This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. NVIDIA’s >5x YoY “Singapore” Revenue Growth Is A Red Flag
- NVIDIA delivered another blockbuster quarter with record revenues of $30 billion, blowing well past the guided $28 billion, up 15% QoQ and up 122% YoY.
- $5.6 billion in revenues were attributed to Singapore, making up more than 18% of overall revenues and up >5 times YoY
- What the heck is the city state doing with all of those GPUs?
2. TSMC (2330.TT; TSM.US): 2024 Top Clients
- TSMC’s top 5 clients for 2024 are Apple (AAPL US), Advanced Micro Devices (AMD US, Qualcomm Inc (QCOM US), Mediatek Inc (2454 TT) and NVIDIA Corp (NVDA US).
- Smartphone orders continue to dominate at TSMC, with QCOM and MediaTek being key clients.
- Looking ahead to 2025, Intel Corp (INTC US) is expected to rely more on TSMC, potentially leading to changes in TSMC’s client ranking.
3. Taiwan Dual-Listings Monitor: TSMC Maintaining Strong Premium; UMC Headroom Continues to Decrease
- TSMC: +15.4% Premium; Wait for Closer to 20% Before Opening Fresh Short
- UMC: +1.2% Premium; Can Consider Shorting at 1.5% or Higher; Headroom Continues to Decrease
- ASE: +5.2% Premium; Wait for More Extreme Levels Before New Trade
4. Taiwan Tech Weekly: Nvidia Results Imminent; Apple IPhone 16 Reveal Date; Micron’s Taiwan Expansion
- Nvidia, Dell, Marvell results coming out this week.. Apple iPhone 16 Reveal September 9th?
- Micron progressing on potential Taiwan capacity expansion due to strong HBM DRAM demand
- AMD acquires a key U.S. server systems integrator, expanding its enterprise server opportunity in a market including Taiwan’s server ODM players such as Hon Hai, Wiwynn, Inventec, Quanta, and Compal.
5. Intel Missed the Party, while AMD’s ZT Systems is the Bet to Stay in the Game
- First, let’s start with Intel. Intel had a pretty poor earnings result. There’s no two ways about it.
- Intel reports Q2 EPS $0.02 ex-items vs FactSet $0.10, announces $10B cost reduction plan; suspends dividend
- There was another layoff of around 15% of employees, a full dividend suspension (finally, guys), and a capex cut.
6. Earnings Preview (Nvidia and Marvell)
- It’s about to be primetime for the AI semiconductor trade, and for the first time in a long time (maybe ever), I wanted to write an earnings preview. It might be the first time (ever) and hopefully the last time.
- Two critical companies report this week. I’ll start with Marvell, the less important but the one I like, and then talk about some exciting dynamics at Nvidia that could lead to volatility and why it might not even matter.
- Marvell has always been a favorite of this newsletter. I won’t lie; I root for the hometown on this one. Inphi was my first paid post, and it worked out with a buyout by Marvell only two weeks later.
7. MHI (7011 JP): Election Unlikely to Affect Defense Budget
- The next leader of Japan’s ruling LDP, who will almost certainly become prime minister in October, will probably not make major changes to the nation’s defense policy.
- Guidance remains unchanged after 1Q results that suggest the possibility of a better than expected order flow but also a material negative impact from a stronger yen.
- MHI’s valuation is not yet in speculative territory, but neither is it compelling. If the yen remains stable, we expect the share price to test its recent highs.
8. Silergy (6415.TT): 2024 Can Be Operating Trough, and Revenue in 2025 Is Expected to Grow by 20-30%.
- Company’s 2Q24 overall performance exceeded expectations, and 3Q and 4Q are expected to be flat and to grow by 10-20% per quarter, respectively.
- With expectations of continued improvement in ASP and cost structure, overall gross profit margin is expected to continue to grow.
- Gen4 (12″) is mainly applied in EV, AI server, and new energy sectors, as these applications have higher specification requirements.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Terumo (4543 JP) Secondary Offering – Smaller Than It Looks
- On Thursday 29 August, Terumo Corp (4543 JP) announced a secondary offering where 7 major cross-holders would sell just under 5% of the shares outstanding to international investors.
- In recent quarters, Terumo has seen better consensus EPS growth than Peers in recent quarters, and Peers have underperformed. Right now, Terumo isn’t ‘cheap’ but consensus growth is strong.
- This back-end demand in this case has enough moving parts that it bears a closer look.
2. Terumo Placement – US$1.4bn Secondary Selldown, Buyback Should Aid Deal Dynamics
- A group of shareholders are looking to raise around US$1.36bn from selling ~5% stake in Terumo Corp (4543 JP).
- While the deal shouldn’t come as a surprise, given the ongoing cross-shareholding unwind narrative in Japan, the timing of such a selldown isn’t always certain.
