This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. WeRide IPO: High-Risk Venture Investment and Unproven Business Model
- WeRide, a pure-play autonomous driving company with operations in 7 countries, may raise up to $120M in upcoming IPO in the United States.
- WeRide is expected to IPO this week. The company’s amended prospectus puts the price range per ADS at $15.50 to $18.50, implying a market cap of ~$4.6B at the midpoint.
- The company has raised ~$1.4B in equity financing to date and was backed by Qiming Venture Partners and the venture capital fund of the Renault Nissan Mitsubishi Alliance, among others.
2. Brainbees (FirstCry) IPO Trading – Decent Subscription and Valuation
- BrainBees Solutions (FirstCry) raised around US$500m in its India IPO.
- FirstCry is India’s largest multi-channel retailing platform for Mothers’, Babies’ and Kids’ products in terms of GMV, for the year ending Dec 2022 (9M23), according to RedSeer.
- In our previous notes, we looked at the company’s past performance and valuations. In this note, we talk about the trading dynamics.
3. WeRide IPO – Stiff Competition and Bleak Sentiment. Premium Valuation Doesn’t Help
- WeRide (WRD US) is looking to raise US$119m in its US IPO.
- WeRide provides autonomous driving products and services from L2 to L4 of driving automation.
- We had looked at the firm’s past performance in our earlier notes. In this note, we discuss our thoughts on valuation.
4. China Resources Beverage Pre-IPO – Thoughts on Valuation
- China Resources Beverage is looking to raise US$1bn in its upcoming Hong Kong IPO.
- China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
- In our earlier notes, we talked about the company’s past performance and undertook a peer comparison. In this note, we will look at valuations.
5. Hindustan Zinc OFS Early Look – Due for a Correction, Large Selling Pressure Looming
- Vedanta Ltd (VEDL IN) is looking to raise US$760m from selling some stake in Hindustan Zinc (HZ IN).
- Overall, while the deal would represent just 2.6% of the firm’s outstanding shares, the deal is a large one to digest at 41 days of the stock’s three month ADV.
- In this note, we take an early look at the deal, and comment on the deal dynamics.
6. ECM Weekly (12th Aug 2024) – Ola Electric, Brainbees, WeRide, Akum, CR Beverages, Eternal Beauty
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, the prior week witnessed a number of listings with divergent results.
- Given the market volatility, there was only one large placements in the prior week.
7. WeRide (WRD US) IPO: The Bear Case
- WeRide (WRD US), a provider of autonomous driving products and services, seeks to raise up to US$119 million through a Nasdaq IPO and US$321 million through a concurrent private placement.
- In WeRide (WRD US) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on a volatile revenue profile, high customer concentration risk, widening losses that raise doubts on the path to profitability, elongated cash collection cycles and cash burn.
8. P N Gadgil Jewellers Pre-IPO – Strong Revenue Growth but Margin Worry Persists
- P N Gadgil Jewellers (1742652D IN) looking to raise up to US$132m in its upcoming India IPO.
- P N Gadgil Jewellers (PNGJ) is an Indian organized jewellery player. Its product offerings include traditional as well as modern and functional jewellery designs, in gold, diamond, silver and platinum.
- In this note, we look at the company’s historical performance.
9. Ola Electric (OLAELEC IN) : Soaring High – How Much Higher Can It Go?
- Ola Electric’s stock has surged since its Friday listing, despite a lukewarm IPO response. We look at a possible base-to-bullish case valuation range for Ola Electric’s stock price.
- With the e2W market up 96% YoY in July and Ola Electric’s sales soaring 114%, the momentum is strong. Likely catalyst on the horizon adds to investor optimism.
- Currently, on FY2026E EV/Revenue, Ola Electric trades on par with its closest Indian e2W peer.
10. ACME Solar Holdings – Strong Sector Tailwinds but Need to Keep an Eye on Profitability
- ACME Solar Holdings (1700918D IN) is looking to raise US$360m in its upcoming India IPO.
- ACME Solar (ACME) is a renewable energy firm with a portfolio of solar, wind, hybrid and firm and dispatchable renewable energy (FDRE) projects.
- In this note, we talk about the company’s historical performance.
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. HSCEI/HSTECH/HSIII Index Rebalance Preview: Potential Changes, Flow & Positioning
- The constituent changes for the Hang Seng China Enterprises Index (HSCEI INDEX), Hang Seng TECH Index (HSTECH INDEX) and HSIII Index will be announced after market close on Friday.
- We forecast 2 changes for the Hang Seng China Enterprises Index (HSCEI INDEX), 1 change for the Hang Seng TECH Index (HSTECH INDEX) and 3 changes for the HSIII Index.
- With same-way and opposing flow on stocks from different passive trackers, the one-way trade is currently estimated at HK$5.2bn (US$672m). That will change with final capping done on 3 September.
2. Select Sector Indices – HUGE Impact of Proposed Constituent Weighting Changes
- S&P DJI have started a market consultation to change the index weighting methodology for the Select Sector Indices to reduce concentration and avoid reverse turnover.
- There is US$281bn tracking the Select Sector Indices from the SPDR ETFs. The market consultation will have a larger impact on indices where there is a high degree of concentration.
- The largest inflows are expected in Apple, Conocophillips, Amazon.com and Netflix while the largest outflows will be from Microsoft, NVIDIA, Chevron, Procter & Gamble, Exxon Mobil, Costco Wholesale and Meta Platforms.
3. To Tender Or Not – Gauging The Future of Sun Corp (6736)
- The revised/final True Wind Tender Offer for up to 19% of Sun Corp (6736 JP) ends this week. With the “excitement” the last two weeks, the SunCorp/CLBT ratio is higher.
- The minimum threshold is relatively low. The Tender will most likely succeed with very high pro-ration.
