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: TSMC Sales Ahead; Display Driver Growth Reversal; AI Names Keep Flying
- Latest Performance: Taiwan AI Names Keep Flying; ASE & Mediatek Lose Steam After Reporting
- Largest Display Driver Maker in the World’s Guidance Implies Growth Reversal Coming in Feb & March
- TSMC and Samsung Will Keep Their Most Advanced Chipmaking at Home
2. Intel’s UMC Partnership Is A Big Deal. For UMC.
- UMC’s Q423 results in line with expectations. Q124 guidance, down 2-3% QoQ, demonstrates ongoing headwinds for foundry
- Intel, UMC foundry partnership helps the latter overcome their 14nm issues while giving them bargain basement access to US manufacturing capacity
- If Intel could have developed and deployed the proposed 12nm specialty process on their own, they would have….
3. SMIC (981.HK): The GM Reaches a New Low of 9-11% in 1Q24F, Despite Revenue Growing by 2% QoQ.
- The 1Q24F outlook is still showing a decline, with a slightly increase in revenue of 2% QoQ. However, the GM is expected to decrease to 9-11% from 16.4% in 4Q23.
- Management predicts that there will be a double U-shaped recovery in 2024F. Revenue in 2024F is expected to grow annually by mid-single-digit.
- The main areas of growth for SMIC in 2024F will be in mobile phones, smart homes, IoT, and computing.
4. China Semi Foundry: Fierce Competition & Sluggish Rebound In Year Of The Dragon
- Both SMIC & Hua Hong reported Q423 earnings in line with expectations and both guided Q124 flat to slightly down. SMIC expects FY24 mid single digit growth YoY.
- The downturn has exposed inherent weakness in China’s Semi Foundry segment relative to peers as exemplified by the significant GM disparity
- China’s two leading semi foundries have ~80% domestic dependence. Right now, that’s a headwind
5. Largest Display Driver Maker in the World’s Guidance Implies Growth Reversal Coming in Feb & March
- Novatek reported over 20% YoY growth for 4Q23 and slightly beat expectations but the latest guidance implies growth to reverse to a sales contraction in the latter part of 1Q24E.
- Gross and operating margins are guided to contract; nevertheless, inventory dropped to one of the lowest levels since COVID and is expected to remain healthy.
- Novatek’s latest results appear to signal that while inventory levels are healthy, the demand growth rebound for display drivers that started in June 2023E could lose steam in 1Q24E.
6. MonotaRO (3064 JP): Slowdown in the Price
- Annual sales growth has dropped from 20% or more in recent years to 12.5% in FY Dec-23. The operating margin ticked up last year, but is basically trending sideways.
- The share price has dropped by 35% since April 2023, bringing the projected P/E ratio down to the bottom of its 10-year range. Buy back in for the long term.
- Guidance, which is usually accurate, is for 12.7% sales growth this year and an operating margin of 12.5%. Growth should continue in future years with flat or better margins.
7. KLA & LaserTec, AMD, Hyperscaler Capex, SK Hynix, SWKS and QRVO, WOLF, MCHP
- KLA had a rare miss. The guidance was a bit light for the inspection execution machine.
- KLA rarely misses and is by far the best financially managed of the large-cap semicap companies.
- KLA reports Q2 EPS $6.16 ex-items vs FactSet $5.91
8. Novatek (3034.TT): It’s the Low Season in 1Q24F; AI Is Gradually Added to Different Applications.
- 4Q23 surpassed the guidance for revenue, GM, and OPM. 4Q23 EPS reached NT$8.76, compared to NT$10.46 in 3Q23 and NT$6.64 in 4Q22.
- 1Q24F is typically the traditional low season for consumer electronics, and there are fewer working days during the Lunar New Year.
- It is expected that the dividend payout ratio this year will be similar to previous years, which has been higher than 80% in the past few years.
9. Himax: Industry Readthrough for Automotives, Notebooks, and Edge AI Applications
- Readthrough: Automotive Applications End-Demand — China Market Soft But Touch and Dimming Technology is Expanding
- Readthrough: Panel Makers Constraining Supply in 1Q24 to Protect Pricing
- Readthrough: Customers Are Restocking Notebooks in 1Q24E, PC Replacement Cycle is Coming
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Metcash Placement – Not One, but Three Synergistic Acquisitions at a Go
- Metcash Ltd (MTS AU) is looking to raise up to A$300m (US$195m) in its primary placement. The proceeds will be used to partially fund the acquisition of three businesses.
- The deal would be a large one to digest at 22.5 days of three month ADV and 8.4% dilution.
- In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.
2. Thai Credit Bank IPO Trading – Half the Deal Already Spoken For, the Other Half Should Be Liquid
- Thai Credit Bank PCL (3674238Z TB) raised around US$281m in its Thailand IPO.
- TCB is a commercial bank that focuses on providing business loans to small and medium-size enterprises (SMEs), nano loans and micro credits to merchants, and home loans for individual customers.
- We had looked at the firm’s past performance and shared our thoughts on TCB’s valuation in earlier notes. In this note, we will look at the trading dynamics.
3. Apeejay Surrendra Park Hotels IPO – Has Bounced Back Strongly, at a Decent Discount
- Apeejay Surrendra Park Hotel (PARK IN) (ASPH) plans to raise up to US$111m via selling a mix of primary and secondary shares in its India IPO.
