In today’s briefing:
- Shinko Electric (6967) – Waiting for a Package
- HSTECH Index Rebalance Preview: One Constituent Change & US$884m Trade
- Fujitsu General (6755) – Long Sale Process Finally Over. Unexciting but Uncomplicated Deal.
- Fujitsu General (6755 JP): Fujitsu (6702 JP) Supports a Light Tender Offer
- Korea Short Selling Comeback: How Pre-Registering Accounts Will Affect the Trading Scene
- LQ45 Index Rebalance Preview (Jan 2025): Identifying Potential Index Changes
- LG CNS IPO: Valuation Insights
- NIFTY50 Index Rebalance Preview: Yuuge Flow & Impact; Positioning Mixed
- S&P/ASX Index Rebalance Preview: Lots of Change; Could Be More with Sigma/CWG Merger
- GA Pack (468 HK): Shandong Xinjufeng’s Offer Gets a Boost as Mengniu Sells Down
Shinko Electric (6967) – Waiting for a Package
- Shinko Electric Industries (6967 JP) has been on the block. 2nd Round Bids were apparently due last month, but with “Economic Security” considerations, one wonders if that stretches a bit.
- The stock is now at the low end of its range vs Ibiden, and the timing is right for a deal which could give it a pop.
- A “split price” takeover seems reasonable as a structure. I expect upside. Still.
HSTECH Index Rebalance Preview: One Constituent Change & US$884m Trade
- The review period for the March rebalance of the Hang Seng TECH Index (HSTECH INDEX) ended on 31 December.
- There could be one constituent change in March. With capping changes, that could lead to a one-way turnover of 2.6% resulting in a round-trip trade of HK$6.88bn (US$884m).
- Horizon Robotics (9660 HK) is also a potential inclusion to the HSCI Index in March, though inclusion in Southbound Stock Connect will only come through in May.
Fujitsu General (6755) – Long Sale Process Finally Over. Unexciting but Uncomplicated Deal.
- In December 2019, an article in slightly odd Japanese business magazine Sentaku (選択) suggested Fujitsu Ltd (6702 JP) would imminently seek to address dual listings of subs.
- Some subs went early. The auction for Fujitsu General (6755 JP) started spring 2023, failed, started again, failed again, and the shares languished.
- Two years later we have a deal. Large privately-held company Paloma-Rheem Holdings is the buyer in a split-price deal which comes at a decent but not exorbitant premium.
Fujitsu General (6755 JP): Fujitsu (6702 JP) Supports a Light Tender Offer
- Fujitsu General (6755 JP) announced a preconditional tender offer from Paloma Rheem Holdings Co at JPY2,808 per share, a 23.5% premium to the last close.
- The offer, which is preconditional on regulatory approvals and will open in early July, is attractive compared to historical trading ranges and peer multiples.
- The process is lacking as Fujitsu declined to conduct an auction. The offer is below the midpoint of the IFA DCF valuation range, and the Board requested price.
Korea Short Selling Comeback: How Pre-Registering Accounts Will Affect the Trading Scene
- KRX and FSS confirmed the NSDS is ready and account registration numbers will be issued, confirming short selling will resume on April 1st, despite no official FSC statement yet.
- Today’s buzz is about pre-registration for short selling, with FSS tracking accounts down to individual desks. This could limit short-selling flexibility, despite addressing the overseas lending issue.
- Exposing too much info on short-selling accounts could shrink securities lending participants, causing supply-demand imbalances, spiking borrowing fees, and creating unique trading opportunities early on.
LQ45 Index Rebalance Preview (Jan 2025): Identifying Potential Index Changes
- The review period for the LQ45 Index January rebalance ended 31 December. The changes should be announced the last week of January, becoming effective after the close on 31 January.
- We highlight 4 potential inclusions and 4 potential exclusions for the index at the rebalance. The actual number of changes could be lower at 2-3 a side.
- Nearly all stocks will have over 1x ADV to trade from passive trackers if they are added to or deleted from the index.
LG CNS IPO: Valuation Insights
- LG CNS (LGCNSZ KS), the IT service unit of LG Corp (003550 KS), seeks to raise up to US$837 million through a primary/secondary offering.
- We previously discussed the IPO in LG CNS IPO: The Bull Case and LG CNS IPO: The Bear Case.
- We examine the syndicate’s valuation methodology. Our analysis suggests that LG CNS is attractive in the IPO price range. We would participate in the IPO.
NIFTY50 Index Rebalance Preview: Yuuge Flow & Impact; Positioning Mixed
- Zomato (ZOMATO IN) and Jio Financial Services (JIOFIN IN) should replace Bharat Petroleum Corp (BPCL IN) and Britannia Industries (BRIT IN) in the NIFTY Index (NIFTY INDEX) in March.
- Passive NIFTY Index trackers will need to trade at least 4.5x ADV and 8.8x delivery volume on the stocks. There is some opposite flow from Nifty Next 50 Index trackers.
- There does not appear to be a lot of positioning in Jio Financial Services (JIOFIN IN) and the stock could outperform its peers over the next few months.
S&P/ASX Index Rebalance Preview: Lots of Change; Could Be More with Sigma/CWG Merger
- Nearing the end of the review period, there could be 36 adds/deletes across the S&P/ASX family of indices in March.
- Passive trackers will need to trade a lot of stock in the forecast changes, with the impact being especially large for the changes to the S&P/ASX 200 and S&P/ASX 300.
- Completion of the merger with Chemist Warehouse in February will set off huge passive buying in Sigma Healthcare (SIG AU) over the February to June period.
GA Pack (468 HK): Shandong Xinjufeng’s Offer Gets a Boost as Mengniu Sells Down
- China Mengniu Dairy Co (2319 HK), Greatview Aseptic Packaging (468 HK)‘s largest customer, has ceased to be a substantial shareholder. Mengniu opposes the Shandong Xinjufeng offer.
- This development suggests that Mengniu has low confidence in a management competing offer and will likely shift its business away from GA Pack.
- The stake sale will help the Shandong Xinjufeng Technology Packaging (301296 CH) offer turn unconditional as it will nudge minorities to tender, partly due to GA Pack’s uncertain outlook.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Analytics and News
- ✓ Events & Webinars
