In today’s briefing:
- Solactive Global Uranium & Nuclear Components Index Rebalance: 6 Adds, 5 Deletes
- Adani Group: Hindenburg Report Spurs MSCI to Invite Feedback
- MSCI Wants a Consult on Adani Group – I’m Not Sure What They Can Do
- Index Rebalance & ETF Flow Recap: NKY, LQ45, New Deal, URA, NIFTY, Stock Connect, SenseTime, Adani
- Last Week in SPACE: Kawasaki Kisen Kaisha, Osstem, Fujitsu General, Adani Enterprises
- PCOMP Index Rebalance: DMC, UBP to Replace MEG, RLC
- Kanematsu Electronics (8096) – ¥6200/Share Tender Offer by Parent – Easy Takeout
- Kanematsu Sustech (7961) ¥2250/Share Tender Offer by Parent – Supremely Illiquid But Interesting
- ECM Weekly (29th Jan 2023) – Adani, Oasis, Mankind Pharma, ZJLD, India IPO Bookrunners
- Clarifications About Osstem Implant Tender Event
Solactive Global Uranium & Nuclear Components Index Rebalance: 6 Adds, 5 Deletes
- Solactive has announced the constituent changes for the Global Uranium & Nuclear Components Index. There are 6 adds and 5 deletes with implementation at the close on 31 January.
- Estimated one-way turnover is in excess of 12% and will result in a one-way trade of US$207m. There are 11 stocks with estimated passive flows greater than 5x ADV.
- Some of the inclusions have had BIG rallies over the last couple of months and there could be profit taking on those names in the next few days.
Adani Group: Hindenburg Report Spurs MSCI to Invite Feedback
- The Adani Group stocks have taken a dive following the Hindenburg Research report. Group market cap is down more than US$47bn with company promoters taking the biggest hit.
- The Adani Enterprises FPO is almost certain to be undersubscribed. MSCI, in an unprecedented step, is monitoring publicly available information and is seeking feedback from the investment community.
- We find that the real float of some Adani Group stocks is much lower than the headline numbers and there could be selling if MSCI lowers the FIF.
MSCI Wants a Consult on Adani Group – I’m Not Sure What They Can Do
- The Adani Group listcos have been on a wild ride for the last few years, rising from 10x TTM EV/EBITDA in March 2020 to 60x at end-September 2022.
- Adani Group “business incubator’ Adani Enterprises (ADE IN) last fall indicated it might raise $2.4bn of equity and combined 6 co market cap is down $135bn since.
- A short seller report last week put the cat amongst the pigeons. Now MSCI is consulting investors about what it might do regarding Things.
Index Rebalance & ETF Flow Recap: NKY, LQ45, New Deal, URA, NIFTY, Stock Connect, SenseTime, Adani
- The review period for the upcoming rebalance of the MSCI, Nikkei 225, NIFTY, Nifty Next 50, SSE STAR50 and KRX New Deal Indices ends on 31 January.
- The IDX30, LQ45, IDX80, Global X Uranium ETF (URA US) rebalances will be implemented on 31 January while the PSEi Index (PCOMP INDEX) rebalance will be implemented on 3 February.
- There were inflows to Asian country ETFs and iShares MSCI Emerging Markets (EEM), and outflows from IShares MSCI Min Vol EM ETF (EEMV) and iShares MSCI Pacific ex Japan (EPP).
Last Week in SPACE: Kawasaki Kisen Kaisha, Osstem, Fujitsu General, Adani Enterprises
- Be long Kawasaki Kisen Kaisha (9107 JP) vs MOL and NYK. The shares are cheap on a forward basis. KLine is reducing the Real World Float, causing further potential squeeze.
- Sabana Industrial REIT (SSREIT SP)‘s Partial Offer at 0.88x book is not overwhelming, but it is also not a control stake. It is probably priced near-right.
- IF Osstem (048260 KS)‘s price were to go higher, it is conceivable there could be a bump, but don’t bet on it as long as the stock trades <KRW 190,000.
PCOMP Index Rebalance: DMC, UBP to Replace MEG, RLC
- As forecast, DMCI Holdings (DMC) and UnionBank of the Philippines (UBP) will replace Megaworld Corp (MEG) and Robinsons Land Co (RLC) at the close on 3 February.
- The PSE is using float higher than 20% for San Miguel (SMC PM), Emperador (EMP PM) and AC Energy Corp (ACEN) – there will be passive buying on the stocks.
- Historically, the inclusions have outperformed the exclusions and there has been a big move in the stocks the day after announcement. Square off existing pre-positions by mid-week.
Kanematsu Electronics (8096) – ¥6200/Share Tender Offer by Parent – Easy Takeout
- Kanematsu Corp (8020 JP) announced two tender offers Friday to take out subsidiaries. One more liquid one. One very small sub. This is the larger, easier deal.
- Kanematsu Electronics is an IT shop, designing and executing system integration and maintenance services. It is a great business. The takeout is a 33% premium to an all-time high.
- It might still be a bit cheap, but it is not egregious, and it would be quite difficult to block.
Kanematsu Sustech (7961) ¥2250/Share Tender Offer by Parent – Supremely Illiquid But Interesting
- Kanematsu Corp (8020 JP) announced two tender offers late Friday to take out minorities in subsidiaries. One larger, safer deal. One smaller, illiquid, but potentially interesting one.
- This is the interesting one. It is being done at the wrong price, and it has investors who might care who have been long-time holders.
- This could get interesting. You have a buyer. A target. It’s pretty clean except for shareholder structure. And the buyer has room to pay up.
ECM Weekly (29th Jan 2023) – Adani, Oasis, Mankind Pharma, ZJLD, India IPO Bookrunners
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- While the holiday shortened week didn’t see much action in Asia, but there was one more ADR filing in the US, adding to the mini-pipeline.
- Adani’s ongoing FPO was the only live deal this week, although it had enough drama to make up for the lack of other deals.
Clarifications About Osstem Implant Tender Event
- The acquirer would cancel the deal unless at least 2.394M shares (15.4% of SO) were tendered. This is the minimum purchase quantity condition that will trigger a cancellation.
- If the minimum purchase volume is exceeded, will there be a pro rata allocation risk? The answer is no. The acquirer will purchase all the tendered shares
- The cancellation risk seems slim as only 15.4% of the SO should be tendered, which doesn’t seem to be a challenging target.
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