- ASPH ranks as the eighth largest in India in terms of chain affiliated hotel rooms inventory as of Sep 2023, as per Horwath HTL Report.
- In this note, we talk about the past performance and our thoughts on valuations.
4. Digital Core REIT Placement – Taking a Turn for the Better After All the Negative News
- Digital Core REIT (DCREIT SP) is looking to raise at least US$100m in its primary placement. The proceeds will be used to fund potential acquisitions and debt repayment.
- The deal will be a large one to digest at 72.7 days of three month ADV and 12.8% dilution.
- In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.
5. CaiNiao’s FYQ3: Solid Revenue Growth & EBITA Margin Improvement Distinguish It From Express Peers
- CaiNiao’s revenue growth remained strong, up +24% Y/Y in December quarter
- EBITA turned positive from loss in prior year period, but margin < FYQ2
- Overall, an impressive set of results that distinguishes CaiNiao from express peers
6. Kayou Pre-IPO Tearsheet
- Kayou (000KAYOU CH) is looking to raise up to US$500m in its upcoming HK IPO. The deal will be run by CICC, Morgan Stanley and JP Morgan.
- Kayou is a Chinese pan-entertainment product retailer of toys, with trading cards in particular as its core product.
- As of 9M23 (30th Sep 23), it had an IP matrix of 44 IPs through licensing from IP partners and the development of proprietary IPs.
7. Bharti Hexacom Pre-IPO Tearsheet
- Bharti Hexacom (6597372Z IN) is looking to raise up to US$1bn in its upcoming India IPO. The bookrunners are SBI Capital, Axis Capital, BOB Capital, ICICI Securities and IIFL Securities.
- Bharti Hexacom (BH) is a communications solutions provider offering consumer mobile services, fixed-line telephone and broadband services to customers in the Rajasthan and the North East telecommunication circles in India.
- It offers its services under the brand ‘Airtel’. BH relies on a robust network infrastructure with a mix of owned and leased assets.
8. Agilus Diagnostics Limited Pre-IPO – Still Recovering from COVID
- Agilus Diagnostics Limited (SRLL IN) is looking to raise around US$200m in its upcoming India IPO.
- Agilus Diagnostics Limited (Agilus) is a diagnostic testing service provider.
- In this note, we look at the company’s past performance.
9. Samhyun IPO Valuation Analysis
- Our base case valuation of Samhyun is target price of 28,106 won, which is 25% higher than the mid-point of the IPO price range (22,500 won).
- Given the moderate upside, we have a Positive view of Samhyun IPO. Our base case valuation is based on P/E of 34.6x net profit of 8.6 billion won in 2023.
- Samhyun developed one of the world’s first CVVD (Continuously Variable Valve Duration) technology for automobile engines, which improves fuel efficiency by controlling the engine’s valve opening time.
10. Pre-IPO Xiaocaiyuan International Holding – A “Dark Horse” In Mass Chinese Cuisine Market
- Based on effective strategic positioning, Xiaocaiyuan is able to seize the market’s demand for cost-effective catering during consumption downgrade and the trend of increasing restaurant chain rate in China.
- The key for Xiaocaiyuan to generate increasing profits at low spending-per-consumer is due to its strong supply chain, which will be favored by capital especially when Xiaocaiyuan enters community catering.
- Xiaocaiyuan International Holding (XCY HK) is better than peers. However, due to poor sentiment in HKEX, it’s not sure if Xiaocaiyuan’s valuation/share price performance could outperform peers as well.
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. JSR (4185) – Possible Trouble in Arb Land as SUNY/CNSE Files Suit Against JSR Sub Inpria
- JSR Corp (4185 JP) announced 2 February on its website that the Research Foundation for the State University of New York (“RF SUNY”) filed suit against JSR subsidiary Inpria 25 January.
- JSR claims no wrongdoing. A court order from the US District Court for the Northern District of New York denied RF SUNY’s request for a hearing by 5 February.
- This may put a short-term damper on sentiment in the name, and I expect the JICC people have been working on this for a week.
2. JAPAN ACTIVISM: Activist Elliott Takes on Mitsui Fudosan (8801)
- The FT carries an article this AM saying Elliott Management have built a stake in Mitsui Fudosan (8801 JP) and has asked it to undertake measures to increase ROE.
- Measures requested apparently include a very large buyback and a demand the company sell down its stake in Oriental Land (4661 JP). The article is worth reading.
- Shares are up sharply on this news. The fund was in the news last year about this time regarding Dai Nippon Printing (7912 JP). I’d expect more noise to come.
3. The Next Step in Lawson’s Big Boots Adventure – KDDI and MitCorp to Take It Private
- Today, just before the close, the Nikkei sprung a headline saying KDDI Corp (9433 JP) would take over Lawson Inc (2651 JP). The stock immediately headed to limit up.
- Post-Close, details emerged. KDDI will buy the 50% that MitCorp does not own, this will become a 50/50 JV. TOB launch at ¥10,360 will be in April. Squeezeout in September.
- This appears to be the Next Step in Lawson’s Big Boots Adventure. The premium is too light. The price is too low. And that is not counting the synergies.
