In today’s briefing:
- Whitehaven Coal – 35% of Mkt Cap Cash/ Aggressive Capital Allocation The Key
- CPSE / BHARAT22 / CNXBANK Index Rebalance Preview: Capping Changes in March
- OZ Minerals (OZL AU): Scheme Meeting on 13 April
- OZL Scheme Booklet Posted – 60 Days to Completion
- K-New Deal Official Constituent Changes: Evaluating Flow Trading Opportunities
- Impala Platinum: A Turnaround Is On The Horizon
Whitehaven Coal – 35% of Mkt Cap Cash/ Aggressive Capital Allocation The Key
- Whitehaven Coal (WHC AU) underwhelming capital allocation in H1 2023 may have disappointed investors, but armed with a war chest of 2.47 bn AUD (35% mkt cap), we remain optimistic.
- The company aims to purchase 240 mn shares ( or about 25% of outstanding shares ) over and above the 10% it completed from last year’s buyback phase.
- Trading at 2.2x/3.2x FY23e/FY24e, the stock is extremely cheap with a conservative dividend yield of 9.1%/6.3% FY23e/FY24e ( assuming a 20% dividend-only payout ratio).
CPSE / BHARAT22 / CNXBANK Index Rebalance Preview: Capping Changes in March
- The BHARAT 22 ETF (ICICIB22 IN) will rebalance on 17 March while the CPSE ETF (CPSEBE IN) and Nifty Bank Index (NSEBANK INDEX) will rebalance on 29 March.
- There are no constituent changes for the indices in March but there will be capping changes for the stocks and there is a reasonable impact on some stocks.
- There are stocks that will have opposing flows on the two days, while there are some stocks that will have same way flows from passive trackers.
OZ Minerals (OZL AU): Scheme Meeting on 13 April
- The IE considers BHP Group Ltd (BHP AU)’s A$28.25 offer for OZ Minerals Ltd (OZL AU) to be fair and reasonable as it is within its valuation range of A$27.37-30.47.
- Copper prices and peers’ share prices have risen since the deal announcement. The IFA address perky copper prices by using reasonable long-term copper prices to value the assets.
- This is done with no hint of a competing bid. At last close price and for the 2 May payment, the gross and annualised spread is 0.9% and 6.1%, respectively.
OZL Scheme Booklet Posted – 60 Days to Completion
- On 2 March, the Court approved the distribution of the OZ Minerals Ltd (OZL AU) Scheme Booklet, which was posted on 3 March 2023. The Scheme Meeting is 13 April 2023.
- The Independent Expert has concluded the Scheme is Fair and Reasonable and in the best interests of OZL shareholders. Directors unanimously support.
- This deal is almost certainly done. The IE report is, as is often the case, enormously informative. Watch the franking credit timing. Not a lot of spread left here.
K-New Deal Official Constituent Changes: Evaluating Flow Trading Opportunities
- Notable constituent changes are Posco Chemical (003670 KS), Douzone Bizon (012510 KS), Ecopro (086520 KS), Connectwave (119860 KS), SK Innovation (096770 KS), KMW (032500 KS), & Hanmi Science (008930 KS).
- Among these, Douzone Bizon (012510 KS) and KMW (032500 KS) are expected to receive the most significant flow impact (x ADTV) at the close of March 9th.
- Since the flow size is concentrated within a fairly right trading window, between 2 pm and the close on the 9th, the degree of price impact should be relatively higher.
Impala Platinum: A Turnaround Is On The Horizon
- Most PGM prices are below their moving averages, with supply shortages and higher demand en route.
- Impala Platinum’s stock is priced at a cyclical discount.
- The stock provides a lucrative dividend opportunity with the firm’s 30% of operating cash flow distribution policy.
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