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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

EDP - Energias de Portugal SA / Event-Driven

The changes to the S&amp;P Global Clean Energy Index have been announced. There are 52 additions to the index to take the number of index constituents up to 82. The changes are effective after the close of trading on 16 April.The 52 additions and capping changes will result in a one-way turnover of close to 55% and will require the ETFs tracking the index to trade US$12bn to rebalance their portfolios.The largest buying impact in terms of ADV to trade will be on <a href="https://www.smartkarma.com/entities/edp-energias-de-portugal-sa" target="_blank" data-smartkarma-citation="entities:21362:1" rel="noopener">Edp - Energias De Portugal Sa (EDP PL)</a>, <a href="https://www.smartkarma.com/entities/sse-plc" target="_blank" data-smartkarma-citation="entities:22163:1" rel="noopener">SSE PLC (SSE LN)</a>, <a href="https://www.smartkarma.com/entities/northland-power-inc" target="_blank" data-smartkarma-citation="entities:25480:1" rel="noopener">Northland Power (NPI CN)</a>, <a href="https://www.smartkarma.com/entities/enel-americas-sa-c3a67f8a-ad13-45ff-a676-cbc513b8c458" target="_blank" data-smartkarma-citation="entities:25965:1" rel="noopener">Enel Americas SA (ENIA US)</a>, <a href="https://www.smartkarma.com/entities/drax-group-plc" target="_blank" data-smartkarma-citation="entities:21911:1" rel="noopener">Drax Group PLC (DRX LN)</a>, <a href="https://www.smartkarma.com/entities/meyer-burger-technology-ag" target="_blank" data-smartkarma-citation="entities:25013:1" rel="noopener">Meyer Burger Technology Ag (MBTN SW)</a> and <a href="https://www.smartkarma.com/entities/centrais-eletricas-br-sp-adr" target="_blank" data-smartkarma-citation="entities:28638:1" rel="noopener">Centrais Eletricas Br-Sp Adr (EBR US)</a>.The largest selling impact will be on <a href="https://www.smartkarma.com/entities/meridian-ener-partly-paid-sh" target="_blank" data-smartkarma-citation="entities:4327:1" rel="noopener">Meridian Energy (MEL NZ)</a>, <a href="https://www.smartkarma.com/entities/contact-energy-ltd" target="_blank" data-smartkarma-citation="entities:13136:1" rel="noopener">Contact Energy (CEN NZ)</a>, <a href="https://www.smartkarma.com/entities/verbund-ag" target="_blank" data-smartkarma-citation="entities:22563:1" rel="noopener">Verbund AG (VER AV)</a>, <a href="https://www.smartkarma.com/entities/innergex-renewable-energy-inc" target="_blank" data-smartkarma-citation="entities:25479:1" rel="noopener">Innergex Renewable Energy (INE CN)</a>, <a href="https://www.smartkarma.com/entities/cia-energetica-de-spon-adr" target="_blank" data-smartkarma-citation="entities:28644:1" rel="noopener">Cia Energetica De-Spon Adr (CIG US)</a>, <a href="https://www.smartkarma.com/entities/boralex-inc" target="_blank" data-smartkarma-citation="entities:25478:1" rel="noopener">Boralex Inc (BLX CN)</a> and <a href="https://www.smartkarma.com/entities/scatec-solar-asa" target="_blank" data-smartkarma-citation="entities:25120:1" rel="noopener">Scatec Solar ASA (SSO NO)</a>.Among the current index constituents, there will be buying on <a href="https://www.smartkarma.com/entities/orsted-a-s" target="_blank" data-smartkarma-citation="entities:24765:1" rel="noopener">Orsted A/S (ORSTED DC)</a> and <a href="https://www.smartkarma.com/entities/vestas-wind-systems-a-s" target="_blank" data-smartkarma-citation="entities:22524:1" rel="noopener">Vestas Wind Systems A/S (VWS DC)</a>.We recommend buying the surprise inclusions and unwinding the positions by implementation date. A lot of the stocks that will have a reduction in index weight have been sold off over the last few months and the active positions will be covered leading up to implementation date - we recommend buying these stocks in the days leading up to implementation date since the stocks could rally once the overhang of passive selling has been removed.

