In today’s briefing:
- Keppel O&M Spin-Off Approaching Quickly
- Thinking Strategically About a Shinsei Position – Things To Do NOW
- KOSDAQ150 Index Rebalance Preview: Moving in the Right Direction
- Kakao Pay: Downsized Rights Offering of Kakao Pay Securities & Potential Selling by Alipay
- KOSDAQ 150 Rebalancing: 7 Regular Changes + 2 Special Entries
- JCNC Is Overstretched Vs. Astra
- Fu Shou Yuan (1448 HK): An Everlasting Growth Business
- EQD | HSBA Vs ICBC (5 HK,1398 HK): Trade a Relative Value Vol Spread
- Seven & I – The US Is About to Hit the Brakes
- Shanghai/Shenzhen Northbound Connect: Weekly Moves (7 October 2022)
Keppel O&M Spin-Off Approaching Quickly
- After 18mos of hints, and two rights recapitalisations at Sembcorp Marine (SMM SP), SMM and Keppel Corp (KEP SP) announced a deal to merge their O&M businesses at end-April.
- Keppel shareholders would receive ~18 shares of SMM per share of Keppel owned, Keppel spins out the equity of its legacy rig assets and leaves the O&M biz clean.
- The structure announced lets us examine “forward KEP”, and anticipate interest and valuations post-spin, which is “supposed to” happen in Q4. We’re in Q4 now, and Keppel is interesting here.
Thinking Strategically About a Shinsei Position – Things To Do NOW
- SBI Holdings (8473 JP)‘s subsidiary has reportedly filed its application to become a Bank Holding Company, the definition being a company holding a 50% or greater stake in a bank.
- The day after I last wrote, Shinsei announced it had received approval to change its name to SBI Shinsei Bank as of 4 January 2023.
- My expectation is the move above 50% happens sooner rather than later. And in that case, investors should think about their approach. Get your cowbells ready.
KOSDAQ150 Index Rebalance Preview: Moving in the Right Direction
- With 85% of the review period complete, we see 10 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
- There are a few stocks that are close adds/deletes on market cap and liquidity and could make it into the final list depending on price/volume over the next few weeks.
- The potential adds have outperformed the potential deletes over the last month and pre-positioning could continue till the end of the review period.
Kakao Pay: Downsized Rights Offering of Kakao Pay Securities & Potential Selling by Alipay
- The lack of minority shareholders participation in Kakao Pay Securities rights offering is likely to be viewed negatively by many investors since Kakao Pay may need to inject more capital.
- On 8 June 2022, Alipay sold 5 million shares of Kakao Pay and Alipay put a lockup on its remaining 46 million shares in Kakao Pay for another 120 days.
- All in all, we continue to have a Negative view of Kakao Pay.
KOSDAQ 150 Rebalancing: 7 Regular Changes + 2 Special Entries
- KOSDAQ 150’s December rebalancing will feature seven regular changes and two special entries.
- Among the additions, we should focus on Dear U and ISC, which have a balanced level of liquidity and flow, rather than those theme stocks with high volatility.
- As for Nature Holdings, Eoflow, and Nextin, I suggest a more aggressive entry point due to low trading volume. Then, I’d basket-trade the deletions on equal weight.
JCNC Is Overstretched Vs. Astra
- Jardine Cycle & Carriage (JCNC SP) is currently trading at a ~9% discount to NAV, around the narrowest since the post-Covid nadir in April 2020.
- JCNC’s recent results highlighted a marked improvement in its unlisted Vietnamese automotive ops.
- Weakness in the Indonesian rupiah has taken some of the shine off Astra International (ASII IJ)‘s strong sales growth.
Fu Shou Yuan (1448 HK): An Everlasting Growth Business
- The volatile market environment prompted us to seek for companies with secured demand, high earnings quality and solid financial position – Fu Shou Yuan International (1448 HK) fits these criteria.
- It has established earnings record, favourable demographic environment, good reserve for growth and upside from geographical expansion. We like its emphasis on shareholder return through rising payout and share buyback.
- Its net cash position, which amounted to 20% of the market capitalisation, adds further comfort to us. Meanwhile, valuations are not stretched relative to international peers.
EQD | HSBA Vs ICBC (5 HK,1398 HK): Trade a Relative Value Vol Spread
- We looked at HSBC and ICBC to consider relative vol surfaces
- We evaluate relative risks of credit deterioration in China on both stocks
- We suggest a relative value vol trade that offers good risk reward in various scenarios
Seven & I – The US Is About to Hit the Brakes
- With OP up by 22% YoY to beat the consensus estimate by ¥2.0bn, Seven & I turned in a strong 2QFY23 along with a considerable upgrade to FY23 guidance.
- However, the post-earnings price reaction seems to suggest that the market is a bit worried about the short-term performance of Seven & I Holdings (3382 JP)’s US convenience store business.
- In addition, the struggling non-core businesses whose future remains undecided could also be weighing in on Seven & I’s price performance.
Shanghai/Shenzhen Northbound Connect: Weekly Moves (7 October 2022)
- Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
- Overall, net outflow over the past week was ~US$0.15bn, split between Shanghai (+US$0.05bn) and Shenzhen (-US$0.20bn).
- The largest inflows were into Kweichow Moutai (600519 CH) and Zhejiang Huayou Cobalt (603799 CH). The largest outflows were in LONGi Green Energy Technology (601012 CH) and CATL (300750 CH).
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