In today’s briefing:
- NTT and NTT Data Reshuffle the Deckchairs and Everyone “Wins”
- India: Preview of Stock Reclassification for Active Funds
- Mindtree & L&T Infotech’s US$18bn Merger: Details and Index Implications
- Trading Opportunity Coming on SK Telecom ADR Premium
- JAPAN ACTIVISM: Silchester Goes After Bk of Iwate – Cheaper Than Chips
NTT and NTT Data Reshuffle the Deckchairs and Everyone “Wins”
- NTT (Nippon Telegraph & Telephone) (9432 JP) and NTT Data Corp (9613 JP) this morning announced a 1pm joint presser. Imaginations ran wild and NTT went up 12+%.
- The reality is more subdued (as it should have been for a during-market-hours-presser) and it involves a restructuring of a small NTT subsidiary which happens to own NTT Data shares.
- But it is still positive. It is something of a win-win for both parties.
India: Preview of Stock Reclassification for Active Funds
- Two-Thirds of the way through the review period, we see 7 stocks migrating from MidCap to LargeCap, 8 stocks from LargeCap to MidCap, and 1 new listing added to LargeCap.
- Post listing, Life Insurance Corp of India (LIC) (1248Z IN) should be added to the LargeCap segment while Delhivery (1058656D IN) should be added to the MidCap segment.
- On average, stocks expected to migrate from Mid Cap to Large Cap have outperformed. Stocks expected to migrate from the Large Cap to Mid Cap segment have performed the worst.
Mindtree & L&T Infotech’s US$18bn Merger: Details and Index Implications
- The Larsen & Toubro Infotech (LTI IN) and Mindtree Ltd (MTCL IN) merger will create a company with revenue of US$3.5bn and a market cap of US$18bn.
- The merger ratio is 73 shares of Larsen & Toubro Infotech for 100 shares of Mindtree. The merger is expected to complete in 9-12 months.
- There are likely to be some inflows from MSCI and FTSE trackers but the big kicker will be inclusion in the NIFTY Index – but a (smallish) rally is needed.
Trading Opportunity Coming on SK Telecom ADR Premium
- ADRs are traded at a significant premium when the foreign room for underlying shares is exhausted. This is the pattern that KT showed in 2018.
- SKT’s foreign room is currently 1.85%. That is, the burnout rate is 98.15%. Only about 2M shares need to be burned to hit bottom. This is 0.91% of SO.
- The shortage of SKT ADRs is likely to intensify, which in turn suggests that the ADR premium may rise further.
JAPAN ACTIVISM: Silchester Goes After Bk of Iwate – Cheaper Than Chips
- Silchester has written letters to four Japanese regional banks where they hold large stakes asking for higher dividends and payout ratios. It has proposed a special div AGM agenda item.
- Bank Of Iwate (8345 JP) is nearly 40% held by cross-holders and government-affiliated entities, and Real World Float is less than 50%. Winning at the AGM is tough.
- The collection of banks is mixed. But this one is cheap. Cheap as chips. Or cheaper.
Before it’s here, it’s on Smartkarma