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Last Week in Event SPACE: Sing Air, JD Logistics, China Mobile, Angang/Bengang, Link Admin, Xiaomi

291 Views30 May 2021 07:55
SUMMARY

Last Week in Event SPACE ...

  • Plus, other events, CCASS movements, and Mood Spins.

(This insight covers specific insights & comments involving Stubs, Pairs, Arbitrage, share Classifications, and Events - or SPACE - in the past week)

M&A - ASIA

Singapore Airlines (SIA SP) (Mkt Cap: $1.7bn; Liquidity: $9mn)

Singapore Air announced the launch of a renounceable rights offering for S$6.2bn of Mandatory Convertible Bonds, following on from last year. The record date will be 28 May 2021. That Singapore Airlines had raised S$15.4bn since April 2020 (S$8.8bn in rights issues, S$2.1bn in secured financing, S$2.5bn in convertible bonds ($850mm 1.625% in Dec 2020), notes, and credit lines, S$2.1bn of secured financing against aircraft, and earlier this month a S$2.0bn sale and leaseback of 11 aircraft), lost S$2.5bn this year on an operating basis, and in February the company deferred S$4bn of aircraft delivery over the next four fiscal years) and lowered non-fuel expenditures by S$5bn annually should be a positive outcome.

  • Travis Lundy's opinion is and has been that SIA is a range trade. If you can buy it cheap, it might be worth something. If you buy it more expensively (say 10-15% above the TERP from last year's rights issue) you are probably paying too much. The stock is not a good range trade because so much of the value of this airline 10yrs from now is a product of unknown factors. And there are a lot of unknown factors. At the top end of the range trade (where we are now), Travis would think this is not such a good stock to be long.
  • At the current price, Travis is bearish SIA shares vs markets and to some extent, outright. This new S$6.2bn potentially increases dilution by another 33.7% in June 2030. The Rights MCBs are a capital suck. If these get redeemed early, something else happened which was dramatically good. Travis expects non-airline stocks are going to be the way to play that. There has been too much dilution for SIA to easily revisit its old prices. Travis would avoid the MCBs. He would avoid the shares.

Link Administration Holdings (LNK AU) (Mkt Cap: $2.2bn; Liquidity: $7mn)

Link has announced it has received an Offer from KKR, in partnership with Domain Holdings Australia (DHG AU), representing an EV of $3bn for 100% of PEXA, or A$1.38bn for Link's equity stake. The offer is subject to a number of conditions including FIRB and Link abandoning PEXA's IPO. The proposal remains "open and capable of acceptance" until 5 pm on the 30 May.

  • Link provided a trading update for PEXA this past Tuesday. By that measure, EBITDA of A$113mn and A$128mn is forecast in FY21 and FY22, implying a forward EV/EBITDA of 26.5x, almost bang in line with Domain's FY21E EV/EBITDA of 26.1x (according to CapIQ).
  • Macquarie's infrastructure arm MIRA and Swiss private markets group Partners Group are believed to kicking tyres, as is Canadian outfit Dye & Durham. The wild card is that Link proceeds with the IPO, regardless. An IPO was expected to value PEXA at up to $3 billion. Link needs to decide whether pushing the company to market will generate higher returns for its shareholders, and with it, providing the company with the option of remaining invested.
  • When PEP/Carlyle tabled a A$5.40/share non-binding indicative Offer back in October last year, the proposal included an option of a cash offer for Link ex-PEXA of A$3.80/share. All else being equal, Link could therefore be worth upwards of $6.38/share.

(link to my insight: Link Group (LNK AU): KKR Opens The Bidding For PEXA)

China Mobile (941 HK) (Mkt Cap: $131bn; Liquidity: $310mn)

China Mobile will issue roughly 5% of its share capital in A-shares to create a new capital markets venue. This is largely in response to the loss of NYSE listing but has been in the works since a couple years ago because of the GDR construct. The initial implied price for the issuance by the Use of Proceeds suggests a ~30% H discount to As (at current price), an issuance price just over PBR = 1.0x, and a 4.7% dividend yield for the A-shares. The existing listed China mobile telephony business listed in A-shares is China United - the China Unicom parent. That A-share trades at 3.8x EV/EBITDA, 1.1x book, and a 1.5% dividend yield (on a 100+% payout ratio!).