- In this note, we will talk about the placement and run the deal through our ECM framework.
3. Initial Thoughts on the Kioxia IPO – Impact on SK Hynix and Samsung Electronics
- Kioxia is getting ready to complete its IPO in Japan as soon as in October. Kioxia’s valuation is expected to exceed JPY 1.5 trillion (about USD 10.3 billion).
- SK Hynix’s stake in Kioxia (through Bain led consortium) is 19%. SK Hynix’s stake in Kioxia would rise to 34% if the CBs are converted into equity.
- The IPO of Kioxia has mixed implications for SK Hynix which is a major shareholder. However, the IPO of Kioxia has a more direct negative impact on Samsung Electronics.
4. Kioxia IPO Early Re-Look – Better Placed This Time Around
- Kioxia Holdings (6600 JP) aims to list in Japan by Oct 2024 at a valuation of over US$10bn, as per media reports.
- Kioxia is a manufacturer and a global leader in flash memory and solid state drives for smartphones, PCs, enterprise servers and data centers
- In this note, we take an early look at the possible listing.
5. Terumo (4543 JP): A US$1.4 Billion Secondary Offering
- Terumo Corp (4543 JP) has announced a secondary offering of up to 73.2 million shares, worth JPY203 billion (US$1.4 billion) at the last close.
- The secondary offering facilitates the exit of large shareholders. Terumo also announced a buyback worth a maximum of JPY30 billion or 15 million shares.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 10 and 12 September (likely 10 September).
6. Interglobe Aviation (Indigo) Placement – Another US$800m+ Deal, This Time by the Correct Co-Founder
- InterGlobe Aviation Ltd (INDIGO IN)’s co-founder, Rakesh Gangwal, aims to raise around US$850m via selling around 3.8% stake in Indigo.
- He had earlier stated his intention to pare down his stake after a long drawn, and very public battle, with his co-founder Rahul Bhatia. He has sold many times before.
- In this note, we will talk about the lockup dynamics and possible placement.
7. Keppel Infra Trust Placement – While the Raising Is Relatively Large, Its past Deals Have Done Well
- Keppel Infrastructure Trust (KIT SP) is looking to raise around S$206m (US$158m) in its primary placement.
- Proceeds will be used to pay down its bridge loan facility linked to its Ventura acquisition. KIT also appears to have secured its unitholders’ approval for the raising earlier.
- In this note, we run the deal through our ECM framework and comment on deal dynamics.
8. Hyundai Motor India IPO Valuation Analysis
- Our base case valuation of Hyundai Motor India is market cap of US$18.6 billion, based on P/E of 24.4x our estimated net profit of 64.1 billion INR in FY25.
- There have been some increasing concerns about Hyundai Motor India paying out higher royalty to its parent Hyundai Motor and dividend to shareholders, which could lower profit.
- According to a recent article by livemint, the expected valuation of Hyundai Motor India has fallen to about USD16 billion to USD20 billion.
9. STCube: Rights Offering Capital Raise of 89 Billion Won
- STCube announced it plans to increase capital by 89 billion won (13 billion won through a third party rights offering and 75.7 billion won through shareholder preferred capital increase).
- We have a positive view of STCube’s capital raise and there could be some alpha generating returns in our view.
- The fact that the company’s share price surged nearly 5x from the last rights offering in May 2022 (to October 2022) is likely to positively impact capital raise this time.
10. Hamamatsu Photonics (6965) – Toyota Selling Yet Another Cross-Holding
- Today after the close we got news that after a year-plus of Hamamatsu Photonics Kk (6965 JP)‘s sliding stock price, Toyota Motor (7203 JP) is selling their 5+% stake.
- The offering is standard. Probably prices 9 Sep 2024. HP’s amended buyback program and probable index upweights offset most of the offering size over the next several months.
- So investors have to decide whether they want to catch the falling knife.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. Updates on The Couche-Tard Deal for 7&I (3382 JP)
- Today saw the publication of three different articles regarding the Alimentation Couche-Tard (ATD CN) approach and offer to purchase all the shares of Seven & I Holdings (3382 JP)
- The first in the Nikkei said ATD could push offer a high price, even up to ¥8 trillion. The second mentioned debt financing being feasible because of prodigious cash flow.
- The third in Bloomberg noted that 7&i had requested the government upgrade its FEFTA status to “core”, which would lead to a more burdensome/restrictive government approval process.
2. Toyota Partial Offer Results – What Next?
- Today after the close, Toyota Motor (7203 JP) reported the results of their ¥800bn Tender Offer Buyback, originally intended to repurchase 290.12mm shares from cross-holders.
- In the end, 343.83mm shares were tendered (53.71mm shares more than originally expected, worth about ¥150bn at Tender Price). That creates back-end “issues” which must be considered.
- The resulting supply/demand profile is mixed, but on balance, I expect sees positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.
3. Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
- Zomato (ZOMATO IN) has a market cap of over US$27bn but is not a member of the NIFTY Index and S&P BSE SENSEX Index since it is not an F&O member.
- Once SEBI’s proposed and enhanced stock inclusion thresholds are implemented, Zomato (ZOMATO IN) should be added to the F&O segment of the market.
- Passive NIFTY Index and S&P BSE SENSEX Index will have to buy a lot of Zomato stock at subsequent rebalances. The impact will be higher given the lower real float.
4. Shin Kong (2888.TW) And Taishin (2887.TW) Agree to Merge, But It Isn’t Clean, And It’s A Bad Price
- After rumours were rekindled a week earlier, on 22 August 2024, Taishin Financial Holding (2887 TT) and Shin Kong Financial Holding (2888 TT) announced they would merge.
- The ratio is 0.6022 shares of Taishin for every share of Shin Kong putting NEWCO assets at about the level of Taiwan #3 CTBC Financial. That’s bad.
- There’s history here. LOTS of history. This would need approvals from the FSC and FTC, but CTBC is already a spoiner, and the SKFH Board Meeting was anything but clean.
5. Huafa Property (982 HK): Buy With Both Hands
- A state-owned Offeror pitching a lifetime high Offer Price – with a solid premium – for an illiquid company? Sounds like a slam dunk.
- Yet property manager Huafa Property Services Group (982 HK) has perennially traded wide to Huafa Industrial Co., Ltd. Zhuhai (600325 CH)‘s terms. This is not justified.
- The Scheme Meeting/SGM is tomorrow (28 August), with payment on (or before) the 30 September. Or a gross/annualised return of 4%/46%. Buy here. Then buy some more.
6. Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Nuvoton Could Drop Some More
- With the review period complete, Nuvoton Technology (4919 TT) is a near certain deletion from the Yuanta/P-Shares Taiwan Dividend Plus ETF in September.
- Passive trackers will need to sell 20m shares in Nuvoton Technology (4919 TT). That is over 10% of float and the stock could continue to remain under pressure.
- The potential deletion still appears to be under positioned. There could be renewed selling in the stock over the next few weeks.
7. Jardine Matheson (JM SP): Trading “Cheap”
- I see Jardine Matheson Holdings (JM SP)‘s discount to NAV and implied stub at 12-month lows.
- Recent interim results were okay. Stripping out DFI Retail Group Holdings (DFI SP)‘s outperformance, the remainder of the Jardine stable delivered weaker numbers.
- Further afield, the implied stub is marginally below the long-term average since the Jardine Strategic Holdings (JS SP) circularity was collapsed in April 2021.
8. NIFTY NEXT50 Index Rebalance: 7 Changes on Expected Lines
- There are 7 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) that will be implemented at the close on 27 September. Changes are on expected lines.
- Estimated one-way turnover for the Nifty Next 50 Index (NIFTYJR INDEX) is 19.6% resulting in a one-way trade of INR 63.64bn (US$759m). Many stocks have over 1x ADV to trade.
- The adds have outperformed the deletes this year but there has been big underperformance over the last month as stocks expected to benefit from rural spending have rallied.
9. Shinko Electric (6967) Deal Approval Delayed; From Here, Big Gap-, Small Break-, Some Delay-Risk
- Today after the close, Shinko Electric Industries (6967 JP) offered a progress report on the approvals for the JIC Consortium Tender Offer originally “scheduled” to start in late August 2024.
- “Procedures and Steps Necessary under the competition laws of Vietnam and China have not been completed” so the Tender Offeror expects to commence the Tender Offer in/after late January 2025.
- The announcement appears to suggest no update is likely for another five months or until the Tender Offer starts. That will introduce questions of further delay.
10. Yamaha Motors (7272 JP) – Secondary Offering as Toyota Sells Down – Easy To Digest
- On Firday 23 August, Yamaha Motor (7272 JP) announced that three cross-holders would sell about 4.6% of the shares out in a secondary sale.
- MS&AD was expected. Toyota was probably expected. Yamaha Corp is a bit of a surprise. But it also frees up Yamaha Motor to sell down cross-holdings (top 2 are Toyota/Yamaha).
- Given the price/guidance/dividend yield and limited size, this should be quite easy to place.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. Gold: Fakeout or Generational Buying Opportunity?
- Gold has reached another all-time high at 2500, will history repeat itself? Is this another generational buying opportunity or a bull trap fakeout?
- We conclude that the upside breakout in gold prices has more room to run, though the market is extended and could pull back at any time.
- A long-term point and figure analysis of monthly prices using a 5% box and 3-box reversal shows a measured objective of 4406.
2. India to Become Next China?
- India’s rapid economic growth, coupled with China’s recent economic challenges, has fueled discussions about whether India can become the next global economic power, as China has done for decades.
- China and India, Asia’s two largest economies, have taken different economic paths in recent years.