- For those on the edge, I discuss possibilities on the back end. It will be less liquid, but that may not be bad.
4. TCM (570 HK): A Spoonful Of Sugar …
- A 14.8% gain month-to-date, including this past Monday’s 6.5% pop – you just knew something positive was taking place behind closed doors. And leaking its way into the public.
- So it was no real surprise to read in the latest monthly update announcement on the HKEx that various regulatory approvals are almost, but not quite, satisfied.
- The wording in the announcement strikes a positive tone. Even remaining conservative on the timeline, this could be wrapped up before year-end.
5. J Tower (4485) – Once Ambitious, Still High Growth, Sells Itself Low/Cheapish.
- JTower (4485 JP) IPOed itself Dec-2019 at ¥1,600/share. An 8-bagger in a year, fell by half, doubled, fell 70%, then doubled, fell 35%, up 50%. That’s the first 3yrs.
- Since then, the trend has been lower. The stock is down 80+% in 2 years, especially painful after an equity raise at just under ¥5,000 6 months ago.
- But the stock today closed at ¥1,430, and the Tender Offer is at ¥3,600. A 150% premium. That’s big, but it may be “too low.” An interesting case.
6. China Traditional Chinese Medicine (570 HK): Relief as Update Favours the Bulls
- China Traditional Chinese Medicine (570 HK)’s monthly update reinforces the bull case. The gross spread has remained uncomfortably high since falling on no news on 26 June.
- The monthly update will relieve the bulls, as the consortium has finally made the regulatory submissions. The update stresses that the filing delay is due to an unwieldy consortium.
- Potential stumbling blocks remain, which should not be an issue. Nevertheless, the risk (17.7% downside to the undisturbed price)/reward (21.4% gross spread) remains attractive.
7. CPMC (906 HK) Responds To Champion’s Offer
- On the 30th July 2024, packaging play CPMC Holdings (906 HK) dispatched the Composite Document for the HK$6.87/share, in cash, Offer from SASAC/NCSSF-backed Champion.
- The Response Document, including the IFA opinion (with a fair & reasonable conclusion) has now been dispatched.
- However, the focus remains on ORG Technology Co., Ltd. A (002701 CH)‘s superior HK$7.21/share Offer, which is currently negotiating the necessary regulatory approvals.
8. Greatview Aseptic Packaging (468.HK) – The Story Behind The “Hostile Offer”
- The connection between Newjf and Greatview is deep. Newjf expressed an interest in acquiring Greatview early on, but the two parties didn’t reach an agreement. Greatview is not entirely “innocent”.
- Newjf’s decision to forcibly acquire Greatview at this moment should be made after careful consideration. Mengniu may not necessarily oppose this merger. Mengniu is likely to take a neutral stance.
- Newjf’s Offer is attractive. In the absence of a more realistic action by Greatview to make a higher Offer, we advise investors not to walk away from Newjf’s Offer easily.
9. Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for September
- Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 6 September.
- With no constituent changes in March and 1 add/1 delete in June, there could be more changes in September with Health Care stocks among the potential inclusions.
- Changes to the Hang Seng Industry Classification System (HSICS) will be implemented from the September rebalance and that will alter industry coverage.
10. Merger Arb Mondays (12 Aug) – China TCM, Canvest, GA Pack, Fuji Soft, Fancl, Descente, Takiron
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Malaysia Airports Holdings (MAHB MK), Asia Cement China (743 HK).
- Lowest spreads: Fuji Soft Inc (9749 JP), Second Chance Properties (SCE SP), Descente Ltd (8114 JP), C.I. TAKIRON Corporation (4215 JP), Fancl Corp (4921 JP).
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. Portfolio Watch: We Dare to Say the Bottom Is In for Risk Assets
- We have successfully navigated our macro portfolio through yet another week of high volatility, especially following Monday’s (in hindsight) outlier event.
- Risk sentiment has turned, and recession fears are muted for now.
- With position squaring largely completed, equities have regained momentum.
2. Positioning Watch – Positioning Squaring in JPY is Complete
- This week likely marks the end of the positioning squaring phase, as multiple positioning gauges now signal that trades are no longer as extended as they were 2-3 weeks ago across various assets.
- This shift provides an opportunity to revisit our strategies and assess where macroeconomic trends might be steering global assets next, now that the worst of speculative activity has subsided.
- As we all know, the CFTC report is always a week behind in updating markets on positioning, making last Friday’s report particularly interesting.
3. Global FX: Weeks where decades happen
- Carry strategies experiencing drawdowns, wiping out YTD gains
- Market expected to stabilize after recent shocks, carry strategy appeal diminished
- Yen likely to take a breather, BOJ stance unchanged, market normalization ongoing.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
4. Modern Monetary Theory (MMT) Revisited
- The inflationary implications of Modern Monetary theory have finally been exposed in the aftermath of the COVID-19 pandemic after 2022
- The risks of inflation were underplayed due to prolonged disinflationary impulses stemming from decades of globalisation. Recent US practice of MMT could force the Fed to raise its inflation target.
- Japan pursued an MMT framework since 2013, but the continuation of quantitative easing and arrival of rising inflation is undermining the yen. The Eurozone faces the same predicament as Japan.
5. US Rates: July Morning turns into Cruel Summer
- Weak employment data led to a shift in Fed forecast, with projected rate cuts in September and November
- Rates have backed off from lows, with markets pricing in a less dovish path
- Treasury market in transition, with dealer balance sheets at bloated levels and auctions showing poor results due to lack of demand from traditional investors.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
6. Can Ukraine drive to Moscow?
- Welcome to this week’s Great Game! Once again, we’re focused on the two big wars going on – Ukraine and Gaza.
- What are the risks, what will hit markets and what’s the outlook?
- Last Tuesday, Ukraine launched an offensive into Russian territory in the Kursk and Belgorod Oblasts.
