In today’s briefing:
- Trend Micro (4704) Up For Sale? Would Be a HUGE Buyout But How Huge? And Who?
- China A50 ETFs Rebalance Preview: Three Changes in March
- NIFTY MIDCAP150 Index Rebalance Preview: 15 Potential Changes in March
- FXI Rebalance Preview: GTJA, ZTE In; CTG, China Coal Out
- CATL A/H Listing – IPO Filing Updates
- Kaonavi (4435 JP) – Small HR Software Co Gets 121% Premium LBO from Carlyle
- Trend Micro (4704 JP): Rumoured Buyout Interest Starting to Take Shape
- Daiichi Sankyo Placement – Momentum Is Weak but the Deal Is Small
- Takasago Thermal Engineering Offering (1969) – Small Start to Larger Unwind
- Piolax (5988 JP) – Murakami-San Gets BIG Buyback Tender Offer
Trend Micro (4704) Up For Sale? Would Be a HUGE Buyout But How Huge? And Who?
- A Reuters article overnight says Trend Micro might be up for sale. This caused the ADRs to jump 10% overnight. The remaining co-founders are 65 and 70 this year.
- The stock has effectively gone sideways the last few years as Value Act has been activisting. Now one has to exercise one’s imagination to think about a possible sale price.
- On a DCF basis, a PE fund couldn’t reasonably do this. Multiples are too high. That means a strategic buyer would be more likely. But Who? Why? And How much?
China A50 ETFs Rebalance Preview: Three Changes in March
- With just over a week left to review cutoff, there could be three changes for the iShares A50 China (2823 HK)/ CSOP China A50 (HKD) (2822 HK) ETFs in March.
- Guotai Junan Securities, Cambricon Technologies and SAIC Motor could replace CGN Power, Luzhou Laojiao and Inner Mongolia Yili Industrial Group.
- Guotai Junan Securities (2611 HK) is expected to be added to the iShares China Large-Cap (FXI) (FXI US) in March, so there should be inflows for the A-shares and H-shares.
NIFTY MIDCAP150 Index Rebalance Preview: 15 Potential Changes in March
- With the review period now complete, there could be 15 changes for the NIFTY Midcap 150 Index at the March rebalance.
- Estimated one-way turnover is 8.3% resulting in a one-way trade of INR 7.65bn (US$88m). With over US$40bn tracking the index actively, the impact on the stocks will be much larger.
- The outright adds have outperformed the forecast deletes over the last 6 months, but there has been underperformance this calendar year.
FXI Rebalance Preview: GTJA, ZTE In; CTG, China Coal Out
- Nearing the end of the review period, we expect two changes for the iShares China Large-Cap (FXI) (FXI US) ETF in March.
- Guotai Junan Securities (2611 HK) is a high probability add while China Tourism Group Duty Free (1880 HK) is a high probability delete.
- ZTE Corp H (763 HK) is a potential inclusion currently and could replace China Coal Energy Co H (1898 HK) as long as it stays in inclusion zone.
CATL A/H Listing – IPO Filing Updates
- Contemporary Amperex Technology (CATL), one of the world’s largest battery solutions providers, aims to raise at least US$5bn in its H-share listing.
- CATL is the global leader in new energy vehicle battery solutions, in China and globally, as per SNE Research. Its A-shares have been listed since 2018.
- We have looked at the company’s past performance in our earlier notes. In this note, we talk about updates from its most recent filings.
Kaonavi (4435 JP) – Small HR Software Co Gets 121% Premium LBO from Carlyle
- Another Japanese smallcap takeover at a huge premium. Must be a day ending in “y.” It is a thing recently.
- Interestingly, this is NOT an MBO. It is an LBO. Carlyle is buying out Kaonavi Inc (4435 JP) at ¥4,380/share which is 19x book and 89x EBIT. Nice price.
- I expect this gets done easily because the co-CEO with 28.7% and Recruit with 20.6% are putting in. There’s another easy 9.7%. One more holder and this is done.
Trend Micro (4704 JP): Rumoured Buyout Interest Starting to Take Shape
- Trend Micro Inc. (4704 JP) shares have hit their daily trade limit, following a Reuters report that Bain, Advent, KKR, and EQT AB are potential bidders.
- The lack of a controlling shareholder and increased cybersecurity M&A activity support the buyout interest. In 4Q2024, cybersecurity M&A reached the highest quarterly volume in the past three years.
- The valuation is undemanding. If it trades in line with its median peers’ CY2024 EV/Sales and EV/EBITDA multiple, it implies JPY11,500-15,000, a 6%- 38% premium to the current price.
Daiichi Sankyo Placement – Momentum Is Weak but the Deal Is Small
- Mizuho Bank is looking to raise US$151m from selling some of its stake in Daiichi Sankyo (4568 JP).
- While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Takasago Thermal Engineering Offering (1969) – Small Start to Larger Unwind
- Takasago Thermal Engineering (1969 JP) reported Q3 earnings today. Revs up tiny yoy over 9m. OP +13%, Net +18.2%. Progression a bit behind guidance for full-year (but guidance unchanged)
- Orders received and carried forward a record high. Margins up. DX/etc investments up. Crossholdings down but still HUGE outbound/in-bound. Goal is to shrink from 20% of net assets to 15%.
- Today the company announced some crossholders would sell ~5% of shares out, and the company would launch a buyback for half that. Meh…
Piolax (5988 JP) – Murakami-San Gets BIG Buyback Tender Offer
- Piolax Inc (5988 JP) is a small, low ROE, over-capitalised autoparts maker mostly making low-moat parts, but they sell A LOT of them. About a gajillion.
- They started 100% div payout ratios 3yrs ago, and last year started a new MTMP to pay out 100% and then buy back a lot of stock. Murakami bought 10%.
- In November they launched a big buyback. Now they are launching a 23.78% Tender Offer Buyback where Murakami-san will sell. Big accretion on forward expectations downgrades. Hmmm… 🤨
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