In today’s briefing:
- Tsuruha (3391 JP)/Welcia (3141 JP): Index Promotion & Passive Flows Likely Priced In
- [Japan Activism/M&A] Thinking About the Partial Tender Trade Coming in Dec25
- Kioxia (285A JP) Placement: Limited Passive Buying & Big Runup Opens Up More Downside
- [Japan Offering] Bain Starting Kioxia (285A) Selldown; More to Come Soonish?
- Kioxia (285A JP): Bain’s US$2.1 Billion Selldown
- Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 3 Changes; US$4bn Trade
- [Japan Offering] Toyota Selling Down Toyoda Gosei (7282) In BIG Offering; 85d ADV, 125% of Max RWF
- UK Backloads A Tax Trap
- KOSPI Size Indices: Lots of Change as Averaging Starts
- National Storage REIT (NSR AU): Brookfield and GIC’s Attractive NBIO at A$2.86
Tsuruha (3391 JP)/Welcia (3141 JP): Index Promotion & Passive Flows Likely Priced In
- Tsuruha Holdings (3391 JP) acquires Welcia Holdings (3141 JP) in just over 4 weeks. Aeon Co Ltd (8267 JP)‘s tender offer for Tsuruha Holdings (3391 JP) could commence in December/January.
- The enlarged Tsuruha Holdings (3391 JP) could migrate upward in the MGlobal Index and that will bring in large passive flows. But there is one thing to watch out for.
- Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) have outperformed peers over the last 6 months and now trade at a higher forward PE.
[Japan Activism/M&A] Thinking About the Partial Tender Trade Coming in Dec25
- A month ago I wrote [Japan Activism/M&A] – Closing In On the Tsuruha Partial Tender – Likely Needs To Be Higher. Now we are <2wks to the deal.
- At the time, I said the Partial Tender Offer Price needed to be higher than the mooted ¥2,280. Tsuruha Holdings (3391 JP) shares are up 10.0% in that month.
- The three largest peers are -2.0% on average in that period. The average of 8 peers is +0.5%. I still expect the partial offer price needs to be near ¥3,100
Kioxia (285A JP) Placement: Limited Passive Buying & Big Runup Opens Up More Downside
- Bain Capital is looking to place 36m shares of Kioxia Holdings (285A JP) to overseas investors at a 7-9% discount to the last close of the stock.
- The stock has run up a lot since its IPO with the last leg driven by inclusion in a global index that took place at the close on Friday.
- Toshiba (6502 JP) had already been selling stock, and the Bain selling could take the stock lower, especially with limited passive buying in the short-term to support the big runup.
[Japan Offering] Bain Starting Kioxia (285A) Selldown; More to Come Soonish?
- After the close today, BCPE Pangea Cayman announced plans to sell a stake of 36mm shares of Kioxia Holdings (285A JP) in an overnight block. It trades tomorrow.
- This is 6.7% of shares out, 1.5x ADV. The discount is 7-9%. But it is 35% of Max Real World Float. And probably gets tradable shares to 34+%, not 35%.
- That means another offering is likely near-term. The lockup is only 30 days it appears. There is possibly a fair bit of long-dated index demand.
Kioxia (285A JP): Bain’s US$2.1 Billion Selldown
- Bloomberg reports that Bain Capital is selling 36.0 million Kioxia Holdings (285A JP) shares through a block trade. IFR reports that the offering is worth up to JPY330 billion (US$2.1 billion).
- The offering is unsurprising given the shares are up around 7x since the IPO. The offering is easily digestible as it represents 2.7 days of the average ADV since listing.
- Kioxia is anticipated to return to growth in 3Q, and the underlying margin is recovering from recent lows. However, Kioxia’s EV/EBITDA multiple is full compared to peers and historical ranges.
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 3 Changes; US$4bn Trade
- With the review period now complete, there could be 3 constituent changes for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
- Constituent changes along with capping changes will lead to a one-way turnover of 12.7% and in a round-trip trade of TWD 125bn (US$4bn).
- There are multiple stocks that have same-way or opposite flow from trackers of other Taiwan indices and present some interesting trading opportunities.
[Japan Offering] Toyota Selling Down Toyoda Gosei (7282) In BIG Offering; 85d ADV, 125% of Max RWF
- Last week, before the long weekend, Toyota Motor (7203 JP) and Sumitomo Mitsui Financial Group (8316 JP) announced a very big secondary selldown of shares in Toyoda Gosei (7282 JP).
- The selldown is 85x 3mo ADV, 27% of shares out. 125% of Max Real World Float. It’s a lot of stock at $750mm. One wonders where demand is.
- They also announced a big buyback, which is some of it, and there are index impacts, BUT this offering needs to find LOTS of new fundamental owners quickly.
UK Backloads A Tax Trap
- The UK’s fiscal hole was even smaller than we thought (£6bn), allowing the government to backload a fiscal tightening that is unsurprisingly focused on tax increases.
- Delaying prudence to an election year is implausible. There will be a substantial deficit in 2029-30, not the current budget surplus in the OBR forecasts based on existing policy.
- Labour is setting up a tax trap for Reform and the Conservatives to say how they’d avoid tax increases, similar to the backloaded spending cuts they myopically ignored in 2024.
KOSPI Size Indices: Lots of Change as Averaging Starts
- The review period for the March rebalance of the KOSPI Size Indices will commence on 1 December and will end on 28 February.
- Nearing the start of the averaging period, we forecast 34 migrating stocks. Among new listings, 1 stock could be added to LargeCap, 2 to MidCap and 2 to SmallCap.
- The upward migrations have outperformed the downward migrations by a lot over the last 3 months. The gap in returns versus the KOSPI2 INDEX is a lot smaller.
National Storage REIT (NSR AU): Brookfield and GIC’s Attractive NBIO at A$2.86
- National Storage REIT (NSR AU) has received a non-binding proposal from Brookfield and GIC at A$2.86 per unit, a 26.5% premium to the undisturbed price.
- The Board has granted exclusive due diligence until 7 December. A scheme offer would be conditional on FIRB, NZ OIO and ACCC approval.
- The offer is attractive as it represents an all-time high and implies a P/NTA of 1.11x. The short exclusivity period increases the odds of a binding proposal.
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