7. Steno Signals #112 – Liquidity is BOTTOMING
- Happy Sunday, folks!I hope you’ve enjoyed the weekend.
- After a bizarre week, starting with the rug-pulling in Japan on Monday morning, it was time for a well-deserved break over the past two days.
- We’ve encountered tons of questions about the size of the USDJPY carry trade, and here’s what we’ll say on the topic: Those claiming that the carry trade is 10-20 trillion USD have very little understanding of the netting of derivatives and/or the FX hedging policies of international investors.
8. EM Watch: The Chinese race towards 0% interest rates
- Welcome to our Weekly EM Watch, where we look at China and other large EM countries through the lens of Western macro investors.
- Over the past week, we received the latest quarterly update on Chinese foreign direct investments and the situation went from dire to abysmal.
- There is a net negative inward FDI flow, and despite a significant $190 billion surplus in customs goods and services, the basic balance, which comprises both the current account and FDI, recorded a substantial deficit of $30 billion for the first time.
9. Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 16 Aug 2024
- Japan’s Q2 economic rebound may be misleading due to annualized reporting; future slowdown is a concern.
- Political instability in Japan and Thailand, with both countries’ leaders stepping down amid economic challenges.
- We maintain a cautious market outlook, especially on Thailand’s struggling economy and currency.
10. Assessing the Damage: It’s Not Just the Carry Trade
- The recent disorderly risk-off episode can be attributed to the unwind of a series of trades that depend on a low-volatility and complacent environment.
- Historically, such unwinds have resolved in volatility spikes and higher equity returns soon afterwards
- The current environment is supportive of a quick market recovery, though the risk of a LTCM-style blowup could see a longer and more complex market bottom.
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. MARKETS AND SEMICONDUCTORS
- Hello! I went on a short hike this weekend, which always seems to cause something to change.
- What changed was that we are seeing a very large leveraged unwind in the market, driven by the BOJ’s hike in interest rates.
- Let me write out the series of events. First and foremost, last week, we saw some of the first macro jitters. The CPI came to light, which was viewed as positive. But then NFP showed a bit of weakness.
2. Taiwan Dual-Listings Monitor: TSMC and ASE Premiums Break Down Again; ASE Spread Near 1-Year Lows
- TSMC: Premium Breaks Back Down to +8.3%; 5-15% Could Now Be the Key Range
- UMC: -2.2% Discount; Good Level to Go Long the Premium
- ASE: Premium Breaks Down Again, Now Only +1.5%; Consider Going Long
3. Taiwan Tech Weekly: Tough Start for Nvidia and Apple Supply Chains; Asustek, Novatek Results Ahead
- Tough Start to the Week — Negative News for Nvidia and Apple Supply Chains
- Key Events: Asustek & Novatek Results; Mediatek & TSMC July Sales Data
- UMC Signals Non-AI Industry Inventory Correction Through 2024E; Why Intel Is Increasingly Important
4. PC Monitor: Promising Uptake of Microsoft Copilot and AI Services; Remain Structurally Long
- Given market concerns that AI is overhyped and not yet delivering sufficient value, we analyze Microsoft’s Copilot disclosures and examine signs of AI services traction among corporate clients.
- Signs indicate that Copilot is gaining substantial traction with corporate clients, adding value to software development, business operations, and healthcare documentation functions.
- The number of organizations paying for MSFT’s AI services is expanding rapidly. We view this as a promising indicator of increased AI adoption and substantial value creation.
5. GlobalWafers (6488.TT): Semi Industry Expected to Recover in 2H24, Holding an Bright Outlook in 2025
- The 2Q24 revenue was NT$15.3bn, 1.6% QoQ and -14.4% YoY. GM in 2Q24 was 32.3%, -5.8% QQ and -14.3% YoY. OPM in 2Q24 was 22.0%, -16.3% QoQ and -24.1% YoY.
- The widespread adoption of AI-driven electronic devices, along with the onset of the AI-powered device replacement cycle, is likely driving increased demand for peripheral ICs and sensors.
- With inventory levels gradually depleting and downstream customers ramping up production capacity in 2025, the semiconductor industry is expected to recover in 2H24 and maintain an optimistic outlook for 2025.
6. Asustek & Acer Key Takeaways: Strong July Revenue Growth and ‘New Product Life Cycle’ Starting 3Q24
- Strong Revenue Growth Signals Robust Demand in PC and Server Markets for Asustek and Acer
- Asus Management Continues to Describe Multi-Year PC Growth Cycle Ahead; 3Q24 Will Be Start of ‘New Product Lifecycle’
- Visit to Guang Hua Digital Plaza to Review New PC Models First-Hand. Remain Structurally Long PC Makers; Acer, Asus, Dell.
7. Silicon Motion 2Q24 Results Take-Aways: Strong Growth & NAND Flash Market Share Gains Expected
- Silicon Motion reported 2Q24 results on Friday, describing strong demand for NAND flash controllers driven by the PC industry and improving demand from the smartphone industry.
- The company expects industry NAND flash pricing to continue improving into 2025E. Moreover, SIMO expects to expand its market share for NAND flash controllers by year-end.
- Maintain Structural Long rating for SIMO. The recent share price decline is painful for holders however share weakness is an accumulation opportunity with an investment view to mid-2025E.
8. TSMC July Revenue Surges 44.7% YoY, Sets A New Record Monthly High
- TSMC July revenues of NT$256.95 billion, +23.6% MoM & + a whopping 44.7% YoY
- Q224 silicon area wafer shipments amounted to 3,035 MSI, up 7.1% QoQ but down 8.9% YoY
- Q224 semiconductor sales reached $149.9 billion, +6.5% QoQ and +18.3% YoY.
