In today’s briefing:
- [Japan M&A] Toyota Inds (6201) – Process ALWAYS Bad, Price Bad To Worse; Easily Worth ¥20k+
- Gold Miners ETF (GDX US) Dec Rebalance Preview: Stock Price Moves Shrink Capping Trade
- HEW: Slow Shovels
- Toyoda Gosei (7282 JP): The Current Playbook
- CSI300 Index Rebalance: 11 Changes & US$7.77bn Trade
- Weekly Deals Digest (30 Nov) – SBI Shinsei, JDI, ANE, Canon Electronics, Digital, Mandom, NSR, Qube
- SSE50 Index Rebalance: 4 Changes a Side & US$2.2bn Trade
- ANE (9956 HK): Precondition Satisfied
- [Japan M&A] ParentCo Finally Buys Out Canon Elec (7739 JP) – OK Premium, Meh Process, No Synergies
- Relative Value Opportunities in Asia-Pac, Pair Trade Roundup (1 Dec)
[Japan M&A] Toyota Inds (6201) – Process ALWAYS Bad, Price Bad To Worse; Easily Worth ¥20k+
- In April there was a story suggesting Toyota Group would buy out Toyota Industries (6201 JP). In June, they announced a deal. It was a BAD DEAL.
- The price was low, but it was BAD governance because it was the WRONG DEAL. TICO’s Board declared a valuation fair for a deal not announced, ignoring the ACTUAL DEAL.
- The valuation? Assumed no changes to the business. Actual deal? Sell 90+% of net assets driving 50% of net income, buy back 24+% of shares at discount.
Gold Miners ETF (GDX US) Dec Rebalance Preview: Stock Price Moves Shrink Capping Trade
- The VanEck Gold Miners ETF/USA (GDX US) transitioned from the tracking the NYSE Arca Gold Miners Index to the MarketVector Global Gold Miners Index in September.
- Dundee Precious Metals (DPM CN)‘s stock price has continued to move higher and is likely to be added to the index in December.
- Stock moves over the last month have shrunk the capping trade massively. Estimated one-way turnover is 1.8% and the round trip trade is US$1.75bn.
HEW: Slow Shovels
- UK fiscal policy had an even smaller hole to fill than we expected, with the work to fill it in delayed until the election. There is no dovish pressure on the BoE from this.
- European data releases were relatively resilient again, with household lending and business sentiment broadly increasing. National inflation surprises were offsetting.
- Next week’s Euro area flash HICP is still tracking 2.1% in our forecast. Final PMI releases and the BoE’s decision maker panel survey results are our other release highlights.
Toyoda Gosei (7282 JP): The Current Playbook
- Since the announcement of the US$0.8 billion secondary offering, Toyoda Gosei (7282 JP)’s shares have declined 4.9% to the undisturbed price of JPY3,754 per share (20 November).
- It is instructive to look at recent large Japanese placements to understand the potential trading pattern. Toyoda’s share decline is better than the median of recent large placements.
- The offering will likely be priced on 1 December. The average large Japanese placement tends to generate positive returns.
CSI300 Index Rebalance: 11 Changes & US$7.77bn Trade
- There are 11 changes for the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) with implementation taking place at the close on 12 December.
- Nearly all the changes are in line with forecasts. Jiangsu Zhongtian Technologies Co, Ltd. (600522 CH) is the one surprise addition.
- The adds outperformed the deletes and the CSI300 from June-September but have given back a chunk of the gains since then. Expect positioning to build over the next few days.
Weekly Deals Digest (30 Nov) – SBI Shinsei, JDI, ANE, Canon Electronics, Digital, Mandom, NSR, Qube
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: SBI Shinsei Bank (8303 JP), NS Group (471A JP), JD Industrial Technology (2231713D CH) IPOs, and Toyoda Gosei (7282 JP)‘s US$0.8 billion secondary offering.
- Event-Driven developments: ANE Cayman Inc (9956 HK), Canon Electronics (7739 JP), Digital Holdings Inc (2389 JP), Mandom Corp (4917 JP), National Storage REIT (NSR AU), Qube Holdings (QUB AU).
SSE50 Index Rebalance: 4 Changes a Side & US$2.2bn Trade
- There are 4 constituent changes for the SSE50 Index (SSE50 INDEX) that will be implemented at the close on 12 December.
- Dawning Information Industry C (603019 CH) is a surprise add given the upcoming merger with Hygon Information Technology C (688041 CH).
- The SSE50 Index adds have underperformed the deletes over the last couple of months and there could be outperformance from here as positioning builds ahead of the implementation of the changes.
ANE (9956 HK): Precondition Satisfied
- The precondition for the consortium’s privatisation offer for ANE Cayman Inc (9956 HK) has been satisfied. The right to increase the share alternative cap was also satisfied.
- The consortium has until 12 December to decide whether to increase the share cap. The option helps the consortium gain support from shareholders who would not accept the cash offer.
- The scheme vote remains low risk, as the offer is attractive relative to historical ranges and peer multiples. The de-rating of peers is also helpful.
[Japan M&A] ParentCo Finally Buys Out Canon Elec (7739 JP) – OK Premium, Meh Process, No Synergies
- Friday post-close, parent Canon Inc (7751 JP) announced a buyout of subsidiary Canon Electronics (7739 JP). The ¥3,650/share offer is supported and recommended (to shareholders) by Target Co management.
- This is the least surprising of parent-subsidiary buyout situations, but it took some time. I expect there are some funds already long a basket of these, including this one.
- This is not a very fair procedure. The result is therefore, unfair. And no synergies to boot. But it is a 30+% premium to last, and Canon already owns 55%.
Relative Value Opportunities in Asia-Pac, Pair Trade Roundup (1 Dec)
- Context: This Insight follows up on previously highlighted relative value opportunities, using a statistical methodology based on mean-reversion to identify opportunities in paired securities.
- Highlights: Currently twelve pair trade opportunities across four markets and five sectors persist.
- Why read: Statistical analysis offers a unique perspective on relative value. Gain insights into actionable statistical pair trade opportunities and monitor performance of previously highlighted pairs.
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