4. Japan – Increasing Shorts on Some Interesting** Stocks
- There are some Japanese stocks that have dropped in price even as the broader market has powered higher. That could lead to the stocks being deleted from global portfolios.
- The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
- BayCurrent Consulting (6532 JP) is a dark horse for inclusion in the Nikkei 225 (NKY INDEX) in March and this deletion could take the stock lower before the Nikkei 225 announcement.
5. NIFTY NEXT50 Index Rebalance Preview: Potential Adds Continue to Run
- With the review period for the March rebalance complete, there could be 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
- Estimated one-way turnover is 13.9% resulting in a one-way trade of INR 28.6bn. Four inclusions will have over 1x ADV to buy; five deletions will have 2.5x+ ADV to sell.
- The potential adds have outperformed the potential deletes by 28.6% over the last month. With positioning from a rebalance perspective mostly done, gradually unwind over the next few weeks.
6. China ETF Inflows & Impact: Concentrated, Then Diversified; Central Huijin Steps Up
- Nearly US$37bn has flowed into mainland China listed ETFs since 2 January and could be driven by the National Team supporting the market. Central Huijin has announced their ETF buying.
- Most of the inflows have been focused on large cap indices including CSI 300, SSE50, CSI 500, CSI 1000, ChiNext, STAR50 and Chinext50 indices.
- While the inflows were initially focused on the CSI 300, there has been a diversification recently with big inflows to the SSE50, CSI 500, CSI 1000 and ChiNext indices.
7. Lawson (2651 JP): KDDI Corp (9433 JP) Pre-Conditional Tender Offer at JPY10,360
- Lawson Inc (2651 JP) has recommended a pre-conditional tender offer from KDDI Corp (9433 JP) at JPY10,360 per share, an 18.8% premium to the undisturbed (5 February).
- The pre-conditions relate to regulatory approvals in Japan, China, South Korea, and the EU. The offer is expected to start in April, suggesting no significant issues, particularly with SAMR approval.
- Based on the irrevocables, the minimum acceptance condition requires a 30.2% minority acceptance rate, achievable as the offer represents an all-time high.
8. India: Free Float Changes & Passive Flows in February
- Companies in India have disclosed their shareholding pattern as of end-December in January. There are companies with significant float changes from end-September and/or end-December.
- 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.
- There are 15 stocks that could have passive inflows from global trackers while 9 could see passive outflows in February.
9. STAR100 Index Rebalance Preview: High Risk/Return Trade Setup
- The review period for the March rebalance ended 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
- There are 10 stocks in inclusion zone and 11 in deletion zone. There should be 10 changes since that is the cap for the maximum changes at a single rebalance.
- The potential adds and deletes are down between 37-47% over the last 6 months and a long/short trade could provide superior risk-adjusted returns.
10. L’Occitane (973 HK): Blackstone Pondering an Offer
- Bloomberg reports that L’Occitane (973 HK) draws takeover interest from Blackstone (BX US), which is considering partnering with Chairman and largest shareholder Reinold Geiger.
- Blackstone needs an attractive takeover premium due to the presence of significant disinterested shareholders (Mr. Geiger and Acatis KVG).
- Shareholders will be wary of the latest rumour due to Mr Geiger’s aborted offer on 4 September 2023. Nevertheless, the valuation is undemanding compared to peer multiples.
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. Korea M&A Reforms: Considering on Adopting Poison Pill in 2024
- On 4 February, numerous local media mentioned that there is an increasing probability of the Korean financial authorities introducing poison pill in order to improve corporate governance and M&A reforms.
- The main purpose of the poison pill would be to increase shareholder value, encourage the management to focus on investment and employment, and effectively defend itself against M&A attempts.
- Poison pill could have positive impact on companies with high levels of treasury shares and preferred shares. The uncertain outcome of National Assembly election in April remains a key risk.
2. Further Cracks Appearing in the US Economy
- Commercial Real Estate issues, the dog that didn’t bark in 2023, is back.
- Unlike March 2023, this cannot be fixed by liquidity injections alone.
- US employment data surprises on the upside. Further Government manipulation?
3. Where Are We In the Global Liquidity Cycle?
- January 2024 another strong month for Global Liquidity which hits US$171.7 trillion
- US Fed and China’s PBoC are in the forefront of adding liquidity
- Global Liquidity Cycle trough in October 2022. Next peak late-2025
4. Macro Regime Indicator: Time to Embrace a New Economic Dawn?
- The recent performance of the US economy prompts a reassessment of long-held market sentiments.
- As we witness an intersection of sturdy growth, moderating inflation, and evolving liquidity dynamics, investors and policymakers alike stand at a crossroads.
- This month’s ‘Macro Regime Indicator’ questions the endurance of the current (US) economic strength and its implications for inflation and asset allocation.
5. SLOOS Survey: The US Economy Is Re-Accelerating and Money Growth Is Back!
- The demand- and supply for money has bottomed out! That is the overwhelming conclusion from the quarterly survey on banking standards released by the Fed.
- The SLOOS improves further from Q4 to Q1, and especially the supply side has eased quite a bit and is almost back in neutral territory.
- The rebound in demand is underwhelming, but it also typically lags supply/financial conditions by another quarter, meaning that Q2 is the likely big rebound in loan demand.
