In today’s briefing:
- FTSE EPRA Nareit Index Rebalance: Two Adds for Japan
- HSI, HSCEI, HSTECH: September Rebalance Flows Post Capping
- Kyocera (6971 JP) Founder Kazuo Inamori Passes – Implications for Holdings
- Sep22 FTSE EPRA Nareit Index Rebalance – Big Impact on Sekisui House (1928 JP)
- Hang Lung Group Chips Away At Holding In Hang Lung Props
- STI Index Rebalance: Emperador IN, ComfortDelGro OUT
- Kadokawa – Investments From Sony and Tencent
- Leapmotor Pre-IPO – Thoughts on Valuation
- NIFTY NEXT50 Index Rebalance: Significant Impact for an Overlooked Index
- NIFTY50 Index Rebalance: Adani Enterprises Replaces Shree Cement
FTSE EPRA Nareit Index Rebalance: Two Adds for Japan
- Healthcare & Medical Investment Corporation (3455 JP) and Sekisui House (1928 JP) have been announced as inclusions to the FTSE EPRA Nareit Developed Asia Index.
- Healthcare & Medical Investment Corporation (3455 JP) is also an inclusion to the FTSE All Cap Index at the September rebalance and the EPRA Nareit inclusion will increase passive inflows.
- Sekisui House (1928 JP) has been rangebound over the last few months and the index inclusion could take the stock higher relative to its peers in the short-term.
HSI, HSCEI, HSTECH: September Rebalance Flows Post Capping
- The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
- The largest inflows will be on Baidu (9888 HK), SenseTime Group (20 HK), China Shenhua Energy (1088 HK), Tencent (700 HK), Kuaishou Technology (1024 HK) and Anta Sports (2020 HK).
- The largest outflows will be on Meituan (3690 HK), AIA Group (1299 HK), Sunny Optical (2382 HK), SMIC (981 HK), China Pacific Insurance (2601 HK) and China Construction Bank (939).
Kyocera (6971 JP) Founder Kazuo Inamori Passes – Implications for Holdings
- Kazuo Inamori (稲盛和夫), founder of Kyocera Corp (6971 JP) and KDDI Corp (9433 JP) precursor company DDI (Dai Ni Den Den), and former chairman of JAL overseeing restructuring, has passed.
- In his own name, he owns 10.212mm shares of Kyocera, and likely other assets. Inheritance tax would be due 10 months from now.
- Kyocera is not blowing out the lights compared to peers, but it is relatively inexpensive to its history and peers. If the shares are sold, Kyocera can buy them.
Sep22 FTSE EPRA Nareit Index Rebalance – Big Impact on Sekisui House (1928 JP)
- Yesterday FTSE Russell announced two Asian additions to its FTSE EPRA Nareit Global Developed Index – Sekisui House (1928 JP) and Healthcare & Medical Investment Corporation (3455 JP).
- Sekisui House is larger cap, and will see big dollars added. H&M IC is much smaller and will see less, but has had a huge run-up, outright and relative.
- Trading impact will be significant on both tickers in terms of days of ADV.
Hang Lung Group Chips Away At Holding In Hang Lung Props
- Hang Lung (10 HK) recently announced it had acquired 1.3% in Hang Lung Properties (101 HK) over a one-year period, increasing its holding to 59.5%.
- HLG currently trades at a 62% discount to NAV, a level last seen around the Covid lows in May 2020.
- HLG is the most basic of Holdco structures – there is almost a 100% overlap in the stub ops with HLP’s property investments.
STI Index Rebalance: Emperador IN, ComfortDelGro OUT
- Emperador (EMI SP) will replace Comfortdelgro Corp (CD SP) in the FTSE Straits Times Index (STI) (STI INDEX) at the close of trading on 16 September.
- Though the changes were expected, there is over 4 days of ADV to trade on both stocks and we do not feel there are a lot of pre-positions built up.
- There are some risks in the stocks, and we would look to close out positions prior to the implementation of the changes.
Kadokawa – Investments From Sony and Tencent
- Kadokawa announced yesterday that subsidiary From Software would conduct a third-party allocation of shares to Sony and Tencent.
- The allotment values From Software at about ¥120bn with Tencent acquiring 16.25% and Sony acquiring 14.09% of the company.
- This creates opportunities for both Sony and Tencent and likely puts Kadokawa on track to eventually be acquired though timing may be somewhat later than we had anticipated.
Leapmotor Pre-IPO – Thoughts on Valuation
- Leapmotor (LM) aims to raise around US$1.5bn in its Hong Kong IPO. LM is a smart EV company based in China, founded in 2015.
- As of end Jun 22, it had delivered a total of 104,829 cars with most of its sales coming from its mini units, T03.
- In our previous note, we spoke about the company’s past performance, PHIP updates and undertook a peer comparison. In this note, we will talk about valuations.
NIFTY NEXT50 Index Rebalance: Significant Impact for an Overlooked Index
- Adani Total Gas (ATGL IN), Bharat Electronics (BHE IN), Hindustan Aeronautics (HNAL IN), IRCTC (IRCTC IN), Mphasis (MPHL IN), Samvardhana Motherson (MSS IN) and Shree Cement (SRCM IN) are adds.
- Adani Enterprises (ADE IN), Jubilant Foodworks (JUBI IN), Lupin (LPC IN), Mindtree (MTCL IN), Punjab National Bank (PNB), Steel Authority of India (SAIL) and Zydus Lifesciences (ZYDUSLIF IN) are deletes.
- There is significant impact on a lot of the stocks in terms of days of delivery volume to trade. Given the index is overlooked, there could be significant price movements.
NIFTY50 Index Rebalance: Adani Enterprises Replaces Shree Cement
- Adani Enterprises (ADE IN) will replace Shree Cement (SRCM IN) in the NIFTY Index (NIFTY INDEX) at the close of trading on 29 September.
- We had forecast the change in April and Adani Enterprises (ADE IN) is up over 60% since then while Shree Cement (SRCM IN) is down a bit.
- Passive NIFTY Index (NIFTY INDEX) trackers will need to buy over 7% of the real float on Adani Enterprises (ADE IN). The stock could continue to move higher.
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