9. Novatek (3034.TT): 3Q24 Guidance Slightly Weak in GM
- The 3Q24 revenue is expected 10.5% higher than 2Q24, but the GM/OPG outlook will be 5.1%/3.6% lower because of pricing adjustments and limited NRE sales .
- Smartphone’s demand will enter peak season with expected stockpiling for new models. Automotive inventory adjustment is needed due to muted demand.
- Dividend payout ratio has remained at 80-85% in recent years, with no major changes expected.
10. SMIC (981.HK): Revenue and GM Continued to Trend Up in 3Q24
- Expected sequential revenue growth of 13% to 15%, gross margin expected between 18% and 20%.
- The company has not increased capacity utilization through price cuts but supports customers in facing competition to maintain market share.
- Inventory replenishment behavior will end in the third quarter, and fourth-quarter orders will more accurately reflect actual demand rather than the impact of restocking.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Ola Electric IPO Trading – Decent Anchor, Tepid Overall Demand
- Ola Electric managed to raise around US$734m in its India IPO.
- Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells
- In our previous notes, we looked at the company’s past performance and valuations. In this note, we talk about the trading dynamics.
2. BrainBees Solutions IPO: Five Facts Why FirstCry Is Not a First Class Company
- We highlight several red flags with regard to BrainBees Solutions (0172540D IN) operations, business strategy and governance for investors’ careful consideration.
- At the announced IPO price band of Rs440 – Rs465, Brainbees implied EV/Revenues (FY24) works out to 3.5X – 3.7X – a significant discount to India listed online retail verticals.
- Despite seemingly inexpensive relative valuations, we do not see a compelling reason to invest in the company, specially given the several red flags discussed below.
3. ECM Weekly (5th Aug 2024) – Ola Electric, Brainbees, WeRide, Sanil, CR Beverages, Carote, Fortescue
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, the coming week will see see the listing of Akums Drugs while books will be open for Ola Electric, BrainBees Solutions and Black Sesame Technologies.
- On the placement front, there were two large deals in Fortescue Metals (FMG AU) and Adani Transmission (ADANIT IN).
4. Eternal Beauty Pre-IPO Tearsheet
- Eternal Beauty Holdings Limited (EBHL12 HK) is looking to raise about US$200m in its upcoming Hong Kong IPO. The deal will be run by BNP Paribas, Citic, CMBI and DBS.
- Eternal Beauty is the largest brand management company of perfumes in the combined markets of Mainland China, Hong Kong and Macau, in terms of retail sales in 2023.
- The company has a diverse portfolio of iconic brands of not only perfumes, but also color cosmetics, skincare products, personal care products, eyewear and home fragrances under management.
5. Brainbees Solutions (FirstCry) IPO: Key Facts, Financials and Valuations
- BrainBees Solutions (0172540D IN) that operates FirstCry, India’s leading Online Mom and Child vertical, has launched a USD500 mn IPO that closes on August 8th.
- The IPO pricing suggest a post-money equity valuation of around USD 2.8 billion and an EV/Revenue multiple in the range of 3.5X-3.7X.
- Brainbees operates in an attractive online vertical noted for its high frequency purchases and long term customer relationship. However it has not built significant competitive advantages versus leading horizontal platforms.
6. Ola Electric IPO: Forecasts and Valuation
- Ola Electric (1700674D IN) plans to raise INR55bn through fresh issue of shares while existing shareholders will offer 84.9m shares at an indicative IPO price band of INR72-76 per share.
- We expect the company’s revenues to continue to expand and grow at much higher rates during the next few years compared to competitors in the Indian two-wheeler market.
- Our valuation analysis suggests that Ola Electric’s IPO is attractively priced compared to peers and we would suggest subscribing for the company’s IPO.
7. Black Sesame IPO Trading – Lackluster Demand, Combined with Bad Timing
- Black Sesame Technologies (BLACKSES HK) raised around US$133m in its Hong Kong IPO, after pricing its IPO at the low-end.
- Black Sesame International Holdings (BSIH) is an automotive-grade computing SoC and SoC-based intelligent vehicle solution provider.
- We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.
8. Paras Healthcare Pre-IPO Tearsheet
- Paras Healthcare Limited (0490145D IN) is looking to raise about US$180m in its upcoming India IPO. The deal will be run by ICICI, IIFL and Motilal Oswal.
- Paras Healthcare is the fifth largest healthcare provider, in terms of bed capacity in North India, Bihar and Jharkhand, with an aggregate of 2,135 beds, as of March 31, 2024.
- The company offers several clinical specialties across its hospitals including cardiac sciences, oncology, neuro sciences, gastro sciences and orthopedics and joint replacement.
9. Brainbees Solutions (FirstCry) IPO: Valuation Insights
- BrainBees Solutions (0172540D IN), India’s largest multi-channel retailing platform for mothers’, babies’ and kids’ products, will launch an IPO to raise up to US$500 million.
- We previously discussed the IPO in Brainbees Solutions (FirstCry) IPO: The Bull Case, Brainbees Solutions (FirstCry) IPO: The Bear Case and Brainbees Solutions (FirstCry) IPO: The Investment Case.
- Our valuation analysis suggests that the IPO price range of Rs440-465 per share is attractive. Therefore, we would participate in the IPO.
10. Initial Thoughts on the K Bank IPO
- In this insight, we provide an update on the K Bank IPO, which is more likely in 1H 2025. K Bank is one of the largest Internet-only banks in Korea.
- A successful IPO of K Bank could have a positive impact on KT Corp (030200 KS) which is the indirectly the largest shareholder of K Bank.
- K Bank had total operating income of 51.5 billion won (up 328% YoY) in 1Q 2024. Operating margin improved materially from 5.7% in 1Q 2023 to 19.5% in 1Q 2024.
