In today’s briefing:
- S&P/ASX Index Rebalance Preview (March 2022): A Busy Rebalance Across Indices
- SMC (6273) Buyback – Small Short Sharp
- There Are Offer Premiums. And Then There’s Resonant’s
- Tata Consultancy Services (TCS IN): US$2.4bn Mega Buyback
- Dentsu BIG Buyback – Both Larger and Smaller Than It Appears
- Initial Thoughts on the KOSPI200 Rebalance in June 2022
- MCT and MNACT’s Options for Dealing with Quarz’s Campaign
- Liquid Universe of European Ordinary and Preferred Shares: February ‘22 Report
- Demerger Plans for Naturgy
- Korea Local Metaverse ETFs: Passive Flow Preview
S&P/ASX Index Rebalance Preview (March 2022): A Busy Rebalance Across Indices
- There are just 3 trading days to go in the review period for the March rebalance of the S&P/ASX family of indices. There will be plenty of changes.
- We see one change for the ASX20, one change for the ASX50, up to four changes for the ASX200 and up to 15 adds/11 deletes for the ASX300.
- There will be a large impact from passive trading on quite a few stocks. There will be same way flow on some stocks from the FTSE AW/AC trackers.
SMC (6273) Buyback – Small Short Sharp
- SMC Corp (6273 JP) announced better Q3 and an upward revision to still-below consensus for this year. Consensus is for up-and-to-the-right the next few years (but implied Q4 looks light).
- The company raised its dividend so now it is 1% yield.
- And the company announced a small but intriguing buyback. If you own the stock or trade in the space, it is worth understanding
There Are Offer Premiums. And Then There’s Resonant’s
- A 266% premium to last close. That is what Murata Manufacturing (6981 JP) is Offering for 4.2%-held Resonant (RESN US).
- The $4.50/share Offer price was last exceeded a little under a year ago. Shares have rolled over 84% since last February following an exuberant, meteoric spike over Resonant’s RF capabilities.
- The Offer is conditional on attaining ownership of 50% of shares out, including Murata’s stake.
Tata Consultancy Services (TCS IN): US$2.4bn Mega Buyback
- Indian IT giant Tata Consultancy Svcs (TCS IN) released their public announcement document for their latest buyback after market close on 14th February 2022.
- The company is planning to spend up to INR180bn (~US$2.4bn) which is one of the largest amounts spent in Tender Offer-style Buybacks in India.
- Below is a closer look at the details of this Buyback.
Dentsu BIG Buyback – Both Larger and Smaller Than It Appears
- Yesterday 14 February, Dentsu announced bte profits, and guidance for 2022 which appears in-line to slightly strong in terms of revenue, slightly weak/conservative in terms of IFRS/GAAP OP.
- The company also announced what appears to be a BIG buyback.
- Looks are deceiving, but somehow not, but there are catches in both directions. If you have a flow axe, it is worth knowing the flow details.
Initial Thoughts on the KOSPI200 Rebalance in June 2022
- In this insight, we discuss the potential additions and deletions in the upcoming June 2022 KOSPI200 rebalance.
- These top 10potential inclusionsare down on average 4.4% YTD, outperforming KOSPI which is down 10.1% YTD.
- These top 10 potential exclusions are down on average 12.3% YTD, underperforming KOSPI which is down 10.1% YTD.
MCT and MNACT’s Options for Dealing with Quarz’s Campaign
- Quarz Capital’s open letter urges Mapletree North Asia Commercial Trust (MAGIC SP)’s (MNACT) board to protect unitholders’ interest and negotiate for a higher offer from Mapletree Commercial Trust (MCT SP).
- MCT has three options – keep the terms unchanged, improve the terms or support MNACT’s board benchmarking the merger vs alternative transactions.
- MCT’s likely move is to keep terms unchanged and seek shareholder approval. MNACT’s board can appease unitholders by exploring alternative transactions.
Liquid Universe of European Ordinary and Preferred Shares: February ‘22 Report
- Spreads have generally tightened across our liquid universe, 410 bps in the case of Volkswagen. Spreads in Sixt (45.7%) and Schroders (37%) are worth mentioning.
- Recommendations Long ords / short prefs: Fuchs Petrolub, Henkel, Handelsbanken.
- Recommendations Long prefs / short ords: BMW, Grifols, Roche, Telecom Italia (takeover interest), Volkswagen.
Demerger Plans for Naturgy
- Naturgy Energy Group SA (NTGY SM) surprised the market by announcing its division into two listed companies: one for regulated network assets, and the other for liberalised businesses (generation & commercialisation/marketing).
- Naturgy is trading at 10.1x EV/2021a EBITDA and at a demanding 21.9x P/E, higher than Iberdrola SA (IBE SM)’s 16.3x and Endesa SA (ELE SM)’s 11.5x.
- Strategies: pair trades long REE SM/short NTGY SM or long ENG SM/short NTGY SM. Risk: this strategy assumes that both CriteriaCaixa and IFM will stop acquiring shares of Naturgy.
Korea Local Metaverse ETFs: Passive Flow Preview
- Among Korea’s local metaverse ETFs, the Big Three have significant AUMs. At yesterday’s closing prices, their AUMs are ₩0.41T, ₩0.40T, and ₩0.20T, respectively. Their total is now 1 trillion won.
- Those on which we can perform stable momentum trading are the 14 stocks included in all three ETFs. Passive funds account for +3% of MC in half of these names.
- Weighting adjustment uses keyword relevance. So, estimation is not easy. Nevertheless, since the absolute value does not change significantly, we can reduce the error by using the previous rebalancing weighting.
Before it’s here, it’s on Smartkarma
