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

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 <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>.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>.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>.

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

The S&amp;P Global Clean Energy Index is designed to measure the performance of 30 companies from around the world that are involved in clean energy-related businesses, comprising a diversified mix of clean energy production and clean energy equipment and technology companies.There are two ETFs that are benchmarked to the index and these ETFs have seen massive inflows over the last year. This has caused liquidity issues in the underlying stocks and has led to S&amp;P having multiple market consultations to reduce constituent concentration, easy liquidity limitations and improve index replication.The changes due to these market consultations will cause large passive flows on the stocks. A few stocks have moved substantially over the last couple of months but there could be more in store for a few of them.Depending on the which proposals are implemented, one-way turnover for the review could be in the range of 30-50% and there are a lot of stocks that will have more than 10 days of ADV to trade.In this Insight we look at the index, the inflows on the ETFs, the various market consultations and the impact on the stocks that constitute the index and those that could be added to the index in the April rebalance.

The S&amp;P Global Clean Energy Index is designed to measure the performance of 30 companies from around the world that are involved in clean energy-related businesses, comprising a diversified mix of clean energy production and clean energy equipment and technology companies.There are two ETFs that are benchmarked to the index and these ETFs have seen massive inflows over the last year. This has caused liquidity issues in the underlying stocks and has led to S&amp;P having multiple market consultations to reduce constituent concentration, easy liquidity limitations and improve index replication.The changes due to these market consultations will cause large passive flows on the stocks. A few stocks have moved substantially over the last couple of months but there could be more in store for a few of them.Depending on the which proposals are implemented, one-way turnover for the review could be in the range of 30-50% and there are a lot of stocks that will have more than 10 days of ADV to trade.In this Insight we look at the index, the inflows on the ETFs, the various market consultations and the impact on the stocks that constitute the index and those that could be added to the index in the April rebalance.

Global Clean Energy Index: MASSIVE Changes Coming Up; 30-50% One-Way Turnover

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

On Wed 22 Aug after the close <a href="https://www.smartkarma.com/entities/11796" target="_blank" data-smartkarma-citation="entities:11796:1">Daido Metal (7245 JP)</a> announced a large secondary offering including new and treasury shares. The offering size is large representing 19.4% of shares outstanding (adjusted for treasury stock) and about 82 days ADV. Trouble with falling margins as the company conducted an extremely rapid overseas expansion led to a weakening balance sheet, and as the company continues to invest to try and generate growth drivers to see it past the eventual decline ICE volumes, a capital raise has become necessary.We discuss the following below:<ul>
<li>Company business model and industry structure</li>
<li>Growth initiatives and the rationale behind them</li>
<li>Recent margin trends and likely trajectory</li>
<li>Valuation</li>
</ul><table class="table table-striped"><tbody>
<tr>
<td>Details</td>
<td></td>
</tr>
<tr>
<td>New Shares</td>
<td style="text-align: right;">1,558,400</td>
</tr>
<tr>
<td>Treasury Shares to be Sold</td>
<td style="text-align: right;">5,141,600</td>
</tr>
<tr>
<td>Overallotment</td>
<td style="text-align: right;">1,005,000</td>
</tr>
<tr>
<td>Total Shares Offered</td>
<td style="text-align: right;">7,705,000</td>
</tr>
<tr>
<td>Existing Shares Excluding Treasury Stock</td>
<td style="text-align: right;">39,815,253</td>
</tr>
<tr>
<td>Final Shares Outstanding</td>
<td style="text-align: right;">47,520,253</td>
</tr>
<tr>
<td>Implied Dilution vs. Existing Shares Excluding Treasury Stock</td>
<td style="text-align: right;">19.4%</td>
</tr>
<tr>
<td></td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td>Pricing Date (X)</td>
<td style="text-align: right;">29 Aug-4 Sep</td>
</tr>
<tr>
<td>Subscription Date</td>
<td style="text-align: right;">X+1 to X+2</td>
</tr>
<tr>
<td>Payment Date</td>
<td style="text-align: right;">X+5</td>
</tr>
<tr>
<td>Delivery Date</td>
<td style="text-align: right;">X+6</td>
</tr>
<tr>
<td></td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td>Discount </td>
<td style="text-align: right;">0-10%</td>
</tr>
<tr>
<td></td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td>Average 30 day ADV</td>
<td style="text-align: right;">94,143</td>
</tr>
<tr>
<td>Days ADV including Overallotment</td>
<td style="text-align: right;">81.8</td>
</tr>
</tbody></table><table class="table table-striped"><tbody>
<tr>
<td>Use of Funds</td>
<td>JPY m</td>
</tr>
<tr>
<td>Expansion of capacity for automotive bearings</td>
<td style="text-align: right;">1,875</td>
</tr>
<tr>
<td>Installation of production and sales management system</td>
<td style="text-align: right;">932</td>
</tr>
<tr>
<td>Purchase of European automotive engine bearing affiliates stock to turn the company into a subsidiary</td>
<td style="text-align: right;">820</td>
</tr>
<tr>
<td>Investment in aluminium die casts capacity</td>
<td style="text-align: right;">1,634</td>
</tr>
<tr>
<td>Investment in wind turbing bearing factory</td>
<td style="text-align: right;">1,867</td>
</tr>
<tr>
<td>Total</td>
<td style="text-align: right;">7,128</td>
</tr>
<tr>
<td></td>
<td style="text-align: right;"></td>
</tr>
<tr>
<td>Funds raised at 10% discount to Friday's close</td>
<td style="text-align: right;">6,796</td>
</tr>
<tr>
<td>Shortfall</td>
<td style="text-align: right;">332</td>
</tr>
<tr>
<td>Required price for zero shortfall</td>
<td style="text-align: right;">926</td>
</tr>
<tr>
<td>Implied discount for zero shortfall</td>
<td style="text-align: right;">5.7%</td>
</tr>
</tbody></table>

