Industrials

• Late Thursday night, the Adani Group announced that the family entities had sold Rs 154bn or US$1.8bn+ of stock in four listed entities to Australian-listed GQG Partners (GQG AU). 
• GQG is a US$90bn AUM asset manager specialising in emerging markets. They bought stakes of 2.55-4.10% in each of four entities. 
• This “increases” float, but doesn’t. As of now, this will partially offset one MSCI downweight in May, and will likely cause three FIF uplifts.

• Celltrion and Posco Holdings will switch places. Although there is still time until the screening period, the market capitalization gap between them has already widened significantly.
• Posco Holdings will likely welcome a passive inflow of 0.44x ADTV, whereas Celltrion is expected to face outflows of around 0.69x ADTV.
• Ecopro BM entered the Top 20 (preliminary screening table) with a YTD stock price increase of 130%, becoming the first KOSDAQ-listed company to do so.

• Two thirds of the way through the review period for the June rebalance, we see 9 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX). 
• One-Way turnover is estimated at 3.5%. Impact on the expected deletions is a lot higher than the impact on the expected inclusions and shorts are building up on the deletes.
• Since the start of the review period, the potential inclusions have outperformed the potential deletions by nearly 50% and the KOSDAQ 150 Index (KOSDQ150 INDEX) by over 20%.

• Today after the close, Ihara Science (5999 JP) reported on TDNet a forthcoming change in the Tender Offer Registration Statement by MBO bidder N.I.M.
• N.I.M. and normally-known-as-deep-value-activist NAVF (a.k.a. Nippon Active Value Fund), Ihara Science’s #2 shareholder, signed a Tender Offer Agreement whereby NAVF agreed to tender. 
• It got a little more complicated 90mins later, but this was an announcement which did not need to be made. It begs the question of why. And what next.

• US Large-Sized Farms Increase – Due to Input Cost Pressure According to the Farms and Land in Farms Report by the USDA, the largest farms in the US that had sales of $1 million or more, now operate almost 26% of the country’s farmland.
• The farms in this sales class have increased in size, while farms in every other sales class have either remained the same size or decreased.
• According to the Farms and Land in Farms Report by the USDA, the largest farms in the US that had sales of $1 million or more, now operate almost 26% of the country’s farmland.

• Late Thursday night, the Adani Group announced that the family entities had sold Rs 154bn or US$1.8bn+ of stock in four listed entities to Australian-listed GQG Partners (GQG AU). 
• GQG is a US$90bn AUM asset manager specialising in emerging markets. They bought stakes of 2.55-4.10% in each of four entities. 
• This “increases” float, but doesn’t. As of now, this will partially offset one MSCI downweight in May, and will likely cause three FIF uplifts.

• Celltrion and Posco Holdings will switch places. Although there is still time until the screening period, the market capitalization gap between them has already widened significantly.
• Posco Holdings will likely welcome a passive inflow of 0.44x ADTV, whereas Celltrion is expected to face outflows of around 0.69x ADTV.
• Ecopro BM entered the Top 20 (preliminary screening table) with a YTD stock price increase of 130%, becoming the first KOSDAQ-listed company to do so.

• Two thirds of the way through the review period for the June rebalance, we see 9 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX). 
• One-Way turnover is estimated at 3.5%. Impact on the expected deletions is a lot higher than the impact on the expected inclusions and shorts are building up on the deletes.
• Since the start of the review period, the potential inclusions have outperformed the potential deletions by nearly 50% and the KOSDAQ 150 Index (KOSDQ150 INDEX) by over 20%.

• Today after the close, Ihara Science (5999 JP) reported on TDNet a forthcoming change in the Tender Offer Registration Statement by MBO bidder N.I.M.
• N.I.M. and normally-known-as-deep-value-activist NAVF (a.k.a. Nippon Active Value Fund), Ihara Science’s #2 shareholder, signed a Tender Offer Agreement whereby NAVF agreed to tender. 
• It got a little more complicated 90mins later, but this was an announcement which did not need to be made. It begs the question of why. And what next.

