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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

<ul>
<li>At the December rebalance, there will be one change for the ASX100 while there will be five changes to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a>. All changes were expected.</li>
<li>Nearly all inclusions and exclusions have over 2 days of ADV to trade and that increases significantly on some stocks. The volatility on the inclusions has been extremely high.</li>
<li>There could be another change announced in the coming week depending on results of the <a href="https://www.smartkarma.com/entities/oil-search-ltd" target="_blank" data-smartkarma-citation="entities:773:1" rel="noopener">Oil Search Ltd (OSH AU)</a> Scheme Meeting for the merger with <a href="https://www.smartkarma.com/entities/santos-ltd" target="_blank" data-smartkarma-citation="entities:711:1" rel="noopener">Santos Ltd (STO AU)</a>.</li>
</ul>


At the December rebalance, there will be one change for the ASX100 while there will be five changes to the S&amp;P/ASX 200 (AS51 INDEX). All changes were expected.
Nearly all inclusions and exclusions have over 2 days of ADV to trade and that increases significantly on some stocks. The volatility on the inclusions has been extremely high.
There could be another change announced in the coming week depending on results of the Oil Search Ltd (OSH AU) Scheme Meeting for the merger with Santos Ltd (STO AU).


ASX100/​200 Dec21 Index Rebalance: Kangaroos Loose in the Top Paddock

<ul>
<li>The National Court of PNG and the independent expert have given the go ahead for <a href="https://www.smartkarma.com/entities/oil-search-ltd" target="_blank" data-smartkarma-citation="entities:773:1" rel="noopener">Oil Search Ltd (OSH AU)</a> shareholders to vote on the proposed merger with Santos.</li>
<li>If the Oil Search shareholders approve, the stock could be deleted at the close on 10 December. Spark Infrastructure could be deleted at the end of November following its acquisition.</li>
<li>There will be inclusions to the S&amp;P/ASX100 and S&amp;P/ASX 200 ahead of the regular rebalance. Then there will be more changes a couple of weeks later at the regular rebalance.</li>
</ul>


The National Court of PNG and the independent expert have given the go ahead for Oil Search Ltd (OSH AU) shareholders to vote on the proposed merger with Santos.
If the Oil Search shareholders approve, the stock could be deleted at the close on 10 December. Spark Infrastructure could be deleted at the end of November following its acquisition.
There will be inclusions to the S&amp;P/ASX100 and S&amp;P/ASX 200 ahead of the regular rebalance. Then there will be more changes a couple of weeks later at the regular rebalance.


Santos/Oil Search: Expert and Court Thumbs Up; Potential S&P/ASX Changes

<p>S&amp;P Dow Jones Indices has announced the list of changes to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> as part of the December index review that will be effective after the close of trading on 18 December.</p><p>There are 2 inclusion and 3 exclusions in the review. It seems like the index committee has not followed the index methodology that specifies that stocks with a rank of 179 or better will be added to the index, and stocks with a rank of 221 or lower will be deleted from the index.</p><p>The inclusions are <a href="https://www.smartkarma.com/entities/kogan-com-ltd" target="_blank" data-smartkarma-citation="entities:23575:1" rel="noopener">Kogan.com (KGN AU)</a> and <a href="https://www.smartkarma.com/entities/reece-ltd" target="_blank" data-smartkarma-citation="entities:3186:1" rel="noopener">Reece Ltd (REH AU)</a> while the exclusions are <a href="https://www.smartkarma.com/entities/avita-medical-ltd" target="_blank" data-smartkarma-citation="entities:14257:1" rel="noopener">Avita Medical (AVH AU)</a>, <a href="https://www.smartkarma.com/entities/cooper-energy-ltd" target="_blank" data-smartkarma-citation="entities:14286:1" rel="noopener">Cooper Energy (COE AU)</a> and <a href="https://www.smartkarma.com/entities/western-areas-ltd" target="_blank" data-smartkarma-citation="entities:15497:1" rel="noopener">Western Areas (WSA AU)</a>.</p><p>There are more deletes than adds since the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> has 201 constituents at the moment following <a href="https://www.smartkarma.com/entities/deterra-royalties-ltd" target="_blank" data-smartkarma-citation="entities:30851:1" rel="noopener">Deterra Royalties Ltd (DRR AU)</a>'s spin-off from <a href="https://www.smartkarma.com/entities/iluka-resources-ltd" target="_blank" data-smartkarma-citation="entities:10105:1" rel="noopener">Iluka Resources (ILU AU)</a>.</p>

