In today’s briefing:
- S&P Global Water Index: Market Consultation Driven Potential Changes
- A Taiwan Basket Trade For A Special Index Rebal
- Link Admin (LNK AU): ACCC Approval & Index Changes
- Hitachi Transport (9086 JP) – Tender Launch Likely Soon But Watch for Flow
- Oisix-Shida Stoush with SHiDAX Suggests Strong but Subtle Strategy
- Dongfang Electric (1072 HK): At Full Throttle
- Onewo Space-Tech Pre-IPO – Thoughts on Valuation
- US Fresh Sell Levels
- Tyro Payments Rejects Potentia’s Proposal. MCB Accepts
- Hong Kong Buybacks Weekly (Sep 9th): Tencent, AIA, Xiaomi
S&P Global Water Index: Market Consultation Driven Potential Changes
- S&P DJI commenced a market consultation for the S&P Global Water Index on 29 July and that could lead to quite a few changes to the index in October.
- We currently see 14 deletions and 10 inclusions for the index in October. Most of the changes will have a high impact from passive fund trading.
- There could be more changes in April 2023 once stocks listed in Emerging Markets are included in the index.
A Taiwan Basket Trade For A Special Index Rebal
- The FTSE TWSE Taiwan indices get rebalanced in line with the standard FTSE Global indices – on the third Friday of September.
- The most interesting one is the probably the least famous. It has only one change but it has massive re-weightings because of the way the index is constructed.
- Historical patterns suggest a right-way long-short basket, reversed on the event, is a good trade.
Link Admin (LNK AU): ACCC Approval & Index Changes
- The ACCC will not oppose the proposed acquisition of Link Administration (LNK AU) by Dye & Durham removing a major hurdle. Other regulatory approvals are still pending.
- If regulatory clearances are received in the next week and the Court approves the Scheme, Link Administration (LNK AU) will stop trading at the close on 15 September.
- We estimate passive trackers across all indices will need to sell 35.53m shares (A$153m; 18 days of ADV) of Link Administration (LNK AU) at the close on 15 September.
Hitachi Transport (9086 JP) – Tender Launch Likely Soon But Watch for Flow
- Hitachi Transport System (9086 JP) has had a “long” wait to get its approvals, but EC and China are in, any remaining should be in shortly.
- Yesterday, as a footnote on the SG Holdings offering document, there was a comment about SG Holdings selling shares. This was likely more good corporate governance hygiene than warning.
- Shares are down this morning. I’d expect final approvals and launch quite soon. I would therefore look to buy the dip on flow – block or not.
Oisix-Shida Stoush with SHiDAX Suggests Strong but Subtle Strategy
- Shidax Corp (4837 JP) is a food service business in the midst of a so-far reasonably successful restructuring. The family had a partner in Unison and hoped to extend.
- The founding family and Unison now have ~60% together, and they vote together. Unison wants out. The family wants Oisix ra daichi (3182 JP) in. So Oisix has tendered.
- But SHiDAX sees the conflict and minorities getting hosed. So they object. The “easy” solution is a full MBO with Oisix support.
Dongfang Electric (1072 HK): At Full Throttle
- Strong new orders in 2H22 and FY23 are the drivers for Dongfang Electric (1072 HK) after it posted a 31.6% earnings growth and new orders of Rmb36.7bn in 1H22.
- Demand outlook for its major products including coal-fired, gas turbine, renewable, pumped storage and hydrogen energy are all very encouraging.
- We estimate order backlog will equal to 1.6x FY22F revenue by year-end. Despite solid outperformance, DEC is still cheap at 12.6x and 9.8x PERs for FY22 and FY23.
Onewo Space-Tech Pre-IPO – Thoughts on Valuation
- Onewo Space-Tech (ONEWO HK) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke (2202 HK).
- As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
- In this note, we provide our earnings estimates and thoughts on valuation.
US Fresh Sell Levels
- US bounce in line off of SPX 3,900 support. Index trendline resistances will offer fresh sell points with NDX our top short pick in the US.
- RTY was our long pick off of 1,775 support, to trade a bounce toward trendline and will then turn bearish again.
- NDX 12,500 zone the fresh short area. DAX and weaker Asia still a high conviction short group.
Tyro Payments Rejects Potentia’s Proposal. MCB Accepts
- Tyro Payments (TYR AU) has rejected a proposal from a Potentia-led consortium at A$1.27/share, by way of a Scheme.
- Mike Cannon-Brookes’ Grok Ventures, holding 12.5% and Tyro’s largest shareholder, has backed the Offer.
- Tyro’s board considered the proposal to be materially below Tyro’s fundamental value and highly opportunistic. Tyro’s share price was down 66% ytd prior to Potentia’s approach.
Hong Kong Buybacks Weekly (Sep 9th): Tencent, AIA, Xiaomi
- We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Sep 9th based on HKEx daily reports.
- In the past 7 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Aia (1299 HK), Xiaomi (1810 HK).
- In the past 30 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Aia (1299 HK), Ck Asset (1113 HK).
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