IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/pt-avia-avian" target="_blank" data-smartkarma-citation="entities:35034:1" rel="noopener">PT Avia Avian (AVIA IJ)</a> is a market leader in the decorative paints and coatings industry in Indonesia, with around a 20% market share based on sales revenue in 2020. </li>
<li>Avia is seeking to raise up to $405 million at an IPO price range of IDR780-930. Selling shareholders will also raise up to $364 million through a private placement.</li>
<li>The fundamentals are attractive as Avia is delivering strong growth in both its segments, rising group margins and strong cash generation. Overall, we believe that Avia is worth a look.</li>
</ul>



PT Avia Avian (AVIA IJ) is a market leader in the decorative paints and coatings industry in Indonesia, with around a 20% market share based on sales revenue in 2020. 
Avia is seeking to raise up to $405 million at an IPO price range of IDR780-930. Selling shareholders will also raise up to $364 million through a private placement.
The fundamentals are attractive as Avia is delivering strong growth in both its segments, rising group margins and strong cash generation. Overall, we believe that Avia is worth a look.


Avia Avian IPO Initiation: Painting by Numbers

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/pt-avia-avian" target="_blank" data-smartkarma-citation="entities:35034:1" rel="noopener">PT Avia Avian (AVIA IJ)</a>  is looking to raise US$772m in its Indonesia IPO.</li>
<li>Avia Avian (AA) is a paint manufacturer and retailer and the market leader in Indonesia’s decorative paint and coating industry with a market share of 20% based on FY20 revenue</li>
<li>AA offered at a valuation that isn't cheap but still justifiable. We think it should trade towards 44.7x and 38.5x FY22 and FY23 P/E ratios based on selected peers’ average. </li>
</ul>



PT Avia Avian (AVIA IJ)  is looking to raise US$772m in its Indonesia IPO.
Avia Avian (AA) is a paint manufacturer and retailer and the market leader in Indonesia’s decorative paint and coating industry with a market share of 20% based on FY20 revenue
AA offered at a valuation that isn't cheap but still justifiable. We think it should trade towards 44.7x and 38.5x FY22 and FY23 P/E ratios based on selected peers’ average. 


Avia Avian IPO - Leader in Indonesia Paint Industry with Justifiable Valuation

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>TOPIX is constructed differently than other major indices. It has no fixed number of constituents like S&amp;P500, and it has reasonably loose rules on membership, which will soon get tighter as the TOPIX spends a few years matching the TSE Prime market section which launches 1 April 2022, but it probably will still not be tight enough to be a legitimate blue chip index. But it is what we got.</p><p>There is a slew of TOPIX rebalance trades every year. There are monthly "company data" changes. Then there are quarterly changes for FFW. And there is an annual liquidity factor adjustment rebalance. </p><p>On the 7th last week, the TSE announced the July FFW changes. They are bigger than many expected. And more numerous (15 dozen changes). I see a bit over US$2.5bn to sell on the down-weights. </p><p>And some large trades are reasonably impactful. </p><p>More below the fold. </p>

TOPIX is constructed differently than other major indices. It has no fixed number of constituents like S&amp;P500, and it has reasonably loose rules on membership, which will soon get tighter as the TOPIX spends a few years matching the TSE Prime market section which launches 1 April 2022, but it probably will still not be tight enough to be a legitimate blue chip index. But it is what we got.There is a slew of TOPIX rebalance trades every year. There are monthly "company data" changes. Then there are quarterly changes for FFW. And there is an annual liquidity factor adjustment rebalance. On the 7th last week, the TSE announced the July FFW changes. They are bigger than many expected. And more numerous (15 dozen changes). I see a bit over US$2.5bn to sell on the down-weights. And some large trades are reasonably impactful. More below the fold. 