S&amp;P Dow Jones Indices has announced the list of changes to the S&amp;P/ASX 200 (AS51 INDEX) as part of the December index review that will be effective after the close of trading on 18 December.There are 2 inclusion and 3 exclusions in the review. It seems like the index committee has not followed the index methodology that specifies that stocks with a rank of 179 or better will be added to the index, and stocks with a rank of 221 or lower will be deleted from the index.The inclusions are Kogan.com (KGN AU) and Reece Ltd (REH AU) while the exclusions are Avita Medical (AVH AU), Cooper Energy (COE AU) and Western Areas (WSA AU).There are more deletes than adds since the S&amp;P/ASX 200 (AS51 INDEX) has 201 constituents at the moment following Deterra Royalties Ltd (DRR AU)'s spin-off from Iluka Resources (ILU AU).

<p>S&amp;P Dow Jones Indices will announce changes to the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> as part of the December index review on 11 December and the changes will be effective after the close of trading on 18 December.</p>
<p>Today is the data cutoff to determine the list of inclusions and exclusions.</p>
<p>We see 5 potential inclusions in the December review: <a href="https://www.smartkarma.com/entities/reece-ltd" target="_blank" data-smartkarma-citation="entities:3186:1" rel="noopener">Reece Ltd (REH AU)</a>, <a href="https://www.smartkarma.com/entities/kogan-com-ltd" target="_blank" data-smartkarma-citation="entities:23575:1" rel="noopener">Kogan.com (KGN AU)</a>, <a href="https://www.smartkarma.com/entities/tyro-payments-ltd" target="_blank" data-smartkarma-citation="entities:28393:1" rel="noopener">Tyro Payments (TYR AU)</a>, <a href="https://www.smartkarma.com/entities/codan-ltd-australia" target="_blank" data-smartkarma-citation="entities:6189:1" rel="noopener">Codan Ltd (CDA AU)</a> and <a href="https://www.smartkarma.com/entities/de-grey-mining-ltd" target="_blank" data-smartkarma-citation="entities:6192:1" rel="noopener">De Grey Mining (DEG AU)</a>.</p>
<p>We see 6 potential inclusions in the December review: <a href="https://www.smartkarma.com/entities/cooper-energy-ltd" target="_blank" data-smartkarma-citation="entities:14286:1" rel="noopener">Cooper Energy (COE AU)</a>, <a href="https://www.smartkarma.com/entities/western-areas-ltd" target="_blank" data-smartkarma-citation="entities:15497:1" rel="noopener">Western Areas (WSA AU)</a>, <a href="https://www.smartkarma.com/entities/service-stream-ltd" target="_blank" data-smartkarma-citation="entities:18493:1" rel="noopener">Service Stream (SSM AU)</a>, <a href="https://www.smartkarma.com/entities/gwa-group-ltd" target="_blank" data-smartkarma-citation="entities:663:1" rel="noopener">Gwa Group Ltd (GWA AU)</a>, <a href="https://www.smartkarma.com/entities/avita-medical-ltd" target="_blank" data-smartkarma-citation="entities:14257:1" rel="noopener">Avita Medical (AVH AU)</a> and <a href="https://www.smartkarma.com/entities/unibail-rodamco-westfield" target="_blank" data-smartkarma-citation="entities:27181:1" rel="noopener">Unibail-Rodamco-Westfield (URW AU)</a>. <a href="https://www.smartkarma.com/entities/tassal-group-ltd" target="_blank" data-smartkarma-citation="entities:16234:1" rel="noopener">Tassal (TGR AU)</a> is ranked very close to <a href="https://www.smartkarma.com/entities/unibail-rodamco-westfield" target="_blank" data-smartkarma-citation="entities:27181:1" rel="noopener">Unibail-Rodamco-Westfield (URW AU)</a> and could be an alternate delete name.</p>
<p>There are more deletes than adds since the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> has 201 constituents at the moment following <a href="https://www.smartkarma.com/entities/deterra-royalties-ltd" target="_blank" data-smartkarma-citation="entities:30851:1" rel="noopener">Deterra Royalties Ltd (DRR AU)</a>'s spin-off from <a href="https://www.smartkarma.com/entities/iluka-resources-ltd" target="_blank" data-smartkarma-citation="entities:10105:1" rel="noopener">Iluka Resources (ILU AU)</a>.</p>
<p>The expected inclusions have underperformed the expected exclusions significantly over the last few weeks on the momentum unwind and switch to value stocks. There are a few expected adds and deletes with over 2 days of ADV to trade and they could outperform from here to implementation date.</p>

