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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

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.
Today is the data cutoff to determine the list of inclusions and exclusions.
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>.
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.
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>.
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.

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

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/reece-australia-ltd" target="_blank" data-smartkarma-citation="entities:3186:1" rel="noopener">Reece Australia (REH AU)</a>, an Australia based plumbing company, plans to raise US$360m (A$600m) via an institutional placement and entitlement offer.  The company last did a fund raise in May 2018 which we covered in <a href="https://www.smartkarma.com/insights/reece-limited-placement-eps-accretive-capital-raising-for-us-acquisition" target="_blank" rel="noopener">Reece Limited Placement: EPS Accretive Capital Raising for US Acquisition</a>. That placement was to fund its acquisition of MORSCO in the US. The deal did very well.This placement is to shore up its balance sheet and bring down its leverage which had risen owing to the earlier acquisition.

Reece Australia (REH AU), an Australia based plumbing company, plans to raise US$360m (A$600m) via an institutional placement and entitlement offer.  The company last did a fund raise in May 2018 which we covered in Reece Limited Placement: EPS Accretive Capital Raising for US Acquisition. That placement was to fund its acquisition of MORSCO in the US. The deal did very well.This placement is to shore up its balance sheet and bring down its leverage which had risen owing to the earlier acquisition.

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Reece Limited, an Australia based plumbing company, is raising AUD560m via an institutional placement and entitlement to fund its acquisition of US-based plumbing distributor MORSCO. In this insight, we will quickly recap on the company's recent financial performance, the calculation of the deal and score the deal in our ECM framework. <h2>Placement specifics</h2><ul>
<li>Company Name: Reece Ltd</li>
<li>Ticker: REH AU Equity</li>
<li>Primary placement (AUD139m) and 1 for 11 pro-rata accelerated non-renounceable entitlement…</li>
</ul>

Reece Limited, an Australia based plumbing company, is raising AUD560m via an institutional placement and entitlement to fund its acquisition of US-based plumbing distributor MORSCO. In this insight, we will quickly recap on the company's recent financial performance, the calculation of the deal and score the deal in our ECM framework. Placement specifics
Company Name: Reece Ltd
Ticker: REH AU Equity
Primary placement (AUD139m) and 1 for 11 pro-rata accelerated non-renounceable entitlement…


Reece Limited Placement: EPS Accretive Capital Raising for US Acquisition

APAC IPOs & Placements

Zhen Zhou, Toh

ZIP Industries Aust Pty Ltd / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/24111" target="_blank" data-smartkarma-citation="entities:24111:1">ZIP Holdings (ZHL AU)</a> is looking to raise approximately US$311.6-332.7m in its upcoming IPO. About US$208-222.5m will be fulfilled through the issuance of primary shares while the remaining will be from Quadrant PE and Michael Crouch selling their shares. Post-IPO, Michael and Quadrant PE will continue to retain at least 20% of Zip's enlarged outstanding shares.In this insight, we look at Zip's revenue driver, market share, competitive moat, and future growth. As usual, we will the run deal through our ECM framework.

ZIP Holdings (ZHL AU) is looking to raise approximately US$311.6-332.7m in its upcoming IPO. About US$208-222.5m will be fulfilled through the issuance of primary shares while the remaining will be from Quadrant PE and Michael Crouch selling their shares. Post-IPO, Michael and Quadrant PE will continue to retain at least 20% of Zip's enlarged outstanding shares.In this insight, we look at Zip's revenue driver, market share, competitive moat, and future growth. As usual, we will the run deal through our ECM framework.

Zip Holdings IPO - A Leader in a Niche Market With Limited Growth and Product Diversification

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Thematic (Sector/Industry)

<ul><li>A lift in new dwelling investment to a record high has underpinned Australia's current housing expansion.  The revolution in Australian housing reflects a shift towards higher density dwellings.  Building approvals for high density dwellings now accounts for half of residential approvals, well above the historical norm of around one-third.  Moreover, within the higher density segment, there has been a shift towards apartment blocks with four or more storeys.</li><li>Evidente believes that Australia's housing revolution is here to stay.  Australia's urban population density is still amongst the lowest in the world, consumer tastes continue to evolve towards more affordable, apartment living, and there are simply physical limits to the urban sprawl in Australia's major cities.</li><li>I identify two listed stocks that are leveraged to the prospect of strong growth in transport infrastructure designed to ease traffic congestion associated with more higher density dwellings: toll road operator, <a href="https://www.smartkarma.com/entities/593" target="_blank" data-smartkarma-citation="entities:593">Transurban Group (TCL AU)</a>, and <a href="https://www.smartkarma.com/entities/12350" target="_blank" data-smartkarma-citation="entities:12350">Downer EDI Ltd (DOW AU)</a>, which generates more than one-third of its revenues from its transport services and rail divisions.</li><li>Around the new normal however, booms and busts are inevitable. The RBA has identified a growing risk of over-supply of apartments emerging in inner city Brisbane and Melbourne.  Bank exposures here are limited such that apartment prices would need to drop by more than 25% for banks to experience material losses.  Evidente's model portfolio remains modestly overweight Australia's major banks due to the large P/B discount relative to industrials.</li></ul>

A lift in new dwelling investment to a record high has underpinned Australia's current housing expansion.  The revolution in Australian housing reflects a shift towards higher density dwellings.  Building approvals for high density dwellings now accounts for half of residential approvals, well above the historical norm of around one-third.  Moreover, within the higher density segment, there has been a shift towards apartment blocks with four or more storeys.Evidente believes that Australia's housing revolution is here to stay.  Australia's urban population density is still amongst the lowest in the world, consumer tastes continue to evolve towards more affordable, apartment living, and there are simply physical limits to the urban sprawl in Australia's major cities.I identify two listed stocks that are leveraged to the prospect of strong growth in transport infrastructure designed to ease traffic congestion associated with more higher density dwellings: toll road operator, Transurban Group (TCL AU), and Downer EDI Ltd (DOW AU), which generates more than one-third of its revenues from its transport services and rail divisions.Around the new normal however, booms and busts are inevitable. The RBA has identified a growing risk of over-supply of apartments emerging in inner city Brisbane and Melbourne.  Bank exposures here are limited such that apartment prices would need to drop by more than 25% for banks to experience material losses.  Evidente's model portfolio remains modestly overweight Australia's major banks due to the large P/B discount relative to industrials.

Australia's Housing Revolution Continues, but for How Much Longer?

Australia

Reece Limited operates as a plumbing, building and hardware merchant throughout Australia.  The Company offers a variety of bathroom, kitchen and laundry products through its national stores and showrooms.  Reece's products are utilized by plumbers, consumers, architects, builders and interior designers.

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Reece Ltd (REH AU)

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

Reece Limited Placement - Fixing a Leak

Reece Australia (REH AU), an Australia based plumbing company, plans to raise US$360m (A$600m) via an institutional placement and entitlement...

Sumeet Singh

Reece Limited Placement: EPS Accretive Capital Raising for US Acquisition

Reece Limited, an Australia based plumbing company, is raising AUD560m via an institutional placement and entitlement to fund its acquisition of...

Ke Yan, CFA, FRM

Zip Holdings IPO - A Leader in a Niche Market With Limited Growth and Product Diversification

ZIP Holdings (ZHL AU) is looking to raise approximately US$311.6-332.7m in its upcoming IPO. About US$208-222.5m will be fulfilled through the...

Zhen Zhou, Toh

Australia's Housing Revolution Continues, but for How Much Longer?

A lift in new dwelling investment to a record high has underpinned Australia's current housing expansion. The revolution in Australian housing...

Sam Ferraro

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