6. Get Ready to Buy in May…
- The U.S. equity market is setting up for a price surge that begins in May, supported by positive election year seasonality and the rising likelihood of a May rate cut.
- We reiterate our belief that stock prices are likely to be choppy and trade sideways until May.
- The historical record shows that breadth thrusts, such as the one experienced off the October bottom, are long-term bullish, but need a period of consolidation and correction.
7. Positioning Watch – Spread-trades are the way to play the current environment
- Very interesting dynamics in markets lately, with the NFP report Friday shocking markets at first glance before sending them back into rally-mode, likely a signal that asset pricing will be more about underlying fundamentals and economic data rather than interest rates alone.
- Despite rate cuts being pushed back a bit by both data and central bankers, the US economy is going strong, and the “interest rates work with a lag” arguments have been swept away for now, which leaves us with good news actually being good news.
- This week’s positioning watch is chart-packed with short and concise text – Enjoy!EquitiesRetail Investors’ allocation towards stocks has remained fairly stable since 2022 and has retracted after the boom in late 2023, but despite having a high correlation with the performance in small vs big equities (Russell 2000 vs S&P 500), Large Cap has outperformed Russell 2000 and other small cap indices by MILES since 2022.
8. The Weekly Market Monitor – How China Is Pushing Stocks Higher Except at Home
- China is injecting liquidity into the markets, but ironically, with investors sick and tired of negative returns, much of this liquidity is finding its way everywhere except China.
- The downturn in commercial real estate is becoming a global phenomenon. A growing number of companies is grappling with bad real estate loans, leading to a sharp increase in provisions.
- The most recent Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) reveals yet another trend that the recession is already behind us.
9. Portfolio Watch: NVDA or Bust?
- Hello everyone and welcome back to yet another assessment of our macro book- and as per usual accompanied by our current macro outlook!We knock on the door to a week with yet another US CPI release- this time revised:The revision we received today proved not to be the unpleasant surprise everyone feared given the 2023 revision and Waller & Powell both having flagged it and as a result, our expectations of a soft print remain unchanged- for elaboration see here.
- While it might feel like we’re repeating ourselves, our belief in the USD and US risk assets being the best options out there hasn’t budged.
- That said, we’ve been tossing around a few ideas and topics internally over the last week: Markets haven’t continued the dramatic price movements since last Friday’s (some might label it as “fake”, see here) NFP blowout, but it’s noteworthy that short-term expectations are significantly outstripping those further along the curve.
10. Steno Signals #85 – NFP Report Full of FAKE News?
- A week of bizarre front-end volatility has come to an end.
- From “higher for longer” to banking crisis 2.0 to inflation crisis 2.0 in a matter of five trading days.
What’s up and down? It’s time to cut through the BS.
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. AMD. This Party’s Just Getting Started…
- Q423 revenues of $6.2 billion, $100 million above the guided midpoint, up 6% QoQ and up 10% YoY
- Q124 guidance was for $5.4 billion at the midpoint, down 13% QoQ and flat YoY.
- We forecast 2024 Data Center growth of >70% YoY with potential for further upside
2. TSMC, SMCI, Texas Instruments, AWE, ASML, and LRCX
- TSMC started this season’s earnings with a strong result. Shares rallied immensely on this print, and it’s justified. In almost every metric, TSMC came out ahead.
TSMC had a revenue, operating income, and gross margin beat and guided above the street.
Now let’s break out revenue by node and platform for a further look into the results of the world’s largest foundry.
3. Intel 18A is in Sight, Does it Matter?
- Intel reported earnings last week. Intel was one of my favorite stocks last year, and I wrote about it here in “Is This the Intel Inflection”, where I successfully called the bottom in the stock.
- It’s worked pretty well, even against the SOXX index since then.
- I’ll summarize my thesis back then, update you now on what I think about Intel, and write about results and read-throughs.
4. Samsung Memory Revenues Up Impressively
- Samsung’s earnings was recently reported, with memory revenues up nearly 50% in the fourth quarter
- This gain has been driven by very strong growth in AI and a normalization of inventory levels
- The memory business is approaching positive margins once again, and SK hynix is already profitable
5. LRCX. Recovery Stalls As Outlook Remains Stubbornly Muted
- LRCX reported Q423 revenues of $3.76 billion, marginally ahead of the guided midpoint, up 8% QoQ but down 29% YoY
- Looking ahead, LRCX forecasted Q124 revenues of $3.7 billion, essentially flat sequentially.
- The memory recovery is happening, but only for HBM and node transitions. No spending on memory capacity additions means limited upside for LRCX.
6. Taiwan Dual-Listings Monitor: Can TSMC Sustain Extreme ADR Spread?; UMC Results Catalyst Tomorrow
- TSMC: +13.5% ADR Premium, Historically High Spread Represents Short Opportunity
- UMC: -0.9% ADR Discount, Results Tomorrow Could Open Up Trade Opportunity
- ASE: +9.1% Premium, Historically High But Likely Best to Wait for Higher Levels
7. Taiwan Tech Weekly: Semiconductors Surging in Southeast Asia; UMC & Mediatek Results Today
- UMC & Mediatek Results Today in Taiwan, Samsung Also Reporting; Taiwan AI Names Flying; Himax & Novatek Top Losers Ahead of Results.
