Most Read

Today is the review cutoff for dividend data and stock prices that will be used to select the inclusions and exclusions as well as for capping of index weights.
We see 26 adds and 5 deletes for the index at the December rebalance resulting in one-way turnover of 46% and a one-way trade of TWD 78.1bn (US$2.51bn).
Passive trackers will need to buy over 5 days of ADV on 15 stocks and sell over 5 days of ADV on 19 stocks and this will present trading opportunities.

FTSE All-World/All-Cap Index Rebalance: Watch Golden Agri-Resources & Delhivery

For Asia Pacific, there are 2 adds to the FTSE All-World Index, 2 adds to the FTSE All-Cap Index and 2 deletions from the FTSE All-World Index.
All changes are on expected lines. The one surprise is the non-inclusion of Rainbow Children’s Hospital (RAINBOW IN) to the All-Cap Index where it likely just failed investable market cap.
Sungeel Hitech (365340 KS) is also an add to the KOSDAQ 150 Index at the close on 8 December, while there is a huge lock-up expiry for Delhivery (DELHIVER IN).

Hang Seng TECH Index Rebalance: Float & Capping Changes

As expected, there are no adds or deletes for the Hang Seng Tech Index (HSTECH INDEX) in December. However, there are plenty of capping and float changes to drive flows.
The December rebalance is expected to have a one-way turnover of 2.3% resulting in a one-way trade of HK$1.9bn.
Short interest is greater than 5% of float on a few stocks and a continued recovering in markets could lead to a squeeze higher.

Sapporo Holdings: Activist Investor, 3D Investment Partners Is Just A Few Steps From Turning Hostile

By Oshadhi Kumarasiri

Following a couple of investor-activism campaigns against Toshiba Corp (6502 JP) and Fuji Soft Inc (9749 JP), Singapore-based Japan-focused activist investor, 3D-Investment-Partners seems to be turning its attention towards Sapporo.
Earlier this month, 3D Investment Partners requested Sapporo’s outside directors to postpone the announcement of the new Medium Term Plan until they hear out opinions and new ideas from shareholders.
We believe that there’s a chance that 3D Investment Partners could turn hostile as Sapporo Holdings (2501 JP) seems to be completely ignoring the activist investor’s requests and proposals.

FTSE TWSE Dividend+ Dec 22 Quiddity Final Expectations: Crucial Shift in Tracking AUM a GAME CHANGER

By Janaghan Jeyakumar, CFA

In October 2022, FTSE Russell confirmed that the number of constituents in the FTSE TWSE Taiwan Dividend+ Index will be increased from 30 to 50 during the December 2022 Rebalance.
Considering the combined effect of expected index changes and capping flows, there could be 27 potential inflows names and 28 potential outflow names with total one-way flow size of US$2.45bn.
There are multiple names on both sides with several days of volume to trade.

FTSE TWSE Taiwan 50 Index Rebalance Preview: Far Eastern Could Replace AUO

Today is the review cutoff and we expect Far Eastern New Century (1402 TT) to replace AU Optronics (2409 TT) in the FTSE TWSE Taiwan 50 Index in December.
Passive Taiwan 50 trackers will need to buy nearly 6 days ADV on Far Eastern New Century (1402 TT) and sell 1.6 days of ADV on AU Optronics (2409 TT).
There will be same way flows from the FTSE TWSE Taiwan Dividend+ Index trackers and will substantially add to the impact on the stocks.

Link Admin’s In-Specie Distribution of PEXA: Active Selling Followed by Passive Buying

Link Administration (LNK AU) is selling 10% of its shareholding in PEXA Group (PXA) and plans to proceed with an in-specie distribution of the remainder to Link shareholders in January.
The increased float will make PEXA Group (PXA AU) the highest ranked non-index constituent and that should result in inclusion to the S&P/ASX 200 (AS51 INDEX) in March.
There could be selling on PEXA Group (PXA AU) from Link Administration (LNK AU) shareholders following the distribution. Then the passive flows will kick in and support the stock.

Meritz Merger Event: Swap Conditions, Spread Arb Trade, & K200 Flow Implementation

By Sanghyun Park

The last trading day to secure appraisal rights is today (the 22nd). You must buy stocks by today to make arb trade possible using appraisal rights.
We should consider LONG FINANCIAL SHORT FIRE/SECURITIES. KSD allows us to maintain borrowed stocks of the target company without redemption procedures if new stocks are listed after the merger.
K200 trackers will have to buy in for FIRE at the close on January 27, whereas SECURITIES will be on March 31. We should design a setup targeting this preemptively.

FTSE TWSE 50 & 100 Dec 22 Final Expectations: Greatek Is Still the Main Talking Point

By Janaghan Jeyakumar, CFA

The base date for the December 2022 index review FTSE TWSE Taiwan 50 and Taiwan Mid-Cap 100 for the December 2022 Rebalance is today (21st November 2022).
In this insight, we take a look at Quiddity’s final predictions for expected ADDs/DELs for the December 2022 index review.
I expect one change for the Taiwan 50 Index and one change for the Taiwan Mid-Cap 100 index.

Lifestyle (1212 HK)’s Scheme Gets Up

Independent shareholders of Lifestyle International Holdings (1212 HK) comfortably voted through the Scheme resolution.
94.93% of stakeholders present (and via proxy) voted FOR, with 5.07% voting AGAINST.
The last day of trading is the 6 December with payment expected on or before the 30 December.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 21

Most Read: Zhongsheng Group, Haier Smart Home Co Ltd, Golden Agri Resources, Tata Motors Ltd, Semiconductor Manufacturing International Corp (SMIC), China Construction Bank H, Meituan, Monadelphous and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home
HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls
Hang Seng Index Dec22 Rebal – 3 IN, None Out (The March to 80 Continues)
FTSE All-World/All-Cap Index Rebalance: Watch Golden Agri-Resources & Delhivery
SENSEX Dec 22 Index Rebalance: Tata Motors (TTMT) To Replace Dr Reddy (DRRD)
Hang Seng TECH Index Rebalance: Float & Capping Changes
HSCEI Dec 2022 Rebalance – 4 IN, 4 OUT, 3% One-Way Flow
Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan
ECM Weekly (20th Nov 2022) – I-Tail, Growatt, Lygend, SinoHytech, Meituan/Tencent, Olympus, Paytm
S&P/ASX Quiddity Final Expectations Dec 22: Mostly Mining Companies, Avoid Short Buildup!

HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home

The inclusion of Tingyi Holding (322 HK), China Resources Mixc Lifestyle Services (1209 HK) and Haier Smart Home Co Ltd (6690 HK) gets us to 76 index constituents.
Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 2.01% and will result in a one-way trade of HK$3,845m.
Shorts on Haier Smart Home Co Ltd (6690 HK) and Tingyi Holding (322 HK) are around 5% of float and covering could take the stocks higher.

HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls

There are 4 adds and 4 deletes for the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance. The only surprises are some non-adds and non-deletes.
Using prices from the close on 18 November, estimated one-way turnover is 4.64% and will result in a one-way trade of HK$2,612m at the close on 2 December.
Short interest is larger on the deletes than the adds. However, at 17 days of ADV to cover and 11.7% of float, short interest on Zhongsheng Group is huge.

Hang Seng Index Dec22 Rebal – 3 IN, None Out (The March to 80 Continues)

Hang Seng Index continues its march to 80 names, after which it will commence a march, or a slog, to 100 names in an effort to gain more comprehensive coverage
Doing so will admit names which move to Hong Kong from New York and will make way for more dynamism and lower SOE weights.
The three ADDs are Tingyi Holding (322 HK), China Resources Mixc Lifestyle Services (1209 HK), and Haier Smart Home Co Ltd (6690 HK) with a pro-forma combined weight just <1%.

FTSE All-World/All-Cap Index Rebalance: Watch Golden Agri-Resources & Delhivery

For Asia Pacific, there are 2 adds to the FTSE All-World Index, 2 adds to the FTSE All-Cap Index and 2 deletions from the FTSE All-World Index.
All changes are on expected lines. The one surprise is the non-inclusion of Rainbow Children’s Hospital (RAINBOW IN) to the All-Cap Index where it likely just failed investable market cap.
Sungeel Hitech (365340 KS) is also an add to the KOSDAQ 150 Index at the close on 8 December, while there is a huge lock-up expiry for Delhivery (DELHIVER IN).

SENSEX Dec 22 Index Rebalance: Tata Motors (TTMT) To Replace Dr Reddy (DRRD)

As forecast, Tata Motors Ltd (TTMT IN) will be added to the S&P BSE SENSEX Index (SENSEX INDEX) in December to replace Dr. Reddy’s Laboratories (DRRD IN).
We estimate passive trackers will need to buy 2.3x ADV (7.2x delivery volume) on Tata Motors Ltd (TTMT) while selling 5x ADV (10.5x delivery volume) on Dr. Reddy’s Laboratories (DRRD).
The HDFC Limited (HDFC IN) / HDFC Bank (HDFCB IN) merger should see Adani Enterprises (ADE IN) added to the S&P BSE SENSEX Index (SENSEX INDEX) prior to the June rebalance.

Hang Seng TECH Index Rebalance: Float & Capping Changes

As expected, there are no adds or deletes for the Hang Seng Tech Index (HSTECH INDEX) in December. However, there are plenty of capping and float changes to drive flows.
The December rebalance is expected to have a one-way turnover of 2.3% resulting in a one-way trade of HK$1.9bn.
Short interest is greater than 5% of float on a few stocks and a continued recovering in markets could lead to a squeeze higher.

HSCEI Dec 2022 Rebalance – 4 IN, 4 OUT, 3% One-Way Flow

The HSCEI sees 4 names out, 4 names in. The ADDs are PetroChina (857 HK), Zhongsheng Group (881 HK), Li Auto (2015 HK), Haier Smart Home Co Ltd (6690 HK).
The DELETEs are Alibaba Health Information Technology (241 HK), China Gas Holdings (384 HK), Innovent Biologics Inc (1801 HK), and Bilibili (9626 HK).
One way volume is just under 4.7% with all the name changes, FAF changes, and capping flows.

Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan

Plenty of index change announcements in the last week – Kospi 200 Index, KOSDAQ 150 Index, Hang Seng Index, HSCEI, HSTECH, S&P BSE SENSEX Index and FTSE AW/AC Index.
There are a bunch of indices that have the end of their review periods in the coming week while announcements for China indices are expected post market close on Friday.
There were outflows from ETFs for most Asian markets over the week with China and Hong Kong ETFs taking the biggest hits.

ECM Weekly (20th Nov 2022) – I-Tail, Growatt, Lygend, SinoHytech, Meituan/Tencent, Olympus, Paytm

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, Indian IPOs delivered some decent performance while HK IPOs are likely to pick up as well.
There were a number of placement and blocks this week, after the expiry of lockups in a few Indian names.

S&P/ASX Quiddity Final Expectations Dec 22: Mostly Mining Companies, Avoid Short Buildup!

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for S&P ASX 200, 100, 50, and 20 in the run up to the December 2022 Rebalance.
The 6-month reference period for the December 2022 Rebalance is now complete.
I do not see any changes for ASX 20 or ASX 100. I see one ADD/DEL for ASX 50 and three ADDs/DELs for ASX 200.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 20

Most Read: Brilliance China Automotive, Devsisters, OZ Minerals Ltd, FTX Token, Haier Smart Home Co Ltd, Zhongsheng Group, Oriental Watch, Fairfax India Holdings, Meituan and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSCI Index Rebalance and Stock Connect: Changes at the Margins
KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises
OZ Minerals (OZL AU): BHP Ups Offer by 13%; This Should Get Done
FTX Fallout – A Quick Update
HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home
Has The US Fed Already Paused Its QT and ‘Pivoted’?
HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls
Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally
Fairfax India Holdings: Major Value Unlock Via BIAL IPO
Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan

HSCI Index Rebalance and Stock Connect: Changes at the Margins

We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises

There are 11 inclusions and 11 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 8 December.
We had forecast most of the changes (10 adds and 9 deletes), so there are a few surprises. The inclusion of SillaJen Inc (215600 KS) is the biggest one.
The adds to the index become short sell eligible from the open of trading on 9 December while the deletions will not be short sell eligible from the same time.

OZ Minerals (OZL AU): BHP Ups Offer by 13%; This Should Get Done

BHP Group has made a revised conditional, non-binding and indicative proposal to acquire all shares in OZ Minerals Ltd (OZL AU) at A$28.25/share, 13% higher than its earlier offer.
The OZ Minerals Board has agreed to give BHP Group Ltd (BHP AU) exclusive due diligence access for 4 weeks and intends to unanimously recommend the revised proposal.
Barring a competing proposal, this is BHP Group‘s best and final price – expect the stock to trade close to A$28/share today.

