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Tokyo Metro’s IPO seeks to raise more than US$2 bil
The initial public offering (IPO) of Tokyo Metro Co, one of two subway operators based in Japan’s capital, is seeking to raise around JPY319.6 billion ($2.81 billion), boosting the country’s market for new listings.
The company’s IPO would be the biggest in Japan since SoftBank Corp’s US$21 billion listing in December 2018, according to Bloomberg. Tokyo Metro, whose IPO could value it at about JPY639.1 billion, plans to list on the Tokyo Stock Exchange on Oct 23, it said in a filing to Japan’s Ministry of Finance.
The offering is for 290.5 million shares at an indicative price of JPY1,100 each. Tokyo Metro expects to set the IPO’s price range on Oct 7 and to price the shares on Oct 15. The domestic tranche of the offering makes up 80% of the deal, while the rest will go to international investors.
Tokyo Metro forecasts a dividend of JPY40 per share for the fiscal year ending March 2025, implying a yield of 3.6% based on the indicative price.
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The Ministry of Finance now holds about 53.42% of the shares, and the Tokyo Metropolitan Government holds 46.58%. Legislation requires the national government to sell shares in Tokyo Metro by March 2028 to repay debt sold in the aftermath of the 2011 quake and tsunami.
IPOs in Japan have raised US$1.5 billion this year through Sept 20, Bloomberg data show. Tokyo Metro’s listing, together with other deals, could lift that figure closer to the US$4.4 billion raised in all of 2023.
Tokyo Metro, which was established in 2004, operates nine train lines and carries, on average, about 6.52 million passengers per day.
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Nomura Securities Co, Mizuho Securities Co. and Goldman Sachs Japan Co are joint global coordinators for Tokyo Metro’s IPO. — Bloomberg
MMC Port is said to weigh biggest Malaysia IPO in over a decade
MMC Port Holdings is considering an initial public offering (IPO) in Kuala Lumpur that could raise as much as MYR7 billion ($2.13 billion), people familiar with the matter said, making it the biggest in Malaysia in over a decade.
The port operator, owned by Malaysian tycoon Syed Mokhtar Al-Bukhary, is working with financial advisers on plans for a first-time share sale that may take place as soon as the second half of 2025, the people said, asking not to be identified as the process is private. MMC could be valued at MYR24 billion to MYR27 billion, they said.
Deliberations are ongoing, and details such as size, value and timing could change, the people said. MMC Port didn’t respond to requests for comment.
The company, part of MMC Corp, runs seven ports along the Straits of Malacca, one of the world’s busiest shipping lanes, and is the biggest such operator in the nation, according to its website. It also operates three cruise terminals.
MMC had looked into listing the port unit in 2018 and 2020. Global Infrastructure Partners had also been exploring an acquisition of up to 49% of the port operator but shelved the plan earlier this year on valuation concerns. — Bloomberg
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Frasers Hospitality Trust’s tax rate rises to 37.5% in Australia
Following the share swap between InterBev Investment (IBIL), a unit of Thai Beverage Y92 Public Company (ThaiBev) and TCC Assets, completed in September, TCC Assets owns 86.89% of Frasers Property TQ5 (FPL). As a result, TCC Assets owns more than 10% of Frasers Hospitality Trust ACV Acv (FHT), Frasers Hospitality REIT, and FHT Australia Trust (FHTAT).
In Australia, under a managed investment trust (MIT), Singapore REITs (S-REITs) benefit from a lower tax rate of 10%. To qualify as a withholding MIT, several conditions must be met. Among other requirements, no individual, who is not a resident of Australia, can directly or indirectly hold, control or have the right to acquire an interest of 10.0% or more in FH-REIT (and therefore FHTAT) at any time during the income year.
Following the completion of the share swap on Sept 20, FHTAT would not qualify as a withholding MIT for FY2024 (for the 12 months to Sept 30). FHTAT will not enjoy this preferential Australian withholding tax rate, and the distribution from FHTAT for FY2024 would be subject to an effective Australian tax rate of 37.5%. The reduction in FHT’s distributable income for FY2024 is estimated to be approximately $1.3 million. Based on FY2023’s distributable income, this represents a 2.5% reduction.
“The loss of a status of MIT structure is certainly a bummer for the REIT which is just at the cusps of a recovery after the Covid-19 crisis,” says a note by DBS Group Research. FHT’s Australian properties are Frasers Suites Sydney, Novotel Melbourne on Collins and Novotel Sydney Darling Square. The report suggests that the tax impact could cause a 15% drop in DPU in FY2025. “While certainly a deep cut, we await more updates from management post FY2024 results in early November 2024. Stock trades at close to 0.6 times P/B, one of the cheapest among the hospitality REITs,” the report says. — The Edge Singapore
More long-term push needed
FSSA China Growth’s portfolio manager Martin Lau saw the recent round of stimulus as a positive surprise, as it signals a serious intent to meet economic growth targets, with additional monetary easing announced and indications for more fiscal measures to come. He believes this should help encourage consumer spending while cushioning structurally weaker sectors like property.