- Semiconductor Surge: Southeast Asia Taking Center Stage Amid Taiwan’s Geopolitical Shift
- First Run of Tech/Semis’ Guidance Tells Us What Industries and Companies to Avoid
8. MediaTek (2454.TT): 2024F Indicating a Complete Recovery from the Previous Downturn Situation.
- MediaTek expects a reduced DOI level in 2024F while maintaining operating expenses and pricing discipline in 2023.
- The upgrade cycle has begun for devices equipped with AI functions. The Dimensity 9300 is just the first edge AI product for smartphones.
- MediaTek does not predict a significant increase in demand and expects a steady demand for smartphones.
9. KLAC. Looks a Lot Like LRCX!
- Q423 revenues of $2.49 billion, marginally above the guided midpoint, up 3.6% QoQ but down 15.6% YoY. Net income was $583 million, down $158 million QoQ.
- Current quarter guidance of $2.3 billion, down 8% QoQ and also down around 5% YoY
- Interesting Q&A discussion on backlog. KLAC’s order book is risker than their peers due to their shorter lead times. Something to watch…
10. Mediatek Results Take-Aways: High-End Devices to Take Market Share Globally; Upward Revisions Likely
- Mediatek’s results for 4Q23 exceeded expectations; Forward guidance also suggests that consensus forecasts for 2024 may need to be revised upward.
- Foresees the start of its “next growth phase” in 2024, with AI influencing mobile upgrades and the introduction of new products in late 2025, indicating potential growth through 2026E.
- Mediatek indicated that AI interest will drive high-end mobile devices to gain market share in 2024E.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Amer Sports IPO Trading – Downsized and Cornered, Close to Optimistic Fair Value
- Amer Sports (AS US) raised around US$1.3bn in its US IPO, after pricing its IPO below its initial range, as per media reports.
- Amer Sports is a sports and outdoor brands company making clothing and other sporting equipment for use in snow sports, running, climbing, baseball, american football, tennis and other sports.
- We have looked at the company’s performance and valuation in our past note. In this note, we talk about the trading dynamics.
2. Mixue Pre-IPO: Reliable Price Advantage – An On-The-Ground Viewpoint
- We believe Mixue’s low prices are fit for the current weak economy.
- Any “freshly made” price lower than Mixue’s will compete with bottled drinks.
- We also believe low rental is the key for Mixue’s low prices.
3. Brainbees Solutions (FirstCry) IPO: The Bear Case
- FirstCry (0172540D IN), India’s largest multi-channel retailing platform for mothers’, babies’ and kids’ products, has filed for a US$700 million IPO.
- In Brainbees Solutions (FirstCry) 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 the worrying trend of India’s KPIs, margin pressures, cash burn, and deteriorating balance sheet strength.
4. Ola Electric Pre-IPO – The Negatives – Still a Long Road Ahead with Ample Competition
- Ola Electric is looking to raise about US$1bn 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 this note, we talk about the not-so-positive aspects of the deal.
5. Metals Acquisition Ltd Secondary Listing – Too Much to Pay for a Single Asset
- Metals Acquisition (MTAL US) is looking to raise up to A$300m (US$197m) through its ASX secondary listing.
- The proceeds will be used to repay Glencore’s deferred consideration facility for the MTAL’s acquisition of its CSA copper mine, amongst other uses.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
6. Ola Electric Pre-IPO – The Positives – India’s Answer to Tesla?
- Ola Electric is looking to raise about US$1bn 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 this note, we talk about the positive aspects of the deal.
7. Samhyun IPO Preview
- Samhyun is getting ready to complete its IPO on the KOSDAQ exchange in March. The IPO total offering amount is 40 billion won to 50 billion won.
- The company generated sales of 99.8 billion won (up 45.5% YoY) and operating profit of 9.8 billion won (up 250% YoY) in 2023.
- Samhyun developed one of the world’s first CVVD (Continuously Variable Valve Duration) technology for automobile engines, which improves fuel efficiency by controlling the engine’s valve opening time.
8. Xiaocaiyuan International Holding Pre-IPO Tearsheet
- Xiaocaiyuan International Holding (XCY HK) is looking to raise up to US$200m in its upcoming HK IPO. The deal will be run by Huatai and UBS.
- Xiaocaiyuan is a Chinese home-style cuisine restaurant operator. It prices its menus’ items to achieve average spending per consumer between RMB50 and RMB70 for its dine-in customers at its restaurants.
- According to the firm, a Xiaocaiyuan restaurant offers approximately 45 to 50 menu items in each season, including cold dishes, stews and braised dishes, amongst others.
9. ECM Weekly (4th Feb 2024) – Ola Electric, Mixue, Citicore, Amer, Thai Credit, Indus Tower, MTAL
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, Amer Sports (AS US) was priced below its range, while Thai Credit Bank PCL, managed to get enough support to pull thru.
- Given the earnings season, there weren’t many placement apart from Indus Towers (INDUSTOW IN) and Metals Acquisition (MTAL US)‘s CDR offering.
