. It will take its sweet time doing so. For no apparent reason.
- Hang Lung Properties (101 HK)‘s first-ever scrip dividend provides the means for the Chan Family to indirectly chip away at minorities.
- Hollysys Automation Technologies (HOLI US) accountant resignation announcement is a nothing burger. An update on PRC regulatory approvals would be welcome about now though.
TSMC Just Provided Substantial Visibility into Their Long-Term Growth Estimate; ASML Adds Color
- TSMC and ASML reported 1Q24 results last week; both stocks have fallen post results, impacted by global concerns despite a strong outlook for these two leaders into 2025E.
- TSMC guided for strong growth not just in 2024E, but if one digs into management’s comments, they actually provided strong visibility into their 2028E internal revenue expectations.
- For ASML, its EUV product business is the key indicator to watch. We believe TSMC shares will continue to re-rate even through a period of global economic softness.
Ohayo Japan | Nasdaq Falls over 2%
- The Nasdaq Composite extended its decline for a sixth consecutive session, marking its longest losing streak in over a year, as Nvidia’s plunge exacerbated market concerns
- Paramount Global’s shares surged over 10% after reports of discussions between Sony Pictures Entertainment, Apollo Global Management, and Paramount for a joint buyout bid.
- Sekisui House completed a $4.9 billion acquisition of U.S.-based MDC Holdings, expanding its U.S. homebuilding operations to 16 states
JD.com (JD US / 9618 HK): Announced 2.8% Share Buyback In 1Q24 + My 1Q24 Preview
- JD.com (9618 HK) announced this week that it has repurchased 2.8% of the outstanding shares of the company in the first quarter of 2024.
- Improved shareholder returns is a key thesis for the stock, given that there is little market expectation on such given limited track record.
- A positive catalyst on full year performance could be the government’s announced stimulus policy for home appliance in April this year (trading old for new).
EQD / NSE Volatility Update / 15-Apr-24 to 19-Apr-24
- Unprecedented levels of FII option-buying & increasing geo-political risk causing IVs to re-price higher.
- Skew/ Smile characteristics of the Vol Surface reflect increased risk aversion but not it panic mode – yet.
- BankNifty IVs exhibiting unusual “kink-in-the-curve”. Enter barbell structures to position for reversion in curve shape.
Taiwan Dual-Listings Monitor: TSMC Breaks Down From Extreme, UMC Discount Near Historical Low
- TSMC: +9.2% Premium, Major Breakdown From Previous Historically Extreme High
- UMC: -1.9% Discount, Is Near Low End of Historical Range
- ASE: +10.4%; ADR Short Interest Jumps to Very High Level vs. History
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