In today’s briefing:
- [Japan M&A] Toyota Inds (6201) Proposed Takeover – It Looks Bad, and It’s Worse Than It Looks
- Toyota Industries (6201 JP): After a High, Comes the Low of a Takeunder
- TIP Customized Taiwan Select High Dividend Index Rebalance: 22 Changes as Expected
- HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$8.1bn of Flows Post Capping (June 2025)
- NIFTY200 Momentum30 Index Rebalance Preview: 69% One-Way Turnover & US$1.9bn Trade
- FXI Rebalance: Pop Mart, SF Holding In; China Merchant Sec, China Railway Out
- Mayne Pharma (MYX AU): Twists and Turns as Cosette Chases a Get-Out-Of-Jail-Free Card
- Henderson Land (12 HK): Large Passive Flow Coming Up as Shorts Cover
- US vs EU: Mutually Assured Destruction?
- Lee Jae-Myung Becomes the New South Korean President – Four Investment Themes That Could Outperform
[Japan M&A] Toyota Inds (6201) Proposed Takeover – It Looks Bad, and It’s Worse Than It Looks
- 2wks ago I said “a deal could be announced near-term.” 2wks later we have a deal. But it is a bad deal for TICO minorities. Low price. Minimal transparency. Awful.
- But if you dig through deal structure and economics, it is worse than it looks. It takes digging to understand how bad, and they could tell you, but they won’t.
- The deal will take time. Things will be in limbo til then. And Toyota Group governance and capital allocation is conditional on this deal getting done, which is also bad.
Toyota Industries (6201 JP): After a High, Comes the Low of a Takeunder
- Toyota Industries (6201 JP) disclosed a preconditional tender offer from Toyota Fudosan at JPY16,300, a 23.3% premium to the undisturbed price but a 11.4% discount to last close.
- While representing a pre-rumour all-time high, the offer is below the midpoint of the special committee IFA DCF valuation range. The Board has a neutral recommendation.
- The offer undermines minorities as it lacks split pricing for the Toyota Motor (7203 JP) and its affiliates’ shareholding and likely undervalues the significant real estate holdings.
TIP Customized Taiwan Select High Dividend Index Rebalance: 22 Changes as Expected
- There are 16 adds and 6 deletes for the TIP Customized Taiwan Select High Dividend Index in June. The TIP Taiwan Select High Dividend ETF has an AUM of US$12.4bn.
- The ETF has started trading the stocks and are expected to continue trading for the next 7 trading days. In reality, the process could drag on for some stocks.
- The index committee appears to have a little discretion in choosing the inclusions with one expected add not being added and one lower ranked stock being added to the index.
HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$8.1bn of Flows Post Capping (June 2025)
- The June rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This leads to large flows.
- The net round-trip trade across all stocks across the four indices is estimated at HK$63.55bn (US$8.1bn). There are 12 stocks with over 2x ADV to trade from passive trackers.
- The trade size is much bigger than usual due to the inclusion of BYD in the HSTECH Index and due to a change in the FAF methodology for Secondary Listings.
NIFTY200 Momentum30 Index Rebalance Preview: 69% One-Way Turnover & US$1.9bn Trade
- There could be 20 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 27 June.
- If all changes are on expected lines, one-way turnover is estimated at 68.7% and that will result in a round-trip trade of INR 159bn (US$1.87bn).
- Financials are expected to gain 9 index spots and Materials are expected to gain 3 spots. Consumer Discretionary could lose 5 spots and Information Technology could lose 4 spots.
FXI Rebalance: Pop Mart, SF Holding In; China Merchant Sec, China Railway Out
- Pop Mart (9992 HK) and S.F. Holding (6936 HK) will replace China Railway Group (390 HK) and China Merchants Securities (6099 HK) in the iShares China Large-Cap (FXI) (FXI US).
- Passive trackers will need to buy between 0.4-0.6x ADV in the adds and sell between 0.5-1.3x ADV in the deletes. There are some small capping flows too.
- There are a lot of shorts in Pop Mart (9992 HK), China Railway Group Ltd H (390 HK) and China China Merchants Securities Co Ltd (H) (6099 HK).
Mayne Pharma (MYX AU): Twists and Turns as Cosette Chases a Get-Out-Of-Jail-Free Card
- Mayne Pharma (MYX AU) disclosed that Cosette served a scheme termination notice. Mayne maintains that a material adverse clause was not breached and considers the termination notice invalid.
- The Cosette MAC breach claims likely hinge on establishing that forecasts provided during due diligence are materially lower than the unaudited management accounts. Precedents do not favour Mayne.
- While the last close price (A$4.48) is below the undisturbed price (HK$5.41), there remains downside. My estimated deal break valuation range is A$3.26-A$4.00.
Henderson Land (12 HK): Large Passive Flow Coming Up as Shorts Cover
- Henderson Land Development (12 HK) will be added to a global sector index at the close on 20 June.
- Estimated passive buying in Henderson Land Development (12 HK) is 42m shares (US$131.5m; 7.5x ADV).
- The stock is up over the last 2 months as shorts have covered. Performance is in line with peers and positioning does not appear to be excessive.
US vs EU: Mutually Assured Destruction?
- Section 899 is generally understood to be about leverage and deterrence.
- It is unlikely to be fully implemented due to the potential harm it could cause to the US.
- There are concerns about what could happen if the EU challenges this approach or if it is partially intended as a method to raise revenue.
Lee Jae-Myung Becomes the New South Korean President – Four Investment Themes That Could Outperform
- Now that Lee Jae-Myung has become new South Korean President, the uncertainty revolving who will lead South Korea in the next five years is now over.
- In this insight, we discuss four investment themes (related to Lee Jae-Myung becoming the new South Korean President) that could outperform the market for the remainder of 2025.
- The four investment themes include Korean Holdcos/Quasi Holdcos, Korean Cultural Contents, Securities, and SK Group Companies.
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