FTX Fallout – A Quick Update

By Rose Choy

FTX filed for bankruptcy on 11/11 after halting client withdrawals in the previous week, despite SBF (the ex-CEO) tweeting 2 days prior that it had $1 bn of excess cash.
With over 130 affiliates included in the filing and no first day documents in the Delaware Court, the bankruptcy filing seems disorderly. The fallout is far-reaching in the industry.
As we await the top 50 creditor list and more details, we have compiled a hit list of some of the major affected players in the industry.

HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home

The inclusion of Tingyi Holding (322 HK), China Resources Mixc Lifestyle Services (1209 HK) and Haier Smart Home Co Ltd (6690 HK) gets us to 76 index constituents.
Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 2.01% and will result in a one-way trade of HK$3,845m.
Shorts on Haier Smart Home Co Ltd (6690 HK) and Tingyi Holding (322 HK) are around 5% of float and covering could take the stocks higher.

Has The US Fed Already Paused Its QT and ‘Pivoted’?

By Michael J. Howell

US Fed has injected a positive US$167bn into markets so far in Q4, 2022. This partly reverses the US$1.1 trillion they withdrew in year up to September
Based on US Fed projections of a further US$1.5-2 trillion of QT liquidity withdrawals, the S&P500 could skid lower to 3200 (i.e. minus 20% from here)
QT has stalled, showing the operational difficulty of withdrawing cash. This may also reflect underlying concerns about US Treasury market liquidity. A pause/ pivot is coming, but its not now

HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls

There are 4 adds and 4 deletes for the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance. The only surprises are some non-adds and non-deletes.
Using prices from the close on 18 November, estimated one-way turnover is 4.64% and will result in a one-way trade of HK$2,612m at the close on 2 December.
Short interest is larger on the deletes than the adds. However, at 17 days of ADV to cover and 11.7% of float, short interest on Zhongsheng Group is huge.

Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally

By Sameer Taneja

Oriental Watch (398 HK) paid a 31-cent dividend in its H1FY23 result on the 16th, equating to an annualized dividend yield of 15% on the current share price.
The outlook for the rest of the year is much brighter, given the recovery in China and the inability of the Chinese to travel. October numbers were strong.
The stock trades at a 6.7x PE, with more than 50% of the market capitalization in cash. In slightly better market conditions, this could be a 6 HKD stock.

Fairfax India Holdings: Major Value Unlock Via BIAL IPO

Fairfax India Holdings (FIH/U CN), a holdco with investment activities exclusively in India, is edging closer to IPOing 49%-held Bangalore International Airport (BIAL).
Reportedly FIH is seeking a value upward of C$3.7bn for BIAL, a 45% premium over the current fair value holding.
Currently trading at a P/B of 0.6x compared to its five-year average of 0.8x, and the two-year average pre-Covid of 1.06x.

Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan

Plenty of index change announcements in the last week – Kospi 200 Index, KOSDAQ 150 Index, Hang Seng Index, HSCEI, HSTECH, S&P BSE SENSEX Index and FTSE AW/AC Index.
There are a bunch of indices that have the end of their review periods in the coming week while announcements for China indices are expected post market close on Friday.
There were outflows from ETFs for most Asian markets over the week with China and Hong Kong ETFs taking the biggest hits.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 19

Most Read: China Shenhua Energy Co H, Li Auto, Brilliance China Automotive, Devsisters, Swire Pacific (B), OZ Minerals Ltd, Oriental Land, Lotte Chemical and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSCEI Index Rebalance Preview: Could Be A BIG One
HSI Index Rebalance Preview: Small Step or Giant Leap?
HSCI Index Rebalance and Stock Connect: Changes at the Margins
KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises
Swire B Vs A – It Bounced Before, It Can Bounce Again – A 19 Year Low On the Ratio In Sight
OZ Minerals (OZL AU): BHP Ups Offer by 13%; This Should Get Done
Nikkei 225 March 2023 Review Quiddity Leaderboard (Nov 2022)
OZ Minerals (OZL AU) And BHP Have a Deal – Investors Have an OTM Option on Copper
Lotte Chemical – Ready to Announce Rights Offering Close to 2 Trillion Won?
OZ Minerals (OZL AU)’s A$28.25 Non-Binding Offer from BHP

HSCEI Index Rebalance Preview: Could Be A BIG One

There could be up to 6 changes to the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, mainly driven by the deletions.
If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.
There is large short interest on quite a lot of stocks and will play an important role in the rebalance.

HSI Index Rebalance Preview: Small Step or Giant Leap?

Currently at 69 index members, we just could reach 80 constituents at the December rebalance. That would leave the index committee to plan the move to 100 constituents in 2023.
We list 10 potential inclusions to the index in December. One-way turnover is just under 4% and inclusions of all stocks will increase index market cap coverage significantly.
Shorts are more than 3% of free float on five of the potential inclusions and these stocks could see some short covering ahead of the announcement of the changes.

HSCI Index Rebalance and Stock Connect: Changes at the Margins

We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises

There are 11 inclusions and 11 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 8 December.
We had forecast most of the changes (10 adds and 9 deletes), so there are a few surprises. The inclusion of SillaJen Inc (215600 KS) is the biggest one.
The adds to the index become short sell eligible from the open of trading on 9 December while the deletions will not be short sell eligible from the same time.

Swire B Vs A – It Bounced Before, It Can Bounce Again – A 19 Year Low On the Ratio In Sight

Swire Pacific has been buying back Swire Pacific (B) (87 HK) and Swire Pacific (A) (19 HK) shares since August. They are now 58+% done with their HK$4bn buyback program.
The buyback so far has been 50% B shares and 50% A shares. This still seems odd to me but they are doing what they are doing.
B/A ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks. Now 5% cheap to average.

OZ Minerals (OZL AU): BHP Ups Offer by 13%; This Should Get Done

BHP Group has made a revised conditional, non-binding and indicative proposal to acquire all shares in OZ Minerals Ltd (OZL AU) at A$28.25/share, 13% higher than its earlier offer.
The OZ Minerals Board has agreed to give BHP Group Ltd (BHP AU) exclusive due diligence access for 4 weeks and intends to unanimously recommend the revised proposal.
Barring a competing proposal, this is BHP Group‘s best and final price – expect the stock to trade close to A$28/share today.

Nikkei 225 March 2023 Review Quiddity Leaderboard (Nov 2022)

Early predictions for the March 2023 Nikkei rebalance (TBA early Feb) are little changed. One way turnover would still be about 1.4%. I see 3 ADDs and 3 DELETEs.
The 3 ADDs should be Oriental Land (4661), Renesas Electronics (6723), and Japan Airlines (9201). The 3 DELETES Toho Zinc (5707), Toyobo (3101), and Nippon Light Metal (5703).
Oriental Land is the one to watch in March. The Sep 2023 rebalance and subsequent ones are smaller in size but more interesting in impact.

