Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>There could be up to 6 changes to the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> at the December rebalance, mainly driven by the deletions.</li>
<li>If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.</li>
<li>There is large short interest on quite a lot of stocks and will play an important role in the rebalance.</li>
</ul>


There could be up to 6 changes to the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, mainly driven by the deletions.
If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.
There is large short interest on quite a lot of stocks and will play an important role in the rebalance.


HSCEI Index Rebalance Preview: Could Be A BIG One

Asia Consumer Research, Investory

Devi Subhakesan

Asia Consumer Research

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

Equity Bottom-Up

Health And Happiness (H&H) / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/health-and-happiness-h-h-int" target="_blank" data-smartkarma-citation="entities:20582:1" rel="noopener">Health And Happiness (H&amp;H) (1112 HK)</a> 's first half financial performance was bolstered by robust sales growth in its adult, pet nutrition products even as infant formula sales remained weak.</li>
<li>Multiple sector specific headwinds continue to impact sales of Infant formula in Mainland China. It now accounts for less than 50% of H&amp;H's overall sales.</li>
<li>Segment-Wise valuation suggest stock upside even at conservative multiples. With nearly half the revenues and gross margins being contributed by high growth Adult, Pet nutrition segments, this seems appropriate. </li>
</ul>



Health And Happiness (H&amp;H) (1112 HK) 's first half financial performance was bolstered by robust sales growth in its adult, pet nutrition products even as infant formula sales remained weak.
Multiple sector specific headwinds continue to impact sales of Infant formula in Mainland China. It now accounts for less than 50% of H&amp;H's overall sales.
Segment-Wise valuation suggest stock upside even at conservative multiples. With nearly half the revenues and gross margins being contributed by high growth Adult, Pet nutrition segments, this seems appropriate. 


H&H Holdings: Growing Adult, Pet Care Offset Slowing Baby Care. Segment Valuation Suggest Upside

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Yashili International Holdings / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yashili-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3397:1" rel="noopener">Yashili International Holdings (1230 HK)</a> independent shareholders unanimously approved the proposed transactions at the 16 August EGM, a crucial step for <a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy Co (2319 HK)</a>’s HK$1.20 offer.</li>
<li>The remaining pre-condition is the completion of the 25% Yashili acquisition. The completion conditions suggest that this pre-condition is low risk and will likely be completed soon.</li>
<li>The value test is only applicable to the scheme. At last close and for a November completion, the gross and annualised spread to the offer is 8.1% and 29.6%, respectively.</li>
</ul>



Yashili International Holdings (1230 HK) independent shareholders unanimously approved the proposed transactions at the 16 August EGM, a crucial step for China Mengniu Dairy Co (2319 HK)’s HK$1.20 offer.
The remaining pre-condition is the completion of the 25% Yashili acquisition. The completion conditions suggest that this pre-condition is low risk and will likely be completed soon.
The value test is only applicable to the scheme. At last close and for a November completion, the gross and annualised spread to the offer is 8.1% and 29.6%, respectively.


Yashili’s Pre-Condition EGM Approval Secured

<ul>
<li>The approval by <a href="https://www.smartkarma.com/entities/yashili-international-holdings-ltd" target="_blank" data-smartkarma-citation="entities:3397:1" rel="noopener">Yashili International Holdings (1230 HK)</a> independent shareholders of the proposed transactions at the 16 August EGM is a pre-condition to the HK$1.20 per share privatisation proposal.</li>
<li>Shareholders will pass the ordinary resolutions at the EGM so that they can vote on the attractive privatisation proposal. The key risk is timing around the satisfaction of the pre-conditions.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-mengniu-dairy-co" target="_blank" data-smartkarma-citation="entities:354:1" rel="noopener">China Mengniu Dairy Co (2319 HK)</a>’s offer remains attractive in the context of multiples and historical share prices. At the last close, the gross spread to the offer is 10.1%.</li>
</ul>


The approval by Yashili International Holdings (1230 HK) independent shareholders of the proposed transactions at the 16 August EGM is a pre-condition to the HK$1.20 per share privatisation proposal.
Shareholders will pass the ordinary resolutions at the EGM so that they can vote on the attractive privatisation proposal. The key risk is timing around the satisfaction of the pre-conditions.

