In today’s briefing:
- Hyundai Heavy Industries: Passive Inflow Timeline (MSCI & K200) & Position Closing Timing
- Air China (753 HK): Weaker 1Q22 Due to Exceptional Factors
- Edizione & KKR/Atlantia: Defensive and Generous Takeout Offer
Hyundai Heavy Industries: Passive Inflow Timeline (MSCI & K200) & Position Closing Timing
- The typical approach for the MSCI rebalancing trading is to close the position around the announcement. However, HHI is waiting for another passive inflow event right after MSCI SAIR.
- KOSPI 200 rebalancing trading usually starts six weeks before implementation. It means early May, which coincides with the closing timing of the MSCI rebalancing trading position.
- Suppose the sentiment for the local shipbuilding sector will remain neutral. In that case, KOSPI 200 flow makes us consider pushing back the position closing for the MSCI flow trading.
Air China (753 HK): Weaker 1Q22 Due to Exceptional Factors
- Air China Ltd (H) (753 HK) has weaker passenger traffic in Mar and 1Q22 when compared with China Southern Airlines (1055 HK), and this is mostly due to the Olympics.
- We expect one-off factors to remove starting Apr and traffic gap against CSA will narrow going forward. Its associate Cathay Pacific (293 HK) has also seen good pick-up in Mar.
- Air China outperformed CSA by 8pp YTD. There are signs of quarantine requirement relaxation for incoming passengers, and we anticipate gradual international traffic recovery to bode well for Air China.
Edizione & KKR/Atlantia: Defensive and Generous Takeout Offer
- On 14 April, a consortium led by Edizione launched a defensive delisting takeover bid for Atlantia for €23/share (which won’t be adjusted for the €0.74 dividend payable before end of acceptance).
- The premium is 24.4% (before takeover rumors), and represents 8.9x EV/Fwd Revenue and 14.1x EV/Fwd EBITDA (Capital IQ consensus). The offer price is 16% higher than my SOTP valuation (€19.82/share).
- It is almost a knock-out bid with minimal interloper risk. Gross spread to the aggregate amount is 4%, annualised return is 18% (assuming 13 July settlement). Recommendation is long ATL IM.
Before it’s here, it’s on Smartkarma
