Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<div>The Stock Exchange of Thailand (SET) will announce the results of the semi-annual review of the <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-50-index" target="_blank" data-smartkarma-citation="entities:31493:1" rel="noopener">Stock Exchange of Thailand SET 50 Index (SET50 INDEX)</a> in mid-June and the changes will be effective after the close of trading on 30 June.</div><div>
The review period for market cap calculations runs from 1 March to 31 May, while the liquidity calculations run from 1 June 2020 to 31 May 2021.
We see three potential changes at the current time with an estimated one-way turnover for the rebalance at 2.19%.
Potential inclusions are <a href="https://www.smartkarma.com/entities/sri-trang-gloves-thailand-public-company-limited" target="_blank" data-smartkarma-citation="entities:29141:1" rel="noopener">Sri Trang Gloves (Thailand) Public Company Limited (STGT TB)</a>, <a href="https://www.smartkarma.com/entities/sri-trang-agro-industry-pcl" target="_blank" data-smartkarma-citation="entities:2759:1" rel="noopener">Sri Trang Agro Industry (STA TB)</a> and <a href="https://www.smartkarma.com/entities/irpc-pcl" target="_blank" data-smartkarma-citation="entities:19051:1" rel="noopener">IRPC PCL (IRPC TB)</a>.
Potential deletions are <a href="https://www.smartkarma.com/entities/vgi-pcl" target="_blank" data-smartkarma-citation="entities:12409:1" rel="noopener">VGI PCL (VGI TB)</a>, <a href="https://www.smartkarma.com/entities/com7-pcl" target="_blank" data-smartkarma-citation="entities:27411:1" rel="noopener">Com7 PCL (COM7 TB)</a> and <a href="https://www.smartkarma.com/entities/toa-paint-thailand-pcl" target="_blank" data-smartkarma-citation="entities:24235:1" rel="noopener">TOA Paint (Thailand) (TOA TB)</a>.
<a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a> will not completed six months of trading history by the end of the review period and will not be eligible for inclusion at the June rebalance.
There is a possibility that the <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-50-index" target="_blank" data-smartkarma-citation="entities:31493:1" rel="noopener">Stock Exchange of Thailand SET 50 Index (SET50 INDEX)</a> methodology is changed to make it a free float weighted market cap index from a full market cap index. That will see a lot of passive flow on some stocks that have a low free float.
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The Stock Exchange of Thailand (SET) will announce the results of the semi-annual review of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) in mid-June and the changes will be effective after the close of trading on 30 June.
The review period for market cap calculations runs from 1 March to 31 May, while the liquidity calculations run from 1 June 2020 to 31 May 2021.
We see three potential changes at the current time with an estimated one-way turnover for the rebalance at 2.19%.
Potential inclusions are Sri Trang Gloves (Thailand) Public Company Limited (STGT TB), Sri Trang Agro Industry (STA TB) and IRPC PCL (IRPC TB).
Potential deletions are VGI PCL (VGI TB), Com7 PCL (COM7 TB) and TOA Paint (Thailand) (TOA TB).
Kerry Express Thailand (KEX TB) will not completed six months of trading history by the end of the review period and will not be eligible for inclusion at the June rebalance.
There is a possibility that the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) methodology is changed to make it a free float weighted market cap index from a full market cap index. That will see a lot of passive flow on some stocks that have a low free float.


SET50 Index Rebalance Preview: Potentially Three Changes & Move to Free Float Weighting

Event-Driven

The SET50 Index is one of the very few indices that is still weighted by full market cap. Stocks need to have a minimum free float of 20% to be eligible for index inclusion but the free float is not used to determine the weight of the stock in the index.This had led to stocks with low free floats having an inordinately high weight in the index. The most recent case in point was <a href="https://www.smartkarma.com/entities/delta-electronics-thai-pcl" target="_blank" data-smartkarma-citation="entities:20912:1" rel="noopener">Delta Electronics Thai (DELTA TB)</a> - the stock was an inclusion in the SET50 index at the December review. DELTA is now the third largest stock in the index with a 6.07% weighting, even though the SET free float of the stock is only 22.35%. The stock has jumped 1000% over the last year.Media reports now indicate that there are changes brewing that could result in the SET revising the calculation methodology to more accurately determine the free float of stocks, and a change to the calculation methodology of the SET50 Index that would see it move from a full market cap weighted index to a free float market cap weighted index.In this Insight, we take a look at the stocks that would be affected by the changes and the impact of passive fund trading on the stocks.