China Mengniu Dairy Co (2319 HK)’s offer remains attractive in the context of multiples and historical share prices. At the last close, the gross spread to the offer is 10.1%.


Yashili’s Pre-Condition EGM Set for 16 August

<ul>
<li>Currently at 69 constituents, it is unlikely that we reach 80 member by year end. Hang Seng Indexes is finding it tough to reach the target by excluding unprofitable companies.</li>
<li>We list 11 stocks that could be added to the index in September - with one-way turnover just over 5%, the actual number of inclusions will be lower.</li>
<li>There are a few potential inclusions where short interest is over 5% of the free float. These stocks could see short covering ahead of announcement of the changes.</li>
</ul>


Currently at 69 constituents, it is unlikely that we reach 80 member by year end. Hang Seng Indexes is finding it tough to reach the target by excluding unprofitable companies.
We list 11 stocks that could be added to the index in September - with one-way turnover just over 5%, the actual number of inclusions will be lower.
There are a few potential inclusions where short interest is over 5% of the free float. These stocks could see short covering ahead of announcement of the changes.


HSI Index Rebalance Preview: Finding the Balance

China

Heilongjiang Agriculture Co., Ltd. plants, processes, and sells rice, soybean, wheat, corn, and other grain products.  The Company also produces fertilizers and sells paper products.

MeiHua Holdings Group Co., Ltd. manufactures various pharmaceuticals. The Company manufactures monosodium glutamate, amino acids, L-Threonine L-Glutamine  L-Proline  and Natamycin.

Jiangxi Zhengbang Technology Co., Ltd. produces and markets forage and forage additive for livestock and poultry. The company also produces and markets livestock, poultry and aquatic products.

Uni-President China's products include beverages and food. 

The Group recorded a revenue of RMB22,761.8 million in 2020, representing an increase of 3.4% as compared with that of the corresponding period last year, and profits after tax of RMB1,625.7 million, representing an increase of 19.0% as compared with that of last year. 

We recorded a double-digit growth in the food business as the increasing brand value of daily-consumed noodles “Soup Daren（湯達人）” was highly recognized by consumers and the brand philosophy of the high-end Chinese cuisine “Kai Xiao Zao （開小灶）” was continuously promoted to create and extend the consumption scenarios, thereby contributing to such multifold growth in revenue. 

The beverages business was gradually recovering despite the impacts caused by the epidemic. “Uni Assam Milk Tea（統一阿薩姆奶茶）” was favoured by consumers as
usual with a unwavering leading position in the milk tea market and positive growth in revenue. Sugar-free tea “Chai Li Won（茶裏王）” aligned with consumers’ lifestyle concept of “sugar-free” to improve its brand recognition. On its road to value marketing, the Group remained steadfast in developing brands that are loved and trusted by consumers.

Angel Yeast Co., Ltd. produces yeast and yeast products, including high-activity dry yeast, yeast monosodium glutamate, and special yeast.  The Company also manufactures dairy products, food additives, soy bean products, and other food products.

Shenzhen Shenxin Taifeng Group Co., Ltd. develops, manufactures, and sells communication products, as well as produces feedstuffs and breeds poultry.  The Company's products include feedstuffs, communication products and agricultural products as well as is involved in property development and management.

Shenzhen Shenxin Taifeng Group Co,Ltd. (000034 CH)

Beijing Dabeinong Technology Group Co.,Ltd produces and sells animal feeds, cultivates and promotes seed products.  The Company's products include mix feed, concentrate feed, compound feed, paddy seed, corn seed, and cotton seed.

