In today’s briefing:
- TSMC. How To Turn Chicken Salad Into Chicken Sh*t
- J&T Global Express (1519 HK): The US$9.9 Billion Lock up Expiry
- Krafton Placement – Stock Has Been Doing Well, Momentum Remains Strong
- RMB Dual Counter Trading Is Coming – This Changes AH Relationships
- Jardine Cycle & Carriage Is A Short
- Roland DG (6789 JP): Taiyo Mulling Three Options or Is It?
- Investor Activism Update: Seven & I Sets the Path in Investor Activism Battle
- Krafton: Block Deal Sale of About 270 Billion Won
- HK Connect SOUTHBOUND Flows (To 19 Apr 2024); Strong Net Buying on Energy/Finance/Telco SOEs. Again.
- Mr. Choi Goes to Washington
TSMC. How To Turn Chicken Salad Into Chicken Sh*t
- Q124 revenues of $18.87 billion, marginally above the high end of the guided range, up 12.9% YoY and down 3.8% QoQ. Guided Q224 +6% QoQ. Maintained full year 2024 outlook
- Unnecessary, minor downward revisions for semi & foundry growth, combined with confusion about the reason triggered an allergic reaction on the markets. TSMC down ~8% since.
- SMCI plunged 23% by Friday close, ARM down 16.9%, NVIDIA down 10%, AMD & Micron down ~5% etc. Nice one, TSMC!
J&T Global Express (1519 HK): The US$9.9 Billion Lock up Expiry
- J&T Global Express (1519 HK)’s 180-day IPO lock-up period for 88% of outstanding shares expires on 24 April. The shares exiting the lock-up period are worth US$9.9 billion.
- The likely sellers will be the Series pre-A1, pre-A2, A and B investors as are they are materially in the money at the last close price.
- J&T has returned to organic growth with a shift to profits and declining cash burn. While the last close is 17% below the IPO price, the shares are fairly valued.
Krafton Placement – Stock Has Been Doing Well, Momentum Remains Strong
- SK Square is looking to raise around US$198m via selling 2.1% of Krafton (259960 KS).
- The stock has been doing well over the past few months and its earnings and price momentum remain strong.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
RMB Dual Counter Trading Is Coming – This Changes AH Relationships
- A week after the State Council issued “Several Opinions” (关于加强监管防范风险推动资本市场高质量发展的若干意见》), the CSRC announced Friday five capital market cooperation measures with HK Connect. The goals are to increase cross-border investor flows.
- They include: a broader range of ETFs in Connect, including REITs in both directions, include RMB counters in Southbound, improve mutual recognition of funds, increasing China IPOs in Hong Kong.
- RMB Dual Counters Southbound-eligible will take time. They have some homework, but it is on the “To Do” list “as soon as possible and smoothly.” Watch impact on H/A Pairs.
Jardine Cycle & Carriage Is A Short
- Jardine Cycle & Carriage (JCNC SP)‘s current implied stub value is around its highest-ever level.
- The simple ratio of JCNC/Astra International (ASII IJ) is at its highest level outside the 2008 GFC.
- A weak Indonesian rupiah is likely a factor. Still, JCNC is trading rich to its NAV. A takeover from parent Jardine Matheson Holdings (JM SP) is idealistic.
Roland DG (6789 JP): Taiyo Mulling Three Options or Is It?
- On 19 April, Taiyo Co-CEO Brian Heywood told Bloomberg and Reuters they were considering three options to Brother Industries (6448 JP)’s tender for Roland DG Corp (6789 JP).
- Taiyo’s options are bumping its offer, walking away or tendering into the Brother’s offer if it bumps and alleviates dis-synergies concerns.
- All three options are likely a ruse. Taiyo’s primary play is to frustrate and pressure Brother to withdraw its bid if it cannot get the Board’s recommendation.
Investor Activism Update: Seven & I Sets the Path in Investor Activism Battle
- Value Act’s recent statement might suggest that they have prevailed and Seven & I Holdings (3382 JP) has yielded to their demands. However, the reality might be less straightforward.
- Value Act sought new market expansion, but Seven & I is focused on reinforcing its presence in existing, well-established markets.
- Given Value Act’s impatience, their acceptance of Seven & I’s plan for a 2026 Super Stores IPO, contingent on a business transformation, is unexpected.
Krafton: Block Deal Sale of About 270 Billion Won
- After the market close on 22 April, it was reported that SK Square plans to sell 2.2% stake in Krafton in a block deal sale worth about 270 billion won.
- The estimated block deal sales price range is from 243,000 won to 251,000 won, representing a 3.1% to 6.2% discount to the closing price of 259,000 won on 22 April.
- We would take the deal. The company’s valuations remain attractive and it has been successful in expanding its sales and profits.
HK Connect SOUTHBOUND Flows (To 19 Apr 2024); Strong Net Buying on Energy/Finance/Telco SOEs. Again.
- A shares were up on the week, while Hs were down. BIG divergence among liquid names.
- Net SOUTHBOUND buying was +HK32.1bn. SOUTHBOUND ended its consecutive post-CNY daily net buy streak on 25 March, then started a new one. No net sell days since.
- Little market news. More geopolitical news. SOE bank H-shares are seeing relentless net and gross buying, very very little selling.
Mr. Choi Goes to Washington
- The Deputy Prime Minister Choi Sang Mok reaffirmed the Corporate Value Up program, pushing up the major value driven/low PBR stocks in Korea today.
- Deputy Prime Minister Choi emphasized that as part of Corporate Value Up program, corporate tax benefits to companies that have made efforts to strengthen shareholder return policy will be provided.
- The Korean government also plans to revise the law to separate taxation on the dividend income of shareholders of companies that expand dividends.
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