Daily BriefsIndustrials

Industrials: Hyundai Heavy Industries, Asia High Yield Bond Index, RITES Ltd, Adani Ports & Special Economic Zone, Chin Well Holdings and more

In today’s briefing:

  • Hyundai Heavy Industries: In the Zone for KOSPI200 Fast Entry
  • Hyundai Heavy Industries Fast Entry & Flow Schedule
  • Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
  • RITES: Robust Order Book To Drive Future Growth
  • Pick of the Week – Adani Ports & SEZ Limited
  • Looking Forward to a Better Year Ahead

Hyundai Heavy Industries: In the Zone for KOSPI200 Fast Entry

By Brian Freitas

Hyundai Heavy Industries (1748326D KS) raised KRW 1.08 trillion (US$920m) in its IPO by selling 18m shares at KRW 60,000/share. The issue was heavily oversubscribed and some of that enthusiasm has spilled into trading on day 1.

The stock is currently trading at KRW 118,500/share, up 97% from the IPO price.

The stock is now in range for inclusion in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) via Fast Entry at the December rebalance. The announcement of the Fast Entry will come a lot earlier, likely in mid to late October.

With a very small free float, the stock will not make it into the FTSE All-World and MSCI Standard Index via Fast Entry. Inclusion in those indices will take place in the first half of 2022 at the earliest.


Hyundai Heavy Industries Fast Entry & Flow Schedule

By Sanghyun Park

As expected, the stock price of Hyundai Heavy Industries is skyrocketing today, which is its market debut day. The opening price was already up 85% from the offering price of ₩60,000. It briefly peaked at ₩135,000, +125% from the offering price, and is now settling at ₩118,000, up 97%.

HHI on the IPO day
IPO price₩60,000
Opening₩111,00085.00%
High₩135,000125.00%
Low₩91,00051.67%
Current₩118,00096.67%
Source: KRX

Fast Entry

At the current price, its market cap reaches ₩10.3T. Yes, it is comfortably above the threshold of ₩7.75T, the market cap of the 50th largest market cap stock among the KOSPI ordinary shares. Coincidently, the current 50th largest market cap stock is Korea Shipbuilding & Offshore Engineering (009540 KS) at this point.

So, if the current share price is maintained for the next 15 trading days, HHI’s KOSPI 200 Fast Entry can be regarded as a done deal. However, the implementation date will be December 9th, the next trading day of the latest month of the KOSPI 200 futures, which also happens to be the regular rebalancing date.

KOSPI 200 Fast Entry
Fast Entry screeningIf the daily average market capitalization for 15 trading days from the date of listing is within the top 50 among all common stocks on KOSPI
Procedure for successful Fast EntryNewly listed stocks are included from the next trading day of the latest month of the KOSP I200 futures market, which comes first after 15 trading days have elapsed from the listing date (quarterly expiration date)
Procedure for NOT successful Fast EntryIf the average market capitalization is within the top 50 common stocks on KOSPI, it is included in the next regular rebalancing regardless of the trading period requirement (6 months). Otherwise, it is considered for inclusion in the regular rebalancing only after six months have elapsed since listing.
Market cap of the 50th KOSPI common stock₩7,749.7B
Market cap at the offering price₩10,342.1B
– Beat by %33.45%
Source: KRX

However, MSCI Standard and FTSE All-World Fast Entries are not possible with the current market cap. Of course, it meets the full market cap requirement but does not meet the float-adjusted market cap requirement because the MSCI/FTSE-concluded float will almost certainly stay at 10%.

MSCI Standard Fast Entry
Fast Entry screeningAs of the first or second trading day of listing, the total market cap must be at least 1.8 times the Interim Cutoff, and the free float-adjusted market cap must be at least 1.8 times the half of the Interim Cutoff.
Procedure for successful Fast EntryFast Entry is announced on the night of the first or second trading day. Fast Entry to the index is effective after the close of the 10th trading day after listing.
Procedure for NOT successful Fast EntryReviewed in the following regular review. In the semi-annual review, a three-month trading period is required to be included in the stock universe.
Interim cutoff = US$2.8B (estimated)₩3,300.0B
Full market cap hurdle = Cutoff * 1.8₩5,940.0B
Float-adjusted market cap hurdle = Cutoff * 0.5 * 1.8₩2,970.0B
Market cap at the offering price₩10,342.1B
– Beat by %74.11%
Float-adjusted market cap at the offering price₩1,034.2B
– Beat by %-65.18%
Source: MSCI
FTSE All-World Fast Entry
Fast Entry screeningAs of the first trading day of listing, the full market cap is above the full market cap threshold (= Mid Cap Inclusion Level*1.5). The free float-adjusted market cap is above the investable market cap threshold (= Mid Cap Inclusion Level*0.5). The Mid Cap Inclusion Level is the full market cap of the smallest company belonging to the 86th percentile of the full market cap of the regional universe.
Procedure for successful Fast EntryFast Entry is announced on the night of the first trading day. Fast Entry to the index is effective after the close of the 5th trading day after listing.
Procedure for NOT successful Fast EntryReviewed in the next regular review. A three-month trading period is required.
Mid Cap Inclusion Level = US$3.7B (estimated)₩4,358.3B
Full market cap threshold = Mid cap threshold * 1.5₩6,537.4B
Investable market cap threshold = Mid cap threshold * 0.5₩2,179.1B
Market cap at the offering price₩10,342.1B
– Beat by %58.20%
Float-adjusted market cap at the offering price₩1,034.2B
– Beat by %-52.54%
Source: FTSE

