In today’s briefing:
- Nikkei 225 Index Rebalance Sep25: Performance of Potential Adds/Deletes & Positioning
- [Japan M&A] Yutaka Giken (7229 JP) TOB – Possibly the Most Offensively Low TOB Price I’ve Ever Seen
- STAR50/STAR100 Index Rebalance: Changes & Capping Lead to US$3.3bn Trade
- Alibaba (BABA, 9988HK): June Quarter, Actually 2-Digit Growth, To Win Price War
- 5 Keys to Unlocking Japanese Superstocks
- Alibaba (BABA US): Why Did the Stock Rally Despite 2Q25 Operating Profit Dip?
- Is NPS Really Going for Board Seat Play Via Cumulative Voting? Field Check on This Narrative
- Ohayo Japan | US Stocks Retreat; Trump Tariffs Unlawful
- Hyundai Glovis: Cumulative Voting System Could Improve Corporate Governance of Hyundai Motor Group
- Gemvax & Kael – Rights Offering of 249 Billion Won
Nikkei 225 Index Rebalance Sep25: Performance of Potential Adds/Deletes & Positioning
- The changes to the Nikkei 225 (NKY INDEX) as part of the September rebalance should be announced in just over 2 weeks. We expect 2 changes at the review.
- BayCurrent Consulting‘s PAF will double, Fast Retailing‘s CPAF will stay the same, and Sony Financial Group will be deleted from the index following its spinoff from Sony Corp (6758 JP).
- Sanrio (8136 JP)‘s improved liquidity increases the probability of index inclusion, and the stock could be added to the index at the next rebalance if it misses in September.
[Japan M&A] Yutaka Giken (7229 JP) TOB – Possibly the Most Offensively Low TOB Price I’ve Ever Seen
- Honda Motor (7267 JP) and Samvardhana Motherson International Ltd (MOTHERSO IN) have arranged to buy Honda’s 69.7%-owned subsidiary Yutaka Giken (7229 JP) in a Tender Offer.
- The transaction structure means Motherson buys Yutaka for less than net cash but even assuming Motherson pay minority TOB price for everything, TOB ex-net cash = 0.05x PBR, <1x EBITDA.
- But they are paying less. They are paying ¥12.4bn less than net cash, and getting the other ¥58bn of net assets (¥23bn inventory, the rest in hard assets) for free.
STAR50/STAR100 Index Rebalance: Changes & Capping Lead to US$3.3bn Trade
- There is 1 constituent change for the STAR50 INDEX and 5 changes for the STAR100 Index at the next rebalance that will be implemented at the close on 12 September.
- We estimate one-way turnover of 6.1% for the SSE STAR50 (STAR50 INDEX) resulting in a round-trip trade of CNY 23.8bn (US$3.3bn).
- There will be huge capping outflows for Cambricon Technologies Lt (688256 CH) following the massive rally in the stock over the last couple of months.
Alibaba (BABA, 9988HK): June Quarter, Actually 2-Digit Growth, To Win Price War
- The de facto total revenue increased by 10% YoY excluding two disposed shopping malls.
- We believe Alibaba will win the price war for food deliveries, because competitors’ earnings were even worse.
- The stock surged by 13% in NYSE after the result release, but we still believe it has an upside of 48% for next twelve months.
5 Keys to Unlocking Japanese Superstocks
- We looked at the 40 companies in Japan that returned the best 5-year relative returns over the past 20 years. The average relative return was 1,965%.
- The most consistent common trait of all these stocks was that most had underperformed the market in the previous 2 years. The average underperformance was -61%.
- Valuation was hugely important, but not the way you’d expect. The stocks often started at a modest discount, but more importantly, they always ended at massive premiums.
Alibaba (BABA US): Why Did the Stock Rally Despite 2Q25 Operating Profit Dip?
- Alibaba (BABA US) jumped 12.9% on Friday following better than expected 2Q2025 results and upbeat management commentary.
- Investors cheered growth plans centered around Consumption and AI + Cloud, signaling confidence in the company’s long-term strategy.
- 2Q2025 operating profits dipped slightly, as higher costs in quick commerce were largely offset by growth in other business segments.
Is NPS Really Going for Board Seat Play Via Cumulative Voting? Field Check on This Narrative
- Short-Term, pinpointing exact tickers off this NPS/cumulative voting narrative is tough—activism risk is real, but predicting moves in governance-sensitive names is still premature.
- NPS may go aggressive, potentially sparking a market-wide narrative. If limited activism unwinds, Korean stocks could see a broad re-rate, beyond just individual governance names.
- Tactically, consider enhanced setups in these names under a passive framework, while closely monitoring governance developments and NPS-driven activism for actionable alpha in individual tickers.
Ohayo Japan | US Stocks Retreat; Trump Tariffs Unlawful
- US equities retreated Friday as investors locked in profits, with the S&P 500 down 0.6% and the Nasdaq off 1.2%
- A federal appeals court ruled that most of Donald Trump’s global tariffs were unlawful, finding his use of the International Emergency Economic Powers Act exceeded presidential authority
- Major Tokyo Stock Exchange-listed companies are increasingly appointing outside directors as board chairmen, with 109 companies doing so as of August 2025
Hyundai Glovis: Cumulative Voting System Could Improve Corporate Governance of Hyundai Motor Group
- A major critical reason Hyundai Glovis has been outperforming this year has been due to the potential passage of the cumulative voting system under second amendment to the Commercial Act.
- In addition, Hyundai Glovis’ profits have been improving. Hyundai Glovis is also expected to benefit from the continued higher use of robotics in its operations.
- The value of its Boston Dynamics is also becoming more highlighted. Hyundai Glovis currently has a 10.9% stake in Boston Dynamics.
Gemvax & Kael – Rights Offering of 249 Billion Won
- On 29 August, Gemvax & Kael (082270 KS) (Gemvax) announced a rights offering capital raise of 249 billion won.
- Gemvax will issue 6.7 million new shares in this rights offering, representing 16% of its outstanding shares.
- The expected rights offering price is 37,100 won which is 13.4% lower than current price. We are negative on this rights offering.
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