In today’s briefing:
- S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200
- Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview
- Quiddity Leaderboard TWSE Div+ Jun 23: Take the Win on YFY Now
- Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs
- Update on the Trading Opportunities Post OCI Spin-Off
- Yuexiu Property (123 HK): US$1.1bn Dilutive and Unnecessary Rights Issue
- Toshiba – HDD Business Risk
- [Meituan (3690 HK) Rating Change]: Meituan’s Counterstrike Is Effective, Upgrade to BUY
- Essential Metals In Limbo As MinRes Lurks
- Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion
S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200
- Shareholders have approved OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU) and OZL is expected to stop trading after the close on 18 April.
- OZ Minerals Ltd (OZL AU) will be replaced by Bellevue Gold (BGL AU) in the S&P/ASX 200 (AS51 INDEX) and by Seven Group Holdings (SVW AU) in the S&P/ASX 100.
- There has been huge short covering on Seven Group Holdings (SVW AU) and Bellevue Gold (BGL AU) over the last few months.
Yuanta/P-Shares Taiwan Dividend Plus ETF: June Rebalance Preview
- Using data from the close on 19 April, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
- There will also be capping and funding flows that will lead to a one-way turnover of 13.6% and a one-way trade of US$885m.
- There are 10 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1 day ADV to trade.
Quiddity Leaderboard TWSE Div+ Jun 23: Take the Win on YFY Now
- In this insight, we take look at Quiddity’s estimations for index changes and capping flows for the Taiwan Div+ index for the June 2023 review.
- I currently see 4 ADDs/DELs but there are several names close to the border and expectations could change before the base date as prices move around.
- My latest estimation for one-way flow is around US$778mn which translates to a turnover of approximately 12%.
Flow Trading Opportunities on LG Chem with Potential Inclusion in Battery ETFs
- We now have an environment that allows Korea’s battery ETFs to include LG Chem in upcoming reviews. KODEX is in June, and TIGER is in July.
- If LG Chem is included in each review, the expected one-day inflow is at 0.7-0.8x DTV, which can lead to a price impact similar to that of SKIET in 2021.
- We should consider setups targeting this, including Long Short, which utilizes LG Energy Solution or LG Corp as a hedge.
Update on the Trading Opportunities Post OCI Spin-Off
- The Korea Exchange announced today (20 April) the change in index constituents and major dates for the Oci Co Ltd (010060 KS) spin-off.
- Oci Co Ltd (010060 KS)’s shares will be suspended from trading from 27 April to 26 May 2023.
- After the spin-off and relisting of holdco/opco shares, we believe that there is a greater probability of OCI Co (opco) shares outperforming OCI Holdings (holdco).
Yuexiu Property (123 HK): US$1.1bn Dilutive and Unnecessary Rights Issue
- Yuexiu Property (123 HK) will raise US$1.1bn through a rights offering – 30 rights shares for every 100 existing shares. The subscription price is HK$9.00, a 23.3% discount to TERP.
- As Yuexiu is in no danger of breaching the three red lines, the rights issue is an opportunistic play on capitalising on the strong share price run.
- Rights shares will be entitled to the final and special dividend announced on 15 March. Shares go ex-rights on 2 May and the rights start trading on 15 May.
Toshiba – HDD Business Risk
- We have been tracking Toshiba’s rapidly deteriorating HDD business over the last few quarters.
- Recent trends raise further concerns about the long-term viability of the business.
- In particular, visibility remains low on a strong recovery in demand and until that occurs the possibility of a YoY deterioration remains high.
[Meituan (3690 HK) Rating Change]: Meituan’s Counterstrike Is Effective, Upgrade to BUY
- We upgrade Meituan to BUY as (1) its recent subsidy campaign vs. Douyin has achieved some successes, and (2) its food delivery margin may have further upside;
- We suggest that Douyin’s local service market share reaches a high level, especially when compared with its eCommerce market share;
- Our C1Q23 top/bottom line are in-line/25.5% vs. cons. Raise TP to HK$ 165, which implies 4x PS/12x PE/1x PS for delivery/in-store/new initiatives.
Essential Metals In Limbo As MinRes Lurks
- On the 9th Jan, lithium player Essential Metals (ESS AU) entered into a Scheme with Tianqi Lithium JV, comprising Tianqi Lithium (9696 HK) (51%) and IGO Ltd (IGO AU) (49%).
- Shortly before the 20 April Scheme Meeting, Mineral Resources (MIN AU) announced a 19.55% stake.
- A Scheme failure was expected. And 68.47% voted against the transaction. The question is – now what?
Aggressive Shorting on Dongwon Industries, Which Has Not Been Noticed as a K200 Deletion
- Dongwon Industries’ float rate is less than 10% (1 – 63.15% – 27.65% = 9.20%), which makes it ineligible for KOSPI 200. KRX will reflect this in the June review.
- The passive outflow size due to K200 deletion is expected to be about 50 billion won, which will cause an impact of about 28x ADTV.
- Considering this deletion has not been sufficiently exposed in the market, the actual price impact may be even more significant and preemptive.
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