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Jan 23
0

Most Read: Adani Enterprises, Jinko Solar, Jb Financial Group, Fujitsu General, Oriental Land, Bank of Kyoto, Golden Energy & Resources, LG Energy Solution and more

By | Daily Briefs, Most Read

In today’s briefing:

  • SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro
  • CSI300 Index Rebalance Preview: Early Look at Potential Changes in June
  • KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)
  • Fujitsu General (6755) – Fujitsu’s Stake On The Block
  • Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Relia, Kingston, Fengxiang, Jafco, Esso, Golden Energy
  • Last Week In SPACE: Bank of Kyoto, WM Motors, Japanese Banks, Hong Kong Aerospace, CP ALL/MAKRO
  • Merger Arb Mondays (23 Jan) – Origin Energy, Warrego, Golden Energy, Yashili, Kingston, O2Micro
  • Good Morning Japan | The Doves Strike Back; Google Joins Layoff Parade; “Too Early for BOJ Exit”
  • LG Energy Solution: Another MSCI Upweight Event Coming in May

SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro

By Brian Freitas

  • A third of the way through the review period of the June rebalance, we see one potential index change with Adani Enterprises (ADE IN) replacing Wipro Ltd (WPRO IN). 
  • Adani Enterprises (ADE IN) could move lower in the short-term due to the public issue of shares but should find support from passive buying from local and global index trackers.
  • Wipro Ltd (WPRO IN) has underperformed most of its peers by a wide margin over the last year and the passive selling could provide an entry point.

CSI300 Index Rebalance Preview: Early Look at Potential Changes in June

By Brian Freitas

  • Two thirds of the way through the review period, we see 15 potential index changes at the June rebalance that will be implemented at the close on 9 June.
  • We estimate a one-way turnover of 2.35% at the June rebalance leading to a one-way trade of CNY 5.57bn.
  • The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last six months, though there is some near-term deterioration.

KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)

By Brian Freitas

Fujitsu General (6755) – Fujitsu’s Stake On The Block

By Travis Lundy

Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End

By Brian Freitas

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Relia, Kingston, Fengxiang, Jafco, Esso, Golden Energy

By David Blennerhassett

Last Week In SPACE: Bank of Kyoto, WM Motors, Japanese Banks, Hong Kong Aerospace, CP ALL/MAKRO

By David Blennerhassett

  • Japanese banks are the hottest new thing but unless you think Bank of Kyoto is going to change its spots, it’s still best thought of as a range trade. 
  • WM Motors opts for a backdoor listing via merging with WE Solutions Limited (860 HK). There’s probably a good reason for doing so.
  • You pay for the liquidity of Japanese banks by paying a higher PBR against not as much improvement in ROE. That’s life.

Merger Arb Mondays (23 Jan) – Origin Energy, Warrego, Golden Energy, Yashili, Kingston, O2Micro

By Arun George

Good Morning Japan | The Doves Strike Back; Google Joins Layoff Parade; “Too Early for BOJ Exit”

By Mark Chadwick

  • OVERSEAS.  SPX +1.9% to close on highs; Beta-driven rally as Tech rebounds;  Dovish talk from 2 Fed Members;  Google joins the fray slashing 12,000 staff; US Banks not far behind.
  • JAPAN.  NKY Futs +1.3% vs Cash; USDJPY 129.6;  CORE Inflation hits 4%;  Kishida: too early to discuss BOJ 2% policy exit;  Japan courts global elite grads; Population declines in 2022
  • DAILY NUGGET.  Change of Direction with new BOJ Leadership? Ha, policy direction has already been decided, and whoever the Govt selects will just continue where Kuroda left off.

LG Energy Solution: Another MSCI Upweight Event Coming in May

By Sanghyun Park

  • MSCI will likely reflect the ESOP selling in the upcoming rebalancing. Since MSCI’s rounding magnitude is 5%p, a similar passive impact as that of the previous IR may appear.
  • This means that the remarkable price rally up to last November’s announcement date can be repeated this time closer to the announcement time in May.
  • Conservatively assuming MSCI Korea’s tracking fund size to be ₩60T, LG Energy’s 5%p up-weight is expected to induce about ₩330B of passive inflow, which is 2.09x ADTV.

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Jan 22
0

Most Read: Brilliance China Automotive, Li Auto, PEXA Group, Adani Enterprises, Jinko Solar, Jb Financial Group, CP ALL PCL, Sabana Industrial REIT, Bank of Kyoto and more

By | Daily Briefs, Most Read

In today’s briefing:

  • HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
  • HSI Index Rebalance Preview: Better Late Than Never?
  • Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi
  • ASX200 Index Rebalance: PEXA to Replace Pendal
  • SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro
  • CSI300 Index Rebalance Preview: Early Look at Potential Changes in June
  • KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)
  • CP ALL PCL (CPALL TB) – A King for All Seasons
  • Sabana REIT (SSREIT SP): Partial Offer from Volare
  • Last Week In SPACE: Bank of Kyoto, WM Motors, Japanese Banks, Hong Kong Aerospace, CP ALL/MAKRO

HSCI Index Rebalance Preview and Stock Connect: A Lot of Change

By Brian Freitas

  • We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
  • We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only. 
  • There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

HSI Index Rebalance Preview: Better Late Than Never?

By Brian Freitas

  • There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
  • We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
  • All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi

By Brian Freitas

ASX200 Index Rebalance: PEXA to Replace Pendal

By Brian Freitas

SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro

By Brian Freitas

  • A third of the way through the review period of the June rebalance, we see one potential index change with Adani Enterprises (ADE IN) replacing Wipro Ltd (WPRO IN). 
  • Adani Enterprises (ADE IN) could move lower in the short-term due to the public issue of shares but should find support from passive buying from local and global index trackers.
  • Wipro Ltd (WPRO IN) has underperformed most of its peers by a wide margin over the last year and the passive selling could provide an entry point.

CSI300 Index Rebalance Preview: Early Look at Potential Changes in June

By Brian Freitas

  • Two thirds of the way through the review period, we see 15 potential index changes at the June rebalance that will be implemented at the close on 9 June.
  • We estimate a one-way turnover of 2.35% at the June rebalance leading to a one-way trade of CNY 5.57bn.
  • The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last six months, though there is some near-term deterioration.

KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)

By Brian Freitas

CP ALL PCL (CPALL TB) – A King for All Seasons

By Angus Mackintosh

  • CP ALL is a unique and high-quality proxy for the recovery in domestic consumer demand plus increasing tourist arrivals, which should soon see a further boost from China.
  • We would expect a strong finish to the year with an even stronger pickup in 2023 across convenience stores, Lotus supermarkets and hypermarkets, as well as Siam Makro cash-and-carry. 
  • CP ALL is a top growth pick in Thailand, with EPS expected to grow by +35% and 25% for FY2023E and FY2024E, with ongoing expansion and economic recovery.

Sabana REIT (SSREIT SP): Partial Offer from Volare

By Arun George

  • Sabana Industrial REIT (SSREIT SP) disclosed a partial offer from Volare to acquire a maximum of 109.6 million units at $0.465 per unit, a 9.4% premium to the undisturbed price.
  • The partial offer is conditional on minimum acceptances representing 10.00% of outstanding units. Quarz Capital, the activist fund, says the offer is attractive.
  • ESR Group (1821 HK), the sponsor, is unlikely to tender. Based on a proration of 13.54% and at the last close price of S$0.425, the breakeven price is S$0.420.

Last Week In SPACE: Bank of Kyoto, WM Motors, Japanese Banks, Hong Kong Aerospace, CP ALL/MAKRO

By David Blennerhassett

  • Japanese banks are the hottest new thing but unless you think Bank of Kyoto is going to change its spots, it’s still best thought of as a range trade. 
  • WM Motors opts for a backdoor listing via merging with WE Solutions Limited (860 HK). There’s probably a good reason for doing so.
  • You pay for the liquidity of Japanese banks by paying a higher PBR against not as much improvement in ROE. That’s life.

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Jan 21
0

Most Read: PEXA Group, Anycolor, Jb Financial Group, LG Chem Ltd, Fanuc Corp, DGB Financial Group, Asymchem Laboratories, LG Energy Solution, CP ALL PCL, Golden Energy & Resources and more

By | Daily Briefs, Most Read

In today’s briefing:

  • ASX200 Index Rebalance: PEXA to Replace Pendal
  • Anycolor (5032 JP) Shareholder Structure Now And Future
  • KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)
  • Introducing KODEX Top 5 Plus ETF Rebalancing Event
  • Fanuc (6954) | Bullish on Robots
  • KOSPI 200 Ad Hoc Rebalance for Meritz Securities: DGB Financial Will Be Added
  • Hong Kong CEO & Director Dealings (20 Jan): Asymchem Labs, Honbridge, Flat Glass, Gushengtang
  • ECM Weekly (20th Jan 23) – HK Brokers, Wuxi, IQIYI, Anycol, Adani, WM Mot, LG Ene, AIn, Oasis, Perta
  • CP ALL PCL (CPALL TB) – A King for All Seasons
  • Golden Energy (GER SP): Long-Stop Date Extended as the Offer Looks Increasingly Light

ASX200 Index Rebalance: PEXA to Replace Pendal

By Brian Freitas

Anycolor (5032 JP) Shareholder Structure Now And Future

By Travis Lundy

  • Anycolor (5032 JP) is conducting a Secondary Offering so that three major pre-IPO shareholders can sell their shares. Legend Capital, Skyland Ventures, and Highsino Group are selling.
  • That should bring minimum publicly-traded longs to 6.3685mm shares, but it could easily be higher. 
  • Based on the most conservative read of all the data, Real World Float is a net 21.2% after this offering. In reality, probably higher. But there’s still overhang.

KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)

By Brian Freitas

Introducing KODEX Top 5 Plus ETF Rebalancing Event

By Sanghyun Park

  • At this point, one constituent change is expected, and LG Chem is expected to replace KT&G.
  • The return of the equal-weighted long/short basket trade for the constituent changes in the past two years was recorded from 2.3% to 3.8%.
  • Both LG Chem and KT&G are expected to have a significant rebalancing flow impact. It can be an event that brings a juicy day trading return.

Fanuc (6954) | Bullish on Robots

By Mark Chadwick

  • Fanuc is a core structural growth stock that has fallen by -4% over the past year. We turn bullish with 8 days to earnings
  • We believe that Fanuc is a key beneficiary of continued investment in automation and realignment of supply chains globally
  • We focus on Fanuc’s core value drivers – revenue, margins, risk and investment – and see 25% upside for long term investors

KOSPI 200 Ad Hoc Rebalance for Meritz Securities: DGB Financial Will Be Added

By Sanghyun Park

  • With JB Financial Group gone for Meritz Fire, the next one in line will enter KOSPI 200 in place of Meritz Securities. And the lucky one is DGB Financial.
  • DGB can expect an inflow of 8.23x ADTV and will face a 2.8x ADTV in one day on March 31.
  • Given the size of the preemptive flow that JB Financial is currently attracting, we should prepare for DBG to start receiving a similar level of price impact earlier than usual.

Hong Kong CEO & Director Dealings (20 Jan): Asymchem Labs, Honbridge, Flat Glass, Gushengtang

By David Blennerhassett

ECM Weekly (20th Jan 23) – HK Brokers, Wuxi, IQIYI, Anycol, Adani, WM Mot, LG Ene, AIn, Oasis, Perta

By Sumeet Singh

  • Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
  • Things are starting to pickup on the IPO front with the first somewhat sizeable US ADR filing done this week.
  • Placements deal flow continued to stay strong this week, even as the performance didn’t.

CP ALL PCL (CPALL TB) – A King for All Seasons

By Angus Mackintosh

  • CP ALL is a unique and high-quality proxy for the recovery in domestic consumer demand plus increasing tourist arrivals, which should soon see a further boost from China.
  • We would expect a strong finish to the year with an even stronger pickup in 2023 across convenience stores, Lotus supermarkets and hypermarkets, as well as Siam Makro cash-and-carry. 
  • CP ALL is a top growth pick in Thailand, with EPS expected to grow by +35% and 25% for FY2023E and FY2024E, with ongoing expansion and economic recovery.