- Analysts at UBS Global Research pointed out: “China’s post-epidemic economic recovery is weak, while India’s performance is strong.”
3. Steno Signals #114 – A Powell Put is Ueda’s Catastrophe
- Happy Sunday from Denmark!I’ve had a few days to digest Powell’s speech from Friday, and my takeaway is unequivocally dovish.
- Powell and the committee have signaled that they will not tolerate further cooling of the U.S. labor market without responding.
- This marks a full-blown shift in priorities, with inflation numbers now taking a backseat to labor market data going forward.
4. China Unlikely to Escape Middle-Income Trap Without Social or Political Reform
- As economic growth of China move to sub-5% level (a figure which may have been manipulated upward), the living standard of its lower-middle and lower class are hopeless to improve.
- Standing at USD12970 in 2023, the capita real GDP grows much slower than previous decade.
- This is the middle income trap which is experienced by other middle-income Asian countries as well, like Philippines, Thailand, and Malaysia.
5. EM Watch: 5 Charts on the Nosediving Chinese Indicators!
- China’s exports fired on all cylinders during the spring, but we are now starting to see signs of fading inventories in the US (and to some extent, Europe) again.
- We believe the front-loading of imports, with rising freight rates being a symptom of this, propelled the Chinese economy ahead of the feared tariffs implemented by the Biden administration and potentially increased under a Trump presidency.
- We know that Chinese exporters have front-loaded exports of cars and other goods ahead of the tariff deadlines in both the US and Europe, and we are now seeing freight rates moderating alongside some concerning nowcasts out of China.
6. The Week At A Glance: The slippery slope of data revisions
- Happy Monday from Europe.
- Powell is cutting, Ueda is hiking and USDJPY is heading lower.
- It sounds like a tune we have heard before, and while we are NOT on imminent recession watch, we need to be aware of the potential slippery slope once the revised cat is let out of the bag.
7. China Consumption Disappoints
- China consumption patterns are slowing and becoming more volatile at a sub sector level. There is also less certainty over new employment and wage growth.
- China’s consumption is vital to growth when production is transitioning from old economy dependency on residential investment, steel, cement and other industries.
- We forecast GDP to slow in H2 and be 4.0% in 2025
8. Energy Cable: On the inventory build-up due to China-tariffs
- The Chinese rebound story is losing momentum fast, which has important implications for Western economies and assets, while the impact from freight rates on inflation might not be as large as previously feared.
- Take aways Beta from freight rates to goods inflation is lower than usual due to inventory building in the USChinese retail and IP down some 10% from the pre-pandemic trend China’s export of disinflation will force policy makers in the West to introduce tariffs and subsidies Greetings from a sunny Copenhagen.
- This week we’ll discuss freight rates and what inventory data tells us to expect going forward and then we’ll dive into some more data points on the weak Chinese economic outlook.
9. Real Estate: India/China Rotation Sparks Sector Growth
- Uptick in Real Estate positioning driven by a shift towards Indian Real Estate stocks, which has outweighed reductions in exposure to China & HK Real Estate
- Three names stand out: Phoenix Mills, Macrotech Developers, and DLF Limited, all of which have seen ownership rise to record levels.
- New positions in Indian Real Estate by Allianz and JKC have been offset by closures in Chinese Real Estate by LO Funds and SEB, among others.
10. How Different Is the Current Unemployment Behavior?
- A climb in the unemployment rate can be associated with recessions, especially when dominated by a negative change in employment
- But the recent rise in the unemployment rate through July does not seem to be consistent with the characteristics of prior recessions on balance
- Nevertheless, further increases in the unemployment rate need not be of the same breed
Entity | Insights | Analytics | News | Discussion | Filings | Reports |
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. TSMC Foundry 2.0: Strategic Shift Or Brand Tinkering?
- TSMC Foundry 2.0 more than doubles its addressable market and resets its market share to 28%, down from the ~60% share it has long enjoyed in the “traditional” foundry market
- The lion’s share of this new market will come from IDM, a combination of increased outsourcing (e.g. Intel) and new JV deals (e.g. Germany and Japan)
- Foundry 2.0 reflects the reality of how the semi industry is evolving and it’s the polar opposite of Intel’s IDM 2.0
2. Taiwan Tech Weekly: Taiwan Rebound Lagging Nvidia; Why TSMC’s ‘Foundry 2.0’ Is Significant
- Taiwan Tech Stocks Rally, But Lag Nvidia’s Massive Rally; Prepare for Nvidia, Dell, HP Results Next Week
- Hon Hai & Zhen Ding Show No Major AI Slowdown; Taiwan AI Supply Chain Names Lag Nvidia’s Rebound
- TSMC Foundry 2.0: Strategic Shift Or Brand Tinkering? Why It Is Significant
3. Q224 DRAM, NAND Revenues Grow For The Fifth Quarter In a Row
- DRAM revenues amounted to $23.3 billion in Q224, representing increases of 28.3% QoQ and 110.5% YoY.