OZ Minerals (OZL AU) And BHP Have a Deal – Investors Have an OTM Option on Copper

After nearly 3 months of no talks and movement, then a flurry of both, BHP Group Ltd (BHP AU) and OZ Minerals Ltd (OZL AU) have an agreed Revised Proposal.
OZ Minerals Board has agreed to support the Revised Proposal at A$28.25/share, a 13% bump, subject to due diligence provided on an exclusive basis for four weeks.
A fully-franked dividend or capital return will be allowed (Scheme price to be adjusted). This will probably trade tight. One owns a call option on copper for probably 3-4 months.

Lotte Chemical – Ready to Announce Rights Offering Close to 2 Trillion Won?

By Douglas Kim

Numerous local media mentioned today that Lotte Chemical (011170 KS) is getting ready to announce a major rights offering to acquire Iljin Materials.
The size of the rights offering has not been finalized but the range of the rights offering could be about 1 trillion won to 2 trillion won.
There are additional concerns about Lotte Chem funding additional capital into Lotte E&C, which could face more financial difficulties in the local construction sector.

OZ Minerals (OZL AU)’s A$28.25 Non-Binding Offer from BHP

OZ Minerals Ltd (OZL AU) has received a revised non-binding indicative offer from BHP Group Ltd (BHP AU) at A$28.25 per share, a 13.0% premium to the previously rejected offer.
The Board has granted four weeks of due diligence and intends to recommend a binding offer at A$28.25 per share, in the absence of a superior proposal.
While the offer is below the rumoured Board’s target of a A$30 offer, it is still attractive. At the last close, the gross spread to the offer is 3.3%.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 18

Most Read: Meituan, Devsisters, Oriental Land, Halcyon Agri, OZ Minerals Ltd, Delhivery, Pendal Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend
Tencent Distribution of Meituan Shares Official – Impact and Index Implications
KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises
Nikkei 225 March 2023 Review Quiddity Leaderboard (Nov 2022)
Halcyon Agri: Hainan Rubber’s Conditional MGO
OZ Minerals (OZL AU): BHP Ups Offer by 13%; This Should Get Done
Delhivery IPO Lockup Expiry – US$2.8bn Lockup Release, with Softbank the Largest Holder
Pendal/Perpetual: Revised Terms As Supreme Court Orders Scheme To Proceed
OZ Minerals (OZL AU) And BHP Have a Deal – Investors Have an OTM Option on Copper
Good Morning Japan | Hopes Dashed but Resilience Evident

Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend

Tencent (700 HK) has announced that it will pay an interim dividend via an in-specie distribution of the bulk of its holding in Meituan (3690 HK).
Passive FTSE and MSCI trackers will receive shares in Meituan (3690 HK) from their Tencent (700 HK) holdings and they will not need to trade anything in the market.
First it was JD.com Inc. (9618 HK), now it is Meituan (3690 HK). The market will be looking for other stocks held by Tencent (700 HK) that could be next.

Tencent Distribution of Meituan Shares Official – Impact and Index Implications

In mid-August at mid-day, a Reuters article suggested Tencent (700 HK) would seek to divest its $24bn stake in Meituan (3690 HK) this year. The stock fell 9% that afternoon.
The general underlying suggestion was that regulators wanted them to sell. Other articles suggested later both aspects were “untrue”
With Q3 earnings, Tencent today announced a Jan23 distribution (Mar23 settlement) of 958,121,562 Meituan shares (1 for every 10 Tencent shares held). There are significant flow and index implications.

KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises

There are 11 inclusions and 11 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 8 December.
We had forecast most of the changes (10 adds and 9 deletes), so there are a few surprises. The inclusion of SillaJen Inc (215600 KS) is the biggest one.
The adds to the index become short sell eligible from the open of trading on 9 December while the deletions will not be short sell eligible from the same time.

Nikkei 225 March 2023 Review Quiddity Leaderboard (Nov 2022)

Early predictions for the March 2023 Nikkei rebalance (TBA early Feb) are little changed. One way turnover would still be about 1.4%. I see 3 ADDs and 3 DELETEs.
The 3 ADDs should be Oriental Land (4661), Renesas Electronics (6723), and Japan Airlines (9201). The 3 DELETES Toho Zinc (5707), Toyobo (3101), and Nippon Light Metal (5703).
Oriental Land is the one to watch in March. The Sep 2023 rebalance and subsequent ones are smaller in size but more interesting in impact.

Halcyon Agri: Hainan Rubber’s Conditional MGO

Halcyon Agri (HACL SP) has announced Sinochem, its largest shareholder with 65.2%, has entered into a SPA to sell 36% of shares out to China Hainan Rubber Industry (601118 CH).
Upon completion of the SPA, Hainan Rubber will make an MGO, conditional on a 50% tendering acceptance. Sinochem has provided an undertaking not to tender its remaining 29.2% stake.
The Offer Price? The SPA price is US$0.315/share and the Offer Price will be the SGD equivalent at the close of the SPA.

OZ Minerals (OZL AU): BHP Ups Offer by 13%; This Should Get Done

BHP Group has made a revised conditional, non-binding and indicative proposal to acquire all shares in OZ Minerals Ltd (OZL AU) at A$28.25/share, 13% higher than its earlier offer.
The OZ Minerals Board has agreed to give BHP Group Ltd (BHP AU) exclusive due diligence access for 4 weeks and intends to unanimously recommend the revised proposal.
Barring a competing proposal, this is BHP Group‘s best and final price – expect the stock to trade close to A$28/share today.

Delhivery IPO Lockup Expiry – US$2.8bn Lockup Release, with Softbank the Largest Holder

In May 2022, Delhivery raised around US$680m in its India IPO, the company is backed by a host of financial investors, the largest being Softbank.
Delhivery is an online logistics service provider which covers express parcel delivery, heavy goods delivery, part truckload (PTL) freight, truckload (TL) freight, supply chain solutions, cross border solutions etc.
In this note, we will talk about the upcoming lockup expiry.

Pendal/Perpetual: Revised Terms As Supreme Court Orders Scheme To Proceed

Under the revised terms, Pendal (PDL AU) shareholders will receive 1 Perpetual (PPT AU) share for every 7 Pendal shares plus $1.65/share cash versus 7.50 Pendal shares and $1.976 cash.
Separately, the Supreme Court of NSW ruled that Perpetual cannot delay the Scheme on the expectation of a more favourable Offer for the company.
The first court hearing for the Scheme has been deferred until next week to seek orders convening the Scheme Meeting and for the despatch of the Scheme Booklet to shareholders.

