In today’s briefing:
- Taishin (2887 TT)/Shin Kong (2888 TT) Merger: Index Flows in July
- Shin Kong/Taishin Merger Flows and Perhaps Unforeseen Problems
- [Japan ECM] Kokusai Elec (6525) Offering – Expect It Very Well Bid, and the Back End Squeezy
- Kokusai Electric (6525 JP): Small Index Impact for Now, but Could Lead to Something Bigger
- Toyota Industries (6201 JP): Vocal Activism Gathering Pace
- Labour’s Collapsing Credibility
- SK Square: Time to Take Profits + Why Are There Holdco Discounts in the First Place?
- SK Square Placement: Clean up by Kakao
- Meituan Possible US$4bn Selldown – Will End up Being Well-Flagged but Sentiment Isn’t Great
- Ohayo Japan | Markets Climb as Nvidia, Bitcoin Soar
Taishin (2887 TT)/Shin Kong (2888 TT) Merger: Index Flows in July
- Taishin Financial Holding (2887 TT) and Shin Kong Financial Holding (2888 TT) announced a Merger of Equals in August 2024 and completion is expected on 24 July.
- Taishin Financial Holding (2887 TT) has underperformed its peers over the last 18 months while Shin Kong Financial Holding (2888 TT) has underperformed its peers following the merger announcement.
- There will be passive flows in the merged entity following the completion of the merger and could help reverse some of Taishin Financial Holding (2887 TT)‘s underperformance.
Shin Kong/Taishin Merger Flows and Perhaps Unforeseen Problems
- A new factoid about the merger between the Shin Kong Financial Holding (2888 TT) and Taishin Financial Holding (2887 TT) merger of FHCs came to my notice last week.
- There is withholding tax on a portion of the Taishin shares to be received. The last day of trading will be 11 July 2025. Expect repercussions.
- This week will see multiple index events, combined with the risk arb events, and the WHT may affect how passive investors trade the events.
[Japan ECM] Kokusai Elec (6525) Offering – Expect It Very Well Bid, and the Back End Squeezy
- After the close today, Kokusai Electric (6525 JP) announced that large holder (and original PE owner) KKR HKE Investment LP would sell down 30mm shares or 12.88% of shares out.
- This is not expected, but also not unexpected – it’s exactly a year since the first selldown. There is a decent-sized short position, and it isn’t a huge offering.
- This changes two aspects of the future supply/demand balance. Both are important for how this trades in coming months.
Kokusai Electric (6525 JP): Small Index Impact for Now, but Could Lead to Something Bigger
- KKR HKE Investment is offering 30m shares (12.86% of shares out) of Kokusai Electric (6525 JP) in a secondary offering that could raise up to JPY 91bn (US$620m).
- Applied Materials (AMAT US) will become the largest shareholder in Kokusai Electric (6525 JP) after the placement.
- There will not be a lot of buying from passive trackers following the placement, but it could ease the way for inclusion of the stock in the Nikkei 225 Index.
Toyota Industries (6201 JP): Vocal Activism Gathering Pace
- Toyota Industries (6201 JP)’s preconditional tender offer from Toyota Fudosan is susceptible to a bump if there is enough vocal opposition from minorities.
- In July, two public pieces have sharply criticised the offer – the Asian Corporate Governance Association (ACGA) on 2 July and Sloane Robinson Investment Management on 8 July.
- Some of the criticism has merit, while others do not. Nevertheless, these letters are the first and right step to agitate for terms that are closer to TICO’s intrinsic value.
Labour’s Collapsing Credibility
- Labour failed to campaign on a platform up to the UK’s structural problems, depriving it of the support to deliver change in its first year. Reform UK now lead most polls.
- Spending cut U-turns compound the fiscal hole exposed by the slippage of optimistic assumptions, making further tax hikes and more persistent deficits seem inevitable.
- Far-centrism has been rejected, but challenges to Labour’s right and left break its ability to triangulate back towards success. Investors may not stay so forgiving.
SK Square: Time to Take Profits + Why Are There Holdco Discounts in the First Place?
- We are changing our View on SK Square (402340 KS) to Negative.
- The major reason for this change is due to the surge in its share price along with lack of upside relative to its NAV.
- Regarding SK Square, our holdco discount remains 40%. However, if there are real, positive continued efforts to improve corporate governance, this holdco discount could be reduced further.
SK Square Placement: Clean up by Kakao
- Kakao Corp (035720 KS) is looking to raise US$316m from a clean-up sale in SK Square (402340 KS) .
- The deal is a small one, representing 5.4 days of the stock’s three month ADV, and 1.7% of total shares outstanding.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Meituan Possible US$4bn Selldown – Will End up Being Well-Flagged but Sentiment Isn’t Great
- As per news reports, Prosus NV (PRX NA) could look to sell some/all of its Meituan (3690 HK) stake, worth around US$4bn
- Prosus has held its stake for a few years, owing to the dividend payout by Tencent, but Meituan appears to be planning to take on one of its subsidiaries.
- In this note, we will talk about the possible selldown and other deal dynamics.
Ohayo Japan | Markets Climb as Nvidia, Bitcoin Soar
- S&P 500 +0.27% to 6,280; Nasdaq +0.09%; Dow +0.43% – all record highs
- Fast Retailing net profit rose 8% to ¥339bn (Sep–May), a four-year high; quarterly OP misses on China weakness
- Seven & i net profit jumped 2.3x to ¥49bn, boosted by Ito-Yokado asset sale, but core conbini sales declined
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