In today’s briefing:
- Denso’s Big Multi-Year Toyota Industries (6201) Selldown
- JSR (4185 JP) – Activist Murakami-San Goes to 5+%! Bumpitrage? Appraisal Rights? A Technicality?
- If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated
- JSR Corporation (4185 JP): Murakami Becomes a Substantial Shareholder
- KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents
- TOPIX Inclusions: Who Is Ready (Apr 2024)
- SK Square: Higher NAV Driven by Its Holding in SK Hynix
- HD Hyundai Marine Solutions IPO: Valuation Insights
- IntelliCentrics (6819 HK): 18th April “Scheme” Vote
- What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene
Denso’s Big Multi-Year Toyota Industries (6201) Selldown
- We knew this was coming. We did not know HOW it was coming. The news today has to be seen as a bit of a disappointment.
- Why is it a disappointment? Toyota Industries (6201 JP) is not buying back a big chunk, and there is no offering to oblige new investors to take a look.
- This is long, slow, leakage on a company which is not overwhelmingly cheap, where it requires good governance to get out well, and even then…
JSR (4185 JP) – Activist Murakami-San Goes to 5+%! Bumpitrage? Appraisal Rights? A Technicality?
- In what is a surprising move to me, Murakami-san has gone substantial on JSR Corp (4185 JP) with the vast majority of his stake purchased at a spread of <0.05%.
- As suggested in JIC Launches a NOT-¥1trln Tender Offer for JSR (4185). Welcome? Yes. Overwhelming? Meh, the deal price was not overwhelming. It got less so as the market rose.
- But this is an odd target. High float. No competition. Would take a lot to block or force the bumpitrage, which suggests appraisal rights or a “technicality.”
If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated
- A couple of years ago, Rakuten (4755 JP) – burning through cash to start its mobile business – announced it would its Bank and Securities units. Bank listed. Securities didn’t.
- Mizuho ended up buying 49% of Securities. Today, it was announced there would be discussions to put Bank, Securities, Card, and Insurance in a new listed Holdco.
- How this works will end up being complicated. More complicated than it should be. But the complexity would make this more of a win-win for everyone.
JSR Corporation (4185 JP): Murakami Becomes a Substantial Shareholder
- Murakami’s City Index Eleventh entity reported a 5.11% position in JSR Corp (4185 JP). The share purchases started on 19 March, the day of the tender start.
- Murakami’s average buy-in price of JPY4,346.22 per share is broadly in line with the JPY4,350 tender offer.
- Murakami’s disclosure suggests two possibilities: starting an activist campaign for a bump or pursuing the appraisal process to determine a fair value. We think the latter is likely.
KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents
- KRX limits individual stock weight to 20% in ETFs with few constituents. KRX confirms working on it, with an official announcement expected soon.
- Excludes index ETFs like KOSPI 200. KRX hasn’t finalized criteria for constituent number but expected to involve fewer than 30 stocks.
- This could open new passive trading opportunities. Sector ETF cap at 30%, large AUM ones offer noteworthy trading potential.
TOPIX Inclusions: Who Is Ready (Apr 2024)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- There were no Section Transfers announced in the last 3 months so currently there are no live TOPIX Inclusion events at present.
- There are currently 79 names capable of satisfying all the key section transfer requirements. Our long-term pre-event candidate CELSYS (3663 JP) is one of them.
SK Square: Higher NAV Driven by Its Holding in SK Hynix
- SK Square owns a 20.07% stake in SK Hynix which is now worth 27.2 trillion won. SK Square’s market cap is only 39% of SK Square’s stake in SK Hynix.
- SK Square has benefited from increased capital allocation to low P/B stocks in Korea due to the Corporate Value Up program. SK Square is trading at P/B of 0.7x.
- Amid the tremendous demand for Nvidia’s AI related chips, this has also benefited several Korean companies including SK Hynix and SK Square.
HD Hyundai Marine Solutions IPO: Valuation Insights
- HD Hyundai Marine Solution (443060 KS), the ship after-service subsidiary of HD Hyundai (267250 KS), aims to raise up to US$550 million.
- We previously discussed the IPO in HD Hyundai Marine Solutions IPO: The Investment Case.
- We examine the syndicate’s valuation methodology. Our analysis suggests that the HMS is, at best, fairly valued at the IPO price range. We would pass on the IPO.
IntelliCentrics (6819 HK): 18th April “Scheme” Vote
- Soon-To-Be ex-healthcare technology platform play IntelliCentrics Global Holding (6819 HK) is a pseudo risk arb.
- IntelliCentrics is selling its key ops, declaring a special dividend from the sale proceeds, subsequently being wound up, then delisted.
- Shareholders have the option of voting on a raft of resolutions on the 18th April. Irrevocables total 72.1%. This is done. Just the final dividend amount needs to be confirmed.
What’s Additionally Being Heard on Hanwha’s Austal Deal from Korea’s Local Scene
- Hanwha received counsel indicating foreign regulators won’t oppose Austal’s acquisition. They admit it’s restricted to AUKUS countries but argue Korea’s ties ease opposition.
- Hence, Hanwha Ocean is dropping some heavy hints that even though Austal has turned down the acquisition offer for now, there’s still a chance the deal could go through.
- The pivotal factor lies in whether Hanwha Ocean can secure approval from the AUKUS countries. Should they succeed, it is anticipated that Austal would be inclined to accept the deal.
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