In today’s briefing:
- Let’s Get Real About the Odds of MBK Launching a New Tender for YPP
- Keppel: Study on Disclosure (Report 1)
- CSI 500 Index Rebalance Preview: 50 Changes; 11% Turnover; US$5bn Round-Trip Trade
- CSI 1000 Index Rebalance Preview: 100 Changes; 10% Turnover; US$4bn Round-Trip Trade
- China Everbright Env (257 HK): An Underappreciated Beneficiary
- Vikran Engineering Limited Pre-IPO Tearsheet
- DNOW, Inc. – Positioned for an Evolving Energy Market
Let’s Get Real About the Odds of MBK Launching a New Tender for YPP
- Since MBK’s tender started, institutional trading has been light, leaving local retail investors in control. Choi’s 35% ceiling poses real proration risk for traders eyeing the action.
- MBK might not have wanted YPP; they could just be using it as bait to not only drain Choi’s cash but also to put them in a tight financial spot.
- MBK is set to focus on snapping up Korea Zinc shares in the open market to increase their stake and thwart any buyback tender offers.
Keppel: Study on Disclosure (Report 1)
- Keppel Ltd, once renowned for its offshore marine and real estate businesses, is undertaking a fundamental transformation to become a global asset manager with S$200bn in funds under management (FUM) by 2030.
- It is unprecedented for an industrial operator to successfully transform into an asset manager of such scale.
- As such, close attention ought to be given to the progress and prospects of Keppel’s transformation.
CSI 500 Index Rebalance Preview: 50 Changes; 11% Turnover; US$5bn Round-Trip Trade
- With 95% of the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index at the close on 13 December.
- We estimate a one-way turnover of 11% at the rebalance resulting in a one-way trade of CNY17.56bn (US$2.48bn). The Information Technology and HealthCare sectors gain at the expense of Industrials.
- After drifting lower over the last couple of months, the forecast adds have outperformed the forecast deletes over the last couple of weeks. There should be more to go here.
CSI 1000 Index Rebalance Preview: 100 Changes; 10% Turnover; US$4bn Round-Trip Trade
- With 95% of the review period now complete, we forecast 100 changes (the maximum permitted) for the CSI 1000 Index at the close on 13 December
- We estimate a one-way turnover of 9.9% at the rebalance resulting in a one-way trade of CNY14.4bn (US$2.04bn). The Industrials sector could gain the most index spots.
- The forecast adds have drifted lower versus the forecast deletes over the last few months. Part of that can be attributed to the inflows to ETFs tracking the CSI1000 Index.
China Everbright Env (257 HK): An Underappreciated Beneficiary
- China Everbright Environment (257 HK) will benefit immensely from the lower debt burden of local governments as the central government rolls out more fiscal support measures.
- We anticipate an acceleration in receivable collection to improve its cash flow while the new projects pipeline may speed up. Its FCF has positively turned around in 1H24.
- Despite recent outperformance, it remains a laggard since 2022. Still, it trades on an undemanding 5.5x PER and an appealing 6.3% yield on a higher dividend payout.
Vikran Engineering Limited Pre-IPO Tearsheet
- Vikran Engineering Limited (1635154D IN) is planning to raise about US$119m through its upcoming IPO in India. The lead bookrunners for the deal are Pantomath Limited, Systematix Group.
- Vikran Engineering Limited (VEL) based in Mumbai, operates as an Engineering, Procurement & Construction (EPC) firm, focusing on power, water, and railway infrastructure projects.
- VEL plans to allocate its funds towards financing the company’s working capital needs and general corporate purposes.
DNOW, Inc. – Positioned for an Evolving Energy Market
- DNOW’s existing fulfillment model is contributing to increased earnings and free cash flow capacity through industry cycles.
- 1H24 revenue totaled $1,196 million compared with $1,178 million in 1H23, despite a 5% decline in the average global rig count. US revenue totaled $947 million in 1H24 compared with $883 million in 1H23 despite a 24% decline in the average US rig count.
- US gains reflect increased market share and a partial contribution from the $185 million Whitco acquisition, which closed March 12, 2024. Free cash flow totaled $98 million in 1H24.
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