OZ Minerals (OZL AU) And BHP Have a Deal – Investors Have an OTM Option on Copper

After nearly 3 months of no talks and movement, then a flurry of both, BHP Group Ltd (BHP AU) and OZ Minerals Ltd (OZL AU) have an agreed Revised Proposal.
OZ Minerals Board has agreed to support the Revised Proposal at A$28.25/share, a 13% bump, subject to due diligence provided on an exclusive basis for four weeks.
A fully-franked dividend or capital return will be allowed (Scheme price to be adjusted). This will probably trade tight. One owns a call option on copper for probably 3-4 months.

Good Morning Japan | Hopes Dashed but Resilience Evident

By Mark Chadwick

Good Morning Japan: We strive to provide the very best breaking macro, stock and thematic overnight news that will impact your trading day in Japan. FOLLOW US to keep abreast!
OVERNIGHT: Hawkish Fed speak weigh on markets but digested as signs of economic weakening-housing, shipping; Markets and Tech resilient. AMAT 1Q guidance supportive; FTX debacle: “Complete failure of controls !”
JAPAN: Flat open indicated; JPYUSD ¥140 handle; Likely takes the lead from the US; Expect supportive bids into weekend with AMAT guidance

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 17

Most Read: Meituan, Monadelphous, Haw Par Corp, Halcyon Agri, Samyang Holdings, Devsisters, Lotte Confectionery, Swire Pacific (B) and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend
Tencent Distribution of Meituan Shares Official – Impact and Index Implications
S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec
2023 High Conviction: Haw Par Is Cheap
Tencent Meituan Dividend – The US$20bn Overhang – Impact, Placement, Index, Other Investees
Halcyon Agri Suspended Ahead Of Possible Offer
KOSPI200 Index Rebalance: Just One Change
KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises
KOSPI 200 & KOSDAQ 150 Rebalance Changes + KOSPI 200 & KOSDAQ 150 Exclusion Candidates in 2023
Swire B Vs A – It Bounced Before, It Can Bounce Again – A 19 Year Low On the Ratio In Sight

Meituan (3690 HK): Impact of Tencent’s In-Specie Dividend

Tencent (700 HK) has announced that it will pay an interim dividend via an in-specie distribution of the bulk of its holding in Meituan (3690 HK).
Passive FTSE and MSCI trackers will receive shares in Meituan (3690 HK) from their Tencent (700 HK) holdings and they will not need to trade anything in the market.
First it was JD.com Inc. (9618 HK), now it is Meituan (3690 HK). The market will be looking for other stocks held by Tencent (700 HK) that could be next.

Tencent Distribution of Meituan Shares Official – Impact and Index Implications

In mid-August at mid-day, a Reuters article suggested Tencent (700 HK) would seek to divest its $24bn stake in Meituan (3690 HK) this year. The stock fell 9% that afternoon.
The general underlying suggestion was that regulators wanted them to sell. Other articles suggested later both aspects were “untrue”
With Q3 earnings, Tencent today announced a Jan23 distribution (Mar23 settlement) of 958,121,562 Meituan shares (1 for every 10 Tencent shares held). There are significant flow and index implications.

S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec

Volatile stock prices could mean one change for the S&P/ASX 50 Index and one change for the S&P/ASX 200 (AS51 INDEX) at the December rebalance.
Atlas Arteria (ALX AU) could replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) could replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
Short interest on St Barbara Ltd (SBM AU) has spiked in the last few weeks and there could be short covering ahead of implementation of the changes.

2023 High Conviction: Haw Par Is Cheap

Haw Par Corp (HPAR SP) is trading around multi-year trough levels on an implied stub valuation, and on an HPAR/UOL Group (UOL SP) ratio.
Preceding my comments on HPAR 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%.

Tencent Meituan Dividend – The US$20bn Overhang – Impact, Placement, Index, Other Investees

On 16th Nov 22, post-market close, along with its 3Q22 results Tencent also declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
The share distribution follows the template of the US$16bn worth of JD.com shares that Tencent paid out after its dividend announcement at the end of 2021.
In this note, we talk about the implications of the deal.

Halcyon Agri Suspended Ahead Of Possible Offer

Natural rubber play Halcyon Agri (HACL SP) was suspended ahead of trading on the 14 November.
Word on the street is that a privatisation will be announced shortly.
The benefit of hindsight … Halcyon’s largest shareholder, SOE-backed Sinochem, recently increased its stake, paying ~S$0.45/share.

KOSPI200 Index Rebalance: Just One Change

There will be 1 addition and 1 deletion for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the December rebalance that will be implemented on 8 December.
Lotte Confectionery (280360 KS) was a high probability add while Samyang Holdings (000070 KS) was the second delete on the list. Hyundai Home Shopping Network (057050 KS) avoided deletion.
Passive trackers will need to buy around 14 days of ADV on Lotte Confectionery (280360 KS) and sell nearly 13 days of ADV on Samyang Holdings (000070 KS).

KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises

There are 11 inclusions and 11 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 8 December.
We had forecast most of the changes (10 adds and 9 deletes), so there are a few surprises. The inclusion of SillaJen Inc (215600 KS) is the biggest one.
The adds to the index become short sell eligible from the open of trading on 9 December while the deletions will not be short sell eligible from the same time.

KOSPI 200 & KOSDAQ 150 Rebalance Changes + KOSPI 200 & KOSDAQ 150 Exclusion Candidates in 2023

By Douglas Kim

Korea Exchange announced the KOSPI 200, KOSDAQ 150, and KRX 300 rebalance changes today. Lotte Confectionery will be added and Samyang Holdings will be deleted from the KOSPI 200 index.
The rebalances of these Korean indices are regularly updated twice a year. The changes to these indices will be effective starting 9 December.
The potential exclusion candidates for KOSPI 200 in 2023 include K Car, Handsome, HS Enterprise, Zinus, and Hyundai Home Shopping.