Beijing Dabeinong Technology Grp (002385 CH)

Fujian Sunner Development Company Ltd. processes and markets poultry.  The Company's products include frozen chicken meat and other chicken parts.

Harbin High-tech Group Co., Ltd. is an investment holding company.  Through its subsidiaries, the Company processes soybeans, manufactures pharmaceuticals and water resistant coiled materials, develops and manages real estate, as well as operates in commercial trading.

New Hope Liuhe Co Ltd develops, produces, and markets a variety of animal feeds The Company also operates a commercial tradingbusiness, produces packing materials, chemicals and fish oil, and provides consulting services.

Nisshin Seifun Group Inc. produces and sells flour, fodder, processed foods, and medicines. The Company offers specialized pasta sauce, frozen foods, and gourmet soup. Nisshin Seifun Group also markets pet foods.

PPB Group Berhad is an investment holding company. The Company operations include grains trading, flour and animal feed milling industry as well as downstream activities including livestock farming, food processing and consumer products distribution with primary focus in Indonesia, Malaysia, China, India and Europe.

PT Indofood Sukses Makmur Tbk and its subsidiaries manufacture instant noodles, wheat flour, baby food, food seasonings, coffee, cooking oil, and snacks.

IOI Corporation Berhad cultivates and processes oil palm and rubber.  The Company, through its subsidiaries, operates in property development and investment, provides landscape services, and sells ornamental plants and turfing grass. IOI Corporation also manufactures industrial and medical gases, and provides building, engineering, and construction services.

CJ CheilJedang Corp. manufactures processed food products.  The Company's products include refined sugar, monosodium glutamate (MSG), condiment, wheat powder, flour, cooking oil, processed meats, and animal feed.  CJ CheilJedang also manufactures pharmaceutical and household products.

Flowers Foods, Inc. produces and markets packaged bakery foods for retail and foodservice customers. The Company offers fresh packaged and frozen bakery products, as well as pastries, doughnuts, and bakery snack products. Flowers Foods serves customers in the State of Georgia.

Universal Robina Corporation manufactures, markets, and distributes branded consumer foods. The Company's products include hogs and poultry farming, animal feeds, corn products, and animal health products.

NICHIREI CORPORATION produces and distributes frozen food, ice, and meat products.  The Company also provides a variety of cold storage services, as well as manages leasing business for buildings and parking garages.

YAMAZAKI BAKING CO., LTD. produces baking foods including bread, pastry, and cake.  The Company operates nationwide sales network.  YAMAZAKI BAKING also operates franchised cafeterias and convenience stores.

Hatsun Agro Products Limited manufactures skimmed milk powder, skimmed milk powd er blends, instant skimmed milk powder, whole milk powder, and full cream milk p owder.

China Feihe Limited manufactures and sells dairy products. The Company provides infant milk formula products processing, production, marketing, and other services. China Feihe also sells infant milk formula products on some electronic commerce platforms.

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China Feihe (6186 HK)

HSCEI Index Rebalance Preview: Could Be A BIG One

There could be up to 6 changes to the HSCEI in December resulting in one-way turnover of 6.47% and in a one-way trade of HK$4,124m. Short interest...

Brian Freitas

H&H Holdings: Growing Adult, Pet Care Offset Slowing Baby Care. Segment Valuation Suggest Upside

Segment-Wise valuation suggest stock upside even at conservative multiples. With nearly half the revenues and gross margins now from high growth...

Devi Subhakesan

Yashili’s Pre-Condition EGM Approval Secured

The remaining pre-condition is low risk and will likely be completed soon. Interims on 24 August. At last close and for a November completion, the...

Arun George

Yashili’s Pre-Condition EGM Set for 16 August

The EGM will take a convoluted transaction further to completion. Expect the spread to narrow. At the last close, the gross spread to the offer is...

Arun George

HSI Index Rebalance Preview: Finding the Balance

There could be up to 5 inclusions as Hang Seng works its way up to 80 index members. We highlight the probable inclusions and find that some of...

Brian Freitas

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