  • Despite the BAD governance of issuing new A shares at such a low implied PCFR and EV/EBIT ratio and PER, the ability of China Mobile and China Telecom to issue shares at such a low price means the A/H premium of the offer may end up being higher because the largest demand may come from buyers who want implied earnings with dividend upside.
  • Travis expects the trade is to be long China Mobile here expecting that the China Mobile A-Share will see good demand because of a relatively high implied dividend yield and a stated Company desire to increase shareholder returns (which are already at 50+% payout ratio).
  • He expects another good trade is to be long China Telecom Corp Ltd (H) (728 HK) because it currently trades at a very low price to book and because of improved earnings and potential promise to raise dividends. The RMB Share Stabilisation Plan requires action at a price which is nearly double the current price. That implies the Hs would trade at a 50% discount. That seems slightly high. Not impossible, but I expect odds are that it should trade at a lower discount - even if 40% that would mean 20% upside from here.
  • Travis expects that both the China Mobile issue and China Telecom issue of A-shares will be well-received because of dividend support, and a desire by the National Team to make the issuances successful, even if that means sticking them in a drawer (i.e. getting cornerstone pre-IPO buyers to buy and be locked up).

Angang Steel Co Ltd (H) (347 HK) / Bengang Steel (000761 CH).

Reportedly SOE-backed Angang is planning a potential merger with regional player Bengang. Bengang recently disclosed that its parent, Bengang Group, which in turn is owned by Liaoning SASAC, had received interest in its ~69% stake into Bengang. Such discussions remain in the planning stages, with any sale subject to approval from relevant regulatory bodies. A merger between Angang and Bengang, both of which are headquartered in Liaoning, is not a new development; it was first floated back in 2005. However, the State Council - or Central SASAC - Angang's parent, and Liaoning SASAC, could not reach an agreement on terms.

  • Where it could get funky, is that Angang has both A and H shares, and is part of both the Shanghai and Shenzhen Stock Connect whereas Bengang has A and B shares, no Hs, and is not part of the Connect program. As far as I know, an H/B swap has never occurred before. But that's not to say it can't happen.
  • There is interim step that could be implemented, wherein the Bengang B shares are converted to H shares. Such an outcome would provide an option of exchanging H shares for H shares. This process takes time and typically faces a long bureaucratic process, and it's not readily apparent whether the exercise achieves or accelerates a scrip exchange. My guess is if this deal is to be done via the issuance of scrip, then the powers that be can tinker and kludge an H for B exchange.
  • The Liaoning province where both of these large steel players are headquartered, has given the green light to consolidate. Angang has tabled a five-year plan to achieve greater output, and generate more profit. A merger with Bengang will help achieve that goal. With significantly lower net debt/EBITDA and net debt/equity multiples, Angang is a superior producer to Bengang, which in turn suggests Angang is a suitable partner for Bengang.

(link to my insight: Amalgamated Steel: Merging Angang & Bengang As, Bs, and Hs)

ZOZO Inc (3092 JP) (Mkt Cap: $10.5bn; Liquidity: $28mn)

Zozo announced a ¥32bn buyback. And it announced a ¥25bn placement. The reasoning is that the company wants to have a place in the TSE Prime market and without a higher float, the company won't meet the 35% tradable shares criteria it is supposed to have in June. While this will not get them there by end of June, companies with a "plan" to get there will be granted provisional inclusion if they meet the other criteria, and this construct has a decent chance of getting them there. The explanation by the company is a little odd though.

