In today’s briefing:
- STAR50 Index Rebalance: Two Changes in June (As Expected)
- SSE180 Index Rebalance: Small Impact but Not Widely Tracked
- JD Industrials IPO: The Bull Case
- Rockwell Automation: The Strategic Partnership with Autonox Robotics Could Be A Game Changer – Key Drivers
- Textron Inc.: Major Contracts With The U.S
- (Mostly) Asia-Pac Weekly Risk Arb Wrap: Toyo Construction, Silk Laser, Sing Tao, GK Goh Holdings
- Last Week In Event SPACE: Rakuten Bank/Group, Cathay/Swire Pacific, Japan Post
- Revision of the Corporate Governance Code Requires Substantive Discussion, Not Individual Issues
STAR50 Index Rebalance: Two Changes in June (As Expected)
- The index committee has used a 6-month minimum listing history and that results in two changes. This is the first rebalance with less than 5 changes at a review.
- One way turnover is estimated at 1.03% and will result in a one-way trade of CNY 1,025m. Given the adds are new listings, there will be some reverse funding flow.
- There appears to be little pre-positioning on the adds while there is a bigger buildup on the deletes.
SSE180 Index Rebalance: Small Impact but Not Widely Tracked
- There are 18 changes for the SSE180 Index that will be implemented at the close of trading on 9 June.
- The impact on the stocks is small but this is not a widely tracked index, so there could still be opportunities for some high risk/reward basket trades.
- With Northbound Stock Connect eligibility no longer drawing on the SSE180 Index constituents, the index could lose relevance over time.
JD Industrials IPO: The Bull Case
- JD Industrials (2231713D CH)/JDI, a leading industrial supply chain technology and service provider in China, has filed for a US$1bn IPO. JD.com Inc (ADR) (JD US) owns a 77.95% stake.
- JDI is the largest industrial supply chain technology and service provider in China in terms of GMV, customer coverage and SKU offerings in 2022, according to CIC.
- The key elements of the bull case rest on large addressable markets, market share gains, robust product revenue growth underpinned by key accounts, improving underlying margin and strong cash generation.
Rockwell Automation: The Strategic Partnership with Autonox Robotics Could Be A Game Changer – Key Drivers
- It was a successful second quarter for Rockwell Automation, as the company outperformed market expectations in terms of both sales and earnings.
- The company’s strong execution, focus on business resiliency, and improved electronic component availability contributed to double-digit sales and margin growth.
- Despite the uncertain economic environment, Rockwell Automation’s differentiated offerings continued to experience robust demand, with organic sales surpassing expectations.
Textron Inc.: Major Contracts With The U.S
- It was a mixed first quarter for Textron as the company failed to meet the revenue expectations of Wall Street given the lower revenues observed at Bell.
- Despite the Aviation, Industrial, and Systems segments offsetting the decline, Textron’s revenues were below expectations though it did manage an earnings beat.
- Textron Aviation received an initial award on the US Navy Multi-engine Training System contract, and fleet utilization remained strong, contributing to aftermarket revenue growth.
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Toyo Construction, Silk Laser, Sing Tao, GK Goh Holdings
- There are 38 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
- There were no new deals were discussed on Smartkarma this week.
- Key updates took place for Toyo Construction (1890 JP), Silk Laser Australia (SLA AU), Sing Tao News Corp (1105 HK), and GK Goh Holdings (GKG SP).
Last Week In Event SPACE: Rakuten Bank/Group, Cathay/Swire Pacific, Japan Post
- Rakuten Bank (5838 JP)‘s TOPIX inclusion is this week. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.
- Swire Pacific (A) (19 HK)‘s P/B is back down to 0.31x as Cathay Pacific Airways (293 HK) tackles alleged language bias by flight attendants.
- Understanding real money demand on the Rakuten (4755 JP) story is key. If there is any, that makes deal overhang smaller than it looks.
Revision of the Corporate Governance Code Requires Substantive Discussion, Not Individual Issues
- Companies were occupied with meeting the raised standards, and there was little substantive discussion of how corporate governance should be implemented to achieve the corporation’s goal of maximizing shareholder interests.
- A few companies have made steady progress, but we cannot expect corporate governance initiatives to go further than they are now if left to the efforts of well-intentioned companies.
- Unless the benchmark is changed from TOPIX to another index with a smaller number of components, it will be nearly impossible to find a satisfactory engagement for a passive fund.
💡 Before it’s here, it’s on Smartkarma
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