Swire B Vs A – It Bounced Before, It Can Bounce Again – A 19 Year Low On the Ratio In Sight

Swire Pacific has been buying back Swire Pacific (B) (87 HK) and Swire Pacific (A) (19 HK) shares since August. They are now 58+% done with their HK$4bn buyback program.
The buyback so far has been 50% B shares and 50% A shares. This still seems odd to me but they are doing what they are doing.
B/A ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks. Now 5% cheap to average.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 16

Most Read: Taiwan Semiconductor (TSMC) – ADR, Brilliance China Automotive, Olympus Corp, Harmonic Drive Systems, Sungeel Hitech, Chindata Group, I-Tail, Monadelphous and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher
HSCI Index Rebalance and Stock Connect: Changes at the Margins
Olympus Placement – Had Been Doing Well, till Recently
Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix
Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue
KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation
Chindata: China Merchants Potentially In The Mix
I-Tail Corporation IPO – Blowout 3Q22, Revised Earnings, Updated Thoughts on Valuation
Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase
S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec

TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher

Overnight, Berkshire Hathaway Inc Cl B (BRK/B US) announced that it held 60.06m shares (US$4.43bn) of Taiwan Semiconductor (TSMC) – ADR (TSM US) as of 30 September.
That caused the ADR to spike after-hours and the local shares have rallied 8% today to close the gap with the ADR.
The ADR premium is trading near the lows and with Berkshire buying up a substantial chunk, Taiwan Semiconductor (TSMC) – ADR should trade at a bigger premium to Taiwan Semiconductor (2330).

HSCI Index Rebalance and Stock Connect: Changes at the Margins

We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

Olympus Placement – Had Been Doing Well, till Recently

MUFG aims to raise around US$255m via selling around 1% of Olympus Corp (7733 JP).
The stock has been doing well recently and MUFG has sold before. Although, the recent earnings updates didn’t go down too well.
In this note, we will run the deal through our ECM framework and comment on other deal dynamics.

Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix

By Douglas Kim

This insight will discuss the impact of Buffett’s investment in Taiwan Semiconductor (TSMC) – ADR (TSM US) on Samsung Electronics (005930 KS) and SK Hynix (000660 KS).
We believe that Buffett’s sizeable investment in TSMC is likely to have a positive impact on Samsung Electronics and SK Hynix.
This would be similar to how Buffett’s investment in the Japanese trading companies which has had a positive impact on the major Korean trading companies.

Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue

In February 2021 Nabtesco Corp (6268 JP) announced it would sell half of its stake in Harmonic Drive Systems (6324 JP) to concentrate on its own products and growth.
It was a not-very-well-held secret Nabtesco had invested wanting to own HDS. HDS didn’t want to be owned. Eventually Nabtesco gave up. So they sold over time into low float.
Now they are letting go of the other half. Sale structure means ongoing pressure.

KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation

By Sanghyun Park

Given SunEel’s market cap and the level of relevance to the rechargeable battery business, KODEX will likely include it this time around.
If you are looking for a short-selling opportunity, I recommend adjusting the timing after this KODEX ETF passive event.
If you are long targeting the KOSDAQ 150 inclusion, I recommend taking a slightly longer holding window to additionally target the passive inflow of the KODEX ETF.

Chindata: China Merchants Potentially In The Mix

Bain Capital-backed Chindata Group (CD US) is on the move after Bloomberg flagged – again – interest from industry players.
This time, SOE-backed China Merchants Group is understood to be mulling a takeover of Chindata. Shares are up 23% since that article earlier this month.
Back in April, Bloomberg mentioned GDS Holdings (ADR) (GDS US), PE outfit PAG, and EQT AB (EQT SS)-backed EdgeConneX were rumoured to be interested in merging with Chindata.

I-Tail Corporation IPO – Blowout 3Q22, Revised Earnings, Updated Thoughts on Valuation

By Shifara Samsudeen, ACMA, CGMA

I-Tail, an OEM in the wet pet food category, aims to raise around US$600m in its Thailand IPO. It is a subsidiary of Thai Union Group (TU TB) .
As per ITC, it was the number two pet food company in Asia and in the top ten pet food companies globally. ITC expertise lies in fish-based wet pet food.
In our previous notes, we have looked at various aspects of the deal. In this note, we talk about its 3Q22 updates and run the deal through our ECM framework.

Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase

Chindata Group (CD US) is the leading carrier-neutral hyperscale data center solutions provider in Asia Pacific emerging markets.
At the beginning of the month, Bloomberg reported a takeover offer for Chindata from China Merchants Group, which is a state-owned company.
Several state-owned companies have shown interest towards acquiring data centers and data center companies, which is likely to be in line with China’s strategy of digitization.

S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec

Volatile stock prices could mean one change for the S&P/ASX 50 Index and one change for the S&P/ASX 200 (AS51 INDEX) at the December rebalance.
Atlas Arteria (ALX AU) could replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) could replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
Short interest on St Barbara Ltd (SBM AU) has spiked in the last few weeks and there could be short covering ahead of implementation of the changes.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 15

Most Read: Delhivery, Wharf Holdings, Golden Energy & Resources, Sumitomo Precision Products, Softbank Group, Warrego Energy, Brilliance China Automotive, Nearmap Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises
FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry
Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy
Wharf Holdings (4 HK): MSCI Deletion, Short Interest & Trade Ideas
Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase
Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done
Softbank Group (9984 JP) –Vision and LatAm Funds Take Another USD10bn Valuation Hit in 2Q 22
Warrego Enters Into A Scheme With Beach
HSCI Index Rebalance and Stock Connect: Changes at the Margins
Nearmap (NEA AU)’s Update Results in an Unwarranted Increase in the Spread

MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises

MSCI announced the changes as part of the November SAIR. For Asia Pacific, there are 48 adds and 55 deletes (including one nationality change).
The deletion of Wharf Holdings (4 HK) is the biggest surprise. The stock should trade weak given the large flow and days of ADV to sell.
There are listing changes for BeiGene (BGNE US), Li Auto (LI US), Xpeng (XPEV US) and Hutchison China MediTech Ltd (HCM US) to their Hong Kong listed lines.

FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry

We see 4 potential adds, 1 close add and 1 potential delete for the FTSE All-World/All-Cap indices at the upcoming QIR that will be implemented at close on 16 December.
The largest impact will be the passive selling on Golden Agri Resources (GGR SP) due to a nationality change from Singapore to Ineligible.
There is a big lock-up expiry on Delhivery where US$2.89bn of shares will be free for trading on 21 November – that is significantly larger than the potential passive buying.

Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy

On Friday, MSCI announced the changes to its indices as part of the November SAIR. Most changes were expected, but there were a few surprises.
Friday was also the review cutoff for the FTSE Dec QIR. Next Friday has announcement of changes to the Hang Seng, Sensex and FTSE indices.
Big inflow to iShares Core MSCI Emerging Markets ETF (IEMG US) during the week as inflows to IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) continue.