The changes to the S&amp;P Global Clean Energy Index have been announced. There are 52 additions to the index to take the number of index constituents up to 82. The changes are effective after the close of trading on 16 April.The 52 additions and capping changes will result in a one-way turnover of close to 55% and will require the ETFs tracking the index to trade US$12bn to rebalance their portfolios.The largest buying impact in terms of ADV to trade will be on Edp - Energias De Portugal Sa (EDP PL), SSE PLC (SSE LN), Northland Power (NPI CN), Enel Americas SA (ENIA US), Drax Group PLC (DRX LN), Meyer Burger Technology Ag (MBTN SW) and Centrais Eletricas Br-Sp Adr (EBR US).The largest selling impact will be on Meridian Energy (MEL NZ), Contact Energy (CEN NZ), Verbund AG (VER AV), Innergex Renewable Energy (INE CN), Cia Energetica De-Spon Adr (CIG US), Boralex Inc (BLX CN) and Scatec Solar ASA (SSO NO).Among the current index constituents, there will be buying on Orsted A/S (ORSTED DC) and Vestas Wind Systems A/S (VWS DC).We recommend buying the surprise inclusions and unwinding the positions by implementation date. A lot of the stocks that will have a reduction in index weight have been sold off over the last few months and the active positions will be covered leading up to implementation date - we recommend buying these stocks in the days leading up to implementation date since the stocks could rally once the overhang of passive selling has been removed.

Global Clean Energy Index: 52 Adds, 55% Index Turnover, US$12bn to Trade

Earlier today, S&amp;P Dow Jones announced that all the proposals of the latest market consultation would be implemented at the close of trading on 16 April to reduce constituent concentration, ease liquidity limitations, and improve index replication further than would have been achieved from the result of the prior market consultation.We expect there will be 37 additions to the index taking the number of index constituents up to 67. This number will increase over the next few rebalances as the target is to get up to at least 100 constituent stocks.With index weight dependent on free float market cap and turnover, plus capping of index weight dependent on exposure scores, this is going to be a large rebalance. We expect a one-way turnover of 48.1% with our expected changes.Stocks that could see passive buying (sorted in terms of days of ADV) are <a href="https://www.smartkarma.com/entities/drax-group-plc" target="_blank" data-smartkarma-citation="entities:21911:1" rel="noopener">Drax Group PLC (DRX LN)</a>, <a href="https://www.smartkarma.com/entities/enel-americas-sa-c3a67f8a-ad13-45ff-a676-cbc513b8c458" target="_blank" data-smartkarma-citation="entities:25965:1" rel="noopener">Enel Americas Sa (ENIA US)</a>, <a href="https://www.smartkarma.com/entities/fortum-oyj" target="_blank" data-smartkarma-citation="entities:21762:1" rel="noopener">Fortum OYJ (FUM1V FH)</a>, <a href="https://www.smartkarma.com/entities/erg-spa" target="_blank" data-smartkarma-citation="entities:21186:1" rel="noopener">ERG SpA (ERG IM)</a>, <a href="https://www.smartkarma.com/entities/terna-rete-elettrica-nazionale" target="_blank" data-smartkarma-citation="entities:21232:1" rel="noopener">Terna Rete Elettrica Nazionale (TRN IM)</a>, <a href="https://www.smartkarma.com/entities/china-longyuan-power-group-corp-ltd" target="_blank" data-smartkarma-citation="entities:14215:1" rel="noopener">China Longyuan Power Group Corp (916 HK)</a>, <a href="https://www.smartkarma.com/entities/nordex-se" target="_blank" data-smartkarma-citation="entities:21682:1" rel="noopener">Nordex SE (NDX1 GR)</a>, <a href="https://www.smartkarma.com/entities/acciona-sa" target="_blank" data-smartkarma-citation="entities:21248:1" rel="noopener">Acciona SA (ANA SM)</a>, <a href="https://www.smartkarma.com/entities/avista-corp" target="_blank" data-smartkarma-citation="entities:17178:1" rel="noopener">Avista Corp (AVA US)</a> and <a href="https://www.smartkarma.com/entities/idacorp-inc" target="_blank" data-smartkarma-citation="entities:15190:1" rel="noopener">Idacorp Inc (IDA US)</a>.Stocks that could see passive selling (sorted in terms of days of ADV) are <a href="https://www.smartkarma.com/entities/meridian-ener-partly-paid-sh" target="_blank" data-smartkarma-citation="entities:4327:1" rel="noopener">Meridian Energy (MEL NZ)</a>, <a href="https://www.smartkarma.com/entities/contact-energy-ltd" target="_blank" data-smartkarma-citation="entities:13136:1" rel="noopener">Contact Energy (CEN NZ)</a>, <a href="https://www.smartkarma.com/entities/verbund-ag" target="_blank" data-smartkarma-citation="entities:22563:1" rel="noopener">Verbund AG (VER AV)</a>, <a href="https://www.smartkarma.com/entities/edp-renovaveis-sa" target="_blank" data-smartkarma-citation="entities:21363:1" rel="noopener">EDP Renovaveis SA (EDPR PL)</a>, <a href="https://www.smartkarma.com/entities/scatec-solar-asa" target="_blank" data-smartkarma-citation="entities:25120:1" rel="noopener">Scatec Solar ASA (SSO NO)</a>, <a href="https://www.smartkarma.com/entities/innergex-renewable-energy-inc" target="_blank" data-smartkarma-citation="entities:25479:1" rel="noopener">Innergex Renewable Energy (INE CN)</a>, <a href="https://www.smartkarma.com/entities/boralex-inc" target="_blank" data-smartkarma-citation="entities:25478:1" rel="noopener">Boralex Inc (BLX CN)</a> and <a href="https://www.smartkarma.com/entities/siemens-gamesa-renewable-energy-s-a" target="_blank" data-smartkarma-citation="entities:21270:1" rel="noopener">Siemens Gamesa Renewable Energy, S.A. (SGRE SM)</a>.Among existing constituents, there will be passive inflows on <a href="https://www.smartkarma.com/entities/orsted-a-s" target="_blank" data-smartkarma-citation="entities:24765:1" rel="noopener">Orsted A/S (ORSTED DC)</a>, <a href="https://www.smartkarma.com/entities/vestas-wind-systems-a-s" target="_blank" data-smartkarma-citation="entities:22524:1" rel="noopener">Vestas Wind Systems A/S (VWS DC)</a>, <a href="https://www.smartkarma.com/entities/solaredge-technologies-inc" target="_blank" data-smartkarma-citation="entities:27981:1" rel="noopener">SolarEdge Technologies Inc (SEDG US)</a>, <a href="https://www.smartkarma.com/entities/sunrun-inc" target="_blank" data-smartkarma-citation="entities:19726:1" rel="noopener">Sunrun Inc (RUN US)</a> and <a href="https://www.smartkarma.com/entities/enphase-energy-inc" target="_blank" data-smartkarma-citation="entities:8872:1" rel="noopener">Enphase Energy (ENPH US)</a>.