S&amp;P Dow Jones Indices will announce changes to the S&amp;P/ASX 200 (AS51 INDEX) as part of the December index review on 11 December and the changes will be effective after the close of trading on 18 December.
Today is the data cutoff to determine the list of inclusions and exclusions.
We see 5 potential inclusions in the December review: Reece Ltd (REH AU), Kogan.com (KGN AU), Tyro Payments (TYR AU), Codan Ltd (CDA AU) and De Grey Mining (DEG AU).
We see 6 potential inclusions in the December review: Cooper Energy (COE AU), Western Areas (WSA AU), Service Stream (SSM AU), Gwa Group Ltd (GWA AU), Avita Medical (AVH AU) and Unibail-Rodamco-Westfield (URW AU). Tassal (TGR AU) is ranked very close to Unibail-Rodamco-Westfield (URW AU) and could be an alternate delete name.
There are more deletes than adds since the S&amp;P/ASX 200 (AS51 INDEX) has 201 constituents at the moment following Deterra Royalties Ltd (DRR AU)'s spin-off from Iluka Resources (ILU AU).
The expected inclusions have underperformed the expected exclusions significantly over the last few weeks on the momentum unwind and switch to value stocks. There are a few expected adds and deletes with over 2 days of ADV to trade and they could outperform from here to implementation date.

ASX200 Index Rebalance Preview: Expected Inclusions Underperforming as Momentum Unwinds

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Equity Bottom-Up

<div class="content-highlight"><h2>Undervalued Iluka to benefit from industry supply challenges and sustained favourable prices.</h2></div><hr><p><a href="https://www.smartkarma.com/entities/10105" target="_blank" data-smartkarma-citation="entities:10105:1">Iluka Resources (ILU AU)</a>'s share price is down almost 30% since May 2018 highs above AUD 12 per share. The sell-off reflects concerns that prices of zircon and titanium dioxide feedstocks will decline and came despite a modest rise in the S&amp;P/ASX 200 Resources index. We generally see global metals and mining firms as overvalued, but not Iluka. The market is too pessimistic on the outlook for prices. Demand growth for zircon and titanium dioxide feedstocks is only likely to be steady, but supply constraints underpin our optimism. Producing mines are depleting and grades are in decline. Also, the bench of replacement deposits are generally of lower quality and prices will need to remain favourable to incentivise supply.</p><p>Cost increases and disruptions at Sierra Rutile also weigh on investor sentiment and see concerns Iluka's planned expansions in Sierra Leone will destroy value, but Iluka has a strong operational track record. It's also unreasonable to extrapolate recent issues at an ageing mine, now finished, to new capacity being built. With the shares at more than a 20% discount to our AUD 11 fair value estimate, we think shareholders are being compensated for the risk.</p><hr><h2>Key Takeaways</h2><ul>
<li>The zircon and rutile price recovery lagged other commodities and has further to go. Both are late-cycle commodities. Zircon is primarily used for tiles, ceramics, and porcelainware. About 90% of titanium feedstocks are used to make pigments for paint, plastics, and paper.</li>
<li>The market is too pessimistic on the outlook for zircon and rutile prices. Depletion of higher-grade orebodies and a weaker bench of replacements mean prices should sustain around current levels.</li>
<li>Industry dynamics are favourable and likely to support attractive returns. The three largest producers of zircon and high grade titanium dioxide feedstocks account for about 70% of supply global.</li>
<li>Iluka's medium-term developments should underpin modest volume growth. The firm's inventory of undeveloped projects and execution record means it's unlikely production will fall longer-term. The market underestimates the value of the Mining Area C iron ore royalty. It brings a stable and growing source of cash flow with no costs. <a href="https://www.smartkarma.com/entities/147" target="_blank" data-smartkarma-citation="entities:147:1">Bhp Billiton (BHP AU)</a> is nearly tripling output. This low-risk cash flow is worth around AUD 3 per share, more than one-quarter of our AUD 11 per share fair value estimate.</li>
</ul>