• US Large-Sized Farms Increase – Due to Input Cost Pressure According to the Farms and Land in Farms Report by the USDA, the largest farms in the US that had sales of $1 million or more, now operate almost 26% of the country’s farmland.
• The farms in this sales class have increased in size, while farms in every other sales class have either remained the same size or decreased.
• According to the Farms and Land in Farms Report by the USDA, the largest farms in the US that had sales of $1 million or more, now operate almost 26% of the country’s farmland.

• HKEX (388 HK) has announced that the expansion of Northbound Stock Connect eligible stocks will take effect from the start of trading on 13 March.
• 598 stocks listed on the Shanghai Stock Exchange and 436 stocks listed on the Shenzhen Stock Exchange will be added to Northbound Stock Connect.
• Currently, we see 43 stocks being added to the MSCI China Index in May (inflows of US$1.42bn), further increasing China’s weight in the MSCI Emerging Markets Index. 

• There are 5 migrations from MidCap to LargeCap, 4 LargeCap to MidCap, 3 new additions to MidCap, 9 SmallCap to MidCap, 11 MidCap to SmallCap, 3 new additions to SmallCap.
• The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.
• Given the huge outperformance and looking at how the migrations have performed historically, we’d expect the stocks migrating to MidCap to underperform post implementation of the changes.

• HKEX (388 HK) has announced that the expansion of Northbound Stock Connect eligible stocks will take effect from the start of trading on 13 March.
• 598 stocks listed on the Shanghai Stock Exchange and 436 stocks listed on the Shenzhen Stock Exchange will be added to Northbound Stock Connect.
• Currently, we see 43 stocks being added to the MSCI China Index in May (inflows of US$1.42bn), further increasing China’s weight in the MSCI Emerging Markets Index. 

• There are 5 migrations from MidCap to LargeCap, 4 LargeCap to MidCap, 3 new additions to MidCap, 9 SmallCap to MidCap, 11 MidCap to SmallCap, 3 new additions to SmallCap.
• The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.
• Given the huge outperformance and looking at how the migrations have performed historically, we’d expect the stocks migrating to MidCap to underperform post implementation of the changes.

• The MSCI Feb QCIR was implemented on Tuesday and there were a bunch of announcements for other indices from Wednesday to Friday.
• The implementation of the March rebalance for the Hang Seng family of indices and the SSE STAR50 (STAR50 INDEX) take place at the close on Friday.
• Redemptions continue on IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) and KraneShares CSI China Internet ETF (KWEB US). 

• Golden Energy & Resources (GER SP)’s update notes that the Widjaja family’s offer remains conditional on Indonesian regulatory, Dian Swastatika Sentosa (DSSA IJ) shareholder and SGX circular approval.
• There are four issues – an unattractive distribution cash alternative, a decline in Golden Energy Mines (GEMS IJ) shares, unfavourable FX and an increase in Stanmore Coal (SMR AU) shares.  
• The offer remains light. A “fair” delisting price is around S$0.40 (vs S$0.16 current delisting price) and would imply an all-cash offer of S$1.074, 19% above the last close.

• There are 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Three new deals were discussed on Smartkarma this past week: Slater & Gordon (SGH AU)‘s off-market Offer; SHL Japan Ltd (4327 JP)‘s MBO/LBO; and GK Goh Holdings (GKG SP)‘s MBO. 
• Key updates took place for Nitro Software Ltd (NTO AU), Yashili International Holdings (1230 HK), Halcyon Agri (HACL SP), and Golden Energy & Resources (GER SP).

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, there were two deals launched this week.
• For placements, Japan Post Bank (7182 JP)‘s planned selldown by Japan Post Holdings (6178 JP) came earlier than expected.