Golden Energy (GER SP): Long-Stop Date Extended as the Offer Looks Increasingly Light

By Arun George

  • The long-stop date for the satisfaction of the offer conditions has been extended from 9 April to 9 August, to help Dian Swastatika Sentosa (DSSA IJ) obtain shareholder approval.
  • An alternative explanation is that the Widjaja family’s offer for Golden Energy & Resources (GER SP) is increasingly looking unattractive in light of Stanmore Coal (SMR AU)’s share price rally. 
  • The offer remains light and we think that there is a good chance that the Widjaja family will raise its offer (likely a bump to the delisting price) to succeed.  

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Jan 20
0

Most Read: HDFC Bank, Meituan, Anycolor, Shandong Fengxiang, Esso Thailand, Kakao Pay, Pertamina Geothermal, Jb Financial Group and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Anycolor (5032) Overseas Offering – Pre-IPO VCs Selling This High Growth Name
  • HDFC/​​​HDFC Bank Mega Merger: Foreign Holdings Move Lower; Foreign Room Higher
  • Quiddity Primer for HSTECH Rebalance Events
  • Anycolor (5032 JP) Shareholder Structure Now And Future
  • Fengxiang (9977 HK): A Delisting Fail That Is No Biggie
  • Esso Thailand: Ignore Bangchak Corp’s Takeunder
  • MSCI Korea: Potential Inclusions & Exclusions in February 2023 Highlighted by Locals
  • Good Morning Japan |Fed Hawks Return; Earnings Weigh; ValueAct Tgts S&I(3382); Spate of JP BUY U/Gs
  • Pertamina Geothermal Energy IPO Early Look- Ticks the ESG Box but Has Missed Its Targets in the Past
  • KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)

Anycolor (5032) Overseas Offering – Pre-IPO VCs Selling This High Growth Name

By Travis Lundy

  • In late December, I wrote 2023 High Conviction – Anycolor (5032) Aiming at TSE Prime and TOPIX – And How!. Shares closed at ¥6,470 that day. Then went to ¥5,500. 
  • They have since rebounded some, and now 3 pre-IPO VC investors have announced an overseas offering. This was NOT unexpected. They need more shares to get their TSE Prime listing.
  • The Offering is 3.27mm shares which is 5-6 days of volume. This lifts the TSE Prime inclusion amount, eventually, but the story is still about growth and model.

HDFC/​​​HDFC Bank Mega Merger: Foreign Holdings Move Lower; Foreign Room Higher

By Brian Freitas

Quiddity Primer for HSTECH Rebalance Events

By Janaghan Jeyakumar, CFA

  • The Hang Seng Tech Index (HSTECH INDEX) represents the 30 largest technology companies listed in Hong Kong which have high business exposure to certain technology themes.
  • This index was launched in 2020 and has gained significant passive tracking over the last two years.
  • In this insight, we take a brief look at the selection criteria and the historical price performance of past Rebalance Events.

Anycolor (5032 JP) Shareholder Structure Now And Future

By Travis Lundy

  • Anycolor (5032 JP) is conducting a Secondary Offering so that three major pre-IPO shareholders can sell their shares. Legend Capital, Skyland Ventures, and Highsino Group are selling.
  • That should bring minimum publicly-traded longs to 6.3685mm shares, but it could easily be higher. 
  • Based on the most conservative read of all the data, Real World Float is a net 21.2% after this offering. In reality, probably higher. But there’s still overhang.

Fengxiang (9977 HK): A Delisting Fail That Is No Biggie

By David Blennerhassett

  • Unless investing for the back-end, it was a no-brainer once the Composite Document for PAG Capital’s unconditional mandatory Offer for Shandong Fengxiang (9977 HK) was dispatched.
  • At the time of the Doc, shares were trading through terms. You could have sold in the market; or opted to tender.
  • The General/H-class meetings were held yesterday, the 18 January, to vote on delisting Fengxiang. There was no guarantee this would occur. And it didn’t. Yet the Offer remains open.

Esso Thailand: Ignore Bangchak Corp’s Takeunder

By David Blennerhassett

  • Back on the 11 January, refiner/retailer Bangchak Corporation (BCP TB)‘s board approved the purchase of a 65.99% stake in Esso Thailand (ESSO TB) from Exxon Mobil.
  • The purchase price remains indeterminate (the indicative price is Bt8.84/share), based on a pricing adjustment mechanism as it relates to Esso’s financial accounts at the close of the stake purchase.
  • Esso is down 17% since the announcement, and 37% from its recent (Oct-22) high. That seems excessive. 

MSCI Korea: Potential Inclusions & Exclusions in February 2023 Highlighted by Locals

By Douglas Kim

  • We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (10 February) that are being highlighted by the locals. 
  • The potential candidates for inclusion in the MSCI Korea Index emphasized by locals in February 2023 include Kakao Pay and Hanwha Aerospace. 
  • The potential exclusion candidates in the MSCI Korea Index emphasized by locals include S-1 Corp, Celltrion Pharm, and Cheil Worldwide. 

Good Morning Japan |Fed Hawks Return; Earnings Weigh; ValueAct Tgts S&I(3382); Spate of JP BUY U/Gs

By Mark Chadwick

  • OVERSEAS: SPX down 3 in a Row as  Fed Hawks out in force; Oil bucks trend ;  P&G see weak sales; Musk makes it up on TESLA’s self driving
  • JAPAN: Kishida Cabinet approval at record lows;  Activist ValueAct tgts S&i(3382); Spate of Street upgrades to BUY incl General Contractors at MS; Japan CPI on tap.
  • DAILY NUGGET: Could be Nothing Burger but the costs of US default is rising as Debt Limit hit.

Pertamina Geothermal Energy IPO Early Look- Ticks the ESG Box but Has Missed Its Targets in the Past

By Sumeet Singh

  • Pertamina Geothermal Energy (PGE) is looking to raise around US$500m in its upcoming Indonesia IPO. PGE is an Indonesian state owned power producer which utilizes geothermal energy to produce electricity.
  • PGE currently manages 13 Geothermal Working Areas with a total capacity of 1,877 MW, of which 672 MW is owned by it, while 1,205 MW is via joint operations.
  • In this note, we take an early look at the IPO.

KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)

By Brian Freitas

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Jan 19
0

Most Read: LG Energy Solution, Anycolor, Mirae Asset TIGER Fn Metaverse ETF, HDFC Bank, Alibaba (ADR), CP ALL PCL, Hanwha Aerospace, Tencent and more

By | Daily Briefs, Most Read

In today’s briefing:

  • 2023 High Conviction – Anycolor (5032) Aiming at TSE Prime and TOPIX – And How!
  • LG Energy IPO Lock-Up – Last of the Lockups at US$3bn
  • Anycolor (5032) Overseas Offering – Pre-IPO VCs Selling This High Growth Name
  • ETF Arbitrage in Korea: Names Suitable for Pair Trades
  • HDFC/​​​HDFC Bank Mega Merger: Foreign Holdings Move Lower; Foreign Room Higher
  • Aequitas HK IPOs Sponsor + GC Performance (2019-2022)
  • Anycolor Placement – First Placement Since Listing but Should Do Fine
  • StubWorld: CPALL Trading “Cheap” To MAKRO
  • Hanwha Aerospace: A Surprise in MSCI’s February QCIR?
  • Tencent/Netease: January Game Approval Shows Tencent Playing Catching Up

2023 High Conviction – Anycolor (5032) Aiming at TSE Prime and TOPIX – And How!

By Travis Lundy

  • “VTuber” (Virtual Youtuber) animated influencer company Anycolor (5032 JP) was listed on 8 June 2022 at ¥1530. The stock popped 214% on Day1.It is up another 60% since then.
  • Today Anycolor reported Q2 earnings (result, presentation) and revised its full-year forecast to 30 April. Revenues will be +7-18% vs forecast, OP +18-39%, NP +15-39%. Price is 43x forecast EPS.
  • The company also announced it is preparing a Section Transfer application, but gave little more info. So we dig into what THAT means.

LG Energy IPO Lock-Up – Last of the Lockups at US$3bn

By Sumeet Singh

  • LG Energy Solution (373220 KS) (LGES) raised US$10.8bn in its South Korea IPO, after pricing at the top-end of the IPO price range.
  • The stock was listed on 27th Jan 22. Its one-year lockup is set to expire soon.
  • In this note, we will talk about the lock-up dynamics and updates since our last note

Anycolor (5032) Overseas Offering – Pre-IPO VCs Selling This High Growth Name

By Travis Lundy

  • In late December, I wrote 2023 High Conviction – Anycolor (5032) Aiming at TSE Prime and TOPIX – And How!. Shares closed at ¥6,470 that day. Then went to ¥5,500. 
  • They have since rebounded some, and now 3 pre-IPO VC investors have announced an overseas offering. This was NOT unexpected. They need more shares to get their TSE Prime listing.
  • The Offering is 3.27mm shares which is 5-6 days of volume. This lifts the TSE Prime inclusion amount, eventually, but the story is still about growth and model.

ETF Arbitrage in Korea: Names Suitable for Pair Trades

By Sanghyun Park

  • As for the one using the creation/redemption mechanism, the tracking error (market value – NAV) is still too tight to call this an arbitrage opening.
  • Then, at this point, we need to pay attention to ETF arbitrage from a pair trade perspective. There are a total of 3 pairs we can consider for this.
  • The mean reversion cycle is still not short. However, the diversion range is not extensive, so we can aim for a relatively stable setup in a market with increased volatility.

HDFC/​​​HDFC Bank Mega Merger: Foreign Holdings Move Lower; Foreign Room Higher

By Brian Freitas

Aequitas HK IPOs Sponsor + GC Performance (2019-2022)

By Ethan Aw

  • In this note, we will take a look at broker performance for HK IPOs from 2019-2022. 
  • The following dataset includes all HK IPOs above US$100m for the period of Calendar Years 2019-2022, which amounted to a total of 173 deals. 
  • The deals you see in this note are based on our historical IPO tracker. Feel free to drop us a message for additional information on any of these IPOs.

Anycolor Placement – First Placement Since Listing but Should Do Fine

By Ethan Aw

  • Some shareholders of Anycolor (5032 JP) are looking to raise US$151.5m via an International Only Follow-on offering. 
  • The deal is a relatively small one to digest in terms of ADV, representing only 4 days of three-month ADV.  Although, it is still 10% of current mcap. 
  • In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

StubWorld: CPALL Trading “Cheap” To MAKRO

By David Blennerhassett

  • 7-11 play CP ALL PCL (CPALL TB) is coming up “cheap” on my monitor versus cash & carry subsidiary Siam Makro Public (MAKRO TB). 
  • Preceding my comments on CPALL/MAKRO are the current setup/unwind tables for Asia-Pacific Holdcos. 
  • These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Hanwha Aerospace: A Surprise in MSCI’s February QCIR?

By Sanghyun Park

  • Hanwha Aerospace is still narrowly across the borderline. It is especially painful that the share price was corrected by more than 4% today.
  • But suppose the cutoff MC is set at less than ₩2.7T, and Aerospace succeeds in recovering slightly. In that case, it will likely manage to come within the borderline.
  • Given that the preemptive flow must not have been significant and the profit forecast has been upwards until recently, a price shooting may appear at the time of the announcement.

Tencent/Netease: January Game Approval Shows Tencent Playing Catching Up

By Ke Yan, CFA, FRM

  • China just announced game approval for January batch. The number of games approved is slightly higher than the previous three months.
  • Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
  • Both Tencent and Netease received approval for one game each. Overall Tencent is still behind its peers since the approval resumed.

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Jan 18
0

Most Read: Mizuho Financial Group, Relia Inc, Tencent, Tsi Holdings, WM Motor Technology Co Ltd, OASIS Corp, Hong Kong Aerospace Technology, Meritz Fire & Marine Insurance and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Thinking About Japanese Banks – Go Big, Go Small, Go Insurance
  • Mitsui & Co To Buy Out Relia (4708) – Moshi Moshi Is TOO CHEAP
  • Quiddity Primer for HSCEI Rebalance Events
  • TSI Holdings (3608) – New Year, New Buyback, Still Good, Still Cheap
  • WM Motor Reverse Merger and Placement – The US$2bn Merger and US$500m Planned Placement
  • OASIS IPO Pricing Is Not Even Worth Reviewing: Strongly Recommend Avoiding It
  • Hong Kong Aerospace Tech’s (1725 HK) US$1bn Rocket-Launch Site
  • Meritz Fire & Marine Insurance: Treasury Shares Cancellation of 5.9% of Outstanding Shares
  • Gap Trades in Korean Prefs Vs Common Share Pairs in 1Q 2023
  • Good Morning Japan |Rally Sputters as Earnings in Focus; GS Misses; BOJ – DAY OF RECKONING

Thinking About Japanese Banks – Go Big, Go Small, Go Insurance

By Travis Lundy

  • Japanese Banks have had a good run recently. From the day before the BOJ changed the 10yr yield target in December in its YCC programme to today, +30% vs TOPIX.
  • The question is how that is spread out. There are lots of banks. Some are cheaper than others. Some are better than others. Can we draw conclusions to trade better?
  • If you are looking at Japanese Banks to play a change in BOJ policy when Governor Kuroda’s term ends shortly, there are definitely conclusions one can draw. I offer comments.

