In today’s briefing:
- KOSPI Size Index Series Rebalancing in September: Eight Strong Targets
- China Comm Const (1800 HK): Accelerating New Contract Wins
- Kubota (6326) | Small Tractors…big Problem
KOSPI Size Index Series Rebalancing in September: Eight Strong Targets
- Eight stocks are highly likely to migrate with a substantial passive flow. Compared to the early phase of the screening period, GS Engineering & Construction newly made the list.
- Most names should show a quite substantial passive flow (x ADTV). In particular, KCC Corp and BGF Retail deserve our special attention for their expected passive impact.
- The flow occurs on high potential migration stocks about 20 days before the effective date. So I would start building Long/Short Basket positions with the above eight names around mid-August.
China Comm Const (1800 HK): Accelerating New Contract Wins
- China Communications Construction (1800 HK) sealed Rmb371bn of new contract in 2Q22, or a 35.2% YoY growth, representing a sharp acceleration from just 4.9% in 1Q22.
- We estimate backlog is now around Rmb3.5trn and this equals to 5.2x FY21 revenue. This should have improved from 4.6x at end-FY21 and provides CCCC a secured pipeline.
- CCCC is well positioned to gain more contracts in 2H22 as driven by the local government special purpose bonds issue. Such issue reached Rmb1.5trn, or a 166.1% growth, in Jun.
Kubota (6326) | Small Tractors…big Problem
- Kubota was a key beneficiary of stay-at-home demand in the US over the past two years
- The pull-forward in demand is now normalising, while the macro environment has also turned more difficult
- We think Kubota will miss full year analyst numbers and expect the stock to trade lower to 1.2x book
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