In today’s briefing:
- MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Two Potential Adds; Two Close
- Tata Consultancy Services (TCS IN): US$2.4bn Mega Buyback – Letter of Offer Out; TCS Cheap Vs Peers
- TOPIX-Nikkei Skew Trade – Updates Factoring in Ukraine
- TIGER WISE Tour Leisure ETF Rebalancing Preview
- Bank of Kyoto (8369) – A Complicated Risk Model Clarified
- BE Clean Energy Back in the Cross Hairs of China Shandong Hi-Speed Financial Group?
- SENSEX Index Rebalance Preview (June): Down to the Wire
- Preemptive/Appraisal Rights to Parent Company Shareholders in ECO Listing in Korea
- CPI/Immofinanz: Additional Acceptance Period, S Immo
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Two Potential Adds; Two Close
- Core Lithium Ltd (CXO AU) and Lake Resources Nl (LKE AU) could be added to the MVIS Global Rare Earth/Strategic Metals Index at the upcoming rebalance in March.
- Firefinch Ltd (FFX AU) and Sayona Mining (SYA AU) are close adds but unlikely to make the cut for inclusion at the March rebalance.
- There will be a modest impact on the potential adds at the rebalance but the impact on some of the other names could be higher due to capping changes.
Tata Consultancy Services (TCS IN): US$2.4bn Mega Buyback – Letter of Offer Out; TCS Cheap Vs Peers
- In early February 2022, Indian IT giant Tata Consultancy Svcs (TCS IN) officially announced a INR180bn (~US$2.4bn) Buyback which is one of the largest in Indian stock market history.
- Today the company published the Letter of Offer confirming the final details and the expected timeline for this Buyback.
- Below is a closer look at these details and their implications for shareholders.
TOPIX-Nikkei Skew Trade – Updates Factoring in Ukraine
- The Nikkei is now down 9.57% vs. when we first recommended our skew trade (now up 0.40%).
- Despite some frustrating idiosyncratic moves which have prevented the skew trade from outperforming more it has mostly held up.
- Looking forward, we believe it is worthwhile assessing upside and downside macro risks for the components of the trade.
TIGER WISE Tour Leisure ETF Rebalancing Preview
- The TIGER Tour Leisure ETF shows the fastest AUM growth among the local themed ETFs in Korea. It seems clear that this is due to the reopening expectations.
- The absolute size of AUM seems small. But the number of components is only 19, and most of them are small caps. So the actual passive impact is not small.
- Another noteworthy aspect is that the rebalancing is pretty straightforward. It primarily relies on the float-adjusted market caps. So, the rebalancing estimation visibility is relatively high.
Bank of Kyoto (8369) – A Complicated Risk Model Clarified
- Last May I proposed a model for thinking about the appropriate discount of Bank of Kyoto (8369 JP) vs its giant equity portfolio and small operations. It was a sell.
- In December, the bank changed its shareholder return ratio, which indicated less value destruction, and tighter appropriate discount. The shares rallied and discount narrowed.
- Now the Shares Adjusted for Banking Ops Valuation have seen the discount to After-Tax Equity Portfolio Valuation widen sharply in the past 10 days. So here’s the hedging model.
BE Clean Energy Back in the Cross Hairs of China Shandong Hi-Speed Financial Group?
- Beijing Enterprises Clean Energy Grp (1250 HK) and China Shandong Hi-Speed Financial Group (412 HK)/CSFG have simultaneously entered trading halts today. CSFG is likely a suitor for BE Clean Energy.
- There is a track record of SOE privatisations of clean energy companies – Huadian Fuxin Energy Corp (816 HK), Huaneng Renewables Corp H (958 HK) and CP Clean Energy
- In this note, we look at CSFG’s recent failed attempt at acquiring a 22.78% stake at a price of HK$0.088, along with BE Clean Energy’s trading updates and peer multiples.
SENSEX Index Rebalance Preview (June): Down to the Wire
- Tata Motors Ltd (TTMT IN) and Tata Motors DVR (TTMT/A IN) are likely inclusions to the S&P SENSEX INDEX in June while Dr. Reddy’s Laboratories (DRRD IN) could be deleted.
- Hindalco Industries (HNDL IN) could be added depending on sector balance while Nestle India (NEST IN) is a close delete on liquidity.
- The inclusion of Tata Motors could result in the discount on the DVR line Tata Motors DVR (TTMT/A IN) narrowing versus the common shares Tata Motors Ltd (TTMT IN).
Preemptive/Appraisal Rights to Parent Company Shareholders in ECO Listing in Korea
- The KFSC officially unveiled revisions to the guidelines on corporate governance disclosure. The key to these revisions is to regulate the equity carve-out (ECO).
- These protection measures may include granting PREEMPTIVE or/and APPRAISAL rights to the parent company shareholders in a post-ECO listing.
- There will be high potential for short-term momentum for POSCO, which has already decided ECO, and SK Innovation (SK On), whose post-ECO listing is practically a foregone conclusion.
CPI/Immofinanz: Additional Acceptance Period, S Immo
- CPI has revealed a 55.07% stake in Immofinanz. The additional acceptance period will end on 28 May. CPI will likely continue purchasing shares in the market.
- CPI now also controls 42.55% of S Immo. A combined CPI/Immofinanz/S Immo would have €24bn assets. Scale and sound capital management may bring handsome profits in the longer term.
- Immofinanz’s shares offer 5.1% 23e FFO yield. Gross spread to offer price is 0.6%. The convertible spread is c.2%. My TP is €25.86/share, 12.2% discount to EPRA NTA. Long IIA VA.
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