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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 100 and <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> as part of the December index review on 3 December and the changes will be effective after the close of trading on 17 December.The review period for the rebalance ends on 19 November, so we are exactly two-thirds of the way through the review period.As of the close on 20 September, we see <a href="https://www.smartkarma.com/entities/pilbara-minerals-ltd" target="_blank" data-smartkarma-citation="entities:7460:1" rel="noopener">Pilbara Minerals (PLS AU)</a> as a potential inclusion to the S&amp;P/ASX100 and <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration Holdings (LNK AU)</a> as a potential deletion.For the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a>, potential inclusions are <a href="https://www.smartkarma.com/entities/imugene-ltd" target="_blank" data-smartkarma-citation="entities:20276:1" rel="noopener">Imugene Ltd (IMU AU)</a>, <a href="https://www.smartkarma.com/entities/paladin-energy-ltd" target="_blank" data-smartkarma-citation="entities:10117:1" rel="noopener">Paladin Energy (PDN AU)</a>, <a href="https://www.smartkarma.com/entities/amalgamated-holdings-ltd" target="_blank" data-smartkarma-citation="entities:20978:1" rel="noopener">Event Hospitality and Entertainment (EVT AU)</a>, <a href="https://www.smartkarma.com/entities/liontown-resources-ltd" target="_blank" data-smartkarma-citation="entities:20488:1" rel="noopener">Liontown Resources (LTR AU)</a> and <a href="https://www.smartkarma.com/entities/arena-reit" target="_blank" data-smartkarma-citation="entities:12209:1" rel="noopener">Arena Reit (ARF AU)</a>, while potential deletions are <a href="https://www.smartkarma.com/entities/kogan-com-ltd" target="_blank" data-smartkarma-citation="entities:23575:1" rel="noopener">Kogan.com (KGN AU)</a>, <a href="https://www.smartkarma.com/entities/redbubble-ltd" target="_blank" data-smartkarma-citation="entities:24321:1" rel="noopener">Redbubble Ltd (RBL AU)</a>, <a href="https://www.smartkarma.com/entities/monadelphous-group-ltd" target="_blank" data-smartkarma-citation="entities:553:1" rel="noopener">Monadelphous (MND AU)</a>, <a href="https://www.smartkarma.com/entities/omni-bridgeway-ltd" target="_blank" data-smartkarma-citation="entities:8840:1" rel="noopener">Imf Bentham Ltd (OBL AU)</a> and <a href="https://www.smartkarma.com/entities/spark-new-zealand-ltd-3dcc706a-f086-4dd4-882b-2a42a36ccf8d" target="_blank" data-smartkarma-citation="entities:26915:1" rel="noopener">Spark New Zealand (SPK AU)</a>.With multiple M&amp;A deal pending, including <a href="https://www.smartkarma.com/entities/afterpay-limited" target="_blank" data-smartkarma-citation="entities:26940:1" rel="noopener">Afterpay Touch (APT AU)</a>, <a href="https://www.smartkarma.com/entities/sydney-airport" target="_blank" data-smartkarma-citation="entities:19063:1" rel="noopener">Sydney Airport (SYD AU)</a>, <a href="https://www.smartkarma.com/entities/ausnet-services" target="_blank" data-smartkarma-citation="entities:10293:1" rel="noopener">Ausnet Services (AST AU)</a>, <a href="https://www.smartkarma.com/entities/oil-search-ltd" target="_blank" data-smartkarma-citation="entities:773:1" rel="noopener">Oil Search Ltd (OSH AU)</a> and <a href="https://www.smartkarma.com/entities/spark-infrastructure-group" target="_blank" data-smartkarma-citation="entities:595:1" rel="noopener">Spark Infrastructure (SKI AU)</a>, there could be more additions to the index if deals are completed or highly likely to be completed by end November.Short interest on most potential inclusions is quite low, while the short interest on many potential exclusions is quite high.

