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Most Read: NTT Docomo Inc, Sea Ltd, Jardine Cycle & Carriage, Honshu Chemical Industry, Leyou Technologies and more

In today’s briefing:

  • NTT/Docomo – The KDDI Quibble
  • MSCI Singapore: SEA Change Coming in May 2021
  • Jardine Cycle & Carriage: “Buy The Fact” On MSCI Deletion
  • Honshu Chemical (4115) – An Embarrassment of Riches
  • Leyou Tech (1089 HK): Offer Doc Despatched

NTT/Docomo – The KDDI Quibble

By Travis Lundy

Today during the lunch session, there were reports across the newswires of KDDI Corp (9433 JP) and other companies (including both Softbank Corp (9434 JP) and Rakuten Mobile) sending a letter to the Telecommunications Ministry (It was, in fact, addressed to the Ministry of Internal Affairs and Communications). 

The headlines were…


This caused NTT Docomo shares to fall sharply on the PM session open, briefly falling as much as 75bp to ¥3861 (vs the ¥3900 Tender Offer Price) before the shares settled around ¥10 down on the day near ¥3876-3884/share for most of the rest of the day.

The media said that the letter called on Japan’s Telecommunications Ministry “to ensure a fair market environment amid NTT’s planned takeover of Docomo, arguing the deal could inhibit fair competition and development of the telecom market.” (Bloomberg). 

The letter, it turns out, is on KDDI’s home page in Japanese (link).

There are interesting comments within the letter but I am surprised it took this long to produce. This really looks like it is KDDI and others setting the stage to be able to pursue a campaign of harassment against NTT if necessary going forward. Complain about it in general terms before the deal goes through, in order to give yourself room to complain about specifics later. 

It is what I would do if I were in their shoes. 

What was surprising to me was the reaction on NTT Docomo shares. Given the nature of the document, the nature of JFTC and MIC purview on the transaction, and what must have been reasonably explicit “approval” to get the NTT deal for Docomo done in the first place, if this letter means something about the future competitiveness of the NTT/Docomo/East/West/Com grouping, the stock which should have been negatively impacted was NTT (Nippon Telegraph & Telephone) (9432 JP). Indeed, NTT shares ended up “only” 1.4% on the day after starting the day higher, but this was stronger than KDDI on the day.

More commentary about NTT Docomo, NTT, and KDDI below the fold.  

MSCI Singapore: SEA Change Coming in May 2021

By Brian Freitas

MSCI announced the results of the November 2021 Semi Annual Index Review (SAIR) earlier today. While there were no surprises, there was also another announcement that flew under the radar.

MSCI announced that foreign listings would become eligible for the MSCI Singapore indices starting from the May 2021 SAIR since the market met the Foreign Listing Materiality Requirements at the November 2020 SAIR.

This means that Sea Ltd (SE US) will be eligible for inclusion in the MSCI Singapore indices at the May 2021 SAIR. We estimate passive buying of US$2.46bn at the close of trading on 27 May 2021.

Jardine Cycle & Carriage: “Buy The Fact” On MSCI Deletion

By David Blennerhassett

Yesterday, MSCI announced its November 2020 Semi-Annual Index Review.  As widely anticipated, Jardine Cycle & Carriage (JCNC SP) and Yangzijiang Shipbuilding (YZJSGD SP) are shown the exit, reducing the number of index constituents to 19. The changes will be effective after the close of trading on 30 November.

In MSCI Singapore Index Rebalance Nov20: Shrinking Number of Constituents, Brian Freitas reckons 8.9 days of ADV to sell of JCNC from passive funds. JCNC is down ~3% today as I type, against +3% for ASII.

I see JCNC’s discount to NAV at ~36% against a 12-month average of ~17%, having recently moved off its all-time low of ~38%.

As JCNC is all-but a proxy into Astra, this appears a straight-forward mean reversion play. 

More below the fold.

Honshu Chemical (4115) – An Embarrassment of Riches

By Travis Lundy

On 11 November 2020, Mitsui & Co Ltd (8031 JP) and Mitsui Chemicals (4183 JP) announced a transaction to take out minorities in jointly-held subsidiary Honshu Chemical Industry Co (4115 JP).

The result is a governance embarrassment for the two major acquirers, and the target company itself. 

And the Tender Offer is long-dated. It is announced today, but it is expected to start in May 2021 after receiving anti-trust approvals both in and outside Japan.

But a situation with such an embarrassing valuation contains possibilities.  More below the fold. 

Leyou Tech (1089 HK): Offer Doc Despatched

By David Blennerhassett

Back on the 27 August, Leyou Technologies (1089 HK)  announced a take-private transaction by way of a Scheme from Tencent Holdings (700 HK) at $3.3219/share, a 30.27% premium over the closing price of HK$2.55/share on 19 September 2019, the last trading day prior to Leyou’s announcing it was in preliminary discussions with various independent potential investors.

70.02% of shares out – primarily comprising chairman Charles Yuk’s stake – have given irrevocables to vote in favour of the Scheme. Disinterested Shareholders comprise all shares out, therefore the blocking stake at the Scheme Meeting is 308.5mn shares or 10% of shares out. No single shareholder has such a stake. The headcount test applies. 

This is a very clean deal. 

Leyou’s shares wobbled a little in September after gaming companies were asked by Committee on Foreign Investment in the United States on their security protocols in handling Americans’ personal data. Those concerns were unfounded, and Canadian and US regulatory bodies signed off on the Offer on the 8 October.

The Scheme Document has now been despatched. The Court Meeting/EGM will be held on the 11 December. Assuming all falls into place, consideration under the Offer will be paid on or before the 31 December.

The IFA (Optima Capital) considers the Offer to be fair and reasonable.

More below the fold.

Before it’s here, it’s on Smartkarma