In today’s briefing:
- SBI Applies for Bank Holdco License for Shinsei Stake. Aims to Go Above 50%. It’s Coming.
- HSCI Index Rebalance and Stock Connect: Potential Changes in December & March (There’s a Lot!)
- A Coming Crash: The Law of Conservation of Financial Volatility?
- Two Bits of Non-Bullish Toshiba News
- Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases
- BREAKING! Dog Loses To Mangalore – Idemitsu Kosan Does Its Deal for Toa Oil (5008)
- Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB
- FTSE All-World/All-Cap Index Rebalance Preview (Dec): Quieter Than Usual as IPOs Dry Up
- Saudi Arabia Gaming: Plans to Invest $38 Billion in Global Game Industry
- Lionheart Studio IPO Valuation Analysis
SBI Applies for Bank Holdco License for Shinsei Stake. Aims to Go Above 50%. It’s Coming.
- Last Friday most of the way through the afternoon session, media reports ran a story saying SBI Holdings (8473 JP) had applied for a Bank Holding Company authorisation.
- That is a filing with the FSA one makes when one wants to acquire >50% of voting rights in an entity with a Banking license. Shares popped, and fell back.
- They probably didn’t pop enough. There is a BIG sell flow coming, but the timing is giri-giri on eventiness, and confident traders could take the whole trade.
HSCI Index Rebalance and Stock Connect: Potential Changes in December & March (There’s a Lot!)
- We see three new listings as potential inclusions to the HSCI in December. One is already in Stock Connect, one will be added to Stock Connect while one will not.
- Given the large market moves, there will be many changes to the HSCI in March 2023. Quite a few stocks could remain in the HSCI but drop out of Connect.
- Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.
A Coming Crash: The Law of Conservation of Financial Volatility?
- Volatility is sequential and the turbulence and illiquidity in forex and bond markets will inevitably spread to equities? A CRASH could be coming!
- VIX has already moved up, but this barely acknowledges volatility elsewhere. The VIX always sees greater volatility because it includes the effects of economic volatility as the business cycle breaks
- Upcoming World recession seems set to force the VIX above 50 index points. Stay ‘risk-off’ and choose ‘carry’ at the front-end of yield curves
Two Bits of Non-Bullish Toshiba News
- On Friday, Toshiba investors got two bits of news which have been taken as non-bullish.
- Affiliate and former subsidiary Kioxia (6600 JP) announced it would cut wafer input volume by 30% starting in October, and Toshiba’s announcement on the Privatisation process status implied some delay.
- Today the shares are getting hit vs Peers. It’s still a problem of lots of moving parts.
Toyo Construction (1890 JP) – There’s Nuance in Them Thar Press Releases
- On Friday, post-close, there was a flurry of excitement as YFO put out a press release amending the start date of the planned Tender Offer to early November.
- Not long after, there was another release by Toyo Construction (1890 JP) itself.
- You have to read both for what they are. And as they say…. Get your programs here!
BREAKING! Dog Loses To Mangalore – Idemitsu Kosan Does Its Deal for Toa Oil (5008)
- Friday post-close, Idemitsu Kosan (5019 JP) announced a deal to buy out subsidiary Toa Oil Co Ltd (5008 JP). Cornwall has agreed to tender, so it’s a done deal.
- This is at ¥3,150/share, which is nearly 30% higher than the bid 21 months ago, where Cornwall bought enough to block, but it is a disappointing outcome for governance.
- A clearly problematic tolling agreement with the parent, and what could be ¥100bn of excess land value are ignored. Minority investors get hosed. One of the problems of minority investments.
Index Rebalance & ETF Flow Recap: S&P/ASX, China A50, SET50, Bilibili, Leapmotor, Onewo, CALB
- Last week we had the implementation of the first two tranches of the Nikkei 225 (NKY INDEX) rebalance with the third tranche to be implemented at the close on Monday.
- Thursday saw the NIFTY indices implementation while Friday marked the end of the review period for the December rebalance of the Hang Seng family of indices.
- There were large inflows to China, Taiwan, Korea and Hong Kong ETFs during the week while there were some outflows from Japan.
FTSE All-World/All-Cap Index Rebalance Preview (Dec): Quieter Than Usual as IPOs Dry Up
- We see 4 potential inclusions to the FTSE All-World and All-Cap indices that will be implemented at the close of trading on 16 December.
- There are a couple of other recent listings that are close to the investable market cap threshold and could be added to the All-Cap index.
- Given the lack of IPO in the April to August period, the rebalance will be quieter than usual though lock-up expiries will keep things interesting.
Saudi Arabia Gaming: Plans to Invest $38 Billion in Global Game Industry
- Saudi Arabia’s Savvy Games Group has a grand ambition to invest in the global gaming industry. It recently announced that it will invest US$37.8 billion in the global gaming industry.
- There has been a sharp appreciation of the USD and Riyal versus JPY which could help to accelerate more M&As of Japanese game companies by SGG.
- Saudi Arabia’s aggressive push to expand into the global gaming industry could aid this sector in the coming months as it could result in further major M&As in this sector.
Lionheart Studio IPO Valuation Analysis
- Our base case valuation of Lionheart Studio is a target price of 19,362 won per share, which is 46% lower than the low end of the IPO price range.
- Our IPO valuation assumes a 7.2x EV/EBITDA (comps’ average) using 2023 estimated EBITDA of 145 billion won for the company.
- All in all, we believe there is a strong probability of Lionheart Studio being forced to lower its IPO price range in order to attract more investors.
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