In today’s briefing:
- Outsourcing (2427 JP) – Earnings Out, With a Bigger Impairment, But Not Clearly A MAC
- Outsourcing (2427 JP): The Weak 4Q Unlikely to Deter Bain
- Seven Group Reloads On Boral (BLD AU)
- Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: One Deletion & Capping Changes
- Offshore China ETFs Rebalance Preview: Big Price Moves Could Lead to Four Changes
- FXI Rebalance Preview: Three Potential Changes as Big Moves Unfold
- APM Human Services (APM AU) Rejects CVC’s NBIO
- Quiddity Leaderboard TDIV Mar 24: 8 Days to Sell in Bizlink
- Quiddity Leaderboard T50/100 Mar 24: Bizlink TDIV DEL; Foxtron’s Futile Rally; One More Surprise
- Taiwan Top 50 ETF Rebalance Preview: Alchip (3661) Could Replace Feng Tay (9910)
Outsourcing (2427 JP) – Earnings Out, With a Bigger Impairment, But Not Clearly A MAC
- Outsourcing Inc (2427 JP) delayed its earnings from 14 February to 19 February on tardiness in calculating impairment losses. That caused a short sharp shock in share price.
- An article came out suggesting it was a small number, and domestic biz EAS-related. Results today do not suggest EAS-related, and half is overseas. But no suggestion of precondition breach.
- For that, I think this probably goes through, and the EC FSR review period should end on 20 Feb so a deal announcement by Friday is eminently possible.
Outsourcing (2427 JP): The Weak 4Q Unlikely to Deter Bain
- Outsourcing Inc (2427 JP) has disclosed a weak 4Q materially below guidance due to cost overruns and JPY6,875 million in impairments. The results did not provide an update on Bain’s tender.
- The weak 4Q has raised concerns that Bain would reconsider terms. Our take is that the results will not warrant a change in the DCF valuation or breach a pre-condition.
- Bain is likely to consider the results a reflection of near-term industry weakness rather than company-specific issues. The annualised spread for a March-end completion is 9.8%.
Seven Group Reloads On Boral (BLD AU)
- After Boral (BLD AU) rejected Seven Group (SVW AU)‘s $6.50/share Offer in 9 June 2021, Seven bumped to $7.30 cash if they got to 29.5%, and $7.40 if 34.5%.
- Seven reached 29.5% by July 1, 34.5% less than a week later, then 52.65% on the 15 July, and at the close of the Offer (29 July 2021), held 69.6%.
- Seven, now holding 71.6%, has made a cash/scrip Offer for shares not owned, with certain tendering thresholds triggering more cash. Terms are best & final.
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: One Deletion & Capping Changes
- Bizlink Holding (3665 TT) should be deleted from the Yuanta/P-Shares Taiwan Dividend Plus ETF in March and that will trigger selling of over 8 days of ADV.
- There will be capping and funding flows due to the higher AUM and passive trackers will need to trade over 0.4x ADV in 5 stocks.
- Shorts have covered positions in Bizlink Holding (3665 TT) but there has been a recent uptick that could be linked to positioning for the rebalance.
Offshore China ETFs Rebalance Preview: Big Price Moves Could Lead to Four Changes
- As of the review cutoff date of 19 February, there could be four changes for the iShares A50 China (2823 HK) / CSOP China A50 (HKD) (2822 HK) in March.
- Shaanxi Coal Industry, Hygon Information Technology, CGN Power and China Everbright Bank could replace Aier Eye Hospital Group, Bank Of Ningbo, WuXi AppTec and Jiangsu Yanghe Brewery.
- CGN Power (1816 HK) is a potential iShares China Large-Cap (FXI) (FXI US) inclusion while Hygon Information Technology C (688041 CH) is an inclusion to a global index in March.
FXI Rebalance Preview: Three Potential Changes as Big Moves Unfold
- With the review period complete, there could be 3 changes for the iShares China Large-Cap (FXI) (FXI US) in March.
- CGN Power (1816 HK), Yankuang Energy (1171 HK) and China Coal Energy (1898 HK) could replace Wuxi Biologics (2269 HK), China Resources Beer (291 HK) and China Vanke (2202 HK).
- Short interest on China Vanke (H) (2202 HK) and Yankuang Energy Group (1171 HK) is higher than the other stocks and there could be covering on implementation day.
APM Human Services (APM AU) Rejects CVC’s NBIO
- Employment and disability services play APM Human Services (APM AU) has rejected PE-outfit CVC Asia Pacific’s proposal, which valued APM at less than half of its November 2021 IPO price.
- APM confirmed it had received – on Friday, 16 February – a conditional and non-binding A$1.60/share indicative proposal. That’s a 93% premium to undisturbed. Yet, APM’s IPO Price was A$3.55/share.
- CVC – and other suitors – need to persuade executive chair and founder Megan Wynne and US private equity group Madison Dearborn, who collectively control ~65% of the company.
Quiddity Leaderboard TDIV Mar 24: 8 Days to Sell in Bizlink
- In this insight, we take a look at Quiddity’s flow expectations for the March 2024 index rebal event.
- Today is the base date for the March 2024 index rebalance. Based on the closing prices today, I expect one DEL for the TDIV index in March 2024.
- Separately, I also expect the AUM assumption to be revised in March 2024.
Quiddity Leaderboard T50/100 Mar 24: Bizlink TDIV DEL; Foxtron’s Futile Rally; One More Surprise
- In this insight, we take a look at the names leading the race to become ADDs/DELs for the T50 and T100 Indices for the March 2024 index rebal event.
- I expect one change for the T50 index and two other changes for the T100 index.
- The two T100 expected DELs are special because one could be a surprise deletion due to liquidity test failure and the other one is TDIV member with significant flow implications.
Taiwan Top 50 ETF Rebalance Preview: Alchip (3661) Could Replace Feng Tay (9910)
- With the review period complete, Alchip Technologies is a high probability inclusion and Feng Tay Enterprise is a high probability deletion for the Yuanta/P-Shares Taiwan Top 50 ETF in March.
- Passive trackers will need to buy around 0.4x ADV in Alchip Technologies (3661 TT) and sell 4x ADV in Feng Tay Enterprise (9910 TT).
- There will be positioning in both stocks, though it appears larger in Alchip Technologies (3661 TT) as compared to Feng Tay Enterprise (9910 TT).
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