In today’s briefing:
- Index Rebalance & ETF Flow Recap: MSCI, ASX, STAR50, China 50, NIFTY100, SMM SP, Pertamina Geo IPO
- CSI500 Index Rebalance Preview: Potential Adds Continuing to Outperform
- Halcyon Agri: MGO Triggered. Currency Translation Cuts Offer Price
- Newmont’s Indicative Offer for Newcrest Mining (NCM AU)
- Mitsui & Co (8031) Q3 – Big Profit, New Bigger Buyback, Some Index Selling; and Competition
- Merger Arb Mondays (6 Feb) – Yashili, Kingston, Origin, Pushpay, Halcyon, O2Micro, Techno Associe
- Pertamina Geothermal IPO: Valuation Insights
- Last Week in SPACE: Adani Group, Bendigo/Bank of Queensland, Renault/Nissan, Keisei/Oriental Land
- BBL/KBANK: Huge Outperformance as BBL Nears NVDR Limit
- Hesai Group IPO – Thoughts on Valuation
Index Rebalance & ETF Flow Recap: MSCI, ASX, STAR50, China 50, NIFTY100, SMM SP, Pertamina Geo IPO
- There were some review cutoffs last week as well as the implementation of the PCOMP INDEX, IDX 30 Index, LQ 45 Index and IDX 80 Index.
- The big event in the coming week is the announcement of the MSCI February QCIR on Friday morning Asia time with implementation at the close of trading on 28 February.
- Inflows to iShares Core MSCI Emerging Markets ETF (IEMG US) continue while IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) continues to see redemptions.
CSI500 Index Rebalance Preview: Potential Adds Continuing to Outperform
- Three quarters of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 9 June.
- There is a big sector skew in the potential changes. We estimate a one-way turnover of 11.47% at the June rebalance resulting in a one-way trade of CNY 10.11bn.
- The potential adds have outperformed the potential deletes and the CSI500 Index over the last few weeks. There could be more outperformance till nearer the end of the review period.
Halcyon Agri: MGO Triggered. Currency Translation Cuts Offer Price
- As expected, all conditions to the Sinochem/China Hainan Rubber (601118 CH) SPA have now been satisfied, triggering a mandatory Offer for Halcyon Agri (HACL SP), conditional on a 50% tendering.
- Hainan Rubber holds 36%. Sinochem has provided an undertaking notto tender its remaining 29.2% stake. Hainan needs 14% out of 34.8% available – or ~40% to tender.
- The takeaway disappointment is the Offer Price of S$0.413/share, down from S$0.435 at the time of the initial announcement last November, due to SGD weakness.
Newmont’s Indicative Offer for Newcrest Mining (NCM AU)
- Newmont Mining (NEM US) has made an indicative, non-binding and conditional proposal to acquire Newcrest Mining (NCM AU). The exchange ratio is 0.38 Newmont shares for each Newcrest share.
- At Newmont Mining (NEM US)‘s last close, this values Newcrest Mining (NCM AU) at A$27.4/share and at an equity value of A$17.3bn, a 22% premium to the last close.
- Newmont Mining (NEM US) intends to list CDIs on the ASX following the acquisition and that will have implications for changes in the S&P/ASX family of indices.
Mitsui & Co (8031) Q3 – Big Profit, New Bigger Buyback, Some Index Selling; and Competition
- Mitsui & Co Ltd (8031 JP) reported Q3 earnings Friday afternoon during the market session. Like at Q2, they upped their fiscal-year forecast to well above Street consensus.
- Also like Q2, they announced a buyback – this one an extension in time, shares, and money on the one already in place, raising the total Core CashFlow Payout Ratio.
- This creates interesting index flows over the next several months, and other trading cos have live buybacks too.
Merger Arb Mondays (6 Feb) – Yashili, Kingston, Origin, Pushpay, Halcyon, O2Micro, Techno Associe
- 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 – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), Origin Energy (ORG AU), Golden Energy & Resources (GER SP), 111 Inc (YI US), Toyo Construction (1890 JP).
- Lowest spreads – Essential Metals (ESS AU), Tyro Payments (TYR AU), Chip Eng Seng Corp (CHIP SP), Conexio Corp (9422 JP), Kanematsu Electronics (8096 JP), Elmo Software (ELO AU).
Pertamina Geothermal IPO: Valuation Insights
- Pertamina Geothermal (0125738D IJ)/PGE, a subsidiary of PT Pertamina (Persero) (PERT IJ), is seeking to raise up to US$600 million at a narrowed price range of IDR875-880 per share.
- We previously discussed the IPO in Pertamina Geothermal IPO: The Investment Case.
- PGE is attractively valued at the IPO price range. We would participate. Books will be closed on 10 February and the shares will start trading on 24 February.
Last Week in SPACE: Adani Group, Bendigo/Bank of Queensland, Renault/Nissan, Keisei/Oriental Land
- Stay away from Adani Enterprises (ADE IN). It has wrapped itself in a cloak of nationalistic righteous indignation. Do not buy the dip. Or even a larger one.
- The timing of a Bendigo And Adelaide Bank (BEN AU) and Bank Of Queensland (BOQ AU) merger makes a lot of sense right now.
- This Renault SA (RNO FP) / Nissan Motor (7201 JP)‘s press release and “agreement”, as-is, is a Nothingburger.
BBL/KBANK: Huge Outperformance as BBL Nears NVDR Limit
- Bangkok Bank (BBL TB) has outperformed Kasikornbank PCL (KBANK TB) by 33% over the last 11 months and the price ratio is nearing the high end of the historical range.
- The number of NVDRs issued on Bangkok Bank Public (BBL TB) have continued to increase while decreasing on Kasikornbank PCL (KBANK TB).
- Bangkok Bank Public (BBL TB) now trades at a higher forward PE as compared to Kasikornbank PCL (KBANK TB) and the gap in price to book has narrowed significantly.
Hesai Group IPO – Thoughts on Valuation
- Hesai Group (HSAI US) is looking to raise around US$170m in its upcoming US IPO.
- HSAI is a manufacturer of three-dimensional light detection and ranging (Lidar) solutions. It has shipped over 103,000 Lidar units from 2017 to the end of 2022.
- We have looked at the company’s past performance and undertaken a peer comparison in our previous notes. In this note, we will talk about valuations.
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