On Wed 22 Aug after the close Daido Metal (7245 JP) announced a large secondary offering including new and treasury shares. The offering size is large representing 19.4% of shares outstanding (adjusted for treasury stock) and about 82 days ADV. Trouble with falling margins as the company conducted an extremely rapid overseas expansion led to a weakening balance sheet, and as the company continues to invest to try and generate growth drivers to see it past the eventual decline ICE volumes, a capital raise has become necessary.We discuss the following below:
Company business model and industry structure
Growth initiatives and the rationale behind them
Recent margin trends and likely trajectory
Valuation


Details



New Shares
1,558,400


Treasury Shares to be Sold
5,141,600


Overallotment
1,005,000


Total Shares Offered
7,705,000


Existing Shares Excluding Treasury Stock
39,815,253


Final Shares Outstanding
47,520,253


Implied Dilution vs. Existing Shares Excluding Treasury Stock
19.4%






Pricing Date (X)
29 Aug-4 Sep


Subscription Date
X+1 to X+2


Payment Date
X+5


Delivery Date
X+6






Discount 
0-10%






Average 30 day ADV
94,143


Days ADV including Overallotment
81.8



Use of Funds
JPY m


Expansion of capacity for automotive bearings
1,875


Installation of production and sales management system
932


Purchase of European automotive engine bearing affiliates stock to turn the company into a subsidiary
820


Investment in aluminium die casts capacity
1,634


Investment in wind turbing bearing factory
1,867


Total
7,128






Funds raised at 10% discount to Friday's close
6,796


Shortfall
332


Required price for zero shortfall
926


Implied discount for zero shortfall
5.7%



Daido Metal: Heavy Investment Burden Prompts Capital Raise but Can the Company Restore Margins?

Actionable Insights, Assured Alpha, ANTYA Investments

ANTYA Investments

Actionable Insights, Assured Alpha

Investing That Empowers You

ANTYA Investments Inc., regulated by the Ontario Securities Commission, is registered to provide wealth management services in Canada. ANTYA manages institutional, and high net-worth client portfolios on a discretionary basis. Our investment philosophy embraces a Core-Satellite approach.  The core of the portfolio is chosen from a group of fifteen asset classes. A few stock specific asymmetrical investment opportunities comprise the satellite segment. ANTYA invests only in global, large capitalization, and investment grade companies.  

