Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the March 2024 index rebal event.</li>
<li>Although I do not see any regular ADDs/DELs for the March 2024 rebalance, there might be one or two intra-review changes during the first quarter of 2024. </li>
<li>These intra-review changes will be triggered by the completion of M&amp;A events and it is important to know which names are leading the race to become intra-review ADDs.</li>
</ul>


In this insight, we take a look at the potential index changes for F100 and F250 in the run-up to the March 2024 index rebal event.
Although I do not see any regular ADDs/DELs for the March 2024 rebalance, there might be one or two intra-review changes during the first quarter of 2024. 
These intra-review changes will be triggered by the completion of M&amp;A events and it is important to know which names are leading the race to become intra-review ADDs.


Quiddity Leaderboard F100/​​​250 Mar 24: Intra-Review Replacements for NETW and LXI REIT

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<ul>
<li>UK Industrials maintain top Sector weight. Real Estate and Consumer Discretionary underweights fund Technology overweight.</li>
<li>Investment Managers Industry group hits record exposure. REITs largely unloved by UK Small/Midcap funds.</li>
<li>Future plc remains the most widely held company. XPS Pensions and Foresight Group Holdings are the top overweights. B&amp;M, Weir Group and Rightmove lead the underweights.</li>
</ul>


UK Industrials maintain top Sector weight. Real Estate and Consumer Discretionary underweights fund Technology overweight.
Investment Managers Industry group hits record exposure. REITs largely unloved by UK Small/Midcap funds.
Future plc remains the most widely held company. XPS Pensions and Foresight Group Holdings are the top overweights. B&amp;M, Weir Group and Rightmove lead the underweights.


European Event-Driven Analyst

Jesus Rodriguez Aguilar

<ul>
<li>Brookfield intends to launch an all-cash voluntary and conditional (50%+1) offer for underperforming, leveraged and Belgium-portfolio concentrated <a href="https://www.smartkarma.com/entities/befimmo-sa" target="_blank" data-smartkarma-citation="entities:21316:1" rel="noopener">Befimmo SA (BEFB BB)</a> at a 52% premium, 0.82x P/Fwd BV and 21.3x equity value/FFOe.</li>
<li>The offer represents a 21% discount to EPRA NTA (€60.32/share), large in comparison with other recent deals in the European space (in line with EPRA NTA).</li>
<li>Considering the share price underperformance, shareholders are likely to take the cash. Gross spread is -0.1%. Trading volume has been rather high over the last sessions.</li>
</ul>


Brookfield intends to launch an all-cash voluntary and conditional (50%+1) offer for underperforming, leveraged and Belgium-portfolio concentrated Befimmo SA (BEFB BB) at a 52% premium, 0.82x P/Fwd BV and 21.3x equity value/FFOe.
The offer represents a 21% discount to EPRA NTA (€60.32/share), large in comparison with other recent deals in the European space (in line with EPRA NTA).
Considering the share price underperformance, shareholders are likely to take the cash. Gross spread is -0.1%. Trading volume has been rather high over the last sessions.


