In today’s briefing:
- MOG Digitech (1942 HK): What the Flow Is Going On?
- JPX Nikkei 400 Index Rebalance: Some Big Impact Names
- Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding
- India – Positioning on Some Interesting Names
- Alibaba (9988 HK): 1Q24, Brilliant Result After Reorganization, 90% Upside
- Insulet’s Lawsuit Against Eoflow, Medtronic’s Tender Offer, and Eoflow’s “Special Sauce”
- Hongkong Land: Exchange Square Sale Would Be BIG News. (If True)
- Metro Pacific Investments (MPI PM): Risk/Reward as Uncertainty Hangs on the Delisting Threshold
- Hotel Shilla Pref: Discount Vs Common to Narrow and Boost from Chinese Group Tours to Korea
- Metro Pacific’s Tender Offer Kicks Off
MOG Digitech (1942 HK): What the Flow Is Going On?
- MOG Holdings (1942 HK) has been skyrocketing in price since the start of the year. Remarkably, there is little change in the number of shares that trade daily.
- MOG Holdings (1942 HK) has a market cap of US$6.44bn and trades at a modest Price/Sales ratio of 75x and an equally modest Price to Book Value of 89.5x.
- Liquidity has improved to the point where the stock could be added to some indices. However, there is a precedent of stocks not being added following market participant feedback.
JPX Nikkei 400 Index Rebalance: Some Big Impact Names
- There are 38 adds/36 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
- Based on the adds, deletes and capping changes, we estimate one way turnover of 4.35% and a two-way trade of JPY 461bn (US$3.24bn).
- There are a few stocks that will have same way flow from other index trackers within a few weeks of the JPX Nikkei 400 Index rebalance.
Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding
- The review period for a bunch of indices ended early last week and the announcement of the changes will be made in the next few weeks.
- Hydro Lithium (101670 KS) will replace Nice Information Service Co (030190 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the close on Monday.
- There have been big net inflows into China focused ETFs and outflows from Taiwan focused ETFs during the week.
India – Positioning on Some Interesting Names
- Power Finance, Astral, IDFC First Bank, Cummins India, HDFC Asset Management, Ashok Leyland, Polycab India and Supreme Industries have all run up over the recent past and have investor attention.
- The increase in market cap has put the stocks on active manager radars and could also result in the stocks being added to global indices in the near future.
- We take a look at the positioning on the stocks and recommend pair trades to reduce market risk while trying to capture alpha.
Alibaba (9988 HK): 1Q24, Brilliant Result After Reorganization, 90% Upside
- The revenue growth rate rose to 14% in 1Q24, compared to the past four stagnant quarters.
- All businesses continued to improve their margins, so that the general operating margin rose to 19% in 1Q24 versus 12% in 1Q23.
- We believe the re-organization is successful and the stock price is overly impacted. Buy.
Insulet’s Lawsuit Against Eoflow, Medtronic’s Tender Offer, and Eoflow’s “Special Sauce”
- Insulet Corp (PODD US)’s lawsuit against Eoflow (294090 KS) caused a sharp decline in Eoflow’s share price today (down 10.7% to 24,950 won).
- Insulet is accusing Eoflow of hiring several senior personnel that have helped Eoflow to develop a product that could take away market share from Insulet.
- The most important factor may be Eoflow’s “special sauce” which is some kind of technology/mechanism that allows this 17% greater efficiency/convenience for the wearable EOPatch insulin device.
Hongkong Land: Exchange Square Sale Would Be BIG News. (If True)
- According to Sing Tao, two PRC firms and a mainland bank have formed a consortium to acquire Hongkong Land (HKL SP)‘s 33-storey Three Exchange Square.
- This “news” is straight out of left field. For its part, HKL said the market rumour is pure speculation.
- HKL’s P/B of 0.24x is closing in on its all-time low of 0.21x during the depths of Covid.
Metro Pacific Investments (MPI PM): Risk/Reward as Uncertainty Hangs on the Delisting Threshold
- Metro Pacific Investments Co (MPI PM)‘s voluntary delisting tender offer from a consortium at PHP5.20 (net price of PHP5.1677 per share) will run from 9 August to 7 September.
- The delisting proposal was approved on 8 August. Excluding the consortium’s votes, only 37.4% of minorities (representing 13.73% of outstanding shares) voted YES for the delisting proposal.
- A key risk is satisfying the 95% delisting threshold, which would require a minorities acceptance rate of 86.4%. The risk/reward is unattractive at the current spread of 4.4% (net 3.8%).
Hotel Shilla Pref: Discount Vs Common to Narrow and Boost from Chinese Group Tours to Korea
- Hotel Shilla, one of the largest operators of duty free shops in Korea, will be a major beneficiary of the return of the group tours from China to Korea.
- We expect the consensus to raise the company’s sales estimates in 2024 to 2025 by about 3-7% and net profit estimates by 20-25%+ in this period.
- Currently, Hotel Shilla Pref/Common stock price ratio is 0.61 which is 22% below the five year average of 0.78.
Metro Pacific’s Tender Offer Kicks Off
- Back on the 26 April, First Pacific (142 HK) and three other entities, proposed delisting Metro Pacific Investments (MPI PM) at PHP 4.63/share. This was subsequently bumped to PHP 5.20.
- A Special Stockholders’ Meeting was held on August 8, and MPI stakeholders approved all the resolutions. An SGM for independent First Pac shareholders will be held on the 24 August.
- The Tender Offer is now open and closes on the 7 September, with (expected) settlement on 19 September – provided the Tender Offer delisting conditions are met.
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