In today’s briefing:
- Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March
- Outsourcing (2427) MBO Situation – Checking, and Thinking, and Noodling, and Speculating
- S&P/ASX Index Rebalance Preview: Newmont Still Has Nearly A$1bn to Sell
- Japan – Shorts & Positioning on Passive Sells
- Initial Thoughts on Hyundai Motor India IPO
- Itoki (7972) Mammoth Buyback Coming Imminently After 35% Jump
- Sector ETF Rebalancing with Remarkable Price Impact History: ISC In, Wonik IPS Out
- Industrial & Infrastructure Investment Corp Placement – Back to the Markets for the 12th Time
- Trend Micro (4704) – In-Line Announcement Causes Selloff – Hopium Meets Reason
- Emerging Korean Investment Theme: Potential Corporate Defense Mechanisms for Share Cancellations
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March
- At 82 index constituents currently, we expect the index committee to progress towards reaching 100 constituents. We are (highly) unlikely to reach the target this calendar year though.
- We highlight nine stocks that have a decent chance at being added to the index over the next couple of rebalances. All companies are profitable and meet inclusion requirements.
- The market consultation on proposed changes to the Hang Seng Industry Classification System (HSICS) could lead to more inclusions from the Information Technology sector from the June rebalance.
Outsourcing (2427) MBO Situation – Checking, and Thinking, and Noodling, and Speculating
- I got a bunch of questions about my Outsourcing comments yesterday in Outsourcing (2427) – Earnings Delay Causes Consternation.
- This piece is intended to clarify what I know (still limited), put parameters around what it might be, and draw lines in the sand which I might later erase.
- This may be nothing. But it may not be. I will try to answer the questions I received in a kind of Q&A format, and I hope that helps.
S&P/ASX Index Rebalance Preview: Newmont Still Has Nearly A$1bn to Sell
- With two days left in the review period, there could be 28 adds/deletes across the S&P/ASX family of indices in March.
- There is nearly A$1bn to sell in Newmont (NEM AU) due to the potential S&P/ASX 20 Index deletion and a large decrease in the number of shares held in Australia.
- There could be 2-41 days of ADV to buy in the index inclusions while the impact on the deletions will range between 0.7-24 days of ADV.
Japan – Shorts & Positioning on Passive Sells
- BayCurrent Consulting, Open House, Sumitomo Chemical, Koei Tecmo Holdings, Kose Corp, Oji Holdings, Daiwa House Reit Investment and Tosoh Corp will have passive selling at the close on 29 February.
- Short interest has increased on all these stocks over the last few weeks and there has been big underperformance versus the Nikkei 225 Index and TOPIX Index.
- Cumulative excess volume has increased on the stocks and there will be short covering in the last week of the month.
Initial Thoughts on Hyundai Motor India IPO
- Hyundai Motor India has been taking initial steps for an IPO. We believe this IPO could be completed sometime in 4Q 2024.
- Hyundai Motor India Limited (HMIL) IPO offering size is estimated to be at least US$3 billion, which would be one of the largest in India and the world this year.
- If HMIL is valued at US$25 billion and HMC sells a 15% stake, its remaining 85% stake would be worth US$21 billion, representing 55% of HMC’s market cap.
Itoki (7972) Mammoth Buyback Coming Imminently After 35% Jump
- Two days ago, Japanese manufacturer of ubiquitous office furniture Itoki Corp (7972 JP) announced salutary earnings/presentation(J) results, new MTMP(E) outlines, new shareholder return policy(J), yutai program(J), div hike(J), and buyback(J).
- It was a big day. The stock went limit up on 14 Feb and is +12% today. +25% in two days.
- No single holder holds that much BUT the parameters tell you how this gets done. It’s interesting, but it is important to read the fine print below!
Sector ETF Rebalancing with Remarkable Price Impact History: ISC In, Wonik IPS Out
- Will there be changes in April’s rebalancing? With two weeks left, two names are likely. Wonik IPS may be replaced by ISC Co Ltd, given a ₩150B market cap difference.
- In the previous rebalancing, constituent changes had a notable price impact. Despite a passive flow impact of +1.0x ADTV, HPSP and EO Technics saw about a 15% 3-day return.
- Wonik IPS is estimated to receive -4.0x ADTV, while ISC is expected to receive +1.0x ADTV. This is also quite similar to the previous rebalancing.
Industrial & Infrastructure Investment Corp Placement – Back to the Markets for the 12th Time
- Industrial & Infrastructure Fund Investment (3249 JP) is looking to raise around US$341m in its primary follow-on offering to acquire 28 properties and an equity interest in a silent partnership.
- The deal is a somewhat large one to digest, at 83 days of three month ADV and 16.2% dilution.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
Trend Micro (4704) – In-Line Announcement Causes Selloff – Hopium Meets Reason
- Last November, Trend Micro Inc (4704 JP) announced a second change to Shareholder Return Policy in 9 months. Activist ValueAct had been pushing. This was their big win.
- I discussed, bullishly, in Trend Micro BIG Bonanza But Shareholder AND Balance Sheet Structure Matter. N225 Divs Get a Fillip.
- Yesterday, with 2024 earnings, we got the promised special dividend and 2024 buyback, and in-line forecasts. No surprises. But the stock is down hard as yesterday’s hopium met today’s reason.
Emerging Korean Investment Theme: Potential Corporate Defense Mechanisms for Share Cancellations
- Local sources confirm government’s focus on strengthening stock market for April election. Market expects aggressive policies for share cancellations, including corporate defense mechanisms.
- Chosun Ilbo, a government-friendly and influential media outlet, advocates for corporate defense mechanisms to boost share cancellations, shaping a political atmosphere.
- This theme is likely to emerge in Korea’s market. We must consider political dynamics and screen companies with high treasury shares for potential stock boosts.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Analytics and News
- ✓ Events & Webinars