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. Thinking About The Toyota Tender Offer Buyback
- In May when shares were trading near ¥3,500-3,600, Toyota announced a ¥1trln buyback. When shares fell, they announced a Tender Offer Buyback at a large discount (¥2,781/share).
- Subsequently, the shares fell very sharply on Thursday 1 August, then again Friday and yesterday. That put shares WELL below the Tender Offer Price. That creates possible opportunity.
- This insight discusses modalities (talk to your advisor for specific advice/info) who might do what and why. It sets parameters. But I think Toyota is cheap here.
2. Go-To Arbs Amid Market Carnage
- As global market roil, clean M&A deals come into focus.
- This insight briefly summarises those transactions in Asia/Oceania which are expected to comfortably complete, irrespective of the background noise.
- Standout deals include APM Human Services (APM AU), Huafa Property Services Group (982 HK), Alps Logistics (9055 JP), I’Rom Group (2372 JP), and Arvida (ARV NZ).
3. Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?
- In its last update, Alibaba Group announced that the company was preparing for its primary listing in Hong Kong and the process was expected to complete by the end August.
- The Board meets on 14 August to approve results for the three months ending June. Could there be an announcement on the dual primary listing too?
- Mainland Chinese own between 3.5%-15.5% of companies that converted from Secondary to Dual-Primary in the last few years. Similar buying in Alibaba could take the stock higher from here.
4. How Has the Index Rebalance Strategy Performed During Market Turmoil?
- The market turmoil over the last few trading sessions has not been kind to a simple index rebalance strategy of buying the forecast adds and selling the forecast deletes.
- The overall returns and stock specific returns indicate that trades are more crowded in some indices as compared to others and traders should consider that when position sizing.
- Anecdotally, periods of negative returns are followed by periods of strong returns for the strategy as weak hands are shaken out of their positions.
5. China TCM (570.HK) Privatization Update – Things Are Still Manageable
- What disappoints investors is that privatization progress is slower-than-expected. Since approval is in “advanced stage”, August update is eye-catching. Investors may need more patience with this type of SOE deal.
- The key to the success of this privatization lies in whether CNPGC is willing to abide by its commitments. If yes, CNPGC will take all measures to solve the problems.
- According to our valuation calculation, even without this privatization, HK$3.5/share is fair for China TCM. Reasonable share price is above HK$5/share. Don’t forget, the privatization is still on the agenda.
6. Kokusai Electric (6525): Global Index Inclusion Highly Dependent on Free Float
- IPO lock-up expiry of Kokusai Electric (6525 JP) results in a forecasted increase in free float to 35% and fcap of $2.9bn for the August 2024 review.
- Secondary offering of Kokusai Electric (6525 JP) results in a forecasted increase in free float to 60-65% and latest fcap of $3.4bn- $3.7bn for the November 2024 review.
- Inclusion will be determined based on fcap against the fcap threshold. Fcap uncertainty for November is largely driven by stock price fluctuations and the Greenshoe Option.
7. Itochu (8001 JP) Launches Lowball TOB for Descente (8114) – Buying China on the Cheap
- Today, Itochu Corp (8001 JP) announced it would launch a Tender Offer when approvals were received, to buy out minorities in Descente Ltd (8114 JP) at ¥4,350/share.
- Itochu was buying at that price or higher, in the market, in October 2023. Earnings and book are up since then. Outlook for the Descente China Holdings affiliate? Great.
- The valuation transparency is disappointing. Activists would have 3mos or so to push for more. But with friendly holders, they get very close to the minimum anyway.
8. JPX Nikkei 400 Index Rebalance: A Bunch of Chunky Adds & US$6bn Trade
- There are 44 adds/41 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
- Based on the adds, deletes and capping changes, we estimate one way turnover of 7.9% and a round-trip trade of JPY 880bn (US$6bn).
- The adds have outperformed the deletes over the last year though that has been faded over the last couple of months. Breaking with history, there could be outperformance near-term.
9. KKR ¥8,800 Takeover of Fuji Soft (9749) – Details and Arb Grid
- KKR has announced its previously leaked takeover of Fuji Soft Inc (9749 JP). Two activists with 30+% between them have agreed to tender at ¥8,800.
- Given what the founder, crossholders, and other arbs own, this gets done easily. Congrats on the win to the activists.
- We will see more activism and more pressure on under-earning companies to go private to clean themselves up outside the public eye. Big opportunities for years.
10. Update: Shinko Electric (6967) Shorter-Dated and Break Risk Small but GAP RISK Now Much Higher
- When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
- Nearly 7mos ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 5mos ago, recommended taking profits.
- Ibiden has now underperformed Shinko by 25+% in 2-plus weeks. GAP RISK is higher but this is a short-timer. HUGE yield to “expected” start date, so everyone assumes a delay.
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. The Carry Trade as Risk Driver
- Risk appetite is undergoing a cross-asset carry trade-driven panic and a bottom is near. The equity market is sufficiently oversold and poised for a relief rally.
- Barring some unexpected exogenous event, downside risk is limited at these levels.
- Expect a short-term relief equity rally into August, led by small caps and value stocks.
2. Market Watch: Forget about emergency cuts. Here is what the Fed will do next!
- Good evening from Europe.
- I will keep this analysis short and sweet as I know you are all trying to deal with these nasty markets and time is of the essence.
- We have thankfully made our way through this turbulence clearly in the money, but we are starting to see interesting counter-trends arising now.
3. Portfolio Watch – What can we trade in this weak labor environment?
- What a crazy day (week), starting August off with a somewhat disastrous NFP report.
- Private sector jobs are trending down, government payrolls are trending down, while manufacturing and goods-producing jobs actually improved in July despite the recessionary ISM manufacturing report.
- This is a clue that the manufacturing sector is rebounding, as we have been alluding to, which is something that will likely become relevant for markets in the coming months.