Mitsui & Co To Buy Out Relia (4708) – Moshi Moshi Is TOO CHEAP

By Travis Lundy

  • Mitsui&Co has been in Relia Inc (4708 JP) for a long time. As part of investing in BPO/RPA/AI services, they are buying out Relia, merging it with a KDDI sub.
  • They are buying it at an all-time high, and a 50% premium. Looks nice. But it’s not nice enough.
  • This is one of those times when I can reiterate, Japan Needs More Cowbell. 

Quiddity Primer for HSCEI Rebalance Events

By Janaghan Jeyakumar, CFA

  • The Hang Seng China Enterprises Index (HSCEI INDEX) is one of the most widely discussed indices in the Hang Seng Indices family.
  • The HSCEI serves as a benchmark to reflect the overall performance of “Mainland” Securities listed in Hong Kong.
  • In this insight, we take a brief look at the selection criteria and the historical price performance of past Rebalance Events.

TSI Holdings (3608) – New Year, New Buyback, Still Good, Still Cheap

By Travis Lundy

  • Last April I wrote about Tsi Holdings (3608 JP) which was trading at 0.5x EV/EBITDA and where I suggested it could double in 2-3yrs. 
  • The day after I wrote, the stock closed at ¥312/share, briefly touched ¥480 before ending the year at ¥444. On Friday they announced Q3 earnings, now TTM EV/EBITDA is 2.5x.
  • They also announced a buyback, and the stock is up further. It is worth looking into the details both near-term and what they mean longer-term.

WM Motor Reverse Merger and Placement – The US$2bn Merger and US$500m Planned Placement

By Sumeet Singh

  • On 11th Jan 2023, WM Motor Technology Co Ltd announced its intention to merge with Apollo Future Mobility (860 HK) .
  • WM Motor failed to list in Hong Kong last year and this is essentially its attempt to undertake a reverse merger at a valuation well below its previous funding rounds.
  • In this note, we will talk about the deal dynamics and  take an early look at its implications.

OASIS IPO Pricing Is Not Even Worth Reviewing: Strongly Recommend Avoiding It

By Sanghyun Park

  • Of the four peers, only Coupang adopts the gross method. Since the others adopt the net method, it is impossible to compare PSR with OASIS, which uses the gross method.
  • If they really want to use PSR, it should only be compared with Coupang. Even if we apply CPNG’s current EV/Sales multiple (1.36x), it would only slightly exceed ₩0.5T.
  • A more logical way would be to use EV/GMV. Even in this case, it wouldn’t be easy to expect a valuation higher than ₩0.5T.

Hong Kong Aerospace Tech’s (1725 HK) US$1bn Rocket-Launch Site

By David Blennerhassett

  • On the 9th of January, 2023, the Republic of Djibouti signed an MOU with Hong Kong Aerospace Technology (1725 HK) (HKAT) to develop a (reported) US$1bn international commercial “spaceport”.
  • In the middle of last year, Djibouti announced plans to launch two nanosatellites to facilitate farming and other related activities.
  • HKAT, a recent back-door listing, has a market cap of US$258mn. Wholly-owned subsidiary Gang Hang Ke (Shenzhen) Space Technology, has been successfully involved in the launch of ten satellites. 

Meritz Fire & Marine Insurance: Treasury Shares Cancellation of 5.9% of Outstanding Shares

By Douglas Kim

  • After the market close today, Meritz Fire & Marine Insurance announced that it will cancel 6.57 million treasury shares, representing 5.9% of its outstanding shares. 
  • This treasury shares cancellation by Meritz F&M Insurance should have a continued positive impact on its share price. 
  • Share cancellation by Meritz F&M Insurance and the need to adjust to higher merger ratio are likely to lead to Meritz F&M Insurance outperforming MFG in the next few days.

Gap Trades in Korean Prefs Vs Common Share Pairs in 1Q 2023

By Douglas Kim

  • In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 1Q 2023. 
  • The pref/common shares ratio of the 28 companies in this insight declined from 68.9% on 16 July 2022 to 65% on 16 January 2023, which is a short term reversal.
  • We see some attractive longer-term opportunities for Amorepacific Corp, Doosan Fuel Cell, LG H&H, and LG Chem, which have high discounts for the preferred shares versus their counterpart common shares.

Good Morning Japan |Rally Sputters as Earnings in Focus; GS Misses; BOJ – DAY OF RECKONING

By Mark Chadwick

  • OVERSEAS: SPX snapp rally;  Eearnings refocus as GS misses; Tech bid continues;  TELSA +7% as analysts see merits of price cuts; Japan’s BOJ in focus.
  • JAPAN: NKY Futs +0.4% vs Cash; USDJPY flat at 129.16. BOJ Day -this is all that matters.
  • DAILY NUGGET: Sustainable Aviation Fuel thematic is ramping up. ANA and JAL recent annoucements highlight the commercial potential for the supply chain.

