In today’s briefing:
- Rakuten Bank – Big TOPIX Inclusion Next Week
- Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand
- Rakuten (4755 JP): The Current Playbook
- KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
- StubWorld: Japan Post Holdings Coming Up “Cheap”
- KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline
- JD Industrials Pre-IPO – Peer Comparison
- Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals
- Dickson Concepts 113 HK: Straight From The Ben Graham Stable, >40% Discount to NCAV
- Quiddity Leaderboard SET50 Jun 23: Final Expectations
Rakuten Bank – Big TOPIX Inclusion Next Week
- Rakuten Bank priced its IPO low and then immediately bounced. Earnings came in as forecast, and the forecast next year did too. Highish PBR, high ROE, not-so-high-PER on low ROA.
- The stock fell on 16 May after Rakuten Bank announced its capital raising. That was probably a knee-jerk reaction, and had no reason.
- Next week sees the TOPIX inclusion. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.
Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand
- The Rakuten (4755 JP) offering is producing interesting analysis. My read on the telecom side is that things are better (or less bad) than they were.
- Longer-Term, I see the idea. Shorter-term, there will still be questions until there are not. However, there could be a lot of non-fundamental “I want this” demand in the offering.
- Questions to ask yourself are: 1) how much will get placed with investors who want it 20+% lower than 15 May highs? 2) how many shorts will cover?
Rakuten (4755 JP): The Current Playbook
- Since the announcement of the placement, Rakuten (4755 JP)’s shares are down -15.7% from the undisturbed price of JPY707 per share (12 May prior to press reports of the placement).
- To understand how the shares will trade as the offer is launched, we think it is instructive to look at recent large Japanese placements. Pricing date is likely 24 May.
- So far, Rakuten’s shares have mostly followed the pattern of previous large placements. Investors participating in previous large Japanese placements tend to secure positive returns.
KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
- Following the spin-off, Dongkuk Steel Mill (001230 KS) will be deleted from the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and replaced with Youlchon Chemical (008730 KS).
- Youlchon Chemical (008730 KS) just missed being added to the index at the June rebalance but will be added a couple of weeks after the regular rebalance.
- Shorts on Dongkuk Steel Mill (001230 KS) have increased over the last month but overall short interest is way below historical levels.
StubWorld: Japan Post Holdings Coming Up “Cheap”
- At 0.3x, Japan Post Holdings (6178 JP) is top of the heap in terms of dollar “UpValue” to move to PBR 1.0x under Japan’s governance changes.
- Preceding my comments on Japan Post are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline
- Applying the T+3 relisting date as the effective date will again lead to noteworthy changes to the timeline of rebalancing flow trading.
- It seems unnecessary to concentrate shorting on the trading halt day for Dongkuk Steel. We should aim for price corrections driven by passive flows on the T+2 period before effective.
- Despite the Dongkuk Steel shareholders’ approval on the 12th, Youlchon Chemical’s price experienced a significant decline. The ongoing risk of major shareholder stake sales appears to have overshadowed this event.
JD Industrials Pre-IPO – Peer Comparison
- JD Industrials (JDI) is looking to raise about US$1bn in its upcoming HK IPO.
- JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
- In this note, we will undertake a peer comparison versus domestic and international peers.
Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals
- Today, Toyo Construction (1890 JP) announced it was against YFO’s AGM shareholder proposals. And that the Special Committee was unanimously against YFO’s tender proposal.
- The content is mixed. Some is probably correct (YFO hasn’t done a great job it appears). Some is clearly taking management’s statements at face value where it shouldn’t.
- And some is just the passage of time. Last year, ¥1,000 was “too high.” This year it is “not enough.” Now Toyo and YFO are stuck with each other.
Dickson Concepts 113 HK: Straight From The Ben Graham Stable, >40% Discount to NCAV
- Dickson Concepts Intl (113 HK), an HK distributor of luxury goods, is a classic example of a Graham net-net with a >40% discount to NCAV (Net Current Asset Value).
- The company has 4.7 bn HKD of cash against total liabilities of 2.3 bn HKD (on a market cap of 1.6 bn HKD), thus representing deep value.
- With an economic environment in HK for retail sales improving + an existing 8% dividend yield, we could make a case for higher dividend payments.
Quiddity Leaderboard SET50 Jun 23: Final Expectations
- In this insight, we take a look at the potential ADDs/DELs for Thailand’s SET50 index rebalance in June 2023.
- There are only few more days left for the base date and we believe there could be two ADDs/DELs for the SET 50 index.
- The LONG Thai Life Insurance (TLI TB) – SHORT Bangkok Life Assurance (BLA TB) trade had a good spell of performance but now it might be time to rethink.
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