10. Shouhui Tech Pre-IPO Tearsheet
- Shouhui Tech (SHOU HK) is looking to raise around US$200m in its upcoming Hong Kong IPO. The bookrunners on the deal are CICC, and Huatai International.
- Shouhui Tech (Shouhui) is an online life and health insurance intermediary service provider in China.
- According to F&S, Shouhui was the third largest online insurance intermediary in China in terms of GWPs of long-term life and health insurance in 2022, with a 7.1% market share.
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. Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Fast Retailing
- The review period for the Nikkei 225 (NKY INDEX) March rebalance ends yesterday. There could be three changes at the rebalance with sector balance in focus.
- Depending on the changes, passive trackers will need to buy between 1.3-19x ADV (7.1-24% of real float) on the inclusions and sell between 3.5-47x ADV on the deletions.
- Fast Retailing (9983 JP) avoids capping in March, passives will buy Nitori Holdings (9843 JP), and 25 stocks have over 0.5x ADV to sell as part of the funding trade.
2. Aeon (8267) Wants To Buy a Bigger Stake in Tsuruha (3391); What Does Tsuruha Want?
- Aeon Co Ltd (8267 JP) owns 13% of Tsuruha Holdings (3391 JP). Oasis owns 13% too. Oasis ran a governance campaign but lost last summer’s AGM. Aeon supported Tsuruha.
- Tsuruha shares popped in November when Tsuruha said it was looking at its strategic options. BBG reported PE firms were circling. Now Aeon wants to buy Oasis’ stake.
- That would put Aeon in a near-blocking position without consolidating. And it would mean minorities stayed minorities. The real question is whether this is what Tsuruha wants.
3. FINAL PREDICTIONS: March 2024 Nikkei 225 Rebal (Socionext, Disco, and 1 Consumer Goods Stock to ADD)
- The Nikkei 225 data for the March 2024 rebalance is a wrap. The names are the same as before but there is likely less DISCO Corp (6146 JP) to buy.
- It’s still big, but smaller than before because of the difference between performance and the change in PAF required to be below 1%. A 4:1 share split would be optimal.
- I recommend a few positioning changes from before, and the Fast Retailing trade loses one short-term option but the longer-term one stays in place.
4. Korea: Stocks with Near-Term Potential Passive Flows
- There are a few stocks in Korea that have outperformed/ underperformed their peers and could be added to or deleted from global passive portfolios next month.
- There could be buying in EcoPro Materials and Hanjin KAL while Hotel Shilla, Pearl Abyss, F&F, Hyundai Mipo Dockyard, Hanon Systems and Jyp Entertainment could be sold.
- There will be a lot of flow on the stocks and passive trackers will need to trade over 7 days of ADV in most stocks.
5. STAR50 Index Rebalance Preview: Sustaining Outperformance on Expected Impact
- The review period for the March rebalance ended 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
- We expect the index committee to continue using a 6-month minimum listing history resulting in three changes to the index.
- The potential inclusions have dropped but there has been significant outperformance versus the potential deletions. That could continue as positioning continues for the high expected impact on the stocks.
6. Timing of Double Dividends Opportunities in Korea
- The change in the dividend payment system in Korea in 2024 is likely to result in some attractive “double dividends” opportunities.
- According to the Korea Exchange, there are seven stocks that have changed their dividend record dates policy last year and also that pay quarterly dividends.
- Hyundai Motor (005380 KS) (common) provides a dividend yield of 5.8% and Hyundai Motor (005385 KS) (pref) provides a dividend yield of 9.6% at current prices.
7. NIFTY50 Index Rebalance Preview: One Change for Sure; Second One Is a Maybe
- With the review period complete, Shriram Finance (SHFL IN) should replace UPL Ltd (UPLL IN) in the NIFTY Index (NIFTY INDEX) at the March rebalance.
- We have Trent Ltd (TRENT IN) marginally ahead of Bharat Electronics (BHE IN) as lower probability replacements for Bharat Petroleum Corp (BPCL IN) in the index.
- The impact on the stocks will be large in terms of delivery volume to trade, but the stocks have moved a lot over the last few months.
8. A/H Premium Tracker (To 26 Jan 2024): AH Premia Still Near Multi-Yr Wides, SOEs May See New Action
- The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND flows were small positive and NORTHBOUND flows a decent buy. AH premia stopped rising. Chinese shares bounced. SOEs being bought. Tech being sold. Tencent seeing SB outflows, still.
- New article in China Securities Journal hints at new measures on SOEs. Watch this space. Wouldn’t be short SOEs vs Privates on H/A basis.
9. UOL Group (UOL SP): At Risk of Passive Selling in February
- UOL Group (UOL SP) has underperformed its Singapore peers and the drop in market cap could result in the stock being deleted from global passive portfolios in February.
- UOL Group (UOL SP) has traded higher since end October and there has been a steady increase in cumulative excess volume on the stock since then.
- UOL Group (UOL SP) trades richer than its closest peer, City Developments (CIT SP), on EV/Sales and EV/EBITDA. The recent outperformance presents a trading opportunity.
10. Benesse (9783) – Tender Offer To Launch; No Change in Terms (¥2,600/Share)
- The “MBO” for Benesse traded through terms from the 6th day post-announcement onwards. 37% total traded since announcement, 20% since that 6th day.