- In the case of NAND, Q224 revenues amounted to $16.5 billion, representing increases of 17% QoQ and 83% YoY.
- Unprecedented demand for HBM & DDR5, robustly increasing content per box for both PC & Smartphone, looming capacity constraints, more/better LTA coverage are all mounting tailwinds for the memory segment
4. AMD Scales Up Just As Intel Scales Down
- AMD announced their intention to acquire hyperscale solutions Provider ZT Systems in a cash and stock transaction valued at $4.9 billion
- The real target of the deal is the 1,000 Data Center design engineers all of who will transfer directly to AMD’s engineering team with an annual OpEx of $150 million
- This is AMD scaling up to grab a larger share of the ~$400 billion by 2027 AI Data Center TAM just as Intel is scaling down its workforce by 15,000
5. Hon Hai & Zhen Ding Show No Major AI Slowdown; Taiwan AI Supply Chain Names Lag Nvidia’s Rebound
- Hon Hai’s Latest Key Take Aways — No Slowdown for AI Server or Mobile Demand Indicated
- Zhen Ding — Delivers Higher Than Expected 2Q24 Growth; No Indication of AI Server or Mobile Slowdown
- Taiwan AI Supply Chain Names Have Lagged Nvidia’s Massive Rebound Since August 9th
6. Could a Japan “Megaquake” Disrupt Semis?
- Japan’s Meteorological Agency has issued a warning of an upcoming serious 8-9-point earthquake
- The expected epicenter is home to at least one dozen semiconductor wafer fabrication plants: “Fabs”
- While it’s hard to predict earthquakes, this news should be considered when investing in the area.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. COLOWIDE (7616) – UGLY Register On Expensive Co Needs a Capital Construct Upgrade, Won’t Get It Here
- Colowide Co Ltd (7616 JP) is an industrial fastish-food operator in Japan. They sell several dozen kinds of cuisine under several dozen brands, owned and franchised in Japan and overseas.
- The company “philosophy” is “Everything we do is for our customers and employees.” The stock is up 30% in 10yrs. It pays no dividend, but it pays a big yutairimawari.
- This means Real World Float is 100% owned by retail who want restaurant coupons. This offering will be bought by index, short covers, and another 20-30k coupon holders.
2. Colowide Placement – Needs a Very Large Correction
- Colowide Co Ltd (7616 JP) aims to raise around US$230m in order to fund its prospective M&A transactions over the next few years
- While the company has undertaken a number of M&A transactions in the past, it hasn’t clearly stated its intended targets for this round.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
3. Peptron Rights Issue: The 25% Discount Is an Attractive Outright Position Opportunity
- Peptron’s lack of single-stock futures means no risk-free arbitrage but also less speculative selling, making the 25% discount an attractive outright position opportunity.
- The low capital increase rate may stabilize the stock price, and more forfeited shares could lower the cost of securing subscription rights during the trading window.
- Consider buying rights during the trading period or targeting forfeited shares. Conservatively estimate the final offering price range to set a profitable cost for securing rights.
4. Lumir IPO Preview
- Lumir is getting ready to complete its IPO on KOSDAQ in September. The IPO which is expected to raise between 49.5 billion won to 61.5 billion won.
- Lumir specializes in the development of observation satellite technology including image data processing devices and onboard computers for a number of government satellite series.
- Lumir had sales of 12.1 billion won (up 90.5% YoY) in 2023. Its sales surged by 477% YoY to reach 8.2 billion won in 1H24.
5. Bajaj Housing Finance Pre-IPO – Peer Comparison – Bigger and Faster
- Bajaj Housing Finance (BHF IN) is looking to raise around US$830m in its upcoming India IPO.
- BHF is a non-deposit taking housing finance company engaged in mortgage lending since FY18. Its mortgage products include home loans, loans against property, lease rental discounting and developer financing.
- We have looked at the company’s past performance in our earlier notes. In this note we will undertake a peer comparison.
6. Hyosung Siblings’ Cross-Transfers Are Done: The 10%+ Hyosung Corp Stake Block Deal Remains
- The Hyosung siblings swapped ₩60B in shares over August 13-14, raising the elder brother’s Hyosung Corp stake to 40.9% and lowering HS Hyosung below 3%.
- The younger brother must sell additionally at least 11.2% of his 14.2% Hyosung Corp stake. The elder brother may buy, but his cash position and 40% stake limit his need.
- This block deal will be the first to apply the new pre-disclosure rule. So, we should use it to test how the rule affects price movements for better entry timing.
7. Ecom Express Pre-IPO Tearsheet
- Ecom Express Limited (1062300D IN) is looking to raise about US$310m in its upcoming India IPO. The deal will be run by Axis, IIFL Securities, Kotak and UBS.