Lau’s long-term holdings include dairy producer China Mengniu Dairy and sports equipment company Anta Sports, despite the widespread weakness across consumer categories over the past two years. He continues to avoid most state-owned enterprises (SOEs) and cyclical companies with persistently low returns and weak pricing power.
Similarly, JP Morgan China’s portfolio managers Rebecca Jiang and Howard Wang also continue to avoid big SOEs. While the managers think the new policy package marks a clear shift from the previous supply-side recovery model to one focusing on boosting consumer spending and stabilising the real estate sector, they have not made major portfolio changes, maintaining their bias towards technology, consumption, healthcare and new energy-related companies.
Schroder’s portfolio manager Louisa Lo acknowledges that recent policy changes have “ excited “ markets. However, she recognises that the sustainability of market recovery depends on actual policy implementation and its impact on improving macro fundamentals. Although Lo notes that the policy stimulus has helped improve the outlook for many portfolio holdings, she has not made significant portfolio changes.
Unlike the fund managers at FSSA, JP Morgan China and Schroders, Matthews China’s Andrew Mattock, Winnie Chwang and Sherwood Zhang are willing to deviate from the benchmark and load up on sectors where they see opportunities, including that in consumers, industrials, and real estate in recent years, Morningstar points out.
The fund managers were encouraged by the latest initiative that made central government-backed loans fully available for local entities to purchase unsold housing inventory, seeing it as a way to alleviate the oversupply problem.
The managers at Matthews China also expect financials and consumer discretionary to be near-term beneficiaries, given the cut in reserve requirement ratio, mortgage rate, and stock market-boosting measures. Overall, the team was comfortable with its existing portfolio positioning going into the stimulus push and remained watchful of its impact on reviving consumer demand. — Cherlyn Yeoh
Mixed sentiments on China equities following revival efforts: Morningstar report
Despite Beijing’s series of surprise stimulus measures, fund managers remain cautious about Chinese equities, with most keeping their investment portfolios unchanged, according to a Morningstar report.
In a report released on Oct 8, Morningstar analysts Claire Liang, Sabrina Du and Sam Hui note that while market participants have welcomed China’s latest initiatives, fund managers have had varied perspectives, with some viewing this as a clear policy shift while others await future developments.
However, most fund managers have stayed true to their investment portfolios and have yet to act on these changes, the Morningstar analysts state.
In late September, China launched a series of stimulus measures, including extensive interest rate cuts, reserve requirement ratios and mortgage rates, alongside the central government promising additional fiscal support to stabilise the property market.
This sent China equities on a “blistering rally”, the analysts highlight. The Morningstar China Target Market Exposure Index, which measures the performance of large and mid-cap Chinese companies listed in Hong Kong and the US, was up 17.29% (in US dollars) for the week of Sept 27, representing its largest weekly gain since 2009.
The Hong Kong stock market has also seen record daily transactions since the stimulus announcements, with the Hong Kong stock exchange turnover reaching HK$500 billion ($83.89 billion) on Sept 30, led by Chinese stocks. In contrast, Morningstar analysts note that the average daily turnover for the first eight months of 2024 was a mere HK$106.8 billion.
On Sept 30, the combined turnover on the Shanghai and Shenzhen stock exchange grew to a record RMB 2.6 trillion ($480.13 billion), more than triple the daily average of RMB 793 billion, the Morningstar analysts add.
Morningstar director of equity research Asia Lorraine Tan says China markets are “no longer cheap” at the current juncture. She notes that over the past two weeks, Morningstar’s coverage universe has moved from a discount of 21% of its fair value estimate to just 4%.
“Because China had been underweight by most, the impact of the buying has led to huge price moves given limited selling. At this stage, we believe some companies have more than factored in any potential positives. And if there is any disappointment or if good policy news tapers off, we think we could see some steep retracements,” she says in an Oct 8 commentary.
While Tan thinks there are still buying opportunities, Morningstar would be highly selective as the risk/reward ratio has risen. The firm sees attractive discounts in the consumer cyclical, consumer defensives and communication services sectors, preferring higher quality names with attractive upsides, such as internet giant Tencent, property developer CR Land and fast food operator Yum China. — Cherlyn Yeoh