The SET50 Index is one of the very few indices that is still weighted by full market cap. Stocks need to have a minimum free float of 20% to be eligible for index inclusion but the free float is not used to determine the weight of the stock in the index.This had led to stocks with low free floats having an inordinately high weight in the index. The most recent case in point was Delta Electronics Thai (DELTA TB) - the stock was an inclusion in the SET50 index at the December review. DELTA is now the third largest stock in the index with a 6.07% weighting, even though the SET free float of the stock is only 22.35%. The stock has jumped 1000% over the last year.Media reports now indicate that there are changes brewing that could result in the SET revising the calculation methodology to more accurately determine the free float of stocks, and a change to the calculation methodology of the SET50 Index that would see it move from a full market cap weighted index to a free float market cap weighted index.In this Insight, we take a look at the stocks that would be affected by the changes and the impact of passive fund trading on the stocks.

SET50 Index: Change to Free Float Weighting In the Works?

Asean-focused. Ex-Head of Thai Research

Athaporn Arayasantiparb, CFA

Asean (Thailand) Focused Independent Research

M Corp Review

M Corp is led by Athaporn Arayasantiparb who served as Head of Research for UOB and ANZ in Thailand and was an award-winning telecoms analyst at UBS in 2010 (AsiaMoney Thailand category) and Regional Strategist for DMG in Singapore. Prior to that, he also served as Kasikornbank credit analyst and scholar. He has a total work experience of 17 years, of which 14 were in research and 4 in research management roles. He started his career as an engineer for PTT and currently manages family investments. He holds an MBA from Stern (NYU) and CFA Charter since 2006. Apart from IPO Radar, which focuses on future listings, MCorp Review also provides six on-going thematic series ranked by frequency in descending order, namely: 1) Silicon Stories (technology) 2) Sathorn Series (financial services) 3) Thai-Coons (billionaire origin stories) 4) Reality Check (data-driven, investigative) 5) Thai Media Spotlight; and 6) Thai Macro Watch (global market drivers).

Equity Bottom-Up

Five interesting news/trends we detected recently include:<ul>
<li>
Pa Daeng sells 7 power plants to BAFS for Bt1.7bn but then turns around to buy two hotels worth Bt5-10bn. Looks like they are moving from the defensive to recovery theme.</li>
<li>
GPSC, PTT's power arm and acquirer of Glow, announces it will increase the Group's renewable footprint from 11% to 30% in 5 years at a cost of Bt70bn.</li>
<li>
JKN diversifies outside media and targets almost doubling since 2019 to Bt3bn in 2021. Hospitals, hair clinic, drinks....nothing seems off-limits.</li>
<li>
CAT Telecom is currently looking to lease towers from private operators, poising AIS against the allies (True Corp and DTAC). We believe the allies have a slight leg up in this face-off, with DTAC enjoying the highest 4% upside.</li>
<li>
Market movements. Call this a snippet within a snippet for lack of a better word. We summarize some of the smaller movements on insider selling and IPO implications.</li>
</ul>

Five interesting news/trends we detected recently include:

Pa Daeng sells 7 power plants to BAFS for Bt1.7bn but then turns around to buy two hotels worth Bt5-10bn. Looks like they are moving from the defensive to recovery theme.

GPSC, PTT's power arm and acquirer of Glow, announces it will increase the Group's renewable footprint from 11% to 30% in 5 years at a cost of Bt70bn.

JKN diversifies outside media and targets almost doubling since 2019 to Bt3bn in 2021. Hospitals, hair clinic, drinks....nothing seems off-limits.