Earlier today, S&amp;P Dow Jones announced that all the proposals of the latest market consultation would be implemented at the close of trading on 16 April to reduce constituent concentration, ease liquidity limitations, and improve index replication further than would have been achieved from the result of the prior market consultation.We expect there will be 37 additions to the index taking the number of index constituents up to 67. This number will increase over the next few rebalances as the target is to get up to at least 100 constituent stocks.With index weight dependent on free float market cap and turnover, plus capping of index weight dependent on exposure scores, this is going to be a large rebalance. We expect a one-way turnover of 48.1% with our expected changes.Stocks that could see passive buying (sorted in terms of days of ADV) are Drax Group PLC (DRX LN), Enel Americas Sa (ENIA US), Fortum OYJ (FUM1V FH), ERG SpA (ERG IM), Terna Rete Elettrica Nazionale (TRN IM), China Longyuan Power Group Corp (916 HK), Nordex SE (NDX1 GR), Acciona SA (ANA SM), Avista Corp (AVA US) and Idacorp Inc (IDA US).Stocks that could see passive selling (sorted in terms of days of ADV) are Meridian Energy (MEL NZ), Contact Energy (CEN NZ), Verbund AG (VER AV), EDP Renovaveis SA (EDPR PL), Scatec Solar ASA (SSO NO), Innergex Renewable Energy (INE CN), Boralex Inc (BLX CN) and Siemens Gamesa Renewable Energy, S.A. (SGRE SM).Among existing constituents, there will be passive inflows on Orsted A/S (ORSTED DC), Vestas Wind Systems A/S (VWS DC), SolarEdge Technologies Inc (SEDG US), Sunrun Inc (RUN US) and Enphase Energy (ENPH US). 

Global Clean Energy Index: All Proposals to Be Implemented; 48% One-Way Turnover

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Hyundai Energy Solutions / Equity Capital Markets

<div class="content-highlight">
Our base case valuation - Jinko Solar shares are currently trading at 10.7x P/E (2018) and 6.2x P/E (2019E). If we use a 10.7x P/E for Hyundai Energy Solutions (using its net profit of 18.6 billion won in 2018), this would imply a market cap of 199 billion won or 16,585 won per share. This would be 36% lower than the mid-point of the bankers' valuation (26,000 won). Given the steep discount to the bankers' valuation, we would avoid this deal. 
Some investors are also likely to think that Hyundai Energy Solutions should trade at a discount to Jinko Solar (20-30%+) mainly because Hyundai Energy Solutions generates most of its revenue in Korea, which is a much more fickle solar PV market, as compared to the much bigger markets in China, the U.S., and Europe. This valuation discount would reduce the valuation of Hyundai Energy Solutions even further.
</div>Overall, we believe that most investors will strongly disagree with how the bankers valued this company. Unless the bankers lower the IPO price range much further, there is a good chance that the company will have difficulties in pulling off this IPO.