Brookfield/Befimmo: Recommended (Cheap) Cash Offer

<a href="https://www.smartkarma.com/entities/hammerson-plc" target="_blank" data-smartkarma-citation="entities:21974:1" rel="noopener">Hammerson PLC (HMSO LN)</a> announced on 6 August a fully covered highly dilutive <a href="https://www.hammersontransaction.com/system/files/2020/launch-announcement.pdf" target="_blank" rel="noopener">rights issue</a> combined with a sale of VIA Outlets; both should raise £825 mn gross proceeds (c. £794 mn net) to recapitalise the business.
<ul>
<li>Following completion of both the rights issue and the disposal of VIA, Hammerson's net debt would reduce to £2.2 billion on a pro-forma basis as at 30 June 2020 and LTV would fall to 41.7% on a fully proportionally consolidated basis.</li>
<li>Those £794 mn net proceeds seem somewhat far from what's needed to restore Hammerson to a more comfortable leverage, another £500 mn, in my view.</li>
<li>Hammerson reported a £1.09 bn loss in H1 2020 (vs. a £319 mn loss in H1 2019).</li>
</ul>
The capital increase is highly dilutive. Considering the share consolidation, the UK issue price of 15p represents a discount of 94.6% to the closing price of 279.80 p on 5 August, and a 41.4% discount to the TERP of 25.59 p (by reference to the LSE closing price on 5 August).
Shares closed at 47p on 7 August, 15% below the closing price prior to the announcement.
Following completion of both the rights issue and the disposal of VIA, Hammerson's net debt would reduce to £2.2 bn pro-forma (57% gearing) as at 30 June 2020 and LTV would fall to 41.7% on a fully proportionally consolidated basis (vs. a dangerously high 51%). The focus, according to Hammerson, remains on further disposals to reduce debt over the medium term.
From a covenant perspective, Hammerson's announcements buy some time and allow trading and capex to continue in the short term. But I have already pointed out that Moody's has placed the rating under review, and that a downgrade to high yield is not unlikely (with higher financing costs). This and the refinancing profile should put pressure on Hammerson.
It is also worth considering that these businesses have been the growth drivers for Hammerson over the last years, and disposing of them is akin to selling the family silver.
I see further downside in Hammerson. The analyst consensus on S&amp;P Market Intelligence is underperform, and I also recommend a straight short in Hammerson.
Pair trade. Over the last two years, Hammerson has underperformed <a href="https://www.smartkarma.com/entities/british-land-co-plc-the" target="_blank" data-smartkarma-citation="entities:21839:1" rel="noopener">British Land Co (BLND LN)</a> by a lot. The S&amp;P Market Intelligence analyst consensus on British Land is neutral BLND. Looking at the charts it seems that Hammersons could outperform British Land in the short term, if it does, would be a good time to short Hammersons and buy British Land on a bounce in the price ratio.

Hammerson PLC (HMSO LN) announced on 6 August a fully covered highly dilutive rights issue combined with a sale of VIA Outlets; both should raise £825 mn gross proceeds (c. £794 mn net) to recapitalise the business.

Following completion of both the rights issue and the disposal of VIA, Hammerson's net debt would reduce to £2.2 billion on a pro-forma basis as at 30 June 2020 and LTV would fall to 41.7% on a fully proportionally consolidated basis.
Those £794 mn net proceeds seem somewhat far from what's needed to restore Hammerson to a more comfortable leverage, another £500 mn, in my view.
Hammerson reported a £1.09 bn loss in H1 2020 (vs. a £319 mn loss in H1 2019).

The capital increase is highly dilutive. Considering the share consolidation, the UK issue price of 15p represents a discount of 94.6% to the closing price of 279.80 p on 5 August, and a 41.4% discount to the TERP of 25.59 p (by reference to the LSE closing price on 5 August).
Shares closed at 47p on 7 August, 15% below the closing price prior to the announcement.
Following completion of both the rights issue and the disposal of VIA, Hammerson's net debt would reduce to £2.2 bn pro-forma (57% gearing) as at 30 June 2020 and LTV would fall to 41.7% on a fully proportionally consolidated basis (vs. a dangerously high 51%). The focus, according to Hammerson, remains on further disposals to reduce debt over the medium term.
From a covenant perspective, Hammerson's announcements buy some time and allow trading and capex to continue in the short term. But I have already pointed out that Moody's has placed the rating under review, and that a downgrade to high yield is not unlikely (with higher financing costs). This and the refinancing profile should put pressure on Hammerson.
It is also worth considering that these businesses have been the growth drivers for Hammerson over the last years, and disposing of them is akin to selling the family silver.
I see further downside in Hammerson. The analyst consensus on S&amp;P Market Intelligence is underperform, and I also recommend a straight short in Hammerson.
Pair trade. Over the last two years, Hammerson has underperformed British Land Co (BLND LN) by a lot. The S&amp;P Market Intelligence analyst consensus on British Land is neutral BLND. Looking at the charts it seems that Hammersons could outperform British Land in the short term, if it does, would be a good time to short Hammersons and buy British Land on a bounce in the price ratio.

