In today’s briefing:
- HDFC/HDFC Bank Mega Merger: Index Implications as We Near Completion
- KRX New Deal Index Rebalance Preview: Potential & Close Changes in September
- LQ45 Index Rebalance Preview (July): Identifying Potential Changes
- Toshiba (6502) – Thinking About the Arb
- NIFTY100 Index Rebalance Preview: Double/Triple Whammy for Some Stocks
- SET50 Index Rebalance Preview: Two Changes – One High Probability; One Has Possibilities
- Ventia (VNT AU) – Placement Could Lead to ASX200 Inclusion in June
- Ecopro – Is This the Start of the End?
- Japan Tobacco High Conviction Update: Potential 62% Upside
- Penguin International (PBS SP): Chairman & Dymon Return To the Well
HDFC/HDFC Bank Mega Merger: Index Implications as We Near Completion
- Foreign shareholding has dropped in HDFC Limited and increased in HDFC Bank – the net effect is an increase in foreign room to just north of 18%.
- The merger is expected to complete in Q2/Q3 when there will be buying from MSCI trackers. There will be adhoc inclusions to the NIFTY, Nifty Next 50 and SENSEX indices.
- HDFC Limited (HDFC IN) trades 1.39% below the merger ratio with HDFC Bank (HDFCB IN) and also at a lower price to book.
KRX New Deal Index Rebalance Preview: Potential & Close Changes in September
- The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
- There are potential changes to some of the indices and then there are close changes that will result in big flows if they eventuate.
- The March rebalance saw some funky moves on the stocks that had big flows and we could see more of that at the September rebalance.
LQ45 Index Rebalance Preview (July): Identifying Potential Changes
- The review period for the LQ45 Index ends on 30 June. The changes should be announced in the last week of July, becoming effective after the close on 31 July.
- Potential adds are Adaro Minerals (ADMR IJ), Bumi Resources Minerals (BRMS IJ), Panin Financial (PNLF IJ), Energi Mega Persada (ENRG IJ), Transcoal Pacific (TCPI IJ) and Pertamina Geothermal Energy (PGEO).
- Potential deletions are Japfa Comfeed Indonesia (JPFA IJ), Indocement Tunggal Prakarsa (INTP IJ), Timah Persero (TINS IJ), Bank Tabungan Negara Persero (BBTN IJ) and Chandra Asri Petrochemical (TPIA IJ).
Toshiba (6502) – Thinking About the Arb
- Toshiba is trading at a 12-13% annualised return on the arb when using the expected Tender Offer Start Date proposed in the Takeover Announcement on 23 March 2023.
- On Day 1-2 post-announcement, Toshiba traded at an 11-13% annualised spread. Since the announcement, a 12-name Peer Basket is up 11+% meaning Toshiba back end risk has shrunk.
- Forward consensus EPS ratios have fallen, in part due to the shift forward one fiscal year by comps. We’ll see where those lie in a week when earnings come.
NIFTY100 Index Rebalance Preview: Double/Triple Whammy for Some Stocks
- Halfway through the review period, we see 5 potential changes for the Nifty Next 50 Index (NIFTYJR INDEX)/ Nifty 100 Index (NSE100 INDEX) at the September rebalance.
- All the potential adds are expected to migrate from MidCap to LargeCap at the AMFI June reclassification, while we expect two of the potential deletes to move the other way.
- Of the potential deletes, one is a high probability deletion from the MSCI India Index at the May QCIR while there is another that is a lower probability deletion.
SET50 Index Rebalance Preview: Two Changes – One High Probability; One Has Possibilities
- Two thirds of the way through the review period, we forecast two changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the June rebalance.
- Thai Life Insurance (TLI TB) and WHA Corp Pcl (WHA TB) could replace Jaymart PCL (JMART TB) and Ngern Tid Lor (TIDLOR TB).
- JMT Network Services (JMT TB) is a very close delete on market cap, while Intouch Holdings (INTUCH TB) is a close delete on liquidity. Multiple possibilities here.
Ventia (VNT AU) – Placement Could Lead to ASX200 Inclusion in June
- Ventia (VNT AU) completed an A$300m placement overnight with Apollo and CIMIC Group Ltd (CIM AU) selling around 14% of the shares outstanding at a small discount to the close.
- The placement will significantly increase Ventia (VNT AU)‘s float and make the stock a high probability inclusion to the S&P/ASX 200 (AS51 INDEX) at the June rebalance.
- We now expect two changes to the S&P/ASX 200 (AS51 INDEX) in June and the impact on the stocks is over 5.5 days of ADV to trade.
Ecopro – Is This the Start of the End?
- A SELL note from a broker on Ecopro BM Co Ltd (247540 KS) was a key reason for the 7% and 8+% fall for Ecopro Co Ltd (086520 KS) .
- Is this finally start of the end of the rally for the poster boy for Korean EV
- When will earnings matter and what are the catalysts that could start the downfall?
Japan Tobacco High Conviction Update: Potential 62% Upside
- Japan Tobacco’s 1Q23 performance exceeded consensus expectations, with revenue and OP surpassing by 5.3% and 12.3%, respectively.
- Consensus expected no volume growth for Japan Tobacco in declining combustible tobacco market; targeted mid-single digit constant currency revenue growth via pricing.
- Higher cigarette prices are expected to contribute to Japan Tobacco (2914 JP)‘s OP growth, which we anticipate will exceed its historical peak levels in the next few years.
Penguin International (PBS SP): Chairman & Dymon Return To the Well
- On the 21st January 2021, Singapore-based builder and operator of aluminum high-speed boats Penguin International (PBS SP) announced a Voluntary Conditional Offer from its Chairman and Dymon Group at S$.65/share.
- In Penguin International (PBS SP): Friendly Privatization Deal Might Need A BumpJanaghan Jeyakumar expected a bump in terms. No to be, and the Offeror held 80.05% at the close.
- The Offeror, via a new vehicle, has returned to the fold with a S$0.82/share Offer Price. The Offer is unconditional. This is done.
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