In today’s briefing:
- [Japan M&A] Toyota Inds (6201) Proposed Takeover – It Looks Bad, and It’s Worse Than It Looks
- TIP Customized Taiwan Select High Dividend Index Rebalance: 22 Changes as Expected
- [Japan Activism] Murakami Owns ~42% and Company Announces 31.3% Buyback
- HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$8.1bn of Flows Post Capping (June 2025)
- Henderson Land (12 HK): Large Passive Flow Coming Up as Shorts Cover
- FXI Rebalance: Pop Mart, SF Holding In; China Merchant Sec, China Railway Out
- Virgin Australia IPO – Not Terribly Exciting, After Significant Items Adjustment
- MBK Partners Plans to Launch a Tender Offer for Makino Milling Machine
- Tam Jai (2217 HK): Anxiety Creeps in Ahead of the Scheme Document
- Wistron GDR Offering – Well Flagged US$922m Offering, Discount Slightly Wider than Recent Deals
[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.
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.
[Japan Activism] Murakami Owns ~42% and Company Announces 31.3% Buyback
- With earnings today (which beat guidance), Mitsui Matsushima (1518 JP) announced upbeat guidance for next year, a very large dividend hike from ¥130/share to ¥230/share, and a Very Large Buyback.
- The buyback is ¥20bn (vs ¥47bn market cap) or 3.5mm shares (31.3%). It starts 2 June. Astute Murakami trackers may recognise the potential pattern here.
- If the company buys back all 3.5mm shares at just below book, EPS of ¥756 = 12.9% ROE and PER of 7.8x. Even up 30% from here that isn’t super-rich.
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.
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.
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).
Virgin Australia IPO – Not Terribly Exciting, After Significant Items Adjustment
- Bain Capital is looking to raise around US$440m via selling some of its stake in Virgin Australia Holdings (VAH AU).
- Virgin Australia is the second largest airline group operating in the Australian aviation market, with an average 32% domestic RPT capacity market share in CY24.
- In this note, we look at the company’s past performance and provide our thoughts on valuations.
MBK Partners Plans to Launch a Tender Offer for Makino Milling Machine
- MBK Partners plans to launch a tender offer for Makino Milling Machine (6135 JP) at 11,751 yen per share by early December to take over the controlling ownership.
- The key long-term investment case for Makino is that it is one of the best companies in the world for making advanced machine tools that are increasingly becoming more sophisticated.
- One could make the argument that this may not the final offer and some investors may require slightly higher prices in order to make the deal final.
Tam Jai (2217 HK): Anxiety Creeps in Ahead of the Scheme Document
- The spread to TORIDOLL Holdings Corporation (3397 JP)’s HK$1.58 offer for Tam Jai International (2217 HK) has risen to 9.7% ahead of the scheme document’s release.
- Several readers have asked whether the Tam Jai offer will mirror the Goldlion and Soundwill deal break. The schemes share similarities but are also different in several ways.
- The scheme’s vote risk has undoubtedly increased partly due to the recent 2025 results and deal breaks. This situation warrants a safety-first approach.
Wistron GDR Offering – Well Flagged US$922m Offering, Discount Slightly Wider than Recent Deals
- Wistron Corp (3231 TT) is looking to raise up to US$922m in its global depository receipts (GDRs) offering.
- Similar to previous GDR listings, the firm has undergone a long drawn out process prior to launching the deal, having to jump through a number of board/shareholder/regulatory approval loops.
- In this note, we run the deal through our ECM framework and comment on deal dynamics.
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