Our base case valuation - Jinko Solar shares are currently trading at 10.7x P/E (2018) and 6.2x P/E (2019E). If we use a 10.7x P/E for Hyundai Energy Solutions (using its net profit of 18.6 billion won in 2018), this would imply a market cap of 199 billion won or 16,585 won per share. This would be 36% lower than the mid-point of the bankers' valuation (26,000 won). Given the steep discount to the bankers' valuation, we would avoid this deal. 
Some investors are also likely to think that Hyundai Energy Solutions should trade at a discount to Jinko Solar (20-30%+) mainly because Hyundai Energy Solutions generates most of its revenue in Korea, which is a much more fickle solar PV market, as compared to the much bigger markets in China, the U.S., and Europe. This valuation discount would reduce the valuation of Hyundai Energy Solutions even further.
Overall, we believe that most investors will strongly disagree with how the bankers valued this company. Unless the bankers lower the IPO price range much further, there is a good chance that the company will have difficulties in pulling off this IPO. 

Hyundai Energy Solutions IPO Valuation Analysis

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hyundai-energy-solutions" target="_blank" data-smartkarma-citation="entities:28345:1" rel="noopener">Hyundai Energy Solutions (322000 KS)</a> is getting ready to complete its IPO in November. The IPO price range is from 24,000 won to 28,000 won. The IPO base deal size is from $80 million to $94 million. The book-building for the institutional investors starts on November 4th.</li>
<li>The company's geographical sales breakdown is one of the key concerns of the company. This is mainly because its sales declined so much (down 62% YoY) in the United States in 2018. Most of the company's growth in the past two years has been led by the much higher sales growth in Korea. The incumbent Moon Jae-In administration has been big proponents of alternative energy, especially solar power in Korea. The potential change in the control of the National Assembly in Korea in April 2020 remains a major risk for the entire Korean solar-related companies, especially Hyundai Energy Solutions since more than 70% of its revenues are generated in Korea. </li>
<li>The panel prices for domestic declined by 46% from 694 won per WP in 2016 to 377 won per WP in 1H19. The continued decline of the solar PV panel prices remains one of the biggest risks for the company as the industry still suffers from an extreme amount of price competition, especially from the Chinese PV panel producers. </li>
<li>One of the negative factors of this IPO is that the solar/alternative energy-related stocks have been relatively weak in Korea this year. For example, <a href="https://www.smartkarma.com/entities/oci-co-ltd" target="_blank" data-smartkarma-citation="entities:1904:1" rel="noopener">Oci Co Ltd (010060 KS) </a>which is a global leader in producing polysilicon for the solar panels, experienced a 35% drop in its share price YTD.</li>
</ul>



Hyundai Energy Solutions (322000 KS) is getting ready to complete its IPO in November. The IPO price range is from 24,000 won to 28,000 won. The IPO base deal size is from $80 million to $94 million. The book-building for the institutional investors starts on November 4th.
The company's geographical sales breakdown is one of the key concerns of the company. This is mainly because its sales declined so much (down 62% YoY) in the United States in 2018. Most of the company's growth in the past two years has been led by the much higher sales growth in Korea. The incumbent Moon Jae-In administration has been big proponents of alternative energy, especially solar power in Korea. The potential change in the control of the National Assembly in Korea in April 2020 remains a major risk for the entire Korean solar-related companies, especially Hyundai Energy Solutions since more than 70% of its revenues are generated in Korea. 
The panel prices for domestic declined by 46% from 694 won per WP in 2016 to 377 won per WP in 1H19. The continued decline of the solar PV panel prices remains one of the biggest risks for the company as the industry still suffers from an extreme amount of price competition, especially from the Chinese PV panel producers. 
One of the negative factors of this IPO is that the solar/alternative energy-related stocks have been relatively weak in Korea this year. For example, Oci Co Ltd (010060 KS) which is a global leader in producing polysilicon for the solar panels, experienced a 35% drop in its share price YTD.


South Korea

Duksan Hi-Metal Co., Ltd. manufactures OLED, conductive ball, and solder powder used in the semiconductor packaging process.  The Company also produces compact camera module for mobile phone camera.

