In today’s briefing:
- Nikkei 225 Sep22 Annual Review; Data Final, Predictions Unch’d; Strategy Involved
- KOSPI Size Index Series Rebalancing in September: Eight Strong Targets
- SK REITs Issues a Rights Offering Worth 210 Billion Won
- EVOC Subject to a Third Privatisation Attempt?
- Hyundai Motor 2P Reversion Trading Relative to Ordinary
- Potential Interest in Quilter
Nikkei 225 Sep22 Annual Review; Data Final, Predictions Unch’d; Strategy Involved
- The data is largely unchanged since the Nikkei 225 Sep Annual Review Predictions – 3 In, 3 Out set of predictions published 15 days ago.
- The consultation results are out. They are as expected too. This has the hallmarks of a VERY well-signalled trade. But it’s a biggie. The funding trade alone is ¥600bn.
- Because of the data, market conditions, and the variability of choice at the edges, I believe that warrants particular strategy.
KOSPI Size Index Series Rebalancing in September: Eight Strong Targets
- Eight stocks are highly likely to migrate with a substantial passive flow. Compared to the early phase of the screening period, GS Engineering & Construction newly made the list.
- Most names should show a quite substantial passive flow (x ADTV). In particular, KCC Corp and BGF Retail deserve our special attention for their expected passive impact.
- The flow occurs on high potential migration stocks about 20 days before the effective date. So I would start building Long/Short Basket positions with the above eight names around mid-August.
SK REITs Issues a Rights Offering Worth 210 Billion Won
- SK REITs (395400 KS) announced today that it will conduct a rights offering worth 210 billion won, representing 25% of its current market cap of 829 billion won.
- The rights offering will allow SK REITs to acquire SK U Tower. The rights offering price is 5,060 won, which is 5.4% discount to the current price of 5,350 won.
- We would subscribe to this SK REITs rights offering. The SK U Tower in Bundang has excellent location and it has SK Hynix as the main tenant.
EVOC Subject to a Third Privatisation Attempt?
- EVOC Intelligent Technology Company Limited H (2308 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers on 1 August.
- It is likely that after two failed attempts, Mr Chen Zhi Lie, the ultimate controlling shareholder, will try a third time to privatise EVOC.
- The previous offer of HK$1.50 per H Share in 2020 marginally missed the 90% minimum acceptance condition. Expect a similar structure with a likely slightly higher offer price.
Hyundai Motor 2P Reversion Trading Relative to Ordinary
- The possibility that Ord’s current outperformance remains a structural trend is not high because of the 2P discount close to its YTD high and a price reversal with 1P.
- This price reversal has been a strong signal for reversion because 2P receives more dividends by ₩50 per share along with a liquidity premium compared to 1P.
- Also, the dividend yield difference with Ord is not small from a historical point of view. So, we should expect 2P reversion not only to 1P but Ord.
Potential Interest in Quilter
- UK wealth manager Quilter PLC (QLT LN) is reportedly set to receive takeover bids from at least four different suitors, according to the Daily Mail. One of them is Natwest.
- Interest in Quilter is not anything new: market share, investments in technology and a new platform make it appealing, in spite of headwinds for the industry.
- My 136p TP is based on an average of comps-based P/E multiples. Considering valuation and potential interest, I would be long the shares.
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