4. BOJ and Carry Trade: THE BUTTERFLY FLAPPED ITS WINGS
- The crowded JPY carry trade will not unwind quickly although future unwind episodes may not be as dramatic.
- The size of the carry trade is unknown, however its correlation to various asset classes is predictable.
- The largest question for global markets is whether the unwind of the JPY carry trade is a harbinger of tighter monetary conditions globally as markets decline and leverage tightens.
5. Quant Signals – Here is THE steepener to own in a cutting cycle!
- We have examined the quantitative data surrounding the cutting cycle to optimise the curve steepener trade for hit ratios, carry returns, and ‘max contributions.’
- This is the steepener trade you want to own in a cutting cycle!
- In our Saturday Portfolio Watch, we discussed the potential value in steepeners and promised to more thoroughly backtest the curve in order to find the optimal steepening expression in a cutting cycle environment.
6. The Week At A Glance: On Credit Watch While Liquidity Is Turning Nasty
- Welcome to our weekly “The Week At A Glance” publication, where we dig into the most important key figure releases and tradeable themes for the upcoming week.
- Everything is about assessing the USD economic cycle and the potential for rate cuts of the magnitude priced in after a crazy week last week.
- We ultimately have our doubts (especially as the labor market report on Friday was heavily impacted by the storm Beryl), but we are still waiting for potential triggers to bet on it.
7. Steno Signals #111 – More or less liquidity? More or less recession? More or less real?
- Happy Sunday! What a week, and what a few months we have ahead!
- To use the words of my friend Boris Kovacevic, “it’s like 2024 never happened.” Everything we learned about the re-acceleration of inflation in H1 and the “high for longer” narrative has just vanished into thin air over the course of a few days.
- While it is hard to disagree that a cutting cycle is commencing, it is still very much up in the air whether this is a normal cutting cycle.
- We spent last week examining returns in various asset classes around the commencement of cutting cycles, and the saddening truth is that it very much depends on the type of cycle.
8. 6 Major Signs of Market Downturn and Strategy for Outperformance Amid Market Convulsions
- In this insight, we discuss strategies for outperformance amid market convulsions and downturn.
- In particular, we highlight six reasons why it may be a wise move to position one’s portfolio more defensively (at least for the next several months).
- Warren Buffett slashed nearly half of his holdings in Apple, which was probably one of the main triggers of the tremendous market sell off in Asian markets on Monday.
9. Sajith Pai: Unpacking India – [Making Markets, EP.40]
- Sajeet Pai, a VC at Bloom Ventures, provides insights on the Indian market, discussing unique features like low levels of debt and lack of trust.
- India’s massive population presents challenges and opportunities for investors, with a large segment of the population having low per capita income.
- Cultural differences, such as the prevalence of cash on delivery in e-commerce, highlight the need for a nuanced approach when entering the Indian market.
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10. Asia Economics: The Market Panic Does Not Alter Medium-Term Trajectory
- Fears of a US recession and higher Japanese rates have sparked a market panic that may hurt Asian economies and markets in the very near term.
- However, the Asian region should weather the storm so long as the US avoids a recession, as we believe it will.
- Not all Asian central banks will follow the Fed in cutting rates. Improved growth in Asia and stable inflation yield a different set of tradeoffs than that facing the US.
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 Tech Weekly: Hit Hard By AI/Tech Pullback; Watch UMC, Mediatek, Realtek, AMD, MSFT Earnings
- Top Gainers/Loser: Taiwan Tech Stocks Hit Hard Last Week By Global AI/Tech Pullback
- Key Events This Week: Major Earnings Week Including UMC, Mediatek, Realtek, AMD, Microsoft
- TechChain Insights: Call with Silicon Motion; QLC NAND Emerging as Key Enabler for AI Devices
2. AMD. Playing The Long Game
- Q224 revenues of $5.8 billion, +5.5% QoQ, +9% YoY and $100 million above the guided midpoint
- AMD forecasted current quarter revenues of $6.7 billion at the midpoint, up 15% QoQ and about the same YoY.
- AMD shares are up 9% in premarket trading, hardly the response one expected from a good but not amazing report. But why?
3. Intel Q224 Meltdown. Don’t Say We Didn’t Warn You…
- Q224 revenues of $12.8 billion, in line with their updated May outlook, ~flat QoQ and down 1% YoY.
- Gross margin (non-GAAP) was 38.7%, down 1.1 points YoY but down a whopping 4.8 points from the April outlook.
- Shares tanked >24% in after hours trading. What’s really going on at Intel?
4. Earnings: NXPI, CDNS, TXN, SLAB, Alphawave, TSEM, KLAC, SK Hynix, MXL, STM, ASMI, VRT, UCTT
- This is going to be a big week, so I’ll be as brief as I can while getting everything in one place.
- Let’s start with Automotive, which is my favorite idea set right now. The problem is that the near-term results were much weaker than I expected, and it looks like the bottom is maybe in.
- I was expecting another quarter of scrapping along the bottom, and Industrial weakness punched a new low.
5. The ROI of AI (It’s a Dollar Auction)
- The single most complicated question to answer is what exactly the ROI of AI is.
- You can easily argue that there is some value and that it can be done quite profitably when you are just inferencing the model for money.
- The problem is that when you peer a little closer at the training costs, particularly the cost of scaling models at the frontier, it’s starting to become hard to answer. What exactly is the ROI?
6. Mediatek: AI Features Can Shorten Smartphone Replacement Cycle; New Verticals to Kick In 2H25E
- Mediatek 2Q24 Earnings Beat Expectations; Strong Mid-Term Revenue Guidance Maintained
- 2Q24 Global Smartphone Market Witnessed Best Growth in Three Years
- Repeats Strong Mid-Term Guidance; Continues to Signal Revenue Strength for 2025E & 2026E. Maintain Structural Long Rating.
