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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

China Longyuan Power Group / Event-Driven

<p>Earlier today, S&amp;P Dow Jones announced that all the proposals of the latest market consultation would be implemented at the close of trading on 16 April to reduce constituent concentration, ease liquidity limitations, and improve index replication further than would have been achieved from the result of the prior market consultation.</p><p>We expect there will be 37 additions to the index taking the number of index constituents up to 67. This number will increase over the next few rebalances as the target is to get up to at least 100 constituent stocks.</p><p>With index weight dependent on free float market cap and turnover, plus capping of index weight dependent on exposure scores, this is going to be a large rebalance. We expect a one-way turnover of 48.1% with our expected changes.</p><p>Stocks that could see passive buying (sorted in terms of days of ADV) are <a href="https://www.smartkarma.com/entities/drax-group-plc" target="_blank" data-smartkarma-citation="entities:21911:1" rel="noopener">Drax Group PLC (DRX LN)</a>, <a href="https://www.smartkarma.com/entities/enel-americas-sa-c3a67f8a-ad13-45ff-a676-cbc513b8c458" target="_blank" data-smartkarma-citation="entities:25965:1" rel="noopener">Enel Americas Sa (ENIA US)</a>, <a href="https://www.smartkarma.com/entities/fortum-oyj" target="_blank" data-smartkarma-citation="entities:21762:1" rel="noopener">Fortum OYJ (FUM1V FH)</a>, <a href="https://www.smartkarma.com/entities/erg-spa" target="_blank" data-smartkarma-citation="entities:21186:1" rel="noopener">ERG SpA (ERG IM)</a>, <a href="https://www.smartkarma.com/entities/terna-rete-elettrica-nazionale" target="_blank" data-smartkarma-citation="entities:21232:1" rel="noopener">Terna Rete Elettrica Nazionale (TRN IM)</a>, <a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power Group Corp (916 HK)</a>, <a href="https://www.smartkarma.com/entities/nordex-se" target="_blank" data-smartkarma-citation="entities:21682:1" rel="noopener">Nordex SE (NDX1 GR)</a>, <a href="https://www.smartkarma.com/entities/acciona-sa" target="_blank" data-smartkarma-citation="entities:21248:1" rel="noopener">Acciona SA (ANA SM)</a>, <a href="https://www.smartkarma.com/entities/avista-corp" target="_blank" data-smartkarma-citation="entities:17178:1" rel="noopener">Avista Corp (AVA US)</a> and <a href="https://www.smartkarma.com/entities/idacorp-inc" target="_blank" data-smartkarma-citation="entities:15190:1" rel="noopener">Idacorp Inc (IDA US)</a>.</p><p>Stocks that could see passive selling (sorted in terms of days of ADV) are <a href="https://www.smartkarma.com/entities/meridian-ener-partly-paid-sh" target="_blank" data-smartkarma-citation="entities:4327:1" rel="noopener">Meridian Energy (MEL NZ)</a>, <a href="https://www.smartkarma.com/entities/contact-energy-ltd" target="_blank" data-smartkarma-citation="entities:13136:1" rel="noopener">Contact Energy (CEN NZ)</a>, <a href="https://www.smartkarma.com/entities/verbund-ag" target="_blank" data-smartkarma-citation="entities:22563:1" rel="noopener">Verbund AG (VER AV)</a>, <a href="https://www.smartkarma.com/entities/edp-renovaveis-sa" target="_blank" data-smartkarma-citation="entities:21363:1" rel="noopener">EDP Renovaveis SA (EDPR PL)</a>, <a href="https://www.smartkarma.com/entities/scatec-solar-asa" target="_blank" data-smartkarma-citation="entities:25120:1" rel="noopener">Scatec Solar ASA (SSO NO)</a>, <a href="https://www.smartkarma.com/entities/innergex-renewable-energy-inc" target="_blank" data-smartkarma-citation="entities:25479:1" rel="noopener">Innergex Renewable Energy (INE CN)</a>, <a href="https://www.smartkarma.com/entities/boralex-inc" target="_blank" data-smartkarma-citation="entities:25478:1" rel="noopener">Boralex Inc (BLX CN)</a> and <a href="https://www.smartkarma.com/entities/siemens-gamesa-renewable-energy-s-a" target="_blank" data-smartkarma-citation="entities:21270:1" rel="noopener">Siemens Gamesa Renewable Energy, S.A. (SGRE SM)</a>.</p><p>Among existing constituents, there will be passive inflows on <a href="https://www.smartkarma.com/entities/orsted-a-s" target="_blank" data-smartkarma-citation="entities:24765:1" rel="noopener">Orsted A/S (ORSTED DC)</a>, <a href="https://www.smartkarma.com/entities/vestas-wind-systems-a-s" target="_blank" data-smartkarma-citation="entities:22524:1" rel="noopener">Vestas Wind Systems A/S (VWS DC)</a>, <a href="https://www.smartkarma.com/entities/solaredge-technologies-inc" target="_blank" data-smartkarma-citation="entities:27981:1" rel="noopener">SolarEdge Technologies Inc (SEDG US)</a>, <a href="https://www.smartkarma.com/entities/sunrun-inc" target="_blank" data-smartkarma-citation="entities:19726:1" rel="noopener">Sunrun Inc (RUN US)</a> and <a href="https://www.smartkarma.com/entities/enphase-energy-inc" target="_blank" data-smartkarma-citation="entities:8872:1" rel="noopener">Enphase Energy (ENPH US)</a>. </p>