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/176/175/original/2020-12-03_05-39-01.png?1606941555" class="editor-image img-responsive" data-smartkarma-image-id="176175"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics </div></section><div><p><strong>FOUR QUADRANTS PICKS</strong> - Our recent series of Insights covering companies that are extreme outliers in our Relative Price Score/Results &amp; Revision Score matrix has featured the following seven companies:-  </p></div><div>
<ul style="list-style-type: disc;">
<li>
<strong>CONTRARIAN BUYS</strong> - <a href="https://www.smartkarma.com/entities/nikon-corp" target="_blank" data-smartkarma-citation="entities:7117:1" rel="noopener">Nikon (7731 JP)</a>, <a href="https://www.smartkarma.com/entities/fuji-media-holdings-inc" target="_blank" data-smartkarma-citation="entities:3191:1" rel="noopener">Fuji Media (4676 JP)</a>, <a href="https://www.smartkarma.com/entities/east-japan-railway-co" target="_blank" data-smartkarma-citation="entities:14271:1" rel="noopener">East Japan Railway (9020 JP)</a> </li>
<li>
<strong>CONTRARIAN SELLS</strong> - <a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener">M3 (2413 JP)</a>, <a href="https://www.smartkarma.com/entities/disco-corp" target="_blank" data-smartkarma-citation="entities:15817:1" rel="noopener">DISCO (6146 JP)</a> </li>
<li>
<strong>TURNAROUND BUYS</strong> - <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> </li>
<li>
<strong>EX-GROWTH SELLS</strong> - <a href="https://www.smartkarma.com/entities/kao-corp" target="_blank" data-smartkarma-citation="entities:12933:1" rel="noopener">Kao  (4452 JP)</a> </li>
</ul>
<p><strong>2021 HIGH CONVICTION COLLECTION</strong> - For Smartkarma's '2021 High Conviction Collection' we have chosen one of the seven to be our selection. Given the lack of short ideas so far - only two and both in the US - our pick, <a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener">M3 (2413 JP)</a>, is the first Asian, and first Japanese, 'short' to join the Collection.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/176/209/original/2020-12-03_10-35-14.png?1606959327" class="editor-image img-responsive" data-smartkarma-image-id="176209"></figure></section><p><a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener"><strong>M3</strong></a>- M3 is the most extreme outlier of the seven stocks we have featured and was recommended as a 'Suga Growth Long in our Smartkarma Original - <a href="https://www.smartkarma.com/insights/japan-in-the-suga-era-policy-priorities-suga-stocks" target="_blank" data-smartkarma-citation="insights:43773" rel="noopener">Japan in the Suga Era - Policy Priorities &amp; 'Suga Stocks'</a>. Since then the stock has appreciated by 40% and by 10% since we published <a href="https://www.smartkarma.com/insights/japan-four-quadrants-contrarian-sells" target="_blank" data-smartkarma-citation="insights:45725" rel="noopener">Contrarian Sells</a>, adding almost ¥2 trillion in market value M3 is Japan's fifteenth largest company with a market value of ¥6.4 trillion, despite having only ¥144 billion in trailing revenues, ¥43 billion in trailing operating income, and just ¥18 billion in trailing CITC. While valuations may be less of a concern in the momentum-driven post-COVID era, we have highlighted several areas of concern regarding the company's margin-diluting diversification, that suggest that M3's tripling in value seen in 2020 will not be repeated. <strong>M3 is our 2021 'High Conviction Sell' </strong>     </p>
</div>

Source for all charts &amp; tables: Japan Analytics FOUR QUADRANTS PICKS - Our recent series of Insights covering companies that are extreme outliers in our Relative Price Score/Results &amp; Revision Score matrix has featured the following seven companies:-  


CONTRARIAN BUYS - Nikon (7731 JP), Fuji Media (4676 JP), East Japan Railway (9020 JP) 

CONTRARIAN SELLS - M3 (2413 JP), DISCO (6146 JP) 

TURNAROUND BUYS - Softbank Corp (9434 JP) 

EX-GROWTH SELLS - Kao  (4452 JP) 

