In today’s briefing:
- Cayman Islands: Headcount To Be Decapitated On 31 August
- Indonesian Digital Banks – Ecosystems and Channels
- Canon (7751) – Second Buyback This Year – Last Happened in 2014
- JPX Nikkei 400 Index Rebalance: Some Biggish Impact Stocks
- Bajaj Finance: Stellar Earnings – In Line with Our Projections
- 2022 JPX Nikkei 400 Rebal – 36 IN, 34 OUT, 4.9% One Way
- Messed up Korea IPO Pipeline and Unexpected Beneficiaries
- Last Week In Event SPACE: SJM, Yashili, Cayman Headcount, ResApp, Honda Tsushin Kogyo
- Japan Stocks on the Move | Money Forward, Monotaro, CyberAgent
- Alcoa Corp: The Alumina Price Upside & Other Drivers
Cayman Islands: Headcount To Be Decapitated On 31 August
- The Companies (Amendment) Act 2021 of the Cayman Islands (Amendment Act), which will come into force on 31 August 2022, will abolish the current ‘headcount test’.
- Those companies incorporated in the Cayman Islands, and subject to a members’ Scheme of Arrangement, were previously required to satisfy the headcount test under section 86 of the Companies Act.
- This development clarifies previous uncertainty/ambiguity which could arise, with ‘take private’ deals of Cayman-incorporated, Hong Kong-listed companies, where a Scheme is the favoured privatisation path.
Indonesian Digital Banks – Ecosystems and Channels
- Indonesian Digital Banks are an increasing focus for investors given their potential to serve the huge numbers of underbanked in Indonesia through tapping into e-commerce and fintech ecosystems and customers.
- Players such as Bank Jago,Allo Bank Indonesia, PT Bank Neo Commerce, and Bank Rakyat Indo Agroniaga lead the field with the potential to tap their respective potential ecosystems.
- We prefer Bank Jago and Allo Bank Indonesia, given the former’s exposure to the GoTo‘s ecosystem and the latter’s to CT Corp, Bukalapak, and Grab (GRAB US).
Canon (7751) – Second Buyback This Year – Last Happened in 2014
- Canon Inc (7751 JP) reported Q2 earnings early last week. Shares dropped 4% the next day but closed down only 1%. Now they are above the prior close.
- They biked the dividend nicely (was ¥45/share last year, guided to ¥50 this year, but made ¥60/share instead.
- And now they have announced another ¥50bn buyback on top of the one announced in May. Fourth time in 14 years a second tranche is announced in one year.
JPX Nikkei 400 Index Rebalance: Some Biggish Impact Stocks
- There are 36 adds and 34 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. Some of the changes are interesting.
- Based on the adds, deletes and capping changes, we estimate one way turnover of 4.75% and a two-way trade of JPY 444.45bn (US$3.3bn).
- Oriental Land (4661 JP) is a delete from the JPX Nikkei 400 Index but a high probability inclusion to the Nikkei 225 (NKY INDEX) at the September rebalance.
Bajaj Finance: Stellar Earnings – In Line with Our Projections
- Bajaj Finance Ltd (BAF IN) [“BAF”] reported Q1FY23 PAT of approx. INR 2600cr which puts it on track to post INR 11,000cr+ PAT in FY23, in line with our projections.
- BAF is back on its pre-COVID growth trajectory as also highlighted in our prior note. Q1FY23 AUM growth came in at 6.2% QoQ and annualized ROE is back to 20%+.
- The strong Q1FY23 earnings is despite elevated competition in the marketplace which led BAF to forgo business where margin profile was not attractive.
2022 JPX Nikkei 400 Rebal – 36 IN, 34 OUT, 4.9% One Way
- The Ninth Annual JPX Nikkei 400 Index Review was announced on Friday 5 August. There are 36 Inclusions, 34 Deletions. They are mostly in line with Janaghan Jeyakumar, CFA‘s predictions.
- The “BIG SELL” is Oriental Land (4661 JP). The “BIG BUY” is Softbank Corp (9434 JP) as he predicted 11 months ago. There are some down-weights from capping.
- Oriental Land is also a potential Nikkei 225 Inclusion as discussed in Nikkei 225 Sep22 Annual Review; Data Final, Predictions Unch’d; Strategy Involved.
Messed up Korea IPO Pipeline and Unexpected Beneficiaries
- Hyundai Oilbank, this year’s biggest fish, dropped the IPO. Another big fish, CJ Olive Young, also officially announced that it would give up its listing.
- The bookbuilding results of SOCAR turned out to be disastrous, suggesting an increased possibility that a higher-than-typical flow level will likely be seen in WCP and K Bank.
- In particular, despite the valuation issues, we should pay attention to the possibility of an unexpected level of local institutional flows flocking to WCP, which has less schedule risk.
Last Week In Event SPACE: SJM, Yashili, Cayman Headcount, ResApp, Honda Tsushin Kogyo
- Participate in SJM Holdings (880 HK)‘s Excess Application Auction, though one would need to bid for a fantastically large quantity of shares to get anything, because everyone else will
- At a 11% gross spread to terms, and potential 4Q22 completion, Yashili(1230 HK) IS A CLEAR BUY. The world is a bit risk averse and it shows up in spreads.
- The ‘headcount test‘ for Cayman-incorporated companies failed to move with the times and address the fact that the majority of shares of Hong Kong-listed companies were held by HKSCC Nominees.
Japan Stocks on the Move | Money Forward, Monotaro, CyberAgent
- The Nikkei was up 0.6% last week (-2.1% YTD) while the yen weakened 1.2% to 135/$
- Prime Minister Kishida met with US House Speaker Nancy Pelosi. China cancelled a meeting between the Foreign Ministers of Japan and China.
- Record high temperatures of 40c, record high Covid cases, 575k people evacuated due to torrential rain & flooding…..keep calm and carry on.
Alcoa Corp: The Alumina Price Upside & Other Drivers
- Alcoa Corp is seeing improving shipment volumes and benefitting heavily from the stronger U.S. dollar as well as the higher alumina price index.
- Higher costs and lower aluminum and alumina premiums combined with lower metal prices, which included about $40 million to set inventories to net realizable value, more than offset those advantages.
- It is worth highlighting that Alcoa holds accreditations from the Aluminum Stewardship Initiative, the most comprehensive independent system for auditing ethical aluminum production.
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