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Jan 17
0

Most Read: Mizuho Financial Group, Bank of Kyoto, Wuxi Biologics, Relia Inc, Tencent, Alibaba (ADR), Taiwan Semiconductor (TSMC) – ADR and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Thinking About Japanese Banks – Go Big, Go Small, Go Insurance
  • Bank of Kyoto (8369) – Not a Normal Regional Bank
  • Wuxi Biologics Placement – Lesser Discount than Recent Deals but Still Looks Good
  • Mitsui & Co To Buy Out Relia (4708) – Moshi Moshi Is TOO CHEAP
  • Quiddity Primer for HSCEI Rebalance Events
  • Alibaba: Buoyed By The Ending Crackdowns, Yet Expensive With No Turnaround in Sight For Cash Cows
  • Taiwan Dual-Listings: TSMC Premium In Upper Range, UMC Briefing This Afternoon
  • TSMC Analyst Call Take-Aways: Signs of Industry Stabilization & 2H23E Recovery
  • HK Short Interest Weekly: Tencent, Baba, CMB, Bidu, Meituan, HSBC, Differ, Li Auto
  • Good Morning Japan |US Off = Directionless; BOJ in Focus +2trn JGB Buying; Kuroda off to Davos

Thinking About Japanese Banks – Go Big, Go Small, Go Insurance

By Travis Lundy

  • Japanese Banks have had a good run recently. From the day before the BOJ changed the 10yr yield target in December in its YCC programme to today, +30% vs TOPIX.
  • The question is how that is spread out. There are lots of banks. Some are cheaper than others. Some are better than others. Can we draw conclusions to trade better?
  • If you are looking at Japanese Banks to play a change in BOJ policy when Governor Kuroda’s term ends shortly, there are definitely conclusions one can draw. I offer comments.

Bank of Kyoto (8369) – Not a Normal Regional Bank

By Travis Lundy

  • Bank of Kyoto (8369 JP) is a classic “deep value” trade. It has a low PBR, and… “Dude, it’s equity portfolio alone is worth more than the whole bank.”
  • It has a larger market cap than most super-low PBR Japanese regional banks, is more liquid, and the narrative is quite easy to tell. 
  • Japanese Banks are the hottest new thing but unless you think This Particular Leopard is going to change its spots, it is still best thought of as a range trade. 

Wuxi Biologics Placement – Lesser Discount than Recent Deals but Still Looks Good

By Ethan Aw

  • Wuxi Biologics Holdings is looking to raise up to US$513m by selling about 1.3% of Wuxi Biologics (2269 HK). 
  • This is the company’s 16th placement since it listed in June 2017. 
  • In this note, we will discuss deal dynamics, past deal performance, and share the scores on our ECM framework.

Mitsui & Co To Buy Out Relia (4708) – Moshi Moshi Is TOO CHEAP

By Travis Lundy

  • Mitsui&Co has been in Relia Inc (4708 JP) for a long time. As part of investing in BPO/RPA/AI services, they are buying out Relia, merging it with a KDDI sub.
  • They are buying it at an all-time high, and a 50% premium. Looks nice. But it’s not nice enough.
  • This is one of those times when I can reiterate, Japan Needs More Cowbell. 

Quiddity Primer for HSCEI Rebalance Events

By Janaghan Jeyakumar, CFA

  • The Hang Seng China Enterprises Index (HSCEI INDEX) is one of the most widely discussed indices in the Hang Seng Indices family.
  • The HSCEI serves as a benchmark to reflect the overall performance of “Mainland” Securities listed in Hong Kong.
  • In this insight, we take a brief look at the selection criteria and the historical price performance of past Rebalance Events.

Alibaba: Buoyed By The Ending Crackdowns, Yet Expensive With No Turnaround in Sight For Cash Cows

By Oshadhi Kumarasiri

  • Alibaba (ADR) (BABA US), along with several other Chinese tech names have rallied more than 100% over the past 2.5 months with the Chinese government indicating regulatory crackdowns are over.
  • However, we think this could just be a temporary respite for tech names as there’s a lot more to be done in terms of a data security and privacy standpoint.
  • Nevertheless, Alibaba Group (9988 HK) is still quite expensive, given that government interventions have pretty much curtailed Alibaba’s avenues for growth in the domestic market.

Taiwan Dual-Listings: TSMC Premium In Upper Range, UMC Briefing This Afternoon

By Vincent Fernando, CFA

  • TSMC ADRs are trading at the high end of the recent premium/discount range.
  • UMC ADRs are near the middle of their premium/discount range, however the company will host its analyst results call this afternoon.
  • ASE’s ADR premium is at the upper end of its range.

TSMC Analyst Call Take-Aways: Signs of Industry Stabilization & 2H23E Recovery

By Vincent Fernando, CFA

  • TSMC’s comments during its 4Q22 analyst call indicate the company expects an industry recovery in 2H23E, adding further confirmation to this view expressed by other firms.
  • TSMC grew faster than the industry in 2022 and expects to grow faster than the industry in 2023E again.
  • Based on our cycle-adjusted PE valuation metric, TSMC my not be super cheap vs. history, but it is also inexpensive.

HK Short Interest Weekly: Tencent, Baba, CMB, Bidu, Meituan, HSBC, Differ, Li Auto

By Ke Yan, CFA, FRM

  • We analyzed the latest HK SFC report for aggregate short position as of Jan 6th.
  • Top short increases and decreases were tabulated for one week and four week period. 
  • We highlight short changes in Tencent, Baba, Cm Bank, Bidu, Meituan, HSBC, Differ Gp Auto, Li Auto-W.

Good Morning Japan |US Off = Directionless; BOJ in Focus +2trn JGB Buying; Kuroda off to Davos

By Mark Chadwick

  • OVERSEAS:  US MLK Holidays – World markets directionless;  US Equity Futs flat; European Markets bid on Inflation peak;  BOJ decision to lead markets this week.
  • JAPAN:  NKY Futures +0.2% vs Cash ; USDJPY flat at 128.52 ; BOJ speculation dominates local headlines;  Kuroda heads to Davos = no fireworks? ;  Dec Machine Tools orders +1%YoY
  • DAILY NUGGET:  Fast Retailing and Sustainability: Set to introduce a new repair service in its domestic stores.