2021 HIGH CONVICTION COLLECTION - For Smartkarma's '2021 High Conviction Collection' we have chosen one of the seven to be our selection. Given the lack of short ideas so far - only two and both in the US - our pick, M3 (2413 JP), is the first Asian, and first Japanese, 'short' to join the Collection.
M3- M3 is the most extreme outlier of the seven stocks we have featured and was recommended as a 'Suga Growth Long in our Smartkarma Original - Japan in the Suga Era - Policy Priorities &amp; 'Suga Stocks'. Since then the stock has appreciated by 40% and by 10% since we published Contrarian Sells, adding almost ¥2 trillion in market value M3 is Japan's fifteenth largest company with a market value of ¥6.4 trillion, despite having only ¥144 billion in trailing revenues, ¥43 billion in trailing operating income, and just ¥18 billion in trailing CITC. While valuations may be less of a concern in the momentum-driven post-COVID era, we have highlighted several areas of concern regarding the company's margin-diluting diversification, that suggest that M3's tripling in value seen in 2020 will not be repeated. M3 is our 2021 'High Conviction Sell'      


2021 High Conviction 🇯🇵 Sell M3 (2413 JP)

Quantitative Analysis

<p>Long-time Japan strategist Jonathan Allum, most recently of SMBC Nikko, put a guest post titled <a href="https://www.ft.com/content/a97cf336-518d-45dd-8092-ec0363c18725" target="_blank" rel="noopener"><em>Takeaways from 30 years of Covering the Japanese Market</em></a> in the Financial Times on 26 November (Thanksgiving) which is well worth a read.</p><p>He points out that foreign investors in 2020 are likely going to be net dis-investors in Japan for the fourth year in five, fifth year in six, and increasing the net selldown which has occurred since the monster year in 2013. </p><section class="figure"><section class="figure"><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/956/original/Screenshot%202020-11-29%20at%203.07.23%20PM.png?1606633655" class="editor-image img-responsive" data-smartkarma-image-id="174956"></figure></section><p>This data is compiled from the weekly data which shows each investor category. On a net basis across all investor categories, it will be flat because while it shows buybacks on market, crediting the "Business Corporations" category, it does not show the data of investors selling into Tender Offers or the data of investors buying from IPOs.</p></section><p>Of course, the data is not that clean because investing doesn't always happen according to calendar year decisions. </p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/174/969/original/Screenshot%202020-11-29%20at%203.40.57%20PM.png?1606635676" class="editor-image img-responsive" data-smartkarma-image-id="174969"></figure></section><p>It just so happens that the last two really big selloffs in dollar terms (both exceeding ¥6trln on a rolling 52wk basis) did not happen to see start and end points coincide with those of the Gregorian calendar.</p>
<p>There has been an interesting confluence of "lack of participation in the market" this year. After lifting ETF buys in March 2020, the BOJ has slowed down its ETF buying considerably in the past six months (the current 6-month total is near the lower end of the range seen in the past four years), buybacks are down this year as companies slowed their activity in the face of covid-19-induced uncertainty, and foreigners are net sellers. </p>
<p>Of course Japanese insurers are on the verge of extending what will be a 12-year streak of net sells to a 13th year, and it looks like Japanese banks will be extending their net selling to a 14th year in a row. Trust Banks will be net buyers for the sixth year in seven this year, but for at least the fourth year in a row it will be less than the net buying of ETFs by the BOJ so ex-BOJ trust banks will have been net sellers for several years. </p>
<p>Business corporations are up ¥1.335trln year-to-date through the 20th of November, and will almost certainly extend their streak to ten years on the buy side. The interesting net flow this year is the "Proprietary" flow at brokers. This is now positive for ten years in a row, and there are particular reasons for this, as discussed below.</p>
<p>Because of the noise around recent articles about the BOJ and foreign activity, I decided to once again dust off the long-term analytics on Japan investor class flows, and present them here. Because flows net off to close to zero (i.e. there are a certain number of shares, and if some investor class is a net seller, other investor classes must be net buyer(s)), deriving a model for behavior is useful.  Long ago, in roles in fixed income and equity derivatives strategy, I built models of net foreign buying, and they uniformly showed that foreign investors chase/push/drive performance. My final model is a multi-input model which provides a simple combination of two factors they chase.</p>
<p>This insight discusses those behavior models, investor class flow dynamics, cycles, and trends and pressures near-term.</p>
<p>The combination of the investor class flows, and the model which drives net foreign activity, is interesting. I think it helps because the top-down aspect matters for understanding allocation flow.</p>
<p>Read on for the nitty gritty (as usual, we start with Conclusions First).</p></section>