- The deal as announced 10 November was entirely too cheap. It was somewhat egregious if you look through the balance sheet. Plus there was a free museum on top.
- But to no avail. There is no bump. There have been no activists peeping above the parapet (yet). It isn’t impossible to block, but if nobody shows their face…
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. A ‘Back Seat’ Bond Yield Driver: US Treasury Is Forcing The Fed To End QT. US Yields To Re-Test 5¼%?
- ‘Stealth QE’ from the US Fed set to continue, but US Treasury is the ‘back seat driver’
- Treasury wrestling to cap near-term coupon supply to avoid rising yields, but Fed willing to let regional banks’ liquidity levels rise
- Rising public debt is the major bogey: pushed up by demographics and monetized by Fed and Treasury. 10-year yields will re-test 5¼%
2. Korean Government to Announce Specific Measures to Increase Value of Low PBR Stocks in February
- Choi Sang-Mok (Deputy Prime Minister and Minister of Strategy and Finance) stated that the Korean government will announce specific plans to increase the value of low PBR stocks this month.
- We provide a list of 97 stocks in KOSPI 200 that are trading below 1x P/B. They are trading at average P/B of 0.54x.
- We expect these low P/B stocks to continue to outperform the market in the next several weeks leading up to the government’s actual announcement.
3. Outlook 2024: Europe At A Crossroads
- Claims that the European Parliament elections in June are critical for the EU may be exaggerated.
- The election results, however, are considered the second most significant of 2024.
- The outcome could be crucial for the prospects of EU reform and enlargement.
4. US Liquidity & Debt Watch: Yellen to Decide the QT Tapering Timing Tomorrow
- Yesterday, the US Treasury revealed the issuance targets for Q1 and Q2.
- The net addition to marketable debt is $760 billion for Q1.
- While this is a substantial amount, it’s $55 billion less than the October estimate for Q1 ($816 billion).
5. New Zealand CPI Inflation 4.7% y-o-y (consensus 4.7%) in Q4-23
- New Zealand’s CPI inflation rate in Q4-23 was 4.7% year-on-year, marking a decrease from the previous quarter’s rate of 5.6%.
- The Q4-23 inflation rate is 1.05 percentage points below the one-year average.
- The 0.5% quarter-on-quarter rate annualises even lower, closely aligning with the target.
This insight is AI generated from publicly available sources.
6. Steno Signals #84 – The Red Sea troubles are spreading FAST!
- Happy Sunday folks and welcome to our flagship editorial!We have been banging the drum on the re-acceleration of goods inflation due to the Red Sea debacles for a while.
- Our Geopolitical Team highlighted the shipping risks as the largest risk to markets already on Oct 31 and we have been all over this story since – sadly watching the ever accelerating worsening by the week.
- The Suez has de facto been closed for containerships not sailing under Russian flag for a while, but the attacks over the weekend on the British tanker MV Merlin Luanda is potentially a sharp escalation of the situation as the tanker carried Russian oil.
7. War In 2024
- Investors have adapted to ongoing global conflicts such as the Russia/Ukraine war, the Middle East crisis, and China/Taiwan tensions.
- Despite this, they must remain cautious of less publicized war risks worldwide.
- These less visible risks are part of the turbulent times we currently live in.
8. Evergrande Nugget: Popping the World’s Largest Asset Bubble
- Monday, a Hong Kong court ordered the liquidation of Evergrande- whether the court ruling will be of much help to creditors remains to be seen as the court’s jurisdiction is separated from the bulk of Evergrande’s assets located in the Mainland.
- This ruling doesn’t come as a surprise to the markets, as Evergrande’s impending bankruptcy has been public knowledge for months.
- Beijing has displayed little inclination to rescue the world’s most heavily indebted real estate developer, burdened with an astounding $300 billion in total liabilities- a fact that has been reflected in the now-suspended Evergrande share price.
9. China Macro: Sector Positioning Update
- Industrials and Consumer Staples Remain Top Overweights, Though Sentiment Fragile for Both.
- Energy sector shows signs of a turnaround from long-term decline, whilst Financials remain unloved by China investors.
- Real Estate allocations have hit record lows, with average holdings at just 2.93%, while Consumer Discretionary sector approaches all-time highs.
10. US: On Track for a Rate Cut in Jun’24 as Core PCE Inflation Eases MoM and YoY
- Real GDP grew 2.5% in CY23, helped by exports (+2.7%), PCE (+2.2%), government spending (+4.4%), and falling imports (-1.7%). Slower PCE and government-spending to reduce growth to ~1% in H1CY24.
- Core PCE inflation (the Fed’s target) eased to 2.93%YoY in Dec’23, the lowest in 33 months. More crucially, MoM annualized gains in core PCE averaged 1.85% in H2CY23.
- 13 months of M2 contraction, and deceleration in RGDP and core PCE, provide the perfect backdrop for a rate cut in Jun’24. Expect FOMC to hint at that this week.
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1. Memory Monitor: Microsoft Copilot Will Supercharge Demand for DRAM; SK Hynix, Nanya Tech, Micron
- MSFT’s new AI features for Windows will need computers with at least 16GB of DRAM to run effectively. MSFT is asking manufacturers for this as a minimum for AI models.