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Jan 16
0

Most Read: Brilliance China Automotive, Shinko Electric Industries, Melco International Development, Bank of Kyoto, Fujitsu Ltd, Tencent, Flat Glass, DearU and more

By | Daily Briefs, Most Read

In today’s briefing:

  • HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
  • Fujitsu (6702) Subsidiary Selldowns To Come
  • Melco Trading “Cheap” As Macau Opens Up
  • Global Liquidity Has Bottomed …
  • Bank of Kyoto (8369) – Not a Normal Regional Bank
  • Last Week In SPACE: Cosmo, Olam, Yamada Denki, Jardine Cycle/Astra, Tianneng Power/Battery, Fujitsu
  • ECM Weekly (15th Jan 2023) – 2022 Performance, 2023 Pipeline, Bilibili, HTHT, China Edu, CDP, Allied
  • Hong Kong CEO & Director Dealings (15 Jan): WWPKG, Tianyun International, Yeahka, Flat Glass
  • DearU’ Bubble + NCsoft’s Universe = The Largest K-Pop Fandom Platform in Korea
  • Good Morning Japan |Fed 1 Inflation 0, Fed Wins; Equity Bid Continues; Telsa Cuts Px; BOJ in Focus

HSCI Index Rebalance Preview and Stock Connect: A Lot of Change

By Brian Freitas

  • We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
  • We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only. 
  • There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

Fujitsu (6702) Subsidiary Selldowns To Come

By Travis Lundy

Melco Trading “Cheap” As Macau Opens Up

By David Blennerhassett

  • After Macau’s government renewed the concession periods for the city’s six incumbent gambling concessionaires for another 10 years, the key players are up 86% on average
  • Both Melco International Development (200 HK) and Melco Resorts & Entertainment (MLCO US) have gained a little over 100%. 
  • Melco’s NAV discount is back out to 36%. The simple ratio – Melco/MCLO – is around the lowest level since Melco began consolidating MCLO in early 2017.

Global Liquidity Has Bottomed …

By Michael J. Howell

  • Global Liquidity Index (GLI) moves higher to 17.5 (normal range 0-100). Most national liquidity indexes bottomed around October 2022
  • Global Liquidity will reverse its recent fall and rebound to US$174 trillion. Rising Central Bank Liquidity is a common theme. Financial dominance driving a return to Central Bank QE.
  • More liquidity is consistent with future stabilisation and moderate gains in World asset markets. Rebound investment phase. Emerging Markets and Cyclicals favoured. Gold, commodities and crypto also could be winners

Bank of Kyoto (8369) – Not a Normal Regional Bank

By Travis Lundy

  • Bank of Kyoto (8369 JP) is a classic “deep value” trade. It has a low PBR, and… “Dude, it’s equity portfolio alone is worth more than the whole bank.”
  • It has a larger market cap than most super-low PBR Japanese regional banks, is more liquid, and the narrative is quite easy to tell. 
  • Japanese Banks are the hottest new thing but unless you think This Particular Leopard is going to change its spots, it is still best thought of as a range trade. 

Last Week In SPACE: Cosmo, Olam, Yamada Denki, Jardine Cycle/Astra, Tianneng Power/Battery, Fujitsu

By David Blennerhassett

  • Given the likelihood of more buybacks and pressure on capital allocation and structuring of the renewable energy business, Cosmo Energy (5021 JP) is more of a buy than a sell.
  • Olam Group (OLG SP) is a tricky beast to analyze. A key issue for investors is valuing Olam, ex- Olam Agri, ex- OFI.
  • Unloved as it is, Yamada Denki (9831 JP) is still cheap. 

ECM Weekly (15th Jan 2023) – 2022 Performance, 2023 Pipeline, Bilibili, HTHT, China Edu, CDP, Allied

By Sumeet Singh

  • Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs
  • Things remain quiet on the IPO front and are likely to remain that way till CNY. Korea was once again the one that set the IPO ball rolling.
  • Placements were a different matter with deal flow pickup up where it left off last week.

Hong Kong CEO & Director Dealings (15 Jan): WWPKG, Tianyun International, Yeahka, Flat Glass

By David Blennerhassett

DearU’ Bubble + NCsoft’s Universe = The Largest K-Pop Fandom Platform in Korea

By Douglas Kim

  • DearU’s acquisition of NCSoft’s Universe K-Pop fandom platform will expand DearU Bubble’s number one position in the K-Pop fandom platform in Korea.
  • The sale of Universe by NCSoft is a win-win situation for both DearU and NCsoft.
  • Applying a 25x P/E to an estimated net profit of 50 billion won in 2024 would suggest an market cap of 1.25 trillion won for DearU, representing a 52% upside. 

Good Morning Japan |Fed 1 Inflation 0, Fed Wins; Equity Bid Continues; Telsa Cuts Px; BOJ in Focus

By Mark Chadwick

  • OVERSEAS: SPX +0.4%DoD +2.7%WoW; Semi run continues with SOX +0.4%DoD +6.2%WoW; Beta and Growth the big WoW winners;  Fed’s Bostic leans to 25bp hike; Tesla cuts prices
  • JAPAN:  NKY Futs -1.3% vs Cash;  JGB 10Yr Yld hits 0.512% despite BOJ 10trn yen buying; USDJPY up to127.87;  DECARBONIZATION: Resonac (Showa Denko) expansion; Toray  expansion; METI CCS roadmap
  • DAILY NUGGET: Slowing EV sales in China ? Maybe, but its still the largest EV market in the world. We see Nidec as the best way to play.

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Jan 15
0

Most Read: XPeng, Brilliance China Automotive, DMCI Holdings, Bumi Resources Minerals Tbk, Page Industries, Li Auto, Jinko Solar, Adani Enterprises, PEXA Group and more

By | Daily Briefs, Most Read

In today’s briefing:

  • HSCEI Index Rebalance Preview: Handling Treatment & Changes in March
  • HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
  • HSI Index Rebalance Preview: Better Late Than Never?
  • PCOMP Index Rebalance Preview Feb 23: Float Increases to Drive Changes & Flow
  • LQ45 Index Rebalance Preview (Jan): Few Weeks to Implementation
  • NIFTY100 Index Rebalance Preview: Active Trading Before Passive Trading Kicks In
  • Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi
  • CSI300 Index Rebalance Preview: Early Look at Potential Changes in June
  • SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro
  • ASX200 Index Rebalance: PEXA to Replace Pendal

HSCEI Index Rebalance Preview: Handling Treatment & Changes in March

By Brian Freitas

  • We expect one change to the Hang Seng China Enterprises Index (HSCEI INDEX) in March, though there is a possibility of a second change.
  • The change in the index handling treatment for Secondary Listings and Dual Primary Listings will also result in some big float changes resulting in inflows to some stocks.
  • If there are two changes to the index, estimated one-way turnover is 2.39% resulting in a one-way trade of HK$1,536m.

HSCI Index Rebalance Preview and Stock Connect: A Lot of Change

By Brian Freitas

  • We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
  • We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only. 
  • There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

HSI Index Rebalance Preview: Better Late Than Never?