Undervalued Iluka to benefit from industry supply challenges and sustained favourable prices.Iluka Resources (ILU AU)'s share price is down almost 30% since May 2018 highs above AUD 12 per share. The sell-off reflects concerns that prices of zircon and titanium dioxide feedstocks will decline and came despite a modest rise in the S&amp;P/ASX 200 Resources index. We generally see global metals and mining firms as overvalued, but not Iluka. The market is too pessimistic on the outlook for prices. Demand growth for zircon and titanium dioxide feedstocks is only likely to be steady, but supply constraints underpin our optimism. Producing mines are depleting and grades are in decline. Also, the bench of replacement deposits are generally of lower quality and prices will need to remain favourable to incentivise supply.Cost increases and disruptions at Sierra Rutile also weigh on investor sentiment and see concerns Iluka's planned expansions in Sierra Leone will destroy value, but Iluka has a strong operational track record. It's also unreasonable to extrapolate recent issues at an ageing mine, now finished, to new capacity being built. With the shares at more than a 20% discount to our AUD 11 fair value estimate, we think shareholders are being compensated for the risk.Key Takeaways
The zircon and rutile price recovery lagged other commodities and has further to go. Both are late-cycle commodities. Zircon is primarily used for tiles, ceramics, and porcelainware. About 90% of titanium feedstocks are used to make pigments for paint, plastics, and paper.
The market is too pessimistic on the outlook for zircon and rutile prices. Depletion of higher-grade orebodies and a weaker bench of replacements mean prices should sustain around current levels.
Industry dynamics are favourable and likely to support attractive returns. The three largest producers of zircon and high grade titanium dioxide feedstocks account for about 70% of supply global.
Iluka's medium-term developments should underpin modest volume growth. The firm's inventory of undeveloped projects and execution record means it's unlikely production will fall longer-term. The market underestimates the value of the Mining Area C iron ore royalty. It brings a stable and growing source of cash flow with no costs. Bhp Billiton (BHP AU) is nearly tripling output. This low-risk cash flow is worth around AUD 3 per share, more than one-quarter of our AUD 11 per share fair value estimate.


Tight Supply Underpins Positive Outlook for Iluka Resources

Australia

Iluka Resources Limited is involved in the mining, concentration and separation of mineral sands and titanium minerals. The Company also produces ilmenite and other titani-ferrous concentrates, zircon, and synthetic rutile along with the exploration of coal. Iluka's products are exported throughout the world.

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Iluka Resources (ILU AU)

ASX100/200 Dec21 Index Rebalance: Kangaroos Loose in the Top Paddock

There is 1 change to the ASX100 and 5 changes to the ASX200 index. The adds have outperformed the deletes over the year and are trading at...

Brian Freitas

Santos/Oil Search: Expert and Court Thumbs Up; Potential S&P/ASX Changes

Spark Infra and Oil Search could be deleted from the ASX100 & ASX200 indices ahead of the regular rebalance. Then there will be more changes at the...

Brian Freitas

ASX200 Index Rebalance: Strange As

There are 2 adds and 3 deletes. This is 'strange as' since there were 5 adds and 6 deletes expected from following the index methodology. Reece and...

Brian Freitas

ASX200 Index Rebalance Preview: Expected Inclusions Underperforming as Momentum Unwinds

There could be 5 additions and 6 deletions at the upcoming ASX200 rebalance. Changes will be announced on 11 Dec and implemented at the close on 18...

Brian Freitas

Tight Supply Underpins Positive Outlook for Iluka Resources

Undervalued Iluka to benefit from industry supply challenges and sustained favourable prices.Iluka Resources (ILU AU)'s share price is down almost...

Morningstar, Inc.

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52-week Range

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ASX100/​200 Dec21 Index Rebalance: Kangaroos Loose in the Top Paddock

There is 1 change to the ASX100 and 5 changes to the ASX200 index. The adds have outperformed the deletes over the year and are trading at...

Brian Freitas

Santos/Oil Search: Expert and Court Thumbs Up; Potential S&P/ASX Changes

Spark Infra and Oil Search could be deleted from the ASX100 & ASX200 indices ahead of the regular rebalance. Then there will be more changes at the...

Brian Freitas

ASX200 Index Rebalance: Strange As

There are 2 adds and 3 deletes. This is 'strange as' since there were 5 adds and 6 deletes expected from following the index methodology. Reece and...

Brian Freitas

ASX200 Index Rebalance Preview: Expected Inclusions Underperforming as Momentum Unwinds

There could be 5 additions and 6 deletions at the upcoming ASX200 rebalance. Changes will be announced on 11 Dec and implemented at the close on 18...

Brian Freitas

Tight Supply Underpins Positive Outlook for Iluka Resources

Undervalued Iluka to benefit from industry supply challenges and sustained favourable prices.Iluka Resources (ILU AU)'s share price is down almost...

Morningstar, Inc.

ASX100/200 Dec21 Index Rebalance: Kangaroos Loose in the Top Paddock