Equity Bottom-Up

Dismal Stock Performance in 2017 and Since 2012<a href="https://www.smartkarma.com/entities/782" target="_blank" data-smartkarma-citation="entities:782:1">General Electric Co (GE US)</a> (“GE” or “company”) had a terrible 2017, with the stock providing a total return of -42.1%, compared to the S&amp;P 500 Index (“S&amp;P”) at 21.8%. Moreover, the company’s streak of dividend growth after the financial crises was interrupted with the dividend for 2018 slashed in half to an annualised rate of $0.48 per share, pushing it back down to 1999 levels. The management of GE is struggling with a conglomerate operating in multiple business segments, that possess neither technology nor market synergy. We expect continued under-performance in 2018 as well.We do not expect EBITDA to grow from current levels given multiple headwinds in approximately 50% of GE’s revenue base. We expect any gains in costs to be competed away in an over-supplied market for industrial infrastructure. Higher rates will compress EV/EBITDA multiples going forward.  Current valuation of GE does not reflect that eventuality yet. Compressed multiples could easily result in a single digit stock price for GE in the second half of 2018. Currently GE is priced for perfection, although it has proven to be a mere mortal since the financial crises. Simplistic bench-marking to industry peers appears to suggest a fully valued stock price, while ignoring myriad GE specific challenges such as accounting, governance, corporate control over reporting &amp; auditing, and declining product end-market. If, what's past is prologue then the company's accounting has set it up for more downside going forward. Stay tuned.

Dismal Stock Performance in 2017 and Since 2012General Electric Co (GE US) (“GE” or “company”) had a terrible 2017, with the stock providing a total return of -42.1%, compared to the S&amp;P 500 Index (“S&amp;P”) at 21.8%. Moreover, the company’s streak of dividend growth after the financial crises was interrupted with the dividend for 2018 slashed in half to an annualised rate of $0.48 per share, pushing it back down to 1999 levels. The management of GE is struggling with a conglomerate operating in multiple business segments, that possess neither technology nor market synergy. We expect continued under-performance in 2018 as well.We do not expect EBITDA to grow from current levels given multiple headwinds in approximately 50% of GE’s revenue base. We expect any gains in costs to be competed away in an over-supplied market for industrial infrastructure. Higher rates will compress EV/EBITDA multiples going forward.  Current valuation of GE does not reflect that eventuality yet. Compressed multiples could easily result in a single digit stock price for GE in the second half of 2018. Currently GE is priced for perfection, although it has proven to be a mere mortal since the financial crises. Simplistic bench-marking to industry peers appears to suggest a fully valued stock price, while ignoring myriad GE specific challenges such as accounting, governance, corporate control over reporting &amp; auditing, and declining product end-market. If, what's past is prologue then the company's accounting has set it up for more downside going forward. Stay tuned.

General Electric (GE US )- 25% Downside and Perhaps a Single Digit Stock Price in Its Future?

Denmark

Vestas Wind Systems A/S develops, manufactures, and markets wind turbines that generate electricity. The Company installs and maintenance turbines. Vestas Wind Systems serves customers worldwide.

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Vestas Wind Systems A/S (VWS DC)

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

Global Clean Energy Index: MASSIVE Changes Coming Up; 30-50% One-Way Turnover

The huge inflows into ETFs tracking the S&P Global Clean Energy Index have led to many market consultations and there will be massive flows in/out...

Brian Freitas

Daido Metal: Heavy Investment Burden Prompts Capital Raise but Can the Company Restore Margins?

On Wed 22 Aug after the close Daido Metal (7245 JP) announced a large secondary offering including new and treasury shares. The offering size is...

Mio Kato

General Electric (GE US )- 25% Downside and Perhaps a Single Digit Stock Price in Its Future?

Dismal Stock Performance in 2017 and Since 2012General Electric Co (GE US) (“GE” or “company”) had a terrible 2017, with the stock providing a...

ANTYA Investments

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