  • Mio Kato has a "conviction short" call on ZOZO and thinks it will not meet its FY2021 GMV targets in Zozo – 2021 Conviction Call Short Unlikely to Hit Its GMV Targets. Michael Causton takes the opposite tack in Zozo Villa Reborn and Zozo: Record Sales and a Future Plan.
  • This buyback is minimally accretive. This construct actually creates some overhang in the market. The construct is set to have an off-market buy and ongoing on-market selling. This construct will probably mean a small MSCI up-weight in November. It will mean a series of small TOPIX up-weights at the end of every month following a month in which warrants are converted. If warrants are converted in June, there will be a small TOPIX up-weight at the end of July.
  • Travis finds this construct to be overly complex, and inefficient for shareholders (the 6% spread paid to BofA comes from somewhere). He personally tends to agree with Mio on the lack of fundamental attractiveness of Zozo.

(link to Travis' insight: Oh No ZoZo! An Overly Complicated Buyback+Issuance To Stay Prime)

For near-on four and half months, the only disclosure - in the monthly updates - is that the pre-conditions NDRC, MoC, and SAFE)for SINOMACH's Offer for China Machinery Engineering (1829 HK) have yet to be fulfilled. Shares bounced on good volume this past Thursday to close at $3.62/share, its highest level since the Offer was announced. Separately, Pentwater has built (almost) a blocking stake with 9.8% of the H shares by the 4 March. Lakeville is not far behind with 67.556mn shares or ~7.4%. This privatisation is arguably being done too cheap. But no other interested party will emerge. You have an SOE-backed Offeror plus CMEC is relatively illiquid given its low free float. Link to my insight: China Machinery Engineering (1829 HK): Movement In The Works?.

Last week, the once major Qualifying Shareholder or Designated Shareholder Tower Investment Management announced they had sold their stake down in Sawada Holdings (8699 JP) from just below 10% to just over 2%. That changes things. Sawada is a different stock now. Travis is inclined to believe that an exit from Khan Bank for Sawada produces a better outcome for Sawada investors for the whole of their investment than does a tender offer at JPY 1,050/share, but path dependency can affect investors decisions. At the JPY 940+ area, this looks like a place where one reduces one's size. Link to Travis' insight: Sawada Is A Different Stock Now.

STUBS

JD.com Inc. (9618 HK) /JD Logistics (2618 HK)

The final price was HK$40.36 for JD Logistics, the logistics spin-off of JD.com, which is towards the low-end of the HK$39.36-HK$43.36 IPO range. This will raise HK$24.6bn and give a market cap of HK$245.9bn - both figures before over-allotment. JD.com's shares are down 31% from its recent high in February after anti-trust regulators in China sought to overhaul the country's largest tech companies. At the IPO price, JD logistics accounts for ~12% of JD.com's NAV.

  • There are a lot of positive assumptions baked into JD Logistics price, and key competitor S.F. Holding (002352 CH)' surprise 1Q20 loss is food for thought. I tilt more positive towards to JD.com, in which JD Logistics' income is heavily reliant upon. Despite the regulatory overhang, I believe JD.com's discount can narrow from here.

  • There is a high probability of Fast Entry inclusion in the Hang Seng Tech Index and the Hang Seng Composite Index (HSCI), while the stock will need to rally a lot to get Fast Entry in the MSCI Standard, FTSE All-World, FTSE China 50 and Hang Seng China Enterprises Index. the stock does not get Fast Entry, JD logistics should be included in the MSCI Standard Index at the November SAIR, in the FTSE All-World Index and the FTSE China 50 index at the December QIR, in the Hang Seng China Enterprises Index at the regular review in September and could be included in the Hong Kong Hang Seng Index at the regular review in December.

Links to:
my insight: JD Logistics (2618 HK): Priced Towards The Low End
Brian Freitas' insight: JD Logistics: Index Fast Entry Cutoffs
Zhen Zhou, Toh's insight: JD Logistics IPO - Updated Index Implications and Impact on JD.com HoldCo Valuation

Bank Of Kyoto (8369 JP)

The Bank of Kyoto is effectively a bank worth a tiny fraction of book value as a banking operation PLUS a giant equity portfolio of Kyoto companies. If the equity portfolio did not exist, this would be one of Japan's large and largely unprofitable regional banks. The only seriously redeeming feature to the bank right now is its equity portfolio. If the equity portfolio can be monetised and the proceeds returned to shareholders, then investors would want to own it, be monetised, then sell it as fast as they could. But the equity portfolio will likely not be monetised any time soon.

