In today’s briefing:
- FTSE EPRA Nareit Index Rebalance: Two Adds for Japan
- Giordano (709 HK): Minimal Acceptance As Webb Ups Stake
- Berkshire BYD’s Selldown Likely to Follow Its PetroChina Playbook
- FTSE China A50 Index Rebalance: Three Changes Upcoming
- FTSE China 50 Index Rebalance: Yankuang Energy (1171) To Replace Shenzhou Intl (2313)
- Doosan Enerbility: Post-Block Deal Trading
- (Mostly) Asia M&A: August 2022 Roundup
- Nitro Software Rejects Potentia’s Proposal
- JPX-Nikkei 400 Rebal 2023: End-Aug 2022
- SpinTalk: On The Cusp Of Value Realization As Bluerock Residential Readies Its SFR Business Spin-Off
FTSE EPRA Nareit Index Rebalance: Two Adds for Japan
- Healthcare & Medical Investment Corporation (3455 JP) and Sekisui House (1928 JP) have been announced as inclusions to the FTSE EPRA Nareit Developed Asia Index.
- Healthcare & Medical Investment Corporation (3455 JP) is also an inclusion to the FTSE All Cap Index at the September rebalance and the EPRA Nareit inclusion will increase passive inflows.
- Sekisui House (1928 JP) has been rangebound over the last few months and the index inclusion could take the stock higher relative to its peers in the short-term.
Giordano (709 HK): Minimal Acceptance As Webb Ups Stake
- The Cheng-family Offer for Giordano International (709 HK) became open to tendering after the Composite Doc was issued on the 15 August.
- With the first close less than a week away, acceptances are minimal – ~3.6%.
- Separately, David Webb, who definitely will not be tendering, has increased his stake to 5.79%.
Berkshire BYD’s Selldown Likely to Follow Its PetroChina Playbook
- BYD (1211 HK)’s shares declined by -8% on disclosure that Berkshire Hathaway Inc Cl B (BRK/B US) trimmed its stake from 20.04% to 19.92% of outstanding H Shares.
- Berkshire will likely follow its PetroChina (857 HK) playbook and materially sell down over the next few months. Buffet stated that the PetroChina exit was “a decision based on valuation.”
- Berkshire will apply the same investment discipline to the BYD stake. While the shares are trading at a discount to historical multiples, the Berkshire stake is an overhang.
FTSE China A50 Index Rebalance: Three Changes Upcoming
- EVE Energy (300014 CH), PetroChina (601857 CH) and Shaanxi Coal (601225 CH) replace Anhui Conch (600585 CH), CPIC (601601 CH) and Zhangzhou Pientzehuang (600436 CH) at the close 16 September.
- Estimated one-way index turnover at the rebalance is 3.1% and will result in a one-way trade of CNY 1,678m.
- PetroChina (601857 CH) is also an inclusion to the FTSE All-World Index while China Pacific Insurance (2601 HK) is a delete from the Hang Seng China Enterprises Index (HSCEI INDEX).
FTSE China 50 Index Rebalance: Yankuang Energy (1171) To Replace Shenzhou Intl (2313)
- Yankuang Energy Group (1171 HK) will replace Shenzhou Intl Group Holdings (2313 HK) in the FTSE China 50 Index at the close on 16 September.
- Passive trackers will need to buy over 1 day of ADV on Yankuang Energy Group (1171 HK) while selling over 1 days ADV on Shenzhou Intl Group Holdings (2313 HK).
- Short interest on Yankuang Energy Group (1171 HK) is over 10 days of ADV to cover and around 10% of float. That could help the stock move higher.
Doosan Enerbility: Post-Block Deal Trading
- The deal size amounts to ₩572B at a volume of 28.54M shares. The per-share disposal price is ₩20,050, a 7.6% discount from the previous day’s closing price, ₩21,700.
- Enerbility can be a timely LONG target of pension-driven flow in the context where the NPS is seen actively doing portfolio rebalancing lately.
- The volume digested by wall crossing seems quite small, as suggested by yesterday’s short selling volume, the flow volatility range is highly likely to be concentrated in one direction.
(Mostly) Asia M&A: August 2022 Roundup
- For the month of August, 10 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$8.5bn.
- The average premium for the new deals announced (or first discussed) in August was ~41%, and a year-to-date average of 38%.
- This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.
Nitro Software Rejects Potentia’s Proposal
- Adobe rival Nitro Software Ltd (NTO AU) has rejected a A$1.58/share cash Offer from Potentia Capital.
- Nitro considers the proposal to be highly opportunistic and comes at a time of significant share market volatility and cyclical weakness in global technology company valuations.
- Separately, Potentia has acquired a 17% interest in Nitro. They are not done yet.
JPX-Nikkei 400 Rebal 2023: End-Aug 2022
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-August 2022.
SpinTalk: On The Cusp Of Value Realization As Bluerock Residential Readies Its SFR Business Spin-Off
- Bluerock Residential Growth’s (BRG US) spin-off of its single-family rentals business, Bluerock Homes (BHM) is set for October 26, 2022
- Although this is a delay on the initial target of 2Q 2022, BRG has proved to be a very defensive holding during a period of high market volatility
- While financial information on BHM needs to be updated, there does appear to be significant hidden value waiting to be realized post October 6.
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