In today’s briefing:
- MOG Digitech (1942 HK): What the Flow Is Going On?
- LG Energy Solution (373220 KS) – Potential Float Increase Coming Up
- FXI Rebalance Preview: One Potential Change in September
- L’Occitane (973 HK): Controlling Shareholder Mulling a Bid?
- KOSPI Size Indices – Plenty of Overlap With Other Index Flows
- NTT (9432) – LDP Consideration of Full Sale Is Not Necessarily Overhang
- KRX New Deal Index Rebalance Preview: Review Period Nearly Complete
- India – Potential Float Changes & Impact
- An Update on Medtronic’s Tender Offer of Eoflow
- Seeking Clues for a Preemptive Position in the Korean Local Block Deal Market in H2
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.
LG Energy Solution (373220 KS) – Potential Float Increase Coming Up
- Selling from the ESOP program in the first quarter could result in an increase in LG Energy Solution (373220 KS)‘s float in local and global indices.
- The largest buying from passive trackers could take place next month with over 3% of the real float needing to be bought.
- Short interest has increased in the last month and short covering could take the stock higher ahead of the passive buying.
FXI Rebalance Preview: One Potential Change in September
- As of 24 July, there could be one set of changes for the iShares China Large-Cap (FXI) (FXI US) in September.
- There should be less than 1x ADV to buy on ZTE Corp H (763 HK) while there will be nearly 2x ADV to sell on Anhui Conch Cement (914 HK).
- Short interest has been inching higher on ZTE Corp H (763 HK) while it is barely moving on Anhui Conch Cement (914 HK) as the stock trades near its lows.
L’Occitane (973 HK): Controlling Shareholder Mulling a Bid?
- L’Occitane (973 HK) is drawing takeover interest from Reinold Geiger, the Chairman and the largest shareholder, according to Bloomberg. Mr Geiger has been exploring financing options for the potential deal.
- The presence of a significant disinterested shareholder, Acatis KVG, necessitates an attractive takeover premium. Acatis KVG trimmed its stake in July 2021 at HK$30.01 per share.
- L’Occitane released a solid 1QFY2024 update today with constant currency growth of 24.5% YoY. Irrespective of a bid materialising, the valuation is undemanding compared to peer multiples.
KOSPI Size Indices – Plenty of Overlap With Other Index Flows
- The review period for the September rebalance of the KOSPI Size Indices started 1 June and will end 31 August. The changes will be implemented at the close 7 September.
- We see 8 migrations from MidCap to LargeCap, 7 migrations from LargeCap to MidCap, 6 new adds to MidCap, and 16 migrations from SmallCap to MidCap.
- Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.
NTT (9432) – LDP Consideration of Full Sale Is Not Necessarily Overhang
- Six weeks ago, LDP Policy Research Council chairman KAGIUDA led a discussion about full NTT privatisation to fund defence. Today he said serious deliberations begin in August. Shares fell today.
- The LDP wants non-tax resources to increase defence/social spending. Selling would require a change in NTT Law, but the argument is that communications have changed/internationalised.
- As discussed in NTT (9432 JP) – Would the Govt Sell All Its Shares? Why? How? How Long? Overhang?, there are questions on overhang. BUT… presumably there are mitigants.
KRX New Deal Index Rebalance Preview: Review Period Nearly Complete
- The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
- There is one change currently for each of the Secondary Battery, Bio and Game indices. Then there are a couple of changes for the Internet and BBIG indices.
- There are four stocks that will have over 2 days of ADV to trade from passive trackers and these stocks could move around announcement of the changes.
India – Potential Float Changes & Impact
- Over the last few weeks, companies in India have been disclosing their shareholding pattern as of end-June. There are a few companies with significant float changes from end-March and/or end-December.
- The changes in free float could be reflected in domestic and global indices over the next couple of months resulting in action from passive trackers.
- We see 6 stocks where there could be passive inflows and 2 stocks that could have passive outflows – but there are caveats.
An Update on Medtronic’s Tender Offer of Eoflow
- In this insight, we provide an update of Medtronic’s tender offer of Eoflow.
- The foreign ownership of Eoflow has surged in the past two months from 6.5% on 25 May to 33.2% as of 24 July.
- We continue to believe that there is 95%+ probability of this M&A getting completed at the tender offer price of 30,000 won and Eoflow eventually becoming delisted in 2H 2023.
Seeking Clues for a Preemptive Position in the Korean Local Block Deal Market in H2
- As the possibility of implementing the pre-disclosure rule in the second half of this year arises, the local block deal market is expected to become more active.
- Specifically, there are observable movements among Kosdaq mid-sized companies that are particularly sensitive to deal execution risk. This suggests that LHJ’s KIS may further solidify its dominance.
- Significant increases in trading volume through KB Securities could serve as potential clues indicating the imminence of block deals in companies where the likelihood of such deals is high.
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