Long-time Japan strategist Jonathan Allum, most recently of SMBC Nikko, put a guest post titled Takeaways from 30 years of Covering the Japanese Market in the Financial Times on 26 November (Thanksgiving) which is well worth a read.He points out that foreign investors in 2020 are likely going to be net dis-investors in Japan for the fourth year in five, fifth year in six, and increasing the net selldown which has occurred since the monster year in 2013. This data is compiled from the weekly data which shows each investor category. On a net basis across all investor categories, it will be flat because while it shows buybacks on market, crediting the "Business Corporations" category, it does not show the data of investors selling into Tender Offers or the data of investors buying from IPOs.Of course, the data is not that clean because investing doesn't always happen according to calendar year decisions. 
It just so happens that the last two really big selloffs in dollar terms (both exceeding ¥6trln on a rolling 52wk basis) did not happen to see start and end points coincide with those of the Gregorian calendar.
There has been an interesting confluence of "lack of participation in the market" this year. After lifting ETF buys in March 2020, the BOJ has slowed down its ETF buying considerably in the past six months (the current 6-month total is near the lower end of the range seen in the past four years), buybacks are down this year as companies slowed their activity in the face of covid-19-induced uncertainty, and foreigners are net sellers. 
Of course Japanese insurers are on the verge of extending what will be a 12-year streak of net sells to a 13th year, and it looks like Japanese banks will be extending their net selling to a 14th year in a row. Trust Banks will be net buyers for the sixth year in seven this year, but for at least the fourth year in a row it will be less than the net buying of ETFs by the BOJ so ex-BOJ trust banks will have been net sellers for several years. 
Business corporations are up ¥1.335trln year-to-date through the 20th of November, and will almost certainly extend their streak to ten years on the buy side. The interesting net flow this year is the "Proprietary" flow at brokers. This is now positive for ten years in a row, and there are particular reasons for this, as discussed below.
Because of the noise around recent articles about the BOJ and foreign activity, I decided to once again dust off the long-term analytics on Japan investor class flows, and present them here. Because flows net off to close to zero (i.e. there are a certain number of shares, and if some investor class is a net seller, other investor classes must be net buyer(s)), deriving a model for behavior is useful.  Long ago, in roles in fixed income and equity derivatives strategy, I built models of net foreign buying, and they uniformly showed that foreign investors chase/push/drive performance. My final model is a multi-input model which provides a simple combination of two factors they chase.
This insight discusses those behavior models, investor class flow dynamics, cycles, and trends and pressures near-term.
The combination of the investor class flows, and the model which drives net foreign activity, is interesting. I think it helps because the top-down aspect matters for understanding allocation flow.
Read on for the nitty gritty (as usual, we start with Conclusions First).

JAPAN FLOW:  Foreign Investor Flows Still Matter (Redux, Reduxed) - Playing Catchup

Japan

NIPPON PAINT HOLDINGS CO., LTD. produces paints for automobiles, ships, and other industrial paints.  The Company also manufactures fine chemicals such as finishing agents and adhesives.

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Nippon Paint Holdings (4612 JP)

Avia Avian IPO Initiation: Painting by Numbers

Avia is seeking to raise up to $405 million at an IPO price range of IDR780-930. Avia is delivering robust growth, rising group margins and strong...

Arun George

Avia Avian IPO - Leader in Indonesia Paint Industry with Justifiable Valuation

PT Avia Avian (AVIA IJ) is looking to raise US$772m in its Indonesia IPO. We think that valuation is justifiable at the IPO price range.

Sumeet Singh

July TOPIX FFW Rebalancing Trade

The TOPIX July FFW rebalance is large this year, on what is generally an overlooked rebalance trade. There are several multi-hundred million...

Travis Lundy

2021 High Conviction 🇯🇵 Sell M3 (2413 JP)

2021 HIGH CONVICTION COLLECTION - For Smartkarma's '2021 High Conviction Collection' we have chosen one of our seven RPS/RRS outliers to be our...

Campbell Gunn

JAPAN FLOW: Foreign Investor Flows Still Matter (Redux, Reduxed) - Playing Catchup

The Japanese market has unusual flow cyclicality. Foreigners take price. They have been net sellers. They buy when USD-denom TOPIX outperforms....

Travis Lundy

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