LB Semicon Inc. specializes in the back-end line of semiconductor manufacturing as well as components for display equipments. The Company's main services include flip chip bumping for DDI (display driver IC), CIS (CMOS Image Sensor), and other related non-memory semiconductor testing services.

Wonik Holdings Co., Ltd manufactures, sells, and exports semiconductor processing equipment such as gas supply systems, gas purifiers, and scrubbers.  The Company's products include gas cabinets, controller composition, valve manifold boxes (VMB), a line of gas purifiers, and plasma-enhanced chemical vapor disposition (PE-CVD).

HB Technology Co., Ltd. develops and manufactures inspection equipment used inprocess of thin film transistor-liquid crystal display (TFT-LCD). The Company'smain products include automated optical inspection (AOI) and edge grinder.

TOPTEC Co., Ltd. manufactures factory automated systems mainly used in the manufacturing process of Flat Panel Displays, such as Liquid Crystal Displays, Plasma Display Panels, and Organic Light Emitting Diodes.

NEPES Corp. manufactures semiconductors, such as driver integrated circuits (IC) for thin film transistor-liquid crystal display (TFT-LCD).  The Company also manufactures fine chemicals for semiconductors, such as developers, stripper, slurry, and solvents and constructs clean rooms.

Intekplus Co., Ltd. manufactures vision inspection system for LED TV and semiconductors.  The Company also produces vision inspection systems for solar wafers and solar cells.

Hanyang Digitech Co., Ltd. produces and sells semiconductor components, such as dynamic random access memory (DRAM) modules and Internet protocol devices.

Abov Semiconductor Co., Ltd. develops and manufactures semiconductor components, such as Micro Controller Units.

Union Semiconductor Equipment & Materials Co., Ltd. manufactures semiconductor producing devices such as dry gas scrubbers, cleaners, chillers, and slurry delivery systems.  The Company also provides vacuum line installation service and supplies its products to semiconductor manufacturers in Korea.

Global Lighting Technologies Inc. produces molded light guides used for general illumination and backlights for LCD display and keyboards.

Excellence Opto. Inc. manufactures light emitting diode products. The Company produces and sells super flux light emitting diode products, white light emitting diode products, and other products. Excellence Opto. also produces light emitting diode lighting products.

Cosmo Electronics Corporation manufactures relays such as reed relays, solid state relays, photo couplers, and photo metal-oxide semiconductor (MOS) relays.

SK-Electronics Co Ltd manufactures and sells large photomasks for liquid crystal displays and electric devices.  The Company also manufactures various circuit inspection boards.

Jiangsu Akcome Science & Technology Co. Ltd produces solar accessories. The Company's main products include solar frame, EVA film, and mounting bracket. Akcome also provides services for solar industry.

Jiangsu Akcome Science & Technlgy (002610 CH)

Generalplus Technology Inc is engaged in the research, development, design, testing and sales of consumer integrated circuits.

Ultra Chip, Inc. is an IC company that produces semiconductors and other solutions for the mobile terminal markets.

SAMCO INC. develops, manufactures, and sells equipment used to produce semiconductors and electronic devices.  The Company's products include optoelectronic devices, display devices, and liquid crystal parts.  Samco also provides maintenance services for its system.

Chip Hope Co., Ltd. provides application design solutions for integrated circuits (ICs) used in communication and computer peripheral products.

ASIX Electronics Corporation is a fabless integrated circuit design company that focuses on networking, communication, and connectivity applications.

Hyundai Energy Solutions Co.,Ltd produces and sells semiconductor devices. The Company manufactures and sells module products, inverter, and other products. Hyundai Energy Solutions also manufactures micro power station, energy storage system, and other products.

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Hyundai Energy Solutions (322000 KS)

Global Clean Energy Index: 52 Adds, 55% Index Turnover, US$12bn to Trade

There are 52 additions to the S&P Global Clean Energy Index. One-way turnover is nearly 55% and the ETF benchmarked to the index will need to trade...

Brian Freitas

Global Clean Energy Index: All Proposals to Be Implemented; 48% One-Way Turnover

S&P will implement all proposals of the market consultation at the close on 16 April. This will create trading opportunities. One-way turnover is...

Brian Freitas

Hyundai Energy Solutions IPO Valuation Analysis

Our base case valuation - Jinko Solar shares are currently trading at 10.7x P/E (2018) and 6.2x P/E (2019E). If we use a 10.7x P/E for Hyundai...

Douglas Kim

Hyundai Energy Solutions IPO Preview

Hyundai Energy Solutions (322000 KS) is getting ready to complete its IPO in November. The IPO price range is from 24,000 won to 28,000 won. The...

Douglas Kim

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