In today’s briefing:
- HSI Index Rebalance: Four Weddings & A Funeral
- Brookfield/HomeServe: Agreed 1200p Offer
HSI Index Rebalance: Four Weddings & A Funeral
- The inclusion of Orient Overseas International, Zhongsheng Group, Semiconductor Manufacturing International Corp (SMIC) and China Hongqiao plus the deletion of AAC Technologies Holdings takes us to 69 index stocks.
- Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover is 3.43% and will result in a one-way trade of HK$7,444m.
- There is huge short interest on Zhongsheng Group (881 HK) and China Hongqiao (1378 HK) and there could be some short covering from now to implementation.
Brookfield/HomeServe: Agreed 1200p Offer
- HomeServe has reached an agreement on a 1,200p cash offer (vs. my 1,206 TP), 71% premium and an implied EV of £4,706 million; 13.3x EV/Fwd EBITDA, 25.7x Fwd P/E.
- While the deal is highly likely to close (15.3% IRR by year 8) and the founder will bag £490 million, HomeServe could still attract interest from other parties.
- Gross spread as of today’s close is 3.4% and the estimated annual return would be 7.9% assuming settlement on 30 October. Reiterate long HSV LN.
Before it’s here, it’s on Smartkarma
