In today’s briefing:
- HSCI Index Rebalance and Stock Connect: Potential Changes in September
- Toshiba (6502) Strong Vs Peers on No News Means Susceptible to Risk On Underperformance
- Block Deal Sale of KEPCO Engineering & Construction Likely in 2H 2022
- Ashok Leyland (AL IN) | Outperforming but Warrants Caution
- I Squared/FirstGroup: Looming PUSU Deadline
- MergerTalk: The Bidding War For Spirit Airlines
HSCI Index Rebalance and Stock Connect: Potential Changes in September
- We see 28 potential inclusions to the HSCI in September, plus another 9 stocks that are close to the inclusion cutoff. Some stocks are already a part of Stock Connect.
- There could be 22 deletions from the index on market cap, liquidity and prolonged suspension. Most of the deletions would be moved to the ‘sell-only’ Southbound Stock Connect list.
- Some of the stocks that remain in the HSCI could move to the ‘sell-only’ Southbound Stock Connect list since their average market cap drops below HKD 5bn.
Toshiba (6502) Strong Vs Peers on No News Means Susceptible to Risk On Underperformance
- Toshiba Corp (6502 JP) sees its AGM next week with new directors and a possible privatisation process ongoing. But the AGM is a done deal and privatisation is not.
- The event-i-ness of Toshiba keeps it “supported” while its better-valued and higher-growth peers fall harder in the face of recent overall market weakness.
- Toshiba promised transparency on its privatisation process, and so far, it has delivered everything it promised. The next “transparency” likely comes in November.
Block Deal Sale of KEPCO Engineering & Construction Likely in 2H 2022
- There has been increased speculation about a potential block deal sale of Kepco Engineering & Construction (052690 KS), driving its share price lower in the past several days.
- KEPCO owns a 65.77% stake in Kepco Engineering & Construction (052690 KS).
- We believe that there could be a further 10-20% downside risk for KEPCO E&C in the coming weeks.
Ashok Leyland (AL IN) | Outperforming but Warrants Caution
- Ashok Leyland (AL IN) ‘s volumes recovered in FY22 thanks to a much milder than expected omicron wave and market share gains.
- Discounting lead gains, the absence of retail fleet owners in the market, and little excitement around the scrappage policy all warrant caution.
- While the stock is currently outperforming, channel feedback and valuations point to caution.
I Squared/FirstGroup: Looming PUSU Deadline
- FirstGroup’s Board rejected a 118p + up to 45.6p contingent payment. PUSU deadline is 23 June, and can be extended with the consent of the Panel.
- Infrastructure funds have put their sight on UK buses due to predictable revenues and a friendlier regulatory framework. The Board of FirstGroup is aware and should seek higher value.
- I Square could bid a more palatable 166.8p/share: 144p/share (8.2x EV/Fwd EBIT, average of StageCoach and Go-Ahead transactions), plus 22.8p/share (50% discount to the maximum contingent payout). Long.
MergerTalk: The Bidding War For Spirit Airlines
- Jetblue Airways (JBLU US) is going all out to acquire Spirit Airlines (SAVE US) with an increased $33.5/share cash offer, 68% above Frontier Airlines (UCLL US) agreed bid worth $19.99
- Antitrust risk is a substantial obstacle to both transactional options available to SAVE, but JBLU’s stronger commitment to remedial solutions should be enough to make SAVE board reconsider its position
- Deal momentum now seems to be moving in favor of JBLU’s vigorous pursuit of SAVE which is starting to make the target’s risk-reward profile look compelling
Before it’s here, it’s on Smartkarma