S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 100 and S&amp;P/ASX 200 (AS51 INDEX) as part of the December index review on 3 December and the changes will be effective after the close of trading on 17 December.The review period for the rebalance ends on 19 November, so we are exactly two-thirds of the way through the review period.As of the close on 20 September, we see Pilbara Minerals (PLS AU) as a potential inclusion to the S&amp;P/ASX100 and Link Administration Holdings (LNK AU) as a potential deletion.For the S&amp;P/ASX 200 (AS51 INDEX), potential inclusions are Imugene Ltd (IMU AU), Paladin Energy (PDN AU), Event Hospitality and Entertainment (EVT AU), Liontown Resources (LTR AU) and Arena Reit (ARF AU), while potential deletions are Kogan.com (KGN AU), Redbubble Ltd (RBL AU), Monadelphous (MND AU), Imf Bentham Ltd (OBL AU) and Spark New Zealand (SPK AU).With multiple M&amp;A deal pending, including Afterpay Touch (APT AU), Sydney Airport (SYD AU), Ausnet Services (AST AU), Oil Search Ltd (OSH AU) and Spark Infrastructure (SKI AU), there could be more additions to the index if deals are completed or highly likely to be completed by end November.Short interest on most potential inclusions is quite low, while the short interest on many potential exclusions is quite high.

ASX100/​200 Index Rebalance Preview: Potential December Changes With Large Impact

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

The Venerable David Webb just increased his position in <a href="https://www.smartkarma.com/entities/analogue-holdings-ltd" target="_blank" data-smartkarma-citation="entities:28661:1" rel="noopener">Analogue Holdings Ltd (1977 HK)</a> as the company is transforming from a traditional E&amp;M player into a smart city and high tech building management company that has won a contract from the HK Housing Authority. <div class="content-highlight">The company is trading at a deep discount to its peers in various valuation multiples but with the amount of cash in the balance sheet, the ex-cash PER is even lower at 5.2x. It has a 5.5% dividend yield that is quite enviable for a small-cap with a growth prospect. What not to like?</div>

The Venerable David Webb just increased his position in Analogue Holdings Ltd (1977 HK) as the company is transforming from a traditional E&amp;M player into a smart city and high tech building management company that has won a contract from the HK Housing Authority. The company is trading at a deep discount to its peers in various valuation multiples but with the amount of cash in the balance sheet, the ex-cash PER is even lower at 5.2x. It has a 5.5% dividend yield that is quite enviable for a small-cap with a growth prospect. What not to like?

Analogue Holding (1977): From E&M to Smart City

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/seven-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:803:1" rel="noopener">Seven Group Holdings (SVW AU)</a> aims to raise around A$500m (US$38m) via an institutional placement to primarily help reduce its gearing and provide more financing flexibility. The stock has done well over the past few years but is now trading close to its all time highs.

Seven Group Holdings (SVW AU) aims to raise around A$500m (US$38m) via an institutional placement to primarily help reduce its gearing and provide more financing flexibility. The stock has done well over the past few years but is now trading close to its all time highs. 

Seven Group Holdings Placement - Good Track Record but Still a Large Deal to Digest

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

<ul><li>Since the financial crisis, high risk assets had been buffeted by a discount rate shock, notably a lift in the equity risk premium (ERP).  This was consistent with widening corporate bond spread and a divergence between the yield to maturity on US Treasuries and the earnings yield on the S&amp;P500 companies.  The higher ERP has been associated with under-performance from high beta stocks, as predicted by valuation theory.</li><li>Since July 2016, the dangers of safety have emerged and become more evident since early November.  The fact that the risk free rate has lifted by 100 basis points during this time while the S&amp;P500 earnings yield has remained broadly unchanged points to a reversal of the rising ERP.  Accordingly, the lower ERP has driven strong returns from high beta securities. </li><li>In this report, Evidente updates the performance of its model portfolio launched in July and adds to the portfolio's cyclical budget.  The addition of ANZ is designed to shift the large underweight in the major banks to a small overweight, reflecting compelling valuation support <a href="https://www.smartkarma.com/insights/australia-s-major-banks-shrinking-to-greatness-expanding-to-safety" target="_blank" data-smartkarma-citation="insights:7309">Australia’s Major Banks - Shrinking to Greatness, Expanding to Safety</a>.</li></ul>

Since the financial crisis, high risk assets had been buffeted by a discount rate shock, notably a lift in the equity risk premium (ERP).  This was consistent with widening corporate bond spread and a divergence between the yield to maturity on US Treasuries and the earnings yield on the S&amp;P500 companies.  The higher ERP has been associated with under-performance from high beta stocks, as predicted by valuation theory.Since July 2016, the dangers of safety have emerged and become more evident since early November.  The fact that the risk free rate has lifted by 100 basis points during this time while the S&amp;P500 earnings yield has remained broadly unchanged points to a reversal of the rising ERP.  Accordingly, the lower ERP has driven strong returns from high beta securities. In this report, Evidente updates the performance of its model portfolio launched in July and adds to the portfolio's cyclical budget.  The addition of ANZ is designed to shift the large underweight in the major banks to a small overweight, reflecting compelling valuation support Australia’s Major Banks - Shrinking to Greatness, Expanding to Safety.

