In today’s briefing:
- 7&I (3382) – FY24 Better, FY25 OK, Surprisingly Large Buyback
- Canvest (1381 HK): Precondition Satisfied
- China ETF Inflows & Implications: Central Huijin’s Huge Buying
- Minebea Mitsumi Overbids Yageo for Shibaura Electronics (6957)
- STAR Chip Index Rebalance Preview: Potential Changes in June
- HKBN (1310 HK): TPG Cashes In Early
- Shibaura Electronics (6957 JP): Minebea Mitsumi’s (6479 JP) White Knight Tender Offer at JPY4,500
- Korea Short Selling: Biggest Changes in Shorts & Trade Performance
- Corporate Act Amendment Takes Unexpected Turn: Watch for Holdco Momentum Plays Post-June Election
- Quiddity Leaderboard MV Jr-Gold Miners Jun25: Flow Expectations
7&I (3382) – FY24 Better, FY25 OK, Surprisingly Large Buyback
- Today, Seven & I Holdings (3382 JP) reported full-year earnings. The FY2025 guidance looks OK. Not overly exciting. Optically, it falls short, but 7&i guidance includes York only for H1.
- The basic outlines of strategy in the Presentation are unchanged from the 6 March strategy report. The company seems convinced an IPO of SEI is a good thing. I’m underwhelmed.
- The company also announced that it would bring forward ¥600bn of its planned 6-year ¥2trln buyback program, and execute it this year. That’s good.
Canvest (1381 HK): Precondition Satisfied
- Grandblue Environment Co A (600323 CH) has satisfied the precondition related to its privatisation offer for Canvest Environmental Protection Group (1381 HK).
- The offer remains attractive despite the re-rating of peers since announcing the deal. The vote risk is low as the two shareholders holding blocking stakes will be supportive.
- This is a done deal. At the last close, the gross/annualised spread for a mid-June payment is 3.8%/13.0%.
China ETF Inflows & Implications: Central Huijin’s Huge Buying
- Nearly US$22bn has flowed into mainland China listed ETFs over the last 3 trading days, reversing outflows that started in mid February.
- Central Huijin has announced that it will be increasing its ETF holdings to maintain smooth operation of China’s capital markets. The rest of the National Team will be buying too.
- There are multiple implications of the huge ETF creations in a short time frame and a reversal of flows will lead to a reversion in a bunch of trades.
Minebea Mitsumi Overbids Yageo for Shibaura Electronics (6957)
- In early February, Yageo Corporation (2327 TT) made an unsolicited bid for Shibaura Electronics (6957 JP) at ¥4,300/share. They had approached in October 2024, and continued approaches through end-January.
- Shibaura’s bankers approached Minebea Mitsumi (6479 JP) in January. Due diligence, then bids. They bid ¥4,600. Not enough said the SC. Then Trump. Then ¥4,400. Now ¥4,500 accepted 9 April.
- But Trump tariffs relief came 9 April US time. And the Offer Price is below the mid-point of ALL three different financial advisors. I think this is not done yet.
STAR Chip Index Rebalance Preview: Potential Changes in June
- There could be 1 constituent change for the STAR Chip Index at the June rebalance. There will also be a few capping changes.
- Estimated one-way turnover is 2.1% resulting in a round-trip trade of CNY 1.04bn (US$141m). Passives need to trade between 0.65-1.65x ADV in the potential changes.
- Jinhong Gas (688106 CH) is also a potential delete from the STAR100 Index and that will lead to increased passive selling in the stock.
HKBN (1310 HK): TPG Cashes In Early
- Back in December, China Mobile (941 HK) made a pre-conditional HK$5.23/share voluntary Offer for HKBN (1310 HK). The wild card is whether I Squared launches a counter-proposal.
- This transaction has no shortage of intriguing developments. Last month, MBK mysteriously converted its VLNs. Now TPG has entered into an SPA with Mobile to sell its 15.46% stake.
- IF I Squared were to make a counter-proposal, I doubt it would secure the necessary regulatory approvals. Evidently TPG is not waiting around to find out.
Shibaura Electronics (6957 JP): Minebea Mitsumi’s (6479 JP) White Knight Tender Offer at JPY4,500
- Shibaura Electronics (6957 JP) announced a preconditional tender offer from Minebea Mitsumi (6479 JP) at JPY4,500 per share, a 4.7% premium to Yageo Corporation (2327 TT)’s JPY4,300 hostile offer.
- The offer is scheduled to start on 23 April, ahead of Yageo’s 7 May start. The Board intends to recommend the Minebea offer and oppose the Yageo offer.
- Due to its low premium to the Yageo offer, at least another bidding round is highly probable, and the Minebea offer is below the midpoint of the IFA DCF valuation.
Korea Short Selling: Biggest Changes in Shorts & Trade Performance
- The resumption of short selling in Korea came at a good time for investors, giving them some additional tools to manage market volatility.
- Short interest has increased from 0.17% to 0.23% of market cap for the KOSPI market and from 0.46% to 0.63% for the KOSDAR market.
- The KOSPI/KOSDAQ ratio has reverted a bit on profit taking, and the forecast index deletions have recovered a bit but should continue to see increase short interest.
Corporate Act Amendment Takes Unexpected Turn: Watch for Holdco Momentum Plays Post-June Election
- The word on the street is the Dems are banking on their candidate winning in June, then clearing the veto and pushing the Corporate Act amendment through immediately.
- What seemed like a dead issue for the Corporate Act amendment has turned into a surprise, shifting market momentum and potentially impacting the Korean stock scene.
- It could shift the Korean market’s focus to long-term governance improvements, targeting major holdcos like CJ, Hanwha, GS, Doosan, Mobis, SK, and Samsung C&T, with June’s election key.
Quiddity Leaderboard MV Jr-Gold Miners Jun25: Flow Expectations
- The MV Jr-Gold Miners index represents the performance of small-cap gold and silver mining companies listed around the world.
- This index is reviewed semiannually in March and September. There will be no index changes for the June 2025 index rebal event but there will be capping flows.
- We expect one-way flows of US$81mm for June 2025 which translates to a turnover of 1.4%.
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