In today’s briefing:
- Toshiba – 3D Stake Reduction Reduces and Increases Risk
- Nikkei 225 March 2023 Rebal Tomorrow
- Introducing Another Long Short Basket Trading Event with Semicon ETF Rebalancing in Korea
- Alibaba’s Sum of the Parts Valuation: Why the Initial Excitement May Be Overblown
- Detailing & Assessing SK Innovation’s Exchange Offer with SK On Shares as Consideration (10% of SO)
- Rakuten Bank IPO – Thoughts on Valuation
- Sembcorp Marine (SMM SP) JVs for S$8.6bn Multi-Year Offshore HVDC Converter Platforms Deal
- Mincor: Did Twiggy Thwart BHP Offtake?
- Samsung SDS Placement – Well Flagged and the Last One Did Well
- Another Block Deal Sale of Samsung SDS by the Lee Family to Pay for Inheritance Taxes
Toshiba – 3D Stake Reduction Reduces and Increases Risk
- An EDINET filing yesterday revealed that 3D Investment Partners had reduced their stake in Toshiba from 7.2% to 4.9%.
- This significantly derisks the possibility of 3D becoming a forced seller and alters the risk reward here.
- Nevertheless, it is still difficult to be especially bullish here given uncertainty regarding the tender vote is now a little higher.
Nikkei 225 March 2023 Rebal Tomorrow
- The Nikkei 225 March 2023 Rebalance is 31 March at the close. There is about US$1.75bn of funding to sell against US$1.85bn of 3 names to buy.
- The impact on the Buy Side is middling at 3, 6.4, and 6.9 days of ADV to buy. The three DELETES are larger on average but they are all smallcaps.
- One trade – long an ADD vs a Peer – is still worth doing. Indexers buy the stock, it goes into a dark closet, and never comes out.
Introducing Another Long Short Basket Trading Event with Semicon ETF Rebalancing in Korea
- Mirae Asset TIGER Fn Semiconductor TOP 10 ETF saw a rapid increase in AUM in a short period. Currently, AUM has reached 126 billion won.
- Compared to the flow size, the price movement magnitude was substantial. What is particularly important is that the correlation between weight change direction and price impact was quite significant.
- Considering Long Short basket trading based on the weight change direction on a day trading window seems worthwhile.
Alibaba’s Sum of the Parts Valuation: Why the Initial Excitement May Be Overblown
- Alibaba Group (9988 HK)‘s shares rallied after announcing the business split, with investors believing that the sum of parts could be worth more than the current valuation.
- Our analysis shows that NAV is only 12% higher than the current valuation, contrary to the idea of a significantly higher sum of parts value.
- Therefore, we would be looking to short Alibaba (ADR) (BABA US) yet again once this initial excitement settles.
Detailing & Assessing SK Innovation’s Exchange Offer with SK On Shares as Consideration (10% of SO)
- SK Innovation will buy back its shares, worth about 10% of the total issued shares, through a tender offer and offer SK On stocks as consideration instead of cash.
- Even if there is allocation risk, as only 10% of SO are targeted, expectations that pricing discrepancy can sufficiently offset this should be the factor driving up the price today.
- Additional trading openings? This depends on the disparity widening between the intrinsic value of SK On and the exchange ratio.
Rakuten Bank IPO – Thoughts on Valuation
- Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$900m in its Japan listing in April 2023.
- RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
- In our earlier notes, we have looked at the company’s past performance and undertook a peer comparison. In this note, we provide our thoughts on valuation.
Sembcorp Marine (SMM SP) JVs for S$8.6bn Multi-Year Offshore HVDC Converter Platforms Deal
- Sembcorp Marine (SMM SP) is a month in to its new existence as a business more than twice as large as its old business after absorbing Keppel O&M.
- There have been some noises about cost-cutting, which could be key to an early return to profitability.
- Today, mid-day, we get news of the biggest ever offshore renewables contract win in a JV with General Electric – a deal worth €6bn (SGD 8.64bn). It’s big.
Mincor: Did Twiggy Thwart BHP Offtake?
- Earlier today (30 March), Mincor Resources NL (MCR AU) said BHP Group (BHP AU) would not agree to amend off-take agreement specifications, and will no longer accept lower-quality ore.
- Mincor delivers 100% of its ore to BHP. It will continue to deliver on-specification ore to BHP, but has withdrawn its forward guidance.
- Shares rolled over 5.7% to close at A$1.42/share, above Wyloo’s unconditional A$1.40/share. Offer.
Samsung SDS Placement – Well Flagged and the Last One Did Well
- Lee Seo-Hyun, via KEB Hana Bank, is looking to sell her entire stake in Samsung Sds (018260 KS) to raise US$132m.
- While a relatively large one to digest, the deal is very flagged.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
Another Block Deal Sale of Samsung SDS by the Lee Family to Pay for Inheritance Taxes
- After the market close today, Samsung Sds announced a block deal of 1.51 million shares at a discount range of 3.5% to 4.5% to the closing price of 117,900 won.
- Lee Seo-Hyun, the daughter of the late Samsung Chairman Lee Kun-Hee, is selling her 1.51 million shares of Samsung SDS (1.95% of oustanding shares) in a block deal.
- The company faces continued overhang on additional stake sale due to the inheritance tax issue in the next 2-3 years. As a result, we would avoid the block deal sale.
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