CAT Telecom is currently looking to lease towers from private operators, poising AIS against the allies (True Corp and DTAC). We believe the allies have a slight leg up in this face-off, with DTAC enjoying the highest 4% upside.

Market movements. Call this a snippet within a snippet for lack of a better word. We summarize some of the smaller movements on insider selling and IPO implications.


Snippets #47: Pa Daeng's Trades, Battle for CAT's 5G Network

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Golden Land Property Development / Event-Driven

Golden Land Property Development (GOLD TB)

<div>
Almost a year ago to the day, shareholders of <a href="https://www.smartkarma.com/entities/16117" target="_blank" data-smartkarma-citation="entities:16117:1" rel="noopener">Frasers Property (Thailand) Pcl (FPT TB)</a> approved at its <a href="https://www.set.or.th/set/newsdetails.do?newsId=15571856117470&amp;language=en&amp;country=US" target="_blank" rel="noopener">EGM</a> the acquisition of <a href="https://www.smartkarma.com/entities/12764" target="_blank" data-smartkarma-citation="entities:12764:1" rel="noopener">Golden Land Prop Dvlp (GOLD TB)</a> by means of a voluntary tender offer (VTO) at Bt8.50/share.
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<div>
The VTO was initiated to consolidate the Sirivadhanabhakdi family's 80.2% holding into GOLD  - via <a href="https://www.smartkarma.com/entities/1670" target="_blank" data-smartkarma-citation="entities:1670:1" rel="noopener">Frasers Property Ltd (FPL SP)</a> and <a href="https://www.smartkarma.com/entities/18006" target="_blank" data-smartkarma-citation="entities:18006:1" rel="noopener">Univentures Public (UV TB)</a> - under one roof. The VTO was unconditional - FPT would take as many shares as it can get.
</div>
<div>
There was an intention to delist GOLD although it required FPT securing 90%+ in the VTO process, in the first step towards that delisting. At the close of the Offer, FPT held <a href="https://www.set.or.th/dat/news/201908/19081341.pdf" target="_blank" rel="noopener">94.5%</a>.  
An EGM was convened on the <a href="https://www.set.or.th/dat/news/201909/19092126.pdf" target="_blank" rel="noopener">20 Nov 2019</a> for GOLD shareholders to pass a resolution approving the delisting of GOLD shares by FPT at THB 8.55 (subject to downward adjustment due to dividends). The <a href="https://www.set.or.th/dat/news/201910/19100456.pdf" target="_blank" rel="noopener">IFA</a> considered the fair value of GOLD was within the range of HB 7.61-THB 9.57. All resolutions were <a href="https://www.set.or.th/dat/news/201911/19113768.pdf" target="_blank" rel="noopener">approved</a>. 
GOLD has now <a href="https://www.set.or.th/dat/news/202005/20054230.pdf" target="_blank" rel="noopener">announced</a> that FPT intends to make a tender offer to delist GOLD's shares at THB 8.50. The purchase of shares may commence this month, suggesting payment by July-end.
As always, more below the fold. 
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</div>


Almost a year ago to the day, shareholders of Frasers Property (Thailand) Pcl (FPT TB) approved at its EGM the acquisition of Golden Land Prop Dvlp (GOLD TB) by means of a voluntary tender offer (VTO) at Bt8.50/share.


The VTO was initiated to consolidate the Sirivadhanabhakdi family's 80.2% holding into GOLD  - via Frasers Property Ltd (FPL SP) and Univentures Public (UV TB) - under one roof. The VTO was unconditional - FPT would take as many shares as it can get.


There was an intention to delist GOLD although it required FPT securing 90%+ in the VTO process, in the first step towards that delisting. At the close of the Offer, FPT held 94.5%.  
An EGM was convened on the 20 Nov 2019 for GOLD shareholders to pass a resolution approving the delisting of GOLD shares by FPT at THB 8.55 (subject to downward adjustment due to dividends). The IFA considered the fair value of GOLD was within the range of HB 7.61-THB 9.57. All resolutions were approved. 
GOLD has now announced that FPT intends to make a tender offer to delist GOLD's shares at THB 8.50. The purchase of shares may commence this month, suggesting payment by July-end.
As always, more below the fold. 