Wharf Holdings (4 HK): MSCI Deletion, Short Interest & Trade Ideas

In a surprise, MSCI announced the deletion of Wharf Holdings (4 HK) from the MSCI China Index at the November SAIR that will be implemented at the close 30 November.
The stock dropped 14.3% on Friday as volume spiked 26x compared to ADV and 14m shares were shorted on the day.
Total short interest is estimated to be significantly lower than the estimated selling from passive MSCI trackers and there could be a move lower over the next few days.

Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads Pendal Group (PDL AU), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), 21Vianet Group (VNET US), 111 Inc (YI US), Golden Energy & Resources (GER SP).
Lowest spreads – Tyro Payments (TYR AU),Perpetual Ltd (PPT AU), OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), China Vast Industrial Urban Development (6166 HK), Moya Holdings.

Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done

On Friday, Sumitomo Corp (8053 JP) announced a bid for equity affiliate (they own 27+% but Nippon Steel 15%, top 2 is 40+%) Sumitomo Precision Products (6355 JP).
It’s a one-year high and 4-year high price, and 8x average 10yr EV/EBITDA but 4.6x 2024e EBITDA from the Mid Term Plan. And way below a 10-year high.
This gets done if Retail agrees to the tender. If 50% put in, that should do it. So I expect this gets done.

Softbank Group (9984 JP) –Vision and LatAm Funds Take Another USD10bn Valuation Hit in 2Q 22

By Victor Galliano

Headline 2QFY22 results for Softbank Group were in the black, largely due to the Alibaba stake sale, but the group’s three funds registered an aggregate USD10bn of valuation losses
FTX’s write-down to zero will cost Softbank’s Vision Fund 2 USD100m in 3Q22, our main concern is what the VC funding downturn means for portfolio valuations in the coming quarter
The group’s NAV discount has now tightened meaningfully; we believe that this makes it less advantageous for management to announce another share buy-back programme

Warrego Enters Into A Scheme With Beach

The Stokes’ family-backed Beach Energy (BPT AU) is offering Warrego Energy (WGO AU)‘s shareholders $0.20/share, in cash, by way of a Scheme. That’s a 36% premium to the one-month VWAP.
A contingent value payment may be payable to Warrego shareholders from the sale of Warrego’s Spanish assets within 12 months
Warrego’s board unanimously recommend the Beach deal. The transaction is expected to complete in early March. The wild card is whether Strike Energy (STX AU) pitches a revised Offer.

HSCI Index Rebalance and Stock Connect: Changes at the Margins

We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

Nearmap (NEA AU)’s Update Results in an Unwarranted Increase in the Spread

Nearmap Ltd (NEA AU)’s litigation and trading update resulted in the spread to Thoma Bravo’s A$2.10 offer widening to 7.7%. The scheme meeting is on 25 November.
There is no chance that the MAC clause will be triggered due to the downbeat trading update. However, the update is softening the stance of some of the retail dissenters.
There is a small chance of a bump as peers have re-rated. Nevertheless, the low spread prior to the update suggested that the risk of the NO vote was minimal.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 14

Most Read: Wharf Holdings, Delhivery, Toshiba Corp, Tata Motors ADR, Sumitomo Precision Products, Golden Energy & Resources, Warrego Energy, I-Tail and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises
Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy
FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry
Weekly Deals Digest (13 Nov) – Toshiba, Uzabase, Origin Energy, Perpetual, Golden Energy, I-Tail
Last Week in Event SPACE: Tata Motors, Origin Energy, OZ Minerals, Toshiba
Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done
Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase
Warrego (WGO AU) Bidding War Between Strike (STX AU) And Beach (BPT AU)
Good Morning Japan | Bulls Still in Charge
I-Tail Corporation IPO: A Strong 3Q Results Update

MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises

MSCI announced the changes as part of the November SAIR. For Asia Pacific, there are 48 adds and 55 deletes (including one nationality change).
The deletion of Wharf Holdings (4 HK) is the biggest surprise. The stock should trade weak given the large flow and days of ADV to sell.
There are listing changes for BeiGene (BGNE US), Li Auto (LI US), Xpeng (XPEV US) and Hutchison China MediTech Ltd (HCM US) to their Hong Kong listed lines.

Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy

On Friday, MSCI announced the changes to its indices as part of the November SAIR. Most changes were expected, but there were a few surprises.
Friday was also the review cutoff for the FTSE Dec QIR. Next Friday has announcement of changes to the Hang Seng, Sensex and FTSE indices.
Big inflow to iShares Core MSCI Emerging Markets ETF (IEMG US) during the week as inflows to IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) continue.

FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry

We see 4 potential adds, 1 close add and 1 potential delete for the FTSE All-World/All-Cap indices at the upcoming QIR that will be implemented at close on 16 December.
The largest impact will be the passive selling on Golden Agri Resources (GGR SP) due to a nationality change from Singapore to Ineligible.
There is a big lock-up expiry on Delhivery where US$2.89bn of shares will be free for trading on 21 November – that is significantly larger than the potential passive buying.

Weekly Deals Digest (13 Nov) – Toshiba, Uzabase, Origin Energy, Perpetual, Golden Energy, I-Tail

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – I-Tail (ITC TB) is set to launch it’s up to US$600 million SET IPO.
Event-Driven developments – Toshiba Corp (6502 JP), Uzabase Inc (3966 JP), Golden Energy & Resources (GER SP), Perpetual Ltd (PPT AU)/Pendal Group (PDL AU), Origin Energy (ORG AU).

Last Week in Event SPACE: Tata Motors, Origin Energy, OZ Minerals, Toshiba

Tata Motors Ltd (TTMT IN) will eliminate its ADS program. This is another potentially juicy trade.
Canada’s Brookfield, along with EIG look to take over Origin Energy (ORG AU), one of Australia’s largest energy companies.
This OZ Minerals Ltd (OZL AU) trade is fundamentally a bit short gamma on copper. If copper takes another dive, then it may no longer be interesting to be long.

Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done

On Friday, Sumitomo Corp (8053 JP) announced a bid for equity affiliate (they own 27+% but Nippon Steel 15%, top 2 is 40+%) Sumitomo Precision Products (6355 JP).
It’s a one-year high and 4-year high price, and 8x average 10yr EV/EBITDA but 4.6x 2024e EBITDA from the Mid Term Plan. And way below a 10-year high.
This gets done if Retail agrees to the tender. If 50% put in, that should do it. So I expect this gets done.

Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads Pendal Group (PDL AU), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), 21Vianet Group (VNET US), 111 Inc (YI US), Golden Energy & Resources (GER SP).
Lowest spreads – Tyro Payments (TYR AU),Perpetual Ltd (PPT AU), OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), China Vast Industrial Urban Development (6166 HK), Moya Holdings.

Warrego (WGO AU) Bidding War Between Strike (STX AU) And Beach (BPT AU)

Beach Energy (BPT AU)’s all-cash proposal is A$0.20 per share and Strike Energy (STX AU)’s all-scrip proposal is 0.775x STX shares per Petrel Energy (WGO AU) share.
BPT’s all-cash offer provides value certainty. On the other hand, STX’s all-scrip offer lets shareholders get exposure to 100% interest in the West Erregulla project.
Both offers are reasonable but far from knockout bids, which suggests room for a further bidding round. At the last close, BPT’s offer is 3.2% higher than STX’s offer.

Good Morning Japan | Bulls Still in Charge

By Mark Chadwick

Good Morning Japan: We strive to provide the very best breaking macro, stock and thematic overnight news that will impact your trading day in Japan. FOLLOW us to keep abreast!
OVERNIGHT: BETA bid with Commodities &Tech leading; Momentum & Value sold; SOX +15%WoW; China 20-point plan on COVID-19 easing; FTX Bankruptcy – CEO flees the US. Democrats retain Senate-IRA safe.
JAPAN: NKY Futs -0.5% vs Cash; Further yen strength with USDJPY ¥138.81; Bain to lift JP invest >$40b-focus is Kansai tech cos; No new Softbank buyback; Rakuten losing mobile subs

I-Tail Corporation IPO: A Strong 3Q Results Update

I-Tail (ITC TB), Thai Union Group (TU TB)’s pet care division, will launch an up to US$600 million SET IPO this week, according to press reports.
We previously discussed the IPO in I-Tail Corporation IPO: The Bull Case and I-Tail Corporation IPO: The Bear Case.
In this note, we look at the 9M22 results. The results highlight that i-Tail is in rude health with accelerating growth, healthy margins, cash generation and manageable leverage.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Nov 13

Most Read: Sichuan Tianyi Science & A, Hubei Feilihua Quartz Glas-A, Tube Investments of India, FTX Token, LG Energy Solution, Toshiba Corp, Hong Kong Hang Seng Index, Wharf Holdings, Brilliance China Automotive, Alibaba (ADR) and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

CSI500 Index Rebalance Preview: 50 Adds/Deletes in December
ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion
MSCI India November SAIR: Potential Changes & Higher Foreign Holding
FTT/FTX- Another Inflection Point in the Crypto Market Waiting to Happen?
Assessing LG Energy Solution’s Flow Imbalance Situation
Toshiba – Worse Than Even We Thought
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy
Brilliance China: Parent Restructuring Overhang May Continue, but Dividends Itself Provide Upside
ECM Weekly (13th Nov 2022) – I-Tail, Blibli, Nykaa, PB Fin, Five Star, Archean, GDRs, Axis Bank

CSI500 Index Rebalance Preview: 50 Adds/Deletes in December

With a day left in the review period, we forecast 50 changes (the maximum permitted) for the CSI500 Index at the close on 9 December.
We estimate a one-way turnover of 13.53% at the December rebalance leading to a one-way trade of CNY 8.01bn. The Materials, Consumer Discretionary and Information Technology sectors are net gainers.
The potential adds and potential deletes have performed in line over the last few weeks, and we’d look to position for outperformance post the end of the review period.

ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion

At the end of the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. The impact on the potential deletions is higher on average.
The potential adds have outperformed the potential deletes over the last six months, though there has been a sharp narrowing of the gap over the last few weeks.

MSCI India November SAIR: Potential Changes & Higher Foreign Holding

Post the end of the review period, we see 7 potential adds and 2 potential deletes for the MSCI India Index at the November SAIR.
Inclusion in the index will require passive trackers to buy 6-21 days of ADV on the stocks. That increases to 16-45 days of delivery volume.
Cumulative excess volume indicates pre-positioning on most potential adds. Foreign Portfolio Investors (FPI) have increased their holding on all potential adds over the July-September quarter.

FTT/FTX- Another Inflection Point in the Crypto Market Waiting to Happen?

By Rose Choy

On Nov 3, it was leaked that Alameda seemed to have a weaker than expected balance sheet with $7.6 bn of loans and a relatively illiquid portfolio of assets.
Alameda, a large proprietary crypto trading firm, did not officially comment but its CEO Caroline stated on Twitter that most of the loans were repaid.
The potential linkages between Alameda and FTX, a large crytpo exchange, both controlled by Sam Bankman-Fried, are of utmost concern and has riled the crytpo market.

Assessing LG Energy Solution’s Flow Imbalance Situation

By Sanghyun Park

LG Energy’s virtually locked-up shares rise to nearly 95%. This should at least partially explain why its price has substantially outperformed the KOSPI in recent months, showing strong downward rigidity.
Additional long-term money equivalent to 2-3% of SO can come in for 5% float shares. There is no precedent for a float crunch of this magnitude among top-cap local stocks.
It seems necessary to reconsider taking a shorting position for LG Energy even after the 9th of next month when the short-term passives inflow situation is completed.

Toshiba – Worse Than Even We Thought

By Mio Kato

Toshiba’s 2Q results were not pretty with OP of just ¥7.5bn despite strong revenues of ¥855bn, weak orders and a downward revision to guidance as we predicted.
While we expected weakness, every downside risk we flagged came through and in greater force than we had predicted.
It is almost as if some divine force completely unrelated to management is hinting that you should go for the JIP bid if and when it comes through.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy

On Friday, MSCI announced the changes to its indices as part of the November SAIR. Most changes were expected, but there were a few surprises.
Friday was also the review cutoff for the FTSE Dec QIR. Next Friday has announcement of changes to the Hang Seng, Sensex and FTSE indices.
Big inflow to iShares Core MSCI Emerging Markets ETF (IEMG US) during the week as inflows to IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) continue.

Brilliance China: Parent Restructuring Overhang May Continue, but Dividends Itself Provide Upside

By Victoria Li

No substantive progress is achieved on Brilliance Group’s bankruptcy restructuring so far.
Besides estimated max Rmb6 per share, or HKD6.5 per share special dividend 2022E, shareholders may get more cash dividends in the next few years
Our enterprise value analysis shows Brilliance China’s fair value could be as high as HHD21.9 per share, including estimated HKD6.5 per share special dividend 2022E.

ECM Weekly (13th Nov 2022) – I-Tail, Blibli, Nykaa, PB Fin, Five Star, Archean, GDRs, Axis Bank