Earlier today, S&amp;P Dow Jones announced that all the proposals of the latest market consultation would be implemented at the close of trading on 16 April to reduce constituent concentration, ease liquidity limitations, and improve index replication further than would have been achieved from the result of the prior market consultation.We expect there will be 37 additions to the index taking the number of index constituents up to 67. This number will increase over the next few rebalances as the target is to get up to at least 100 constituent stocks.With index weight dependent on free float market cap and turnover, plus capping of index weight dependent on exposure scores, this is going to be a large rebalance. We expect a one-way turnover of 48.1% with our expected changes.Stocks that could see passive buying (sorted in terms of days of ADV) are Drax Group PLC (DRX LN), Enel Americas Sa (ENIA US), Fortum OYJ (FUM1V FH), ERG SpA (ERG IM), Terna Rete Elettrica Nazionale (TRN IM), China Longyuan Power Group Corp (916 HK), Nordex SE (NDX1 GR), Acciona SA (ANA SM), Avista Corp (AVA US) and Idacorp Inc (IDA US).Stocks that could see passive selling (sorted in terms of days of ADV) are Meridian Energy (MEL NZ), Contact Energy (CEN NZ), Verbund AG (VER AV), EDP Renovaveis SA (EDPR PL), Scatec Solar ASA (SSO NO), Innergex Renewable Energy (INE CN), Boralex Inc (BLX CN) and Siemens Gamesa Renewable Energy, S.A. (SGRE SM).Among existing constituents, there will be passive inflows on Orsted A/S (ORSTED DC), Vestas Wind Systems A/S (VWS DC), SolarEdge Technologies Inc (SEDG US), Sunrun Inc (RUN US) and Enphase Energy (ENPH US). 

Global Clean Energy Index: All Proposals to Be Implemented; 48% One-Way Turnover

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Longyuan Power Group / Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power Group Corp (916 HK)</a> achieved an impressive 39.4% YoY growth in wind power generation in 2M21 on a low base a year ago. However, even as we compared 2M21 generation with 2M19, the CAGR still reach a resilient 18.4%. This suggested that the low base effect is not a key reason for the surge in generation, but instead, the underlying demand is resilient. </p><p>Longyuan has taken a beating on the back of the concerns on future tariff, on-grid capacity and profitability if the proposal in the consultation paper released by the National Energy Association is fully implemented. However, with its valuation now back to the end-2020 level (10x PER), we see a lot of uncertainties have been discounted. With a 34% plunge in share price in just 5 trading days and 49% from its peak, the market has already turned from overly bullish to overly bearish, in our view. </p>