• Plug Power’s performance in the quarter was very disappointing as it failed to meet the revenue expectations of analysts.
• The company reported wider than expected losses and it continues to deliver weak results adversely affecting its market sentiment.
• Plug electrolyzers and cryogenic equipment is anticipated to be used in their operations to create and deliver liquid hydrogen via Plug trailers.

• The MSCI Feb QCIR was implemented on Tuesday and there were a bunch of announcements for other indices from Wednesday to Friday.
• The implementation of the March rebalance for the Hang Seng family of indices and the SSE STAR50 (STAR50 INDEX) take place at the close on Friday.
• Redemptions continue on IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) and KraneShares CSI China Internet ETF (KWEB US). 

• Golden Energy & Resources (GER SP)’s update notes that the Widjaja family’s offer remains conditional on Indonesian regulatory, Dian Swastatika Sentosa (DSSA IJ) shareholder and SGX circular approval.
• There are four issues – an unattractive distribution cash alternative, a decline in Golden Energy Mines (GEMS IJ) shares, unfavourable FX and an increase in Stanmore Coal (SMR AU) shares.  
• The offer remains light. A “fair” delisting price is around S$0.40 (vs S$0.16 current delisting price) and would imply an all-cash offer of S$1.074, 19% above the last close.

• There are 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Three new deals were discussed on Smartkarma this past week: Slater & Gordon (SGH AU)‘s off-market Offer; SHL Japan Ltd (4327 JP)‘s MBO/LBO; and GK Goh Holdings (GKG SP)‘s MBO. 
• Key updates took place for Nitro Software Ltd (NTO AU), Yashili International Holdings (1230 HK), Halcyon Agri (HACL SP), and Golden Energy & Resources (GER SP).

• Weekly summary of vol changes and moves across Global Markets
• Analysing ATM volatility and skew changes over the last 5 days
• We suggest a few trades to take advantage of the implied vol surfaces

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, there were two deals launched this week.
• For placements, Japan Post Bank (7182 JP)‘s planned selldown by Japan Post Holdings (6178 JP) came earlier than expected.

• Plug Power’s performance in the quarter was very disappointing as it failed to meet the revenue expectations of analysts.
• The company reported wider than expected losses and it continues to deliver weak results adversely affecting its market sentiment.
• Plug electrolyzers and cryogenic equipment is anticipated to be used in their operations to create and deliver liquid hydrogen via Plug trailers.

• As expected, Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) IN, and Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) OUT.
• The Nikkei implemented the “Tricky Twist” discussed. This lowers the total amount to buy on Oriental Land vs what many would have expected.
• That’s “disappointing” BUT… the behavioural aspects here are really interesting, and the timetable for the event is worth thinking about. 

• It appears the recent pullback is over, and we could see the MSCI ACWI (ACWI-US) test YTD highs at $93. We still expect $93 to cap upside in 2023.
• Overweight Europe/UK and non-U.S., we are buyers on pullbacks as long as FTSE 100 is above 7700, STOXX Europe 50 is above 3800, and EURO STOXX 50 is above 4000.
• As long as these support levels are holding, we are constructive from a price perspective

• Heico delivered a mixed quarter with a decent organic growth in revenues that reflects higher demand for the bulk of its commercial aircraft products and services given the ongoing recovery in commercial air travel.
• Operating income for the Flight Support Group climbed by 60% to $83.6 million in the first quarter of fiscal 2023.
• This acquisition is anticipated to drive the company’s growth prospects.

• As expected, Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) IN, and Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) OUT.
• The Nikkei implemented the “Tricky Twist” discussed. This lowers the total amount to buy on Oriental Land vs what many would have expected.
• That’s “disappointing” BUT… the behavioural aspects here are really interesting, and the timetable for the event is worth thinking about. 

