In today’s briefing:
- Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Capping Flows in December
- Hyundai Motor India IPO Trading – Set for a Tricky Start
- Hyundai Motor India IPO: Little Downside. Low Retail Interest-Myopia, Misguidance, Misinterpretation
- Hyundai Motor India IPO: How Far to Fast Entry?
- Hyundai Motor India: Trading Strategy on the First Day of Trading
- Delfi Ltd (DELFI SP) – Sweeter Times Ahead?
- JD.com (9618-HK): Positive Technical Analysis Signals
- Human Capital Initiatives Can Also Be Viewed as Part of Such Autonomous “kaizen” Activities
- JNBY (3306 HK): >34% ROCE Track Record/10% Dividend Yield/Net Cash Business
- Nexstar Media Group: Will Its Strategic Focus on Political Advertising Result In A Solid Financial Performance? – Major Drivers
Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Capping Flows in December
- The December rebalance for the HSIII Index only involves capping to limit stocks to 12% of the index weight. There will not be any constituent changes.
- Estimated one-way turnover at the rebalance is 4.4% resulting in a round-trip trade of HK$2.9bn (US$378m).
- The largest outflows are expected to be from Meituan (3690 HK) and JD.com (9618 HK) with inflows spread across the other index constituents.
Hyundai Motor India IPO Trading – Set for a Tricky Start
- Hyundai Motor (005387 KS) raised around US$3.3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
- HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
- In our previous notes, we looked at the company’s past performance and valuations. In this note, we will talk about the trading dynamics.
Hyundai Motor India IPO: Little Downside. Low Retail Interest-Myopia, Misguidance, Misinterpretation
- Hyundai Motor India is expected to close flat or slightly positive today, as low retail participation and modest expectations for gains on listing day could limit selling pressure.
- Many retail investors skipped the IPO, influenced by ‘finfluencers’ who had largely advised against it based on misinterpreted valuation comparison with Maruti Suzuki India (MSIL IN) .
- Hyundai Motor India’s meaningful discount to Maruti Suzuki on operating profit based valuation multiples suggest room for outperformance in the medium term.
Hyundai Motor India IPO: How Far to Fast Entry?
- Hyundai Motor (005380 KS) raised INR 279bn (US$3.3bn) by selling some of its stake in Hyundai Motor India (1342Z IN), valuing Hyundai India at INR 1,593bn (US$18.95bn).
- The anchor investor book was fully subscribed. The non-institutional and retail books were undersubscribed, so institutions got more stock. And that changes the free float estimates for one global index.
- Even with the higher float, Hyundai Motor India (1342Z IN) is unlikely to get Fast Entry to one global index later this month. Index inclusions should commence in February 2025.
Hyundai Motor India: Trading Strategy on the First Day of Trading
- Hyundai Motor India (1342Z IN) shares start trading on 22 October. The IPO price is 1,960 INR.
- Although there has been some solid interest on this IPO among many institutional investors, there have been a lower interest among retail investors.
- There has also been relatively low grey market premium. If the share price reaches in the positive upper single digits, we expect many traders to sell into this short-term rally.
Delfi Ltd (DELFI SP) – Sweeter Times Ahead?
- Delfi Ltd (DELFI SP) saw some impact from the weaker IDR and higher cocoa prices in 1H2024 but prospects for 2H2024 look more promising with less expected disruption.
- The company continues to roll out new distribution across modern trade independent and general trade as well as new variants for existing best-selling brands such as Silver Queen chocolate.
- The company remains confident that the cocoa price will decline from current levels although it may remain higher than historic levels. Valuations remain attractive.
JD.com (9618-HK): Positive Technical Analysis Signals
- Despite a share price correction this month, JD.com (9618 HK) remains firmly amid an earnings upgrade cycle driven by improved profitability expectations.
- Following significant share price volatility over the past 2 months, JD.com’s near-term momentum indicators currently display bullish signals.
- JD.com still trades at more than one standard deviation below its 5-year historic average forward PE ratio, and near the lowest level it has ever been.
Human Capital Initiatives Can Also Be Viewed as Part of Such Autonomous “kaizen” Activities
- A year after human capital disclosure became mandatory, little progress was made, but few companies, even those in top 100 in market capitalization, have self-assessed their milestones and actual progress.
- While it was favored that companies with higher scores on human capital disclosure outperformed in stock price, it is reasonable to assume that multiple other factors had an impact.
- Some companies formulated growth strategies by presenting clear cash/capital allocations and have actually achieved improved capital profitability. Human capital initiatives can be viewed as part of such autonomous “kaizen” activities.
JNBY (3306 HK): >34% ROCE Track Record/10% Dividend Yield/Net Cash Business
- HK-Listed Apparel & Footwear Screener: Right Stocks Listed in the Wrong Market – Attractive Yield & Rapid Expansion Outside China – Sep 2024 helped us screen out great names.
- JNBY Design Ltd (3306 HK), an apparel retailer trading at 9.2x FY24 with a ~10% yield and a long-term track record of >34% 10 Yr-average ROCEs, is one such name.
- Even with modest single-digit growth guidance, we see a growing yield and a great cash buffer (20% of the market cap), and dividends are sustainable.
Nexstar Media Group: Will Its Strategic Focus on Political Advertising Result In A Solid Financial Performance? – Major Drivers
- Nexstar Media Group’s second quarter of 2024 delivered robust overall performance as the company continued to showcase its ability to navigate challenging market dynamics effectively.
- As discussed during the recent earnings call, Nexstar achieved record total net revenue and distribution revenue, underscoring its strategic success in optimizing revenue streams amid continued industry shifts.
- Particularly noteworthy was the substantial growth in adjusted EBITDA and adjusted free cash flow, which highlights disciplined execution across operational facets.
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