In today’s briefing:
- SSE50/SSE180 Index Rebalance: Heavy Focus on Sector Balance
- CSI All Share IB & Brokerage Index Rebalance: Couple of Large Flow & Impact Names
- EQD / Weekly Vol Update / IVs Spike with Election Results Round the Corner
- The Battle of CMCDI: What Is the Endgame?
- [Atour Lifestyle (ATAT US, BUY, TP US$39) TP Change]: Should Retail Profit Be Accorded a Multiple?
- ECM Weekly (3rd June 2024) – Shift Up, QuantumPharm, Telix, Sompo, ASMedia, Exedy, Barito, Zomato
- [KE Holdings (BEKE US, BUY, TP US$21) TP Change]: New Stimulus Might Be Needed to Spur the Market
- Selected European HoldCos and DLC: May’24 Report
SSE50/SSE180 Index Rebalance: Heavy Focus on Sector Balance
- There are 5 changes for the SSE50 Index (SSE50 INDEX) that will be implemented at the close on 14 June. There is over 1x ADV to trade on most stocks.
- The index committee has focused on sector balance with higher ranked stocks from the Financials sector ignored and lower ranked stocks from other sectors included.
- The adds have outperformed the deletes over the last 6 months and positioning (especially on the surprises) could lead to further upside for a long/short trade.
CSI All Share IB & Brokerage Index Rebalance: Couple of Large Flow & Impact Names
- The changes to the CSI All Share Investment Banking & Brokerage Index were announced after market close on 31 May and will be implemented at the close on 14 June.
- Guosen Securities (002736 CH) will be added to the index while Northeast Securities (000686 CH) will be deleted from the index.
- There is a lot of flow and impact for both stocks and the stocks could outperform/underperform their peers over the next couple of weeks.
EQD / Weekly Vol Update / IVs Spike with Election Results Round the Corner
- IVs Spike with Election Results release on 04-June-2024. Post event there’s a risk of large IV-crush regardless of the result.
- Current Vol-state is “High & Up”. Wait for the switch to “High & Down” before initiating new risk-premia harvesting strategies
- Weekly IVs have received large markups due to elections. Entire Vol Curve is now in Backwardation – curve inversion at extreme levels
The Battle of CMCDI: What Is the Endgame?
- ASM is a hedge fund with a strong track record of investor activism in taking over distressed assets and closed-end funds.
- Lazard, the second largest CMCDI shareholder, bought shares last week at a multi-year high sending a strong message to the market.
- CMCDI can also explore announcing a discount management program besides agreeing to ASM’s claim to sell assets to pay dividends and offer a share buyback to reduce the NAV discount.
[Atour Lifestyle (ATAT US, BUY, TP US$39) TP Change]: Should Retail Profit Be Accorded a Multiple?
- Atour reported C1Q23 revenue 4.6%/6.8% higher than our est./cons., and non-GAAP NI 6.9%/8.8% higher than our est./ cons, driven by hotel expansion and new retail products.
- The company raised total revenue guidance from 30% to 40% YoY for 2024 due to a strong retail sales trend.
- We believe retail sales is a form of increase in Atour’s same store sales. We thus raise TP to US$39 to reflect this retail-driven increase of same store sales.
ECM Weekly (3rd June 2024) – Shift Up, QuantumPharm, Telix, Sompo, ASMedia, Exedy, Barito, Zomato
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, we undertook a peer comparison and looked at valuations for Shift Up (462870 KS).
- On the placement front, it was another busy week with a number of blocks in India along with Asmedia Technology (5269 TT)‘s GDR offering and Exedy Corp (7278 JP).
[KE Holdings (BEKE US, BUY, TP US$21) TP Change]: New Stimulus Might Be Needed to Spur the Market
- KE Holdings (BEKE) reported C1Q24 revenue/non-GAAP NI in-line/35% above consensus and guided a modest revenue growth of 10% YoY in C2Q24
- We maintain our view that C1Q24 would be the trough as subsequent improvement, albeit at slower magnitude, should happen from C2Q24
- We maintain the stock as BUY rating but lower TP to US$21 to reflect a postponed recovery schedule.
Selected European HoldCos and DLC: May’24 Report
- The Discounts to NAV of covered holdcos did not follow a clear trend during May. Discounts to NAV: C.F.Alba, 46.8% (vs. 49.1%); GBL, 42.9% (vs. 39%); Heineken Holding, 18.3% (vs. 17.3%);
- Industrivärden C, 2.5% (vs. 4.7%); Investor B, 12% (vs. 8.3%); Porsche Automobile Holding, 35.3% (vs. 41.1%). Rio DLC spread widened to 23% (vs. 22.5%).
- What seems interesting: Porsche SE vs. listed assets and the Rio DLC (long RIO LN/short RIO AU).
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