With the exception of Bumrungrad (only a potential deal), the deals mentioned in this review are much smaller than those of Part 1, but it shows that many minor tycoons are just as keen to prove themselves as the top two honchos.<ul>
<li>
Healthcare. If BDMS succeeds in buying Bumrungrad, it will rival some of Thailand's largest deals in history and eliminate its largest competitor in Thai healthcare.</li>
<li>
Going global. The takeover of NH Hotels catapulted Minor into the big leagues amongst global hotel chains. A decade ago, the takeover of MW Brands also made Thai Union the world's biggest seafood company.</li>
<li>
Telecoms. Talk about pure genius. Telenor acquired DTAC for only Bt30bn (US$940m). Before the 3G bidding, they paid themselves dividends worth more than that in one fell swoop.</li>
<li>
Banks. TMB's takeover of Thanachart is half the size of the Bank Ayudhya deal, but don't forget this is the end game for what was really five banks prior to the crisis of 1997!</li>
<li>
Industrial estates. Today, WHA is worth almost a billion dollar and the founder is the 4th richest woman in Thailand, but before they bought Hemraj, they were industry outsiders mainly known for warehouses.</li>
</ul>

With the exception of Bumrungrad (only a potential deal), the deals mentioned in this review are much smaller than those of Part 1, but it shows that many minor tycoons are just as keen to prove themselves as the top two honchos.

Healthcare. If BDMS succeeds in buying Bumrungrad, it will rival some of Thailand's largest deals in history and eliminate its largest competitor in Thai healthcare.

Going global. The takeover of NH Hotels catapulted Minor into the big leagues amongst global hotel chains. A decade ago, the takeover of MW Brands also made Thai Union the world's biggest seafood company.

Telecoms. Talk about pure genius. Telenor acquired DTAC for only Bt30bn (US$940m). Before the 3G bidding, they paid themselves dividends worth more than that in one fell swoop.

Banks. TMB's takeover of Thanachart is half the size of the Bank Ayudhya deal, but don't forget this is the end game for what was really five banks prior to the crisis of 1997!

Industrial estates. Today, WHA is worth almost a billion dollar and the founder is the 4th richest woman in Thailand, but before they bought Hemraj, they were industry outsiders mainly known for warehouses.


Thai M&A (Part 2): Transforming Deals in Other Sectors

Thailand

Global Power Synergy Public Company Limited is a utility company that primarily engages in the production and distribution of electricity, steam, and industrial water to government and industrial customers. The company also focuses on developing sustainable businesses through renewable energy resources and cutting-edge technologies, including energy storage systems and batteries for electric vehicles. It was founded in 2013 and is headquartered in Bangkok, Thailand.

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Global Power Synergy (GPSC TB)

SET50 Index Rebalance Preview: Potentially Three Changes & Move to Free Float Weighting

There could be 3 changes to the SET50 at the June review with STGT, STA & IRPC joining the index at the expense of VGI, TOA & COM7. The methodology...

Brian Freitas

SET50 Index: Change to Free Float Weighting In the Works?

There is a strong possibility that the SET revises the calculation methodology to more accurately determine the free float of stocks, and changes...

Brian Freitas

Snippets #47: Pa Daeng's Trades, Battle for CAT's 5G Network

Country Group gets busy: Selling power, buying hotels, issuing warrants, while AIS and the other two telcos duke it out to supply towers to CAT's...

Athaporn Arayasantiparb, CFA

Golden Land (GOLD TB): Delisting Offer

Almost a year ago to the day, shareholders of Frasers Property (Thailand) Pcl (FPT TB) approved at its EGM the acquisition of Golden Land Prop...

David Blennerhassett

Thai M&A (Part 2): Transforming Deals in Other Sectors

With the exception of Bumrungrad (only a potential deal), the deals mentioned in this review are much smaller than those of Part 1, but it shows...

Athaporn Arayasantiparb, CFA

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