MSCi released this week the results of its quarterly review which will result in the deletion of ACEN Corporation (ACEN) and Globe Telecom, Inc. (GLO) in the MSCi Global Standard Index. <\/p>\n\n\n\n
In addition, Filinvest REIT Corporation (FILRT) and Cosco Capital Inc. (COSCO) will be deleted from the MSCi Small Cap Index. These changes will be implemented on February 28, 2023, Tuesday.<\/p>\n\n\n\n
The effect: the potential deletion of ACEN, GLO and MER from the MSCi indices has been widely speculated during the first few days of January, right after the end of the index review period. Fortunately for Meralco (MER) it was able to retain its membership in the MSCi Global Standard index, much to the dismay of those who are opportunistically looking to buy the stock at discounted prices.<\/p>\n\n\n\n
MSCi primarily considers the stocks\u2019 liquidity, foreign ownership and size to assess which stocks will retain their membership or warrants addition\/deletion to this widely followed index.<\/p>\n\n\n\n
The deletion of ACEN and GLO will result to an indicative outflow of US$90 million (Php4.9 billion) each which is equivalent to ~30 days\u2019 worth and ~29 days\u2019 worth of turnover, respectively, based on their average value turnover over the past 1 month.<\/p>\n\n\n\n
These passive outflows (fund managers indiscriminately following the index composition) have been taken as an opportunity to get the subject stocks at better prices. Once the selling is done by February 28, the share prices of ACEN and GLO are expected to rebound.<\/p>\n\n\n\n
We think GLO is the better horse between the two, considering its 4.8% projected dividend yield for 2023 vs 0.82% 2023 projected dividend yield for ACEN. <\/p>\n\n\n\n
We also think that the 22.6x 2023 PE of ACEN is still rich and trades much higher than the 9.5x 2023 PE of Aboitiz Power (AP). The wide disparity is predominantly due to the ESG premium, which we are not willing to pay. GLO trades at 13.5x 2023 PE, which is the stock\u2019s 18-year average PE.<\/p>\n\n\n\n