Equity analyst UK & Europe, UK Long Short

Peter Toeman

Equity analyst UK & Europe

Accelerating Tomorrow’s Independent Research

Boost Research

Boost Research Ltd is an appointed representative of Messels Ltd which is authorised and regulated by the FCA of the UK. 

This document is issued by Boost Research Limited solely for its clients. It may not be reproduced, redistributed or passed to any other person in whole or in part for any purpose without written consent of Boost Research. The material in this document is not intended for distribution or use outside the United Kingdom. This material is not directed at you if Boost Research is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you.

This document is provided for information purposes only and should not be regarded as an offer, solicitation, invitation, inducement or recommendation relating to the subscription, purchase or sale of any security or other financial instrument.  This document does not constitute, and should not be interpreted as, investment advice.  It is accordingly recommended that you should seek independent advice from a suitably qualified professional advisor before taking any decisions in relation to the investments detailed herein. All expressions of opinions and estimates constitute a judgement and, unless otherwise stated, are those of the author and the research department of Boost Research only, and are subject to change without notice. Boost Research is under no obligation to update the information contained herein. Whilst Boost Research has taken all reasonable care to ensure that the information contained in this document is not untrue or misleading at the time of publication, Boost Research cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. This document is not guaranteed to be a complete statement or summary of any securities, markets, reports or developments referred to herein. No representation or warranty either expressed or implied is made, nor responsibility of any kind is accepted, by Boost Research or any of its respective directors, officers, employees or analysts either as to the accuracy or completeness of any information contained in this document nor should it be relied on as such. No liability whatsoever is accepted by Boost Research or any of its respective directors, officers, employees or analysts for any loss, whether direct or consequential, arising whether directly or indirectly as a result of the recipient acting on the content of this document, including, without limitation, lost profits arising from the use of this document or any of its contents.

This document is provided with the understanding that Boost Research is not acting in a fiduciary capacity and it is not a personal recommendation to you. Investing in securities entails risks. Past performance is not necessarily a guide to future performance. The value of and the income produced by products may fluctuate, so that an investor may get back less than he invested. Investments in the entities and/or the securities or other financial instruments referred to are not suitable for all investors and this document should not be relied upon in substitution for the exercise of independent judgment in relation to any such investment. The stated price of any securities mentioned herein will generally be the closing price at the end of any of the three business days immediately prior to the publication date on this document. This stated price is not a representation that any transaction can be effected at this price.

Boost Research and its respective analysts are remunerated for providing investment research to professional investors, corporations, other research institutions and consultancy houses. Boost Research, or its respective directors, officers, employees and clients may have or take positions in the securities or entities mentioned in this document.  Any of these circumstances could create, or be perceived as creating, conflicts of interest. Boost Research’ analysts are not censored in any way and are free to express their personal opinions. As a result, Boost Research may have issued other documents that are inconsistent with and reach different conclusions from, the information contained in this document. Those documents reflect the different assumptions, views and analytical methods of their authors. No director, officer or employee of Boost Research is on the board of directors of any company referenced herein and no one at any such referenced company is on the board of directors of Boost Research.

Messels is authorised and regulated in the United Kingdom by the Financial Conduct Authority for the provision of investment advice. Residents of the United Kingdom should seek specific professional financial and investment advice from a stockbroker, banker, solicitor, accountant or other independent professional adviser authorised pursuant to the Financial Services and Markets Act 2000. This report is intended only for investors who are 'professional clients' as defined by the FCA, and may not, therefore, be redistributed to other classes of investors.

The content of this report is covered by our Policy of Independence which may be viewed at www.messels.com.