<ul><li>Following a strong start in its first live month, Evidente's model portfolio under-performed in the month of August, falling by -3.0%, well below the ASX200 return of -1.6%.  Since inception on 1 July, the portfolio has generated an accumulated return of +4.2%, lower than the ASX200 return of +4.6%.</li><li>RIO and WES are on close watch due to growing risks of a pull-back in China's residential property markets, while significant restructuring costs and asset impairments at WES reflect poor earnings quality and poor capital allocation decisions by senior management.</li><li>Retail discretionary remains the portfolio's key cyclical overweight bet based on the prospect that there remains plenty of scope for discretionary spending to catch up to food retailing, while household sector balance sheets remain in good shape.  The model portfolio retains a strong  defensive tilt, with overweight bets in telcos, utilities and listed infrastructure stocks being funded by under-weights in financials and materials.</li></ul>

Following a strong start in its first live month, Evidente's model portfolio under-performed in the month of August, falling by -3.0%, well below the ASX200 return of -1.6%.  Since inception on 1 July, the portfolio has generated an accumulated return of +4.2%, lower than the ASX200 return of +4.6%.RIO and WES are on close watch due to growing risks of a pull-back in China's residential property markets, while significant restructuring costs and asset impairments at WES reflect poor earnings quality and poor capital allocation decisions by senior management.Retail discretionary remains the portfolio's key cyclical overweight bet based on the prospect that there remains plenty of scope for discretionary spending to catch up to food retailing, while household sector balance sheets remain in good shape.  The model portfolio retains a strong  defensive tilt, with overweight bets in telcos, utilities and listed infrastructure stocks being funded by under-weights in financials and materials.

Model Portfolio Monthly Update - Retain Strong Defensive Bias

Australia

Monadelphous Group Limited provides engineering and construction services to the resources and petrochemical industries. The Company provides mining and processing industry maintenance, mining equipment refurbishment, project management, construction, and airport ground handling services. Monadelphous Group serves customers in Australia.

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Monadelphous (MND AU)

ASX100/200 Index Rebalance Preview: Potential December Changes With Large Impact

There could be 1 change to the ASX100 and 5 changes to the ASX200 at the December rebalance. With a long M&A pipeline, there could be additional...

Brian Freitas

Analogue Holding (1977): From E&M to Smart City

The company is trading at a deep discount to its peers' multiples but the ex-cash PER is even lower at 5.2x. It has a 5.5% dvd yield that is quite...

Henry Soediarko

Seven Group Holdings Placement - Good Track Record but Still a Large Deal to Digest

Seven Group Holdings (SVW AU) aims to raise around A$500m (US$38m) via an institutional placement to primarily help reduce its gearing and provide...

Sumeet Singh

The Dangers of Safety

Since the financial crisis, high risk assets had been buffeted by a discount rate shock, notably a lift in the equity risk premium (ERP). This...

Sam Ferraro

Model Portfolio Monthly Update - Retain Strong Defensive Bias

Following a strong start in its first live month, Evidente's model portfolio under-performed in the month of August, falling by -3.0%, well below...

Sam Ferraro

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

ASX100/​200 Index Rebalance Preview: Potential December Changes With Large Impact

There could be 1 change to the ASX100 and 5 changes to the ASX200 at the December rebalance. With a long M&A pipeline, there could be additional...

Brian Freitas

Analogue Holding (1977): From E&M to Smart City

The company is trading at a deep discount to its peers' multiples but the ex-cash PER is even lower at 5.2x. It has a 5.5% dvd yield that is quite...

Henry Soediarko

Seven Group Holdings Placement - Good Track Record but Still a Large Deal to Digest

Seven Group Holdings (SVW AU) aims to raise around A$500m (US$38m) via an institutional placement to primarily help reduce its gearing and provide...

Sumeet Singh

The Dangers of Safety

Since the financial crisis, high risk assets had been buffeted by a discount rate shock, notably a lift in the equity risk premium (ERP). This...

Sam Ferraro

Model Portfolio Monthly Update - Retain Strong Defensive Bias

Following a strong start in its first live month, Evidente's model portfolio under-performed in the month of August, falling by -3.0%, well below...

Sam Ferraro

ASX100/200 Index Rebalance Preview: Potential December Changes With Large Impact