• It appears the recent pullback is over, and we could see the MSCI ACWI (ACWI-US) test YTD highs at $93. We still expect $93 to cap upside in 2023.
• Overweight Europe/UK and non-U.S., we are buyers on pullbacks as long as FTSE 100 is above 7700, STOXX Europe 50 is above 3800, and EURO STOXX 50 is above 4000.
• As long as these support levels are holding, we are constructive from a price perspective

• Heico delivered a mixed quarter with a decent organic growth in revenues that reflects higher demand for the bulk of its commercial aircraft products and services given the ongoing recovery in commercial air travel.
• Operating income for the Flight Support Group climbed by 60% to $83.6 million in the first quarter of fiscal 2023.
• This acquisition is anticipated to drive the company’s growth prospects.

• The parent company of SHL Japan Ltd (4327 JP)‘s largest shareholder is buying out its main customer in Japan. 
• This is an LBO/MBO situation, and friends and family get it to 63% or so. A tiny sliver from others gets it over the hump. 
• Should get done easily, but the corporate governance here is not encouraging. Yes, a premium, but no explanation, and it’s a bit low.

• The Widjaja family’s Offer for Golden Energy (GER SP) back in November has been derided in the press, one outspoken minority shareholder, and (a loosely veiled statement) by Singapore RegCo.
• Now the Securities Investors Association (Singapore) (SIAS) has thrown its hat into the ring and has called on GEAR to improve the Offer for shareholders. 
• The long stop date was surprisingly pushed back five months to satisfy the Exit offer conditions. This delay should avail the family of ample time to bump terms.  

• The March 2023 regular rebalance index changes for the SE600 index and the EUROSTX index were announced yesterday. 
• There are 8 ADDs/DELs for the SE600 index and 5 ADDs and 2 DELs for the EUROSTX index.
• In this insight, we take a closer look at the index flow expectations and the historical performance of SE600 and EUROSTX Rebalance events.

Carr’s Group has issued a detailed trading update giving some preliminary financial metrics on FY22 performance. These show both continuing divisions (Speciality Agriculture and Engineering) beating our EBIT estimates, following a strong finish to the year. The shares remain suspended until management finishes the final stages of the audit process, which it believes are ‘essentially complete’. Our note is based on the initial information in the trading update. We will publish a follow-on update once the full results are announced.

• Deere managed to deliver an all-around beat in the first quarter of the new fiscal year.
• The equipment operations had a 20% margin in the financial results for the quarter.
• The management expects demand to exceed the industry’s ability to deliver for another year.

• The parent company of SHL Japan Ltd (4327 JP)‘s largest shareholder is buying out its main customer in Japan. 
• This is an LBO/MBO situation, and friends and family get it to 63% or so. A tiny sliver from others gets it over the hump. 
• Should get done easily, but the corporate governance here is not encouraging. Yes, a premium, but no explanation, and it’s a bit low.

• The Widjaja family’s Offer for Golden Energy (GER SP) back in November has been derided in the press, one outspoken minority shareholder, and (a loosely veiled statement) by Singapore RegCo.
• Now the Securities Investors Association (Singapore) (SIAS) has thrown its hat into the ring and has called on GEAR to improve the Offer for shareholders. 
• The long stop date was surprisingly pushed back five months to satisfy the Exit offer conditions. This delay should avail the family of ample time to bump terms.  

• The March 2023 regular rebalance index changes for the SE600 index and the EUROSTX index were announced yesterday. 
• There are 8 ADDs/DELs for the SE600 index and 5 ADDs and 2 DELs for the EUROSTX index.
• In this insight, we take a closer look at the index flow expectations and the historical performance of SE600 and EUROSTX Rebalance events.

Carr’s Group has issued a detailed trading update giving some preliminary financial metrics on FY22 performance. These show both continuing divisions (Speciality Agriculture and Engineering) beating our EBIT estimates, following a strong finish to the year. The shares remain suspended until management finishes the final stages of the audit process, which it believes are ‘essentially complete’. Our note is based on the initial information in the trading update. We will publish a follow-on update once the full results are announced.

• Deere managed to deliver an all-around beat in the first quarter of the new fiscal year.
• The equipment operations had a 20% margin in the financial results for the quarter.
• The management expects demand to exceed the industry’s ability to deliver for another year.