- Ecom Express operates a pan-India express logistics network covering first-mile pick-up, mid-mile transportation and last-mile delivery as well as reverse logistics (returns) and fulfilment services (warehousing).
- According to Redseer, the company had the widest pan-India coverage and in Tier 2+ regions compared to its peers, covering over 27,000 PIN codes, as of March 31, 2024.
8. Hero Fincorp Pre-IPO – The Positives – Riding on the Parent’s Brand
- Hero FinCorp (HF) is looking to raise around US$438m in its upcoming India IPO.
- HF is a non-deposit taking NBFC. It offers a suite of financial products catering primarily to the retail segment and the MSME customer segment in India.
- In this note, we talk about the positive aspets of the deal.
9. Zomato Placement – Momentum Is Very Strong, past Ant Related Deals Have Been Mixed
- AntFin is looking to raise around US$400m by selling around 2% of Zomato (ZOMATO IN).
- Ant Group had earlier sold some of its stake in Nov 2023 and Mar 2024, with the deals producing a mixed bag result.
- In this note, we talk about the deal dynamics and run the deal through our ECM framework.
10. 99 Speedmart Holdings IPO – Digestible Valuation
- 99 Speed Mart Retail Holdings (99SPD MK) is looking to raise US$530m in its Malaysia IPO. The IPO will be a mix of primary and secondary shares.
- 99 Speed Mart Retail Holdings (99 Speedmart) operates the “99 Speedmart” chain of mini-market outlets, retailing daily necessities across Malaysia.
- In our previous notes, we looked at the firm’s past performance. In this note, we undertake a peer comparison and discuss our thoughts on valuation.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. MEGA M&A! 7&I (3382 JP) Gets Non-Binding Bid from Alimentation Couche-Tard (ATD CN)
- Today, part-way through the day, the Nikkei ran an article saying that Alimentation Couche-Tard (ATD CN) had made a confidential non-binding proposal to buy Seven & I Holdings (3382 JP).
- 7&i shares obviously went up (limit up in a hurry, staying there, large size traded limit up at close).
- Now things get complicated. 7&i has said they received a non-binding proposal for all the shares. There will be a Special Committee of all Independent Directors. All stakeholders will matter.
2. JD.com (9618 HK): Index Implications of Walmart Placement
- Media reports indicate that Walmart (WMT US) is looking to sell 144.5m shares of JD.com (JD US) to raise up to US$3.74bn. That would be substantially all of its stake.
- There will be passive buying from global index trackers at the time of settlement of the placement shares and could absorb around 12% of the placement shares.
- There will be no passive buying from HSI, HSCEI, HSTECH and HSIII trackers in the short-term. An increase in CCASS holdings should result in passive buying in December.
3. Couche-Tard Bid for 7&I (3382) – FEFTA and Economic Security
- The largest potential inbound cross-border M&A in years – for a national champion no less – gets a lot of press coverage.
- This morning, a Nikkei article noted Alimentation Couche-Tard (ATD CN) was likely to need “prior approval” from Japanese regulatory authorities for its takeover “the Nikkei has learned.”
- It wasn’t difficult for the Nikkei to learn that. METI publishes a FEFTA List. 7&i has been on it for years as Type II Designated Business, requiring prior approval.
4. Seven & I Holdings (3382 JP): Couche-Tard “friendly” Proposal Likely to Go Nowhere
- Seven & I Holdings (3382 JP) shares rose 22.7% as it confirmed media reports that it had received a confidential, non-binding preliminary proposal from Alimentation Couche-Tard (ATD CN).
- The interest is unsurprising due to the weak share price performance. Since ValueAct’s open letter on 25 January 2022, the shares are up 5.2% vs. the Nikkei 225 up 38.0%.
- Couche-Tard aims for a friendly offer, which is challenging as it requires support from the founder’s family and the Japanese government. Therefore, the probability of a binding proposal is low.
5. Hang Seng Internet & IT Index Rebalance: Three Changes & A Few Surprises
- There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the September rebalance. There are some surprises.
- Estimated one-way turnover at the rebalance is 3.4% resulting in a round-trip trade of HK$2.04bn (US$262m). 7 stocks will have over 1x ADV to trade.
- Weimob Inc. (2013 HK) is a surprise add. There is 6x ADV to buy from passive trackers and shorts are 12% of shares out and 24x ADV to cover.
6. Apple Inc (AAPL US): $43bn Passive Buying Driven by Berkshire Selling & Market Consultation
- Berkshire Hathaway Inc Cl B (BRK/B US) held over 5% of Apple (AAPL US). Nearly half of that was sold in the June quarter to take the holding to 2.63%.
- Berkshire’s selling should result in an increase in Apple (AAPL US)‘s free float in the S&P 500 INDEX (SPX INDEX) and other related indices.