- MSFT announced Copilot Pro for individuals and small businesses last week. The desire to use generative AI and the minimum required DRAM will drive accelerated PC upgrades.
- We note relative strength in 16GB DRAM prices; In Memory space, we continue to see relative value in SK Hynix, however, Nanya has the opportunity to Outperform in Taiwan.
2. Good Entry Point as Tesla Stabilizes Its 4Q23 Asp and Profits Per EV
- Blended ASP of decline of 1% q/q in the past two quarters in 2H23, better than 3-10% q/q decline during 3Q22-2Q23, resulting in Tesla’s blended ASP decline to decelerate.
- Due to Tesla’s cost cutting efforts with nice inventory control, we calculates profits/EV rebounded nicely by 21% q/q to US$3,490 per EV in 4Q23, much nicer than no profits.
- Good improvement on its FSD Beta version 12.1.2 lately might become a pure profits/EV boost by incremental subscription of US$10,000-15,000 per EV or monthly fee by existing Tesla owners.
3. ASML Guides Q124 Down 27% QoQ, Shares Surge >8%. What Gives?
- ASML reported Q423 revenues of €7.2 billion, up 7.5% QoQ and ~€100 million above the guided midpoint for the quarter.
- ASML guided Q124 at €5.25 billion, down a very significant 27% sequentially. Also reiterated their previous forecast for 2024 revenues to be remain flat with 2023
- ASML shares surged >8% in overnight trading. What’s going on here?
4. Are You Confused About What Intel and UMC Are Working Together?
- What production fabs and capacity? Intel’s Arizona 10nm Fab 12, 22, 32, which are mostly depreciated. Intel will provide nearly 30k/m 12″ capacity for UMC at the first stage.
- Who’s 12nm node and design rule? UMC’s tsmc-like 12nm design rule for customers to produce WiFi 7, TV controller, and other products.
- Other discussions include: “Who will operate the fabs?”, “How to share sales/profits?”, “Mass production time?”, “Why benefits to Intel?”, “Why benefits to UMC?”, “Will TSMC get hurt?”
5. What SK Hynix’s Latest Results Indicate for PC & Mobile Makers into 2025E, Including Apple
- SK Hynix results surpised consensus with a swing to positive operating profit; The company expects industry demand growth to exceed supply growth by a wide margin in 2024E.
- Management suggests optimism not just for 2024E, but also for 2025E. 2025E is when a much larger positive demand impact from AI is expected as AI products will expand substantially.
- SK Hynix comments regarding AI phones imply that consumers will most likely need to upgrade their phones, including iPhones, to take full advantage of AI capabilities
6. A R&D Director Dr. Young Was at TSMC, SMIC, and Intel Foundry Shared Views on 3-1nm Competitions
- With a strong 20A/18A team, Intel might take some CPU shares back from AMD to affect TSMC but reduce geopolitical tensions from the US after Intel returning to the best.
- SMIC can use DUV to do 3nm but different from others’ because Moore’s law is no longer using circuit line width but to use performance, power, density to determine 3nm.
- New fabless industry opportunities are emerging in middle east countries, and south east Asia countries like Vietnam. Despite high cost issues, global expansion will help TSMC to attract global talents.
7. First Run of Tech/Semis’ Guidance Tells Us What Industries and Companies to Avoid
- Continuous weaknesses to be seen in industrial and general non-AI server semi demand starting 3Q23 and lasting into 1Q24 and some weaknesses in digital consumer semi demand starting 4Q23.
- Memory semiconductor vendors see strengths in 4Q23 and continuous improvement in DRAM/NAND price in 1Q24.
- We see a healthy mid single digit q/q and y/y decline on 4Q23 MOI but suggest vendors to avoid in next 1-2 months before they guide down the market.
8. From Dec N.A. SEMI Equipment Billings to Expect a Sales Raise for Applied Materials and Lam Research
- Applied guided -1% q/q and Lam Research guided 8% q/q sales growth, below N.A. front end semi equipment billings’ 12% q/q growth, room for analysts to raise their 4Q23E sales.
- N.A. front end equipment sales reached US$3.775bn, up 1% m/m, down 5% y/y but back end equipment billings reached US$222mn in December, down 8% m/m and down 9% y/y.
- Better than equipment vendors, WSTS/SIA reported November sales of US$48bn, up 3% m/m and up 5% y/y (the first month to turn positive after 14 months of consecutive y/y decline)
9. Intel Ruins The Rally With Its Gloomy Guide
- Q423 revenues of $15.4 billion, +8.5% QoQ, +10% YoY and $300 million above the guided midpoint
- Q124 guided to $12.7 billion, -17.5% QoQ albeit still up 8% YoY.
- Intel’s share priced fell 12% on the guide. CEO says this was an overreaction.
10. Taiwan Tech Weekly: SK Hynix Boosts Optimism for Memory; Intel, Mediatek, Microsoft, UMC Key Events
- Taiwan Tech Plays Have Soared Since TSMC’s Strong Outlook, and SK Hynix Reported a Return to Op Profit
- Memory Monitor: Microsoft Copilot Will Supercharge Demand for DRAM; SK Hynix, Nanya Tech, Micron
- Key Upcoming Events — Intel, Microsoft, Mediatek, UMC Results Ahead