Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

<ul>
<li>The index changes for the STOXX Europe Indices for the June 2022 Rebalance were announced yesterday. </li>
<li>There will be 11 Adds and 11 Deletes for the STOXX Europe 600 Index. Some of these changes will also be reflected in the EURO STOXX Index.</li>
<li>Below is a closer look at the Inclusion Parameters and price performance of the names involved in this Rebalance Event.</li>
</ul>


The index changes for the STOXX Europe Indices for the June 2022 Rebalance were announced yesterday. 
There will be 11 Adds and 11 Deletes for the STOXX Europe 600 Index. Some of these changes will also be reflected in the EURO STOXX Index.
Below is a closer look at the Inclusion Parameters and price performance of the names involved in this Rebalance Event.


STOXX Europe June 2022 Rebal: Focus on Wacker Chemie, Telefonica Deutschland, CD Projekt, and Nokian

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

On 21 December, Morgan Stanley Infrastructure Inc. offered to acquire <a href="https://www.smartkarma.com/entities/tele-columbus-ag" target="_blank" data-smartkarma-citation="entities:21727:1" rel="noopener">Tele Columbus Ag (TC1 GR)</a> from <a href="https://www.smartkarma.com/entities/united-internet-ag" target="_blank" data-smartkarma-citation="entities:21735:1" rel="noopener">United Internet Ag (UTDI GR)</a> United Internet Investments Holding AG &amp; Co. KG, <a href="https://www.smartkarma.com/entities/rocket-internet-se" target="_blank" data-smartkarma-citation="entities:20226:1" rel="noopener">Rocket Internet Se (RKET GR)</a>, Union Investment Privatfonds GmbH, 3d investors, and others for approximately €380 mn.
<div>
The deal will also strengthen the balance sheet of Tele Columbus.
<ul>
<li>Morgan Stanley is also backing a €475 million rights issue, and will make available a further €75 million in equity after completion to back the firm's fiber strategy.</li>
<li>Tele Columbus said the deal would significantly reduce its net debt, and thereby bring a “better risk assessment” for the remaining bonds and loans.</li>
<li>If the takeover offer is successful, United Internet will contribute its stake in Tele Columbus of around 29.9%. In return, United Internet will receive a minority shareholding in Kublai GmbH.</li>
</ul>
The offered consideration is €3.25 per share in cash.
<ul>
<li>For an implied equity value of €380.58 mn, and an implied EV of 1,925.28 mn (€1,544 mn net debt assumed).</li>
<li>The offer represents 4.1x EV/Fwd Revenue vs. 3.9x for the median of comparable companies and 8.5x EV/Fwd EBITDA vs. 7x for the median of comparable companies.</li>
<li>On this basis, the offer price seems fair. There's business plan execution risk, further down the road.</li>
</ul>
With commitments equivalent to 43.26% from the main shareholders, the offer looks almost certain to succeed.
<ul>
<li>Tele Columbus closed on 22 December at €3.22, a gross spread of 1%, equivalent to 2%-3% annual, depending on the closing.</li>
<li>Although not terribly exciting, it looks a fairly safe trade. Some patience may be needed to build a position.</li>
</ul>
Recommendation is LONG Tele Columbus.
</div>

On 21 December, Morgan Stanley Infrastructure Inc. offered to acquire Tele Columbus Ag (TC1 GR) from United Internet Ag (UTDI GR) United Internet Investments Holding AG &amp; Co. KG, Rocket Internet Se (RKET GR), Union Investment Privatfonds GmbH, 3d investors, and others for approximately €380 mn.

The deal will also strengthen the balance sheet of Tele Columbus.

Morgan Stanley is also backing a €475 million rights issue, and will make available a further €75 million in equity after completion to back the firm's fiber strategy.
Tele Columbus said the deal would significantly reduce its net debt, and thereby bring a “better risk assessment” for the remaining bonds and loans.
If the takeover offer is successful, United Internet will contribute its stake in Tele Columbus of around 29.9%. In return, United Internet will receive a minority shareholding in Kublai GmbH.

The offered consideration is €3.25 per share in cash.

For an implied equity value of €380.58 mn, and an implied EV of 1,925.28 mn (€1,544 mn net debt assumed).
The offer represents 4.1x EV/Fwd Revenue vs. 3.9x for the median of comparable companies and 8.5x EV/Fwd EBITDA vs. 7x for the median of comparable companies.
On this basis, the offer price seems fair. There's business plan execution risk, further down the road.

With commitments equivalent to 43.26% from the main shareholders, the offer looks almost certain to succeed.

Tele Columbus closed on 22 December at €3.22, a gross spread of 1%, equivalent to 2%-3% annual, depending on the closing.
Although not terribly exciting, it looks a fairly safe trade. Some patience may be needed to build a position.

Recommendation is LONG Tele Columbus.


