In today’s briefing:
- Solactive Lithium Index Rebalancing: Noteworthy Names in Korea Before the Announcement
- Shinsei Bank (8303 JP) – Reading Between The Lines
- HDFC/HDFC Bank Mega Merger: End Game in Sight
- EC Healthcare (2138 HK): Record High Sales in H1FY23; Medical Segment Remains Key Growth Driver
- OZ Minerals – Circumstances May Merit a Revised Tilt
- A Pair Trade Between GS Holdings & GS Retail
- DTAC/True: NBTC Green Lights Mobile Duopoly. With Caveats
- MSCI Korea Rebalance: Bottom 5% Continue to Underperform
- Jasmine International: Last Minute Wrinkle To Broadband Sale
- Japan Tobacco High Conviction Update: Guidance Has Upside Potential, The Market Is Pass Russia Fears
Solactive Lithium Index Rebalancing: Noteworthy Names in Korea Before the Announcement
- LG Chem’s deletion is almost a done deal. The pouch-type pack goes to LG Energy, and the cathode business is not big enough to beat L&F.
- Chunbo is an additive field that this index has not included so far. So, Chunbo will be added as a new addition rather than replacing someone else.
- SK IE Tech is quite tricky. The key is to see separator and elecfoil as the same field. If so, SK IET is likely to replace Iljin Materials.
Shinsei Bank (8303 JP) – Reading Between The Lines
- Yesterday, a Kyodo News article suggested SBI was “planning to take Shinsei private.”
- This morning, near-identically-worded replies were proffered, belatedly, and SBI appears to have moved its earnings release date to match Shinsei’s.
- It helps to remember Communications mandated by Exchange Rules are worded so that they are not technically or legally incorrect. Shareholder transparency and good governance is not the goal.
HDFC/HDFC Bank Mega Merger: End Game in Sight
- Foreign shareholding in HDFC Limited (HDFC IN) has inched higher while moving a tad lower on HDFC Bank (HDFCB IN). Overall, no change in foreign room on the merged entity.
- The merger could complete in Q1 2023 and there could be sizeable buying from MSCI trackers. There should be no change for FTSE trackers.
- The recently announced market consultation by NSE Indices should result in no buying/selling from passive trackers; there will be some additions to the NIFTY Index and Nifty Next 50 Index.
EC Healthcare (2138 HK): Record High Sales in H1FY23; Medical Segment Remains Key Growth Driver
- EC Healthcare (2138 HK) expects to achieve a record-high sales volume of no less than HK$1.8 in H1FY23, representing a no less than 17% y/y increase.
- The company is optimistic about its business development as the Hong Kong government’s pandemic policy stance is heading towards “normalization” and recently further relaxed quarantine arrangements for inbound travelers.
- With the economy reopening, the company is in a position to reap the benefit of M&A worth HK$641 million completed in FY22.
OZ Minerals – Circumstances May Merit a Revised Tilt
- Copper is widely recognised to be in somewhat short supply, and EV/electrification would increase demand going forward (though slower Chinese homebuilding would soften it).
- A number of developments suggest a further squeeze in prices could be near and copper price strength along with AUD weakness makes an AUD-denominated OZL Takeover Price easier to raise.
- Short-Term positioning and longer-term supply constraints are currently battling for near-term import, but medium-term, there’s no escaping the imbalance. Looks like a buy now.
A Pair Trade Between GS Holdings & GS Retail
- In this insight, we discuss a pair trade between GS Holdings (078930 KS) (go long) and GS Retail (007070 KS) (go short).
- The main investment thesis of this pair trade is that investors will allocate greater portion of their capital to stocks with deep discount to their NAVs such as GS Holdings.
- As the household disposable income continues to get pressured, this will likely force the Korean households to reduce consumer spending, which is likely to negatively impact GS Retail.
DTAC/True: NBTC Green Lights Mobile Duopoly. With Caveats
- Nearly eleven months after Total Access Communication (DTAC TB) and True Corp Pcl (TRUE TB) first announced a merger, the NBTC, the Thai telecommunication regulator, has given the go-ahead.
- This long-winded regulatory process hinged on whether the NBTC actually had the legal clout to halt the merger, which would create a duopoly with Advanced Info Service (ADVANC TB)
- The transaction process should accelerate from here with an expected listing of the new entity by year-end.
MSCI Korea Rebalance: Bottom 5% Continue to Underperform
- In this insight, we provide a ranking system for targeting the bottom 5% of potential exclusion candidates in the upcoming MSCI Korea index rebalance in November.
- The ranking system is based on a combined weighted rankings based on MSCI weight, market cap, and ADTV.
- The six stocks that have received lowest weights include Meritz Financial Group, S 1 Corp, Amorepacific Group, CJ Corp, Green Cross Corp, and LG Household & Health Care-Pref.
Jasmine International: Last Minute Wrinkle To Broadband Sale
- Jasmine International (JAS TB) is looking to sell its 99.8% interest in Triple T Broadband (TTTBB), and 19% stake in Jasmine Broadband (JASIF TB) to Advanced Info Service (ADVANC TB).
- The sale required JASIF shareholder approval, but not all resolutions were approved at an EGM this week.
- This is a setback. However, the transaction remains on track.
Japan Tobacco High Conviction Update: Guidance Has Upside Potential, The Market Is Pass Russia Fears
- Just eight months into Russia’s Ukraine invasion, Japan Tobacco (2914 JP)’s share price has moved back above the pre-Ukraine invasion level suggesting that investors are over with Russia exposure fears.
- Based on the company’s guidance upgrade trend historically and YTD financial performance, we are expecting around ¥70bn upside to 2022 OP guidance in 3Q22.
- With earnings back on a growth trajectory, we are expecting a reversal of the 2017-21 share price to earnings trend to take Japan Tobacco shares over ¥3,500 in the short-term.
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