In today’s briefing:
- Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning
- NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover
- Origin Energy (ORG AU): AusSuper Wreaks Havoc on Brookfield/EIG’s Final Offer
- Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?
- Celltrion Merger Update: Limits Lifted
- AMFI Stock Reclassification Preview (Dec 2023): HUGE Outperformance as Active and Passive Meet
- Quiddity HSTECH Dec 23 Flow Expectations: US$512mn One-Way Flows if the Expected Change Takes Place
- Midea Group H Share Listing: The Investment Case
- Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT
- Start of Tender Offer
Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning
- The coming week has a lot of review periods ending – KOSPI 200, KOSDAQ 150, CSI 300, CSI 500, SSE50, STAR50, ChiNext and SENSEX, among others.
- The TOPIX rebalance will be implemented on Monday while the Global X Lithium & Battery Tech ETF (LIT US) and IDX indices will rebalance at the close on Tuesday.
- There were outflows from Emerging Market ETFs including iShares Emerging Markets (EEM), iShares Core Emerging Mar (IEMG), Schwab Emerging Markets Equi (SCHE) and IShares Edge Min Vol Emerging Markets ETF (EEMV).
NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover
- Halfway through the review period, we see 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
- Estimated one-way turnover is 15.26% and that will result in a one-way trade of INR 24bn. There will be more than 2x ADV to sell on nearly all deletes.
- There is a possibility of an index methodology change, but no news for the last 4 months could indicate pushback from users or more stocks added to the F&O market.
Origin Energy (ORG AU): AusSuper Wreaks Havoc on Brookfield/EIG’s Final Offer
- Origin Energy (ORG AU) has disclosed a best and final offer from Brookfield/EIG at A$6.59 and US$1.86 per share, which implies A$9.53 per share, 8.1% higher than the previous offer.
- AusSuper will vote against the final offer. Taking advantage of the share price dip, AusSuper is said to have further increased its shareholding to 14.98% of outstanding shares.
- The scheme will likely fail as a minority YES vote turnout of 88% is required to pass. Brookfield/EIG could return with an off-market takeover offer, but it also faces issues.
Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?
- Yesterday, Kyocera Corp (6971 JP) announced Q2 results and lowered its full-year forecast. Then the CEO said it was “reconsidering” what to do with KDDI shares (after an AGM disaster).
- The company had already planned to borrow ¥500bn against the KDDI stake to return capital to shareholders. That was in the price 5+ months ago.
- The new hope is that Kyocera just got Corporate Governance Religion. I have my doubts, and even if it did, you have to look carefully at their ambitious plans.
Celltrion Merger Update: Limits Lifted
- Back on the 17 August, biopharmaceuticals developer and producer Celltrion Inc (068270 KS) announced a merger with Celltrion Healthcare (091990 KS).
- On October 23rd, shareholders approved the merger. The appraisal rights exercise period commenced on the 23 October and ends on November 13. 28th December is the merger’s effective date.
- Initially, the stock purchase rights limit was set at 1₩tn; however Celltrion Group’s founder/Chairman Seo Jung-jin has removed this limit. That takes care of NPS, which opposes the merger.
AMFI Stock Reclassification Preview (Dec 2023): HUGE Outperformance as Active and Passive Meet
- We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 13 stocks from SmallCap to MidCap, and 14 stocks from MidCap to SmallCap.
- Some stocks are expected to be inclusions to global indices later this month while others are potential NIFTY Index and/or Nifty Next 50 Index changes in March.
- On average, the upward migrating stocks have outperformed the downward migrating stocks by close to 100% over the last 8 months. The passive flow can be used as an exit.
Quiddity HSTECH Dec 23 Flow Expectations: US$512mn One-Way Flows if the Expected Change Takes Place
- The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
- The index changes and the indicative component weights for the December 2023 index review will be published in a couple of weeks.
- In this insight, we take a look at the potential index changes and the resultant capping flows for the HSTECH Index in December 2023.
Midea Group H Share Listing: The Investment Case
- Midea Group Co Ltd A (000333 CH), the world’s biggest home appliances maker, has filed for a H Share listing to raise US$1 billion, according to press reports.
- Midea is the world’s largest home appliance company in sales volume and revenue in 2022. Its subsidiary, KUKA Group, is one of the world’s “big four” industrial robotics companies.
- The investment case rests on return to growth, margin on an upward trajectory, cash generation, strong balance sheet and undemanding valuation.
Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT
- KRX did not acknowledge any business relevance between SK Square and the Semicon industry, leading to its exclusion from the KRX Semicon after the GICS change.
- We should consider the strong possibility that this same approach will be applied in the upcoming December KOSPI 200 IT rebalancing.
- If we observe a somewhat unusual downward trend in SK Square’s price from the 15th, this could be seen as a hint foretelling the announcement of SK Square’s exclusion.
Start of Tender Offer
- The $26.00/share cash offer of Thermo Fisher Scientific (TMO UN) for Swedish Olink Holding (OLK US) started on 31 October. The 74% premium reflects that high-growth, positive adjusted EBITDA targets are rare.
- The offer values Olink at ~12.2x EV/NTM Fwd revenue vs. 6.4x median of peers. Irrevocables total 66%, but the minimum acceptance condition requires acceptances from a high 70.6% of float.
- Barring any unforeseen circumstances, such as regulatory action, I anticipate the deal closing and set my TP at $26/share. Gross spread is 4.81%.
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