China Longyuan Power Group Corp (916 HK) achieved an impressive 39.4% YoY growth in wind power generation in 2M21 on a low base a year ago. However, even as we compared 2M21 generation with 2M19, the CAGR still reach a resilient 18.4%. This suggested that the low base effect is not a key reason for the surge in generation, but instead, the underlying demand is resilient. Longyuan has taken a beating on the back of the concerns on future tariff, on-grid capacity and profitability if the proposal in the consultation paper released by the National Energy Association is fully implemented. However, with its valuation now back to the end-2020 level (10x PER), we see a lot of uncertainties have been discounted. With a 34% plunge in share price in just 5 trading days and 49% from its peak, the market has already turned from overly bullish to overly bearish, in our view. 

China Longyuan (916 HK): Things Aren't that Bad

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Beijing Jingneng Clean Energy / Event-Driven

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<p>Subsequent to a low-turnout at the H-share class meeting last Friday (the 19th February), <a href="https://www.smartkarma.com/entities/beijing-jingneng-clean-energy-co-ltd" target="_blank" data-smartkarma-citation="entities:16316:1" rel="noopener">Beijing Jingneng Clean Energy (579 HK)</a>'s shares declined 6.7% on Monday, followed by 6.3% yesterday, and 3.1% today. All on above-average volume. </p>
<p>Jingneng is now trading at a 25% gross spread to the voluntary conditional offer price of HK$2.70/share. Quite remarkable given deal completion is binary, and there is little in the way of clarity to indicate deal failure is more certain.</p>
<p>Jingneng's undisturbed price back in early July 2020 when a possible Offer was first <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0706/2020070602025.pdf" target="_blank" rel="noopener">floated</a>, was HK$1.58. However, the power mix that Jingneng supplies has sector-by-sector average gains - some considerable - since the deal.</p>
<p>Jingneng has overshot to the downside, and is a buy outright or against a basket of peers.</p>
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<div>More below the fold.</div>
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Subsequent to a low-turnout at the H-share class meeting last Friday (the 19th February), Beijing Jingneng Clean Energy (579 HK)'s shares declined 6.7% on Monday, followed by 6.3% yesterday, and 3.1% today. All on above-average volume. 
Jingneng is now trading at a 25% gross spread to the voluntary conditional offer price of HK$2.70/share. Quite remarkable given deal completion is binary, and there is little in the way of clarity to indicate deal failure is more certain.
Jingneng's undisturbed price back in early July 2020 when a possible Offer was first floated, was HK$1.58. However, the power mix that Jingneng supplies has sector-by-sector average gains - some considerable - since the deal.
Jingneng has overshot to the downside, and is a buy outright or against a basket of peers.






More below the fold.






<p><a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power Group Corp (916 HK)</a> has a very strong turnout in Jan as its overall power generation was up by 47.5% YoY, with wind generation (+50.8%) being the most important driver. We do not think that a low base and distortion from timing of the Chinese New Year are the reasons for the impressive growth, and we see underlying momentum very solid. While Jan is a record-breaking month for generation, we believe the peak generation in this year is yet to come.</p><p>Longyuan has an attractive long term story, supported by factors including: 1.) beneficiary of government support, 2.) access to the A-share market, 3.) acquisition of Pingzhuang renewable assets, and 4.) increased potential from parent injection. Share price has rallied 59.5% YTD but valuations are still not too stretched. We believe any pull-back is opportunity for taking position in this encouraging long-term story of renewable energy development. </p>

China Longyuan Power Group Corp (916 HK) has a very strong turnout in Jan as its overall power generation was up by 47.5% YoY, with wind generation (+50.8%) being the most important driver. We do not think that a low base and distortion from timing of the Chinese New Year are the reasons for the impressive growth, and we see underlying momentum very solid. While Jan is a record-breaking month for generation, we believe the peak generation in this year is yet to come.Longyuan has an attractive long term story, supported by factors including: 1.) beneficiary of government support, 2.) access to the A-share market, 3.) acquisition of Pingzhuang renewable assets, and 4.) increased potential from parent injection. Share price has rallied 59.5% YTD but valuations are still not too stretched. We believe any pull-back is opportunity for taking position in this encouraging long-term story of renewable energy development. 

