In today’s briefing:
- Introducing KRX Sector Indices: SK Square & Iljin Hysolus Deserve Attention for Rebalancing
- HSCEI Index Rebalance Preview: Could Be A BIG One
- Sea Ltd – Just About Doomed
- MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Couple of Potential Deletes
- KRX New Deal Index Rebalance: All Forecasts Right as KMW Soars and AfreecaTV Drops
- Link Admin (LNK AU): ACCC Approval & Index Changes
- Link Admin Gets ACCC Nod. Woodford Condition Outstanding
- Onewo Space-Tech Pre-IPO – Thoughts on Valuation
- Link’s Scheme in the Home Stretch by Securing ACCC and CBI Approval
- Oisix-Shida Stoush with SHiDAX Suggests Strong but Subtle Strategy
Introducing KRX Sector Indices: SK Square & Iljin Hysolus Deserve Attention for Rebalancing
- The correlation and sensitivity between passive flow and price impact have been significantly high for adds/deletes. So, we need a basket-trade setup focusing on potential adds/deletes.
- We will see 12 changes for Semicon and 6 for Autos. Bank won’t present any change.
- SK Square and Iljin Hysolus are the most prominent names to join the KRX Sector Indices this time. They will have a passive impact of 2.03x and 3.97x ADTVs, respectively.
HSCEI Index Rebalance Preview: Could Be A BIG One
- There could be up to 6 changes to the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, mainly driven by the deletions.
- If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.
- There is large short interest on quite a lot of stocks and will play an important role in the rebalance.
Sea Ltd – Just About Doomed
- It was reported yesterday that Sea Ltd (SE US)‘s e-commerce arm “Shopee” has begun rescinding job offers.
- Having burnt around $2.0bn during the first six months of 2022 pursuing e-commerce and fintech growth aspirations, this seems like an extreme measure to ensure the company’s survival.
- With the gaming profitability fading, we are starting to think that even the extreme cost-cutting could be insufficient to overturn Sea’s e-commerce and fintech cash burn.
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Couple of Potential Deletes
- Sierra Rutile Holdings (SRX AU) is a high probability delete from the index, while Australian Strategic Materials (ASM AU) is close to the deletion threshold.
- Sayona Mining (SYA AU) is the highest ranked non-constituent while Tianqi Lithium (9696 HK) only makes inclusion at the entire IPO raise.
- Deletion from the index will require passive trackers to sell over 5 days of ADV on Australian Strategic Materials (ASM AU).
KRX New Deal Index Rebalance: All Forecasts Right as KMW Soars and AfreecaTV Drops
- The KRX announced the changes to the KRX New Deal indices post market close on Friday. But the changes were not made public and are only available to subscribers.
- Intellian Technologies (189300) and Seojin System (178320) replace Danal (064260) and Kcp (060250) in the Internet Index, while KMW Co Ltd (032500 KS) replaces AfreecaTV (067160 KS) in BBIG.
- Since we published our last forecast on 21 July, KMW Co Ltd (032500 KS) is up 12% while AfreecaTV (067160 KS) has dropped 17%.
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.
Link Admin Gets ACCC Nod. Woodford Condition Outstanding
- Link Administration (LNK AU) has announced the Australian Competition and Consumer Commission will not oppose Dye & Durham’s proposed acquisition.
- The next step is the rescheduled second court hearing on the 15 September.
- The key outstanding condition concerns the “Woodford Matters”, and whether D&D potentially waives this condition, or digs in its heels.
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.
Link’s Scheme in the Home Stretch by Securing ACCC and CBI Approval
- Dye & Durham/DND’s proposed acquisition of Link Administration (LNK AU) at A$4.81 per share has received approvals from the ACCC and the Central Bank of Ireland.
- Key conditions precedent remaining are FIRB, UK FCA and Luxembourg approvals. The second court hearing date has been adjourned to 15 September.
- The transaction is in the home stretch and will likely complete. At the last close, the gross and annualised spread for a 27 September payment is 4.8% and 151%, respectively.
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.
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