In today’s briefing:
- NIFTY NEXT50 Index Rebalance Preview: Potential Changes & Close Names
- Prosus Is Elevated Vs. Tencent As The Accretion Trade Unfolds
- Waaree Energies (WAAREEEN IN): Increased Float & Global Index Inclusion
- STAR Chip Index Rebalance Preview: Forecast Changes for September
- UK Structurally Unemployed
- LIG Nex1 (079550 KS): Stock Soars; Momentum Stalls; Global Index Inclusion Next
- StubWorld: Japan Post Holdings (6178 JP) Is “Cheap”
- TSI Holdings (3608) – YET ANOTHER Big Buyback, Still Good, Still Cheap, But B/S Restructuring Slow
- Doosan Corp (000150 KS): Global Index Inclusion & A Relative Value Trade
- Netease Cloud Music (9899 HK): Stock Up; Short Interest Up; Global Index Inclusion
NIFTY NEXT50 Index Rebalance Preview: Potential Changes & Close Names
- With the review period nearing completion, there could be 4 changes (including 1 migration) for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September.
- There is one stock close to inclusion zone and one stock close to deletion zone and price movements over the rest of the month will determine the final changes.
- Estimated one-way turnover is 7.8% resulting in a one-way trade of INR 30.06bn (US$350m). Six of the eight potential changes will have over 2x ADV to trade from passive trackers.
Prosus Is Elevated Vs. Tencent As The Accretion Trade Unfolds
- Since unwinding the Naspers (NPN SJ)/Prosus (PRX NA) circularity, Prosus has been selling Tencent shares, and buying back its share. Separately, Tencent is buying its shares to offset Prosus’ selling.
- Prosus’ stake in Tencent has now edged below 23%, a little over seven months since dipping below 24%.
- On an implied stub and relative value, Prosus is elevated to Tencent, suggesting an unwinding of the stub.
Waaree Energies (WAAREEEN IN): Increased Float & Global Index Inclusion
- An increase in the stock price and free float should result in Waaree Energies (WAAREEEN IN) being included in a global index in August.
- Estimated passive buying is 8.2m shares (US$295m; 3x ADV; 10.8x delivery volume) at the close of trading on 26 August.
- Waaree Energies (WAAREEEN IN) has outperformed Premier Energies (PREMIERE IN) over the last 3 months but still trades at a lower forward PE.
STAR Chip Index Rebalance Preview: Forecast Changes for September
- There could be 2 constituent change for the STAR Chip Index at the September rebalance. There will also be a few capping changes.
- Estimated one-way turnover is 1.4% resulting in a round-trip trade of CNY 983m (US$137m). Passives need to trade between 0.4-1.9x ADV in the potential changes.
- Both forecast inclusions are newly eligible for index inclusion and the passive buying could provide some support following the drop in the stock price post listing.
UK Structurally Unemployed
- Higher employment taxes can entirely explain the fall in payrolls as the tax wedge hits its highest since 1987, raising our structural unemployment rate estimate by 0.48pp.
- That could understate the structural shift amid a substantial drop in the threshold, rise in the minimum wage (jobs ban) and benefit rates. Some will go ‘inactive’ on disability.
- The unemployment rate must rise more than its natural rate to deliver disinflationary pressure sustainably. Our structural estimates suggest it won’t break excess inflation.
LIG Nex1 (079550 KS): Stock Soars; Momentum Stalls; Global Index Inclusion Next
- LIG Nex1 Co (079550 KS)‘s stock price has doubled over the last 3 months, and the increased market cap could now result in a global index inclusion.
- LIG Nex1 Co (079550 KS) has outperformed most of its peers over the last few months and now trades expensive on a range of metrics.
- While momentum could take the stock higher, there is a risk of pullback as positioning in the stock is unwound.
StubWorld: Japan Post Holdings (6178 JP) Is “Cheap”
- As short-term rates rise, Japan Post Bank (7182 JP)‘s perceived superior fundamentals may be leading to a short squeeze on the stock versus Japan Post Holdings (6178 JP).
- Preceding my comments on Japan Post – and Silicon Integrated Systems (2363 TT) – are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
TSI Holdings (3608) – YET ANOTHER Big Buyback, Still Good, Still Cheap, But B/S Restructuring Slow
- A bit over three years ago I re-wrote on Tsi Holdings (3608 JP). Then? EV/Revenue and EV/EBITDA of 0.03x and 0.5x respectively. I pounded the table.
- My recommended trade: “Buy the stock (preferably from cross-holders interested in selling). Buy with both hands. Buy a lot. Buy more later. Pressure the company to go private.”
- Since then, total return has been +295%. Today they announced another buyback. Tomorrow morning it gets done. Details details details!
Doosan Corp (000150 KS): Global Index Inclusion & A Relative Value Trade
- A doubling of the stock price over the last 3 months could lead to Doosan Corp (000150 KS) being included in a global index in August.
- Doosan Corp (000150 KS) has outperformed its peers over the last few months and now trades at a huge valuation premium to its peer group.
- The stock is 17% off its recent highs and that provides an opportunity for a relative value trade heading into the index inclusion event.
Netease Cloud Music (9899 HK): Stock Up; Short Interest Up; Global Index Inclusion
- Cloud Village (9899 HK)‘s stock price has doubled over the last quarter and the increased market cap should lead to global index inclusion in August.
- Short interest in Cloud Village (9899 HK) is at an all-time high and has increased in lockstep with the stock price.
- Cloud Village (9899 HK) has outperformed Tencent Music Entertainment Group (1698 HK) and now trades at much higher valuations. A pair trade looks attractive here.
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