  • Travis personally assesses the "trading value" of Bank of Kyoto to be lower than the current stock price. That is because of the woeful capital governance by management. If the bank wanted to aim at a 5% ROE based on Common Equity, that would be worth buying because it would mean the bank would have to sell cross-holdings and buy back its own shares and/or pay a big special dividend. But Travis has very low hopes for that.
  • He expects a fair "range" for the bank to be a 0.2-0.3x PBR for the banking ops ex-equity portfolio, and a 40-65% discount range on the equity portfolio. 60% because that is bare minimum acceptable return (3% after tax yield), and 40% because people sometimes get excited about things they should not.
  • For that, given the value of the equity portfolio today, I expect the appropriate value range is ¥4,350-7,200/share. This was reasonably "cheap" last week at ¥5,000, and would be slightly expensive 10% higher. But this is an arb trade, not an investment.

(link to Travis' insight: Bank of Kyoto (8369) - A Deeply Discounted Holdco Which Will Likely Not Monetize)

LG Corp (003550 KS) / LX Holdings (383800 KS)

LG Corp resumed trading this past Thursday subsequent to hiving off LX. I backed out a post-split discount to NAV for LG Corp of 57% and a premium of 46% for LX. LX Holdings should be sold off, and it was.

  • It's not immediately apparent LG Corp was a buy either. Korean conglomerates typically trade at an average discount to NAV of ~50%, and the "New" LG Corp is a modestly cleaner Holdco. Yet this split addressed only 2.3% of LG’s assets, but concurrently reduces LG’s revenue by ~10.2% and cash by ~9%. The spin-off, in effect, simply created another family-owned conglomerate.
  • Until the family decides to seriously unlock value - that is, the spun-off company's valuations, under an independent company, exceed that locked up within a holding company structure - it is likely LG Corp's wide NAV discount will remain in place. It is not clear what synergies, if any, the spun-off entities enjoy.
  • The discount to NAV at which a holding company trades is proportional to corporate governance and shareholder value creation. There is enough substance here to indicate LG's priorities with respect to this spin-off, and potentially future spin-offs, may not necessarily be aligned with minority shareholders.

links to my insight:
LG Corp (003550 KS): The NAV Calcs
LG Corp (003550): Index Treatment As Shares Resume Tomorrow

Wilmar International (WIL SP) / Yihai Kerry Arawana Holdings (300999 CH) (YKA)

I see Wilmar's discount to NAV at 69%, versus its one-year average of 61%. I've inputted a static figure for Yihai pre-its October IPO. The average NAV discount is ~65% since the IPO. The new buyback program was approved at the AGM on the 15 April, allowing the company to acquire up to 10% of shares out over the following 12 months. YTD, Wilmar has acquired 11.99mn shares at a cost of S$61mn, and an average in-price of S$5.08/share. Since the buyback was approved at the AGM, the average price paid is S$4.92/share.

  • Wilmar appears inexpensive here, even for a cross-border, possibly-difficult-to-short subsidiary, Holdco situation. But it is a very clean holding company structure, with a potential near-term catalyst from Adani Wilmar's listing, in conjunction with the continuing buybacks, and senior management buying.
  • I'd buy Wilmar here. YKA accounting for 3x Wilmar's market cap is unsustainable. I see a more realistic discount of 55% - where it traded on average prior to YKA's listing.

(link to my insight: StubWorld: Wilmar's Stake In Yihai Kerry At 300% Of Market Cap)

EVENTS

Xiaomi Corp (1810 HK) (Mkt Cap: $93bn; Liquidity: $640mn)

One of the major surprises in the announcement of the June 2021 quarterly changes of the FTSE Global Equity Index Series (GEIS) was the non-inclusion in the All-World and associated indices. This was despite FTSE earlier explicitly stating that the stock would be eligible for re-inclusion in the GEIS at the June review. FTSE Russell has now announced that they would include Xiaomi in the GEIS in two tranches subject to the final decision by the U.S. District Court for the District of Columbia that would cause Xiaomi to fall within the scope of Executive Order 13959. Link to Brian's insight: Xiaomi (1810 HK) - FTSE Re-Inclusion Coming Up.

