In today’s briefing:
- Toshiba – How Much Risk Is There On A Deal Break?
- FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Updated Dividends & Flow Shift
- KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks
- ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion
- Yashili’s Widening Spread Is an Opportunity
- Readytech (RDY AU): Microequities Baulks At PEP’s A$4.50/Share Indicative Offer
- Betagro IPO Trading – Seems Fairly Valued
- AMFI Stock Reclassification Preview (Dec 2022): Long/Short Trade Flattening Out
- SK On Valuation at 22 Trillion Won – Impact on SK Innovation
- S&P BSE/Sensex Quiddity Leaderboard Dec 22: Potential ADDs Could Outperform the Index
Toshiba – How Much Risk Is There On A Deal Break?
- With Toshiba giving up its deal premium on news that the JIP consortium was struggling to secure financing it is worth assessing how much downside risk there is.
- Prospects are deteriorating rapidly and we believe valuations for Kioxia and the HDD business are likely to lead the way down.
- We estimate that there is still a premium of about 20-25% being assessed for the possibility of a deal but that there is fundamental risk beyond this.
FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: Updated Dividends & Flow Shift
- Updated forward dividend estimates and price moves lead to changes in adds/deletes and to estimated flows at the December rebalance. We now see 26 adds and 5 deletes in December.
- The estimated one-way turnover due to adds, deletes, funding and capping is 46.6% and will result in a one-way trade of TWD 72.7bn (US$2.26bn).
- Passive trackers will need to buy over 5 days of ADV on 15 stocks and sell over 5 days of ADV on 14 stocks. There will be trading opportunities galore.
KOSDAQ150 Index Rebalance Preview: Big Churn in IT, Healthcare Stocks
- With the review period complete, we see 11 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
- Most of the potential changes are high probability ones, but there are some stocks that are very close to market cap and liquidity cutoffs.
- The impact of passive trading will be much higher on the potential deletes as compared to the potential inclusions, though trade notionals are higher for the potential adds.
ChiNext/ChiNext50 Index Rebalance Preview: Overlapping Stocks & Mean Reversion
- At the end of the review period, we forecast 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
- Passive trackers will need to buy +/-0.5 days of ADV for most inclusions and exclusions from the indices. The impact on the potential deletions is higher on average.
- The potential adds have outperformed the potential deletes over the last six months, though there has been a sharp narrowing of the gap over the last few weeks.
Yashili’s Widening Spread Is an Opportunity
- Yashili International Holdings (1230 HK)‘s spread to China Mengniu Dairy Co (2319 HK)’s offer (HK$1.20) has widened to 10.1% due to doubts about the satisfaction of the remaining pre-condition.
- We think the delay in satisfying Dumex Key Condition is due to the glacial bureaucratic process. The pre-conditions long stop date is 31 July 2023, which provides sufficient time.
- Both Danone SA (BN FP) and Mengniu can waive conditions to satisfy the pre-condition. Both have the motivation to complete the transaction as it facilitates the unwinding of their partnership.
Readytech (RDY AU): Microequities Baulks At PEP’s A$4.50/Share Indicative Offer
- Software outfit ReadyTech (RDY AU) has announced an indicative proposal from Pacific Equity Partners and affiliates, to acquire ReadyTech by way of a Scheme of Arrangement at $4.50/share.
- Pemba Capital, with 32.01% of shares out, are in discussion with PEP as to what appears to be the PE firm rolling over shares.
- ReadyTech’s independent board has granted PEP non-exclusive due diligence to flesh out a firm Offer. According to media reports, Microequities, with ~13%, is not on board whatsoever.
Betagro IPO Trading – Seems Fairly Valued
- Betagro (BTG TB) raised about US$460m in its Thailand IPO.
- Betagro is an integrated agro-industrial and food business in Thailand.
- In this note we will talk about the trading dynamics.
AMFI Stock Reclassification Preview (Dec 2022): Long/Short Trade Flattening Out
- Two-Thirds through the review period, we see 6 stocks moving from MidCap to LargeCap and vice versa, 7 stocks moving from SmallCap to MidCap, 8 moving from MidCap to SmallCap.
- There have been changes to the list of stocks over the last couple of months and there could be more, especially on stocks that are close to the cutoff ranks.
- There is a big gap in the performance of the stocks moving upward versus migrating downward and there could be some mean reversion over the next couple of months.
SK On Valuation at 22 Trillion Won – Impact on SK Innovation
- SK On announced that it recently received 1 trillion won in investment, valuing the company at 22 trillion won, 29% higher than SK Innovation’s market cap of 17 trillion won.
- The recent investment of nearly 1 trillion won in SK On was in the form of convertible preferred stock (CPS), which guarantees a minimum return of 7.5%.
- Our SoTP valuation of SK Innovation suggests a target price of 254,396 won per share, which represents a 39% higher levels than current price.
S&P BSE/Sensex Quiddity Leaderboard Dec 22: Potential ADDs Could Outperform the Index
- In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the December 2022 Rebalance.
- The reference period for the trading data used for the index selection ended on 31st October 2022.
- There have been a couple of key revisions to the index selection methodologies for SENSEX and SENSEX Next 50 which could have important consequences.
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