In today’s briefing:
- TOPIX October 2022 Rebal – Treading Water
- CSI300 Index Rebalance Preview: Potential Changes and Close Names
- Ping An A/H Premium: Outpacing the Market
- Straits Times Index Quiddity Leaderboard Mar 23: Sembcorp/Keppel and Other Potential Index Changes
- Costa Group’s Low-Hanging Fruit: Paine Schwartz Renews Interest
- Sumitomo/Myovant: Agreed Minorities Takeout at $27
- ELMO Software (ELO AU): $4.85/Share Offer From K1 Investment
TOPIX October 2022 Rebal – Treading Water
- The TOPIX October FFW rebalance is Friday at the close.
- It is still ¥2trln+ to buy and ¥2trln+ to sell. And there are some big names. A spreadsheet is attached with all the flows.
- Surprisingly, the top 40 Z-scores on each side have traded in a VERY tight range for the 6 weeks prior to the announcement and the two weeks post. Very weird.
CSI300 Index Rebalance Preview: Potential Changes and Close Names
- Near the end of the review period, we see 16 potential changes to the CSI 300 Index at the December rebalance. There are other stocks very close to the cutoffs.
- We estimate a one-way turnover of 3.04% at the December rebalance leading to a one-way trade of CNY 8.4bn.
- The potential adds have outperformed the potential deletes, though the gap has narrowed in the last few weeks. We’d position for outperformance post the end of the review period.
Ping An A/H Premium: Outpacing the Market
- The selloff in the broader market has led to the A/H premium on PingAn blowing out to levels not seen in the last few years and outpacing the HSASP Index.
- At a 24% premium, the risk/reward for a long Ping An Insurance (H) (2318 HK) / short Ping An Insurance Group (601318 CH) trade has never been better.
- The shift from A-shares to H-shares is already taking place – Southbound Stock Connect holdings have been increasing while the Northbound Stock Connect holdings have been decreasing.
Straits Times Index Quiddity Leaderboard Mar 23: Sembcorp/Keppel and Other Potential Index Changes
- In this insight, we take a look at the potential index changes for the FTSE Straits Times Index (STI) (STI INDEX) between now and the March 2023 index review.
- Keppel DC REIT (KDCREIT SP) is currently the lowest ranked index constituent and could get kicked out when Sembcorp Marine (SMM SP) gets added.
- Olam Group (OLG SP) and SATS (SATS SP) are the next highest ranked potential ADD and DEL respectively and could be involved in index changes if their prices move sharply.
Costa Group’s Low-Hanging Fruit: Paine Schwartz Renews Interest
- Costa Group Holdings (CGC AU), one of Australia’s largest fresh fruit and vegetable producer, is understood to be in the cross-hairs of Paine Schwartz Partners.
- According to the AFR, Paine is using Citi to buy shares up to $2.60/share a 16.6% premium to last close, with a 15% stake in mind.
- There’s a whiff of opportunism here after Costa’s recent EBITDA downgrade. However, the return of its major shareholder suggests value has emerged.
Sumitomo/Myovant: Agreed Minorities Takeout at $27
- Sumitomo has increased its all-cash offer by c. 19% to $27/share, a 50% premium, 4.6x EV/Fwd Revenue and corresponds to an implied equity value of $1.7 billion and EV of $2.9 billion.
- The Board of Myovant recommends the offer, which should close in Q1 2023. The market has bought into the deal: USD turnover on 24 October has been $585 million.
- As a result of the improved offer, I increase my TP to $27 (vs $22.84 formerly). Gross spread is 0.78% and the estimated annual return is 1.83%.
ELMO Software (ELO AU): $4.85/Share Offer From K1 Investment
- Elmo Software (ELO AU) has entered into a Scheme Implementation Deed (“SID”) with K1 Investment under which ELMO shareholders will be entitled to receive $4.85/share, in cash.
- The SID has the support of the independent board and ELMO’s three largest shareholders collectively holding ~33.4% of shares out.
- The Scheme is expected to complete in the 1Q23. The proposal requires FIRB approval. This looks done.
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