  • Travis' expectation is that this inclusion squeezes the stock. He would still be long the stock. He thinks the re-inclusion is a bigger deal than the exclusion. Yes, both were pre-positioned and people were ready to take the other side, BUT... southbound and company buyback have removed a chunk of the float since then.
  • The inclusion events will be slightly smaller than the selldown was, but 600mm shares is still a relatively large net amount to buy. That amount was purchased by Southbound investors from 20 January through 12 May - three and a half months. It is three times as much as the company has bought back.
  • This should be a non-negligible flow event. FTSE China 50 Index inclusion should be considered in June. That may add a little more oomph later on.

Links to:
Travis' insight: FTSE Re-Inclusion of Xiaomi - A Bigger Deal Than The Exclusion?
Brian's insight: Xiaomi (1810 HK) - FTSE Re-Inclusion Coming Up

The last day to buy Kunlun Energy (135 HK) WITH dividend should be 28 May 2021. The stock price should have a large adjustment on 31 May 2021. Travis still likes the shares. He recommends being long, staying long, and buying even more. This stock is the wrong price post-div. If it does not have a large adjustment on 31 May, investors might consider selling the shares to buyers who may be buying based on faulty information. Link to Travis' insight: Kunlun Energy (135) - Be Careful Of The Special Div Dates.

TOPIX INCLUSIONS

Nomura Micro Science (6254 JP) (Mkt Cap: $0.3bn; Liquidity: $13mn)

Japanese water treatment technology company Nomura Micro announced (J-only) they had received approval to move from the Second Section to the First Section (Prime) of the Tokyo Stock Exchange as of 2nd June 2021. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to occur at the close of trading on 29th July 2021.

  • The Index Inclusion Parameters are reasonably attractive. Janaghan Jeyakumar estimates the Inclusion quantity to be 0.51 - 0.62mn shares. This translates to an Inclusion Size of ¥1.9 - 2.3bn and an Impact of 1.5-1.8 days of volume based on 3-month ADV.
  • There are no obvious red flags regarding overvaluation from a fundamental angle. The current share price translates to EV/EBITDA (FY21A) of 7x which does not seem very expensive considering the projected EBITDA CAGR of 9% for FY21A-23E (Capital IQ consensus). Furthermore, the current EV/EBITDA (LTM) is below the 1-year trading average.
  • THE TRADE: Janaghan would be Bullish between now and the Inclusion Event (29th July 2021). This is a slightly long-dated TOPIX Inclusion Trade and is unlikely to be a set-and-forget Trade. One should be prepared to enter and exit more than once based on price and volume patterns.

M&A - US

No mention was made with respect to the consortium's Offer in Hollysys Automation Technolo (HOLI US) latest results. No doubt that omission spurred the latest salvo from CPE Funds Management - who previously critiqued Hollysys' 1H21 results. Although CPE would want Hollysys' board to convene a shareholder meeting to consider the consortium's proposal, such a meeting should only occur once the legal issues surrounding the share ownership have been resolved. I like Hollysys here. Shares are cheap, It has a profitable business with quality clients. It is net cash representing 55% of if its market cap, before including short-term investments. The pushback is on timing. I don't expect any major developments until the conclusion of the trial to decide the ownership of the shares. Link to my insight: Hollysys (HOLI US): CPE's Broadsides Continue.

In MergerTalk: Why Skepticism Over A Potential Immunovant Buyout May Offer A Lucrative Opportunity, Robert Sassoon discusses two potentially positive catalysts forImmunovant Inc (IMVT US). One is news on the resumption of its clinical trials following a voluntary pause of dosing after the company had become aware of a physiological signal consisting of elevated total cholesterol and LDL levels in trials with respect tone of its indication targets. The other is the prospect of a buyout proposal for the minority holdings in IMVT by 58% shareholder Roivant Sciences.

