In today’s briefing:
- STAR50 Index Rebalance: Three Changes a Side; One Surprise Change
- ESR Group (1821 HK): Evaluating a Potential Privatisation
- Keisei Electric Rail (9009) – A BUYBACK! But It’s Likely To Be Crossholders Selling in ToSTNeT-3
- STAR100 Index Rebalance: Ten Changes a Side; Adds Outperforming as Expected
- Index Rebalance & ETF Flow Recap: HSCEI, HSCI, HSTECH, HSIII, STTF, Top50, Div+, FXI, FnGuide
- Hyosung Corp (004800 KS): Spin-Off & KOSPI200 Index Implications
- Aussie Broadband’s Non-Binding Indicative Offer for Superloop
- Taiwan Dual-Listings Monitor: TSMC Post-CNY Spread Persisting; Why UMC Discount Could Flip Positive
- Walgreens Boots Alliance (WBA US) – How Do Dow Jones Deletes Do Historically?
- Details of Korea Value-Up Initiatives & Index, Announced This Morning
STAR50 Index Rebalance: Three Changes a Side; One Surprise Change
- There are three constituent changes for the SSE STAR50 (STAR50 INDEX) at the March rebalance. One inclusion and one non-inclusion are surprises.
- One way turnover is estimated at 2.9% and will result in a one-way trade of CNY 4,075m with over 2.5x ADV to trade on all constituent changes.
- The adds have outperformed the deletes over the last few months with a jump in the last few trading sessions. There could be more outperformance over the next two weeks.
ESR Group (1821 HK): Evaluating a Potential Privatisation
- On 21 February, Bloomberg reported that due to the steep share price declines, major ESR Group (1821 HK) shareholders are considering options for their stakes, including ESR’s privatisation.
- The reports also noted buyer interest in ESR’s significant assets. Past share dealings suggest that Warburg Pincus and the co-founders are the likely consortium to lead a potential privatisation.
- The offer probability is low as a scheme would likely require a HK$16.00 offer, posing a funding challenge. Nevertheless, the upside remains as ESR trades at an undemanding valuation.
Keisei Electric Rail (9009) – A BUYBACK! But It’s Likely To Be Crossholders Selling in ToSTNeT-3
- Keisei Electric Railway Co (9009 JP) has long been the target of activist-ish-y holders who seek to have the company monetise its 20+% stake in Oriental Land (4661 JP).
- Last autumn (17-Oct-2023), Keisei was the subject of a presentation by activist-ish-y fund Palliser Capital who called the stock 43% undervalued. They want Keisei to sell some OLC shares.
- Palliser wanted Keisei to use resulting monies for growth capex+shareholder return, improve IR/governance, shrink board, adopt KPIs, etc. Thursday we got an announcement of a 2.9% stock buyback.
STAR100 Index Rebalance: Ten Changes a Side; Adds Outperforming as Expected
- There are 10 changes for the STAR100 Index in March. We correctly forecast all 10 deletes and got 8 of the 10 adds right.
- Estimated one-way turnover is 6.8% and that results in a one-way trade of CNY 1.79bn. Nearly all constituent changes have more than 1 day of ADV to trade.
- The adds have started to outperform the deletes and the index over the last couple of weeks and there could be more outperformance in the next two weeks.
Index Rebalance & ETF Flow Recap: HSCEI, HSCI, HSTECH, HSIII, STTF, Top50, Div+, FXI, FnGuide
- The changes for the SSE STAR50 (STAR50 INDEX) and STAR100 Index were announced post market close on Friday.
- The coming week is a full one with capping cutoffs, review cutoffs, announcements and implementations apart from futures expiries.
- With China open after Lunar New Year, the National Team is back pouring money into ETFs with the largest inflows to the CSI 300, CSI 500, ChiNext and STAR50 indices.
Hyosung Corp (004800 KS): Spin-Off & KOSPI200 Index Implications
- Hyosung Corporation (004800 KS) has announced that it is spinning off part of its business holdings to Hyosung New Holding Corporation in a 0.818:0.182 ratio.
- The stock will remain suspended from late June to late July. We expect Hyosung Corporation (004800 KS) to maintain its index membership while the New Entity will not be added.
- The dynamics between listed ETFs and non-listed passive trackers differ and we take a look at the potential index flows.
Aussie Broadband’s Non-Binding Indicative Offer for Superloop
- Right on the heels of acquiring Symbio Holdings (SYM AU), Aussie Broadband (ABB AU) has made a non-binding indicative offer to take Superloop (SLC AU) private.
- Superloop (SLC AU) had initiated the proposal to take Symbio Holdings (SYM AU) private before Aussie Broadband (ABB AU) swooped in. Now ABB has SLC in its sights.
- The offer is a small premium and Aussie Broadband Pty Ltd (ABB AU)‘s 33.2% premium claim is disingenuous at best. Expect pushback from the Superloop Ltd (SLC AU) Board.
Taiwan Dual-Listings Monitor: TSMC Post-CNY Spread Persisting; Why UMC Discount Could Flip Positive
- TSMC: +17.3% Premium, High Double Digit Level Persisting Since CNY
- UMC: -1.5% Discount, We Believe Spread Biased to Go Positive
- ChipMOS: +0.6% Premium, Collapsed from +4.6%. Now Within Typical Range.
Walgreens Boots Alliance (WBA US) – How Do Dow Jones Deletes Do Historically?
- On 31 January, Walmart (WMT US) announced a 3:1 stock split. For cognoscenti, that meant a Dow Jones Industrial Avg might be in the offing.
- The last change to the index was in Aug-2020, spurred by the 4:1 split for Apple (AAPL US). This time, the likely deletion candidate was Walgreens Boots Alliance (WBA US).
- Indeed, last week, the Index Keepers announced Amazon.com Inc (AMZN US) would replace Walgreens Boots Alliance on 26 Feb (i.e. WBA would be booted on the close of 23 Feb).
Details of Korea Value-Up Initiatives & Index, Announced This Morning
- The rollout of the Korea Value-Up Index has encountered a minor delay. Completion of the index is slated for 3Q, with ETFs scheduled for release in 4Q.
- The government will encourage the National Pension Service to utilize it as a benchmark.
- Dividend payout ratio, dividend yield, PER, and cash flow will be included as screening factors for this index, in addition to the already known factors of PBR and ROE.
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