In today’s briefing:
- LQ45 Index Rebalance Preview (Jan): Reading the Tea Leaves
- Aoki Super (9977) MBO at ¥3,800/Share (All-Time High, 15x Forecast FCF)
- FXI Rebalance Preview: Two Potential Changes in March
- Event Trading on KOSPI Transfer Listings: Notable Post-Listing Price Patterns
- March 2024 Nikkei 225 Rebal: Socionext, Disco, and a Consumer Goods Stock, Still
- Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March
- TDCX (TDCX US): Laurent Junique’s NBIO
- Hollysys (HOLI US): 8th Feb Shareholder Vote. Dazheng Fails The Sniff Test
- Quiddity Leaderboard BSE/SENSEX Jun 24: Wipro SENSEX Deletion Possible
- An Early Look at the Potential KOSPI200 Rebalance Candidates in June 2024
LQ45 Index Rebalance Preview (Jan): Reading the Tea Leaves
- The review period for the LQ45 Index ended on 29 December. The changes should be announced in the last week of January, becoming effective after the close on 31 January.
- Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
- The impact of passive trading will be higher on the deletions than the inclusions since lower liquidity stocks are replaced with higher liquidity stocks.
Aoki Super (9977) MBO at ¥3,800/Share (All-Time High, 15x Forecast FCF)
- The family which owns and controls ubiquitous Nagoya supermarket chain Aoki Super (9977 JP) will acquire the 47% it does not own in an MBO.
- This appears to be an estate planning exercise, creating a context to hand off ownership from the 77yr old former CEO to his 44yr old son and current CEO.
- This comes in at a 44% premium, an all-time high price, and 15+x forecast FCF (even if the forecast looks a little light). This gets done easily.
FXI Rebalance Preview: Two Potential Changes in March
- With a few weeks to go in the review period, CGN Power (1816 HK) and Yankuang Energy Group (1171 HK) could be added to the ETF in March.
- China Resources Beer Holdings (291 HK) and Wuxi Biologics (2269 HK) are potential deletions while there is another stock close to deletion zone.
- There are a lot of shorts on Yankuang Energy in terms of days of ADV and as a percentage of float while short interest on the other stocks is lower.
Event Trading on KOSPI Transfer Listings: Notable Post-Listing Price Patterns
- In the past year, four KOSPI transfer listings showed similar patterns, with pre-listing price increases and substantial corrections in the first five trading days post-listing.
- ChatGPTAmid a sideways market and a 54.2% YoY growth in the local ETF market last year, the impact of passive flow imbalances may have been more significant than before.
- A key factor is the short-selling ban. Posco DX’s SSFs showed significant backwardation pre-KOSPI listing, concentrating proactive short positions, requiring caution in adjusting pre-listing short position costs.
March 2024 Nikkei 225 Rebal: Socionext, Disco, and a Consumer Goods Stock, Still
- No changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
- The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
- There is the upweight to Nitori (9843) but now less funkiness with Fast Retailing (9983). But it will continue being an interesting Nikkei 225 influence (for years to come).
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.
TDCX (TDCX US): Laurent Junique’s NBIO
- TDCX (TDCX US), a Singapore-headquartered digital customer experience (CX) provider, has announced a preliminary non-binding proposal from Laurent Junique, founder/CEO, and largest shareholder (98.3% of the voting power).
- Junique is offering US$6.60/ADS, a 39% premium to the 30-day VWAP, but a 63% discount to its IPO price a little over two years ago.
- One issue dogging TDCX is the key man risk given Junique’s almost absolute control. Now he’s trying to take the company private on the cheap.
Hollysys (HOLI US): 8th Feb Shareholder Vote. Dazheng Fails The Sniff Test
- Hollysys Automation Technologies (HOLI US) has announced that an EGM is scheduled for February 8th to vote on the merger agreement with Ascendent Capital Partners.
- The Offer price remains at US$26.50/ADS. The shareholder approval required is simple majority. Regulatory approvals include NDRC, MoC and SAFE. Maybe a national security review.
- And the Dazheng consortium? Apparently insufficient information as to its financing sources and consortium structure ruled it out. Separately, the SGM to spill the board has now been called off.
Quiddity Leaderboard BSE/SENSEX Jun 24: Wipro SENSEX Deletion Possible
- In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, and 200 Indices in the June 2024 index rebal event.
- As things stand, there could be one index change for the SENSEX index.
- There could be four ADDs/DELs for the BSE 100 index and four ADDs/DELs for the BSE 200 index.
An Early Look at the Potential KOSPI200 Rebalance Candidates in June 2024
- We discuss the potential KOSPI200 rebalance candidates in June 2024. In the past several years, there have been a lot of alpha generating stocks arising from the KOSPI200 rebalances.
- The following companies are likely candidates which could be included in KOSPI200 rebalance in June 2024, including Posco DX, Doosan Robotics, Hyosung Heavy Industries Corp, and DS Dansuk.
- For the potential exclusion candidates, we included 10 stocks that are in the bottom 5% market caps in KOSPI200.
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