SHARE CLASS

The Thai NVDR Company has announced that investors are unable to buy any more Non Voting Depository Receipts (NVDR) in Kasikornbank PCL (KBANK TB) due to the current issuance approaching its permitted limit of 25% of issued shares. With NVDR issuance halted, FTSE should reduce the investability weight of the stock by 10% while MSCI will most likely delete the stock from its indices with both changes could happen early next week. Deletion from the MSCI indices would result in passive funds needing to sell 22.33m shares (US$87.75m; 0.75 days of ADV), while a 10% reduction in the investability weight in the FTSE indices would require passive funds to sell 8.29m shares (US$32.59m; 0.28 days of ADV). In Kasikornbank (KBANK): Impact of the NVDR Issuance Halt, Brain recommends buying the KBANK foreign line and selling the NVDR line to benefit from an increase in the foreign premium.

M&A - EUROPE

On 24 May, Vonovia SE (VNA GR) and Deutsche Wohnen AG (DWNI GR) announced they had signed an agreement on a voluntary public takeover offer to be launched Vonovia for the whole share capital Deutsche Wohnen next June. Shareholders will receive €52/share in cash plus a cash dividend of €1.03 (tbd at the AGM of Deutsche Wohnen). There is a minimum acceptance threshold of over 50%. The deal is highly likely to close. Gross spread is 1.6%, slightly over 6% annualised - at the time of Jesus Rodriguez Aguilar's insight Vonovia/Deutsche Wohnen: Agreed Takeover, provided shares are acquired prior to dividend payment. His recommendation is Long DWNI GR.
On 26 May, British pharmaceutical group Vectura (VEC LN), which specializes in inhaled medicines, has agreed to be acquired by Carlyle by means of a scheme of arrangement. Vectura shareholders will receive 136p in cash and a 19p interim cash dividend (record date 28 May) for each share, a total of 155p. Gross spread was 4.6% to the total consideration at the time of Jesus's insight Carlyle/Vectura Group: Expectations of a Sweetened Bid. Recommendation is long VEC LN.
In Banco Inter & StoneCo – Interesting Concept, Challenging on Execution, Victor Galliano discusses StoneCo Ltd (STNE US) investing BRL2.5bn in Banco Inter SA (BIDI11 BZ) via new shares issued in an up and coming follow on issue, as a cornerstone investor

On 26 May, Ramsay Health Care (RHC AU) signed an agreement to acquire Spire Healthcare (SPI LN) from Mediclinic and others. Consideration is 240p, in cash, adjustable for any dividend or capital distribution at the discretion of the bidder. Mediclinic failed to acquire Spire (at a 25% higher price back then) and is tendering its 29.9% stake. The consideration represents 1.9x EV/Fwd Revenue, 10.5x EV/Fwd/EBITDA and 38.9x Fwd P/E. Past acquisitions in the sector have been carried out at a median 11.7x EV/EBITDA. Premium vs. prior trading session is 24.4%.The Gross spread is a negative (2.9)%. In Ramsay Health Care/Spire Healthcare, Jesus reckons the downside risk is limited and expectations of a sweetened bid are high.

INDEX REBALS

MSCI Japan BIG DELETE Post-Mortem. Partly inspired by the move on Bank Of Kyoto (8369 JP) discussed in Bank of Kyoto (8369) - A Deeply Discounted Holdco Which Will Likely Not Monetize - see above - Travis took a look at the post-mortem on MSCI Japan Semi-Annual Index Rebalance (and that of a few other countries) to see whether there were post-event trading opportunities still. The deletions were largely "expected" with a few, perhaps several, exceptions. The process, as always, has been interesting, and informative. Trading each name against its own peer showed significant alpha as noise against a regular index hedge was significantly reduced. If there are numerous events in one direction, a basket of baskets is a very sound way to hedge out peer/bias/marketcap noise. Link to Travis' insight: MSCI Japan BIG DELETE Post-Mortem - Trades To DO.