 

Analysts’ Certification

The analysts involved in the production of this document hereby certify that the views expressed in this document accurately reflect their personal views about the securities mentioned herein. The analysts point out that they may buy, sell or already have taken positions in the securities, and related financial instruments, mentioned in this document

Thematic (Sector/Industry)

The UK stockmarket has enjoyed a buoyant first quarter keeping track with other developed markets. This might appear somewhat surprising given political turmoil and the existential risk posed by Brexit but it seems that investors always anticipated that Parliament would veto the most damaging "No-deal" option. In this regard investors have been more far-sighted than right-wing Conservative politicians.So where to now for FTSE100 ? The index is back to the level of early 18Q4 which seems appropriate given the anticipated economic downturn recession failed to materialise. The old adage "Sell in May and go away" comes to mind. As strategy this has worked quite well. Over the 25 years the market has been lower at the at the end of the second quarter than at the beginning 42%  of the time, producing an average return of minus 0.4%.In terms of individual companies, Tesco (which we had in the long portfolio) is amongst the top ten performers year-to-date, and Centrica (in the short portfolio) is the second worst.

The UK stockmarket has enjoyed a buoyant first quarter keeping track with other developed markets. This might appear somewhat surprising given political turmoil and the existential risk posed by Brexit but it seems that investors always anticipated that Parliament would veto the most damaging "No-deal" option. In this regard investors have been more far-sighted than right-wing Conservative politicians.So where to now for FTSE100 ? The index is back to the level of early 18Q4 which seems appropriate given the anticipated economic downturn recession failed to materialise. The old adage "Sell in May and go away" comes to mind. As strategy this has worked quite well. Over the 25 years the market has been lower at the at the end of the second quarter than at the beginning 42%  of the time, producing an average return of minus 0.4%.In terms of individual companies, Tesco (which we had in the long portfolio) is amongst the top ten performers year-to-date, and Centrica (in the short portfolio) is the second worst.

United Kingdom

British Land Company plc invests, both directly and through joint ventures, in income-producing and freehold commercial properties in order to maximize their growth and potential.  The Company trades, finances, and develops property. Their portfolio consists of offices, retail superstores, shopping centers, leisure, industrial, and distribution spaces.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

British Land Co (BLND LN)

Quiddity Leaderboard F100/250 Mar 24: Intra-Review Replacements for NETW and LXI REIT

F250 members Network International Holdings and LXI REIT could get deleted from the F250 index in 1Q 2024. The F250 potential ADDs leading the race...

Janaghan Jeyakumar, CFA

UK Small/Midcap Fund Positioning Update

How are UK Small and Midcap equity funds positioned? We analyse the holdings of 106 actively managed UK strategies to find out.

Steven Holden

Brookfield/Befimmo: Recommended (Cheap) Cash Offer

Brookfield takes advantage of the discount to NAV of Befimmo to launch a €1.4 bin offer at a 52% premium. Considering 2-year share price...

Jesus Rodriguez Aguilar

Hammerson's Rescue Rights Issue

Hammerson PLC (HMSO LN) announced on 6 August a fully covered highly dilutive rights issue combined with a sale of VIA Outlets; both should raise...

Jesus Rodriguez Aguilar

FTSE 100 Long/Short: No 2 No Deal

The UK stockmarket has enjoyed a buoyant first quarter keeping track with other developed markets. This might appear somewhat surprising given...

Boost Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Quiddity Leaderboard F100/​​​250 Mar 24: Intra-Review Replacements for NETW and LXI REIT

F250 members Network International Holdings and LXI REIT could get deleted from the F250 index in 1Q 2024. The F250 potential ADDs leading the race...

Janaghan Jeyakumar, CFA

UK Small/Midcap Fund Positioning Update

How are UK Small and Midcap equity funds positioned? We analyse the holdings of 106 actively managed UK strategies to find out.

Steven Holden

Brookfield/Befimmo: Recommended (Cheap) Cash Offer

Brookfield takes advantage of the discount to NAV of Befimmo to launch a €1.4 bin offer at a 52% premium. Considering 2-year share price...

Jesus Rodriguez Aguilar

Hammerson's Rescue Rights Issue

Hammerson PLC (HMSO LN) announced on 6 August a fully covered highly dilutive rights issue combined with a sale of VIA Outlets; both should raise...

Jesus Rodriguez Aguilar

FTSE 100 Long/Short: No 2 No Deal

The UK stockmarket has enjoyed a buoyant first quarter keeping track with other developed markets. This might appear somewhat surprising given...

Boost Research

Quiddity Leaderboard F100/250 Mar 24: Intra-Review Replacements for NETW and LXI REIT