In today’s briefing:
- FTSE EPRA Nareit Developed Asia Preview: A Few Inclusion Possibilities
- Pendal Group (PDL AU): Perpetual’s Bump Should Get the Deal Done
- KLCI Index Rebalance Preview: The Gloves Could Come Off
- FTSE TWSE Dividend+ Sep 22 Capping: Massive Negative Flows for Farglory, Greatek, & Elan
- Ramsay’s Overdue Update on the KKR Proposal
- Hong Kong: Where Have Shorts Been Building Up?
- Hong Kong CEO & Director Dealings – 25th August 2022
- Pendal Enters Scheme With Perpetual
- Softbank (9984 JP) – This Time, It’s Chime
- CTG Duty Free (1880 HK): Our Earnings Forecasts and Views on H-Share Fair Value
FTSE EPRA Nareit Developed Asia Preview: A Few Inclusion Possibilities
- The FTSE EPRA Nareit Index September rebalance will use data from 22 August. The changes will be announced on 31 August and implemented at the close on 16 September.
- Healthcare & Medical Investment Corporation (3455 JP) is a potential inclusion, while there are a few others that are close adds on market cap & other criteria.
- Healthcare & Medical Investment Corporation (3455 JP) is also an inclusion to the FTSE All Cap Index at the September rebalance and the EPRA Nareit inclusion will increase passive inflows.
Pendal Group (PDL AU): Perpetual’s Bump Should Get the Deal Done
- Pendal Group and Perpetual Ltd have entered into a SID where Pendal shareholders will receive 1 share of Perpetual for every 7.5 shares in Pendal, plus cash of A$1.976/share.
- While this is a premium to the last close and undisturbed prices, it is a discount to longer term prices. The Pendal Board has unanimously recommended the offer though.
- In the short-term expect short covering on Pendal Group (PDL AU) and increased shorts on Perpetual Ltd (PPT AU) as arbs step in to close the gap.
KLCI Index Rebalance Preview: The Gloves Could Come Off
- AMMB Holdings (AMM MK) and Ql Resources (QLG MK) could replace Hartalega Holdings (HART MK) and Top Glove Corp (TOPG MK) at the December rebalance.
- One way turnover is estimated at 2.87% and the impact of passive flows is larger on the potential adds as compared to the potential deletes.
- Westports Holdings (WPRTS MK) is a close add and there could be changes over the next few months as we approach the end of the review period.
FTSE TWSE Dividend+ Sep 22 Capping: Massive Negative Flows for Farglory, Greatek, & Elan
- The index constituent weights of the FTSE TWSE Dividend+ Index will be capped during the upcoming September 2022 Index quarterly index review.
- In addition, Elan Microelectronics (2458 TT) could also get deleted as discussed in FTSE TWSE Quiddity Leaderboard Sep 2022: Elan Micro (2458 TT) Could Be a Big Negative Surprise
- In this insight, we take a look at Quiddity’s expectations for index flows resulting from these events.
Ramsay’s Overdue Update on the KKR Proposal
- Ramsay Health Care (RHC AU) notes that discussions with KKR are ongoing, but the indicative proposal is held up by due diligence access to Ramsay Generale de Sante (GDS FP).
- KKR proposed an alternative proposal that the Board rejected as “meaningfully inferior.” KKR remains interested, and its shenanigans are likely a move to nudge down the price.
- At the last close, the risk/reward profile is favourable as the downside due to a deal break (-3% estimated decline) is lower than the upside (+20%) to the indicative proposal.
Hong Kong: Where Have Shorts Been Building Up?
- Short notional in Hong Kong is HK$439bn and has been falling over the last 18 months due to a drop in the market.
- In terms of short notional to issue market cap, the Information Technology, Materials, Health Care and Consumer Discretionary sectors are up there, with Communication Services, Real Estate the least shorted.
- Over the year, the largest shorts in terms of notional have been built on Xiaomi Corp, Meituan, JD.com, AIA Group Ltd, Postal Savings Bank of China, Orient Overseas, Techtronic Industries.
Hong Kong CEO & Director Dealings – 25th August 2022
- The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
- Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
- These insights also flag those companies where shares have been pledged, both recently and ongoing.
Pendal Enters Scheme With Perpetual
- On the 4 April, asset manager Pendal (PDL AU)‘s board unanimously determined the indicative cash/scrip Offer proposal from Perpetual (PPT AU) undervalued the current and future value of the company.
- Pendal And Perpetual have now entered into a SID such that Pendal shareholders will receive 1 Perpetual share for every 7.5 Pendal shares plus $1.976 cash for each Pendal share.
- The negotiation clincher was the increase in the cash component by A$0.306/share. Should the deal complete, Pendal will hold 47% in the enlarged entity.
Softbank (9984 JP) – This Time, It’s Chime
- US fintech Chime, another high-profile fintech in Softbank’s Vision Fund 2 portfolio, sees its secondary market valuation in the private market fall by nearly 50% on a year-to-date basis
- Chime had been planning to IPO in 1H 2022, with its IPO valuation estimated at close to USD40bn; poor market conditions have led to the IPO being shelved
- Chime’s reduced valuation is another hit to Softbank’s portfolio, which has yet to feature a recent “down round”, and which we believe negatively impacts its Vision Fund 2 in particular
CTG Duty Free (1880 HK): Our Earnings Forecasts and Views on H-Share Fair Value
- Our earnings projections for China Tourism Group Duty Free Corp Ltd (1880 HK) are 14% and 18% below market consensus respectively. We think these are more realistic expectations.
- At IPO price of HK$158, CDFC H-share sits on 23.9x FY23F PER. We think it is difficult to trade above 22x – the average for top consumer discretionary names.
- Weakened visitor appetite to Sanya, potentially higher discounts, increase in border opening, higher fixed cost and uncertainties for duty free policies beyond 2025 are negative earnings factors.
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