7. MediaTek (2454.TT): There Appears to Be No Bright Spot in 2H24F.
- 3Q24 Sales: NT$123.5-132.4 billion, down 3% to up 4% QoQ, up 12-24% YoY. 4Q24 is expected to be a slower quarter based on current expectations.
- Advanced 3nm technology can support SP, tablets, and other end devices. AI-powered functions like ARM-based CPU or EV will bear fruit in 2025.
- The GPU has partnered with NVDA. Auto chips partnered with NVDA will be shipped out later in 2025. They will power MTK’s CPU and ISP in conjunction with NVDA’s GPU.
8. PC Monitor: MSFT Results Imminent; Look for Copilot Progress; Taiwan PC Makers Show Healthy Growth
- PC Maker Shares Under Pressure — PC makers’ share prices fell by mid-to-high single digits during July. However, pure PC exposure outperformed as shown by HPQ’s gain during the month.
- Latest PC Industry Data is Promising — Latest IDC data shows that global PC shipments increased 3% YoY in 2Q24, and are up 5% YoY ex-China.
- Microsoft & Taiwan PC Maker Earnings Ahead — Microsoft reports July 30th U.S. time. We expect Taiwan PC makers to report earnings within the first two weeks of August.
9. UMC (2303.TT; UMC.US): 3Q24 Sales Were Slightly Below Consensuses
- 3Q24 guidance: Shipment up mid-single digits QoQ; ASP: Remains firm in USD; GM: around mid-30%. (Consensuses were high single digits.)
- Has provided a 22nm HV solution for high-end OLED DDI to high-end SP, and expects to reach high-volume production in 2025.
- Cooperation with Intel Corp (INTC US) is progressing well, targeting MP for 14nm in 2027.
10. UMC Signals Non-AI Industry Inventory Correction Through 2024E; Why Intel Is Increasingly Important
- UMC’s latest results indicate a mild recovery for consumer, communications, and computing industries. UMC’s capacity utilization to continue improving but industry inventory correction could last until end-2024E.
- UMC maintained 2024E capex guidance however it’s increasingly clear UMC can’t keep up the capex arms race alone. Hence we see UMC & Intel becoming closer and closer partners.
- We continue to view UMC as a long-term accumulate, and rate the stock as Structural Long, this however requires a longer than usual multi-year holding period.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Ola Electric IPO: The Investment Case
- Ola Electric (1700674D IN), the largest Indian player in electric two-wheel vehicles (E2W), will launch a US$660 million IPO at a lower US$4.5 billion valuation (vs. the previous US$7-8bn target).
- We previously discussed the IPO in Ola Electric IPO: The Bull Case and Ola Electric IPO: The Bear Case. In this note, we examine the latest updates in the RHP.
- The investment case rests on rising market share in a growing market, rapid growth aided by product diversification, path to profitability supported by lower losses and declining cash burn.
2. Fortescue Placement – Discount Appears Attractive, but Momentum Has Been Very Weak
- An undisclosed shareholder is looking to raise US$1.25bn (A$1.91bn) from selling some stake in Fortescue Metals (FMG AU).
- The deal is a large one to digest at 13 days of the stock’s three month ADV. The selling shareholder will be locked up for 45 days.
- In this note, we run the deal through our ECM framework and comment on deal dynamics.
3. Ola Electric IPO – RHP Updates – Growing Faster than Expected, Driven by GoI Policy
- Ola Electric is now looking to raise about US$730m in its upcoming India IPO.
- Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells.
- In our previous notes, we looked at the company’s performance, undertook a peer comparison and talked about valuations. In this note, we look at the updates from its recent filings.
4. ECM Weekly (29th July 2024) – ASICS, Kokusai, Amer, Hyundai, Timee, Sanil, Akum, Bloks, Ola Electric
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, the coming week will see Sanil Electric (062040 KS) list, while Akums Drugs and Pharmaceuticals books will open and Ola Electric too might be launched.
- On the placement front, the past week was relatively quiet after a few hectic weeks.
5. Ola Electric: India’s First EV IPO – Key Facts, Financials & Valuation
- Ola Electric (1700674D IN) , India’s leading electric 2-wheeler backed by Softbank Group ‘s Vision Fund, will launch its USD 735 million IPO on Friday, August 2.
- The IPO pricing suggests a post-money equity valuation of around USD 4 billion, significantly lower than its earlier funding levels.
- Government incentives for EVs are being revised, with the current scheme valid only until the end of September, creating uncertainty that has possibly impacted valuations.
6. Ola Electric IPO – Thoughts on Valuation
- Ola Electric is now looking to raise about US$730m in its India IPO.
- Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells.
- In our previous notes, we looked at the company’s past performance. In this note, we will talk about valuations.
7. Ola Electric IPO: Valuation Insights
- Ola Electric (1700674D IN), the largest Indian player in electric two-wheel vehicles (E2W), is seeking to raise up to US$734 million.
- We previously discussed the IPO in Ola Electric IPO: The Bull Case, Ola Electric IPO: The Bear Case and Ola Electric IPO: The Investment Case.
- Our valuation analysis suggests that the IPO price range of Rs72-76 per share is attractive. Therefore, we would participate in the IPO.
8. Sanil Electric IPO Trading – Strong Institutional Demand, Highest Subscription Rate This Year
- Sanil Electric (062040 KS) raised around US$193m in its Korea IPO, after pricing the deal above the top end of the range at KRW35,000/share.
- Sanil Electric is a specialized company that manufactures and sells reactors, transformers, railway vehicle parts, and switchboards. As an industrial transformer manufacturer, the company mainly manufactures power and distribution transformers.
- In this note, we will talk about the demand for the deal and other trading dynamics.
9. WeRide Pre-IPO – The Positives – Large Monetisation Opportunity on the Horizon
- WeRide Corp (WER CH) is looking to raise around US$300m in its upcoming US IPO.