FTSE China 50 Index Rebalance Preview. Using prices from the close at HK/China lunch break on the 24 May, Brian sees Cosco Shipping Holdings Co., Ltd (H) (1919 HK) and Citic Ltd (267 HK) being included in the index, while New Oriental Education & Technology Group (9901 HK) and Evergrande Real Estate Group (3333 HK) could be deleted from the index. Link to Brian's insight: FTSE China 50 Index Rebalance Preview: 2 Deletions Certain; 1 Inclusion Iffy.

FTSE TWSE Taiwan 50 Index Rebalance Preview. Brian expects 4 changes to the index. The inclusions are Evergreen Marine Corp (2603 TT), Yang Ming Marine Transport (2609 TT), Wan Hai Lines (2615 TT), and AU Optronics (2409 TT), while the deletions are Catcher Technology (2474 TT), Cheng Shin Rubber Ind Co., Ltd. (2105 TT), Wiwynn Corp (6669 TT) and Taiwan High Speed Rail (2633 TT). Link to Brian's insight: FTSE TWSE Taiwan 50 Index Rebalance Preview: 4 Potential Changes.

FTSE China A50 Index Rebalance Preview. Brian sees Yihai Kerry Arawana Holdings (300999 CH) and Chongqing Zhifei Biological Products (300122 CH) as potential index inclusions while Offcn Education Technology (002607 CH) and Hengli Petrochemical Co.,Ltd. A (600346 CH) are potential deletions. Link to Brian's insight: FTSE China A50 Index Rebalance Preview: Two High Probability Changes.

KLCI Index Rebalance Preview. Following the announcement of the upcoming inclusion of MR D.I.Y. Group (MRDIY MK) in the FTSE All-World index and confirmation of free float higher than 15%, the stock is a near certainty to be included in the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX) replacing Supermax Corp (SUCB MK). Link to Brian's insight: KLCI Index Rebalance Preview: MRDIY In, Supermax OUT.

KOSPI200 Index Rebalance. There are 5 inclusions and 7 exclusions at the June 2021 review. If SK IE Technology (361610 KS) meets the criteria for index Fast Entry, then HDC Holdings (012630 KS) will be deleted and the announcement will be made on 2 June. Link to Brian's insight: KOSPI200 Index Rebalance: Spot On!.

KOSDAQ150 Index Rebalance. There are 16 inclusions into and exclusions from the index at the June review with an estimated one-way turnover of 7.04%. Link to Brian's insight: KOSDAQ150 Index Rebalance: 16 Changes & Large Turnover.

ASX200 Index Rebalance Preview. Brian sees Orocobre Ltd (ORE AU), Chalice Gold Mines (CHN AU) and De Grey Mining (DEG AU) as potential inclusions in the index replacing Resolute Mining (RSG AU), Austal Ltd (ASB AU) and Perenti Global (PRN AU). Event Hospitality and Entertainment (EVT AU) is a low probability add while the corresponding deletion is G8 Education (GEM AU). Link to Brian's insight: ASX200 Index Rebalance Preview: Gold Miners Shining.

OTHER M&A & EVENT UPDATES

CCASS

My ongoing series flags large moves (~10%) in CCASS holdings over the past week or so, moves which are often outside normal market transactions. These may be indicative of share pledges. Or potential takeovers. Or simply help understand volume swings.

Often these moves can easily be explained - the placement of new shares, rights issue, movements subsequent to a takeover, lock-up expiry, amongst others. For those mentioned below, I could not find an obvious reason for the CCASS move.

Name

% chg

Into

Out of

China Parenting (1736 HK)51.60%GuotaiEmperor
Mongolian Mining (975 HK) 31.94%ICBCHSBC
FSM (1721 HK)60.20%BocomChina Tonghai
Hao Tian (1341 HK)11.51%ABCIOutside CCASS
Wine's Link (8509 HK)28.28%HSBCBNP
Changsha Broad Homes Industrial Group (2163 HK) 26.89%UBSMS
Source: HKEx

The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.

Name

% chg

Into

Out of

Archosaur Games (9990 HK) 12.92%MSOutside CCASS
Jianzhong (589 HK)16.47%BOCIOutside CCASS
Source: HKEx
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