In today’s briefing:
- HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect
- Merger Arb Mondays (19 Feb) – Outsourcing, JSR, Shinko, YSK, Vinda, Altium, Azure, Ansarada
- Citic Limited – A Deeply Discounted Conglomerate in the Hang Seng Index
- Liquid Universe of European Ordinary and Preferred Shares: February‘24 Report
- Keystone Law Group: A Law Firm with Structural Advantages, Primed for Shareholder Returns
- Keisei Electric Rail (9009): Can Be Higher
HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect
- There are 25 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents down to 514.
- We expect 21 of the 25 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.
- Since the start of the year, shares held though Southbound Connect have increased on 22 of the 29 HSCI deletions and there could be some unwinding in the weeks ahead.
Merger Arb Mondays (19 Feb) – Outsourcing, JSR, Shinko, YSK, Vinda, Altium, Azure, Ansarada
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – Probiotec Ltd (PBP AU), Shinko Electric Industries (6967 JP), Genetron Holdings Ltd (GTH US), JSR Corp (4185 JP), Lithium Power International (LPI AU), Altium Ltd (ALU AU).
- Lowest spreads – Tietto Minerals Ltd (TIE AU), Pact Group Holdings (PGH AU), Orecorp Ltd (ORR AU), QV Equities Ltd (QVE AU), Yaizu Suisankagaku Industry (2812 JP).
Citic Limited – A Deeply Discounted Conglomerate in the Hang Seng Index
- Citic Ltd (267 HK) is a well-managed conglomerate trading at a big discount to its constituent parts
- Earnings should move up from here and pays a decent dividend while you wait.
- A member of both the the Hang Seng Index (HSI INDEX) and the HSCCI and will attract inflows once institutional money returns
Liquid Universe of European Ordinary and Preferred Shares: February‘24 Report
- Since mid-January, spreads have tightened, same as in December, across our European liquid universe of ordinary and preferred shares (13 have tightened, 6 widened).
- Recommended trades long preferred / short ordinary shares: Danieli, Grifols, Media-for-Europe, Sixt, Volkswagen.
- Recommended trades long ordinary / short preferred shares: Fuchs, Henkel, SSAB Svenska Stal, Roche.
Keystone Law Group: A Law Firm with Structural Advantages, Primed for Shareholder Returns
Keystone Law Group (KEYS) is a UK-based law firm utilizing a freelance-lawyer platform model.
Its “pay-when-paid” policy and “work-from-anywhere” culture result in minimal invested capital, yielding high returns on capital and a structural competitive advantage over traditional equity-based law firms.
With a 2023E free cash flow yield of approximately 6.8%, the shares are deemed fairly to slightly overvalued.
Keisei Electric Rail (9009): Can Be Higher
- Keisei Electric Railway Co (9009 JP) share price has increased but not run ahead of its fundamentals.
- Weak Yen, COVID rebound, friendlier visa policy by the Japanese government, and the potential for more Chinese tourists visiting Japan are tailwinds for Keisei.
- Valuation may look expensive, but with the high growth rate, investors should consider to use PEG rather than PER or PBR.
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