In today’s briefing:
- MSCI Feb 2023 QCIR: Mostly In-Line; Couple of Surprises
- Big Link REIT (823 HK) Rights Offering
- Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs
- Dai Nippon Printing (7912) – Activism Results Going Forward Are Complicated
- JGC (1963 JP) – A ToSTNeT Buyback Is NOT a ToSTNeT Buyback and Adjusted EV Vs Adjusted EBITDA Is OK.
- SPX 4,200 Risk off Drivers
- Last Week in SPACE: Adani Group, Hongkong Land, Toshiba, Haw Par, Renault/Nissan
- Kakao Pay (377300 KS): MSCI Inclusion (Finally!)
- ECM Weekly (12th Feb 2023) – Hesai, Oasis, Mankind, Greatpower, Ruipeng, CATL, Nissan/Renault
- HYBE’s Tender Offer of SM Entertainment: Closing the Price Gap
MSCI Feb 2023 QCIR: Mostly In-Line; Couple of Surprises
- MSCI has announced the changes for the February QCIR. For Asia Pacific, there are 20 adds and 14 deletes for the MSCI Standard Index with the most changes in China.
- There are no surprises on the adds or deletes. However, there are a couple of stocks that are surprises on not being added to or deleted from the index.
- The largest impact will be on Ebos Group Ltd (EBO NZ) – though there will be pre-positioning on the stock.
Big Link REIT (823 HK) Rights Offering
- After being halted this morning before the start of trade, post-close, Link REIT (823 HK) announced a fully-underwritten Rights Offering.
- The Rights Offering intends to raise HK$18.8bn issuing 1 Right for every 5 Shares held, at a subscription price of HK$44.20, a 26% discount to TERP.
- This will take an already under-levered REIT and add more capital to it. And there is going to be selling pressure at some point.
Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs
- MSCI announced the changes to the GIMI on Friday as part of the February QCIR. MSCI also announced a review of the free float of the Adani Group companies.
- FTSE will announce the changes to the All-World and All-Cap indices after the close of trading on Friday, 17 February. The same day is the S&P/ASX review cutoff for March.
- Yet another weekly outflow for the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) taking the YTD outflow to over US$2.5bn.
Dai Nippon Printing (7912) – Activism Results Going Forward Are Complicated
- A little over two weeks ago, western media outlets reported “sources familiar with the matter” said Elliott Management had built a “significant” stake in Dai Nippon Printing (7912 JP).
- DNP has been a “value name” for years. And years. Lots of cash, lots of real estate, and lots of cross-holdings. DNP had a plan to sell crossholdings, slowly.
- DNP had planned a March 9 presentation of its new MTMP. Elliott, reportedly with a little less than 5%, wanted faster. A few weeks later, DNP has responded with faster.
JGC (1963 JP) – A ToSTNeT Buyback Is NOT a ToSTNeT Buyback and Adjusted EV Vs Adjusted EBITDA Is OK.
- Engineering & Construction firm Jgc Corp (1963 JP) on Friday announced 9M results. Full-Year forecasts were revised, with revenue lowered, but OP, RP, and NP unchanged.
- The company then also announced a ToSTNeT-3 buyback of up to 4.77% of shares out for ¥20bn to be executed Monday 13 February pre-open. But details matter.
- Four Important Takeaways: 1) sometimes a ToSTNeT-3 buyback is not a ToSTNeT-3 buyback, 2) that can be a good sign, and 3) sometimes Adjusted EV vs Adjusted EBITDA is OK.
SPX 4,200 Risk off Drivers
- The stage is set for an equity/risk off decline after the SPX met our 4,200 rally objective as have Asian and European indices.
- We are treating the DXY 101 low as a key USD turn support that will see dollar upside follow through on the back of a bullish 10 yr yield breakout.
- Equity weakness due from mid- Feb into Q2. NDX is hovering near pivotal lows (tech/growth U/P). Scales are tipped toward new lows.
Last Week in SPACE: Adani Group, Hongkong Land, Toshiba, Haw Par, Renault/Nissan
- The MSCI revised the Adani Group weighting after reviewing FF. Adani Enterprises (ADE IN)affected. Adani Green (ADANIGR IN), Adani Power (ADANI IN), and Adani Ports (ADSEZ IN) not affected.
- Hongkong Land (HKL SP) is dirt cheap at 0.3x P/B. It is a China re-opening play. Plus the company is buying back shares.
- The Nikkei didn’t write an article on Toshiba (6502 JP) when everyone else did. They waited another day, with what appears to be a zinger on price at “about ¥2trln“.
Kakao Pay (377300 KS): MSCI Inclusion (Finally!)
- MSCI will add Kakao Pay (377300 KS) to the MSCI Korea Index at the February QCIR. There are 7 trading days to implementation on 28 February.
- Local institutions and foreign investors have been sellers in the last couple of weeks and retail investors have been buying to mop up the selling.
- Cumulative excess volume indicates a fair amount of pre-positioning and we’d look to sell ahead of the passive MSCI buying.
ECM Weekly (12th Feb 2023) – Hesai, Oasis, Mankind, Greatpower, Ruipeng, CATL, Nissan/Renault
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, Hesai Group (HSAI US) provided the first Asia linked listing for the year.
- Things were quiet on the placement front owing to the annual earnings reporting season.
HYBE’s Tender Offer of SM Entertainment: Closing the Price Gap
- We believe that there is a very high probability of a successful tender offer of 25% stake in SM Entertainment by HYBE.
- There is a 4.6% gap between the tender offer price and current price. There is a strong probability of this gap being closed in the next several weeks.
- There could also be an on-going interest by Kakao to try to take over the controlling interest in SM Entertainment but HYBE is not likely to give up control easily.
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