- There will also be large buying in Apple (AAPL US) from the Technology Select Sector SPDR (XLK US) ETF if the proposals in the market consultation are implemented.
7. TCM (570 HK): Profit Warning Is No Biggie
- China Traditional Chinese Medicine (570 HK) flagged a 60-70% drop in its 1H24E net profit versus 1H23, due to reduced sales/profit of TCM concentrate, bad debt provisions, and remedial taxes.
- MAC triggers? No – Sinopharm won’t exercise such right, even if one was ostensibly triggered. I’d be surprised if Sinopharm wasn’t fully aware of TCM’s underlying operations.
- Get involved on any dips today. Trading wide at a 11.7%/38.7% gross/annualised spread, assuming Dec-end payment.
8. HSTECH Index Rebalance: ASMPT (522 HK) Replaces Ping An Healthcare (1833 HK)
- As expected, ASM Pacific Technology (522 HK) will replace Ping An Healthcare and Technol (1833 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 6 September.
- Estimated one-way turnover at the rebalance is 3.2% resulting in a round-trip trade of HK$6.5bn. Passives need to buy over 7x ADV in ASM Pacific Technology (522 HK).
- Positioning appears light in both stocks. Expect ASM Pacific Technology (522 HK) to move up and Ping An Healthcare and Technol (1833 HK) to move lower near-term.
9. China Traditional Chinese Medicine (570 HK): Never a Dull Moment as Profit Warning Lands
- China Traditional Chinese Medicine (570 HK) profit warning notes that the 1H24 net profit would decrease by 60%-70% YoY due to pricing pressure, higher impairment losses and remedial taxes.
- The profit warning could pose a risk to the scheme, as the consortium can withdraw if there is an adverse material change in China TCM’s profits or prospects.
- If there were a danger of triggering the MAC clause, the consortium would not have made the regulatory submissions. The flip side is that the warning helps the shareholders vote.
10. Guzman Y Gomez (GYG AU): Free Float to Determine Index Inclusion
- Guzman Y Gomez (GYG AU) listed on 20 June and is eligible for inclusion in the S&P/ASX family of indices at the September rebalance.
- Whether the stock is included in indices depends on the index providers estimate of free float. We expect index providers to assign floats of between 25-35% for the stock.
- Inclusion in one global index could come in November and another in December. Inclusion in the S&P/ASX indices will depend on whether float is higher than 30% or lower.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. Four Reasons To Be Tactically Bullish
- The U.S. stock market is poised for a period of continued strength.
- Four reasons to be tactically bullish on stocks: price momentum; a sentiment reset from bullish to caution; the historical bullish record of VIX spikes; and positive internals.
- We continue to favour non-Magnificent Seven leadership for the next bull phase.
2. Energy Cable: China is killing the commodity super cycle
- Take aways: Low margins and high stock levels mean that China will export its excess metal capacity. Other commodities like crude and its derivatives look weak as well. Gold only strong performing commodity in China due to domestic economic weakness .
- Welcome to this week’s energy cable with a focus on the economic troubles in China and its impact on commodity prices.
- This week’s piece will have a lot of charts, therefore we’ll keep the text short.
3. The Week at a Glance: The USD in the (Jackson) Hole amidst Over 1 Million Jobs Disappearing?
- Welcome to our weekly “The Week At A Glance” publication, where we explore the most important key figure releases and tradeable themes for the upcoming week.
- We remain almost exclusively long on USD fixed income, and therefore, our attention is particularly focused on two key developments this week:
- The Jackson Hole Conference and Ueda’s Appearance in the Japanese Parliament. Revisions to U.S. Employment Data: The Bureau of Labor Statistics (BLS) will release first-quarter 2024 data from the QCEW on August 21, 2024, at 10:00 a.m. (ET).
4. VIX Went Cray Cray
- Recent market disruptions, including a dramatic rally in the yen and a significant increase in the VIX, have raised concerns
- The convergence of US and Japan CPI rates may have contributed to the narrowing of Fed BoJ policy spread
- The VIX’s large move on August 5, 2019, has sparked concerns about the stability of the S&P options market and the potential impact on global risk levels
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
5. Emerging Markets: Structural Shifts as Allocations Stabilise Among Global Funds.
- Emerging Market allocations are stabilizing among active Global equity funds.
- Country-Level shifts show China & HK allocations more than halving since 2022, while Taiwan has seen strong gains. India becomes the top country underweight.
- Alibaba has declined to record lows, Tencent ownership is stabilizing, and TSMC has reached new highs.
6. BUY/SELL/HOLD: Hong Kong Stock Updates (August 21)
- Hong Kong market showed defensiveness during early August selloff and the overall breadth of the market continues to improve.
- J&T Global Express (1519 HK) received upgrades after reporting strong 2Q24 results. Its SEA and China business showed growth in revenue and profitability.