China Longyuan (916 HK): Record-Breaking Jan, and Strategically Positioned for the Long Term

China Everbright Environment Group / Equity Bottom-Up

China Everbright Environment Group (257 HK)

<p>We believe there will be more positive policy measures to support the waste treatment industry, especially after China's "Two Meetings" to be held in Mar and <a href="https://www.smartkarma.com/entities/china-everbright-international-limited" target="_blank" data-smartkarma-citation="entities:15946:1" rel="noopener">China Everbright Environment (257 HK)</a> (CEE) is in a good position to benefit. Although its share price has increased by 12.9% YTD, with an undemanding PER of 4.1x for FY21F, there is still more room to go.</p><p>CEE's project momentum has stayed encouraging, with over Rmb1.5bn of new waste and water treatment projects secured over the last few months. The recent grant of approval to its subsidiary <a href="https://www.smartkarma.com/entities/china-everbright-greentech-0377b31c-5401-466f-987e-9a176b05fb52" target="_blank" data-smartkarma-citation="entities:24085:1" rel="noopener">China Everbright Greentech (1257 HK)</a> to issue asset-backed notes (ABN) represents another major step towards asset securitisation. We also see CEE a prime beneficiary of public infrastructure REIT, which when issues, will both improve its valuation and capital structure.  </p>

We believe there will be more positive policy measures to support the waste treatment industry, especially after China's "Two Meetings" to be held in Mar and China Everbright Environment (257 HK) (CEE) is in a good position to benefit. Although its share price has increased by 12.9% YTD, with an undemanding PER of 4.1x for FY21F, there is still more room to go.CEE's project momentum has stayed encouraging, with over Rmb1.5bn of new waste and water treatment projects secured over the last few months. The recent grant of approval to its subsidiary China Everbright Greentech (1257 HK) to issue asset-backed notes (ABN) represents another major step towards asset securitisation. We also see CEE a prime beneficiary of public infrastructure REIT, which when issues, will both improve its valuation and capital structure.  

China Everbright Environment (257 HK): Compelling Story yet to Fully Appreciate

China

China Longyuan Power Group is a leading power producer primarily engaged in the generation and sale of wind and coal power, alongside other renewable energy projects such as solar, tidal, biomass, and geothermal. The company also manufactures power equipment and provides related consulting, maintenance, and training services. It was founded in 1993 and is headquartered in Beijing, People's Republic of China.

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China Longyuan Power Group (916 HK)

Global Clean Energy Index: All Proposals to Be Implemented; 48% One-Way Turnover

S&P will implement all proposals of the market consultation at the close on 16 April. This will create trading opportunities. One-way turnover is...

Brian Freitas

China Longyuan (916 HK): Things Aren't that Bad

Longyuan has achieved good generation in 2M21, suggesting excellent underlying demand. The recent weakness in share price has largely discounted...

Osbert Tang, CFA

Beijing Jingneng (579 HK): This Is A Buy

If it does not go through, the downside should be limited. And current valuations are not demanding - 8.8x PER on an LTM basis. I would buy...

David Blennerhassett

China Longyuan (916 HK): Record-Breaking Jan, and Strategically Positioned for the Long Term

China Longyuan has a strong Jan generation with 50.8% YoY growth in wind generation. We expect it to benefit from China's clean energy initiatives...

Osbert Tang, CFA

China Everbright Environment (257 HK): Compelling Story yet to Fully Appreciate

China Everbright Enviornment continued to demonstrate strong capability to secure new projects and it will also benefit hugely from the...

Osbert Tang, CFA

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