By Brian Freitas

  • There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
  • We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
  • All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.

PCOMP Index Rebalance Preview Feb 23: Float Increases to Drive Changes & Flow

By Brian Freitas

LQ45 Index Rebalance Preview (Jan): Few Weeks to Implementation

By Brian Freitas

NIFTY100 Index Rebalance Preview: Active Trading Before Passive Trading Kicks In

By Brian Freitas

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi

By Brian Freitas

CSI300 Index Rebalance Preview: Early Look at Potential Changes in June

By Brian Freitas

  • Two thirds of the way through the review period, we see 15 potential index changes at the June rebalance that will be implemented at the close on 9 June.
  • We estimate a one-way turnover of 2.35% at the June rebalance leading to a one-way trade of CNY 5.57bn.
  • The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last six months, though there is some near-term deterioration.

SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro

By Brian Freitas

  • A third of the way through the review period of the June rebalance, we see one potential index change with Adani Enterprises (ADE IN) replacing Wipro Ltd (WPRO IN). 
  • Adani Enterprises (ADE IN) could move lower in the short-term due to the public issue of shares but should find support from passive buying from local and global index trackers.
  • Wipro Ltd (WPRO IN) has underperformed most of its peers by a wide margin over the last year and the passive selling could provide an entry point.

ASX200 Index Rebalance: PEXA to Replace Pendal

By Brian Freitas

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Jan 14
0

Most Read: Brilliance China Automotive, MatsukiyoCocokara, Li Auto, Shinko Electric Industries, Cosmo Energy Holdings, Jb Financial Group, Japan Excellent, Melco International Development, China Education Group, Seven & I Holdings and more

By | Daily Briefs, Most Read

In today’s briefing:

  • HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
  • MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period
  • Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi
  • Fujitsu (6702) Subsidiary Selldowns To Come
  • Cosmo Energy (5021) Vs Murakami – It’s On!
  • K200 ETFs’ Swap Trading on Meritz & Fresh Buy-In JB Financial on Jan 27
  • Japan Excellent (8987). It WAS Most Excellent. That’s Now Done.
  • Melco Trading “Cheap” As Macau Opens Up
  • China Education Group (839 HK): Solidifying Investment Thesis After Placement
  • Seven & I’s Valuation Nears Breaking Point

HSCI Index Rebalance Preview and Stock Connect: A Lot of Change

By Brian Freitas

  • We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
  • We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only. 
  • There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period

By Brian Freitas

  • We expect a number of changes to the MSCI Standard indices for the Asia Pacific region at the first Quarterly Comprehensive Index Review to be implemented on 28 February.
  • As usual, most changes are expected in China with a smattering of adds and deletes for the other markets.
  • On average, the adds have outperformed the deletes over the last few weeks and months and pre-positioning should continue for the next couple of weeks.

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi

By Brian Freitas

Fujitsu (6702) Subsidiary Selldowns To Come

By Travis Lundy

Cosmo Energy (5021) Vs Murakami – It’s On!

By Travis Lundy

  • In March 2022, longtime Cosmo Energy Holdings (5021 JP) holder Mubadala sold the last 15.7% of Cosmo Energy in a block sale after having sold 5% 8 months earlier.
  • A month later it was revealed noted Japanese activist Murakami-san had bought 5.1%. A week later it was 8.3%. Then he bought more. Cosmo announced a buyback in May 2022.
  • By November Murakami-san had 19.8%. But behind the scenes there had been discussions and those are now coming to light. Cosmo has announced possible defence measures.

K200 ETFs’ Swap Trading on Meritz & Fresh Buy-In JB Financial on Jan 27

By Sanghyun Park

  • KOSPI 200 ETFs will have to sell Meritz FIRE and buy Meritz FINANCIAL at the close on January 27. JB Financial, the top reserved issue, will replace FIRE.
  • We should consider a Long Short for two Meritz companies just before the 27th. As a follow-up setup, we should aim for a potential widening of the swap arb spread.
  • As for the Long JB Financial, I would set the entry timing one week towards the implementation at the latest and look into Kodex Banks ETF (091170) for a hedge.

Japan Excellent (8987). It WAS Most Excellent. That’s Now Done.

By Travis Lundy

  • 4.5 months ago I wrote about a possible “Sustained Flow Event” on Japan Excellent (8987 JP). Since then, the stock has outperformed every other Office REIT. It’s up since then.
  • Outperformance within Office REITs has been a minimum of 3.5%, and a maximum of ~20.8% vs the biggest peer, with an average and median outperformance of 11.7% and 13.4% respectively.
  • This idiosyncratic story has come to an end. It may be a temporary end, but I don’t see the next catalyst.

Melco Trading “Cheap” As Macau Opens Up

By David Blennerhassett

  • After Macau’s government renewed the concession periods for the city’s six incumbent gambling concessionaires for another 10 years, the key players are up 86% on average
  • Both Melco International Development (200 HK) and Melco Resorts & Entertainment (MLCO US) have gained a little over 100%. 
  • Melco’s NAV discount is back out to 36%. The simple ratio – Melco/MCLO – is around the lowest level since Melco began consolidating MCLO in early 2017.

China Education Group (839 HK): Solidifying Investment Thesis After Placement

By Osbert Tang, CFA

  • Positive response of China Education Group (839 HK)‘s placement indicated a good return of investor appetite to the sector. Its premium multiples stay well justified even after recent rally. 
  • The HK$1.6bn proceeds will reduce gearing to 29.2% (including contract liabilities) from 41.7% with minimal dilution. Narrowing in valuation gap against asking price of targets means more M&A potential. 
  • More funding for expansion of existing campuses, increase in accommodation and the set up of COVID-19 related curriculum will allow CEG to realise higher revenue per student.

Seven & I’s Valuation Nears Breaking Point

By Oshadhi Kumarasiri

  • Seven & I Holdings (3382 JP)‘s Q3 OP of ¥160.1bn was a significant surprise to the upside with consensus OP at ¥130.2bn and us expecting around ¥125-130bn.
  • This was mostly driven by an unexpected upside to the retail fuel margin while gasoline prices have come down by more than 34%.
  • Nevertheless, we would expect this temporary misalignment in retail fuel margin to correct over the next few quarters, resulting in around 35-40% downside to the company’s valuation multiples.

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