Tele Columbus AG - Morgan Stanley Infrastructure Agreed Bid

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

The MSCI ACWI index (USD) is breaking out to all-time highs while the MSCI EM index (local) is breaking above its prior highs from January. This is bullish and will continue to be as long as there is an absence of breakdowns. On the other hand, Europe’s EURO STOXX 50 and Japan’s TOPIX have struggled to break above resistance and their RS remains near the lows -- be selective. In addition to covering important technical levels across all markets, we highlight additional ideas in the following Sectors: Services, Communications, Industrials, and Transportation.

The MSCI ACWI index (USD) is breaking out to all-time highs while the MSCI EM index (local) is breaking above its prior highs from January. This is bullish and will continue to be as long as there is an absence of breakdowns. On the other hand, Europe’s EURO STOXX 50 and Japan’s TOPIX have struggled to break above resistance and their RS remains near the lows -- be selective. In addition to covering important technical levels across all markets, we highlight additional ideas in the following Sectors: Services, Communications, Industrials, and Transportation.

Global Equity Strategy: Bullish Outlook Intact

MSCI Emerging Markets Index / Technical Analysis

Global equities continue to trend higher following breakouts that have occurred during the past two weeks. Over this timeframe we have been recommending adding exposure to cyclical Sectors and, despite them getting near-term extended, we believe these upside moves are likely just getting going. Additionally, the US dollar is breaking below support and EM equities are breaking above resistance, only adding to our bullish outlook on global equities. We highlight actionable set-ups within the Consumer Discretionary, Global Real Estate and Utilities Sectors.

Global equities continue to trend higher following breakouts that have occurred during the past two weeks. Over this timeframe we have been recommending adding exposure to cyclical Sectors and, despite them getting near-term extended, we believe these upside moves are likely just getting going. Additionally, the US dollar is breaking below support and EM equities are breaking above resistance, only adding to our bullish outlook on global equities. We highlight actionable set-ups within the Consumer Discretionary, Global Real Estate and Utilities Sectors.

Global Equity Strategy: Still Bullish, But Extended Near-Term

In today’s report we highlight the follow themes:<ul><li>As a whole, Europe continues to lag, but we like the price patterns—mostly multi-year bases. Recent weakness presents a buying opportunity, especially in leading countries, like Germany, and leading Sectors and Groups, such as software stocks. </li><li>Japan recently broke out above a key resistance level, making the current pullback all the more attractive. Add exposure.</li><li>EM remains unchallenged this year from a performance standpoint. While a pullback/pause wouldn’t surprise us, we expect EM to continue to lead, especially in light of the bottom pattern visible in the EM/ACWI ratio.</li><li>Today’s report includes actionable ideas across the developed and EM universe, and across multiple sectors.</li></ul>

In today’s report we highlight the follow themes:As a whole, Europe continues to lag, but we like the price patterns—mostly multi-year bases. Recent weakness presents a buying opportunity, especially in leading countries, like Germany, and leading Sectors and Groups, such as software stocks. Japan recently broke out above a key resistance level, making the current pullback all the more attractive. Add exposure.EM remains unchallenged this year from a performance standpoint. While a pullback/pause wouldn’t surprise us, we expect EM to continue to lead, especially in light of the bottom pattern visible in the EM/ACWI ratio.Today’s report includes actionable ideas across the developed and EM universe, and across multiple sectors.

Global Equity Pullback = Buying Opportunity

Germany

United Internet AG operates as an internet services company. The Company provides landline and mobile internet access products, as well as cloud applications at data centers with fixed monthly fees and volume-based charges. United Internet serves consumers and business clients worldwide.

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United Internet (UTDI GR)

STOXX Europe June 2022 Rebal: Focus on Wacker Chemie, Telefonica Deutschland, CD Projekt, and Nokian

STOXX Europe June 2022 Index changes have been confirmed. The estimated volume impacts seem low but historical performance is promising and paying...

Janaghan Jeyakumar, CFA

Tele Columbus AG - Morgan Stanley Infrastructure Agreed Bid

With commitments of 43.26%, the offer is almost certain to succeed. TC1 closed at a gross spread of 1% (2%-3% annual depending on the closing). It...

Jesus Rodriguez Aguilar

Global Equity Strategy: Bullish Outlook Intact

The MSCI ACWI index (USD) is breaking out to all-time highs while the MSCI EM index (local) is breaking above its prior highs from January. This is...

Vermilion Research

Global Equity Strategy: Still Bullish, But Extended Near-Term

Global equities continue to trend higher following breakouts that have occurred during the past two weeks. Over this timeframe we have been...

Vermilion Research

Global Equity Pullback = Buying Opportunity

In today’s report we highlight the follow themes: As a whole, Europe continues to lag, but we like the price patterns—mostly multi-year bases....

Vermilion Research

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