In today’s briefing:
- S&P/ASX Index Rebalance Preview: Tabcorp, Crown & Potential Changes in June
- SK Telecom: MSCI Special Deletion & Immediate Price Spike on Share Recall
- Woodside Shareholders Approve Deal but Not WPL’s Green Credentials; Now People Talk About Flows
- SK Telecom (017670 KS): Implications of Zero Foreign Room
- HKBN (1310 HK): KKR & PAG’s Pipe Dreams
- Epson (6724) – A Big Buyback Amid Benign Backdrop
- HKBN in the Crosshairs of KKR and PAG
- KOSDAQ 150 Rebalancing: Complete List of Candidates, Including Enchem
- Siemens Energy/Siemens Gamesa: Possible Delisting Offer
- Shanghai/Shenzhen Southbound Connect: Weekly Moves (20 May 2022)
S&P/ASX Index Rebalance Preview: Tabcorp, Crown & Potential Changes in June
- The Crown Resorts Scheme Meeting is scheduled for 20 May and the last trading day could be 24 May, while The Lottery Corp is expected to start trading 24 May.
- The changes for the S&P/ASX 50 Index and S&P/ASX 100 Index will depend on the market cap of The Lottery Corp (TLC AU) and new Tabcorp Ltd (TAH AU).
- The potential adds have outperformed the potential deletes over the last week and couple of months so there will be some pre-positions in there already.
SK Telecom: MSCI Special Deletion & Immediate Price Spike on Share Recall
- Looking at these past similar cases, the MSCI will likely announce SKT’s special deletion within 2-3 days of reaching zero foreign room and rebalancing within 2-3 days after the announcement.
- We will see a passive outflow of about 2M shares or about ₩115B, equivalent to 2.7x ADTV, which will likely lead to an immediate price spike.
- ETF funds tracking the MSCI have a large proportion of loaning SKT shares. So, when an MSCI down-weight occurs to SKT, an immediate recall will push up the price.
Woodside Shareholders Approve Deal but Not WPL’s Green Credentials; Now People Talk About Flows
- The EGM of Woodside Petroleum (WPL AU) today approved the BHP Petroleum merger in overwhelming fashion. 98.66% FOR.
- They did not approve of the Climate Report the board submitted to vetting by shareholders for the first time. That got 51% “support.”
- But now that’s done, people will talk about flows. So far the trade has worked but now time to think about how far to stretch it.
SK Telecom (017670 KS): Implications of Zero Foreign Room
- Foreign investors hold 106.51m shares of SK Telecom (017670 KS) versus a limit of 107.23m shares. There are only 723k more shares (1 day of ADV) available for foreign buying.
- MSCI will delete SK Telecom (017670 KS) from its indices once the foreign room reaches zero, while FTSE will likely reduce the investability weight in two tranches of 5% each.
- SK Telecom (017670 KS) could continue underperforming KT Corp (030200 KS) in the short-term due to passive selling and inability of foreign investors to buy the stock.
HKBN (1310 HK): KKR & PAG’s Pipe Dreams
- According to Bloomberg, KKR and PAG are considering bids for Hong Kong broadband play HKBN Ltd (1310 HK).
- Private equity firms, possibly including Stonepeak, are understood to be conducting due diligence on HKBN, which has a current market cap of ~US$1.6bn.
- Increased broadband usage became a Covid trend. That looks set to continue. This is a steady business, with an attractive yield.
Epson (6724) – A Big Buyback Amid Benign Backdrop
- Seiko Epson (6724 JP) announces the first special div for the 2023 Nikkei 225 dividend futures.
- And it also announces a VERY big buyback. The headlines say 9.5%. The reality is more like 4.0-4.4%, but that is still going to be 15-20% of Real World Float.
- Given mildly positive backdrop, a net cash position, low multiples, and lack of major Real World Float active investor, this could go up.
HKBN in the Crosshairs of KKR and PAG
- Bloomberg reportedKKR & Co Inc (KKR US) and PAG are carrying out due diligence on HKBN Ltd (1310 HK), with a view to launching a privatisation bid.
- HKBN has a relatively concentrated shareholder register which suggests a requirement for a high takeover premium.
- Precedent transactions suggest a privatisation forward EV/EBITDA multiple of at least 10x, implying a minimum offer price of HK$11.80 per share, a 23% premium to the last close.
KOSDAQ 150 Rebalancing: Complete List of Candidates, Including Enchem
- Enchem (348370 KS) is in a bit tricky situation. Applying the KRX’s review period calculation criterion to Enchem satisfies the minimum listing requirement.
- So, we should consider Enchem’s addition odds quite high. Enchem’s inclusion will pave the way for Sungwoo Hitech (015750 KS) to leave the Index.
- We have ten adds/deletes, and WYSIWYG Studios (299900 KS) leads the adds for the passive impact, whereas JNTC Co Ltd (204270 KS) will suffer the most relative to ADTV.
Siemens Energy/Siemens Gamesa: Possible Delisting Offer
- Siemens Energy is considering a cash offer for the 32.9% of Siemens Gamesa it does not own. Group simplification and major restructuring would make sense.
- Applying the 6-month VWAP rule, the offer price could reach c. €18.1/share. Takeover regulation says the offer must be in cash and the price equitable, allowing for other calculation methods.
- Siemens Energy does not need to offer a high premium and could make an announcement on 24 May (CMD). Recommendation is long.
Shanghai/Shenzhen Southbound Connect: Weekly Moves (20 May 2022)
- Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
- Overall, the total value increased US$12.5bn in the past week, with Shanghai accounting for US$5.7bn and Shenzhen US$6.8bn. Tencent (700 HK) is the dominant holding across both programs
- Glory Sun Financial Group Limited (1282 HK) saw the biggest upward movement as the chairman sold to pay off debt. China South City (1668 HK) was reduced by both programs.
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