In today’s briefing:
- MSCI May 2022 Index Rebalance Preview: Changes as We Start the Review Period
- S&P Global Clean Energy Index: Changes for Asia & Impact
- Japan Post Holdings – Good Play On the BOJ’s Conundrum
- Ramsay Health Care (RHC AU): Indicative Proposal from KKR & Index Implications
- TSI Holdings (3608) – That Old Gem – Lots of Visible Cash, and Lots More Invisible Cash
- Kakao Pay: End of 6 Months Lock-Up Period Could Further Put Negative Pressure on Share Price
- StubWorld: Melco Trading Rich As Lawrence Adds To His Position
- KKR to Make a Move for Cleanaway?
- Didi – A Quick Look at Latest Results Before Delisting
- Mindtree-LTI: A Potential US$20bn+ Indian Tech Merger; Mindtree Could Outperform LTI
MSCI May 2022 Index Rebalance Preview: Changes as We Start the Review Period
- The review period for the MSCI May 2022 SAIR started yesterday. As of the close on 15 April, we see 45 potential adds and 65 potential deletions for Asia.
- At a country level, the most changes are in China, while the largest net change is expected in Japan (16 deletions) and China (10 deletions). Indonesia could have five inclusions.
- The largest potential inclusions are Powerchip Semiconductor Manufacturing Corp, Tata Elxsi Ltd, Orient Overseas International, Pop Mart International Group Limited, Eva Airways, Jindal Steel & Power and China Airlines.
S&P Global Clean Energy Index: Changes for Asia & Impact
- There are 12 additions to the S&P Global Clean Energy Index for Asia. The changes were announced on 8 April and will be implemented at the close on 22 April.
- Largest inflows are on Chubu Electric Power, China Yangtze Power, Adani Green Energy, Energy Absolute, LONGi Green Energy Technology, JA Solar Technology, Tianjin Zhonghuan Semiconductor and Sungrow Power Supply.
- The largest outflows are expected on Meridian Energy (MEL NZ), Contact Energy (CEN NZ) and Xinyi Energy Holdings Ltd (3868 HK).
Japan Post Holdings – Good Play On the BOJ’s Conundrum
- The BOJ looks increasingly trapped between a rapidly depreciating yen and a stated desire to hold rates low.
- We believe that the BOJ will eventually have to compromise on its 0.25% ceiling for the ten year JGB once inflation data gives them cover to do so.
- However, we believe Japan Post Holdings could potentially benefit from both macro forces and consider it one of the best risk-reward positions in Japan and perhaps globally.
Ramsay Health Care (RHC AU): Indicative Proposal from KKR & Index Implications
- A KKR led consortium has made a conditional, non-binding, indicative proposal to acquire 100% of the shares in Ramsay Health Care (RHC AU) at A$88/share in cash.
- The offer values Ramsay Health Care (RHC AU) at A$20.14bn and is a premium of 36.7% to the last close. The premium is over 30% even using longer term VWAPs.
- There will be changes to the S&P/ASX family of indices to maintain the number of index members. We will know more once an indicative timeline is published.
TSI Holdings (3608) – That Old Gem – Lots of Visible Cash, and Lots More Invisible Cash
- TSI Holdings has long had a lot of cash and securities but a dearth of income. It’s still that way.
- Earnings were pretty good, but forecasts disappointing. The MTP is much more aggressive.
- The company has an EV/Revenue of 0.03x and EV/EBITDA of 0.5x. THEN it has a lot more interesting stuff hidden away. This could double or more in two years.
Kakao Pay: End of 6 Months Lock-Up Period Could Further Put Negative Pressure on Share Price
- Kakao Pay’s six months end of the lock-up period comes up on 3 May, which could further put negative pressure on its share price.
- Other factors including heightened competition, lack of margin improvement in 2021, and lifting nearly all social distancing measures in Korea are likely to further negatively impact Kakao Pay.
- We expect additional 20 to 30%+ downside risk for Kakao Pay from current levels over the next 6-12 months.
StubWorld: Melco Trading Rich As Lawrence Adds To His Position
- Both Melco International Development (200 HK) and Melco Resorts & Entertainment (MLCO US) have underperformed peers. But Melco is unjustifiably “outperforming” MLCO.
- Preceding my comments on Melco, are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
KKR to Make a Move for Cleanaway?
- An AFR article claimed that KKR & Co Inc (KKR US) is preparing an offer for Cleanaway Waste Management (CWY AU). The shares rose 5.9% to close at A$3.24.
- KKR has a long history with Cleanaway. Private equity has recently acquired waste management companies that are increasingly viewed as “infrastructure-like’’.
- Cleanaway’s scale, cash generation and modest leverage make it a target. A forward EV/EBITDA multiple of 15.8x, in line with Bingo Industries (BIN AU)’s acquisition multiple, would imply A$3.92.
Didi – A Quick Look at Latest Results Before Delisting
- Didi on Monday announced that it will hold an EGM of shareholders on 23rd May for a vote on the voluntary delisting of the company’s ADS’ from the NYSE.
- The company has mentioned that it will not apply for listing it shares on any other stock exchange before the completion of delisting.
- Didi also has reported its 4Q2021 results and we take a look at the company’s recent results in this insight.
Mindtree-LTI: A Potential US$20bn+ Indian Tech Merger; Mindtree Could Outperform LTI
- On Monday, Bloomberg reported that Larsen & Toubro (LT IN) was planning a merger between its public-listed subsidiaries Mindtree Ltd (MTCL IN) and Larsen & Toubro Infotech (LTI IN).
- The companies have responded by saying that the news reports of a merger between MINDTREE and LTI are “speculative in nature“.
- Below is a closer look at the likelihood of this Deal and the valuations of the two companies involved in this event.
Before it’s here, it’s on Smartkarma
