Daily Brief Financials: HDFC Bank, Bajaj Finance Ltd, HDFC Limited, Metro Pacific Investments Co, Nikkei 225, Suncorp, Picton Property Income, Investor AB, Country Garden Holdings Co, China South City and more

• HDFC Limited (HDFC IN) will stop trading at the close on 12 July and will be deleted from all indices at the close on that day.
• As expected, LTIMindtree (LTIM IN) will be added to the NIFTY Index while Jindal Steel & Power (JSP IN) will be added to the NSE Nifty Next 50 Index.
• Importantly, HDFC Limited (HDFC IN)‘s foreign shareholding has dropped over the quarter ended 30 June and that has index implications for future passive flows to HDFC Bank (HDFCB IN). 

• Q1FY24 AUM growth came in stellar at 9%+ QoQ, led by highest-ever quarterly AUM addition of INR 22700cr vs INR 16537cr QoQ. 
• BAF recorded its highest-ever quarterly increase in customer franchise at 3.84mm, taking the total to 72.98mm vs 69.14mm QoQ. New loans booked were also strong at 9.94mm vs 7.56mm QoQ.
• Deposits book grew strong to INR 49,900cr vs INR 44,666cr, a growth of 11.7%+ QoQ. Liquidity surplus is at INR 12,700cr vs INR 11,852cr QoQ.

• In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, and 200 Indices in the December 2023 Rebalance.
• The HDFC/HDFC Bank Merger is expected to trigger index changes in the next few days and we take a look at our expectations for these intra-review changes.
• Apart from that, I see no other changes for SENSEX in December 2023. However, there could be up to six changes for both BSE 100 and BSE 200.

• Metro Pacific Investments Co (MPI PM) disclosed a revised voluntary delisting tender offer from a consortium at PHP5.20 per share (PHP5.24 per share including a potential 1H23 dividend).
• The revised offer remains conditional on meeting the threshold for voluntary delisting (95% of outstanding shares) or obtaining an exemptive relief from the PSE.  The IFA valued MPI at PHP3.37-5.10.  
• The offer was revised to increase the chance of meeting the high delisting threshold, which requires an 86% acceptance rate. At the last close, the gross spread is 8.6%. 

• Good probability of reversal (>60%) for the Nikkei 225 (NKY INDEX)if closing this week up and/or if market price reaches => 34033 intra-week (better: => 34255).
• Index can go a bit higher but first will probably consolidate/digest the latest rally from April. Expect non-directionality. If WEEKLY rally lasts =>3 weeks, place high-probability SHORT trade.
• A pullbackbelow 33189.04 (last WEEKLY Close) seems unlikely this week. In case, buy-the-dips until the price reaches 32586 (Q2 barrier). Past that point the market could sink <= 31750.

• One of main criteria for ACCC to allow ANZ’s takeover of Suncorp centers around competition, will it worsen as a result
• There are 8 banks in Australia with over 100 branches, if the takeover is allowed, this puts the 127 Suncorp branches into the 668 branch stable of ANZ
• There is plenty of expert and public testimony that such a merger would see less competition especially in SME and agribusiness loans, and possibly limit physical access to banking

For FY23 Picton Property Income (PCTN) published resilient underlying (EPRA) earnings, which together with strong rent collection supported a 4% increase in DPS paid. The impact of market-wide property yield widening on NAV was mitigated by portfolio outperformance and low gearing. Continuing occupier demand, rent growth and mostly long-term, fixed-rate borrowings are positive indicators for further progress.

• Discounts to NAV of covered holdcos have generally widened during June. Discounts to NAV: C.F.Alba, 47%; GBL, 40.1%; Heineken Holding, 16.1%; Industrivärden C, 7%; Investor B, 11.7%; Porsche Automobile Holding, 47.3%. 
• The spread of Rio Tinto DLC widened to 19%. Rio Tinto is a candidate for an Australian top hat structure.
• Of interest: Heineken Holding/Heineken, Porsche SE/vs. listed assets and Rio DLC.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Country Garden Holdings Co
• First Pacific Co

China South City’s (CSC) FY 2022-23 results were as weak as expected. Revenue decreased 58% y-o-y to HKD 4.1 bn, with property sales declining 65% to HKD 2.4 bn and recurring income down 26% to HKD 1.7 bn. Earnings-based credit metrics deteriorated substantially, as adjusted EBITDA turned negative. Liquidity stood at a very weak 16% at end-March 2023, while Net Debt/Net Property Assets was sound at 39%, thanks to CSC’s sizeable investment property portfolio.

Given the sustained weakness in CSC’s property sales, we do not expect the company to be able to generate adequate FCF organically. We believe asset disposals will remain key to debt repayment. CSC has been leveraging its new state ties by selling key assets to its SOE parent and accessing more onshore bank funding. Therefore, we maintain our “Hold” recommendation on the CSCHCN curve.