- WeRide provides autonomous driving products and services from L2 to L4 of driving automation.
- In this note, we will talk about the positive aspects of the deal.
10. WeRide Pre-IPO – The Negatives – Losses Have Widened, Still in the Early Stages of Commercialization
- WeRide Corp (WER CH) is looking to raise around US$300m in its upcoming US IPO.
- WeRide provides autonomous driving products and services from L2 to L4 of driving automation.
- In this note, we will talk about the not so positive aspects of the deal.
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. Fancl (4921) – Extendy-Extendy-Bumpity-Bumpity
- The Kirin Holdings (2503 JP) Tender Offer to buy out minorities in Fancl Corp (4921 JP) closes today. Or at least the current one does.
- The original deal announced was light, and the stock has traded above terms since the announcement, with one fund buying up to 7.94%.
- I expect Kirin to extend and bump next week, or bump/extend now, depending on their visibility on Fancl Q1.
2. Sep24 Nikkei 225 Rebal Final Predictions – Fastie Capped, Still 1 ADD, 1 DELETE, 1 Dark Horse and ?s
- The Sep 2024 Nikkei 225 Review base date is here. As before, I see one ADD, one DELETE, one capping, and one Very Dark Horse.
- The rules are clear, but not. This causes confusion. There may be unwritten rules keeping the Very Dark Horse out til next time.
- The Nikkei Index Team announced Fast Retailing (9983 JP) would be capped. I didn’t expect that now. That means $2.2bn+ of selling 30Sep and a reverse funding trade.
3. Rio Tinto (RIO AU/LN): Thinking About The “Unification”
- Just shy of three years ago, BHP (BHP AU) announced the unification of its dual-headed corporate structure to make BHP “simpler and more agile”.
- Collapsing DLCs/share-classes was all the rage back then. The prior year, Unilever (UNA NA) collapsed its DLC; and Royal Dutch Shell unified its A and B lines in 2021.
- Rio (RIO AU/LN) is one of only a handful of remaining DLCs. Renewed investor calls to unwind the DLC and the recent UK’s listing regime reform necessitate a rethink.
4. India: Potential Free Float Changes & Passive Flows in August
- Companies in India have disclosed their shareholding pattern as of end-June in July. There are companies with significant float changes from end-December and/or end-March.
- The changes in free float could be reflected in domestic and global indices over the next few weeks and months resulting in action from passive trackers.
- Depending on the date that the shareholding was published, there could be 12 stocks with passive inflows from global trackers while 5 could see passive outflows in August.
5. [JAPAN ACTIVISM] – Murakami Group Bigger and Bolder on Exedy – STILL Room to Run
- In late May, Toyota Group member Aisin (7259 JP) announced it would sell its 37% stake in Exedy Corp (7278 JP). The market dropped. But that was an opportunity.
- There was an announcement, a ToSTNeT-3 buyback, the offering, and more buyback to come. On 30 May, I said “Buy the deal, buy in the market. It’s cheap and vulnerable.”
- Exedy is up 21% since. On 17 June, activist Murakami-san’s group went over 5%. Then they bought more. Now they have 15%. Or more. Still cheap. Still vulnerable.
6. Nikkei 225 Index Rebalance Preview (Sep 2024): Review Period Done; Fast Retailing Capping Confirmed
- The review period for the Nikkei 225 (NKY INDEX) September rebalance ended yesterday. There could be three changes at the rebalance with sector balance in focus for the additions.
- Fast Retailing (9983 JP)‘s capping in the index has been confirmed and its index weight will drop by around 0.9% resulting in big selling at the close on 30 September.
- Passive trackers will need to buy between 3.5-35x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-42.5x ADV on the deletions.
7. Japan – Passive Selling in a Few Weeks & Shorts Build Up
- Up to 12 stocks could be deleted from global passive portfolios in August. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
- There has been a buildup of shorts on nearly all these stocks though the extent of the pre-positioning varies.
- The increase in shorts is smaller than the estimated passive selling, though there is a fair amount of variability across the names.
8. True Wind Raises Partial Offer for Sun Corp Further, Leaving an Interesting Back End
- On 10 June, Sun Corp subsidiary Cellebrite DI (CLBT US)‘s SPAC sponsor True Wind Capital launched a Tender Offer for 19% of SunCorp at a premium but discount to NAV.
- The price was too low. CLBT shares rose. They lifted the TOB price by 8% to ¥4750. Still too low. It was trading there. Now they have lifted to ¥5500.
- Now a 49% premium to undisturbed, 29.4% premium to all-time high prior to the first tender. Changes in terms means this could get done. More bullish than it looks.
9. Merger Arb Mondays (29 Jul) – China TCM, Canvest, CPMC, GA Pack, Tohokushinsha, Furukawa, Tatsuta
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Greatview Aseptic Packaging (468 HK), Asia Cement China (743 HK).
- Lowest spreads: Fancl Corp (4921 JP), Mimasu Semiconductor Industry (8155 JP), Infocom Corp (4348 JP), L’Occitane (973 HK), Qantm Intellectual Property (QIP AU), Alps Logistics (9055 JP).
10. CPMC (906 HK): Champion’s Offer Now Open. But All Eyes On ORG’s Tilt
- Back on the 6th December 2023, packaging play CPMC Holdings (906 HK) announced a pre-conditional Offer of $6.87/share, in cash, from SASAC/NCSSF-backed Champion.
- The Offer Document is now out. This is not a Composite Document. A “Response Document” is expected in two weeks, which will include the IFA opinion.
- All the above is moot. ORG Technology Co., Ltd. A (002701 CH)‘s superior HK$7.21/share Offer is currently navigating the necessary regulatory approvals. With irrevocables, ORG has 46.44% in the bag.