In today’s briefing:
- Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
- KRX Sector Indexes’ Rebalancing Event, Often off Traders’ Radar but with Significant Price Impacts
- Yamaha Motors (7272 JP) – Secondary Offering as Toyota Sells Down – Easy To Digest
- EURO STOXX 50: Kering Out of Fashion with $750M Deletion. DSM-Firmenich In with $1.3B Addition.
- Naspers X Prosus Discount Update Post Tencent 2Q FY24 Results, Narrowing Gains Momentum
- Yadea (1585): Ready for New Standard
- China Consumption Weekly (26Aug2024): 2Q24 Rev Up By – PopMart 62%, Zeekr 58%, Tongcheng 48%, Etc.
- Consumer Tales Aug Wk#4: Beer in China, Ola’s Path to Profits, Kalyan Jewellers’ Quiet Confidence
- ECM Weekly (26th Aug 2024) – Zomato, Colowide, Star Asia, Yamaha, 99Speed, Hero Fin, Bajaj Housing
- Issues Related to Outside Director Compensation Are Plentiful
Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
- Zomato (ZOMATO IN) has a market cap of over US$27bn but is not a member of the NIFTY Index and S&P BSE SENSEX Index since it is not an F&O member.
- Once SEBI’s proposed and enhanced stock inclusion thresholds are implemented, Zomato (ZOMATO IN) should be added to the F&O segment of the market.
- Passive NIFTY Index and S&P BSE SENSEX Index will have to buy a lot of Zomato stock at subsequent rebalances. The impact will be higher given the lower real float.
KRX Sector Indexes’ Rebalancing Event, Often off Traders’ Radar but with Significant Price Impacts
- Early position buildup has minimal price impact, and even after the announcement, only a few stocks with a larger passive impact see significant movement.
- Since these KRX sector indices include many small to mid-cap stocks, the price impact of constituent changes on ETF rebalancing day was quite noticeable.
- Due to potential learning effects, build positions in predictable high-impact stocks before the announcement, then monitor flows and impacts to decide on targeting the ETF rebalancing trading day.
Yamaha Motors (7272 JP) – Secondary Offering as Toyota Sells Down – Easy To Digest
- On Firday 23 August, Yamaha Motor (7272 JP) announced that three cross-holders would sell about 4.6% of the shares out in a secondary sale.
- MS&AD was expected. Toyota was probably expected. Yamaha Corp is a bit of a surprise. But it also frees up Yamaha Motor to sell down cross-holdings (top 2 are Toyota/Yamaha).
- Given the price/guidance/dividend yield and limited size, this should be quite easy to place.
EURO STOXX 50: Kering Out of Fashion with $750M Deletion. DSM-Firmenich In with $1.3B Addition.
- Kering (KER FP) is the main candidate for direct deletion as it is the only constituent below the exit threshold. Forecasted supply is $750m and 9.7 ADV.
- DSM-Firmenich (DSFIR NA) is the main candidate for addition replacing Kering (KER FP) as it is the highest ranked non-constituent. Forecasted demand is $1.3bn and 22.5 ADV.
- Nokia OYJ (NOKIA FH) and Volkswagen (Pref) (VOW3 GR) are only 2% above the exit threshold. Potential replacements are Engie SA (ENGI FP) and Argenx SE (ARGX US).
Naspers X Prosus Discount Update Post Tencent 2Q FY24 Results, Narrowing Gains Momentum
- Tencent reported a softer set of results for Q2 relative to Q1. Revenue for the quarter was up 1% QoQ and 8% YoY.
- Since our last discount update mid-August, the discounts of both Naspers and Prosus have continued to narrow.
- Naspers’ discount is trading well off the lows reached at the end of July (~45%).
Yadea (1585): Ready for New Standard
- The 1H result was poor due to the inventory clearance from the new product standards, which rendered older products less desirable.
- Management has proven to be able to manage costs carefully during a down cycle.
- Yadea Group Holdings (1585 HK) used to trade around 35x PER; now it is only 10x PER.
China Consumption Weekly (26Aug2024): 2Q24 Rev Up By – PopMart 62%, Zeekr 58%, Tongcheng 48%, Etc.
- Pop Mart’s total revenue increased by 62% YoY due to the promising overseas market.
- Tongcheng’ revenue grew by 48% YoY in 2Q24, as new businesses are successful.
- Alibaba’s Freshippo plans to set up frontline warehouses, which is a way back to online.
Consumer Tales Aug Wk#4: Beer in China, Ola’s Path to Profits, Kalyan Jewellers’ Quiet Confidence
- Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
- With fewer young people and a growing number of older adults, the target market for alcoholic beverages is shrinking in many markets including China.
- Upsides from vertical integration could give Ola Electric (OLAELEC IN) a significant cost advantage over local competitors. Strong pricing power can allow it to decide whether to prioritize growth or margins.
ECM Weekly (26th Aug 2024) – Zomato, Colowide, Star Asia, Yamaha, 99Speed, Hero Fin, Bajaj Housing
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, we looked at a number of upcoming listings in India.
- There was a revival in placement flows during the week, after a lull over the past few weeks.
Issues Related to Outside Director Compensation Are Plentiful
- A few companies have stock compensation plans for outside directors, but their common features are a majority of outside directors on the board and a high percentage of foreign ownership.
- 8 million compensation for an outside director would be too low to devote much of his/her time to that company. Consequently, 17.5% of all outside board members serve multiple companies.
- The need to raise the ratio of female board members amid the low percentage of women in managerial positions has increased the concurrent positions of female board members.
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