In today’s briefing:
- Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS, Here We Go Again!
- Toshiba – Thoughts On The Tender Opinion
- Nikkei 225 Index Rebalance: Passives Trade on Friday
- Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling
- SM Entertainment: Tender Offer Allocation Ratios Announced
- Toyo Construction (1890) Plays Offence – A New Mid-Term Mgmt Plan with High Shareholder Payout
- Rakuten Bank Vs SBI Sumishin Net Bank
- Target & Timing for Flow Trading Position Setup in NICE I&S KOSPI Transfer Event
- Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
- Cosmo Energy (5021) – It’s Even More On
Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS, Here We Go Again!
- On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
- At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares. Its value has since declined to US$17bn
- We have covered the background of the event in our previous notes. In this note, we talk about the recent updates.
Toshiba – Thoughts On The Tender Opinion
- Toshiba released documents on the tender and a notice that the FY end dividend would be cancelled shortly after our last report was published.
- They are interesting in that the Special Committee’s opinions are relatively frank but details on the valuation process are almost non-existent.
- In addition, the information regarding other bids and alternatives was a little surprising to us.
Nikkei 225 Index Rebalance: Passives Trade on Friday
- Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) will replace Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) in the Nikkei 225.
- Estimated one-way turnover at the rebalance is 1.08% and will result in a round-trip trade of JPY 412.8bn (US$3.16bn) at the close on 31 March.
- There has been recent pre-positioning on the stocks as well as movement in short interest over the last couple of months.
Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling
- Following the settlement of Meituan (3690 HK) shares from Tencent (700 HK)‘s in-specie dividend, nearly all the shares are now in CCASS.
- Meituan (3690 HK) has underperformed Tencent (700 HK) by nearly 50% and Alibaba Group (9988 HK) by 27% since the announcement of the in-specie dividend.
- Short interest is higher over the last couple of months but is far lower than the selling that could come through, especially on the Prosus (PRX NA) holding.
SM Entertainment: Tender Offer Allocation Ratios Announced
- Korea Investment & Securities announced the final competition rate for the tender offer of SM Entertainment by Kakao Group (8,333,641 shares of SM Entertainment at 150,000 won per share).
- The competition ratio of the tender offer was 2.2655436 to 1. Accordingly, the allocation ratio was set at 44.1395170%.
- At the current price of 95,100 won, SM Entertainment’s shares are undervalued by about 25% to 45% over the next 6-12 months, in our view.
Toyo Construction (1890) Plays Offence – A New Mid-Term Mgmt Plan with High Shareholder Payout
- YFO continues its fight on Board governance. Toyo Construction has shifted so the Board and a Special Committee will now examine the input Toyo says YFO has not provided.
- Toyo also objected because it said YFO’s bid could not be sustained based on Toyo’s economics. Toyo’s fight should have been offence. With a new Medium-Term Management Plan, it is.
- Toyo now promises strong revenue and double digit OP growth, and a ¥50/share (5.3%) dividend. Toyo is trying to pay off shareholders to support it against YFO. That’s fair/good.
Rakuten Bank Vs SBI Sumishin Net Bank
- Rakuten Bank (5838 JP) is an online bank in Japan. It is looking to raise about $870 million. The pricing is on 5 April and the listing is on 21 April.
- In Rakuten Bank IPO: The Investment Case, we highlighted the key elements of the investment case.
- SBI Sumishin Net Bank (7163 JP), the key peer, will list on 29 March. In this note, we compare Rakuten Bank and SBI Sumishin across several key metrics.
Target & Timing for Flow Trading Position Setup in NICE I&S KOSPI Transfer Event
- NICE I&S will likely complete the transfer schedule in early May, meaning that an ad-hoc change may occur before the regular rebalancing of the KOSDAQ 150 in June.
- If this gets completed before SK Oceanplant’s transfer listing schedule, the top reserved issue in NICE’s GICS sector (INDUSTRIALS) will be included. It is Sun Kwang (003100 KS).
- As evidenced in the case of LX Semicon, we should set up a preemptive position for potential ADDITION at the time of the T or T-1 KRX corporate action announcement.
Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
- The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
- There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
- Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.
Cosmo Energy (5021) – It’s Even More On
- In mid-January, things between activist Yoshiaki Murakami and Cosmo Energy Holdings (5021 JP) came to a head. Cosmo announced a large buyback and possible takeover defence measures.
- The buyback was a beefy chunk of the float because of the expected profit payout. On 9 February, Cosmo lowered its NP guidance by 40%. FY22 div stays at ¥150/share.
- Last Thursday, Cosmo presented its NEW Mid-Term Management Plan. ROE targets similar. Profit targets up. Minimum div goes up; payout ratio goes up. More comes if financial health targets met.
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