- Galaxy Entertainment Group (27 HK) received an upgrade after revenue and EBITDA approached pre-COVID levels. FIT Hon Teng (6088 HK) is seeing improvement in AI server, AirPod, and EV segments.
7. China Is One Step Closer to Its ‘Event Horizon” in the Property Market
- The latest policy proposal is one step closer but still incremental
- Incremental steps taken so far have been ineffective in the short-term
- The ideal solution would be full intervention by the Central Government
8. US Rates Strategy: July CPI, Jackson Hole, and Jittery markets
- Inflation rates are gradually slowing, with both headline and core inflation in line with expectations and at multi-year lows
- Housing prices showed more firming than expected, particularly in rental markets
- Markets are pricing in very soft core CPI inflation over the coming months, with expectations for gradual disinflation and a focus on wage growth by the Fed
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
9. Macro/Rates Watch: When the entire foundation rests on liquidity
- What a July we’ve had.
- The G3 central banks have now received plenty of labor market data that justifies cutting rates fairly aggressively.
- In our opinion, this is a tricky trend to resist, even if market pricing does admittedly seem aggressive.
10. Steno Signals #113 – Neither Inflation, Growth, Nor Liquidity is rising right now
- As most of you know, we remained upbeat on the cycle until around mid-July, as growth parameters continued to perform solidly in real-time, while inflation also posed a risk of re-acceleration.
- Our real-time tracking of the three main macro parameters is the cornerstone of our macro thinking, and through July and August, we have begun to observe a significant shift.
- The risk of rising inflation has collapsed, while growth momentum has also weakened substantially.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. Taiwan Dual-Listings Monitor: TSMC Strong Spread Rebound Into Short Zone; ASE Remains Broken Down
- TSMC: +16.1% Premium; Strong Spread Rebound, Potential Opportunity to Short the Spread
- UMC: +1.6% Premium; Consider Shorting the Spread at This Level
- ASE: +3.8% Premium; Uncertainty Remains on the Sustainability of the Recent Breakdown
2. Taiwan Tech Weekly: Watch Hon Hai & Zhen Ding Guidance for Servers, AI PCs/Mobiles, and IPhone 16
- Last Week — TSMC’s July Revenue Soared, Asustek Guided for PC Growth Acceleration, While KYEC, Mediatek, and UMC Rebounded
- Key Events — This Week Look to Hon Hai & Zhen Ding Earnings and Guidance for Servers, AI PCs/Mobiles, iPhone 16
- PC Monitor: Promising Uptake of Microsoft Copilot and AI Services; Remain Structurally Long
3. Screen Holdings (7735 JP): Still a Buy for the Bounce
- Screen has rebounded from its recent low, but strong 1H results, the recent weakening of the Yen and reasonable valuation point to further short-term upside.
- However, management is guiding for slightly lower operating profit in 2H, and Intel’s capex cuts also support a cautious outlook.
- Screen expects slower growth in 2025 wafer fab equipment demand than SEMI, and neither appear to have factored in concern over insufficient return on investment in AI.
4. Taiwan Dual-Listings Monitor: History Implies TSMC Spread to Trade Down; ASE Still Broken Down
- TSMC: +16.3% Premium; Can Continue to Consider Shorting the Spread Here
- UMC: +0.7% Premium; Wait for Higher Levels Again Before a Fresh Short
- ASE: +4.6% Premium; Breakdown of Spread Could Persist Since History Indicates It’s Now a Normal Level
5. Earnings: ALGM, LRCX, TOLEY, NVMI, ONTO
- Some more minor data points and highlights: KLIC (ball bonders) says that utilization is 75-80%, which is a good read on China despite the negative industrial headwind.
- Allegro Microsystems is definitely scraping the bottom, and while Sanken (its distributor) is still increasing its inventory, I like the setup there.
- Arrow Electronics (Distributor) says things are improving, which is a big counterpoint to everything else.
6. ASPEED’s 159% July Revenue YoY Growth Bodes Well For H224 AI Server Shipments
- ASPEED’s July revenue amounted to NTD 601 million, up 159% YoY
- ASPEED’s YTD revenue of NTD 2,970 million, is up 88% YoY
- This bodes well for H224 server shipments, both general purpose and AI accelerated and should be reflected in NVIDIA’s earnings/outlook scheduled for August 28
7. Himax Sees China Automotive Market Softening; AI Sensing and AI/HPC Optics Opportunities Expanding
- Himax 2Q24 Results Showed Continued Margin Strength But Management Provided Cautious Outlook for 3Q24E Amidst Chinese Market Weakness
- Himax’s AI Sensing and AI/HPC Optical Data Transfer Growth Opportunity for 2025E — Investments into Obsidian Sensors & FOCI
- Himax — Maintain as a Structural Long; Market Sell-Off Opens Accumulation Opportunity