In today’s briefing:
- FTSE China 50 Index Rebalance Preview: Two Changes Now, Could Be More
- ADARO Solid 3Q 2022 : But Prefer ITMG
FTSE China 50 Index Rebalance Preview: Two Changes Now, Could Be More
- Tianqi Lithium (9696 HK) and JD Health (6618 HK) could be inclusions while XPeng (9868 HK) and Longfor Properties (960 HK) are near certain deletions.
- There are a few stocks that are close to the deletion threshold and could be deleted from the index if they continue to sell off over the next few weeks.
- Tianqi Lithium (9696 HK) is also a high probability inclusion to the FTSE All-World Index at the December rebalance. That will bring in additional inflows to the stock.
ADARO Solid 3Q 2022 : But Prefer ITMG
- Adaro Energy (ADRO IJ) showed a sequential decline in earnings owing to a 6.8% QoQ decrease in pricing as discounts for their coal continued to build Vs. Newcastle.
- While the stock trades at a 2.8x FY22 PE and 1.3x EV-EBTIDA FY22E with a 21% dividend yield, the market is pricing in a substantial decline in coal prices.
- Adaro offers a significant margin of safety with 25% of the market cap in cash and decent capital allocation, but we prefer ITMG for its superior grades.
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