In today’s briefing:
- Sembcorp Marine & Keppel O&M: STI Inclusion Possibility & Other Index Flow
- MSCI Feb 2023 QCIR Preview: Potential Changes as Review Period Ends
- Oriental Land (4661) As Nikkei 225 Candidate – What Is Float? What Is “The Tricky Twist”?
- Sumitomo Electric Buys Out Sub Nissin Electric (6641) At ¥1,700/Share – ATH But Still Too Low
- Keisei Electric: Needs Activists to Push the Market
- Quiddity Primer: The Ongoing Evolution of the Hang Seng Index
- Nissin Electric (6641 JP): JPY1,700 Tender Offer from Sumitomo Electric
- Dentium: An Undervalued Corporate Activist Target + Likely Inclusion Candidate for KOSPI 200 in 2023
- Bendigo Adelaide Bank & Bank of Queensland’s Rumoured Merger
- Pertamina Geothermal Energy IPO – Somewhat like an Energy Explorer. Somewhat like a Power Producer
Sembcorp Marine & Keppel O&M: STI Inclusion Possibility & Other Index Flow
- The Sembcorp Marine (SMM) EGM is scheduled for 16 February. If approved by shareholders, the Asset Co transaction and completion of the KOM restructuring will be done by 28 February.
- We expect no market trade from FTSE trackers, buying from MSCI trackers, while there is a question mark over treatment in the FTSE Straits Times Index (STI) (STI INDEX).
- There could be selling in Sembcorp Marine (SMM SP) from active Keppel Corp (KEP SP) shareholders and that could have a bigger impact on the stock.
MSCI Feb 2023 QCIR Preview: Potential Changes as Review Period Ends
- The review period for the February Quarterly Comprehensive Index Review (QCIR) of the MSCI indices ended yesterday. There will be a number of changes in the Asia Pacific region.
- Most of the inclusions are in China and the country weight in the MSCI Emerging Markets Index should increase leading to outflows from other markets.
- On average, the potential adds have outperformed the potential deletes over the last few weeks. At a glance, pre-positioning appears to be lighter than in the past.
Oriental Land (4661) As Nikkei 225 Candidate – What Is Float? What Is “The Tricky Twist”?
- As discussed in Nikkei 225 March Review – Quiddity Leaderboard (Jan 2023) (and earlier versions), Oriental Land (4661 JP) is a candidate to join the Nikkei 225 in March 2023.
- As of early January, it was the top-ranked impact name with 11.8 days of ADV to buy, and if it underperformed the Nikkei from there, there’d be more to buy.
- With the data collection period now complete, it is top-ranked, still. And it is still ~10-12 days to buy. Understanding shareholder structure, however, is key. So I dive in.
Sumitomo Electric Buys Out Sub Nissin Electric (6641) At ¥1,700/Share – ATH But Still Too Low
- Sumitomo Electric Industries (5802 JP) has announced a takeover of two of its subsidiaries today. The larger one is Nissin Electric (6641 JP).
- This deal, done for governance purposes, hits an all-time high price. But, like others, it ignores synergies in pricing, has an inadequate premium, and process is just bad.
- But given the shareholder structure, this is highly likely to sail through un-molested.
Keisei Electric: Needs Activists to Push the Market
- We think there’s something fundamentally wrong with Keisei Electric Railway Co (9009 JP)’s current valuation.
- Its core business with an estimated fair value of ¥720bn, currently has an implied valuation of negative ¥942bn (stub value).
- If investors can convince the management to dispose its stake in Oriental Land (4661 JP), we think there’s more than a 200% upside to Keisei Electric’s valuation.
Quiddity Primer: The Ongoing Evolution of the Hang Seng Index
- The Hang Seng Index (HSI INDEX) is a blue-chip index that represents the performance of the large cap stocks listed in the Hong Kong Stock Exchange.
- The index is undergoing some significant composition changes and the index provider currently uses a highly subjective constituent selection process which is quite challenging to decode.
- In this insight, we take a look at Quiddity’s approach to solving this Hang Seng constituent selection puzzle and the historical performance of past rebalance events.
Nissin Electric (6641 JP): JPY1,700 Tender Offer from Sumitomo Electric
- Nissin Electric (6641 JP) has recommended Sumitomo Electric Industries (5802 JP)’s tender offer of JPY1,700 per share, an 22.7% premium to the undisturbed price (2 February).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the offer has been set to meet the 66.67% ownership ratio.
- The tender offer is attractive in comparison to peer multiples and historical price ranges. Excluding the offeror, there are no substantial shareholders. This suggests a done deal.
Dentium: An Undervalued Corporate Activist Target + Likely Inclusion Candidate for KOSPI 200 in 2023
- We believe Dentium is an attractive stock to own right now. It has an excellent combination of strong growth in sales and profits and discounted valuations.
- Driven by its strong share price appreciation in the past year, Dentium now has become a strong candidate for a potential inclusion in KOSPI 200 index in 2023.
- There is a growing probability that Dentium could be targeted by corporate activists to pressure the company to cancel treasury shares and provide higher dividends.
Bendigo Adelaide Bank & Bank of Queensland’s Rumoured Merger
- The Aussie local press is discussing renewed merger talks for Bendigo And Adelaide Bank (BEN AU) and Bank Of Queensland (BOQ AU).
- Talks of a merger are not new. And we have been here before when BOQ twice made overtures to Bendigo in 2007, but was rejected.
- The swift removal of BOQ’s CEO, a lifetime high ratio – BEN/BOQ – and ANZ (ANZ AU)‘s tilt for Suncorp Bank – suggests a merger makes a lot of sense.
Pertamina Geothermal Energy IPO – Somewhat like an Energy Explorer. Somewhat like a Power Producer
- Pertamina Geothermal Energy (PGE) is looking to raise around US$650m in its upcoming Indonesia IPO. PGE is an Indonesian state owned power producer which utilizes geothermal energy to produce electricity.
- PGE currently manages 13 Geothermal Working Areas with a total capacity of 1,877 MW, of which 672 MW is owned by it, while 1,205 MW is via joint operations.
- In this note, we talk about the company’s financial performance and other issues, based on its recent filings.
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