In today’s briefing:
- Toyota Industries (6201) – SURPRISE! It’s a TOYODA Takeover Proposal (Good Governance May Not Win)
- Laopu Gold (6181 HK): Global Index Inclusion Likely Derailed by Full Circulation
- Shin-Etsu Chemical (4063) – OK Earnings, OK Forecast, But Ground-Breaking Buyback
- Sigma Healthcare (SIG AU): Next Round of Passive Buying Around the Corner
- Toyota Industries (6201 JP): A Rumoured Privatisation with Several Unknowns
- Ather Energy IPO: Expensive and No Immediate Index Inclusion
- Next Target After Hanwha for Regime Change Momentum Play: SK Inc’s Share Cancellation
- Hanwha Ocean Placement – Recent Run-Up, Results Make It Tricky
- Hanwha Ocean (042660 KS) Placement: Index Implications; Stock Appears Wildly Overvalued
- KDB’s Hanwha Ocean Block Deal: Worth Taking a Swing
Toyota Industries (6201) – SURPRISE! It’s a TOYODA Takeover Proposal (Good Governance May Not Win)
- On Friday after the close, media reports surfaced that Toyota Motor (7203 JP) Group chairman and founding family member had put forth a take-private proposal to Toyota Industries (6201 JP).
- The number quoted was ¥6trln market cap (most) or EV (FT), financed by personal funds, 3 megabanks, and reportedly some group companies.
- ¥6trln market cap would be +50%. ¥6trln EV +16%. Simultaneously shocking but somehow not surprising. Opportunistic, and surprisingly elegant as a family/group/cultural solution. More below.
Laopu Gold (6181 HK): Global Index Inclusion Likely Derailed by Full Circulation
- Laopu Gold (6181 HK) was on track to be added to a global index given its large H-share market cap and a free float that was close to 20%.
- Completion of the full circulation in April pushed H-share market cap higher while free float market cap remained the same. Crucially, free float dropped below 15%.
- Laopu Gold (6181 HK) could miss index inclusion in May, while inclusion in August will need some selling from non-float investors following lock-up expiry in June.
Shin-Etsu Chemical (4063) – OK Earnings, OK Forecast, But Ground-Breaking Buyback
- Shin Etsu Chemical (4063 JP) reported FY earnings to beat January guidance for all four major measures, just slightly. They only guide 1 quarter out, and Q1 is up year-on-year…
- …in revenues, but down in OP and NP. Note: OP and NP guidance is nearly identical to what they guided for Q1 last year on ¥585bn revenues (vs ¥610bn now)
- The BIG news here is a Very Large Buyback. The company has long has huge piles of cash. This buyback (~90% of annual profit) starts to make use of it.
Sigma Healthcare (SIG AU): Next Round of Passive Buying Around the Corner
- There was big passive buying in Sigma Healthcare (SIG AU) in March from S&P/ASX trackers following the completion of the merger with Chemist Warehouse Group.
- Sigma Healthcare (SIG AU) should be added to a global index in May and those passive trackers will have a lot of stock to buy.
- While there will be positioning in the stock, it appears lighter than the estimated passive buying. Shorts are being covered and that could provide a boost.
Toyota Industries (6201 JP): A Rumoured Privatisation with Several Unknowns
- Toyota Industries (6201 JP) shares were set to hit the daily upper limit of JPY16,225 due to press reports of a privatisation bid valuing it at JPY6 trillion.
- Toyota Industries confirmed receiving a going-private proposal from a special purpose company, while Toyota Motor (7203 JP) said it is considering all possibilities, including a partial investment.
- There are still several unknowns, including the price, the identity of the offeror, potential irrevocable commitments, the financing structure, and the timeline.
Ather Energy IPO: Expensive and No Immediate Index Inclusion
- Ather Energy is looking to raise INR 30bn (US$349m) in its IPO, valuing the company at INR 120bn (US$1.4bn). The company appears to be expensive compared to peers.
- Ather Energy could be added to one global smallcap index in August/November and to another in December/March. Small Cap classification for AMFI and no major local index inclusion.
- The continued selloff in Ola Electric will give investors pause, especially given Ather Energy‘s stagnant market share and continued losses. There is supply in Ola Electric with PE/VC investors selling.
Next Target After Hanwha for Regime Change Momentum Play: SK Inc’s Share Cancellation
- Local traders are betting SK Inc will preemptively announce a treasury share cancellation before the June election, positioning it as the center of the regime change momentum play.
- From a trading perspective, SK Inc could rally as a “buyback stock” and offer NAV gap trading opportunities.
- Another option could be an event-driven hedge strategy: go long on SK and short index futures post-election. If Lee Jae-myung wins, SK could outperform, but the broader market may drop.
Hanwha Ocean Placement – Recent Run-Up, Results Make It Tricky
- Korea Development Bank (KDB) plans to raise around US$740m via selling around 5%+ stake in Hanwha Ocean (042660 KS).
- HO’s shares have nearly tripled since the start of the year, and the company reported its results today.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
Hanwha Ocean (042660 KS) Placement: Index Implications; Stock Appears Wildly Overvalued
- Korea Development Bank is looking to sell 13m shares of Hanwha Ocean (042660 KS). That is US$740m at the top end of the marketed range and 4x ADV.
- Following the sale, Korea Development Bank will still own over 15% of the company and that will be an overhang for the stock. Plus the stock appears wildly overvalued.
- There will be limited buying from passive trackers at the time of the placement with bigger passive flows coming through in June and August.
KDB’s Hanwha Ocean Block Deal: Worth Taking a Swing
- KDB sells 4.3% of total shares, offloading about one fifth of its holdings. The price range was 81,265–81,710 won, at an 8.51–9.00% discount, totaling 1.056–1.062 trillion won.
- With more float and passive buying (KOSPI 200) potential, plus shipbuilding momentum, the stock’s pullback likely won’t exceed today’s discount — it might be worth taking a swing.
- There’s buzz KDB might sell its HMM stake through block trades, like Hanwha Ocean. However, with HMM’s cash reserves, a tender offer seems more likely to drive stock action instead.
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