In today’s briefing:
- MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises
- Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy
- FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry
- Weekly Deals Digest (13 Nov) – Toshiba, Uzabase, Origin Energy, Perpetual, Golden Energy, I-Tail
- Last Week in Event SPACE: Tata Motors, Origin Energy, OZ Minerals, Toshiba
- Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done
- Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase
- Warrego (WGO AU) Bidding War Between Strike (STX AU) And Beach (BPT AU)
- Good Morning Japan | Bulls Still in Charge
- I-Tail Corporation IPO: A Strong 3Q Results Update
MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises
- MSCI announced the changes as part of the November SAIR. For Asia Pacific, there are 48 adds and 55 deletes (including one nationality change).
- The deletion of Wharf Holdings (4 HK) is the biggest surprise. The stock should trade weak given the large flow and days of ADV to sell.
- There are listing changes for BeiGene (BGNE US), Li Auto (LI US), Xpeng (XPEV US) and Hutchison China MediTech Ltd (HCM US) to their Hong Kong listed lines.
Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy
- On Friday, MSCI announced the changes to its indices as part of the November SAIR. Most changes were expected, but there were a few surprises.
- Friday was also the review cutoff for the FTSE Dec QIR. Next Friday has announcement of changes to the Hang Seng, Sensex and FTSE indices.
- Big inflow to iShares Core MSCI Emerging Markets ETF (IEMG US) during the week as inflows to IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) continue.
FTSE All-World/All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry
- We see 4 potential adds, 1 close add and 1 potential delete for the FTSE All-World/All-Cap indices at the upcoming QIR that will be implemented at close on 16 December.
- The largest impact will be the passive selling on Golden Agri Resources (GGR SP) due to a nationality change from Singapore to Ineligible.
- There is a big lock-up expiry on Delhivery where US$2.89bn of shares will be free for trading on 21 November – that is significantly larger than the potential passive buying.
Weekly Deals Digest (13 Nov) – Toshiba, Uzabase, Origin Energy, Perpetual, Golden Energy, I-Tail
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments – I-Tail (ITC TB) is set to launch it’s up to US$600 million SET IPO.
- Event-Driven developments – Toshiba Corp (6502 JP), Uzabase Inc (3966 JP), Golden Energy & Resources (GER SP), Perpetual Ltd (PPT AU)/Pendal Group (PDL AU), Origin Energy (ORG AU).
Last Week in Event SPACE: Tata Motors, Origin Energy, OZ Minerals, Toshiba
- Tata Motors Ltd (TTMT IN) will eliminate its ADS program. This is another potentially juicy trade.
- Canada’s Brookfield, along with EIG look to take over Origin Energy (ORG AU), one of Australia’s largest energy companies.
- This OZ Minerals Ltd (OZL AU) trade is fundamentally a bit short gamma on copper. If copper takes another dive, then it may no longer be interesting to be long.
Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done
- On Friday, Sumitomo Corp (8053 JP) announced a bid for equity affiliate (they own 27+% but Nippon Steel 15%, top 2 is 40+%) Sumitomo Precision Products (6355 JP).
- It’s a one-year high and 4-year high price, and 8x average 10yr EV/EBITDA but 4.6x 2024e EBITDA from the Mid Term Plan. And way below a 10-year high.
- This gets done if Retail agrees to the tender. If 50% put in, that should do it. So I expect this gets done.
Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads Pendal Group (PDL AU), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), 21Vianet Group (VNET US), 111 Inc (YI US), Golden Energy & Resources (GER SP).
- Lowest spreads – Tyro Payments (TYR AU),Perpetual Ltd (PPT AU), OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), China Vast Industrial Urban Development (6166 HK), Moya Holdings.
Warrego (WGO AU) Bidding War Between Strike (STX AU) And Beach (BPT AU)
- Beach Energy (BPT AU)’s all-cash proposal is A$0.20 per share and Strike Energy (STX AU)’s all-scrip proposal is 0.775x STX shares per Petrel Energy (WGO AU) share.
- BPT’s all-cash offer provides value certainty. On the other hand, STX’s all-scrip offer lets shareholders get exposure to 100% interest in the West Erregulla project.
- Both offers are reasonable but far from knockout bids, which suggests room for a further bidding round. At the last close, BPT’s offer is 3.2% higher than STX’s offer.
Good Morning Japan | Bulls Still in Charge
- Good Morning Japan: We strive to provide the very best breaking macro, stock and thematic overnight news that will impact your trading day in Japan. FOLLOW us to keep abreast!
- OVERNIGHT: BETA bid with Commodities &Tech leading; Momentum & Value sold; SOX +15%WoW; China 20-point plan on COVID-19 easing; FTX Bankruptcy – CEO flees the US. Democrats retain Senate-IRA safe.
- JAPAN: NKY Futs -0.5% vs Cash; Further yen strength with USDJPY ¥138.81; Bain to lift JP invest >$40b-focus is Kansai tech cos; No new Softbank buyback; Rakuten losing mobile subs
I-Tail Corporation IPO: A Strong 3Q Results Update
- I-Tail (ITC TB), Thai Union Group (TU TB)’s pet care division, will launch an up to US$600 million SET IPO this week, according to press reports.
- We previously discussed the IPO in I-Tail Corporation IPO: The Bull Case and I-Tail Corporation IPO: The Bear Case.
- In this note, we look at the 9M22 results. The results highlight that i-Tail is in rude health with accelerating growth, healthy margins, cash generation and manageable leverage.
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