Index float

Below is Hyundai Heavy Industries’ float schedule. The immediate float is 9.62%, which is also the real-world float as its shareholding structure is quite neat.

Float scheduleSharesShareholding %
Locked up shares80,234,63390.38%
KSOE (6 months lockup)70,773,11679.72%
ESOP (1-year lockup)3,491,9973.93%
IPO institutional – lockups5,969,5206.72%
6 months1,266,3031.43%
3 months4,030,7074.54%
1 month630,6790.71%
15 days41,8310.05%
Float shares8,538,4839.62%
IPO institutional – non-lockups3,930,4804.43%
IPO retail4,608,0035.19%
Source: DART

Considering the cases in which KRX calculated immediate floats of IPOs in the past, it is highly likely that KRX will include up to three-month IPO lockup in the immediate float in this case as well. So, the float applied to the KOSPI 200 Fast Entry should be 15%. On the other hand, given HHI’s neat shareholder structure, MSCI/FTSE should have no room to play around. So, the nominal immediate float of 9.67% (10%) will be their immediate float as well.

Index floatNominalKOSPI 200MSCI/FTSE
1 year100.00%16.34%16.34%
6 months96.07%16.34%16.34%
3 months14.92%14.92%14.92%
1 month10.38%14.92%10.38%
15 days9.67%14.92%9.67%
Listing9.62%14.92% (15%)9.62% (10%)
Source: DART

Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers

By BondEvalue

US markets ended mixed with August retail sales coming higher while the weekly jobless claims increased slightly – Nasdaq ended 0.1% higher while S&P finished 0.2% lower. Eight out of eleven sectors ended in the red. Materials and Energy down more than 1%, led the losses while Consumer Discretionary up 0.4% contributed to the gains. European stocks finished higher – CAC closed the day 0.6% higher while DAX and FTSE were up 0.2% each. Brazil’s Bovespa added another 1.1% to the week’s losses. In the Middle East, UAE’s ADX and Saudi TASI gained 0.8% and 0.1% respectively. Asian markets have started mixed as investors keenly watch HSI which has already dropped 6% in the week – HSI was down 1.5% in early trade, Shanghai and Singapore’s STI were down 0.1% while Nikkei was up 0.3%. US 10Y Treasury yields added another 4bp reaching 1.34%. US IG and HY CDX spreads tightened 0.04bp and 0.1bp respectively. EU Main CDS spreads were 0.2bp tighter and Crossover CDS spreads tightened 1.7bp. Asia ex-Japan CS spreads tightened 0.2bp.  0.4bp. Asia ex-Japan CDSUS retail sales for August 2021 were up 0.7% MoM, much better than estimates of a decline of ~2%, indicating resilient demand. The gain came despite a sharp 3.6% drop at motor vehicle and parts dealers amid ongoing shortages and supply chain issues. That resulted in a 1.8% rise in retail sales ex-auto.   Meanwhile, the latest unemployment insurance weekly data showed a 332k increase in jobless claims last week vs. estimates of 320k.

RITES: Robust Order Book To Drive Future Growth

By Axis Direct

We expect the company to deliver Revenues/EBITDA/APAT growth of 26%/23%/21% CAGR respectively over FY21-23E.

RITES Ltd (RITES) maintained an EBITDA margin at 27% despite headwinds caused by Covid19 induced lockdowns in FY21.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Pick of the Week – Adani Ports & SEZ Limited

By Edelweiss

Adani Ports & SEZ Limited (APSEZ)’s business is classified into three verticals consisting of Ports, Logistics and Special Economic Zone.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Looking Forward to a Better Year Ahead

By TA Securities Holdings Bhd

Friday, September 17, 2021 Sector: Building Materials Chan Mun Chun Tel: +603-2167 9731 [email protected] www.taonline.com.my […] FY21 core profit of RM26.6mn came in within our expectation, accounting for 104.9% of our full-year estimate. […] The group expects the global demand for industrial fasteners to gradually return to the pre-pandemic level in the foreseeable future. […] On the other hand, the Vietnam plant is currently running at around 60% of capacity due to a shortage of workers.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

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